Blog entry

Construction permit denied for Banovići coal power plant in Bosnia and Herzegovina

The Federal Ministry for Spatial Planning in Bosnia-Herzegovina has denied RMU Banovići a construction permit for its planned Banovići 350 MW lignite power plant. Key issues such as water supply, coal supply, wastewater, flue gases and ash disposal have not been resolved, leading the Ministry to conclude that the project is not in line with the spatial plan for Tuzla Canton.

The issues had already been raised repeatedly by non-governmental organisations Ekotim and Center for Ecology and Energy Tuzla during the environmental impact assessment procedure, but in January 2016 the Federal Ministry of Environment and Tourism issued an environmental permit regardless. For this reason Ekotim initiated a court case in April 2016, which is still pending.

The Spatial Planning Ministry’s decision shows that the Banovići project, in addition to its climate and health impacts, is plagued by a series of problems that should have been acknowledged years ago.

For example, a new reservoir is planned at Ramići that would be used for the coal plant. However, filling the reservoir during drier periods may be in direct competition with filling Lake Modrac, which is used for drinking water for Tuzla and for cooling the existing Tuzla power plant.

Financing for the Banovići project is being sought from the Industrial and Commercial Bank of China (ICBC), and would be backed by a state guarantee. It is to be hoped that the bank now realises the risks of backing such a poorly prepared project and declines financing.

Romanian coal mine blocked from expanding, but neighbours remain without water

The wells in the village of Lupoaia in southwest Romania have run dry. Lupoaia now depends on the mining company Oltenia Energy Complex (OEC) to deliver water twice a day, as OEC pushes against a suspended environmental permit in order to expand the mine further on to the land of Lupoaia and beyond.

Their life without water is featured in a short film released by Bankwatch Romania.

From nine to eleven in the morning and four to six in the afternoon, OEC maintains a water distribution timetable, which is not always respected. This makes it impossible for residents of Lupoaia to secure enough water for the day. Requests to authorities to adapt the delivery schedule have fallen on deaf ears, and last year there was no water for three weeks during the winter holidays.

Lupoaia hosts one of eight mines that OEC plans to expand. Romanian law requires a thorough analysis of the impacts on the environment and the health of locals. The permit issued by the Agency for Environmental Protection for the expansion carries out a superficial assessment, so Bankwatch Romania brought a suit to the Bucharest Court, which then suspended the environmental permit and halted the expansion. Until a final decision on the environment permit’s cancellation, OEC cannot carry out any work in the expansion perimeter.

Like all forms of resource extraction, surface mining has a significant impact on the environment. In addition to the noise caused by heavy machinery, air and soil pollution, the depths of excavation dozens of meters underground often leads to the destruction of groundwater and drinking water sources for those surrounding the mine. Lupoaia is not alone: the nearby village of Rosia de Jiu faces equally precarious living conditions – a lack of water, noise pollution and unbreathable air.

Energy lending at the EBRD: Fossil fuels up, renewables down

How quickly time has passed. Tomorrow’s One Planet Summit in Paris marks exactly two years since the Paris Agreement was concluded, highlighting once again the increasing urgency of tackling climate change.

If global temperature change is to be limited to no more than 1.5°C – and it must – no more fossil fuel electricity generation facilities can be built globally after this year, according to a 2016 Oxford University study.

In fact, not only can no more fossil fuel power plants be built, but no more fossil fuel infrastructure at all, according to a 2016 Oil Change International study. The 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 without coal, the reserves in currently operating oil and gas fields would take us beyond 1.5°C.

Multilateral development banks, among them the European Bank for Reconstruction and Development (EBRD), are positioning themselves as pioneers in the green finance agenda, but if they are to live up to this role, they need to be more consistent in the fight against climate change.

The EBRD’s fossil fuel financing actually increased between 2010 and 2016. In 2016 the increase was particularly marked.

