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Pljevlja II lignite power plant, Montenegro


View of Pljevlia and the existing power plant.

Although the project is at an early stage of the permitting process, several issues have already emerged.


Now that Czech export credit support for Pljevlja has been cancelled, the project's financing is on very weak footing.

In October 2016 it was reported that the Czech Export Bank and export credit agency EGAP had decided not to finance the project. It now remains unclear who is ready to take on such an uneconomic project in a town with a heavy environmental legacy. Pljevlja needs a just transition to a cleaner economy, not another coal plant.


Economic only with creative accounting – threat of stranded assets

In summer 2016, the Montenegrin government published an analysis purporting to show that Pljevlja II would be an economic investment. However, even a brief examination of the document showed that this is extremely unlikely:

    If Montenegro somehow manages to delay the implementation of the EU Emissions Trading Scheme until 2026 and
    If electricity prices more than double by 2040 and
    If CO2 costs are 10% lower than projected and
    If Pljevlja mine manages to reduce production costs from 24.21 EUR/tonne to 17.5 EUR/tonne within the next ten years and
    If no VAT is paid for the EPC contract,
    Then the Pljevlja II power plant might just turn out economically viable.

As well as the general unlikelihood of all the above coinciding, there is no real overall need for a new coal plant in Montenegro. The future of Montenegro's largest electricity consumer, the Podgorica Aluminium Factory (KAP) is in question and it seems unlikely to function in the medium-long term, which will make a significant impact on demand.

In addition, official documents are unclear on whether the rehabilitation of the existing Pljevlja power plant is planned. If it is, the new unit is almost certainly unnecessary. If it isn’t, Montenegro can cover its demand with additional energy efficiency, wind and solar within a few years if it steps up its level of activity in this field.

Montenegrin decision-makers often highlight the idea of exporting electricity, however an analysis by the University of Groningen and consultancy The Advisory House has shown that for the next ten years at least, there is likely to be a surplus of electricity in the EU, thus it is questionable whether there will be a market for potential electricity exports from Montenegro and other Balkan countries.

Read more
Stranded assets in the Western Balkans - report on the long-term economic viability of new export capacities
Study | March 19, 2015

 

Insufficient economic lignite reserves for the lifetime of the plant

Official documents related to the 254 MW Pljevlja II lignite power plant count all lignite reserves in the Pljevlja area as being available for the use of the plant. However they do not take account of the fact that some of the deposits have been already found to be uneconomic and that the existing power plant will still use up more lignite before the end of its lifetime.

Confronted with this issue, in 2016 EPCG changed its tactic and commissioned Fichtner to come up with a study on how to make the mine deposits economically feasible. Fichtner found that the Pljevlja mine would have to reduce production costs from 24.21 EUR/tonne to 17.5 EUR/tonne within the next ten years, and that one of the ways to do this would be by reducing the number of employees from 872 in mid-2016 to somewhere between 520 and 544 by around 2025. It is unclear whether this can be achieved or not. In addition, the government is in denial, promising new jobs with Pljevlja II while in reality the number of jobs will shrink, whether it is built or not. There is no plan how to carry out this reduction in a socially responsible and inclusive manner.

Read more
Deceptive promises of new jobs in the coal sector don't help workers, communities or the climate
Blog post | November 14, 2016

 

The environmental situation in Pljevlja will be further worsened

As Montenegro plans to join the EU around 2020, all new investments need to be in line with EU standards. However Pljevlja already suffers from serious air pollution [Montenegrin language] which is far away from EU ambient air quality standards.

The town is situated in a depression at around 720 m above sea level, and is prone to temperature inversion and smog. Thus the existing power plant has a disproportionate negative impact on local air quality.

While the new plant is claimed to be less polluting than the existing one, the Montenegrin government has not made any commitment on when it will close the existing plant and in various documents has mentioned 2018, 2025 and 2030. In the latter two cases, the existing plant would run parallel to the new one, thus worsening air quality even further.

In addition to the air quality problems mentioned above, the existing plant has left other serious legacies which pose risks for local people and the plant and mine owners.

