Low Carbon Scenarios for South East Europe: Case Study of Albania Zsuzsa SZALAY, Aleksandra NOVIKOVA, Tamás CSOKNYAI, József FEILER Budapest University of Technology and Economics, Hungary, szalay.zsuzsa@epito.bme.hu

Why buildings of Albania, Serbia, and Montenegro? Building sector responsible for 38-44% of the final energy consumption, 66-74% of the electricity consumption (2013) Small countries- small departments responsible for energy efficiency planning Low thermal comfort standards Outdated wooden stoves widespread Contracting members of the Energy Community Treaty SLED: Support for Low Emission Development in South East Europe There are many reasons for that: First, in 2013, the building sector was responsible for 38 - 44% of the final energy consumption and 66% - 74% of the electricity consumption. The residential buildings contributed the largest share to these figures Second, our countries are small. There are 700,000 people living in Montenegro and therefore the departments responsible for energy efficiency planning are very small. 2.8 million in Albania Third, our living standards are very low as compared to those in the EU. In Albania, usually only one room of a dwelling is heated for a few hours a day. Fourth, many people still use outdated wood stoves, which cause high air pollution. (Respiratory diseases). For instance, ca 60% households of Serbia heat with wood. Cutting down forests brings numerous environmental problems (deforestation, biodiversity loss, soil degradation). Contracting Members of the Energy Community Treaty, obliged to introduce EU energy efficiency legislation. In accordance with the Directive 2006/32/EC on Energy End-Use Efficiency and Energy Services (ESD), the countries have to meet the energy saving target, which equals to 9% of total energy sales in 2018 versus 2010. Achieving this target requires more ambitious policy efforts and larger investments into the demand-side energy efficiency than they happen at present.

Objective To assist the design of climate mitigation policies in the residential buildings of Albania, Serbia, and Montenegro with the information on: What are the future trends of energy consumption and CO2 emissions? What are the key influencing factors? What are the priority sector segments for policies? What kind of policy packages and what level of policy efforts are required to make the residential buildings low energy/carbon in the medium/long term future? What are the associated costs? How high are possible energy savings and CO2 emission reduction? and… our aim was not only to supply ready results, but also to increase the capacity of policy-makers and experts to conduct their own assessment. While many European countries already have a detailed building typology, in most SEE countries there is a lack of understanding how to structure and use this detailed information for policy making. We worked closely with representatives of ministries of energy, environment and other institutions on the design and assumptions of the models.

Architects & policy experts Economists & policy experts Modelling steps Bottom-up model for thermal energy services Architects & policy experts Economists & policy experts Step 1: Development of the building topology Step 5: Construction of the building stock model Step 2: Calculation of the present building performance Step 6: Construction and calibration of the energy sector in the base year Our research consisted of two parts (Fig. 1). The first part included the preparation of the country’s buildings topology, the calculation of buildings energy performance by end-use, as well as the assessment of possible buildings retrofit packages and the associated costs on the level of individual representative buildings. The second part calculated the energy balance and CO2 emissions on the sector level, compared and calibrated the calculated energy balance to that available from the national public statistics, extrapolated sector’s energy consumption and associated CO2 emissions to the future (e.g. 2030) according to business-as-usual assumptions, formulated low carbon policy packages, and calculated energy savings, CO2 emissions avoided, saved energy costs and investments required due to the realization of these packages. As a modelling tool, we used a LEAP software (the Long-range Energy Alternatives Planning System) developed by the Stockholm Environment Institute. Such a complex model can only be carried out with the involvement of several experts. The first part can be conducted by architects or engineers specialized in building energetics. The second part requires the involvement of an economist or modelling specialist. Knowledge on the local conditions is of great importance, as usually the available statistics do not cover all the necessary information for such a model. This methodology is also replicable in other countries. We assessed only thermal energy services delivered in the residential buildings, namely space heating, space cooling and water heating. We did not cover energy use for electrical appliances, lighting and cooking. Step 3: Calculation of possible retrofit packages (BAU, standard, ambitious) Step 7: Calculation of baseline energy consumption and CO2 emissions until 2030 Step 4: Calculation of costs for retrofit packages Step 8: Formulation of policy packages, evaluation of their impact and associated costs