Having closely watched the EBRD’s investments in the energy and natural resources sectors for a long time now, we‘d seen some progress in recent years, including an increase in lending for wind and solar, and a commitment to virtually halt lending for new coal power plants in 2013. This was an important step forward, but not nearly sufficient to address the massive scale of climate change we’re facing.

The EBRD’s recent approval of USD 500 million for the massive Southern Gas Corridor project also suggests that the bank and its shareholders haven’t yet internalised this message. But as the bank is due to review its Energy Strategy in 2018, it is crucial that it finally stops financing fossil fuels.

With a look at the EBRD’s energy-related investments from 2010-2016, let’s see how it’s progressing.

Fossil fuel lending increasing instead of decreasing

Overall, the EBRD lent EUR 9.96 billion for energy-related projects between 2010 and 2016. Around 41 percent of this (EUR 4.05 billion) supported fossil fuels. This does not include projects which support fossil-fuel heavy utilities where it is hard to say what the money was used for, e.g. Elektroprivreda Srbije (EPS), Bulgarian Energy Holding (BEH) in Bulgaria, Samruk Energy in Kazakhstan and Aksa in Turkey.

Alarmingly enough, the EBRD’s fossil fuel financing actually increased between 2010 and 2016, from EUR 600 million to EUR 774 million. While the average remained similar for most of the period, in 2016 the increase was particularly marked.

An increase in fossil fuel lending might have been expected because of the bank’s expansion to the oil and gas-heavy southern Mediterranean. But as the bank hasn’t made any new investments in Russia – another fossil fuel-heavy country – since July 2014, it should have been able to reduce fossil fuel investments overall.

In fact, most EBRD fossil fuel investments took place in Central Asia, Eastern Europe and the Caucasus and the EU during this period. Probably the only good news here is that there has been a general downwards trend in EBRD fossil fuels financing within the EU since 2010. However, the bank still invests in fossil fuels in the bloc, where not as many financial constraints to the energy transition exist as in many other parts of the world.

Renewable energy doing better in the electricity generation sector…

One area where the EBRD has made some progress in moving away from fossil fuels is in its support for new or additional electricity generation capacity, in which fossil fuel projects made up 24 percent of financing while 65 percent went to renewables. Fossil fuel financing in this sub-sector peaked in 2012 but has been relatively low since then. It’s not clear whether this is the result of the bank’s 2013 Energy Strategy or rather changing market conditions.

The fact that such a high percentage of electricity generation investments supported renewable energy is generally welcome. However, not all of the projects can be regarded as sustainable, as they also include small hydropower plants which have proven damaging eg. in the Western Balkans and geothermal plants in Turkey which bring with them unusually high CO₂ emissions by geothermal standards, comparable even to coal-fired power plants.

… Until 2016

Nevertheless, it’s alarming that there was a fall in EBRD support for renewable energy in 2016. In 2015 support peaked at EUR 489 million but in 2016 it was down to EUR 222 million. This may be partly related to the increasingly unfavourable environment for renewable energy in Poland, where the EBRD had previously supported several projects.

Wind dominates the EBRD’s renewable projects, with nearly 68 percent of the investments. The main change within the last few years is the appearance of geothermal and solar in the mix. Solar grew from virtually nothing in 2006-2011 to make up more than 11 percent of renewables investments in 2010-2016, presumably due to dropping prices and increased EBRD investments in the Mediterranean countries.

There also appears to be a much smaller percentage of financing for small hydropower plants than in the 2006-2011 period, when it made up 17 percent of renewables financing. However this is difficult to confirm as some projects may have been financed through commercial bank intermediaries. These would not show up in the statistics because the banks do not publish lists of final beneficiaries.

EU countries receive most renewables finance, Western Balkan countries fail to seize the opportunity

EU countries have received most support for renewable energy. The EU accession countries have received very little, although our monitoring suggests that this is not due to a lack of willingness from the EBRD but rather due to barriers within the countries. Some renewables support has taken place in Turkey and the Mediterranean but it has been heavily exceeded by fossil fuel investments.

