Bankwatch

Home > Archives for Blog entry

Blog entry

ContourGlobal finally quits Kosova e Re coal plant

As if sensing the world was in desperate need of some good news, ContourGlobal has announced today that it is quitting the planned 500 MW Kosova e Re lignite power plant project in Kosovo.

The company stated that it is now impossible for the project to meet the required milestones, citing, among others, the recent formation of a government led by a Prime Minister publicly opposed to the project. 

This is excellent news for Kosovo, as it not only frees up resources to concentrate on much-needed energy efficiency, solar and wind investments, but it will also save the country an enormous amount of money.

Kosovo’s previous government never came clean about exactly how much it would cost households and the state budget to fulfill the terms of the power purchase agreement signed with ContourGlobal.  But with a ‘target’ wholesale electricity price of EUR 80/MWh and a host of other guarantees provided to the company with regard to coal quality, land transfer and other costs paid by the state, it was clear that the project would cost Kosovo dearly. 

The Director of the Energy Community Secretariat, Janez Kopač, several times warned that the contract could bankrupt the country, yet the project limped on. For years it looked like there was no rule that the Kosovo government was not willing to break for the sake of pushing the project forward. From a tender process that breached Kosovo legislation, to an environmental impact assessment without any public consultation, to the utterly illegal power purchase agreement, the legal violations kept piling up.

As a consequence, and given coal’s increasingly bleak future, ContourGlobal failed to find new financing for the project after the World Bank and EBRD confirmed they would no longer support it. With the details of the power purchase agreement gradually becoming public, domestic political opposition to the deal grew too. Kosovo and international civil society groups have opposed the project for almost a decade, and as time has worn on, their arguments have been proven right.

The parties forming Kosovo’s new government declared opposition to the Kosova e Re contract and were expected to annul it in the coming months, but finally ContourGlobal made the first move.

Kosovo must now decide how to move forward. In 2018, distribution losses alone accounted for almost 28 per cent of electricity – half technical losses and half commercial ones. The country has wasted years on pursuing coal projects that could have instead been spent addressing such losses and investing in sustainable forms of renewable energy, that are now more economically viable than coal.

There is no more time to lose on coal. It is no longer a resource, but a liability. It’s time for Kosovo to face the future and turn to clean, efficient energy.

“This publication was produced with the financial support of the European Union. Its contents are the sole responsibility of CEE Bankwatch Network and do not necessarily reflect the views of the European Union”

Will Europe’s just transition pilot support locals in Slovakia?

Citizens of the Upper Nitra region in Slovakia, a coal mining area, are interested in a just transition away from coal and towards a zero-carbon economy. In fact, they have led the process thus far, organizing working groups and contributing to the development of the official action plan for the region’s transformation.

Citizens have not lost interest now that the plan is complete. At a recent seminar held in Prievidza on 12 February, almost 100 people from the local community came to learn how European programming in the upcoming period (2021-2027), the Just Transition Mechanism and other tools can support projects for the transformation of the Upper Nitra region.

This workshop was a chance to take stock of where the region is at, after all of the work done in 2019, and to explain to the local community the path forward. In front of a packed and engaged room, politicians from all levels of government, business leaders, and Slovak and international experts discussed how to move from a citizen-led action plan to citizen-led projects.

The Deputy Prime Minister’s Office had previously invited local municipalities and business entities to propose their visions for a just transition through project concepts that support the transformation of the region of Upper Nitra. The community’s proposals were supposed to show whether the region had the potential to fulfill the action plan’s priorities and whether it would be possible to secure European funding for their ideas.

This “collection of indicative transformation projects” was carried out twice: in 2018, approximately 180 project concepts were submitted, and in 2019, the number of new applicants significantly increased. In the end, out of approximately 220 project concept notes submitted, eight were selected for submission to JASPERS, a joint EU/EIB initiative to support projects receiving EU funds.

Unfortunately, this process raised the expectations of local business leaders who submitted projects—several applicants have received no feedback on their proposals, and those whose projects were sent to JASPERS may have false hope that their projects will be funded.

So far, government representatives have provided very limited advice to the community on what they can expect out of this process, or how to improve their project proposals for the next time around. In fact, little effort was made to include the community beyond the application stage. Yet funding would go directly to the regional authority (NUTS 3 level) and municipalities to build the capacities of locals in to better prepare and implement good projects. 

