April 17, 2018 Read More →

IEEFA Update: In Kosovo, Plans for a Power Plant That Would Be Out of Compliance on Day One

ContourGlobal Wants to Build According to Old Emissions Limits Instead of New Ones

London-listed power-generation investor ContourGlobal portrays its plan for a new coal-fired power plant in Kosovo as a step toward cleaner air for the small Balkan republic.

But the company’s agreement with the government shows it actually hedging its bets, dithering between less- and-more polluting options. ContourGlobal’s 2017 annual report, published this month, shows that the company wants to raise some $1.3 billion in debt and equity finance this year, to build the power plant, and aims to start construction next year.

Plans for the project—a 450-500 megawatt (MW) power plant that would burn domestic lignite—call for it to come online in 2023.

ContourGlobal in its annual report burnishes the proposed plant’s supposed environmental and economic credentials.

“We do not take lightly our decision to sponsor a coal-fired power plant,” the company states.

“It is not our preferred fuel. But the needs and resources of Kosovo argue overwhelmingly in favour of developing this plant with this fuel now. Kosovo is Europe’s poorest country and its current installed electricity generation base is Europe’s largest single source of pollution including dust, other particulate matter, NOX, SOX and CO2.”

“An important benefit and positive effect (of a new lignite power plant) represents the decrease of environmental damage to the country and its people. The health of the Kosovar population and especially a healthy future for the children is one of the greatest goals of any modern civilization,” its annual report states.

CONTOURGLOBAL IS RIGHT TO HIGHLIGHT that dust, sulfur dioxide (SOX) and nitrogen oxide (NOX) are among the most dangerous air pollutants, contributing directly to heart and lung diseases and through formation of ground-level ozone.

And no one would argue with its assessment that Kosovo “suffers with Europe’s worst pollution from two old lignite-fueled power generation facilities.” We calculated last year that two units at the existing Kosovo B power plant ranked as the second- and third-highest dust emitters in Europe, and sixth- and seventh-highest NOX emitters.

But is ContourGlobal really offering the best way forward?

To eliminate such emissions entirely, Kosovo could choose from a range of other sources of generation, including hydropower, wind and solar. Yet ContourGlobal and the Kosovo government seem to prefer a new lignite power plant, and even in this case, the company is not guaranteeing the cleanest solution, as can be seen in the power purchase agreement it signed last December with the Kosovo government.

EU regulations would require an almost immediate upgrade  upon project completion in 2023.

European Union member states agreed in April 2017 to new emissions ranges for dust, SOX and NOX. Those limits will apply across the EU and will be the new reference for permitting large thermal power plants in Europe, and are listed in a “best available techniques reference document,” better known as the LCP BREF. The new limits are based on data from 2010 showing what technically- and economically-viable emissions reduction technologies are used in the sector.

The 2017 BREF replaces now outdated limits agreed to in 2010 under the EU’s Industrial Emissions Directive (IED), which was based on the preceding 2006 LCP BREF for best available technologies as of 2005.

Kosovo is a member of the so-called Energy Community of nations neighboring the EU whose emissions standards sometimes lag but still align with the EU, and ContourGlobal’s power purchase agreement with the government shows the firm vacillating between the 2010 IED and the 2017 BREF standards.

ContourGlobal could simply have recognized the 2017 BREF emissions ranges for “new plants” and agreed to comply with them. Instead, it describes two “options.” The first is to comply with “EU industrial emissions standards,” that is, the 2017 BREF. The second is to comply with the outdated IED emissions limits.

ContourGlobal is thus proposing to bring online in 2023 a brand-new lignite-fired power plant it claims would “decrease environmental damage to the country,” but in fact would only meet the maximum pollution levels allowed using the best technologies from two decades previously.

There is a big difference in emissions associated with the 2010 IED and the updated 2017 BREF.

By way of example, ContourGlobal in its power purchase agreement quotes the IED’s NOX emissions ranges for its new power plant at 150-200 milligrams per cubic meter of exhaust gas. That is about three times BREF’s 50-85 milligram limit. And ContourGlobal quotes the IED’s dust emissions limit of 10 milligrams, far higher than BREF’s 2-5-milligram limit.

WE CAN ONLY SPECULATE AS TO WHY CONTOURGLOBAL is hedging its bets in this way. Perhaps the decision on which way to go will depend on the financial backing it gets. Is the company proposing to fall back on a cheaper, more polluting power plant if it cannot secure lending for a cleaner plant from European banks?

Failing to guarantee 2017 BREF compliance is financially reckless, since the plant would be obsolete on Day One: either ContourGlobal itself or the Kosovo government would have to upgrade it almost immediately to comply with EU regulations.

And by failing to guarantee to commit to the cleanest technologies available today—rather than relying on outdated ones—ContourGlobal is trampling on its own claim to be putting Kosovo’s environment first.

Gerard Wynn is an IEEFA energy finance consultant.

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