EU-backed western Balkans priority energy projects conflict with EU goals
Bankwatch Mail | 11 November 2013
A list of 35 regional priority energy projects selected on 24 October in Belgrade by the Energy Community’s Ministerial Council has been greeted with dismay by civil society groups from across the western Balkans.
This article is from Issue 57 of our quarterly newsletter Bankwatch Mail
The selected “Projects of Energy Community Interest” will be fast-tracked and prioritised for financing in the coming years. Yet civil society organisations maintain that the EU has condoned regional ministers choosing projects that conflict with EU goals such as biodiversity protection and decarbonisation. Several of the projects are aimed at exporting electricity rather than meeting local needs, while others will perpetuate the region’s addiction to lignite power.
Details on problematic Projects of Energy Community Interest
The list includes three highly controversial lignite power plants – Kolubara B (pdf) and Nikola Tesla B3 in Serbia, and Kosova e Re in Kosovo – highlighting the huge loopholes in the Energy Community Treaty, which does not oblige its Parties to implement greenhouse gas emissions reductions targets even though most of them are aspiring EU members.
Governments in the western Balkans regularly claim that more projects are needed to meet electricity demand. Yet several of the selected projects, such as the Upper Drina hydropower plants on the Bosnia and Herzegovina/Serbia border, and the EBRD-financed Lastva-Pljevlja transmission line, as well as damaging important natural sites, are designed for export to Italy.
Civil society groups are concerned about some of the hydropower and transmission projects, as well as the one and only wind project selected, for two reasons.
First, several of the sites are unsuitable because of their high natural value, and the environmental impacts would be too high to justify. Second, many of the projects are not even designed to cover domestic demand, but rather to export electricity, making it arguably even more unjustifiable to damage the sites given that local people will bear the consequences without receiving the benefits.
Exporting electricity from renewable sources – even where environmentally acceptable – also has another consequence that none of the governments eagerly handing over sites with renewable energy potential to develop exports seem to be taking into account. All the countries in the Energy Community have committed to renewable energy targets for 2025 and as they join the EU are likely to have to increase the percentage of renewable energy in their energy mix. But if they sign away their prime renewables locations for export in concession contracts lasting for several decades, what resources will be left to develop for domestic consumption?
“If this is the creme de la creme of energy projects in the region, then we have a serious problem,” commented Bankwatch’s Ionut Apostol. “It is a huge disappointment to see that an EU-backed body such as the Energy Community has chosen to prioritise these polluting projects considering that they directly conflict with EU environmental legislation or climate goals.”
The EU-initiated Energy Community Treaty entered force in 2006 and brings together nine countries from south-east Europe and the Black Sea region: Albania, Bosnia and Herzegovina, Croatia, Kosovo, Macedonia, Montenegro, Serbia, Moldova and Ukraine. The Energy Community is meant to integrate EU and Contracting Parties’ energy markets through the adoption of selected EU energy and environmental legislation.
Carbon leakage occurs when there is an increase in carbon dioxide emissions in one country as a result of an emissions reduction by a second country. For example, if the emissions policy (usually also accompanied by other tighter environmental standards) of a country raises the local costs of burning coal, then another country with a more relaxed policy can do the same for a lower cost. If demand for these goods remains the same, production may move to the cheaper country with lower standards, and overall global emissions will not be reduced.
One of the few bright spots in the list is that two coal plants in Ukraine – Dobrotvir and Burshtyn, destined almost solely for export to the EU – were not among the chosen projects, and nor were the transmission lines that would carry the electricity to Hungary and Poland. However the reason for this is not thought to be a wholesale rejection of ‘carbon leakage’, rather Ukraine’s failure to implement cross-border capacity allocation and auction rules.
The Energy Community was careful to state after its decision that “If a project breaches the Energy Community acquis or national legislation, or an environmental impact assessment has not been performed properly, the PECI label may be removed”, a statement seen by civil society organisations as both an invitation and a cop-out. While the Energy Community Secretariat has a complaints mechanism, the Energy Community Treaty only covers a few environmental directives.
In view of the fact that the countries in the region have not designated Natura 2000 areas, have not adopted greenhouse gas emissions reductions targets, and are only committed to start applying the Industrial Emissions Directive to new plants from 2018, there is a clear danger of ‘destroy first, regret later’.
While the forthcoming extension of the Energy Community Treaty beyond its original 10-year lifespan to 2016 may provide an opportunity to expand its environmental and climate provisions, the danger is that this will come too late to apply to the selected priority projects.
Whose interests are served by these kind of projects?
Dajc-Velipoje wind power plant, Albania
Cost: EUR 127.5m (2016), EUR 155.4m (2020)
This planned windfarm would be sited in a Ramsar wetland near Skadar Lake and has repeatedly been refused permission from Albanian authorities. Rather than contributing to renewables uptake and meeting local energy demand, the project will likely lead to a backlash against renewables and is designed to export electricity to Italy.
Kosova e Re lignite power plant
Cost: EUR 1.2 billion
This highly controversial plant is planned to have a capacity of 600 MW and has been heavily promoted by the US government, notably through the World Bank, which is interested in supporting the project. The EBRD has also declared its interest in financing the new plant. While the plant is being depicted as necessary to ensure the country’s energy security, up to 30 percent of available electricity in Kosovo today is wasted, according to official data, because of lack of energy efficiency programmes in place. This adds to the 37 percent of electricity losses (of which around 17 percent are technical and a result of an old grid and the other are commercial losses, i.e. theft). Professor Daniel Kammen of the University of California has shown that Kosovo has renewable energy capacities that could deliver 34 percent of energy demand by 2025 (pdf), while at the same time providing more jobs than coal.
Pljevlja-Lastva transmission line
Cost: EUR 106m
The transmission line would link generation capacity in Montenegro, Serbia and Bosnia and Herzegovina with the planned Montenegro-Italy undersea cable aimed primarily at exporting electricity to Italy. This EBRD-financed project will damage biodiversity, areas of outstanding natural beauty and tourism because of its routing and the generation capacity it is designed to support. Project documents suggest that transit of power from the Balkans to Italy is the main point of the project, in which case it does not constitute an improvement of the domestic transmission grid.
Kolubara B lignite power plant, Serbia
Cost: EUR 1.3 billion
A new 750 MW coal plant is planned to be built at Kolubara, in western Serbia, in order to exploit resources in the Kolubara coal basin. Construction at the site was started in the 1980s but later abandoned, and it is unclear whether the half-built infrastructure can still be used at the same time as meeting new EU standards.
In April 2012, the EBRD also announced its interest in providing a 400 million euros loan for the new 750 MW Kolubara B coal plant to be built at the site by EPS and Italy’s Edison, however in September 2013 the bank confirmed it was no longer looking at the project. Meetings with Edison have also confirmed that the project is proceeding slowly and it is now unclear who will finance the project.