Government representatives at the seminar made clear that they support Upper Nitra’s transformation and want EU funds to be devoted to this. They stressed multiple times the complex nature of the problem, and therefore the long-term perspective needed when considering its solution, asking for patience from the community.

Yet locals are ready to move forward with the process, and are anxious to see how it will be done. This sense of urgency is partially because many local employers lack a qualified workforce, and yet thousands of local people are still employed in the coal mines due to subsidised electricity from domestic coal. 

One of the key issues remains a sustainable alternative solution for district heating. The region currently relies on coal for this purpose, but will need to shift to new technologies in the upcoming period. The Slovak government is currently preparing EU funding for the insulation of part of the distribution network, and JASPERS will assess a project to use private resources to increase the energy efficiency of municipal buildings. Although an EU-funded waste incinerator will hopefully be off the table, questions still remain about the most appropriate heating solution.

Any system will need to involve a combination of measures: the refurbishing of buildings and distribution networks to improve insulation, underground heat storage, and renewable technologies such as heat pumps and solar power systems.

The Slovak government is looking to the EU for funding and guidance on this and other transformation projects. Will the EU support local solutions which benefit local people, or will they instead cater to the desires of the power holders in Bratislava and corporate headquarters?   

The Czech coal commission and its planned fossil fuels phase-out

It is true that greenhouse gas emissions in the Czech Republic actually decreased by 13% compared to the year 2000. However, this decrease primarily took place in the past, not in the last 5 years. It is also alarming that since 2000, emissions from waste have increased by 47% (mainly due to the accumulation of biowaste in landfills) and those in the transport sector by 54%. The Czech Republic also sadly stands out in terms of per capita emissions: the country emits 11 tonnes of CO2 per person per year, whereas the average is just under 7 tonnes in the EU, 7.5 tonnes in China, 9 tonnes in Germany and 5 tonnes in France.

The coal industry is not closing up shop either: the semi-state-owned company ČEZ failed to withdraw from the contract for the sale of the largest Czech coal-fired power plant to Pavel Tykač and his mining company Vršanská uhelná, which it had the opportunity to do until the end of 2019. This means that in January 2024 the power plant will pass  into the hands of this businessman, who has declared interest in its further operation.

However, this outdated power plant is the largest Czech source of carbon dioxide and also, increasingly, toxic mercury in the air: the 229 kg emitted last year represents a 20% increase over the previous year. At the same time, the Ministry of the Environment allows the power plant to deduct 40% of the measured values ​​of toxic mercury as “measurement uncertainty”, making it easier to “meet” health limits. The Czech Republic also enthusiastically exports electricity produced from coal: in 2017 it exported 10.9TWh, and in 2018 and 2019 it exported 13TWh each year.

The coal commission

Since August 2019, the 17 members of the so-called Coal Commission, initiated by the Minister of the Environment, have been meeting, as well as several of its working groups. Despite the disproportionate composition of members in favour of the coal industry, the aim of the Commission is to formulate a recommendation by 30 September 2020 with a specific date for the end of coal mining and combustion in the Czech Republic and addressing individual coal sources — i.e. shutting down the dirtiest and least effective power plants. The Coal Commission is preparing several scenarios for coal phase-out: the business-as-usual scenario (i.e. the state will not interfere with coal business) with a phase-out by 2045 or 2050; a scenario corresponding to the German approach, with a phase-out between 2038 and 2040; and a scenario which would see phase-out by 2030-2035. 

The Czech Republic is a signatory country to the Paris Climate Agreement, which has the global objective to limit temperature growth to 1.5 degrees (and maximum 2 degrees) compared to the pre-industrial period. However, with its current coal-burning plans (for example, the National Climate and Energy Plan), the country is not contributing enough to achieving this objective. In 2020, the Czech Republic must put forward a new national reduction target, one that is more ambitious. The Coal Commission’s scenario which proposes a rapid end to coal (between 2030 and 2035) needs to be modeled, not only to meet the Czech share of the global climate commitment, but also because the price increase of emission allowances may  eliminate the coal industry before the planned lifetime of coal-fired power plants. 

In the context of the decline in coal use, coal reserves should also be written off beyond the so-called territorial-ecological mining limits. The write-off of stocks are already part of the Government Resolution on Mining Limits of 1991, but the measure has never been realised.

The decline in coal mining and use is supported by the public. Surveys show that coal burning is the least preferred option for generating energy (71% of people agree to close all coal-fired power stations, but most believe this should be done gradually — the most ambitious group is people aged 18-24, out of whom one third see coal ending in 2030).