Priority issues for the EBRD as it reviews its Energy Strategy

In view of all this, our calls to the EBRD to halt financing for fossil fuel projects are as relevant as ever. This has to include not only direct project financing but also corporate investments in fossil-fuel heavy utilities. Diversification of commodity-dependent economies has been an issue at the EBRD for many years and there is still much work to be done to avoid indirect fossil fuel financing through e.g. transportation.

At the same time, the bank has to make sure that sustainability is not sacrificed as it looks to make up for the lost business in Poland in its renewables portfolio. It needs to avoid supporting unsustainable renewable energy projects like CO₂-intensive geothermal projects and hydropower projects with impacts on sensitive areas or species.

As the bank’s 2018 Energy Strategy review approaches, we’ll be keeping a close eye on the situation. Watch this space…

An experiment with EU funded sustainable transport

This blog post is the result of a small experiment whether I can write something meaningful during the 25 km commute from the small wine town Pezinok to Slovakia’s capital Bratislava.

The wifi equipped train I’m using has electricity plugs and bike racks. It was financed with the help of European Structural and Investment Funds and is the kind of low-carbon, citizen-friendly transport solution that civil society groups across Europe want to see prioritised in the next EU budget.

The train’s main advantage is that it avoids the huge traffic jams during rush hours when thousands of people commute to their jobs and back. During this time, it takes about 2 hours to reach Bratislava by car. The train needs only 23 minutes.

After a refreshing 15 minute bike to the station, I can use the time in the train to work on my laptop. (I usually pick earlier trains as they are less packed.) I am sitting on the upper floor and see vineyards passing by, while leaving the cars on the road behind. (The 23 minutes are also ideal for a power nap after work which gives me energy for sports or work in the evening when necessary.)

Image: A blurred reflection of a person with a laptop. — The colours of autumn reflect in the train’s windows.

Getting off at the Bratislava main station, I look around and wish that the EU money invested in the unfeasible Bratislava D4/R7 ring road would be used for renovating and improving the run-down station instead.

I reach my destination in Bratislava by foot or public transport within a few minutes.

EU funds to unlock sustainable transport solutions

The train is an example of transformational, people-centred solutions that should be financed with EU funds. The Slovak authorities should support systematic interconnections between trains, buses and cars. Also bike lanes in Slovakia should receive more than the current EUR 82 million. Pezinok alone wants to use EUR 4 million in EU funding for its cycling infrastructure.

Unfortunately the current programming period of the EU Budget, and the policy of the European Investment Bank, still allows government to waste billions of euros on exactly the sort of transport projects we don’t need.

The Bratislava bypass I mentioned above is only one of many examples across central and eastern Europe where EU money goes to polluting highways that damage our health, and at times, are permitted in locations of pristine local environments and local livelihoods. Those projects are missed opportunities on a massive scale. They prove that we need to change the rules to ensure that all EU spending is sustainable, fit for the economy of tomorrow, and transforms the lives of citizens.

The People’s Budget website outlines in more detail how this can be done. If we’re fast and determined enough, the destination of this train can still be a bright one.

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I wrote this blog post during the train journeys to Bratislava.

Price tag of Georgia’s Nenskra dam goes through the roof

Among the numerous concerns surrounding the Nenskra hydropower project (HPP) is a lack of transparency about the contract between the Georgian government and the project company. Its confidentiality has long been a source of speculation shrouding the controversial billion dollar investment.

The 280 MW Nenskra HPP would be built by JSC Nenskra Hydro, a joint venture between the state-owned Partnership Fund and the South Korean state company K-Water.

International financial institutions are considering financing three quarters of the project’s total costs at over USD one billion. These banks include the European Investment Bank (EIB), the European Bank for Reconstruction and Development (EBRD), the Asian Development Bank (ADB) and the Asian Infrastructure Investment Bank (AIIB).

Without the full details of the contract available it is impossible to analyse the necessity of such a grand infrastructure project. Understanding the potential benefits and whether these outweigh the impacts is a crucial trade-off that has not yet been solved transparently. It is difficult to understand the rationale behind keeping confidential the contract information, since concealing such details feeds further speculation about the project’s impact.

