Blog entry

Transalpine oil pipeline expansion: REPowerEU funds must not swell the coffers of energy crisis profiteers

Scope of TAL+ project remains unclear

Established in 1967, the TAL Group, which operates the existing pipeline, is made up of three oil companies: Austria’s Transalpine Ölleitung in Österreich GesmbH, Germany’s Deutsche Transalpine Ölleitung GmbH and Italy’s Società Italiana per l’Oleodotto Transalpino SpA (SIOT).

The TAL pipeline serves 100 per cent of Bavaria’s needs, 90 per cent of Austria’s and 50 per cent of the Czech Republic’s. In the Czech Republic, the pipeline is connected to refineries in Kralupy and Litvínov through the Ingolstadt–Kralupy–Litvínov (IKL) oil pipeline.

Since the beginning of Russia’s full-scale war in Ukraine, there have been discussions about increasing TAL’s supply to help the Czech Republic and other countries diversify from dependence on Russian oil. The Czech government plans to use a REPowerEU loan to finance the expansion of the pipeline through the TAL+ project, which aims to:

increase TAL capacity by an additional 4 million tonnes of oil per year to replace Russian oil supplying the Czech market (in 2021, the Czech Republic imported about 6.8 million tonnes in total, about half via this route);
increase the oil storage capacity of tank farms along the IKL pipeline, which connects TAL with the refineries in Kralupy and Litvinov; and
modify the Druzhba pipeline to replace Russian oil with supplies from other sources and to eventually transport fossil gas or non-fossil fuels (despite the fact that the technical and economic feasibility of this plan remains unproven).

The Italian government is also looking to develop its fossil energy generation capacity as part of the TAL+ project, possibly also courtesy of REPowerEU funds. However, due to an overall lack of transparency, it is unclear whether the Italian arm of the project will receive any form of public subsidy.

Plans for the Italian section of the pipeline, which flows through the Friuli Venezia Giulia region, involve the construction of four fossil gas combined heat and power (CHP) plants at pipeline pumping stations – each expected to produce 7.7 megawatts (MW) of electricity and 7.2 MW of heat – along with investments in Trieste’s port and storage facilities.

While the generated electricity will be used for the pumping stations along the pipeline, the generated heat is planned to raise the temperature of crude oil by 1 °C to increase flow speed, delivering supposed energy savings and environmental benefits. The investment is reported to cost EUR 58 million.

Feeding the fat cats

By including this project in the REPowerEU chapter of its recovery plan, the Czech government will be using EU money to subsidise even further the already highly profitable oil industry. In particular, this will benefit the TAL Group, whose shareholders include some of the largest oil companies in the world, such as OMV, Shell, Rosneft, ENI, C-BLUE BV (Gunvor), ExxonMobil, Mero, Phillips 66/Jet Tankstellen and Total.

Perpetuating fossil fuel lock-in

The increased capacity planned for the Czech Republic aims to replace the oil currently imported from Russia, which represents 50 per cent of the total oil supply. But simply changing one oil source for another will do nothing but prolong the ongoing climate crisis, which has already severely impacted the country’s environment, economy and society. This course is also incompatible with the EU’s goal of reducing greenhouse gas emissions and achieving climate neutrality by 2050.

The Czech Republic needs to substantially step up efforts to decrease oil demand, not to satisfy it. An analysis by Charles University in Prague, which, among other things, examined projected fuel consumption by the transport sector in the Czech Republic between 2015 and 2050, found that there is unlikely to be almost any decrease in the need for fossil fuels by 2025 and only a small decrease by 2030. Instead of supporting a project that effectively leads to carbon lock-in, the Czech Republic should use REPowerEU money to finance measures that decarbonise the transport sector.

Likewise, the Italian arm of the project substantially undermines Friuli Venezia Giulia’s regional decarbonisation strategy to 2045. In fact, the additional greenhouse gas emissions from the four new cogeneration plants would be equivalent to the emissions of about 40,000 households of four or more people per year.

