Green jobs in Croatia

Analysis of linking economic growth, the reduction of GHG emissions and the promotion of social development in Croatia

UNDP, 2010

Translation to English:
Ivor Bukovac, Sonja Protic

Introduction Do investments in renewable energy and the reduction of greenhouse gas emissions present an unnecessary cost at a time when we witness the fall in production and GDP? Or do they offer the possibility to develop the local economy, create jobs and competitive Croatian products? This analysis deals with these questions, attempting to identify strategic areas and achievable goals for the implementation of energy efficiency in building construction and the production from renewable energy sources in Croatia. The analysis provides an overview of the potential number of green jobs through the achievement of those goals, estimates the total reduction in greenhouse gas emissions, reducing fossil fuel imports and the size of the investment. Not all green jobs are necessarily decent. Green jobs need to be respectful and protective not only for the environment, but also to provide good working conditions and secure the workers rights. UNDP is underlining the importance of green jobs also being decent jobs, which take into account occupational health, safety, career prospects and adequate wages. Therefore, a green job need to upheld certain job standards, protecting peoples livelihoods, rights and sense of dignity. The main reasons for launching this initiative are a large number of unemployed persons in Croatia (322.600 in March 2010), a high share of energy imports, the need to reduce greenhouse gas emissions (Kyoto Protocol obligations through the recent commitment of The European Union and international obligations after 2012) and the low share of generation from renewable energy sources. In 2010, about 5,8% (1.139 GWh) of total electricity consumption is required to be generated from renewable energy sources. This percentage does not include the production from large hydropower plants. However, it is considered that the results achieved will largely miss the set target. During 2008 the production of electricity from renewable energy sources accounted for 1,3% of the total production (with the exception of large hydropower plants) and is not expected to significantly increase until 2010. The Energy Strategy [4] gives an overview of the great potential of the domestic heat and electricity production from renewable energy sources in Croatia, sets goals for 2020 and an indication for the year 2030. This analysis is based on information and targets, used in the Energy Strategy. In 2008 Croatia has imported over 55% of energy [3] and it is estimated that the share of imports will increase to approximately 70% until 2020. Imports of energy directly reflect negatively on importexport balance, contributing to greater indebtedness. Furthermore, a high share of energy import increases Croatias dependence on energy supply. Board for compliance with the provisions of the Kyoto Protocol (UN Kyoto Protocol Compliance Committee) has recently banned Croatia from emissions trading until 3,5 MtCO2 gets removed from the Initial Report of the emission balance. The disputed amount of 3,5 MtCO2 has been previously adopted by the Parties to the 2006 Convention in Nairobi but not by the foregoing authorities later on. Therefore, the Croatian Kyoto target equals 29,777 MtCO2, while overall emissions amounted to 32,385 MtCO2 in 2007 [6], meaning that Croatian greenhouse gas emissions were 2,6 million tons above the accepted goals of the Kyoto Protocol in 2007. If these emissions are not reduced until 2012, Croatia will have to buy certificates on the international market (calculating with the price of beginning of 2010 (12 / ton) the annual expense amounts up to EUR 30 million).

The emphasis of the analysis As outlined in the introduction, the aim of this analysis is an attempt to answer the question of the priority areas for the development of green jobs in the Croatian energy sector, to discover the employment potential, the ability to reduce greenhouse gas emissions and the value of the total investment. The emphasis of the analysis is placed on technologies that could be realized in private surroundings, ie on the domestic market, smaller systems that will contribute to the diversification of local energy sources and to those who have the least impact on the environment. As a background for making this report weve used a report "Needs Assessment for the transfer of technology" which is part of UNDP / GEF project MEPPPC by Ekonerg [7]. The purpose of the report was to identify priority measures for reducing greenhouse gas emissions, for which purpose a multicriteria analysis was made by 20 experts from the Croatian Energy Institute Hrvoje Pozar and Ekonerg. The multicriteria analysis is based on a total of 39 different measures from multiple sectors and for evaluating individual measures following criteria was set: Positive development effects of individual measures (in the form of employment, production increase, export opportunities increase, agricultural safety and sustainability) Possibilities of application of measures or technologies (marginal costs of emission reduction - kn/tCO2, commercial readiness and availability of technology or measure, the applicability depends on cultural and socioeconomic background of existing resources) Contribution to the objectives of climate and energy policy (reducing greenhouse gas emissions, the indirect impact on other emissions such as SO2, NOX and fine particles, and energy conservation through energy efficiency and renewable energy sources).

