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Latvia and the Energy Union: biomass is a blind spot


In a series of blog posts, Bankwatch campaigners are weighing in on the implications that the EU Energy Union, as laid out by Vice-President Šefčovič, could have for each of the countries.

See earlier installations on the Czech Republic and Hungary and don’t miss the next posts.

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The establishment of the Energy Union was featured high on the agenda of the Latvian Presidency of the Council of the EU. For Latvia, it offers a broader European framework, in particular in the context of energy security and energy sustainability. These two aspects are likely to be main policy targets in the upcoming Energy Development Strategy 2014-2020, the document that outlines Latvia’s goals for the energy sector.

Commission Vice President Maroš Šefčovič’s assessment (pdf) of Latvia’s performance highlights the country’s positive performance on two dimensions of the Energy Union – energy efficiency and de-carbonisation.

Energy efficiency

The document does mention that energy efficiency in residential buildings still has untapped potentials, which really is a diplomatic way of hinting at the very poor efficiency (far below EU standards) of many buildings across the country, most of which were built in the Soviet era. The Buildings Performance Institute Europe estimated (pdf) that 43 percent of homes in Latvia are dwellings with leakages and damp walls and that 35% of households cannot afford adequate heating.

No surprise then that both the current and future Energy Development Strategies for Latvia place energy efficiency measures in residential buildings like renovation and insulation as one of the top priorities.

When it comes to allocating real money, however, the government’s plans are much less ambitious.

EUR 150 million of EU Cohesion funds are slated within the next five years for renovation and improvement of energy efficiency in 1800 residential buildings. This makes just 4.7% of the entire residential buildings stock (38 000). To increase this potential, the government should promote and support financing models like Energy Performance Contracting that can facilitate private investments in energy efficiency measures in residential buildings.

Another problem is that the current energy efficiency policy does not mention the accessibility of such measures for those who are considered energy poor and cannot afford proper heating.

Ongoing efforts to increase energy efficiency in residential buildings have so far brought little to any benefit for Latvia’s energy poor. And the Energy Union strategy in its current form does not promise to address energy poverty as a structural issue in a way that could shield vulnerable citizens through social policies.

Dependence on Russia

Latvia’s energy dependence on Russia is (unsurprisingly) the most politicised aspect of the Energy Union in Latvia. According to the national statistical bureau [lv], in 2013 gas provided 70 percent of Latvia’s secondary energy production (electricity and heat). All of that gas is coming from Russia. Energy security therefore is a key challenge for the country.

At the same time, Latvia’s gas market is fully controlled by the monopoly Latvian Gas (owned by the German E.on – 47%, Gazprom – 34%, and Iteria Latvia – 16%) which imports only Russian gas and which has so far successfully lobbied against opening the market (postponed until 2017).

However, national policy aiming at energy security has for a long time remained uncertain and hesitant, and was marked by efforts to build an energy policy in partnership with Russia. With the conflict in Ukraine, however, politicians in Latvia have become more wary of the dependence on Russia and Šefčovič may have run into open doors in Riga.

Renewables dominated by fuelwood

Renewables provide for 35 percent of energy consumption in Latvia (2013). This puts Latvia on the second place in Europe (after Sweden) and it is likely that Latvia will reach its 2020 target of a 40 percent share of renewables. Latvia’s government likes to use this argument to demonstrate that our country is a European leader in climate action. But is this really so?

Without access to domestic fossil fuel resources, Latvia’s primary energy production is dominated by biomass and hydropower. 78 percent of the renewable energy produced in Latvia is coming from fuelwood (2013). (Due to its availability, wood has traditionally been an important resource in Latvia.) And herein lies a potential problem because further increasing renewables in Latvia may not be sustainable if solar and wind are not playing a bigger role.

Apart from the threat to biodiversity that logging can entail, cutting trees and burning them to produce energy has two negative effects. It reduces the available capacity to store carbon from the atmosphere (carbon sink) and releases the CO2 that was captured by the tree. The term renewable energy is therefore rather misleading in this context. Sustainability is something different.

In Latvia, the main provider of fuelwood, the joint-stock company Latvia’s State Forests, owns almost a half of all Latvian forests. An audit of the company by the State Audit Office concluded [lv] last year that the company’s forest management policy violates sustainable forest production. Also this year’s Environmental Impact Assessment [lv] of the Energy Development Strategy 2014-2020 emphasises that an increase in the consumption of renewable energy may intensify logging and have a negative impact on biodiversity.