Building typology in Albania Methodology is based on TABULA/EPISCOPE Categorization Age Type Climate Heating system Calculation steady-state seasonal calculation based on EN ISO 13790 Performance Current BAU Standard retrofit Ambitious retrofit Costs Capital + installation As a result of our project, we analyzed the residential building stock in Serbia, Montenegro, and Albania and prepared building topologies relying on the methodology and experience of the European TABULA/EPISCOPE project. The slide presents our topology for Albania. As you can see, we classified buildings and counted them according to their construction period and type. The main sources for defining the building types are the available statistics, architectural plans and experts’ knowledge. We also calculated their performance in three climate zones. The territory of Republic of Albania is divided into three climatic zones: zone A is the mildest along the sea, B is the medium zone and C is the coldest in the mountainous area. About half of the buildings are located in climate zone B, while climate zone A has about one third of the buildings. The least buildings, about 16% of the stock are located in climate zone C. The most common energy source for heating are wood, LPG gas and electricity. Solar heating and other energy sources, such as coal and oil are negligible. There is a large difference between rural and urban regions: in the rural area wood is much more dominant as a heating fuel than in urban areas. A difference can also be observed between the three climate zones. In the mountainous region of climate zone C, wood is predominant. In climate zone A and B, about half of the households are heated with wood, but electricity and gas also have a significant share. Corresponding to the main energy sources, stove is the most typical heating system, followed by electric heaters and air heat pumps (air conditioners). Systems with low efficiency are common. Only about 3% of the private households have central heating (building or dwelling heating). The penetration of reversible heat pumps that are used both for space heating and cooling is quickly increasing. Sanitary hot water is usually made using electrical hot water boiler, and to a lesser extent with wood or LPG. Further, we calculated their performance in case of renovation, which usually happens in the business-as-usual case, as well as in cases of standard and ambitious retrofits. The standard retrofit would improve building performance to that according to the forthcoming Albanian building code. The ambitious retrofit corresponds to nearly zero energy/carbon performance. For each of retrofit packages we calculated associated costs. The building stock in Serbia and Montenegro show similar characteristics, whilst the Albanian building stock is very different.

Statistical data on the building stock in Albania (2011 census) Population Total 2,821,977 inhabitants Number of residential buildings and dwellings Total 598,267 residential buildings Total 1,012,062 dwellings Total 709,865 inhabited dwellings The total number of residential buildings in Albania was 598,267 according to the 2011 census for a population of 2,821,977 (53.5% of the population live in urban and 46.5% in rural areas). The number of dwellings was 1,012,062, from which only 709,865 dwellings were inhabited. The high number of non-inhabited buildings and dwellings is remarkable, which is not typical in EU countries. The building typology was created with the help of the Albanian experts based on the last census data from 2011. For the representation of the building stock 20 buildings were defined based on the building type (detached houses; semi-detached houses; row (terraced) houses and apartment buildings), and the construction period (buildings built before 1960; between 1961 and 1980; 1981-1990; 1991-2000 and 2001-2011). Detached houses built between 1991 and 2000 (type D1) represent the largest group. Apartment buildings from 1961-1980 and 1981-1990 are also significant regarding the number of dwellings (Fig. 2)

Building stock model The growth in new floor area (0.6% yr.) is due to The high demolition rate of old buildings The growing number of households The larger floor area of new dwellings than it was before Based on the expected trends of the population growth and persons per household, we estimated the total number of households in the future. Then we estimated the number of the existing dwellings, which will still remain in the future in the long term, using the Weibull curve [5]. The construction of new dwellings was estimated as a gap between the demand for dwellings represented by the number of households and the remaining stock of existing dwellings. The dwellings stock was corrected for the inheritance rates provided by country censuses

