Slovenia's shoddy Šoštanj 6 busts the myth of cheap lignite power

Bankwatch has been monitoring and campaigning against the ill-conceived EBRD- and EIB-financed Unit 6 at Šoštanj in Slovenia for several years now. Yet the project never ceases to amaze with its myriad flaws and scandals – and the first few months of 2014 have been no exception.

Debate had already been raging about the project in Slovenia, with ongoing corruption investigations by Slovenia's anti-corruption office and the European Anti-Fraud Office (OLAF) into how the project promoter TES awarded the contract for the project to the French engineering company Alstom. In February 2012 a preliminary report by the Slovene anti-corruption office pointed to a lack of transparency and supervision around the project, as well as a high risk of conflict of interest surrounding certain participants in the tender committee.

Then last June it was revealed that the 600 MW project's price tag had doubled since it was first proposed in 2006. A project that started at an estimated EUR 600 million had by June 2013 risen to EUR 1.44 billion. So much for lignite being cheap – and that's without any external costs such as health being added into the calculations.

However in January this year it was reported that the plant is likely to run at an annual loss of approximately EUR 50 million per year at the beginning of its operation, potentially leaving Slovenian consumers to pick up the losses. During the latest round of debates and finger-pointing that ensued, Slovenia's prime minister, Alenka Bratusek, stated that "we don't have the privilege to decide whether this project can still be stopped. The data we have show halting it would be more expensive than completion."

While the EIB – which lent EUR 550 million for the project – has at least belatedly learnt some lessons from Šoštanj with a senior bank source describing it to the Brussels news site Euractiv as 'one of those projects that tends to haunt you', and a welcome change in the EIB's new energy policy steering the bank away from coal, the same cannot be said of others. The EBRD – which lent another EUR 100 million for Sostanj 6 – has to our knowledge never admitted that it made a mistake by financing the project, although it too at least changed its energy strategy in late 2013, making it much more restrictive on coal investments.

But a final point that never ceases to amaze when it comes to Šoštanj is how Slovenia's south-east European neighbours don't seem to be learning any lessons from it at all, instead ploughing on with plans to build coal and lignite plants as if nothing ever happened.

Plomin C in Croatia; Stanari, Ugljevik III, Tuzla 7 and Banovici in Bosnia and Herzegovina; Kostolac B3, Kolubara B and Nikola Tesla B3 in Serbia; Mariovo in Macedonia; Kosova e Re in Kosovo and Pljevlja II in Montenegro: all are claimed – without any publicly available justification – to be cheaper than the alternatives. All suffer from the same unwillingness by governments to accept that times are changing, and to analyse the real costs and benefits of various forms of energy production with open minds and ears.

Instead of ignoring or insulting voices which question lignite dependence and put forward new ideas, the region's governments must use their imaginations to make use of southeast Europe's plentiful potential to leapfrog into an energy efficient, decarbonised twenty-first century.

Failure to do so might seem cheaper now, but, as Šoštanj shows, the public and governments will pay heavily later.

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