Inadequate environmental assessment

On 22 September 2022, the environmental organisation Legambiente sent a letter to the former Italian Minister for Ecological Transition requesting the revocation of authorisations granted to three of four ‘high-efficiency cogeneration projects’ submitted by SIOT to the regional administration in Friuli Venezia Giulia.

The TAL+ project and connected investments have been split into individual units for the purpose of environmental assessment. However, this prevents a comprehensive evaluation of the project’s cumulative impacts on the environment, with no consideration given to costs, benefits or reasonable alternatives.

Lack of consultation results in public opposition

Local concerns over the expected environmental and climate impacts of the project and the absence of any public consultation with affected municipalities have led to protests and the submission of petitions to the regional administrative court in Friuli Venezia Giulia and to the Italian government. The court recently rejected an appeal filed by the municipality of Cavazzo Carnico requesting the annulment of the authorisation for the construction and operation of the cogeneration plants. Despite this, Legambiente, supported by local communities and activists, is set to file a new appeal on different grounds.

On 24 March 2023, the current Italian Minister for the Environment and Energy Security, Gilberto Pichetto Fratin, issued a statement, claiming SIOT’s plans are ‘consistent with energy-saving objectives and with no detrimental effects from an environmental point of view, being also necessary and strategic in view of the critical situation caused by the Russia–Ukraine conflict’.

Recovery funds must not be used to undermine climate action

Overall, there is a high risk that the project will undermine the climate commitments of both the Czech Republic and Italy. Using public money to back a private consortium made up of some of the biggest oil companies in Europe is not acceptable. Recovery and resilience funds must not be allocated for this project.

The Czech recovery plan lacks a concrete strategy for the decarbonisation of the transport sector. This project will not contribute to reducing oil consumption but do the opposite. EU money must not be spent on projects that go against Green Deal objectives.

The European Commission, which is responsible for assessing whether the initiatives proposed under the Czech and Italian recovery and resilience plans achieve the objectives of green transition, must not allow recovery funds to be used for these projects.

Nuclear ambitions risk hindering Estonia’s energy transition

Until now, nuclear energy has been a remote prospect for Estonian citizens. For over a century, the small Baltic country, with an average electricity demand of about 1,000 megawatts, has heavily relied on oil shale – a carbon-intensive fossil fuel – for its electricity production. Fortunately, more stringent environmental regulations and recent climate policies mean Estonia is now strictly obliged to phase out oil shale and execute a just transition for workers in mining regions.

However, the recent surge of panic over security of supply has opened the door to an increasingly blatant nuclear lobby, whose actions pay no heed to a recent analysis – conducted by the consultancy firm Trinomics in cooperation with the Tallinn branch of the Stockholm Environmental Institute (SEI) – which found that nuclear energy is the least favourable path Estonia could take towards climate neutrality.

More worryingly, Estonia’s Ministry of Economic Affairs and Communications, which commissioned the analysis, has turned a blind eye and seems determined to welcome nuclear investment that would nedlessly complicate its energy system. As a result, Estonia risks missing out on a golden opportunity to ensure a resilient, fully renewable and decentralised energy infrastructure.

No justification for nuclear in the Estonian context

As debates around green transition accelerate, recent studies demonstrate that Estonia has great potential to ramp up the pace by unlocking its massively underutilised wind and solar potential.

And according to the Trinomics/SEI analysis, the use of as-yet-unproven small modular reactors (SMRs) in driving the transition to a climate-neutral electricity system in Estonia is the least recommended of eight different scenarios.

The analysis highlights multiple limitations and threats related to nuclear pathways, including regulation issues, technological delays and citizen opposition to nuclear development. The preliminary evidence warns of:

(1) overreliance on a technology that is still underdeveloped with no history of use in Estonia;

(2) cost overruns (nuclear energy is far more expensive than sustainable alternatives like wind and solar for which Estonia has huge untapped potential);

(3) hold-ups with the deployment of SMRs (climate neutrality could be achieved faster on its current trajectory);

(4) safety risks; and

(5) the unresolved issue of permanent waste disposal.

As a non-renewable source, nuclear power also relies on imports of uranium and other rare materials, often from non-democratic countries, thus supporting exploitation and exacerbating existing inequalities.