The most visible is the massive Jagnjilo spoil tip, consisting of an estimated 70,000,000 tonnes of marl waste dug out from the lignite mine which causes dust to blow around on windy days. Local people report that in 2005-2006 – presumably due to the pressure caused by the weight of this tip – a 5-m wide rift in the ground downhill from the heap opened up, which has now been filled in with rock waste.

Ash pond pollutes the air

A Montenegrin TV reportage showing pollution and people affected by the ash pond.

The Maljevac ash pond serving the existing power plant is within just a few metres of the nearest houses and the ash is often not adequately covered with water, so that it too blows around in windy weather. People in Pljevlja complain of a high rate of illness, especially in the village of Zbljevo next to the ash pond, and there are concerns about the stability of the earth bank around the landfill. EPCG is currently attempting to obtain agreement from the Ministry of Environment to expand the landfill upwards.

Non-standard tender process

Instead of conducting a formal tender process for the main contractor in the Pljevlja II project, the Montenegro government chose a company through an informal selection process that lacked clear deadlines and specifications.

Several companies submitted preliminary offers for plants ranging between 220 and 350 MW and three companies – China's CMEC and Hubei-Powerchina and the Czech Skoda Praha - were shortlisted. A contract was signed with Skoda Praha in September 2016, which reportedly included an obligation for Skoda to find financing for the project. After the Czech Export Bank declined financing in November 2016, Skoda Praha’s future in the project is now uncertain.

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Latest developments


 

Blog entry | March 29, 2017

At least 9 new lignite power plants are being planned in Bosnia-Herzegovina, Kosovo, Macedonia, Montenegro, and Serbia, but according to our new report their feasibility studies do not take into account the effect of CO2 prices. As a result, when these countries join the EU, the plants will not be competitive anymore and will need to be closed down – just like the many coal power plants in Western Europe that are now being shut. The taxpayers in the Western Balkans will end up footing the bill.

Press release | March 29, 2017

A new Bankwatch analysis examining ten coal-fired power plant projects across the Western Balkans finds that, once the cost of carbon emissions allowances are factored in, they could become a serious liability for both the companies involved and the public. Moreover, only a few feasibility assessments for coal power plants in the region are publicly available, and most of those have failed to properly take carbon costs into account, the briefing authors note.

Blog entry | February 23, 2017

It was ten in the evening on 17 December when my colleague and I arrived in Pljevlja, Montenegro. Although we could feel the smell of burnt coal already while driving there, the minute we set foot out of the car, the air was stifling. “This place reminds me of childhood, it smells like in your grandparents’ house when the chimney was stuffed and all the smoke came inside. Only this is outside", he said, with a scarf pulled over his nose.

Blog entry | December 23, 2016

Once again people from Pljevlja in northern Montenegro have taken to the streets to protest against the awful pollution that has been plaguing the town for years.

Blog entry | November 14, 2016

Now is the time for southeast Europe to start an inclusive and just transition away from lignite, argues new Bankwatch research.

Publications

Briefing | March 29, 2017

This briefing analyses ten coal-fired power plant projects across the Western Balkans and finds that, once the cost of carbon emissions allowances are factored in, they could become a serious liability for both the companies involved and the public.

Briefing | November 14, 2016

Coal is the single biggest contributor to global climate change. But governments and investors planning new coal capacities have a range of flimsy arguments why coal would be the best or the only alternative. This briefing busts a number of myths surrounding coal, such as "coal is cheap", "alleviates poverty" or "coal is clean".

Study | November 14, 2016

This report reveals how and why promises for new jobs in south-east Europe’s coal sector are exaggerated. Hardly any coal operations across the region are economically viable, and as a result many coal workers, especially in the mines, are set to lose their jobs, even if the plans for countless new power plants materialise. Governments, coal workers and their wider communities need to work together towards a just transition.

Available languages:

Briefing | May 26, 2016

All the Western Balkans countries have committed to increase their share of renewable energy by 2020 to reach between 25 and 40 percent of their energy mix, as part of their obligations under the Energy Community Treaty. Yet this is far from obvious when examining their investment plans for new power generation capacity. Governments are actively planning to build 2800 MW of new coal plants with construction cost of at least EUR 4.5 billion. In contrast, these countries are only planning to build around 1166 MW of wind power plants, at an estimated cost of EUR 1.89 billion.