As a result of the multicriteria analysis, the following measures to reduce emissions of greenhouse gases were rated the highest grades: The use of biomass in cogeneration and bio-heating plants Energy efficiency in buildings Use of solar thermal systems Production and use of bio-fuels Wind farms The measures stated were used in this analysis to assess the possibility of creating new green jobs, the potential to reduce greenhouse gas emissions, saving fossil fuels and decreasing the total investment.

Green Jobs and global energy trends When classifying green jobs, it is necessary to distinguish three different types of jobs - direct employment (equipment production and maintenance), indirect (accompanying industry) and induced employment (new jobs that occur because of daily consumption of directly and indirectly employed persons) [8]. Currently there are over 2,3 million employees in the field of renewable energy sources. Half of the number of employees refers to the area of biomass and bio-fuels, more than 600 thousand to the production of solar thermal systems, 300 thousand to wind energy, 200 thousand to the production of photovoltaic systems and it is estimated that only in the U.S. in the sector of energy efficiency there was a total of 8 million green jobs in 2006 [8]. Employment growth in the renewable energy sector equally takes place in the developed world (260 thousand employed in the renewable energy sector in Germany, 200 thousand in Spain, 450 thousand in the U.S.) as well as in other countries (million employees in the sector of renewable energy in China).

Figure 1: Installed capacity in MW of new resources in 2008 year in the EU [9]

In 2008 there has been more wind power installed in the European Union than any other energy source, while Photovoltaics took third place as per total installed capacity. World renewable energy industry is growing rapidly every year - the increase of grid-connected photovoltaic systems equals to more than 60% per year.

Figure 2: Average annual increase in the use of renewable sources, 2002-2006 [10]

Solar thermal systems Croatias geographical position and mild climate provides optimal conditions for the use of solar thermal systems. However, due to lack of incentives, the installed area of solar panels falls behind the developed neighboring countries (four times fewer collectors per capita than neighboring Slovenia [11]). Experience gained in the UNDP energy efficiency project shows that an investment in a complete system for preparing hot water for an average household costs approximately HRK 25 thousand and the entire amount returns in a period between 5-10 years (through energy savings, depending on the location, frequency of use and fuel used). With 30-40% subsidy of equipment (which is recently available in four counties of the continental Croatia) the return on investment has been reduced to 3-8 years, while further energy price increases, due to the expected liberalization of energy markets, will further reduce the payback time. New Energy Strategy [4] recognizes the potential of solar thermal systems and sets the goal of 35fold increase in the installed area of solar collectors by 2030 (which would mean 563 m2 per 1.000 inhabitants, a total of 2,5 million m2 installed and 12,2 PJ of energy produced in 2030). As an example of such an installation we have the case of Cyprus in 2008, which led with 730 m2 installed per 1.000 inhabitants (30% more than the Croatian goal for 2030). The proposed objective under this analysis for solar thermal systems is achieved by 2020. The objective of the Energy Strategy envisages the same by 2030 (ten years ahead of schedule). Based on current prices of equipment, the total investment in such an installation would have amounted to USD 1,9 billion, with an annual turnover of USD 120 million. Annual emission reduction by the realization of target proposed would amount to 1,6 million tons of CO2 (at 470 kgCO2 / MWh from electricity substituted by solar thermal systems). Comparison with

recent Austrian experiences [11] show that achieving such an objective (the required 220.000 square meters of collectors per year) would result in 1.300 direct new employees and another 2.000 indirect employees a year by 2020. According to the number of employees in the manufacturing of solar thermal systems leading countries are China (600 thousand employees), Germany (19 thousand), Austria (6,5 thousand) and Greece and Spain with 3 thousand jobs [11].