Based on the assessment of Trinomics/SEI, a nuclear pathway is ‘not recommended’ and considered the ‘riskiest scenario’. The most recommended scenario is a combination of renewable energy sources (RES) and storage, followed by scenarios involving ‘all technologies’ (excluding nuclear) and ‘renewable gas’. We should also recall that Estonia recently set an ambitious target to cover its annual electricity consumption with 100 per cent renewable electricity from 2030 onwards, and that several reforms are currently being designed to accelerate procedures that would facilitate renewable energy. In this context, a non-nuclear pathway can only be viewed as the most logical, efficient and cost-effective way forward.

But should Estonia proceed with a costly, time-consuming and politically vulnerable SMR project, the ambition of its energy transition planning is likely to be negatively impacted and, in the worst case, severely delayed.

Ministry ignores its own report

In 2024, Estonia’s parliament will decide on whether to pursue a nuclear pathway once the findings of a dedicated working group are assessed. However, the Ministry for Economic Affairs and Communications appears to be already designing its energy policy with a bias towards nuclear energy.

Bafflingly, the ‘consultant assessment’ in the Trinomics/SEI analysis is accompanied by an ‘alternative ranking criteria’ that rates nuclear as the most preferred pathway (pages 10 and 28). The need for this alternative ranking is briefly justified on the grounds that selection of the pathway is ultimately a ‘political’ choice (page 9). Of course, this completely contradicts the very concept of an independent assessment and fails to explain why these alternative criteria were included.

The current draft of the Estonian Energy Sector Development Plan until 2035, which has so far only been shared with internal working groups, states that if fossil fuels are to be completely phased out from the energy system, the only alternative for meeting baseload demand is a nuclear power plant – a false assumption that contradicts a host of scientific studies on the potential of renewable energy sources.

Even more concerningly, the draft of the plan already provides for the establishment of a nuclear energy regulatory body, another alarming example of how preparations are being rushed ahead of informed decisions. This could create a self-fulfilling prophecy: once the conditions are created for nuclear energy development, it has a higher chance of being backed by parliament.

Who wins in the nuclear rush?

The race to act before crucial decisions are made raises the question of who will benefit. The answer is clear – Fermi Energia, a controversial nuclear company established in 2019. Currently, Fermi Energia is raising international funds to experiment with novel SMR technologies in Estonia. The company claims that by 2031, its power plant will be fully operational, even though the most optimistic estimate from the government’s side is 2035.

The state recently granted Fermi Energia EUR 180 000 to conduct geological studies in a location of its choosing (Letipea) to investigate the feasibility of constructing a nuclear power station. Residents of Letipea have already collectively made it very clear that they do not want a nuclear power plant in or near their village. In assessing the suitability of the site, the company has completely avoided local consultation and shown no desire to publicly reveal the risks of such an investment. Instead of honestly discussing the social costs and risk scenarios with the local community, the company’s external communication has so far been limited to an evidence-free promise of unlimited cheap energy.

Counteraction must not be delayed

Environmental organisations want the state’s decision on the future of the energy system to be based on evidence, not on the SMR nuclear lobby’s unfounded claims. Instead of rashly signing up for nuclear dependence, Estonia must turn the tide. Until now, the country has taken remarkable steps to break away from fossil fuels and ensure its energy independence. The pursuit of nuclear power must not thwart the goal of an energy system that is fully renewable, resilient and sustainable.

Stara Zagora: caught between its brown coal past and a bright green future

The involvement of our organisation at these meetings and at similar events hosted by other civil society organisations is a core element of our information campaign aimed at raising awareness in coal regions on just energy transition, Territorial Just Transition Plans (TJTPs) and opportunities for the development of these areas. 

But we believe the task of relaying information on these important issues should not rest on the shoulders of the civil society sector. Promoting public awareness of energy transformation is in fact one of the Bulgarian government’s core obligations in relation to the Just Transition Mechanism.

Unfortunately, we have seen a complete dereliction of this duty at the government level. Instead, the political establishment has shown far more interest in competing for people’s votes in yet another snap general election set for this April, the fifth in two years.

