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EBRD confirms it will not finance New Kosovo coal plant

In an e-mailed statement responding to an enquiry from the Institute for Energy Economics and Financial Analysis (IEEFA), an EBRD spokesperson said “the EBRD indeed is not considering this project”, ending years of uncertainty as to whether the bank would make an exception to its overall energy policy restricting coal financing.

The news comes as the EBRD prepares to approve a new Energy Strategy for the next five years, in which it looks set to completely exclude direct financing for coal, but has so far made insufficient commitments to avoid financing oil and gas.

ContourGlobal, the company pushing the New Kosovo coal project, has recently said it will turn to the US Overseas Private Investment Corporation (OPIC) and as yet un-named Export Credit Agencies to finance the project.

Yet any potential financiers considering the project will have to come to terms with the fact that the power purchase contract is most likely in breach of Kosovo’s international obligations on state aid under the Energy Community Treaty. Other irregularities also continue to plague the project, such as changing the tender conditions during the process and allowing a single-bid tender to continue even though Kosovo law does not allow it.

The power purchase contract signed between the Kosovar government and ContourGlobal, in which electricity would be bought at a guaranteed “target price” of EUR 80/MWh and ContourGlobal would be paid an “availability fee” even if it doesn’t produce electricity, confirms what KOSID and other civil society groups have argued for years: that the plant is harmful to Kosovo not only for climate and and environmental reasons, but that its economic impacts will also be devastating.

Our efforts to get the remaining financiers to withdraw from the project will therefore continue unabated.

[1] http://www.climatechangenews.com/2018/10/10/world-bank-dumps-support-last-coal-plant/

Carbon sleight of hand continues at Czech coal giant

Last month journalists received a short message from ČEZ stating that the carbon intensity of its mostly coal operations had fallen by 30 % over the past five years, [1] which it attributed to free allowances obtained from the EU’s emissions trading scheme for investments in clean technologies, the so-called derogation.

The numbers, however, mask the true motivation behind the move – a push for another allocation of free emission allowances, which is a profitable business for ČEZ (and not so much – for the state). That is why in the coming months the Czech Republic may decide against allocating allowances free of charge to the power companies and instead selling them in auctions. The estimated profit of EUR 2-3 billion would then fund the New Green Savings program (Nová zelená úsporám).

ČEZ calculated the difference in its emissions intensity for the years 2012 and 2017, but failed to mention that in 2013 it sold one of its largest power plants, Chvaletice, to the mining company of a billionaire and the so-called ‘coal baron’ Pavel Tykač. Since 2017, it also got rid of another large power and heating plant at Tisová by selling it to Sokolovská Uhelná.

The Chvaletice power plant has an installed capacity of 820 MW and Tisová adds another 295 MW, so ČEZ has altogether removed 1.15 GW of lignite power from its portfolio. The remaining coal-fired power plants owned by ČEZ had an installed capacity of 6.19 GW at the end of 2017, so the contribution of these sales is significant (the total installed power would be 7.3 GW without the sales).

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These two transactions are therefore the real reason for the significant reduction in the emissions intensity of ČEZ operations. Obviously, the greenhouse gas emissions and air pollution remain the same at both power plants and are accounted for by other owners.

In the case of Chvaletice, the new owner plans to operate the plant even longer than originally scheduled, thus, increasing emissions over the years.

ČEZ has, of course, managed to reduce some emissions from its own sources. But publicly claiming that it reduced emissions by 30 % thanks to free allowances is misleading.

If it is to receive the free emission allowances for the period after 2020, ČEZ will have to shut down some coal capacity under the new rules. There are concerns that ČEZ will only try to close the small sources which are old and ineffective and pull the same trick by selling its coal power plant at Počerady.

Furthermore, if received, the money from the derogations would free up ČEZ’s own cash reserves for investing in new coal resources, such as those planned at the Mělník power plant.

What we need is real solutions to reduce emissions intensity and air pollution from coal-fired power plants:

  • A fair sale of emission allowances to polluters in auctions;
  • Financial support for clean sources and energy savings through reasonable support schemes available to those who need them, not only ČEZ;
  • Fewer exemptions from the obligation to reduce air pollution from coal-fired power plants in accordance with the  new European limits, effective from August 2021;
  • Closing outdated coal-fired power plants, which are not necessary due to overproduction and exports of Czech energy (notice the increase in electricity export by 19% in 2017), instead of selling them to non-transparent firms.