Implementation of energy efficiency in buildings According to estimates, 80% of the total number of housing units in Croatia has the lowest energy category [12] (the energy needed for heating is between 200-250 kWh/m2 per year). Currently there are no incentives or obligations to improve the energy performance of existing apartments or houses. New changes in legislation require that every newly constructed house or apartment meet set energy standards and existing ones, used for rent or sale must obtain their energy card, which will make energy consumption visible. Great potential for job creation in the construction industry lies in the application of better insulation of existing buildings. With the implementation of energy efficiency in 20% of the total number of housing units in Croatia (280.000) over the next 10 years and with an investment of USD 10.000 for each existing home or dwelling, the total investment would amount to USD 2,8 billion (USD 280 million per year). Experiences gained in the existing UNDP project talk about the required three man-months for a single dwelling unit, which ultimately means creating 7.000 direct green jobs a year and least that many indirect jobs created. An average Croatian household spends 0,8 toe heating per year[3]. Achieving this goal (decreasing the energy consumption in 20% of housing units per square meter from 250 kWh/m2 to 75 kWh/m2

would mean an annual saving of 150.000 toe (6,3 PJ). With a ton of CO2 emissions at 0,3 toe per year emissions reduction would amount to 500.000 tCO2. In doing so, it is important to mention that the total investment made would pay itself back through savings on heating bills during ten years only (or less, depending on the cost of heating, which is in a constant upward trend).

Application of biomass According to the latest Forest Management Plan based on the forest management plans for 20062015, 42% of Croatian territory is considered as forest (of which 95% are natural forests, and 5% are planted). As demonstrated by the results of the project BIOEN [13] of all energy sources in Croatia, biomass has the greatest economic potential, offers the best opportunity of employment, production of energy from renewable sources and reducing greenhouse gas emissions (because the trees and plants during their growth absorb CO2, which is later emitted by combustion, biomass is carbonneutral). Biomass offers great potential in the use of thermal energy (or bio-heating plants or individual pellet-compressed stoves, using dried wood instead of gas or oil), biogas (related to cattle farms), production of bio-fuels and cogeneration (producing both heat and electric energy). In 2007, after defining a price for an incentive tariff for electricity generated from biomass, investors interest for biomass has emerged. But since the price for heat-energy is not defined most of the projects do not anticipate the utilization of heat, making the overall efficiency of the projects developed low (for electricity only). This represents a barrier to development of bio-heating plants and biomass district heating.

Estimates of the application of biomass in Croatia indicate a possibility of opening 5.000 direct green jobs, with an additional 55.000 indirect and induced green jobs [14]. This analysis assumed achieving the goals envisaged by the Energy Strategy for 2030 in 2020 (ten years before the deadline). The new Energy Strategy estimates the potential of biomass up to 93,5 PJ (in 2005, the total consumption of primary energy amounted to 413,24 PJ [3]) and sets targets for a utilization of 72% of energy resources by the year 2030 [15], which amounts to 68,72 PJ. Identified options for the use of energy from biomass are (calculation based on the Energy Strategy [16]): heat production in cogeneration and industrial boilers - 27 PJ production of pellets and briquettes (dried dense wood) - 25.2 PJ production of electricity (total installed electrical power of 420 MW)

Croatias total investment in this area (thermal stations, heating system, boilers and technology for the production of pellets) is approximately equal to its investment in electricity generation (USD 2,3 billion with the cost of the technology on 2009 level), so that the total investment amounts to USD 4,6 billion. Using biomass at the targeted level would help reducing emissions caused by electricity production by 1,5 million tons of CO2 (calculated with 7.500 hours at rated power and an emission coefficient of 470 kgCO2/MWh) and additional 1,7 million tons of CO2 could be reduced in heat production from pellets and briquettes (calculated with 1 tCO2 from 530 m3 natural gas substituted by biomass). This would lead to a total emission reduction of 3,2 million tones of CO2.