Ultimately, the general scarcity of information available to the public and the lack of transparency on how decisions affecting coal regions are made are failures of government. After all, a successful energy transition cannot be achieved if people are unaware of what the process entails or how it will impact them. Crucially, there is no information about the potential for positive change. All that is heard is scaremongering in the media, whether it be the threats of representatives from the mines and thermal power plants or the warnings from syndicates and politicians that transitioning from coal will leave people jobless and without prospects. 

At the meetings, we noted a very different sentiment from what is commonly presented in the media as ‘public opinion’. When made aware of the facts, participants told us they were open to change. They also recognised the potential for alternative solutions, including the development of other industries. In contrast to alarmist predictions of unemployment and homelessness, representatives from the local non-governmental organisation the Employers’ Club, Trakia University, the Bulgarian Construction Chamber (BCC), and various enterprises active in the area all reported an issue with finding staff. In short, the jobs are there but the workforce has been absorbed by the mines. But blocking investment in the wider industrial zone means there is no potential for it to develop, attract more businesses and create new job opportunities. 

At the meetings, we presented the guidelines for the draft TJTP for Stara Zagora and the wider region along with highlights from the Just Transition Fund. Most of the attendees had no previous knowledge of these schemes.

For two years, politicians have neglected to gauge the views, suggestions and wishes of people in the region. The decision to ignore local and professional expertise as well as the needs of the region in developing the TJTPs represents a huge loss of public potential. 

Even though there is a historical attachment to the coal industry, the region has far more to recommend it. People are fiercely proud of their cultural and historical heritage, which they’re keen to promote. The fertile lands of Stara Zagora are ripe for development, but other industries have been neglected at the expense of the coal mines. 

At our meeting in Galabovo, one of the towns in Stara Zagora most affected by coal pollution, people were adamant that no government representatives had come to inform them of the territorial plans or ask their opinions. There was confusion among the participants on the respective roles of non-governmental organisations and government, and a real desire to hold those responsible for the lack of transparency accountable. Local citizens refuted the claims of politicians and trade unions that a majority want the mines and the notorious Brikel thermal power plant to continue operating. On the contrary, everyone we heard from expressed their opposition, particularly to the coal-fired Brikel plant, which has been marred by several controversies. These include repeated pollution violations as well as instances of corruption and cover-ups by the plant’s operators. Ever since the plant was established in 1962, toxic coal fumes have been poisoning Galobovo’s residents, most of whom have spent their whole lives working in the mines. As such, any politician that visits Galabovo and promises to preserve jobs at Brikel coal plant is also complicit in polluting the air of the immediate and surrounding areas, where levels of sulphur dioxide and nitrogen dioxide far exceed permissible standards. 

Bulgaria’s loss of EUR 98 million in EU funds at the end of 2022 – a direct result of the country’s failure to submit its Territorial Just Transition Plans on time – has prompted no corrective action to date. By failing to include the reforms needed to decarbonise the energy sector, the lack of any coherent renewable energy strategy beyond the upcoming elections has been clearly exposed. Green funding that could have unlocked the vast untapped potential of the renewable energy market in Bulgaria has been sacrificed for the sake of party interests that preserve the status quo and promote unsustainable energy megaprojects.

It is the duty of Bulgaria’s politicians (who, lest we forget, are employed to serve its citizens) to transparently present the opportunities that energy transition offers. If the government is not prepared to draw up and submit well-designed TJTPs to the European Commission, Bulgarian citizens will miss out on EU funds critical to a just energy transition, and economic coercion will see the coal mines and power plants shut down without compensating those employed in the coal industry. 

It is high time that those in power take responsibility for damaging the prospect of a low-carbon economy. Future renegotiation of Bulgaria’s National Recovery and Resilience Plan must guarantee concrete measures and reforms. Failure to do so risks delaying the implementation of Bulgaria’s energy efficiency programme for multi-family residential buildings and its programme for individual renewable energy sources such as battery storage, which are designed to increase capacity, reduce the bills paid by households and businesses and limit dependence on foreign suppliers of fossil fuels. 