It seems that these aspects have not been considered in talks about the Energy Union and Latvia’s performance and opportunities in the energy sector. Yet, to make sure Latvia’s energy path does not lead into a dead end for sustainability, the Energy Union should become a vehicle that navigates through all aspects of a sustainable energy sector.

[Campaign update] Ombla hydropower plant nature impact assessment rejected

The Croatian Ministry of Environment and Nature Protection has refused Hrvatska Elektroprovreda (HEP)’s nature impact assessment for the Ombla hydropower project near Dubrovnik. In its decision (pdf), published on 28 July, the Ministry cited significant negative impacts on preserving the integrity of the Ecological Network (Croatia’s part of the Natura 2000 network), “which cannot be excluded, in spite of mitigation measures”.

The move comes more than two years after the EBRD withdrew from financing the 68 MW underground hydropower plant. HEP attempted to push on with the project, but after negative submissions to the public consultation on the nature impact assessment by local people, NGOs including Bankwatch member Zelena akcija/Friends of the Earth Croatia, and expert bodies like the State Institute for Nature Protection and Croatian Biospeleological Society, the Ministry has put a stop to the project.

Whether this will be the end of this economically and ecologically risky hydropower plant only time will tell, but for now, we can raise a glass for the preservation of the Ombla’s complex ecosystem.

* Campaign updates on the Bankwatch blog highlight news from projects we monitor as well as from our member groups and partners.

Hungary and the Energy Union: The devil is in the details


In a series of blog posts, Bankwatch campaigners are weighing in on the implications that the EU Energy Union, as laid out by Vice-President Šefčovič, could have for each of the countries.

For more introduction, see the first installation in our series on the Czech Republic, the world’s fifth largest electricity exporter. Don’t miss the next post on Latvia.

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On his visit to Budapest in mid-June Vice President Šefčovič praised Hungary for being on track to meet its 2020 greenhouse gas emissions target, as well as its targets on energy efficiency and renewables. But this can hardly be considered a great effort. In the sectors not falling under the Emission Trading Scheme (non-ETS sectors such as transport, agriculture, buildings and waste), the Hungarian target was in fact a 10 percent rise above 2005 levels.

At the same time, the country’s renewables target is being met mainly through expanding unsustainable biomass, while solar and wind power investments are discouraged due to a generally insecure environment for investments: limited EU funding for citizen and community renewables, an unfavourable feed-in-tariff system, and a recently introduced solar panel tax.

Energy security

Hungary is heavily reliant on Moscow for its energy with 80 percent of its gas and 100 percent of its nuclear fuel imported from Russia, an issue Šefčovič made sure to stress in his Budapest speech. But the Hungarian government’s latest energy investment plans effectively bolster its bilateral relations with Moscow: a Russian loan for the Paks-2 nuclear power plant and also the Gazprom-led South Stream gas pipeline is still on the table.

While the dependency on Russia is problematic for obvious reasons, some important elements of the Energy Union, like swapping Russia with Azerbaijan or other autocratic regimes as providers of natural gas and nuclear fuel would not necessarily make Hungary’s energy supply more secure. And building more oil refineries, liquid natural gas (LNG) terminals and oil pipelines will certainly not make Europe any more climate-friendly.

Ultimately, the Energy Union must be about reducing countries’ reliance on gas and other fossil fuels, not just choosing between South Stream or the Southern Gas Corridor. With the falling gas demand in Europe and Hungary, and the still enormous potential for an increase in energy efficiency in Hungary, that Šefčovič acknowledged, this would not have to mean risking energy supply.

Energy efficiency

Now that Hungary finally decided to transpose the EU’s Energy Efficiency Directive – and not without an embarrassing infringement procedure – the government will hopefully realise the counry’s huge potential in boosting energy efficiency in residential buildings. That would be much more meaningful than government officials’ populistic mantra of „decrease energy bills at any costs” that has been used to justify far-fetched and unrealistic fossil fuels or nuclear infrastructure investments.

The European Commission’s assessment of Hungary suggests that EU financial instruments like the European Fund for Strategic Investment (EFSI) and the Emission Trading Scheme (ETS) can be used for targeted investments into energy savings as well as energy efficiency in buildings and in transport. ETS auctioning revenues in Hungary have already been used for improving energy efficiency in buildings but the government needs to ensure that most of the revenues serve this purpose if Hungary is to meet its energy efficiency targets.

For the transport sector, if past mistakes are to be avoided, the focus should be on support for better spatial planning and for railway development instead of the current tendency to favour unnecessary highways that are environmentally and socially harmful.