 

Notes:

[1] E-mail from the spokesman to the journalists:

Mínus 30 procent – o tolik poklesla za 5 let emisní náročnost zdrojů ČEZ

Emisní náročnost zdrojů ČEZ (zdroje Skupiny ČEZ v České republice) poklesla z 0,63 tuny CO2  na dodanou MWh elektřiny v roce 2012 na hodnotu 0,44 tuny CO2/MWh v roce 2017, což jednoznačně prokazuje snížení podílu hnědého uhlí na výrobě elektřiny v rámci ČEZ. Jde o výsledek přechodného přidělování emisních povolenek zdarma výměnou za investice do vybavení a modernizace infrastruktury a čistých technologií (tzv derogace).

Ing. Ladislav Kříž

Hlavní mluvčí Skupiny ČEZ

Manažer útvaru| Útvar komunikace Skupiny ČEZ

ČEZ a.s.

Romania’s energy transition: to be or not to be

One step forward, two steps back

The Clean Energy Package, presented by the European Commission at the end of 2016, brought us a step closer towards a legislative framework to support and facilitate the transition to clean energy.

One of the introduced measures is the obligation of the Member States to prepare a National Integrated Plan for Energy and Climate Change through which clear goals and strategies for 2020-2030 should be set. The first version of this plan should be published and sent to the European Commission by the end of the year.

In the volatile political context at the national level, the launch of the 2018-2030 Energy Strategy of Romania in September should have brought more certainty regarding Romania’s energy future. Instead, the strategy proved that the authorities have the same obsolete vision and aversion to innovations in the field.

Romania under analysis

E3G, an independent think-thank founded to accelerate the global transition to a low-carbon economy, presented an analysis of Romania’s political economy context to promote a better understanding of how political and economic aspects influence the nation’s environmental agenda.

Romania faces extreme weather events that have already caused damages worth over USD 6 billion. In the face of significant climate risks, the current adaptation measures are insufficient and superficial in combating the impacts of climate change.

Moreover, despite significantly contributing to these risks, the fossil fuel industry enjoys strong political support. The energy strategy assigns them an important role in the future. The coal sector is in decline, but no phase-out plan has been formulated.

According to the analysis, Romania’s energy policy focuses on a dated understanding of supply security and the national climate action is motivated only by the European objectives and funds.

Renewables left behind

Romania has already met its renewable energy 2020 targets, mainly through the major expansion of production capacity, facilitated by the Green Certificates Scheme which ended in 2016. Some project developers consider moving their investments to other countries or shutting them down.

Producers’ representatives mentioned that the frequent legislative changes led to the insolvency or even bankruptcy of more than one third of the producers and now the investment recovery rate exceeds 30 years.

Put climate in the spotlight

Climate challenges rarely appear on the public agenda in Romania. There is no basic environmental education and the media do not treat these topics with interest. Therefore, environmental issues receive only moderate attention, the main concerns being energy supply and prices.

In this context, Romania needs to intensify the transfer of knowledge. This can be achieved through the establishment of a platform that combines strategies for environmental impact mitigation of the current energy model and communication of energy transition benefits.

At a time when innovation and sustainability are among the key elements of the energy transition –  transparency and better consultation of all decision-makers should come first. No well-designed strategy can be created without taking in consideration the vision of all those involved in the process. Ambitious climate goals and a just transition for the communities most affected by the elimination of fossil fuels cannot be achieved otherwise.

Controversial dam project in Georgia abandoned by constructor

The USD 575 million worth contract between the Italian construction company Salini Impregilo and the project promoter was signed in August 2015. But with increasing tensions with the local communities and the growing criticism from civil society, the massive Nenskra project has since become a hot potato.

Speculations about Salini’s exit from the project have circulated since at least half a year, but a sentence buried down a statement published on October 18 by the project promoter JSC Nenskra offered the first public confirmation. According to JSC Nenskra, the contract was mutually terminated by the parties, but it remains unclear what led to this move, as well as the terms of Salini’s departure.

For one, Salini owns all the technical documentation related to the Nenskra project, and unless otherwise agreed between the parties, its departure would mean that a new contractor would need to start from scratch, or at least review the available documentation and make the relevant amendments. This would necessarily entail a serious delay in the implementation of the project, and in turn incur substantial additional costs.

The latest warning for investors

In January 2018, the European Bank for Reconstruction and Development (EBRD) approved a USD 214 million loan for the Nenskra project after the decision had been postponed multiple times, and despite civil society groups repeatedly warning about the dire impacts of the project and its highly questionable viability.