More than 10,000 people signed the public call against the sale of the Počerady power plant in 2019, as well as 60 personalities from North Bohemian and national politics, medicine, science and art, such as former prime ministers Petr Pithart and Vladimír Špidla, four former environmental ministers, Senator Alena Dernerová, Mayor Ivana Sihlovcová of Dobroměřice near Počerady and the Director of the Global Change Research Center of the Czech Academy of  Sciences Michal V. Marek.

Estonia, the wild east of small nuclear reactors

Local environmental organisations are not against all forms of nuclear energy: if one day a solution emerges that is inherently safe and uses local nuclear waste as fuel for example, that technology might be worth consideration. But the current campaign by Fermi has none of those features, although the skillfully vague marketing has already recruited many high-profile patrons. What is Fermi energy really up to, and how can this one small company set a precedent to negatively impact the global transition to sustainable forms of energy?

Hardly a panacea for Estonia’s energy and climate needs

A recent conference organised by Fermi provided some answers. Prime minister Jüri Ratas used his keynote to make the case that ‘new generation’ SMRs can help achieve climate neutrality. When looking at nuclear plants in isolation, CO2 emissions are indeed limited. But when considering the construction, constant fuel supply chain and later waste management required, SMRs actually emit large amounts of greenhouse gases, albeit less than coal or shale-fired power plants. 

Fermi, in their pitch for SMRs that same day, ignored this reality. They furthermore dismissed renewables like wind and sun as insufficient for Estonia’s energy demand, and energy storage solutions and interconnections with other nations as inadequate– in spite of the fact that Estonia has one of the highest levels of interconnectivity in the EU. 

So what technology is planned for Estonia? Prioritising cost and market readiness ahead of safety, Fermi is likely to install third generation reactors, albeit in a smaller case. Although they have not stated this publicly, it can be assumed from a recent modelling study commissioned by the company, which concluded that fourth generation designs are still too far into the future to be worth consideration. Fermi CEO Kalev Kallemets has also confirmed this intention numerous times at various smaller public events. The only options that could reach a usable stage in the next decade are preassurised water reactors (PWR) and boiling water reactors (BWR) – see figure below.

This is neither a safe nor cost-effective choice for Estonia: third generation nuclear reactor technology still has known safety risks, no long-term waste solution and an estimated electricity price of 40-90 $/MWh. 

Comparative assessment of SMR technologies by Tractebel. Notice that MSR stands for molten salt reactors that are still possibly decades away from deployment

Follow the money

Is such a plan financially feasible? Fermi claims, based on a study they commissioned and run on estimates they have provided, that the plant’s financial return could be around 150 million euros annually. They have even proposed the possibility of exporting excess energy to neighbouring countries. 

Yet the run on figures assume high energy prices, and the analysis is based on fourth generation SMRs, which Fermi has ruled out as a viable option. On the contrary, a recent independent analysis by the German institute for Economic Research on current reactor designs has shown that on average, a nuclear power plant will incur a loss of about five billion euros, with “positive” scenarios totalling a loss of 1.5 billion. Crucially the authors note: “New” technology concepts do not change the outlook.

It seems obvious then that the local market in Estonia is too tiny for such a costly endeavour, so a bigger scheme must be at play: it appears Fermi’s interest in the country is rather in using it to pave the way to easier and faster licensing of perhaps hundreds of small reactors across the globe. Fermi CEO Kalev Kallemets appeared to confirm the company’s interest in this dangerous approach in his closing remarks of the conference day, and other speakers at the event provided similar arguments. 

For instance, Bret Kugelmass of the US-based Energy Impact Center argued that only nuclear energy can provide enough power to suck vast amounts of carbon from the air, the whole nuclear industry should be thoroughly de-regulated to cut costs, nuclear power plants could be built in densely populated city centers to prove their inherent safety, waste should be dumped in the oceans and nuclear fuel reserves will last for 26 billion years. 

Bret Kugelmass exhibiting a spoon, demonstrating the amount of supposedly released radioactive waste from the Fukushima accident

Estonia, with no prior experiences in regulating nuclear power, appears at risk of being conned into an era of countless, small third generation nuclear power plants. All the company needs to begin is to reach phase zero, which means getting nuclear energy included as a viable alternative in some national energy strategy. The recent National Energy and Climate Plan (NECP), which mentions nuclear as a possible option for meeting future energy needs, shows that this is almost the reality.

