Lignite exit in Romania, Bulgaria, Greece

A total of 3.7 billion EUR for regional development would secure a just transition for coal phase-out in three SEE countries – a new study released by SE3T.net (Southeast Europe Energy Transition Network) finds. This investment can be funded by the Just Transition Mechanism that has been proposed by the European Commission, worth EUR 100 billion.

Bulgaria, Romania, and Greece are currently responsible for more than 9 percent of coal and lignite-fired electricity generation in the EU. And this percentage share may increase in the years to come if, as until now, the pace of coal phase-out remains slower than in western European countries. Bulgaria and Romania do not plan to implement a lignite phase-out despite the fact that the losses of lignite plants cost taxpayers several hundred million EUR each year via subsidies. Due to these high payments which are required to keep lignite plants operational, the economic losses of lignite plants are higher if phase-out happens later.

All three countries can phase out lignite without implications for the security of supply, with only a few hard coal power plants remaining in the system – the study finds. The difficulties lie in job losses and an increase in end-user prices, which are both politically sensitive consequences of the phase-out.

The price effect is expected to be even more limited in the first years by low demand due to the COVID-epidemic. In addition, policymakers in all three countries can further reduce the price impact of the phase-out by implementing end-use energy efficiency measures.

The solution of renewables

An investment in renewable energy can further limit the increase in wholesale prices resulting from a phase-out of lignite and set the countries on a path towards net-zero emissions. In contrast to the (misleading) perception that renewables are expensive alternatives, the modeling shows that the level of support required for increasing RES capacities is below 1.5% of the wholesale prices in the case of Bulgaria, below 2.5% in Greece, and below 5.5% in Romania on average between 2021 and 2030.

Based on NUTS2 and NUTS3 level data used for the study, job losses require significant government intervention in the three countries, albeit the situation varies between them, yet the economic and social challenge is manageable, with the support of EU funds. This might burden national social security systems through higher rates of early retirement and higher unemployment payments, however, closure of lignite and coal power plants will free up national funding in the range of 200-900m EUR per country per year, which could be redirected towards strengthening the social security system as well as to investment in renewable energy and energy efficiency, or reduction of energy poverty.

Greece, the first Balkan country to announce a coal phase-out date

Western Macedonia has grown in the last century mainly due to its coal deposits. Lignite mines and power plants were important local employers. The regional capital, Kozani, is still the leading energy producing area of Greece. It provides around 50% of the total country’s power, via lignite combined heat and power units. Now the city is at a turning point for the future of its ageing coal-based energy infrastructure, which is also a CO2 producer.

In September of 2019, during the United Nations Climate Action Summit in New York, Prime Minister Kyriakos Mitsotakis pledged to phase out all coal-powered electricity production by 2028, making Greece a pioneer in the Balkans where this mineral mainly plays a central role in the energy mix. “Our goal is to close all lignite-power plants by 2028 at the latest, despite the fact that we remain a big producer of brown coal,” he said.

Western Macedonia authorities had already decided to turn to a cleaner energy supply. According to the commitment made to the European Commission (EC), enshrined into the national energy and climate plan, the region pledged to produce energy with zero CO2 emissions by 2050. It involves phasing out all the coal mines in the area and finding alternative energy solutions to supply the district heating network.

“This is even a more urgent and demanding problem to be solved than the production of electricity,” concedes Ioannis Fallas, director of the Cluster of Bioeconomy & Environment of Western Macedonia. The non-profit entity aims at reinforcing the smart, bio, green and circular economy in the region and the neighbouring areas, with the help of the local stakeholders.

One way out could be the building of a biomass plant, although Kozani cannot rely only on this source, due to its size. “Diversifying the energy mix is the way to approach the future. It is a very dynamic process, new things appear all the time in this domain and we have to adapt to them. We need to work with the startups, with the universities and research institutes to widen our horizons, to develop new business based on new knowledge,” says Fallas.

However, to ensure an easier transition to a clean energy economy, some challenges need to be overcome. They are related not only to the technology, but also to society. The region has been supplying lignite to the energy industry for more than seven decades, enough to shape a specific coal oriented mentality of the local population. “It seems to be very difficult to persuade employees, miners, engineers that this specific activity will stop,” states Fallas. If the support consists in an early retirement bonus for the generations close to retirement age, then the younger generations will need to learn a new profession.

The authorities promise to help vulnerable groups, to bring new industries into the area and to turn the region into a development hub. Kozani municipality is designing a strategy to achieve the following: implement a fair transition towards less polluted energy provision, which includes  waste management, energy saving transport, building retrofitting, smart street lighting systems, enhancement of the historic heritage of the city, focus on digital education to bring young people from elsewhere to the region.

Some steps toward the transition to low carbon have already been made. According to Konstantinos Kyriakidis, vice-mayor of local development and entrepreneurship of Kozani municipality, three municipal buildings and three schools have been retrofitted and equipped with photovoltaic systems (PV). The municipality itself has acquired electric cars and provided five charging stations for the citizens. “As a metropolitan municipality for this region, we cooperate with other municipalities and different stakeholders in order to collect good ideas that can be implemented or adapted to our city, in the field of building retrofitting, PV systems or e-mobility,” states Kyriakidis.