In an interview to Georgia’s First Channel on the day JSC Nenskra published its statement, the EBRD’s then Director for Caucasus Bruno Balvanera said the bank has recognised there are issues with the engineering company and it is therefore pausing the process since there are only few companies in the world that can implement a project of this scale.

The Nenskra hydropower project has also received a USD 150 million loan from the European Investment Bank, and a number of other international financial institutions have been considering supporting the project. Yet, this development is but the latest warning sign for any international investors – such as the AIIB and the ADB – who are contemplating such engagement, let alone the Georgian government which continues to promote this highly problematic undertaking.

Nenskra dam in Svaneti - protests against hydro in Georgia

During the three years that it has been involved in the Nenskra project, Salini has failed to meaningfully engage the local residents. Community members have organised several rallies in the region and in the capital Tbilisi to protest the project and the international financial institutions’ role in enabling it. In an unprecedented move, in March this year representatives of all Upper Svaneti communities convened a Lalkhor, a Svan Council meeting, to publish a joint declaration asserting Svans’ status as an indigenous people, and opposing development projects such as the Nenskra hydropower plant that endanger local ecosystems and communities’ livelihoods.

Salini’s checkered track record

In fact, Nenskra is not the first controversial hydropower project Salini has been involved in. Much like in Upper Svaneti, the Bujagali hydropower project in Uganda has seen communities and international civil society protesting the lack of public consultations, loss of livelihood and inadequate compensation as well as resettlement of local residents. In Sierra Leone, the notorious Bumbuna dam, whose construction began in 1982, has been plagued with allegations of corruption, technical problems and tensions with the local communities.

A report published by Bankwatch and Campagna per la Riforma della Banca Mondiale in February 2008 looked at the range of social and environmental impacts of the Gilgel Gibe III project in Ethiopia and Salini’s role in it. Therefore, civil society groups familiar with Salini’s past involvement in controversial hydropower projects have voiced their concerns about the way the company would implement the Nenskra project.

What’s next?

JSC Nenskra expects to complete the project in 2021, and the statement it released two weeks ago insisted that works at the site will resume in November with the construction of two bridges. But as a new constructor to replace Salini is yet to be identified, it remains a mystery who exactly will be carrying out the work. Moreover, due to changes in its technical parameters, the project also lacks a construction permit. Therefore, JSC Nenskra’s plans to resume construction of the already controversial Nenskra hydropower plant next month look particularly questionable.

Bursting bubbles: greens and geeks of the world, unite!

This is relevant to our campaign against destructive hydropower in the Balkans where the lack of baseline data about potential dam sites is chronic and can jeopardise immense local biodiversity. It is also relevant to our efforts in moving the Balkan region beyond coal, where public authorities intentionally fiddle with data on air pollution.

Last week we participated in DesCon 2018, a collaborative hi-tech event on the so called Internet of Things (IoT) that this year was focused on global warming and pollution monitoring.

A winning idea

The illustration used in the presentation: Hydropower in the Context of Sustainable Energy Supply: A Review of Technologies and Challenges – Scientific Figure on ResearchGate. CC BY 3.0

Our idea to monitor environmental flows of small hydropower plants was voted second at the competition organised as a part of the conference, in which five other software or hardware tools entered. The proposed device should provide continuous monitoring of the quantity of water discharged from small dams, a crucial element in preserving ecosystems downstream.

The international team developed the first blueprints of the monitoring device. One team participant, Jari Arkko, was attracted to the idea as he is an avid cave researcher, where water flow measurements are also very relevant. The team has developed a series of scripts to grab publicly available data on electricity production from official sources and use it to calculate water intake by hydropower plants. This will serve as a control variable to monitor the actual discharge from the dams.

Screenshot of the output of the script

The challenge was to scrape the data on electricity production from governmental databases. Open data formats are a rarity in the Balkan countries, the information is scarce and spread around obscure PDF files. And that is if you are lucky enough to find it online. Most of the times information is available only upon request, and yet again not in the machine-readable form. This is hampering citizen’s access to information, a staple of any meaningful civic participation, including involvement in developing a sustainable renewables sector sensitive to water scarcity due to climate change impacts.

Why monitoring matters?

The idea to create such a monitoring device was inspired by Bankwatch’s independent air pollution monitoring campaign carried out in the last two years in the Balkan region.  On DesCon Ioana presented some of the highlights of this work.