Financing tools

Speaking of financing tools, it will be important to introduce clear selection criteria, instruments, and indicators to ensure that only sustainable projects receive funding from the EFSI and the European Investment Bank (EIB) that manages the fund. One questionable Hungarian candidate for EFSI support is Pannonia Ethanol’s bioethanol plant in Dunaföldvár. Once equipped with a carbon capture and storage facility, courtesy of EFSI funding, it will be one of Europe’s biggest bioethanol plants. But funding Hungary’s large biomass projects, with their massive land and ecological footprints, and that could later be greenwashed as ‘green transport’ or ‘renewable energy’ is but one example for the risk of false solutions that has to be averted.

Similarly, the ETS allowances modernisation fund mentioned in Šefčovič’s speech in Budapest runs the risk of being used, for instance, to finance carbon capture and storage facilities which would only sink more money into costly, false solutions riddled with uncertainties.

Citizen power

Lastly, it is encouraging to see Vice-President Šefčovič calling for citizens „to take ownership of the energy transition”. These words need to be put into action with real financial support to help communities and municipalities become active players in the energy market. Because what could better reduce the dependence on one supplier than making citizens and communities provide the energy Hungary needs?

Energy Union benefits are full of paradoxes in the land of Kafka


The European Commission has been hard at work devising the EU’s new energy strategy. It is touted as an ambitious new path for a unified, sustainable energy future, and indeed some of its elements like boosting energy efficiency and expanding renewable energy sources could be an important contribution to the global fight against climate change and for cleaner air. Other parts of this emerging plan – primarily, but not only, prioritising additional imports of natural gas – are simply inconsistent with the EU’s overall energy vision and effectively risk undermining a genuine transformation of Europe’s energy sector.

Nowhere is this dissonance more salient than in central and eastern Europe. In fact, much about the architecture and operation of the Energy Union is still to be decided. The Commission’s Vice-President Maroš Šefčovič has toured some EU member states between May and July to promote the Energy Union strategy and explain the domestic relevance of its five pillars for each of the countries. He will continue his tour in September.

In the meantime, in a series of blog posts, Bankwatch campaigners will be weighing in on the implications that the EU’s new energy enterprise, as laid out by Vice-President Šefčovič, could have for each of the countries.

Don’t miss the next posts on Hungary and Latvia.

Subscribe to our blog via RSS or email

Much like the Czech national energy policy, the concept of the Energy Union is mostly full of paradoxes. Rather than helping the country move to a modern, clean energy economy that responds to the challenges of climate change, adopts new technologies and adjusts to a new market shape , the Commission’s new initiative first and foremost spells replacing gas imports from Russia with gas imports from similarly problematic Azerbaijan.

Instead of using its central location to help the EU transmission system and benefit from it, the Czech Republic will rather use EU priority funding to boost an imaginary, highly controversial nuclear power plant project.

For the Czech Republic the strategy’s most striking paradox, however, lies with the proposed reforms of energy production and distribution. The Commission hails the interconnection capacity of the world’s fifth major electricity exporter (yes, the Czech Republic). Projects of Common Interest (PCIs) which receive priority treatment and EU funding are proposed to further improve the cross-border flows. Looking at the projects at stake, however, we see that the importance of interconnections, as expressed by the Commission, is rather a path to facilitate the country’s wish list, in the Czech case new nuclear capacity.

PCIs in the Czech Republic include new power lines that would connect already well-connected parts of the country and – as if by coincidence – they add new transmission capacity for nuclear reactors that are planned to be built in some distant future. At the same time, another PCI, a phase shifting transformer at the border with Germany, would basically establish a “border guard” for the Czech transmission system. The installation would prevent German offshore wind electricity to go via Czech territory.

Instead of using its central location to help the EU transmission system and benefit from it, the Czech Republic will rather use EU priority funding to boost an imaginary, highly controversial nuclear power plant project.

In other words, while the Energy Union aims at increasing interconnectivity between the electricity grids of EU countries, the Czech Republic would rather see its borders closed for electricity imports (including renewables), but wide open for nuclear and coal electricity exports.

The outlook for renewables

Renewables are not only taking a backseat in the plans for grid connections. The Commission rightly identifies the country being among the most energy intensive and points to problematic changes in renewables’ support regimes. Because of this lack of support and administrative barriers, investment opportunities in the renewables sector are practically non-existent in the country, especially in the solar and wind sectors. Even the current EU funding to renewable power in the Czech Republic is minimal at less than EUR 54 million for seven years for the entire country.