Calibration of the model for thermal comfort, Albania In all countries partial heating and intermittent heating is a typical problem as well as uncertainties of wood share in the energy balance. Floor area heated Zone A – 50% Zone B – 60% Zone C – 80% Duration of space heating Electricity heating - 8 hours Wood and LPG heating – 6 hours Many regional models overestimate potential energy savings and cost-effectiveness of energy efficiency… The energy demand of each representative building in each climate zone was estimated as a sum of its energy demand for space heating, water heating and space cooling. Then we multiplied the number of representative buildings by their energy demand in each climate zone and summed up the results across all climate zones, building types, and building age categories. For reality check, we compared the calculated final energy consumption with the sector energy balance available on the macro level. The calculated final energy consumption appeared to be significantly different from the sector energy balance. Two main reasons were identified: the discrepancy between the census data on energy sources and the sector energy balance and the extent of partial and intermittent heating/ cooling. A special phenomenon is that in Albania traditionally only the main room was heated and only for a part of the day. According to AKBN, in 2008 only 35% of the living area was heated at the coastline and about 70% in the mountains. The trend is that the heated area increases. In 2012, about 45% of the living area was heated in the coastline and 80% in the mountainous region. Hence we calculated a full and a partial heating option with correction factors derived from the calibration of the model. The figure compares the energy balance of Albania in 2010-2013 and the calculated energy consumption of thermal energy uses with and without calibration to partial heating/cooling and the duration of heating/cooling. The non-calibrated energy consumption (energy demand if households would heat the whole floor area during the whole day) is more than twice higher than the calibrated (actual) energy consumption. This gap represents an important message. As the welfare of Albanian people will grow in the future, households will wish to heat larger floor areas for longer period of time. This is why, it is important to reduce the demand for energy through retrofitting existing buildings, to ensure high energy performance of new buildings, and to install advanced technical systems as soon as possible in order to avoid the growing of energy demand due to rising living standards. Models which do not make calibration overestimate energy savings and its cost-effectiveness that provides misleading information for households and policy-makers.

Net energy demand of building types, zone B The net energy demand with partial heating and cooling is only 25-45% of the values for full heating and cooling, but still accounts for 100-180 kWh/m2yr in buildings built before 2000. The progress in the net heating demand shows that the thermal characteristics of the building stock somewhat improved over time, but significant improvement is remarkable only in the last decade. In general, detached house have higher heating demand than large buildings due to the unfavourable surface-to-volume ratio. In most building types heating is dominant in the total energy demand, except for recently constructed dwellings. As a result of the retrofit packages, the heating energy demand drastically reduced to a low energy building standard in the complex retrofit options. The hot water demand remained the same. The cooling energy demand also significantly decreased (Fig. 3). Further, we calculated their performance in case of renovation, which usually happens in the business-as-usual case, as well as in cases of standard and ambitious retrofits. The standard retrofit would improve building performance to that according to the forthcoming Albanian building code. The ambitious retrofit corresponds to nearly zero energy/carbon performance. For each of retrofit packages we calculated associated costs. The “Building as Usual” (improvement BAU) option includes the most frequently applied renovation option nowadays that is the exchange of windows and the installation of standard heat pumps. The “Standard” option (improvement 1) includes interventions on each building component in order to comply with the minimum requirements foreseen in the case of major renovation. This case includes a set of interventions upgrading the building envelope from an insulation point of view and efficient building service systems, also considering fuel switch and implementing solar hot water systems. The “Ambitious” option (improvement 2) goes beyond the building regulations regarding the building envelope. The applied building service systems are still based on the two main energy sources (wood and electricity), but better system efficiencies are considered. In all cases central solar systems are introduced for hot water production. Energy demand could be reduced in case of standard and ambitious retrofits even though these retrofits assume higher thermal comfort.

Moderate scenario New buildings comply with the building codes recently adopted or to be adopted these codes correspond to the characteristics of the measures of the “standard” improvement. Existing buildings will be retrofitted by 2050 in Albania and by 2070 in Serbia and Montenegro to the standard level and will get financial support for that. Grants will be provided to cover eligible costs for: Low income households Households in large buildings : 90% of the retrofitted households in 2016 declining to 10% of them by the target year Low interest loans will be provided to cover eligible costs for: The rest of the households in small houses The rest of the households in row houses and apartment buildings In order to understand the level of efforts, which the countries have to apply to decarbonize their residential building stock, we modeled three scenarios. In the business-as-usual scenario, new buildings are built according to the practices taking place in 2001-2011, i.e. in line with the building code introduced in 2003 . The only difference is that the share of living area heated and the duration of heating is higher than in the past, namely the same as in the business-as-usual improvement. The moderate scenario models the decarbonisation by 2050 in Albania and by 2070 in Serbia and Montenegro. According to this scenario, new buildings will be built according to the buildings codes recently adopted (Monte, Serbia) or to be adopted (in 2016 for Albania) In order to ensure the retrofit of the entire existing buildings stock, all buildings remaining until 2050 will be retrofitted at least once to the level of standard improvement. To ensure the implementation of these retrofits, the countries introduce financial incentives. For the majority of households in detached and semi-detached houses the introduction of low-interest loans is relevant. For households, which live in such houses and which are considered low income, we suggest the introduction of grants (10%). We assume that at present there are only 10% of the households in row houses and multi-residential apartment buildings, which are able to overcome organizational barriers and obtain low interest loans for building retrofit. We assumed that the rest of households in these buildings are eligible to obtain grants. As the market cumulates the experience of providing loans for the retrofits in multi-residential buildings, the share of households, which will be able to obtain the loans will grow to 90% by the end of modelling period. For the rest of the households, which are considered low income, the government will continue to provide grants.