A new industry for the near future would be related to hydrogen production, which seems to be a profitable fuel for buses or trucks covering long distances. It can also be used on an industrial scale, as a compound of other chemical materials.

“We have proposed a redrafting of the national policy concerning energy, in order to radically change the way we produce energy in this country. The Bank of Greece estimated that no action will cost us 700 million euros by 2100,” stressed Lazaros Maloutas, the mayor of Kozani, adding that a relevant budget must be allocated for that.

Much of Europe is bidding adieu to coal

Europe was once wedded inextricably to coal. It was coal that made the Industrial Revolution happen and it was coal that powered the economic dominance of the continent.

Yet at long last coal is on the way out and fast. Last year the use of coal fell by a whopping 24% in power generation within the European Union, according to a new report by the German think tank Agora Energiewende. “Hard coal generation dropped by 32%, while lignite decreased by 16%. This development is driven by CO2 price increases and deployment of renewables,” the report notes.

“Gas replaced around half of the coal, solar and wind the other half,” it adds. “The decline of coal will continue: Greece and Hungary both made commitments in 2019 to phase out coal, bringing the total of member states phasing out coal to 15. Only Poland, Romania, Bulgaria and Slovenia are yet to start.”

Sweden and Austria have been the latest countries to eliminate coal from domestic electricity production by closing their very last coal power plans. Last month Sweden shuttered its only remaining coal-red cogeneration plant, which was launched in 1989 to provide heat and electricity to people in Stockholm. The same week Austria closed its own last coal-red plant, which serviced a district heating network in a municipality south of Graz.

Both countries bid farewell to coal well ahead of schedule in what has rightly been “a milestone” for clean energy on the continent. “With Sweden going coal free in the same week as Austria, the downward trajectory of coal in Europe is clear,” stressed Kathrin Gutmann, of the lobby group Europe Beyond Coal. “Coal is now in terminal decline all across Europe.”

Several European countries have pledged to stop using coal in the next few years, including France, Italy, Portugal, the United Kingdom and Ireland. Meanwhile, Greece, the Netherlands, Finland, Hungary and Denmark have said they will stop using coal for electricity generation by the end of the decade. Germany, a major coal user, will follow suit within two decades, according to plans.

In tandem with the phasing out of coal, renewables have been gaining ground within the EU. “For the rst time, wind and solar combined provided more electricity than coal, contributing 18% of EU electricity in 2019. This is more than a doubling of market share since 2013,” Agora Energiewende explains.

“The increase in wind and solar generation was strongest in western Europe, while Poland and Greece  have started to engage,” the think tank explains, adding, however, that “the rest of eastern Europe is signicantly lagging behind.”

Sweden exits coal two years early

Sweden has joined Europe’s scramble to decommission coal. Power utility Stockholm Exergi has announced the permanent closure of coal-fired co-generation plant KVV6, in Hjorthagen, eastern Stockholm.

The Scandinavian country had planned to rid itself of coal by 2022 but appears to have decommissioned its facilities two years early.

The KVV6 plant has two boiler rooms, one of which was shut before the winter. The other facility was kept operational as a power reserve but a mild winter meant Stockholm Exergi did not have to use it and the utility has decided to shutter the plant for good. 

Stockholm Exergi said it will now focus on carbon-negative approaches. “We continue to work on the transition to climate-neutral solutions and also solutions to create negative emissions,” said chief executive Anders Egelrud. “Here, the researchers agree: We don’t only need to reduce our emissions to zero but also … to develop techniques to specifically reduce carbon dioxide in the atmosphere.”

Race to the line

With the KVV6 plant closure announced on May, the move appeared to come a day ahead of the closure of Austria’s last coal plant, the Mellach district heating plant, on Friday. Belgium was the first European nation to exit coal, in 2016.

U.K. lobby group Europe Beyond Coal praised the moves, claiming they demonstrated the fate awaiting coal in Europe.

“With Sweden going coal-free in the same week as Austria, the downward trajectory of coal in Europe is clear,” said campaign director Kathrin Gutmann. “Against the backdrop of the serious health challenges we are currently facing, leaving coal behind in exchange for renewables is the right decision and will repay us in kind with improved health, climate protection and more resilient economies.”

Laggard

Germany remains a laggard, with its yet-to-be-ratified plan to exit the fossil fuel by 2038 leaving it in breach of the Paris commitment. London-based economic thinktank Carbon Tracker has used asset-level financial models to analyze the operating financials of every EU coal plant. Analysts at the lobby group estimated 84% of lignite and 76% of hard coal generation capacity is operating at a loss in the trading bloc, and the two types of coal generation could lose €3.54 billion and €3.03 billion, respectively, this year. Against ‘relentless’ competition from solar and wind power, the financial case for coal is becoming incrementally worse, according to Carbon Tracker. In 2017, the report stated, ‘only’ 46% of EU coal generators ran at a loss.

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