TIRANA, Aug 3 – In a questions-and-answers statement issued Aug. 3 the World Bank strongly supports the building of the Vlore Thermo Power Plant which it has also helped finance.
The World Bank says that the country’s lack of power was affecting the daily life of the people and also hampering investment in the country. It added that importing power had become very costly power remains scarce in the region.
The Bank also supported the chosen site saying they had held a series of consultations before deciding on the location. This followed objections from a group of people from Vlore opposed to the building of the plant in their area, claiming it would hurt tourism and the environment.
Following are questions on Vlore Thermo Power Plant and answers from the World Bank on the issue.
Q. What type of power plant is the Albanian government building in the Vlore area?
A. The Albanian government is building a new 97 MW, $112 million oil-fueled power plant at a six-hectare site about six kilometers north of Vlore. The selected site was used for many years as an oil terminal and is in a zone earmarked for industrial development. The project is supported by a $25 million credit from the World Bank’s International Development Association, $37.5 million from the European Bank for Reconstruction and Development, $37.5 million from the European Investment Bank, and $12.6 million from KESH (Albanian Energy Corporation). The World Bank’s credit is called Albania: Power Sector Generation and Restructuring Project.
Q. Does the power plant at Vlore have anything to do with the much-larger industrial park that the government had originally planned for the Vlore area but which it has now pledged to move to another area?
A. No, these are two different projects. The Albanian Prime Minister noted in May 2007 that the very large projects initially foreseen to be set up as an energy park in Vlore (3 thermo-power stations with a total capacity of 1200 MW) will not be constructed in Vlore, but will be located in other areas. The current power plant proposed for Vlore will produce than 100 MW.
Q. Why does Albania want to build the power plant and how bad is the electricity crisis in Albania? How has it affected Albanians?
A. Since the electricity crisis, Albanians have had to deal with frequent blackouts in their electricity supply. During the winter of 2007, electricity was cut eight hours per day because of the shortages, depriving Albanians of light, space heating and cooking fuel. The situation continued during this summer and news reports show increasing levels of frustration with the blackouts. All of this affects the quality of life and health in Albania and also deters investors in Albania.
Add to this the fact that there has been no new investment in electricity generation in Albania since 1984 – debilitating in any country – let alone in Albania where supply has fallen as demand is rising exponentially.
Q. Why does Albania need specifically a thermal power plant?
A. The annual energy that Albania can produce today is 4,000 GWh while the demand is 6,800 GWh. That gap must be met somehow, either by importing it or producing it in country.
Albania’s electricity crisis is largely the result of the fact that the country gets 95 percent of its electricity from hydropower (dams), which drops in dry years when shrinking reservoirs cannot keep the turbines going enough to supply the energy needed. Before 1997, Albania produced enough electricity to meet domestic demand and also to export to neighboring countries. But, the demand for electricity has increased four times compared to the early 1990s, while poor maintenance of energy facilities and low rainfall have cut electricity output in half.
While it has many benefits, hydropower is vulnerable to changes in weather and to drought cycles. Albania has made the decision to diversify its sources of electricity. Thermal power plants would help in that effort and provide a stable supply of electricity that would start to address rising demand in Albania. Still, even if the Vlore power plant were up and running tomorrow, it would only meet 30 percent of the gap in the current demand for electricity in Albania.
Also, the project is in line with the recommendations of the “Albania Energy Sector Study” compiled for Albania in 2003 and is part of the country’s Energy Sector Strategy, which was based on a very comprehensive study of the sector, approved by the government, and endorsed by the World Bank and other donors.
Q. Still, wouldn’t it be cheaper to just import electricity than build a new power plant?
A. The cost of importing more electricity is already depleting the budget of the Albanian government and diverting resources from development needs such as health care, education, roads and tourism development. Also, the transmission lines that connect Albania with neighboring countries are old and severely limit the amount of electricity that can be imported. Also, shortages of electricity in the Western Balkans are worsening so, increasingly, electricity imports have already become more expensive and difficult to obtain. Faced with these constraints, Albania’s best option is to build up a diverse domestic power supply that can meet the country’s rising demand.