Ambitious scenario New buildings Additionally to the assumptions of the moderate scenario: after 2023: comply with the building codes to be introduced in that year; these codes correspond to the characteristics of the measures of the “ambitious” improvement; before 2023: are eligible for low-interest loans to cover eligible costs, if their performance achieve that according to the 2023 building code Existing buildings will be retrofitted by 2050 in all countries and will get financial support for that (the same structure as in the moderate scenario) until 2022, will have to comply with the standard improvement after 2023, will have to comply with the ambitious improvement The ambitious scenario models the decarbonisation by 2050 in all countries. According to it: The countries will introduce a new stricter building code in 2023 Before 2023, buildings are eligible for low-interest loans, if their performance achieve that according to the 2023 building code The structure of the financial incentives is similar, with one note that to obtain them, buildings have to comply with the standard improvement until 2022 and after 2023 they have to comply with ambitious imporvement

Results: LEAP model for Albania The slide shows how the Albania model prepared in LEAP looks like. LEAP software (the Long-range Energy Alternatives Planning System) developed by the Stockholm Environment Institute. We worked closely with representatives of ministries of energy, environment and other institutions on the design and assumptions of the models. These policy-makers were trained for LEAP. And the models with all underlying input data were provided to these stakeholders to conduct their own assessments later upon their needs.

Results: SLED Ambitious Albania - Final energy consumption 35% According to the ambitious scenario, the final energy consumption will decrease to 2.7 billion kWh or it will be 35% lower than the business-as-usual level in 2030.

Results: SLED Ambitious Albania - Electricity savings 49% The scenario allows a 49% reduction of the business-as-usual electricity consumption. The total investment costs are EUR 2.7 million over 2015 - 2030 or EUR 179 million/yr. The incremental investment costs into building retrofits are EUR 1.5 billion over 2015 – 2030 or EUR 99 million/yr.. Additionally, the incremental investment costs into new more efficient buildings are EUR 1.1 million or EUR 72million/yr.

Conclusions In all three countries, both moderate and ambitious policy scenarios may deliver significant energy savings Sector priorities for policy-making are different for each country. In Albania, it is important to ensure that buildings built after 1991 will be retrofitted In Serbia and Montenegro, it is important to retrofit the building stock constructed in 1971 – 1990 For all countries it makes sense to focus on energy savings in small buildings. Space heating is the largest energy use for energy savings. From scenario modeling, we concluded that In all three countries, both moderate and ambitious policy scenarios may deliver significant energy savings But sector priorities for policy-making are different for each country. For instance in Albania, it is important to ensure that buildings built after 1991 will be retrofitted while in Serbia and Montenegro, it is important to retrofit the building stock constructed in 1971 – 1990 For all countries the largest energy savings are associated with retrofitting and construction of small buildings (single family houses)

Conclusions The investments required are high in all three countries Need to couple thermal efficiency improvement of existing buildings with their BAU renovation Need to enforce retrofits at the point of sale The investments into all scenarios except for the Serbian ambitious scenario are cost-effective or on the border of cost-effectiveness. Saved energy costs are higher than annualized investment costs as a whole on the country level, but not for all building categories in all climate zones. It is important to calculate other benefits additionally to saved energy costs The realization of the scenarios requires a careful design and massive provision of financial products for the residential energy efficiency as well as the introduction and enforcement of building codes. We also concluded that the investment required are very high in all three countries. This is why, it is important to couple thermal efficiency improvement of existing buildings with their BAU renovation. It also makes sense to use other “windows of opportunities” where retrofits could be demanded for instance at the point of dwelling sale. The investments into all scenarios except for the Serbian ambitious scenario are cost-effective or on the border of cost-effectiveness. However, saved energy costs are higher than annualized investment costs as a whole on the country level, but not for all building categories in all climate zones. This is why, it is very important to calculate other benefits (health, higher productivity, comfort, etc) additionally to saved energy costs. The realization of the scenarios requires a careful design and massive provision of financial products for the residential energy efficiency as well as the introduction and enforcement of building codes.