Considering this, and the fact that one of the ideas underlying the Energy Union is about the EU becoming a world leader on renewable energies, the Commission will need to look closely at what is happening in reality if the Czech Republic is to be part of this effort.

The Commission lists the newly established European Fund for Strategic Investment (EFSI) and research and innovation among the main opportunities and benefits that the Energy Union can offer.
In view of the difficulties in the Czech electricity market, however, the government and the Commission should work closely together to present a credible, functioning mechanism that would allow Czechs to submit renewable projects for funding from the EFSI.

Energy efficiency

A look at the new EU funding period shows that the case is similarly difficult with energy efficiency. The Czech Operational Programmes (OPs) – the documents that outline funding priorities and will guide EU funded investments for the next seven years – lack a clear focus on energy efficiency with the issue being spread across four OPs. In addition, the financed projects would be more effective if the demanded efficiency standards would go beyond the minimal legal requirements.

It is difficult to imagine that the Czech Republic will treat energy efficiency as a strategic priority even under the Energy Union.

Questions remain

The intention of the Energy Union strategy to coordinate energy policies across countries and sectors will need to have a real impact on the ground. In the case of the Czech Republic, there needs to be clarity where priorities lie. Is it in the success of EU measures meant to bolster energy and money savings, or is it rather new gas import routes? Should cross-border connections for electricity and gas be financed if they actually do not contribute to the connectivity of the country? And just how is the Czech Republic going to benefit from innovations in renewable power with almost non-existing financing schemes or capacities to deploy new technologies?

Guest post: Behind the glitz of oil riches – the shrinking space for democracy in Azerbaijan


International sporting competitions can fix the beam of world attention on countries and places otherwise ignored. Especially when that competition is the Olympics – but the spotlight is usually fleeting and when the athletes leave so does the glare of media scrutiny.

This has been the case in Azerbaijan who hosted the inaugural European Games this June. Even before the Games began the ruling Aliyev regime proved they were not going to tolerate critical voices. They banned journalists and human rights organisations from entering the country – including the Guardian, Amnesty International and the oil watchdog Platform. It wasn’t Azerbaijan’s athletes that were getting media attention but Azerbaijan’s activists – people like Rasul Jafarov – one of the creative forces behind the Sport for Rights campaign. This highlighted the numbers of political prisoners in Azeri jails and, in turn, saw Rasul himself jailed for six and a half years.

For many years I have followed the situation in Azerbaijan, getting to know some of the people who have been imprisoned. And I have seen how systemic and brutal the regime’s crackdown has been, as dozens of Azerbaijani journalists and activists were arrested in quick succession, forcing many more to flee the country or go into hiding.

Civil society in Azerbaijan has been stamped on hard leaving a vacuum where a democratic culture should be. Azerbaijan has a strong history of democracy. It was one of the first countries to introduce universal suffrage in 1918 – a full ten years before the UK did. Yet in the intervening years this culture has been destroyed, first through Soviet rule and then by the Aliyev dynasty. After signing a contract with eleven international oil companies in 1994 to exploit the oil resources of the Caspian sea, the Aliyev family have been reliant on hydrocarbon revenues to secure their rule. It is oil and gas revenues which have provided the Aliyevs with the finance needed to pay security forces and establish a secure income base (meaning they don’t have to listen to citizens voices because they are not reliant on those citizens for a tax base).

The crackdown in Azerbaijan intensified in the year before the Games, but it really began in 2013 during the country’s Presidential elections. The regime beat and arrested opposition candidates and the growing youth movements who were demanding change. Real debate was shut down and the pervading atmosphere of fear meant free and fair elections were impossible.

The day before the polls opened a government mobile phone app accidentally ‘leaked’ the results. The official excuse was that the results were from the previous election but given that they listed the current candidates it wasn’t too convincing. On the day there was evidence of ballot box stuffing and carousal voting (where people get driven around to different polling booths to vote many times over). The OSCE/ODIHR Election Observation Mission concluded: “Significant problems were observed throughout all stages of election day processes and underscored the serious nature of the shortcomings that need to be addressed in order for Azerbaijan to fully meet its OSCE commitments for genuine and democratic elections.”

While many people will have heard about Azerbaijan as a repressive country hardly any will have learnt about the country’s democratic history. It was not inevitable that Azerbaijan would become a petro-state. Baku was the world’s largest oil producer in 1990, and the region was the focus of Soviet oil production from 1917 to the Nazi invasion in 1941. However, the USSR shifted exploration to western Siberian reserves and output declined rapidly into the 1990s.

