Croatia coal plant vote unlikely to derail project
6 April 2015, Monitor Global Outlook
SIGNIFICANCE: Croatia, like several countries in the region, is upgrading coal-fired power plants to boost electricity security. This has encountered opposition from environmental groups and local people.
IMPACTS
SOCIAL: Environmental concerns about coal power and other energy projects are real, but have partly gained momentum due to broader political issues.
POLITICAL: The government wants to push ahead with energy projects, but faces rising opposition as a closely-fought election nears.
BUSINESS: The project will go ahead for now, but various challenges – regulatory and economic – remain.
FULL BRIEFING
On Mar. 30, Croatian economy minister Ivan Vrdoljak said that the development of a coal-fired power plant would go ahead, despite a local advisory referendum on the development rejecting the project. The vote was nonbinding and voter turnout was just 36 percent.
The Plomin C project in Labin, Istria, is more likely than not to go ahead, but environmentalists have vowed to keep pressure on the government over coal power. Environmental opposition to energy projects, including offshore oil and gas exploration in the Adriatic Sea, has grown more vocal. This may be linked to broader disenchantment with an embattled government that faces an election by year-end.
“We will certainly keep up the pressure to prevent Croatia making costly investment mistakes in climate-damaging technologies,” Pippa Gallop, coordinator at the CEE Bankwatch Network, which campaigns against coal power, told Monitor Global Outlook. “Even if the government still decides to push on with the project, there are still many other issues which may prevent it finally going ahead: Financing is not secured; the planned long-term power purchase agreement is likely to conflict with EU state aid legislation; and the economics of the plant are highly dubious with the electricity sales price reported to be at least €70 ($76) per megawatt hour.”
The referendum saw 94.5 percent of those who turned out voting against the project – but only 36.7 percent of the 20,544 eligible to vote cast ballots. The referendum was nonbinding in any case, and also fell below the 50 percent threshold legally required in referendums in Croatia.
Economy Minister Ivan Vrdoljak was reported as saying that the low turnout “confirms that citizens support the government’s decision on this being a strategic project.”
Nonetheless, Ms. Gallop says that a larger number of people voted against the coal power plant in the Labin area than voted for the ruling coalition parties in the 2011 general election.
The Plomin C project would add a third 500MW unit to the existing Plomin power plant. State-owned power company Hrvatska Elektroprivreda (HEP) is in charge of the project. On March 2, HEP announced that it had signed an exclusivity agreement with Japan’s Marubeni Corp., allowing the two parties to enter negotiations on the “financing, design, construction and operations and maintenance” of Plomin C. France’s Alstom is expected to be the main supplier.
Other bidders had included a consortium of Abeinsa (part of Abengoa) and Daewoo, and Edison and Samsung.
Bankwatch’s argument that the project may contravene EU state-aid legislation is based on plans that HEP will be a guaranteed customer for 50 percent of the power produced for 20 to 30 years. HEP says that it is in talks with the European Commission to get the go-ahead to proceed, and that the project already meets EU technical and environmental requirements.
Gallop concedes that “the government is reluctant to let go of a project it has promoted for years,” but says that it should learn from Slovenia’s difficulties with the Sostanj coal-fired power plant, the cost of which more than doubled to €1.4 billion ($1.5 billion).
“It looks set to make serious losses,” she said. “After years of warning from NGOs, Sostanj 6 was seriously questioned by the authorities only once it was under construction.” Sostanj 6 was developed by Alstom, which says that the new unit will help reduce Slovenia’s dependence on electricity imports.
Similar arguments are made for Plomin C. Mr. Vrdoljak says that Plomin C is a strategic project that will bring in HRK7.5 billion ($1.1 billion) in investment, and that it will use technology to reduce emissions. Supporters also say that the new unit will help boost Croatia’s energy security, producing almost as much power as HEP’s share of the Krsko nuclear power plant in Slovenia, currently a significant contributor to Croatia’s power grid.
“Bankwatch is missing the strategic perspective – it’s a matter of energy security, as electricity imports remain an issue and will be seriously addressed with Plomin C,” one Zagreb political insider told MGO.
In March, in exclusive comments to MGO, Vrdoljak said that he did not expect a proposed referendum on offshore oil and gas exploration to go ahead.
In his comments following the Labin refereundum, Vrdoljak said that Croatia is “in a phase of unnecessary referendums which lead to a loss of energy, time and money while strategic decisions have to be implemented.”
The political insider said that the growing voice of the environmental movement in Croatia should be seen in the context of opposition to the government, which faces a tough reelection battle in a parliamentary poll expected by year-end, and recently lost the presidency in a surprise defeat.
“I don’t think the referendum is serious. Environmentalism is just another form of rebellion against a government which is only doing projects in energy at the moment – environmentalism is just a tool,” he said.
