Guest post: Pljevlja shareholder A2A must resist pressure to build new lignite unit in Montenegro

A group of 16 leading NGOs from the Balkans and Italy dealing with energy and its impact on the environment yesterday sent a letter to Italian company A2A, a major shareholder in Montenegro’s electricity company EPCG, concerning ongoing negotiations about the construction of a second unit at the Pljevlja lignite-fired power station.

In spite of fierce pressure from the Montenegrin government, A2A has been reported by Montenegrin media to be sceptical about the construction of a new unit at Pljevlja due to concerns about the project’s economics, and our letter aims to encourage the company to stay firm in its position.

We believe that construction of a new unit would be harmful for the people and economy of Montenegro, as well as for its environment.

As an EU candidate country, Montenegro needs to bring its legislation and policies into line with those of the EU, including climate and decarbonisation policies, increasing the share of renewable energy and improving air quality, all of which would be made more difficult by building a new lignite-fired power unit.

The project would further burden the over-indebted public budget, as it is expected that the Montenegrin government would have to provide a state guarantee for the loan that would finance the majority of the project.

The economic feasibility analysis of the project and estimated electricity price from the unit presented by the government are not convincing and the government has never publicly proved this unit is needed to satisfy demand – except by inflating Montenegro’s future demand growth figures. Nor have alternatives ever been seriously discussed.

The air quality in Pljevlja is so poor that local people held a protest on 22 December 2014 to demand the implementation of the relevant laws and policies. However EPCG and the Montenegrin government have so far made no commitments to rehabilitate the existing power plant and bring it into line with the EU Industrial Emissions Directive and other environmental legislation, or to replace it with non-lignite generation capacity. The Montenegrin parliament has several times discussed the fact that the original plans for the existing plant stipulated the inclusion of an appropriate heating solution in Pljevlja, which would have reduced pollution from residential sources, however this has never been implemented, and we do not see any progress on this issue.

The Energy Community has estimated that the rehabilitation of the existing unit at Pljevlja would cost around EUR 50.9 million, while a new unit would cost between EUR 277 and 356.7 million, not including the expansion of the mine, new ash dump or heating for Pljevlja. Nor does this cost include CO2 costs, or rehabilitation and recultivation of the existing ash dump and mine sites.

We therefore doubt that Montenegro can afford both rehabilitation of the existing unit and the construction of a new one and believe that rehabilitation of the existing unit, as well as rehabilitation and recultivation of the damaged areas should be an urgent priority. Therefore we call on A2A to take this into account as it considers its future engagement in Montenegro.