If there is to be any hope of a smooth and just energy transition, Bulgaria’s politicians must ditch the populist rhetoric and prioritise the involvement of civil society in the redrafting of the TJTPs. Otherwise, the futures of both mine workers and the residents of these polluted regions will remain bleak.

Kosovo becomes the first Western Balkan country to stop promoting new hydropower

Earlier this month, the Kosovo parliament approved a new Energy Strategy up to 2031. Given how painfully outdated the previous strategy was, the new one is a crucial step in defining Kosovo’s energy plans.

Among others, it plans 1320 MW of new renewable energy generation until 2031, to add to 297 MW of existing capacity. The new additions should consist of around 600 MW wind, 600 MW of solar photovoltaics, 20 MW of biomass and at least 100 MW of prosumer capacity. It does not clarify the type of biomass, but caution will need to be exercised even for 20 MW, as Kosovo has reportedly already lost 7600 hectares of forest in the last 20 years.

No new hydropower planned

After years of conflicts over hydropower e.g. in Deçan and Shtërpcë/Strpče, the Strategy clarifies that ‘Due to environmental aspects, the Energy Strategy does not promote the construction of hydropower plants.’

This makes Kosovo the first country in the region to stop promoting new hydropower plants – a welcome statement that paves the way for the government to focus on speeding up solar and wind development and intensify its energy saving efforts.

This is important, as – in addition to the notorious Kosova e Re coal power plant – previous governments lost more than a decade promoting hydropower plans that were both damaging and to a large extent unrealistic, given Kosovo’s limited hydropower potential.

In 2009 the country had only 45.8 MW of installed hydropower, but in 2013 the then government planned a totally unrealistic additional 240 MW of hydropower below 10 MW and 305 MW of large hydropower by 2020.

Despite strong support from a feed-in tariff scheme that favoured hydropower over solar and wind, by the end of 2021, Kosovo had 132 MW of installed hydropower capacity. The plants generated less than five per cent of its electricity – and that in a relatively good hydrological year. They have also caused widespread damage including dry riverbeds, excessive logging and polluted drinking water. After this experience, it’s reassuring to see that the government has learnt this lesson and is ready to move on.

Energy crisis mars coal phase-out ambitions

The government’s plans for solar and wind are ambitious compared to Kosovo’s past progress – though quicker action is still needed. The Strategy pledges to reach carbon neutrality by 2050, but uses the same date for coal phase-out. But in reality, the country’s notoriously polluting lignite power units will have to close much earlier, due to their age.

Despite positive plans to phase in carbon pricing starting from 2025 and to use the proceeds to start a Just Transition Fund, the Strategy hesitates to commit to clear closure dates for the oldest units.

No doubt stung by Kosovo’s recent energy crisis, it plans modernisation works at both units of Kosova B, as well as at one or two of Kosova A’s three functional units: ‘One of the Kosovo A units will be refurbished by the end of 2024, while the decision to refurbish or phase out the second unit will be made in 2024 at the latest’. The Kosova A unit or units would then be used as a strategic reserve after that. The only concrete closure date mentioned is that one unit of Kosova A would be closed in 2026, after the other two have been modernised.

In 2021, 93 per cent of Kosovo’s electricity still came from lignite, so upgrades to Kosova B are inevitable for now. But Kosova A’s remaining units came online in 1970, 1971 and 1975 respectively, making them 53, 52 and 48 years old.

In addition to Kosova A’s age, there are three potential problems with this plan. First, the estimated cost of the required investment at Kosova A is EUR 120 million per unit, and that’s in addition to nearly EUR 97 million each needed for the two units of Kosova B. It’s not clear where Kosovo will be able to find these funds.

Second, it is already March 2023, so there is almost no chance of the first Kosova A retrofit being completed by the end of 2024. Yet the annex to the Strategy shows that this would be crucial to the feasibility of the works. With the introduction of carbon pricing, the utilisation rate of both the lignite power plants decreases significantly from around 85 per cent in 2026 to around 19 per cent in 2031, so the later the modernisation is done, the less power they will actually be able to sell.

