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Third time’s a charm? New attempts to sell off unprofitable Czech coal plant in Turkey

The Czech Minister of Industry and Trade announced that there is apparently a bidder who had not managed to submit an offer on time during the previous round. With a new deadline set for 21 August, the bidders can make new offers for purchase.

The offered price is CZK 4.4 billion (EUR 170 million), which amounts to just about a third of the initial investment made by Czech export credit agencies (ECAs). 

The Czech Prime Minister, together with the Industry Minister, plans to visit Turkey in the first half of September to discuss the sale further.

Read more (in Czech)

Belgrade incinerator: Serbia to be a dumping ground for outdated technology?

On 28 June the Serbian Ministry of Environment published two environmental assessments: for the planned municipal waste incinerator and landfill gas plant at Vinča, just outside Belgrade, and for a new waste landfill next to the existing one at the same site.

Nothing unusual about that, except that the EBRD had already published an environmental assessment on its website last November which encompassed all these project elements in one. Ne Da(vi)mo Beograd and Bankwatch submitted 92 pages of comments to the bank in December, and in May received a response with the project promoter’s answers.

Expecting our comments to have been addressed in the new version of the studies, we were surprised to find that they repeat many of the same deficiencies that we pointed out in our comments submitted in December.

The main issue is that no-one has yet come up with any numbers to prove that the incinerator will be compatible with waste prevention and separate collection schemes. These will not only be obligatory for Serbia in the next few years as it advances towards EU membership, but also highly beneficial in terms of protecting public health and saving energy and resources.

It still looks to us like the incinerator will crowd out resources for prevention and recycling and will depend on a large increase in Belgrade’s waste generation which, if it implements EU circular economy policies, may never arise.

But one important thing has changed since our last round of comments in December. On 17 June new pollution control standards called the Waste Incineration Best Available Techniques (BAT) Conclusions were approved in the EU. The Conclusions will immediately be binding for plants permitted after they are published in the EU Official Journal in the coming months.

No-one can say they did not see this coming. The need to develop new BAT Conclusions was stated already in the 2010 Industrial Emissions Directive and drafts of the new rules have been available for two years already. Yet so far, the project promoter and the EBRD have failed to ensure that the project complies with the new rules.

If the Vinča plant goes ahead, it will receive its integrated permit well after the publication of the new standards. While Serbian legislation is unclear on the extent to which these are binding, the EBRD’s Environmental and Social Policy is not. Its requirements on industrial pollution state that: “Certain projects that, due to their nature and scale, would be subject to the EU Industrial Emissions Directive will be required to meet EU Best Available Techniques (BAT) and related emission and discharge standards, regardless of location.”

Irrespective of the rules, failure to apply the latest standards raises the question of why the public in Belgrade is not deserving of the same level of environmental protection as EU citizens. Any government that cares about its citizens cannot permit the construction of a new incinerator that does not afford maximum protection for public health.

Racing against the clock: Kenyan villagers under imminent threat of eviction by project under EU’s bank’s appraisal

The European Investment Bank (EIB) has a long history of financing geothermal power plants in Kenya. The last in line awaiting approval is Akiira 1 geothermal plant, set to occupy the homeland of the Lorropil community (also known to locals as Kambi Turkana).

The project is currently under the EIB’s appraisal, awaiting a EUR 155 mln loan that would constitute a good half of the project cost. According to the EIB website, a complementary ESIA for the steam-field, power plant and transmission line is underway. The money comes with conditions – the bank’s Stakeholders Engagement Standard requires open, transparent and accountable dialogue of the project promoter with all relevant stakeholders at the local level – but in practice this seems to be hardly respected. The exploratory works started back in 2012 without any proper consultation with the community.

Lorropil people share that the company continues to pressure them into leaving their homes. On 4 and 17 June, they were threatened by persons openly associated with Akiira 1 to seek shelter elsewhere by 20 June.

The Lorropil village is home to 47 families –  one of the most vulnerable groups in the area. The villagers are not formally recognised by the state despite residing there for decades. The living conditions are extreme: there is no longer free access to water, and their makeshift homes offer minimal protection and comfort. But these are their only homes and they have nowhere else to go.

