London-listed, global energy investor ContourGlobal portrays its plans for a new coal power plant in Kosovo as a step towards cleaner air, but its legal agreement with the government shows that it fails to commit to best-in-class environmental performance, writes energy finance consultant Gerard Wynn. Courtesy Energy and Carbon blog.

ContourGlobal (CG) this month issued its 2017 annual report, and described in more detail its deal with the Kosovo government last December to build a 450-500 megawatt (MW) power plant, to burn domestic brown coal called lignite.

In its annual report, CG stated that it would now start raising the $1.3 billion in debt and equity finance required to build the power plant, before construction starts next year, aiming for it to come online in 2023.

No-one would argue with ContourGlobal’s assessment that Kosovo “suffers with Europe’s worst pollution from two old lignite fuelled power generation facilities”

CG sought to burnish the environmental and economic credentials of the proposed project.

“We do not take lightly our decision to sponsor a coal-fired power plant,” it said.

Suffering with Europe’s worst pollution

“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.”

To eliminate these emissions entirely, Kosovo could choose from a range of alternative sources of generation, including hydropower, wind or solar power

CG is right to highlight that dust, SOX and NOX are some of the most dangerous outdoor pollutants, contributing toward heart and lung diseases directly and through formation of ground-level ozone.

And no-one would argue with ContourGlobal’s assessment that Kosovo “suffers with Europe’s worst pollution from two old lignite fuelled power generation facilities”. The Institute for Energy Economics and Financial Analysis (IEEFA) calculated last year that the two units at the existing Kosovo B power plant ranked as the 2ndand 3rdhighest dust emitters in Europe, and 6thand 7thhighest NOX emitters.

But is CG offering the best way forward for Kosovo?

To eliminate these emissions entirely, Kosovo could choose from a range of alternative sources of generation, including hydropower, wind or solar power. ContourGlobal and the Kosovo government prefer a new lignite power plant.

But even in this case, CG is not guaranteeing the cleanest solution, shows the power purchase agreement it signed last December with the Kosovo government.

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

Kosovo is a member of the so-called Energy Community of nations neighbouring the EU, whose emissions standards sometimes lag, but still align with the EU

These 2017 BREF limits will apply across the EU.

The 2017 BREF overtakes now outdated limits agreed in 2010, under the EU’s Industrial Emissions Directive (IED), 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 neighbouring the EU, whose emissions standards sometimes lag, but still align with the EU.

Outdated standards

CG could simply have recognised the 2017 BREF emissions ranges for “new plants”, and said it would comply with the new limits.

Instead, its power purchase agreement with the Kosovo government shows the firm dithering between the IED and updated 2017 BREF standards.

The PPA describes two “options”. The first is to comply with “EU industrial emissions standards”, i.e. the 2017 BREF. The second is to comply with the IED emissions limits agreed back in 2010, based on best available technologies as of 2005. CG spells out the second option, even providing a table of the applicable limits, just to be clear what is on the table.

CG is thus proposing to bring online in 2023 a brand new lignite power plant which would only meet the maximum pollution levels allowed using the best technologies from two decades previously

CG is thus proposing to bring online in 2023 a brand new lignite power plant which the company claims will “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.

In its power purchase agreement, for example, CG quotes the IED’s NOX emissions ranges for its new power plant of 150-200 milligrams per cubic metre of exhaust gas. That is three times BREF’s 50-85mg. And CG quotes the IED’s dust emissions limit of 10mg, at least double BREF’s 2-5mg.

We can only speculate why CG is hedging its bets in this way. Perhaps the options depend on the financial backing it gets. Is it proposing to fall back on a cheaper, more polluting power plant, if it cannot secure lending from European banks?

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

And by failing to guarantee to use the cleanest technologies available today, rather than more than a decade ago, CG is trampling on its own claim to be putting Kosovo’s environment first.

Editor’s Note

Gerard Wynn is independent energy finance consultant. This article first appeared on his blog Energy and Carbon on April 16 and is republished here with permission of the author.