Q. When will the Vlore thermal power plant be built?
A. Construction is to begin in the autumn of 2007 and the power plant is expected to be operational by June 2009.
Safeguards and Inspection Panel
Q. How does the World Bank ensure environmental and social issues are evaluated in project decision-making?
A. The World Bank has a rigorous series of policies and procedures to assure these issues are considered when evaluating each project. As an integral part of the design and implementation phase of this project, the Environmental Assessment and Involuntary Resettlement safeguard policies were followed. Recently, a local NGO has made a request for the Inspection Panel of the World Bank to assess whether these policies and practices were fully adhered to by the Bank (Inspection Panel)
Consultations
Q. Were consultations held with local communities when the location of the new plant was being considered?
A. Yes – several meetings were held in Vlore as part of the Environmental Impact Assessment (EIA) in 2002 and 2003. These were well attended. A meeting was held in Vlore on October 31, 2002 to introduce the project to the public and begin the public consultation process. A second meeting was held in Vlore on April 2, 2003 to receive public input on the project. Over 100 persons attended the second meeting, representing various Government agencies, universities, nongovernmental organizations and the general public. The meetings were also covered by Albanian media and television stations. Additional meetings were held with the Ministry of Environment on August 15, 2002 and March 31, 2003. A public consultation meeting was held on September 3, 2003 in Vlore to discuss the draft EIA. It was attended by representatives of national and local Government agencies, businesses, nongovernmental agencies and the general public. Details of the scoping sessions, including minutes of meetings, are available with the National Energy Agency which played a leading role in organizing these sessions.
Q. How was the final site chosen?
A. An internationally recognized consulting firm prepared a feasibility study of the proposed thermal power plant with financing from the United States Trade and Development Agency in 2002. Six sites were evaluated on the basis of ten criteria, each assigned a different weight: These criteria and their weights were: environmental remediation (12%); air quality concerns (8%); levelized cost (12%); socio-economic concerns (8%); reduction in transmission system losses and voltage profile improvement (12%); transmission availability and proximity (10%); fuel availability (14%); water and sewage needs (10%); transportation (8%); and property availability (6%). Two sites were evaluated for each region listed below: Shengjin, Durres, Elbasan, Korca, Fier, Vlore. At the end, the Vlore and Fier sites were found to be the best from a transmission perspective, but the Vlore site offered some advantages: i) as the Vlore site is near the coast, fuel does not have to be transported in-land by pipeline or truck. This significantly reduces the costs of the project and also reduces the risk of a fuel spill; and ii) sea water can be used for cooling. In addition, there is a growth in demand in this area. In mid-November 2002, the Ministry of Energy informed the World Bank about its decision to build the thermal power plant at the Vlore B site.
Environment
Q. Did the Government carry out an Environmental Assessment (EA) of the project?
A. Yes – the EA was reviewed by independent Consultants financed by the Canadian International Development Agency. Safeguard experts from the World Bank, European Bank for Reconstruction and Development and the European Investment Bank also reviewed the EA. Reviewers concurred that the environmental impact would be limited. An EA addendum was prepared to address implementation details associated with the Environmental Management Plan (EMP). The Government and KESH have formally agreed to carry out the measures specified in the EMP. The site and the EA were also approved at various levels of the Government (Vlore Municipality, Ministry of Environment, Council for Territorial Adjustment, etc.). The EA was disclosed in Albania and the World Bank’s Infoshop in October 2003.
Q. Did the World Bank’s EA consider the potential for 300 MW for the power plant and the environmental consequences?
A. The EA and public consultations for the power plant focused on the impact and emissions of a 100 MW plant. The project, supported by the World Bank, EBRD, and EIB is limited to 97 MW. However, the EA mentioned and studied the potential and requirements for future expansion to 300 MW. Should the Government decide to proceed with additional generation units (either at the Vlore site or another location), then a new full-fledged EA will be required.