The price puzzle

Also the recently published cost-benefit analysis contains gaps like a comparison with investments in energy efficiency as an alternative to the Nenskra dam. More importantly, it doesn’t really include an analysis of any costs.

Yet it did reveal a guaranteed price of USD 0.08532 per kWh at which the government of Georgia will have to buy electricity from Nenskra – almost twice the current wholesale price (USD 0.047) for electricity bought in Georgia and imported from abroad.

From the supplementary Environmental and Social Impact Assessment (ESIA) – released in March 2017 after the original ESIA from 2015 needed to be redone for lacking sufficient analytical quality – it can be concluded that the state of Georgia is obliged to purchase 1960 GWh of generated electricity annually for no less than the first 36 years of operation, irrespective of the actual demand placed on the grid.

Piecing it all together, Georgia guaranteed to buy almost 2 GWh annually at a price of USD 85.32 per MWh for three and a half decades.

This might turn out to be a long-term burden for the state, especially in a situation where there are no visible guarantees of an affordable electricity price. Moreover, this deal might become an obstacle for exporting locally-produced electricity to countries with lower tariffs (pg. 3).

The exceedingly high price strongly suggests that the deal is simply too unfavourable for Georgia’s taxpayers and is therefore kept under wraps by the parties involved.

What the ESIA does not contain is a scheme for dealing with cost overruns, a possibility that cannot be ruled out and which is concerning for a few reasons. First, the key facilities associated with the project, including transmission lines and access roads are notably absent from this cost estimation, which could mean that the already high cost of the construction – about USD four million per megawatt – would increase further. Second, the estimated cost of the Nenskra project has swollen nearly 50 per cent in the last two years: initially estimated between USD 650-750 million in 2015, costs have risen to USD 1.035 billion according to the AIIB.

Where is the long-term strategy?

A comprehensive, long-term strategic development plan for the energy sector should serve as the baseline for considering any substantial investments like this one to the sector. In the case of Georgia, HPPs receive political backing but little in the way of qualitative analyses of alternatives.

Under these circumstances, it is extremely difficult to justify a billion dollar project with an incomplete cost-benefit analysis, given the questionable economics, the disproportionate electricity price and the impacts of the project on people.

Between TAP and a hard place – Albanian farmers receive peanuts after losing land and livelihoods to gas pipeline

The full report from the fact-finding mission is available for download.

For the past few years, communities along the route of the Trans Adriatic Pipeline (TAP), the western section of the Southern Gas Corridor have been refusing to accept the toll this gargantuan project is taking on them. While the opposition has been particularly vocal in Southern Italy, grievances have been heard also from Greece and Albania.

On our third mission to Albania earlier this year we found out just how dire the situation is for farmers in the only non-EU country affected by TAP. Labelled an EU ‘project of common interest,’ TAP could soon receive a loan of unprecedented size from the European Investment Bank which has been urged by the European Commission to provide the financing, as has recently been revealed.

A black pipe in front of a foggy panorama. — The black pipes were omnipresent along the corridor of the Trans-Adriatic Pipeline – lying on the surface ready to be put underground.

A fraction of the compensation needed

During the visit, Bankwatch, together with the Albanian Helsinki Committee talked to farmers and communities along the corridor of the Trans-Adriatic Pipeline.

Most of the farmers we spoke to have received compensation for their land but were not at all satisfied, explaining that their loss of income and property was not covered. Some of them calculated for us their income and compared it to what they received. The discrepancy was enormous. And none of the farmers we interviewed were compensated for associated assets like destroyed fences, wells, pergolas or other equipment.

A hill with olive trees and a wide swath where the trees have been cut. — The pipeline route cuts like a scar through what used to be Arjan’s olive grove, one of the farmers affected by the TAP pipeline.

