The outlook for primary energy supplies, heat, and electricity is questionable for the region.
BRUSSELS, March 25 – As Albania moves forward with plans to more than double its energy output through various projects, a World Bank report released this week, says that timing is of the essence due to the long lead times required to implement projects in the energy sector.
The report says countries need to position themselves to secure funding support for such progress as quickly as they can. Failure to introduce an enabling environment to support investment in the sector will translate into a shortfall in investment that, in turn, could constrain economic activity. A 10 percent shortfall in energy availability could lead to a 1 percent reduction in economic growth, and a larger shortfall could have even more detrimental impacts.
“The World Bank stands ready to assist countries in meeting their energy needs,” said Peter Thomson, Director for Sustainable Development in the World Bank’s Europe and Central Asia region. “By helping them create an attractive climate for investment, and by helping secure access to various sources of funding, including carbon finance. However, countries need to act swiftly – time is of the essence.”
The outlook for primary energy supplies, heat, and electricity is questionable for the region. In spite of the underlying resource base, the region as a whole will face an energy crunch unless investments of more than $3 trillion are made over the next 20 years, according to the new World Bank report, Lights Out? The Energy Outlook in Eastern Europe and the Central Asia.
“The demand for primary energy in the Europe and Central Asia region is expected to increase by 50 percent by 2030,” Mr. Thomson said, “while the demand for electricity is expected to increase by 90 percent.”
Following the fall of Communism, the region’s countries experienced six years of dramatic economic decline, followed by vigorous economic recovery, enabling the region to become one of the most economically dynamic in the world. This economic performance was reflected in the region’s energy sector – the initial economic decline was accompanied by a sharp reduction in the production and consumption of energy. But as the region’s economy recovered, both production and consumption increased. Investment, however, lagged, particularly in energy asset maintenance and upgrading, creating the prospect of an energy crunch.
According to the report, if energy production is to be maintained or increased to meet Europe’s energy requirements, significant investment will be required. The projected needs for primary energy development from 2010 to 2030 are estimated to be on the order of almost $1.3 trillion in order to ensure the availability of oil, gas, and coal. In addition, the region’s power sector infrastructure is in desperate need of upgrading. Electricity capacity has hardly increased since the early 1990s and plants are getting old. Investment needed in power sector infrastructure over the next 20 to 25 years is on the order of $1.5 trillion, with a further $500 billion required for district heating.
“The deteriorating capacity has not yet become a full-blown crisis,” said Thomson, “because of the decline in demand during the 1990s and the current drop off in demand related to the financial crisis. But construction lead times of several years mean that action is required now. This level of investment – more than $3 trillion – cannot be provided in this region by the public sector alone. Attracting private sector investors will require changing the investment climate to make it conducive to such investment.”
The report also recommends that to set an example, governments should undertake energy efficiency programs in the public sector, inform the public on energy efficient technology options, and design cities with alternative means of transport.
As climate concerns and emerging markets have led to increased interest in the large European hydro-power market, Albania is likely to be key player in the future, European experts had predicted earlier this month.
“The key hydropower markets are also markets where economic and electricity growth is forecast to be strongest in the next decade: Albania, Croatia and Turkey. These markets offer exciting prospects, both for established players and for smaller participants,” said Zeinegul Hassan, a research analyst at Frost & Sullivan’s Energy & Power Systems Group.
In 2009, the World Bank increased its lending for large hydro-power projects, at a time when investment fell in many other sectors. This was a result of a pan-European commitment to generate more electricity from renewable energy sources and to better exploit mature hydro-power technology, according to Frost & Sullivan.