Given the EU’s intention to introduce Carbon Border Adjustment Mechanism (CBAM) payments in the power sector from January 2026, there is no real option for Kosovo to delay carbon pricing either, so it is unlikely that renovating any of the Kosova A units will be feasible in reality.

The third issue is the strategic reserve. Presumably the idea would be to pay the Kosova A units to be ready for action when needed. However, from 1 July 2025 it will no longer be allowed to have coal units as part of such capacity mechanisms in Energy Community Treaty countries, including Kosovo, due to the recent adoption of the EU’s internal energy market regulation. It’s unclear whether this has been considered in the Strategy.

Double gas dependence

The Strategy includes the option of buying a share in gas power projects in neighbouring countries to avoid the cost and time delay of building a gas import pipeline to Kosovo. It assumes two plants, with Kosovo’s participation costing EUR 100 million each. According to the Strategy’s annex, Kosovo would buy gas via long-term power purchase agreements.

While these plans do indeed sound modest compared to the megalomaniac proposals from a recent EU-funded Kosovo gasification study, they still risk distracting Kosovo with high-cost and unreliable fossil fuel projects, instead of concentrating on decarbonisation and energy savings.

Russia’s brutal invasion of Ukraine has once again underlined that increasing reliance on imported fuels — especially from corrupt and authoritarian regimes like Azerbaijan’s — makes no sense. But an arrangement to build plants jointly with neighbouring countries brings additional dependence, as it relies on that country’s competence in permitting, financing, building and operating the plant – which can’t be taken for granted.

The mention of power purchase agreements also rings alarm bells, as it was exactly such an arrangement that ultimately caused the demise of the Kosova e Re coal power plant project. There is a very high risk that such an agreement would be illegal under Energy Community state aid rules, and that it would lock Kosovo into buying power that it could have got cheaper from somewhere else.

The upcoming National Energy and Climate Plan can address these issues

Kosovo deserves recognition for updating its energy policy goals, as its peers Bosnia and Herzegovina, Montenegro, and Serbia have yet to do so. Still, outstanding issues such as the coal phase-out and gas plans, as well as a lack of clarity about district heating investments, need to be addressed.

Luckily, there is another opportunity for this, as by June this year, Kosovo – like other Energy Community countries – has to submit a National Energy and Climate Plan (NECP) to the Energy Community Secretariat, detailing how it will meet its 2030 greenhouse gas reduction, energy savings and renewable energy targets. There is no time to lose in moving forward with no-regret actions such as adopting a new renewable energy law, but the NECP represents a second chance to tackle the remaining issues.

EBRD funds channelled to Kremlin affiliates: Why the purchase of Tbilisi metro cars from a Russian company should not proceed as planned

Links with the Kremlin and Russia’s defence industry

Metrowagonmash is part of Transmashholding, whose shareholders Russian oligarchs Iskander Makhmudov and Andrey Bokarev – are closely linked with the Kremlin and its defence industry. In 2015, Bokarev and Makhmudov became two of the largest government contractors in Russia. Until 2017, they, along with Russia’s current deputy defence minister Alexei Krivoruchko, also held shares in JSC Kalashnikov Concern, which manufactures around 95 per cent of Russia’s guns.

After leaving Kalashnikov, the partners continued to provide engines for Russian warships through Metrowagonmash’s sister company, as evidenced in the company’s 2018 and 2019 annual reports. In 2021, Transmashholding tried to expand its capabilities in motor production by acquiring Bergen Engines from Rolls-Royce. Citing security risks, the sale was blocked by the government of Norway. In a statement issued on 23 March 2021, the Ministry of Justice and Public Security of Norway said: ‘The engines they [Bergen Engines] produce would have had great military strategic importance for Russia, and it would have strengthened Russia’s military capabilities in a way that would clearly be at odds with Norwegian and allied security policy interests.’

Notably, Andrey Bokarev was among the billionaires and tycoons that met Russian president Vladimir Putin on the day Russia attacked Ukraine. After the invasion, both Makhmudov and Bokarev were sanctioned by Ukraine, the United Kingdom and New Zealand.