A typical house in the Lorropil village

Daniel Lepariyo, the chief of the Lorropil village, explained that the village was constructed in 2004. According to him, the village was displaced without any compensation to make space for the construction of a new village for people resettled due to geothermal projects financed by the EIB and the World Bank . Now, the same people are to be impacted again by a new geothermal plant – Akiira 1.

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Before it is too late, the EIB must establish whether its potential client is involved in these threats and condemn any discovered wrongdoing.

If the Lorropil community is forced to leave the area before the environmental and social assessment is finalised, they might lose their status of project affected persons and their associated privileges – playing right into the hands of the company that in this case, technically, would not be burdened with proper resettlement costs.

The Lorropil community should be identified as Akiira 1 Geothermal Power Plant project stakeholders, effectively and meaningfully engaged in the project decision-making, given equal opportunity to voice their opinions and concerns, and have those considered. If any resettlement scheme is needed, it should be developed in line with the bank’s standards.

A false solution to a real problem?

EU Member States submitted their draft National Energy and Climate Plans (NECPs) in the beginning of 2019 and the European Commission is expected to deliver an assessment of and recommendations on these draft plans in the coming days, in time for the governments to submit their final plans by 31 December 2019. Bankwatch has already analysed these draft plans and highlighted a worrying lack of commitment from the countries of central and eastern Europe to supporting more energy efficiency investments and sustainable mix of renewable energy production.

A new, supplementary analysis, published today confirms these findings by examining the NECPs of Bulgaria, Czechia, Estonia, Hungary, Latvia, Poland and Slovakia and their measures to support the use of wood biomass. It shows that the majority of these countries plan logging and biomass use above sustainable levels.

Instead of investing heavily in energy efficiency and small-scale renewable energy, these countries are choosing to reach their 2030 renewable energy objectives by increasing the use of biomass, even though this would have an adverse effect on the climate and environment of the whole region.

In several of these countries, the projected biomass usage is so high that they would have to import biomass from abroad or resort to unsustainable domestic sourcing. This would drive logging demand up even further and cause significant reduction in CO2 capture in the whole region, contradicting the principles of sustainable forest management. Similarly, the use of biomass in low-efficiency heating systems delays investments in energy efficiency and small-scale renewables.

This reliance on biomass is part of a worrying wider trend of replacing coal with other unsustainable and often non-renewable fuels, such as biomass, gas and/or municipal waste, as shown in another analysis by Bankwatch also published last week.

Central and eastern European governments are often tempted to make apparently “cheap” and unrealistic energy choices in order to perpetuate business as usual. The answer to this challenge has to be two-fold.

First, the European Commission must clearly spell out that these plans, if implemented, would damage ecosystems and the climate, and should therefore be reviewed in order to include sustainability safeguards. Credible sustainability criteria in every Member State must exist before they are allowed to heavily invest in this sector.

Second, the EU has to show it is best placed to support the energy transition in central and eastern Europe, by delivering a post-2020 EU budget that has a strong emphasis on climate and environment. Discussions regarding the next cohesion policy, a major source of public investment in this region, should focus on how to support more ambitious NECPs, for example by scaling up energy efficiency investments, as recommended by the European Semester, and on how to include every actor in order to ensure future-proof and acceptable plans for the next seven years.

Short-term fixes that would bring more problems in the medium- to long-term are of no use to anyone. Only more holistic thinking, focusing on a combination of greenhouse gas savings, material and energy efficiency, biodiversity protection and people’s welfare stands a chance of steering the EU towards the energy future it seems to want.

New opportunities for eastern Europe if the EU’s bank ramps up climate ambition and quits fossil fuels

This fear of losing on the EIB’s low-interest and attractive maturity loans, if climate investments dominate the bank’s spending strategy, is unnecessary but understandable. The EIB’s climate operations have been rather marginal in the eastern states. So far, the EIB has been unable to tap into the region’s vast potential in increasing energy efficiency and renewable energy.

