Albania and North Macedonia: The evolution of the electricity system under the scope of climate change Author: Ioannis Thermos – [email protected] Student MSc Sustainable Energy Engineering Supervisor: Youssef Almulla – [email protected] Master of Science Thesis KTH School of Industrial Engineering and Management Energy Technology TRITA-ITM-EX 2019:420 Division of Energy Systems Analysis SE-100 44 STOCKHOLM 1 Master of Science Thesis TRITA-ITM-EX 2019:420 Albania and North Macedonia: The evolution of the electricity system under the scope of climate change Ioannis Thermos Approved Examiner Supervisor 14/06/2019 Francesco Fuso-Nerini Youssef Almulla Commissioner Contact person [email protected] 2 Abstract Albania and North Macedonia, along with the rest of the Balkan region, have been developing since the early nineties and have achieved an upper-middle income status. Along with this development, the energy demand grew as well. However, the current electricity system in these two countries has not significantly evolved during the past 35 years since the majority of the infrastructure was built during the Soviet era. It is therefore crucial to upgrade the existing system to avoid power shortages and to reduce electricity losses. At the same time, the effects of climate change are becoming more and more obvious and pose a direct threat to the affordability of electricity generated by large hydropower plants during the last decades. This study examines the evolution of the electricity sector of Albania and North Macedonia for the next 20 years. It will put to the test the current electricity system extrapolated into the future, the changes that might be necessary to be made to tackle the effects of climate change and the nations’ commitments to reduce the impacts of a changing climate. The first step is to understand the energy system in each country, starting with their available resources, historical capacities, electricity demand etc. Both countries are almost identical in terms of sizes with each one having an electricity supply system of around 2 GW in capacity and a final electricity consumption of 5,563 GWh and 6,104 GWh in 2017 for Albania and North Macedonia respectively. On the other hand, the systems differ qualitative. To be more specific, almost 100% of Albania’s generation capacity is hydropower, while the North Macedonian system is based mainly on lignite (coal power) and to a smaller extend on hydropower. Since this study focuses on the effects of climate change on electricity produced from hydropower, a correlation was made to link the reduced precipitation with river flow and in the end hydropower generation. The correlation results show that an average decrease in precipitation of 1.6% and 1.9% can be expected in 2037 compared to current levels, that will lead to a decrease in hydropower generation of 3.3% and 4% for Albania and North Macedonia respectively. Then the cost-optimization model, using OSeMOSYS, was created to depict those changes. First, the business-as-usual scenario, used as a reference scenario, extends the current situation into the future. In a few words, Albania and North Macedonia will invest in hydropower and wind capacity respectively to cover the increasing electricity demand. Secondly the Climate Change scenario was investigated, where the decrease in precipitation was considered, but according to the model, electricity imports will increase instead of investing in additional capacity. The third scenario was the Increased Renewables scenario, where the countries fulfil their obligations to install more renewable capacity and diversify their electricity mix. This approach will reduce their vulnerability to climate change and electricity imports but will come at a great investment cost for the countries’ economy. Overall, results show that the regional power sector will be affected by climate change. However, the biggest challenge will be to tackle the annual and seasonal variation in hydropower generation rather than the general decreasing trend in precipitation over the years. To be more specific, annual hydropower generation can even double between a dry and a wet year in some cases. However, under the climate change scenario annual hydropower generation will only decrease by 5.7% and 2.7% during a wet and a dry year compared to the business-as-usual scenario respectively. 3 Acknowledgements First, I would like to thank the supervisor of my thesis Youssef Almulla, PhD candidate in the division of Energy System Analysis (dESA), for his assistance and support. Also, I would like to express my gratefulness to Mark Howells for inspiring me to choose the track of Energy Systems Analysis during my Masters programme. Likewise, I am grateful that I have worked with Francesco Fuso-Nerini, Francesco Gardumi, Georgios Avgerinopoulos, Hauke Henke, Ioannis Pappis and the rest of the dESA team. Special credits go to Alban Kuriqi, PhD candidate in the University of Lisbon, for providing me with valuable precipitation and river flow data for Albania. Also, I would like to thank my colleges and friends for their help and companionship during this journey. Finally, I would like to deeply thank my parents who are always by my side and support me in my goals. 4 Table of Contents Abstract ........................................................................................................................................................... 3 Acknowledgements ....................................................................................................................................... 4 Table of Contents .......................................................................................................................................... 5 List of Figures ................................................................................................................................................ 7 List of Tables .................................................................................................................................................. 8 Abbreviations ................................................................................................................................................. 9 1. Introduction ........................................................................................................................................ 11 1.1. Objectives ....................................................................................................................................... 13 1.2. Tool Description ............................................................................................................................ 13 1.3. Methodology ................................................................................................................................... 13 2. Country Overview, Energy and Climate Situation........................................................................ 14 2.1. Albania ............................................................................................................................................. 14 2.2. North Macedonia ........................................................................................................................... 16 2.3. Climate Change .............................................................................................................................. 18 2.3.1. Change in Precipitation ............................................................................................................ 19 2.3.2. Impacts on Electricity Generation ......................................................................................... 19 3. The OSeMOSYS Model .................................................................................................................... 21 3.1. Model Description ......................................................................................................................... 21 3.2. Reference Energy System ............................................................................................................. 21 3.3. Main Parameters ............................................................................................................................ 23 3.4. Electricity Demand ........................................................................................................................ 23 3.5. Generation Capacity ...................................................................................................................... 24 3.6. Electricity Generation ................................................................................................................... 25 3.7. Power Generation Constraints and Targets .............................................................................. 26 3.8. Power Generation Costs .............................................................................................................. 26 3.9. National Grid and Interconnections Assumptions .................................................................. 28 3.10. Climate Change Impact Assumptions ........................................................................................ 29 4. Scenario Description .......................................................................................................................... 32 5. Results .................................................................................................................................................. 33 5.1. Business