Economic vulnerability assessment in the water sector with a focus on electricity production in hydropower plants: Case of Montenegro

Abstract

The aim of our paper is economic vulnerability assessment in the water sector of Montenegro, with a focus on electricity production in hydropower plants. The absence of an officially defined methodology in Montenegro, as well as in the region of South-East Europe represents a kind of challenge for research of this type especially for the assessment of economic damage caused by climate change and in the future period. In our paper, we treated negative impacts in the water sector as additional costs for the import of electricity due to reduced electricity production caused by the reduction of water potential due to climate change. After collecting, processing and analyzing data on electricity production in Montenegro, we prepared a projection of this production in the future period for the basic scenario - “without climate change”. This was followed by an assessment of the quantitative damage, in accordance with the determined climate scenarios. After analyzing electricity prices in the European market, we defined future unit were defined as a basis for damage assessment. We conclude the paper with the calculation and projection of economic damages caused by climate change in the Montenegrin energy sector. The basic variant of the analysis would be the existing price of electricity imports for 2022, in the amount of 200 EUR per MWh. The other two variants would be one higher and one lower electricity import prices (250 and 150 EUR per MWh, respectively), in order to gain an overview of the future price fluctuations in a certain way.