Wind power Construction of 1.200 MW wind farms by 2020, as envisaged by the Energy Strategy, would mean 1.200 new green jobs created directly and at least another 1.000 indirect jobs, considering a local production of 75% of the components (calculation based on [17]). Annual reduction in CO2 emissions would amount up to 1,3 million tons (calculated with 2.200 hours at rated power and an emission coefficient of 470 kg CO2/MWh). The introduction of an incentive tariff for electricity from renewable energy sources has resulted in great interest of investors, therefore, by the beginning of 2009 the Ministry of Economy, Labour and Entrepreneurship received requests for almost 6.000 MW of new installed capacities in wind energy (representing 150% of todays total installed capacity of the Croatian electricity power system) [18]. Croatian company Konar has recently in collaboration with 19 companies (out of which 10 belong to Konar Group) built its first wind power agregate of 1 MW and is in development of a 2,5 MW wind power agregate) [19]. The total investment for planned 1.200 MW, according to the prices in late 2009 (2.250 USD / kW of installed capacity) would amount to EUR 1,8 billion, while the total energy production would amount to 2,64 TWh (at 2.200 working hours at nominal power).

Proposed measures to create green jobs in the analyzed sectors Establishment of micro-credit lines at commercial banks (preferential interest rates realized in cooperation with CBRD and Environment Protection Fund) for the installation of solar heating systems, insulation of residential units and biomass-fired furnaces Establishment of feed-in tariffs for heat from renewable energy sources (expanding to encourage the installation of renewable energy systems producing heat on other counties by

offering incentives in the form of co-financing of investments by local communities and EPEEF) Redirect the announced funding to encourage buying a housing unit in relation to investment incentives for improving the thermal insulation of new and existing housing units The legal obligation to cover a minimum share of heat energy consumption with its own production when constructing new buildings (depending on the surface of the building, 3070%) Encouraging (attractive credit, tax relief, etc.) companies engaged in production technologies and services for renewable energy Standardization of the quality of biomass and quality certification of solar thermal systems for sale Organization of training for the expected positions required in the renewable energy sector (special emphasis on the unemployed, employed in shipbuilding and the accompanying industrial, rural areas, war veterans) to change the program of secondary education and vocational training for adults Facilitate market price of electricity and additional taxation of energy products - increasing energy prices contributing to the attractiveness of investing in renewable energy and energy efficiency, while energy prices for poor households can be solved by targeting assistance.

Conclusion Sector Sector goals by 2020. Direct green jobs Energy efficiency in Building EE measures use in 20% of existing housing units Achieve goals set in 2030 Energy strategy Achieve goals set in 2030 Energy strategy 7.000 Indirect and induced green jobs Reduction in annual emissions in 2020. (tCO2) 0,5 million Total Annual investment energy output in (USD) 2020.

7.000

2,8 billion

6,3 PJ

Biomass use

5.000

55.000

3,2 million

4,6 billion 1,9 billion

68,7 PJ

Solar thermal systems

1.300

2.000

1,6 million

12,2 PJ

Wind power

Production 1200 MW Wind power

1.200

1.000

1,3 million

2,25 billion

9,5 PJ

TOTAL

14.500 direct jobs

65.000 indirect and induced jobs

6,6 million (21% current Croatian CO2 emissions)

11,55 billion

96,7 PJ (25% immediate energy consumption in 2020.)

The main objective of the analysis is to start discussions on the potential utilization of renewable energy and energy efficiency through local recruitment. The results of the analysis should be seen In this way: While this analysis talks about 1.200 directly employed in wind turbines production that number may be several times higher if the competitiveness of domestic industries producing for export exceeds domestic needs. Creating a favorable climate for green jobs in energy means including not only the economy but also politics, local communities, civil society, trade unions, employers, etc. Given the huge potential that Croatia has to produce its own renewable energy, this time of crisis should be used to redefine development areas and priorities. If we were taught anything by this crisis, it is that sustainable development has no alternative.

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