Kosova e Re lignite power plant, Kosovo

Plans to build a new coal plant close to capital Pristina have been around for over a decade, starting out as a planned 2000 MW unit that would turn the country into the leading energy exporter for the Balkans. Yet, lack of investors and resistance to a massive lignite project in a country that already has the highest single point-source of carbon emissions in Europe have gradually diminished ambitions.

Today, Kosova e Re is planned to have a capacity of 500 MW, and US company ContourGlobal has been chosen as preferred bidder for a concession contract.

Official estimates put the cost at around EUR 1 billion, but the IEEFA has estimated that the final price tag may be as high as EUR 4.2 billion. The World Bank is considering providing a partial risk guarantee for the project, while the IFC may provide a loan. Since Kosovo became a member of the EBRD in December 2012 the bank has also indicated its interest in the project, but has since then stated that it has not been approached for financing. In 2013 both banks committed to virtually halt financing for coal and it remains to be seen how they can justify treating Kosovo as an exception.

Civil society groups in Kosovo, led by the Kosovo Civil Society Consortium for Sustainable Development (KOSID) oppose the construction of a new power plant for the following reasons:

1. It is unnecessary. Reducing electricity losses and investing in efficiency and alternatives are cheaper and create more jobs.

While the plant is being depicted as necessary to ensure the country’s energy security, around a third of electricity is lost in distribution (around 15 percent technical losses, with another 18 percent stolen). Much more is lost as a result of lack of energy efficiency measures in buildings and use of electricity for heating.

Daniel Kammen, Professor at the University of California in Berkeley and former World Bank 'Clean Energy Czar' has shown (pdf) that a range of alternatives exists to meet present supply constraints all at a lower cost than constructing the proposed coal plant. The options include energy efficiency measures, combinations of solar PV, wind, hydropower and biomass, and the introduction of natural gas.

While some of the options shown may be more acceptable than others from an environmental or geopolitical point of view, the study illustrates the fact that alternatives have not been adequately studied by the Kosovo government and World Bank.

2. High costs

The IEEFA has estimated that Kosova e Re would increase electricity prices in Kosovo by up to 50% - a heavy blow in a country where electricity prices have already caused protests.

Concerns about costs have been heightened by the Kosova e Re project only receiving a single bid, which diminishes the likelihood of the Government getting good value for money. In 2015 the government was congratulating itself for securing a reduction of the internal rate of return to 21% but this is still very high indeed.

It has been reported that Kosovo’s state electricity company Kosovo Electricity Corporation would sign a long-term power purchase agreement, which would oblige the Kosovo Electricity Corporationit to buy some or all of the electricity generated, and would limit its freedom to buy electricity from other sources, potentially raising prices even more than necessary for customers.

The long-term power purchase agreement is also likely to conflict with Energy Community Treaty rules, which oblige Kosovo to follow EU state aid legislation.

3. Kosovo needs to increase renewables and energy efficiency and decrease CO2 emissions

By 2020, Kosovo has committed through the Energy Community to source 25 percent of overall energy from renewable sources and improve energy efficiency by 20 percent. And as the country is aiming to join the EU, it will have to adhere to ever stricter CO2 reduction targets (likely to be 80-95 percent for the EU as a whole by 2050).

Kosovo is so far not on track (pdf) to achieve its 2020 renewable energy target. Its renewable energy action plan is unrealistic, and is centred around the construction of the Zhur large hydropower plant and other hydropower facilities, while underestimating Kosovo’s significant solar potential.

4. Water shortage

Kosovo is already water-stressed and its water polluted, and a new plant would add to the problem. A paper by Bank Information Center and KOSID shows that the water modelling for the project miss out several factors including water use by the expanded open pit coal mining operations and conveyance of coal from the mine to the power plant, as well as the impact of a new plant on water pollution.

By December 2016 still no environmental and social impact assessment had been carried out for the project, meaning that none of these risks have been studied in any level of detail.

5. Resettlement and agricultural land shortages

A new power plant would require a new mine, and this will require resettlement of at least 7000 people.

The resettlement that has occurred so far for mine expansion in 2014 and 2012 has been in breach of any known international standards for resettlement and an analysis by resettlement expert Ted Downing has shown that the new resettlement plans have already breached World Bank rules in their early design stages. This appears to have been confirmed by the World Bank’s inspection panel, according to a report leaked in November 2016.

For more information contact

Visar Azemi, KOSID Co-ordinator
or
Pippa Gallop, Bankwatch Research Co-ordinator