Q. Will the proposed power plant worsen environmental pollution and emissions in Albania?
A. The plant will use low-sulphur distillate oil and not heavy fuel oil. The emission limits set by the plant design are in compliance with the permissible limits set by the EU Directives and the World Bank Pollution Prevention and Abatement Handbook. Furthermore, the plant will be constructed with the capability to switch to using gas as fuel as soon as gas becomes available in Albania, reducing environmental pollution even further.
Q. Will the power plant damage the beach or access to it?
A. After a brief construction period, the beach will be returned to its current state. The plant will be located 300 meters inland and the water discharge pipe goes out 600 meters from the coast and the oil terminal is 3.5 kms away from the beach.
Q. Would the proposed power plant damage the Narta wetland?
A. While the site is not far from the Narta Lagoon, it is outside the proposed protected zone surrounding the Lagoon and is isolated from it both by distance and by a spit of land extending out from the coastline. In the context of the GEF/UNDP Project for Conservation of Wetland and Coastal Ecosystems in the Mediterranean Region, the project site also was discussed with UNDP, which informed the World Bank that it would have no objection if the site was outside the protected zone around Narta Lagoon.
Cultural Heritage
Q. Did the World Bank consider cultural heritage in the EA?
A. In keeping with its procedures for this type of project, international consultants prepared a detailed sitting study for the power plant. During the scoping sessions and the preparation of the environmental assessment for the project, the issue of the cultural significance of the Triport Cape area near the project site was not raised.
However, in view of the concern about the issue, the World Bank had an experienced international cultural heritage specialist conduct a site visit and requested the Albanian Government’s assistance in evaluating the cultural heritage in the area. The Ministry of Tourism, Culture, Youth and Sports reviewed the matter and informed the World Bank that they “have identified no historical values or studies for the area as a specific historical zone.”
As yet another step, the World Bank asked Albania’s Director of the Institute of Cultural Monuments, to survey the area.
Q. It has been said that Triport/Aulona is important historically because a number of Sephardic Jews landed there after fleeing persecution and the Spanish Inquisition. Would the proposed power plant affect the historical value of the landing site?
A. There has long been the presence of a Jewish community in the area of Vlore, which was once viewed as the third largest Jewish community in the Mediterranean. The town of Triport/Aulona flourished from the 3rd century BC to 3rd century AD. But it is strongly believed by the Albanian Institute of Cultural Monuments that because the town of Triport/Aulona had already faded by the end of the 3rd century AD, the life of the town had moved to Vlore. Therefore, when the Sephardic Jews arrived in the area, they are most likely to have landed in the town of Vlore, some 5.8 kilometers away from the proposed building site for the power plant. Then Albania’s Director of the Institute of Cultural Monuments, Apollon Bace, said that Triport/Aulona would not have extended to the proposed building site because towns at that time in history were not that large in size and were not built on defenseless flat terrains. Also, in previous excavations for the building of a pier at the proposed site, there were no ceramics or traces of earlier towns found. Because of this, Professor Bace says the town of Vlore has “certainly a great spiritual value for the Jewish community, particularly for the Albanian-Jewish oneƮot the place where the Thermal Power Plant is going to be built.”
Interview of Demetrios Papathanasiou, Task Team Leader for Energy Projects in Albania Country Office to Korrieri Newspaper
Aug. 1 – Following is an interview of a senior World Bank official given to the Albanian newspaper Korrieri about Albania’s power crisis.
1. As you are aware, the country is facing an unprecedented power cut. Despite the fact that government officials offered their reasons, according to your institution what are the reasons?
The problems of the electricity sector in Albania did not develop overnight. They are the result of mismanagement and erroneous decisions taken over many years. The fundamental mistake has been that for much too long, the country has accepted that the national electricity company can survive when it is paid less than half of what it sells.
The shortage of electricity is due to many years of theft, technical mismanagement, and the very unfortunate general acceptance –by too many within the country for too long– that it is OK not to pay for electricity. While there have been some efforts that slightly improved things in the past, these were relatively short-lived.
As a result, KESH has been for most of its existence short of money and heavily dependent on donors’ aid to realize the needed investments that could have guaranteed the security of supply for all.