Our air pollution monitoring offered the first ever observations regarding a pattern of daytime/ nighttime emissions in Tuzla, Bosnia and Herzegovina, indicative of potential switching off of pollution controllers at the local coal power plant. It also produced some jaw-dropping findings in the village of Rosia de Jiu, Romania, where dust particles originating from coal facilities have been up to 30 times the EU limit.

Independent monitoring of air pollution throughout the region has been instrumental in providing local communities, exposed to such alarming levels of pollution, the evidence that official monitoring stations are failing to collect. In most Balkan countries, the national system of monitoring is insufficiently spread, the data is not collected continuously, nor displayed in real time and most of the coal-polluted hotspots are not even being monitored.

It was, therefore, no surprise that the first prize of the DesCon 2018 contest went to a team who built a PM2.5 sensor, which is cheap to produce and easy to carry and map the air quality in certain locations.

Such devices should not absolve the environmental authorities of performing official measurements, but they can be pivotal in determining the sources of pollution in a certain location which makes it then easier to propose remedial measures adapted to the local context.

Climate change and environmental destruction are not easy challenges. They require unconventional approaches and innovative solutions. Ioana and Igor burst the NGO bubble by joining the DesCon crew, and discussing environmental issues with a diverse community. And had a lot of fun. Some  hacking is indeed going to be needed to change the status quo. “One hack at the time” as the motto of the DesCon conference goes.

EBRD – still fixated on gas despite IPCC warnings

According to the new draft strategy, the EBRD expects to finance “different types of gas infrastructure – for example, upstream, midstream, interconnectors, transmission and distribution networks, underground storage, LNG terminals, floating storage and regasification units – that improve interconnectivity, create well-functioning markets, provide flexibility to energy systems and enable fuel switching from coal and heavy fuels.”

While the EBRD does impose some criteria on its future gas lending, the impact of this screening is unsure. In the past, the bank’s way of calculating emissions has allowed the institution to finance the Southern Gas Corridor and claim that it would have a positive impact on combatting climate change.

In the era of the Paris Agreement, it is unacceptable that financing institutions are still supporting the construction of any new fossil fuel infrastructure at all. If the goal of limiting climate change to 1.5°C is to be achieved, no more fossil fuel electricity generation facilities can be built at all since 2017, according to a 2016 Oxford University study.

In addition, Oil Change International has shown that not only can no new fossil fuel power stations be built, but no new fossil fuel infrastructure at all. This is because the potential carbon emissions from the oil, gas, and coal in the world’s currently operating fields and mines would already take us beyond 2°C of warming, and even excluding coal, the reserves in currently operating oil and gas fields would take us beyond 1.5°C.

A new Bankwatch analysis of the EBRD’s EUR 6.35 billion in support for energy-related projects between 2014-2017 shows that 41 percent of the financing supported fossil fuels, while 27 percent supported renewable energy, excluding large hydropower plants.

Between 2014 and 2017, the proportion of investments dedicated to fossil fuels declined compared to 48 percent from 2006-2011, but absolute fossil fuel lending has been on a rising trend since at least 2010, peaking in 2016 at EUR 774 million.

Most of the fossil fuel investments are supporting oil and gas extraction and transportation. In 2017 almost two thirds of fossil fuel investments were made up by just one project – the TANAP section of the Southern Gas Corridor, which received no less than EUR 417 million, out of a fossil fuel total of EUR 674 million.

But the good news is that in 2017, the bank’s renewable investments finally matched its fossil fuel investments. Our analysis shows that the EBRD is generally able to increase its business in renewable energy and add value to the green energy transition.

In this context, the new draft energy strategy of the EBRD is both disappointing and worrying, in that it indicates that the bank is not willing to do as much as it potentially could for the energy transition. The EBRD plans to give a disproportionately large role to gas investments – despite warnings from scientists that such investments are not compatible with a 1.5°C scenario. And it fails to concentrate as much as it could on renewables and energy savings.

Despite the fact that the EBRD’s own draft Strategy admits that, in the best case, gas can only bring a 30 percent reduction in greenhouse gas intensity for power generation compared to coal, the Strategy vastly over-emphasises its role in the energy transition. The new IPCC report says there has to be 74 percent less primary energy from gas in 2050 relative to 2010 unless carbon capture and storage becomes viable. This means the electricity generation share of gas has to decrease to approximately 8 percent of global electricity in 2050. If there is to be such a large reduction it seems highly inappropriate to put such hopes in its role in the EBRD countries of operation.