Our past findings clearly show that the EIB’s climate action varies across the states. For example, in 20 member states – 10 of which are the eastern states – the EIB’s share of energy efficiency and renewable energy investments was below the EU’s average.

Within the EU, the bank invested billions in fossil fuels projects – mainly in Italy, Spain and the UK – which blatantly contradicts Europe’s climate goals. Research shows, Europe must stop fossil fuels infrastructure development plans now. Any further investments of this kind will end up as a stranded asset instead of bringing prosperity and environmental benefits.

Suspending fossil fuels financing and stepping up climate action is an opportunity to boost the EIB’s green financing, especially in central and eastern Europe.

First, the Bank and its shareholders should critically examine its business model, which at the moment favours big projects in transport, energy and industry sectors. This model does not correspond to the needs of modern transformation in central and eastern Europe. The initiative to reshape the EIB and its priorities is a chance to adapt and redirect EIB’s financing to energy transformation based on innovative technologies in energy efficiency and renewable energy.

Right now the EIB is reviewing the energy policy which should eliminate its support for fossil fuels, but reducing greenhouse gas emission requires a comprehensive approach from multiple financial policies, such as budgeting, fiscal stimulations, procurement procedures, public finance management and financial sector regulations.

The intervention of finance ministers who decide the fate of the EIB’s credit policy is prerequisite to bringing the bank on the right track to fight climate change, energy poverty, air pollution and upholding the EU’s prosperity.

Money for nothing: Ugljevik III coal concession must be cancelled, not bought off

In 2013, the Republika Srpska entity authorities in Bosnia-Herzegovina signed a concession contract with a little-known company called Comsar Energy, owned by Russian billionaire Rashid Sardarov, to build a 600 MW lignite power plant at Ugljevik, next to a smaller existing plant.

There was a flurry of activity around the project in 2013 and 2014 as an environmental permit was issued. The project looked set to be another one in a series built and financed by Chinese companies and banks in the region, but it was later reported that negotiations had come to nothing and the project stagnated.

In July 2017 the project seemed to reach a dead end when the Supreme Court of the Republika Srpska Entity cancelled the environmental permit for the project, after a challenge by the Center for Environment. But the Ministry of Spatial Planning, Construction and Ecology responded by issuing another permit without changing the environmental impact assessment or holding new public consultations.

In late 2018 a separate complaint process, via the Energy Community dispute settlement mechanism, resulted in an agreement by the Republika Srpska authorities not to use the existing environmental permit for the project, meaning that if the project is to go ahead, it would have to re-start the permitting process.

And indeed this is a big “if”.

In its annual report on the implementation of concessions issued in April 2018, the Republika Srpska Concession Commission clearly stated that the concessionaire was not fulfilling its obligations and that low electricity prices were hindering the realisation of the project. But no recommendations were made on what to do about it.

In August 2018, local media reported that Comsar threatening to give up the project unless an extension of the concession from 30 to 45 years was granted, together with a reduction of the capacity from 600 MW to 350 MW because the plant would otherwise be unprofitable.

The only surprising thing about this is that it took so long. Coal plant construction has collapsed globally in recent years because of coal’s increasingly poor economics and widespread opposition.

Western Balkans governments are pushing blindly ahead with coal projects via subsidised state-owned companies that suffer losses in order to maintain unsustainable electricity prices and employment levels.

Just this week it has been confirmed that Republika Srpska’s state-owned electricity company, ERS, plans to buy off Comsar Energy’s concession for Ugljevik III. The likely cost has been cited at around EUR 90 million.

So let’s get this straight: Comsar Energy got a concession in 2013, and didn’t fulfill its contractual obligation to build the plant. But now it gets to sell its concession for an unprofitable coal plant back to the public sector for EUR 90 million? Why should we, as electricity consumers, pay for the omissions made in planning this project?

If the concessionaire didn’t fulfill its obligations, the contract should be cancelled, period. It took a risk, and lost. ERS doesn’t need yet another unprofitable new coal project on its hands – it already has Gacko II – and it certainly doesn’t have enough money to pay EUR 90 million for nothing.