The unexplained backtracking of the EBRD and Tbilisi City Hall

The Tbilisi Metro Project, which is co-financed by the Green Climate Fund, received finances from the EBRD in 2020 and the Russian supplier was selected in a two-tier tender in 2021. Russia’s invasion of Ukraine changed the context and stalled the official procurement procedures with Metrowagonmash.

In March 2022, the EBRD suspended a transfer to the Russian company due to the risk of sanctions. In November 2022, the mayor of Tbilisi announced that the municipality and the EBRD had decided to terminate the contract and were in contact with alternative suppliers. Yet in February 2023, a Tbilisi City Hall representative said that Metrowagonmash would remain on as the supplier, as it provided the most affordable tender proposal. The mayor of Tbilisi also stressed that he was forced to keep the existing agreement to avoid the imposition of fines and financial sanctions on the state – although it is not clear who would impose these. The company has agreed to supply 44 wagons (11 sets) at a cost of EUR 49.2 million. According to City Hall, the original agreement was renegotiated with an added provision that payment to the company will only go ahead once the metro cars are received.

We urge the Bank to terminate the contract with Metrowagonmash and find an alternative supplier for the project.

Despite our multiple attempts to obtain more information, the EBRD has not yet responded to our queries about the project.

Bankwatch and Green Alternative call on the EBRD to clarify:

why it reversed its decision to suspend payment to Metrowagonmash;
why it stands behind its decision to retain Metrowagonmash, whose sister company supplies engines to Russia’s Ministry of Defence and whose parent company’s shareholders are sanctioned by the UK, as a supplier for the project;
whether it has assessed the risks associated with the project’s main supplier and with the supply chain in accordance with EBRD’s Environmental and Social Policy;

whether it has fully considered the direct or indirect involvement of the main supplier in the armed conflict through its activities and connections and, furthermore, how this might increase environmental, social and human rights risks;
whether it is aware of any financial losses, sanctions or fines likely to be imposed on Tbilisi City Hall if the contract is to be terminated and by whom.

Let us not forget that in April 2022, the EBRD Board of Governors decided to deny the Russian Federation access to the Bank’s resources with immediate effect. In addition, the Bank noted that it ‘avails itself of all rights to suspend or cancel further disbursements of funding on existing projects’.

The EBRD prides itself on the support it provides to Ukraine amid the war. But actions that might enrich Russia’s wartime coffers undermine and taint this effort. They also cast doubt on the EBRD’s commitment to Ukraine and call into question the future status of ongoing projects with Russian suppliers.

Providing metro cars to Tbilisi should not present a moral dilemma either for Tbilisi residents or for European taxpayers.

How renewable energy could reinvigorate Romania’s slumbering district heating sector

The inefficiency of the old district heating systems raises a different set of concerns among different stakeholders. For residents, it’s the lack of heat and hot water, caused by frequent system breakdowns, not to mention the ever-increasing bills. The inhabitants of cities with heating systems such as Bucharest, Timișoara, Craiova etc. frequently run out of hot water and heat. For us environmental activists, it’s the increase in CO2 emissions and other pollutants, despite district heating being less polluting than individual heating units taken together. And for debt-laden municipalities unlucky enough to administer a coal or gas-based thermal power plant, it’s the high prices of CO2 emission allowances and the losses they have to cover with money from the public budget. But a range of modern technologies based on renewable energy, already proven throughout Europe, could breathe new life into Romania’s district heating systems.

Over the past 30 years, the number of district heating systems in Romania has been decreasing. According to Challenges and opportunities for the centralised thermal energy supply system in Romania, back in 1996 and 1997, 308 Romanian communities were connected to district heating networks. By 2021, this number had fallen to 50.

This decline can be linked to inefficiency due to the hot water losses in the heat transportation grid, which it is itself the result of a lack of modernisation of these systems; economic problems associated with the non-payment of bills by some consumers; and frequent breakdowns resulting from, in most cases, technologically outdated facilities.

The Romanian governments decided, during the past three decades, to allocate funds to ensure the continued operation of district heating systems. Only recently, a sum of RON 41.3 million (EUR 8.39 million) was earmarked for 2020 and RON 310.4 million (EUR 63.09 million) for 2021.