Significant projects that should have happened years ago did not take place. No important power generation plant has been built for 20 years. The country remains inadequate in its electric interconnections with neighboring countries. Today therefore, there are simply no good alternatives for power supply if the hydroelectric reservoirs go dry.
To make matters worse, the whole region in the Western Balkans is facing power shortages. Prices of imported electricity more than doubled in the last year. Because KESH is not paid for more than half of the electricity going through its network, it cannot afford to buy even the small, but expensive, available supplies.
In dry times therefore, the lights will go out. The drier the year, the longer the hours of blackouts. And this year seems, so far, as one of the driest of the last 50 years.
2. The World Bank has been KESH’s main source of revenue, but KESH is again facing financial difficulties. The most direct question would be how responsible does the WB feel for the country’s energy crisis?
I don’t think this is a relevant question really. The fact remains that exogenous factors such as a very dry year and regional shortages of power supply have been important in this crisis. Trying now to allocate responsibilities and blame for the crisis is not something that we participate in and it doesn’t help anyone. We should all be forward-looking to improve things now and avoid any additional future crises. We remain ready to assist further.
3. Last week, the government approved USD 50 million to support KESH for buying energy. In the current situation, according to the Bank, in order to improve the situation is the best solution a funding increase, or review of energy price?
The Government’s energy strategy that was presented last week argues that tariffs should reflect the long-term marginal cost of energy provisions. We agree with this view. However, we also emphasize that the most effective way to keep tariffs low is to stop theft, reduce losses in the system, and increase collections. Albania’s losses in distribution remain among the highest in the world. We should also consider that this has been an exceptionally dry weather so an increase in tariffs will be necessary to allow for imports and to avoid full-blackouts. But, any funding measures from the central budget should carefully consider the overall macroeconomic situation of the country and will need to be agreed with the country’s international partners.
4. If you think of a price increase, what would be the proposal from the World Bank?
It is the responsibility of KESH to prepare a tariff application that leads to a financially viable sector in the short term. Tariffs should appropriately reflect the significantly increased costs of electricity imports this year and could be reduced during more rainy years. However, the social impacts of any tariffs increase should be carefully evaluated. In general, two-block tariffs are a better way to keep prices low for people who are poor and usually consume less electricity, while at the same time ensure that big consumers pay a price that reflects the actual costs of obtaining electricity imports. We would support a well-prepared two-block tariff approach.
5. In what phase is the work for the privatization of Distribution Division in KESH?
The due diligence work of the advisor is on-going and the target is for the privatization process to be completed in the second half of 2008. The privatization of KESH Distribution Division is a long-term solution in which the strategic investor is expected to improve the efficiency of the electricity distribution system in Albania.
6. The tender for purchasing meters failed again for the fourth time. As the World Bank is about such things, what is your opinion on the future of the project on meters? When do you think the law on energy import would be ready for implementation?
Delays in the installation of necessary meters are a major problem for KESH. Every effort should be made to complete this quickly. The World Bank is also considering a project to introduce advanced metering systems for big consumers and to help KESH better control is distribution system. Amendments for the procurement law are currently under discussion. This needs to be advanced as quickly as possible, as the present procurement law and secondary legislation does not provide enough flexibility for the efficient procurement of electricity.
7. There are rumors that the World Bank is interrupting its financing for the Vlora thermal power plant. What is really happening?
This not true. The World Bank has never said that.
8. We have heard that the World Bank experts will investigate the Vlora power plant. What is the reason for that and who asked for this?
Representatives of an Albanian NGO have filed a Request for Inspection with the World Bank’s Inspection Panel and the World Bank’s Board of Directors has approved an investigation of the issues raised by the request. The investigation will start soon. The Inspection Panel makes findings regarding the World Bank’s compliance with its policies and procedures. At the end of the process, the World Bank’s Board will consider the Inspection Panel Investigation Report, as well as the Response and Action Plan submitted by Bank management. Following the Board’s deliberations and decision, these reports will be released and Management will work with Albanian authorities to implement the Action Plan to address the findings of the Inspection Panel.
