PRISTINA (Reuters) - After decades of relying on lignite, Kosovo has been told it needs to phase the energy source out, despite having 14 billion tonnes of reserves, the fifth largest in the world.

Smoke rises from coal-fired power plant in Obilic near Pristina, Kosovo November 1, 2018. REUTERS/Hazir Reka

Last month, the World Bank told Kosovo it would no longer support a planned 500-megawatt (MW) coal-fired power plant. It was supposed to provide a partial risk guarantee to help unlock cheaper loans for its biggest energy project.

“The World Bank has recommended to us to have a 400 MW solar park, a 170 MW wind park and a 350 MW battery storage park,” Valdrin Lluka, Kosovo’s Minister for Economic Development, said.

“We don’t have that luxury to do such experiments in a poor country such as Kosovo. It is a major risk. It is in our national security interest to secure base energy inside our territory,” he told Reuters.

Other Balkan countries rely on coal to produce power, with Serbia and Bosnia generating 70 percent and 60 percent respectively in ailing coal-fired plants, and both are in the process of adding new coal capacities.

London-listed power generator ContourGlobal, which won the tender to build Kosovo’s new plant and operate it for two decades, is now trying to secure funds elsewhere.

The government committed to buying the total output of the plant at a price yet to be determined.

The two old power plants Kosova A and Kosova B are among Europe’s worst polluters. The government said the new plant, to replace Kosova A, would burn 40 percent less coal and release 20 times less emissions.

But power prices in Kosovo, among the cheapest in Europe, would rise 25-35 percent once the plant goes online, mostly due to investment for environmental protection, Lluka said.

By the end of 2018 the best bidder to build the generators at the plant will be picked from China Machinery Engineering Corp., a consortium of ENKA, Mitsubishi Hitachi Power Systems and Tecnicas Reunidas, a General Electric-led consortium and Hyundai.

As the lignite debate continues, local brewer Peja Beer invested 5 million euros into Kosovo’s first solar park. In a sunny day in late October, the 6 MW park outside the western town of Gjakova was producing 3.6 megawatt hours of electricity.

The feed-in tariff for 1 MWh of solar power amounts to 136 euros while 1 MWh from coal-fired plants is sold for 30 euros.

“We see this kind of investment as a good opportunity and we are planning to invest in more capacity,” said Vlera Devolli one of the investors.

The country of 1.8 million people has installed only 50 MW of renewable capacities. It hopes to double them by the end of this or early next year.

“We should not lock ourselves that lignite is the necessary future,” said Learta Hollaj, of the Institute for Development Policy. “If you see the costs to health and environment, then we have a lot of reasons to fight such a project”.