Coal in Europe an in the Balkans
Piotr Trzaskowski, European Climate Foundation
July 2013
Importance of coal for climate

The global consensus is that the world should be
kept within a 2ºC temperature rise (40-60% chance ~
450ppm).

Conversion of known reserves of gas and oil risks
concentrations of CO2 ~ 450ppm.

Conversion of known coal reserves risks
concentrations of CO2 consistent with a world
without ice and outside the Holocene temperature
range that gave rise to human civilisation.

6 degrees temperature rise would mean 50% of
known species disappearing by 2100

10 year turnaround required:
 12Gt less CO2 must be emitted in 2020 in
order to achieve 450ppm (Mckinsey CC 2.1).
 WEO 2010 specifically projects coal use must
peak by 2020 then decline to 2003 levels by
2035 in order to stay within 450ppm.
 WEO 2011 says that by 2017 world should not
be building any new fossil fuel emitting
infrastructure
 But new coal plants lock in coal use for 40
years.

Coal in electricity production emits 2 times more
CO2 per KWh than gas
“Continued growth of greenhouse gas
emissions, for just another decade, practically
eliminates the possibility of near-term return
of atmospheric composition beneath the
tipping level for catastrophic effects.” Hansen
et al, 2008
Where does the EU go?




2009 European Council objective - reduce EU GHG emissions to 80-95% below 1990
levels (in context of necessary reductions by industrialised countries as a group)
EC Roadmap to a Low-Carbon Economy by 2050 (March 2011)
EC Energy Roadmap 2050 (December 2011)
EC Green Paper "A 2030 framework for climate and energy policies" (March 2013)
Source: Roadmap to a Low-Carbon Economy by 2050, European Commission
Role of coal in the EU energy mix
Economic risk environment - Coal not turned out to be economic
Return risks
 Capex risen compared to CCGT leading to diminishing competitiveness given high costs of
capital.
 High load factors less achievable as RES advances
 Diminishing project value as utility economies of scale disrupted (eg EON’s)
 Structural over-capacity in some markets (eg DE) compounded by reduction in demand and
lower near term demand projections.
 CCGTs and RES are being built as considered more economic, flexible, or supported.
 2012/13 low wholesale prices in Europe question economics of new coal but also CCGT
Commodity price volatility
 Coal prices have proved volatile. 2008 price shock – coal not efficient hedge when all fossil
prices rise.
Technology risks
 CCS ready requirements. How far will they go?
 European Commission communication The Future of Carbon Capture and Storage in Europe
Mott Macdonald June 2010 update for UK government on generation costs
Policy risk environment – governments have regulated
Incompatibility risk
 Climate policy has continued on a 20 year tightening trend. Unabated coal is systematically in conflict with
this trend.
Legitimate policy change risks (examples)
 ETS and 10c derogation decision impacting on investment decisions in Poland.
 IPPC Directive now clarifies that MSs can introduce EPS.
 UK set to introduce EPS ‘at the level of a modern gas plant’. Meantime UK requires at least 300MW net CCS
on any new coal project and introduced Carbon Price Floor on April 2013 at £15.70/tCO2.
 Greece banned construction of hard coal plants in 2009.
 The Dutch coal tax introduced in 2013 is now operating at a level of 13.65€/t of coal. Additionally 10%
biomass cofiring is mandatory.
 EU law on phasing out coal mining subsidies. Aid ending in 2018 and be replaced by closure and clean up
support.
 Spanish economy cannot sustain coal subsidies and has announced they will end in December 2014
Coal renaissance in the EU?
“Europe’s dirty secret. The
unwelcome renaissance”
The Economist, Jan 5, 2013
“Shale gas boom sparks EU
coal revival”
Financial Times, Feb 3,
2013
“Europe consuming more
coal”
The Washington Post, Feb
5, 2013
Coal renaissance in the EU?
Causes
• New air pollution rules
–
Large Combustion Plants Directive closures by 2015. Limited working hours
•
Record-low carbon prices
•
Coal relatively cheaper than gas in 2011 and 2012
•
National level coal policies incentivize use of coal in the short term
–
–
–
In March 2013 in the UK introduction of a floor price on Co2 emissions
Jan 1,2013 coal tax in Netherlands
In Spain phase out of subsidies to coal
>>> But this is a short-term trend. Almost no new coal power plants proposed to be
build in the EU.
The story of European coal campaign.
New coal projects planned in mid 2007
20 projects permitted
Mainly Germany, Netherlands and
Italy
111 projects in the EU at various stages from early
announcements of intent to seeking permission
Mostly in Germany, Poland, UK.
Italy and Netherlands
RWE, DONG, Vattenfall, GDF Suez, EON, Iberdrola, PGE, CEZ, ENEA, Enel all pursuing
substantial new coal
Situation 2013
20 permitted
13 operational or under construction one admitting it will never be
profitable (Mannheim)
2 under construction, but subject to legal challenge (Datteln,
Lunen);
3 face legal challenge plus significant mitigation (coal tax plus
cofiring mandate - Eemshaven, Rotterdam x2);
1 IGCC dropped coal gasifier
111 announced projects
2 reached construction stage (Sostanj, Kozienice)
74 shelved and abandoned
15 remain just announced
22 delayed and seeking permits
RWE, DONG, Vattenfall, Iberdrola, PGE, ENEA, all abandoned new coal projects
Enel, EON, GDF Suez, CEZ, PGE, EDF all still pursuing new coal
"We conclude that further new-build coal projects in [the countries studied] are
all very unlikely.”
Poyry report to Uk govt., Outlook for new coal-fired power stations in Germany, the
Netherlands and Spain, April 2013
Role of coal in the EU energy mix
Source: European Wind energy Association, Wind in Power 2012
Coal in the Western Balkans
• Turkey
• Western Balkans
• Existing coal in the EU
Role of coal in the power sector development plans
Developments in the EU in
2012
Plans of Western Balkan
governments
Planned capacities until 2021
in BIH, HR, KOS, RS, MN
5%
coal
29%
51%
gas
hydro
other RES
15%