Our project team Project implemented by the Regional Environmental Center for Central and Eastern Eruope (REC) Supported by the Austrian Development Cooperation Reports are available at: http://sled.rec.org/building.html Models are available on request at: aleksandra.novikova@ikem.de International experts Aleksandra Novikova, Tamas Csoknyai , Zsuzsa Szalay Jozsef Feiler, Agnes Kelemen, Vaiva Indilaite Albania Gjergji Simaku, Teuta Thimjo, Thimjo Plaku Serbia Milica Jovanović Popović, Bojana Stankovic, Branislav Živković , Ignjatović Dušan, Aleksandra Sretenović Montenegro Zoran Miljanic , Biljana Gligoric, Igor Vušanovic Our reports are available at the following link. If you would like to see the models, please contact Aleksandra Novikova at the given email. The slide presents our team of international experts we as well as national teams in Albania, Serbia, and Montenegro.

Thank you www.sled.rec.org Information inquiries: Zsuzsa Szalay: drZsuzsaSzalay@gmail.com Aleksandra Novikova: Aleksandra.Novikova@ikem.de Tamás Csoknyai: CsoknyaiTamas@gmail.com József Feiler: Jozsef.Feiler@gmail.com Vaiva Indilaite: vindilaite@rec.org Gjergji Simaku: Gjergji.Simaku@energjia.gov.al Thank you for your attention and if you have any questions please do not hesitate to contact us at the following emails.

Results – net energy demand, present state The progress in the net heating demand shows that the thermal characteristics of the building stock somewhat improved over time, but significant improvement is remarkable only in the last decade. In general, detached house have higher heating demand than large buildings due to the unfavourable surface-to-volume ratio. In most building types heating is dominant in the total energy demand, except for the recently constructed dwellings.  In the partial heating option, space heating demand is only 25-45% of the values for full heating. These values are more realistic and match the energy balance better. No correction factors were applied for domestic hot water, hence its relative significance increases, and becomes dominant in recently constructed large buildings. Climate zone B, full heating Climate zone B, partial heating

SLED moderate scenario Objective: by 2050, all new and existing buildings will achieve at least the level of standard improvement 1 In order to understand the level of efforts, which the countries have to apply to decarbonize their residential building stock, we modeled three scenarios. In the business-as-usual scenario, new buildings are built according to the practices taking place in 2001-2011, i.e. in line with the building code introduced in 2003 . The only difference is that the share of living area heated and the duration of heating is higher than in the past, namely the same as in the business-as-usual improvement. The moderate scenario models the decarbonisation by 2050 in Albania and by 2070 in Serbia and Montenegro. According to this scenario, new buildings will be built according to the buildings codes recently adopted (Monte, Serbia) or to be adopted (in 2016 for Albania) In order to ensure the retrofit of the entire existing buildings stock, all buildings remaining until 2050 will be retrofitted at least once to the level of standard improvement. To ensure the implementation of these retrofits, the countries introduce financial incentives. For the majority of households in detached and semi-detached houses the introduction of low-interest loans is relevant. For households, which live in such houses and which are considered low income, we suggest the introduction of grants (10%). We assume that at present there are only 10% of the households in row houses and multi-residential apartment buildings, which are able to overcome organizational barriers and obtain low interest loans for building retrofit. We assumed that the rest of households in these buildings are eligible to obtain grants. As the market cumulates the experience of providing loans for the retrofits in multi-residential buildings, the share of households, which will be able to obtain the loans will grow to 90% by the end of modelling period. For the rest of the households, which are considered low income, the government will continue to provide grants.

SLED ambitious scenario Objective: by 2050, the largest part of the new and existing buildings will achieve the level of ambitious improvement 2 The ambitious scenario models the decarbonisation by 2050 in all countries. According to it: The countries will introduce a new stricter building code in 2023 Before 2023, buildings are eligible for low-interest loans, if their performance achieve that according to the 2023 building code The structure of the financial incentives is similar, with one note that to obtain them, buildings have to comply with the standard improvement until 2022 and after 2023 they have to comply with ambitious imporvement