Can the market steer Estonia to the best solution? Even though Fermi employees insisted that SMRs do not compete with solar and wind, this is hardly so. If this were true, why did the company dedicate a whole presentation to bashing alternatives? Once on the market, nuclear power – with its long-term fixed contracts and subsidies – will clearly steal a market share from renewables. Wind parks, for example, are already required to compete at market prices, which was also correctly noted in the keynote by Sandor Liive from Fermi. 

Furthermore,  although the plant would be privately owned, public regulation would be required. Given the limited public financial resources that Estonia has, every euro spent on establishing a costly nuclear regulation body is an investment that could go towards renewables. 

Even an unbuilt SMR creates waste

Fermi seems bent on establishing a wholesale third generation SMR business. The strategy to sway public opinion seems to be to sending mixed messages about the technological choices and viable renewable alternatives, while quietly lobbying the state to start preparing for the inevitable nuclear renaissance. 

In order to push this message, they target renewables like wind and solar as “weak”, “too easy”, “unreliable” and “unacceptable”. With the climate crisis looming and the necessity of a just transition in the coming decade, spending resources on old and non-renewable technologies must be seen as a nuclear waste of time.

Red alert: how alarming levels of air pollution in the Western Balkans require urgent government action

Graph source

The Directive on ambient air quality and cleaner air for Europe (2008/50/EC) laid the foundations by which air quality in many European countries has been improving over the last decade. Air pollution was brought to safer levels, which in turn significantly improved the health of European citizens.

However, safer does not mean risk-free. The limits for even better health protection recommended by the World Health Organization (WHO) are considerably stricter than the ones given in the Air Quality Directive (AQD). But, WHO is also constantly reminding us that there are no safe levels of air pollution, a claim which is supported by a multitude of scientific research (see here and here).

Regardless of the fact that AQD limit values might not provide the best protection for human health, so far they have proven effective to push EU Member States to take action. When there is a risk that one or more limit or target values will be exceeded, Member States are required to draw up short-term action plans in order to reduce the risk or duration of such an exceedance. These plans are obligatory for levels of pollution from sulphur dioxide and nitrous oxides that are more toxic and are proven to have an immediate impact on health. For other pollutants, they are implemented where appropriate, which in practice means in most urban areas where there are many sources of pollution that can be targeted.

But, what happens when air pollution, specifically from dust particles (PM10 and PM2.5), is constant and levels are so high that these short-term action plans turn into annual plans? In Western Balkan countries it is currently impossible to keep air pollution levels within limit values. If the same practice is implemented as is in EU countries, the short-term action plans will be active almost every day throughout the winter months. While there is some prospect of improvement in the long term with proper implementation of the legislation already in place, something needs to be done now, too, at least to reduce the exceedances.

Several years ago, North Macedonia took a step in the right direction regarding this. In addition to the alert thresholds for sulphur dioxide and nitrous oxides, due to growing public pressure, the government introduced a similar threshold for PM10. The initial threshold, however, which activates emergency measures and recommendations if 24-hour PM10 values remain above 100 μg/m3 for seven consecutive days, proved pointless. The set limit value was quite ambitious considering the levels of pollution, but waiting for seven days (many of which had 24-hour values above 400 μg/m3) to trigger a response from the authorities offered little to no protection to the citizens.

This is why this threshold was changed in December 2017 to 24-hour PM10 values above 200 μg/m3 for two consecutive days. The new system also introduced an obligatory annual reduction of this threshold by 12,5 μg/m3. Although not perfect, this system proved more effective, and the annual reduction of the threshold provided a prospect for the reduction of pollution that the long term strategies should envision. The main setback of this system is that the emergency measures are canceled on the first day when the 24-hour value drops below the threshold, which as of December 2019 is set at 175 μg/m3, instead of extending them to the day when the legal limit of 50 μg/m3 is reached. It is not that 170 μg/m3 is less alarming than 175– it is still a long way from what needs to be achieved.

None of the other Western Balkan countries has an alert threshold for PM10; instead, they only have what the AQD prescribes– and in this case, that is the bare minimum. The levels of PM10 pollution in all of these countries in 2019 remained almost unchanged from previous years, and they are again making the headlines world-wide. At the same time, the new European Commission is working on the Green Deal that will very likely recommend bringing the EU’s limit values closer to the WHO ones. This will set a future standard for WB countries, all of which are aspiring EU members, that will be impossible to reach if action is not taken starting yesterday. 