Arjan, an olive farmer in Berat County, used to own 130 olive trees that were 70-80 years old. In his irrigated and well maintained orchard one tree gives up to 150 kg of olives per year. At a price of 150 Albanian lek (~EUR 1.12) per kg, he earned about 22.500 lek (~EUR 169) per tree every year. The compensation he received was only 25.000 lek (EUR 187.5) per tree, hardly more than one year of his income per tree. But it will take 15-20 years until newly planted trees will give olives. And even then, they will only provide about 10-15% of the yield he used to have.

In effect, Arjan received the worth of one year’s olive production while losing more than 15 times that.

Arjan’s business not only supported a family of about 16 people, but also several seasonal workers he employed. Now he is left with next to nothing for years to come. “I don’t know what we will be doing,” he says.

Non-transparent compensation values

To guide the compensation process, the company prepared Guides for Land Easement and Acquisition for each country the pipeline traverses. In Albania, these Guides include partly conflicting rules and do not offer a clear outline for how the compensation is to be calculated. Eventually, also the contracts with farmers are in no way transparent about how the compensation value has been established.

None of the dozens of compensation offers, compensation agreements and notarial documents provided by TAP that relate to the compensation include a detailed valuation of land lease, crops and assets.

Apple trees on the left, clear cut on the right. — Urim’s remaining apple trees next to the pipeline corridor.

Urim, an apple farmer from Cangojn, tried to reconstruct the compensation he received based on his contract and TAP’s compensation booklet.

While the booklet defines a compensation price “per tree” (depending on different production types), his contract only states a compensation per square metre. According to the booklet he should have received more than 18.000 lek per tree. However, for a 403 m2 parcel, for instance, where he had 36 trees, he received 344.662 lek which makes 9.574 lek per tree – half the amount he is entitled to.

He rejected the offer for one year and filed a petition with 21 other farmers who had the same issue. He went to the nearest administrative unit and to Tirana several times. The petition remained unanswered. Instead, the company threatened that the state would seize their land. He signed eventually because of this threat.

Land that disappeared

On the basis of an agreement with the Albanian Immovable Property Registration Office TAP was allowed to establish, enhance and update cadastral data (property ownership, boundaries, and usage) within the pipeline corridor. While this may have been intended to simplify the process of land registration for farmers, it led to irregularities and land loss for some of them.

In several cases, where a person’s land was affected, they received new certificates where the boundaries and even the size of their land had changed.

In none of these cases the relevant land owner understood the reason for the change and in all cases owners were dissatisfied with the new certificates.

One farmer from Fush Peshtan, a village in the Berat region, had bought a parcel of land in 2014 to invest in the family’s own olive business. He had a relatively new certificate, including a map, to show for his purchase.

The new certificate, provided by TAP, showed a parcel whose location had been shifted and its size had been reduced. TAP did not offer to pay a compensation for the difference in the value between those two parcels.

The new parcel has been shifted uphill, above the pipeline corridor. The missing part of his land is now state land. While this causes additional difficulties for the family in accessing their olive orchard, TAP has a clear advantage from this change. It has access to the state land downhill, bordering the location from where the pipeline is coming after crossing the river.

A printed satellite map with colourful markings. — The piece of land next to the river that has been taken away from the farmer (red frame). The TAP pipeline route is marked in yellow and green.

Apart from these issues, farmers told us again about intimidation by company representatives and an overall heavy-handed approach that stymies their efforts to verify whether they have been treated fairly.

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In spite of the highly politicised character of the project, no public authority is currently involved to ensure the fair treatment of affected people. Their ability to disagree and appeal to impartial bodies is – currently – highly limited if at all existent. Our findings should trigger a more thorough engagement with the grievances of affected people. At the very least, the approval of public financial support for TAP must not be rushed.

On December 12 the board of directors of the EIB could decide on a EUR 2 billion loan in EU public money for the realisation of the TAP project. If approved, this would be Europe’s largest ever loan for a single project. It would also be a breach of the bank’s own commitment to human rights as reflected in its statutes.

For more detailed information download the full report from the fact-finding mission.

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