Source: European Wind energy Association,
Wind in Power 2012

Source: Regional Energy Strategy, Energy
Community Treaty, Oct 2012
Coal threat in the Balkans. How much coal in the
pipeline?
Source: Regional Energy Strategy,
Energy Community Treaty, Oct 2012
Source: coal threat list,
klima alianz, June 2013
Country
MW
Country
New
units
MW
Croatia
950
Croatia
1
500
Macedonia
300
Macedonia
2
600
Kosovo
1000
Kosovo
1
600
Montenegro
356
Montenegro
2
730
BiH
1050
BiH
14
10000
Serbia
2540
Serbia
6
3000
Sum
6196
Sum
26
15430
ONEblock
COALmakes
BLOCKaMAKES
A DIFFERENCE
One coal
difference
- Croatia
35
Source: own calculations
30
mln t Co2 eq
25
20
80% reduction
15
95% reduction
10
Plomin C
5
0
1990
1995
2000
2005
2010
2015
 Political implications for the whole EU
2020
2025
2030
2035
2040
2045
2050
Coal threat in the Balkans - a background
Some characteristics
• Lignite
• Open pit mining
• Underdeveloped RES sector. No trust in
alternatives
• A lot of dirty old coal power plants: old vs. new
argument
• Energy as a social policy tool. High levels of
energy poverty
• Political support for a domestic energy source
– lignite
Political uncertainties
• Impact of EU accession process. 2050
perspective and climate change debate. Not
a legal argument!
• RES directive and RES share increase.
• Weak state institutions, no coherent energy
strategies, political manoeuvring, volatile
political support, no energy market.
Investment climate and risks
• Corruption is a risk, but opportunity for some
• Lack of in-country financial resources
• Concessionary financing (Chinese Development Bank, EBRD)
• State as guarantor of foreign investments
• EU thirst for cheap electricity as a driver of investments, but not now!
• New coal investors and financiers (China, Turkey, S. Korea)
• High CAPEX for lignite