Coal news and updates

The smokestacks at Kosovo’s oldest power station tower over decaying buildings and a tangle of rusty pipes, polluting the Balkan countryside and posing the first test of the World Bank’s pledge to avoid coal.

 

The half-century-old plant near the capital, Pristina, produces a third of the nation’s electricity by burning lignite, a type of coal that emits more greenhouse gases than any other fossil fuel and is blamed for hundreds of premature deaths a year in Kosovo. Chronic power outages hobble the country’s $7 billion economy, the poorest in Europe after Moldova.

 

Kosovo’s government is asking the World Bank to help finance a new plant that would provide a reliable power supply while still tapping the nation’s lignite reserves, the world’s fifth largest. The proposal is forcing the lender and its biggest shareholder, the U.S., to make an exception in their clean-energy commitments and concede that burning coal can be the fastest route out of poverty.

 

“We’re going to avoid coal except in the most exceptional circumstances, and in this case, it is one of the exceptional circumstances,” World Bank President Jim Yong Kim said in a May 30 interview. “It’s a dilemma, not just as the World Bank -- it’s a dilemma all over the world.”

 

Boosting growth and attracting foreign investment while agreeing to close the old plant means the country of more than 1.8 million people needs new sources of electricity. The debate with environmentalists is whether that can be achieved without coal, an abundant resource that’s been a source of pride in the former province of Yugoslavia.

 

Shifting Mindset

 

“All these years, we have not been able to think about anything else,” said Visar Azemi, who coordinates Kosid, a coalition of non-profit organizations, media and research institutes that oppose a new plant, in an interview in Pristina. “To talk to people about shifting this mindset to renewables, to something else besides coal, was not an easy task to do.”

 

Containing less energy and more carbon, lignite is cheaper than hard coal and has seen a recent revival in Europe as policy makers allowed mines to be expanded to drive down power prices.

 

The Kosovo project -- a two-unit, 600-megawatt plant that would be fed coal from nearby state-owned mines -- is estimated by the government to cost less than 1 billion euros ($1.4 billion). It would be built with private funds and sit next to Kosovo’s second power plant, which dates back to the 1980s and needs upgrades.

 

Lining Up

 

U.S. and European companies are lining up to bid on the project. New York-based ContourGlobal LP and Sithe Global Power LLC, which is owned by funds managed by Blackstone (BX:US) Group LP, were pre-approved as bidders, along with Turkish company Park Holding AS, according to Economic Development Minister Fadil Ismajli. Public Power Corp SA, Greece’s largest electricity company, is partnering with Sithe Global, he said in an interview earlier this year.

 

To lure investors and their financiers spooked by political or credit risks, the World Bank would offer about $60 million in loan guarantees that would kick in if the government failed to meet obligations such as supplying coal or purchasing electricity. Such guarantees ensure the bank gets involved early on in disputes and helps avoid such crises.

 

Years without investment have curtailed the two plants’ capacity, making outages part of daily life in Kosovo and forcing the state-owned utility to import more expensive electricity. More than a third of the power available is lost during transmission and distribution or is never billed.

 

Winter Nights

 

On winter nights, the smell and haze from wood-burning stoves waft through the streets of Pristina, a city of more than 200,000 inhabitants where Ottoman-era monuments sit beside concrete-block tenements built during the Cold War.

 

The country has “obsolete technologies which are highly polluting and are not sufficient to meet even the basic demands for growth and development of the economy,” Ellen Goldstein, the World Bank’s country director for Southeast Europe, Europe and Central Asia, said in a phone interview.

 

The Washington-based bank looked at all options before concluding that the best way to meet current and future demand is to build a new, more efficient coal-fired plant and complement it with renewable sources, which the government has pledged to expand, Goldstein said. The bank also plans to fund efforts to insulate government buildings.

 

For Kosovo, which declared independence from Serbia in 2008 and is not recognized by Russia or China, coal also means security of supply, Ismajli said in an e-mail.

 

Russia’s annexation of Crimea earlier this year and the instability engulfing Ukraine “demonstrate the importance of developing indigenous resources,” he said. “Kosovo has an abundance of high-quality lignite that is cheap and easy to extract.”

 

Kosid and its international allies, which include the U.S.- based environmental group Sierra Club, say a new lignite-fired plant is avoidable.

 

“There are better, cheaper, smarter options, which also happen to be lower emitting,” said Bruce Buckheit, a former official at the U.S. Environmental Protection Agency who worked as a consultant on Kosovo for the Sierra Club. Among the potential sources of energy is natural gas from Azerbaijan, he said.

 

 

Source: http://www.businessweek.com/