Adopting an alert threshold for PM10, and maybe even PM2.5, in combination with the right short-term measures and proper air quality monitoring, can have some impact in preventing episodes of extremely high pollution during winter months and will set the vision for the long-term improvement of air quality. It will also show some ambition and some consideration for the citizens’ health. Good practices should be embraced and continuously improved so that the region as a whole is moving forward.

Latvia adopts climate and energy plan and long term strategy

On Tuesday the Latvian government formally adopted its National Energy and Climate Plan 2021-2030 (NECP) and Strategy towards Climate-Neutrality 2050 (also known as Long-term strategy, or LTS). The following is a more detailed look at specific aspects of both.

What incentives for housing improvements?

According to the minister of economics, Ralfs Nemiro, Latvia has prepared a “very ambitious and comprehensive” NECP which offers about 100 policy measures in 12 directions with energy efficient buildings as the first. The only objection to the contents of the NECP was raised by the minister of justice who did not support the idea of lowering cadastral values for properties with energy efficiency measures completed. Instead, he suggested using real estate tax without distorting the cadastral system. 

In addition, the minister of finance expressed doubts that reducing the real estate tax would have any profound effects because the sums are minor when compared to the costs covered by grants. Ahead of completing a new Latvia’s long-term housing renovation strategy this year,  finding the right economic incentives for efficiency measures remains an open question.

How transformative a strategy?

The minister of environment Juris Puce, introducing the LTS, stressed its “informational” status and noted that no strategic planning documents yet exist in the system to cover a period of 30 years. Its overarching goal is to reach climate neutrality, and the document paints a vision of a gradual transition to a low-carbon economy in all sectors and points towards technological change. 

While Latvia’s LTS may not have the power for a substantial transformative action, it is more specific than the NECP when it comes to the importance of climate change adaptation. Hence, the LTS entered the field of interest of the Ministry of Interior because of its links with civil protection and warning systems.

Most of the measures proposed in the NECP have been included in the draft National Development Plan 2021-2027, linking them with priorities to be funded by the European budget post-2020, also known as the Multiannual Financial Framework (MFF).

Funding to overcome economic disparities 

The ministries of economy and environment cannot reach agreement on implementation of the Modernisation Fund, which is supposed to support the modernisation of the energy systems in the Member States of Central and Eastern Europe thanks to the money generated by the Emissions Trading Systems (ETS). The government prefers to continue the national programme of emissions trading without increasing the present allocation in the Modernisation Fund. Yet opinions differ regarding the priority projects and recipients: either upgrade of small-scale heating systems or non-ETS emissions reduction in transport and farming. Since October 2019, the report on Latvia’s position has been withdrawn from the agenda already twice.

Despite the overall agreement on the targets of the NECP, negotiations on the Just Transition Fund will pose new challenges. Latvia does not have a CO2-intensive manufacturing industry and is almost free from coal. Yet peat is the source of conflict. It is produced for horticulture and exports and used for energy in very small amounts. 

But the GHG emissions from peat bogs have a high share in the land use, land-use change, and forestry (15%) and cannot continue without restoration.  According to the Peat Association, about 3000 people work in this sector seasonally. 

However, the association largely represents the interests of the owners and the social dimension of this problem is not clear without further study. The NECP’s section on just transition offers a broader picture of obstacles for transformation in all sectors due to lower income. But what is known about the territorial Just Transition plan for Latvia is that it will necessarily include Latvia’s peatlands.

What landscapes of renewable energy

 

In 2018, Latvia had the third highest share of renewable energy (40%) in the EU. Despite the fourth highest share of electricity from renewable sources (53%), Latvia is one of the least successful in energy transition for transport. Attaining sustainable transport systems is required for healthier modes of mobility and environments, but another driver of change in post-fossil energy landscapes will be distributed generation. 

 

Latvia has raised its 2030 renewable energy target to 50% in line with the recommendations of the European Commission. In the 67% renewable electricity target scenario, wind parks will ensure most of the increase in the next decade. 

 

Our recent study found that regulatory and planning barriers prevent Latvia’s wind industry from picking up the pace. To implement the NECP, finding suitable locations for placing the wind turbines and expanding the economic models of power generation to include renewable energy communities will be crucial.