When the Aliyevs came to power, they made the choice to place oil at the heart of the country’s economy and were encouraged to do so by western international oil companies. This choice has harmed the people and landscape of Azerbaijan: fostering inequality and corruption, strangling democracy and enabling the abuse of human rights.

As the glare of media attention fades it’s the resumption of business as usual in Azerbaijan. Last week the European Bank for Reconstruction and Development approved a loan to Russian company Lukoil to develop the Shah Deniz gas field off the coast of Azerbaijan. The bank’s establishing agreement states that they will only lend to “countries committed to and applying the principles of multiparty democracy”. Yet they agreed to lend to a country where neither a system or a culture of democracy exists. Azerbaijani and European civil society groups sent a letter (pdf) to the Bank’s President highlighting how the loan to Lukoil will squeeze the space for civil society, as the regime is entrenched even further.

It is this continued European support for the Aliyevs and the hydrocarbon extraction that props them up which moves Azerbaijan ever further from a democratic transition.

Slovakian dam project is a warning sign for Juncker’s investment drive


Late last month decision makers in Brussels approved the EUR 21 billion European Fund for Strategic Investment (EFSI). This new mechanism, the engine of the Juncker Investment Plan, is basically intended to stimulate investment in sustainable and resource-efficient projects of the kind that individual EU countries find it difficult to realise. But in its current form – that is without stringent economic, social and environmental criteria – this piece of legislation runs a serious risk of helping finance the wrong projects.

One such case is Slovakia’s Slatinka dam. With roots in the 1950s, this plan simply makes no economic, environmental or social sense. According to the plans, this dam is intended for storing water that can be released during the dry season for use by the Mochovce nuclear power plant and other nearby industries downstream. If realised, this large dam would involve the flooding of a vast tract of land to create a reservoir with a capacity of close to 27 million cubic meters.

Over the years, government officials have come up with a variety of reasoning to try and justify this project – from recreational purposes and support for agricultural irrigation to flood control and climate change adaptation measures. But eventually, the heavy toll that constructing this dam and its reservoir would take on the fragile ecosystems, the local residents and ultimately state coffers simply doesn’t justify any of its supposed benefits.

The 12 kilometre long Slatina valley in central Slovakia is a mosaic of protected forests, wetlands and wet meadows which are home to 158 butterfly species, 123 bird species, 27 mammal species and many others. A number of the animal and plant species in the valley are officially classified as critically endangered. The rocky banks of the Slatina river are rich with vegetation, including willows and alders that are over 100 years old.

In fact, in 2013 the European Commission has already ruled that the damage that the planned dam would cause to the valley’s natural habitats would constitute a breach of EU biodiversity regulations as well as counteract the objectives of Slovakia’s own Operational Programme for Cohesion Policy funding.

Moreover, the planned reservoir would also inundate its 625 year old namesake village. The longstanding plan has also meant that for decades local residents are prohibited from building new homes or even repairing existing ones. The local school, the medical clinic and even the train and bus stations have already been abolished. Some of the people still live in the village but, naturally, young residents were left with no choice but to leave for other towns.

Even the economic rationale for this project is highly questionable. The project’s estimated cost of EUR 114 million is based on extrapolation and its economic feasibility seems to rely on the rather dubious assumption it will be operated for at least 400 years.

And in fact, it appears that the project’s developer, the state-owned company Vodohospodárska výstavba, is having a hard time advancing it, failing to produce the necessary documents. Last month the company withdrew an application for a permit for felling 100,000 trees in the area slated for construction of the dam. The delays in the implementation of the project have also meant that the environmental impact assessment for the project, one of the requirements for land use permits, has expired in November 2012. Both documents are legally mandatory for realising the project.

“It is paradoxical that Slatinka has made it to the list of EFSI candidate projects,” said Martina Paulíková from the Slatinka Association. “This instrument is supposed to support innovative investments, growth and jobs, whereas this dam was planned by communist technocrats in the 1950s to support the development of environmentally destructive heavy industries.”

Yet, the Slatinka dam is not the only problematic project the European Investment Bank could be considering for funding through the EFSI. The European Parliament will soon be voting on the European Commission’s EFSI Scoreboard (pdf), that is the assessment methodology for candidate projects. To ensure that only those projects that genuinely contribute to a more sustainable Europe receive this financial support, the Scoreboard must be comprised of stringent economic, social and environmental criteria.