Evolution of the number of homes connected to district heating systems

	Year
Region	2017	2018	2019	2020	2021
North-East Region	90,078	81,073	78,261	72,246	69,061
South-East Region	121,393	105,005	99,079	90,105	77,213
South Region	82,248	79,703	79,220	78,185	76,837
South-West Region	123,147	119,726	119,018	116,990	113,271
West Region	96,740	95,577	94,087	89,085	78,231
North-West Region	95,527	94,128	93,272	94,172	93,266
Central Region	12,279	11,271	16,326	15,932	15,591
Bucharest/Ilfov Region	562,027	561,213	561,058	559,861	558,738
Country	1,183,439	1,147,696	1,140,321	1,116,576	1,082,208

Source: National Authority for Energy Reglementation (ANRE), Raport privind starea serviciului public de alimentare cu energie termică în sistem centralizat pentru anul 2021

The disappearance of the district heating systems combined with the increasingly low quality of existing heating services has led to the mass disconnection of households from this district heating source. Many people have been forced to find quick solutions based on what they can afford and without necessarily weighing up the pros and cons of their choices. While some have switched to individual heating fuelled by wood-fired boilers, unfortunately most have opted for fossil-gas boilers.

Bucharest, Romania’s most crowded city, has the largest number of active district heating systems. However, they are not available in all areas, and the resulting differences in air quality are evident. For instance, Bucharest’s Sector 1, where a significant number of properties and buildings are not connected to a district heating system, has recorded three times more carbon monoxide pollution than Sector 3 has.

Modern and efficient heating systems, especially those that rely on renewable energy sources (geothermal systems, photovoltaic panels, solar panels, heat pumps, etc.) come with many benefits. Unlike individual heating systems, those supplied by clean energy sources run more efficiently, reduce pollution, maintain a secure supply and help cut down on total costs.

Yet, so far, Beiuş is the only city in Romania heated exclusively by geothermal sources. Since 1998, a nearby thermal plant has been providing geothermal water extracted from depths of 2,500 to 3,000 metres. This district system distributes a thermal agent for heating as well as hot water for consumption, supplying 103 apartments in condominiums, schools, kindergartens, churches and public institutions.

Indeed, there is a vast, untapped potential for sustainable district heating throughout the country. The town of Motru is one promising example. According to a November 2022 study commissioned by Bankwatch Romania, a lignite-fired plant that has been feeding the local district heating system could be replaced by heat pumps powered by solar panels. Of all the scenarios examined, heating based on renewable sources proved the most sustainable.

In Bucharest’s City Hall, studies on the feasibility of installing heat pumps that would serve homes connected to the district system in the north of the city are being discussed.

Last year, in 2022, the local council of Sector 1 advanced a ‘heating from the sun’ solution, which would see solar panels and heat pumps installed in blocks where heating services are not up to scratch. Although the formal proposal by the mayor of Sector 1 was not adopted, the administration of Sector 3 subsequently announced their intention to launch a similar initiative.

Bucharest City Hall is responsible for heating the city of Bucharest. As such, it should consider the use of renewables like solar, geothermal and wind energy as realistic options, and should initiate feasibility studies to find the best sustainable solutions. The continuous development of the municipality and the increasing distance of consumers from sources of production can only result in further technological heat losses. Priority must be given to the diversification, improvement and augmentation of renewable thermal energy production. How efficiently these goals are met will depend on the rehabilitation and modernisation of the heating grid.

Overall, Romania still has a decent number of functioning district heating systems. But it is very important that these systems not only remain functional, but also switch to production from renewable energy sources.

Feasibility studies for the modernisation of district heating systems should also be encouraged in order to determine the most sustainable option, whether it be heat recovery from industrial systems, photovoltaic panels, heat pumps, geothermal sources or wastewater heat.

Responsibility also falls on international financial institutions that finance these district heating projects to invest in renewables to the highest extent possible. Even with a minimum 20 per cent output, a district heating system will supply hundreds of thousands of inhabitants while delivering positive benefits for the environment and people’s health.

« Previous Page