World Bank Studies Coal-Fired Power Plant for Kosovo

World Bank Studies Coal-Fired Power Plant for Kosovo

Lisa Friedman, E&E reporter
Published: Tuesday, January 17, 2012

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Building a lignite coal plant in Kosovo could cost nearly twice as much money as previously estimated, a new World Bank analysis of a hotly disputed power project acknowledges.

The study also acknowledges about 400 megawatts of hydro, wind and other clean energy capacity in Kosovo -- something the World Bank had previously dismissed as virtually non-existent.

Yet despite newly recognized financial challenges to coal and the existence of cleaner alternatives, the World Bank ultimately concludes that a new 600 MW coal power station remains the best and cheapest option for replacing Kosovo's long-neglected Communist-era power plants and establishing reliable power supply in the country.

"Even assuming that all of this renewable capacity could be built by 2017, the remaining gap for firm base-load capacity would average about 600 MW in the period 2017-19" and grow even wider over the coming years, the report states. "Firm base-load capacity can only be provided by fossil-fuel fired thermal options, as nuclear is not feasible and neighboring countries are supply-constrained and unable to provide firm capacity."

The analysis of energy alternatives available in Kosovo argues that the country needs about 950 MW of "new, firm" capacity by 2017, growing to 1,500 MW just a few years later. The country's electricity supply options are constrained by limited sources, the authors wrote, noting that "lignite is the only abundant domestic fuel for power generation. Some potential for renewable energy generation exists, but it cannot provide the firm capacity Kosovo needs."

An escape from soot and frequent blackouts?

Europe's poorest country is currently served by two coal plants outside the capital city of Pristina, one of which is the largest point source of air pollution in Europe (spitting out 2.5 tons of dust each hour) and the other poorly maintained. Both are running far below their 1,487 MW of installed capacity, and the country suffers frequent power outages even as electricity consumption and demand soar.

The United States has thrown its weight behind a plan to shutter the dirtiest plant, known as Kosovo A, and refurbish the second. Replacing Kosovo A would be a new power station using lignite coal -- the dirtiest of all fossil fuels -- financed by a World Bank partial risk guarantee. The result, U.S. officials say, would be an overall cleaner energy mix that would include new efficiency measures and also lead to reduced coal imports.

Yet the deal also has the potential to turn into a public relations disaster for both the Obama administration and the World Bank.

The United States has pushed the multilateral lending institution to reduce its coal projects, particularly in the wake of a high-profile fight over a new South African coal plant. The $3.75 billion World Bank loan to South African utility Eskom led to one of the institution's most bruising public battles in recent years, and many inside the bank would just as soon see this newest potential controversy over coal in Kosovo disappear before another international fight erupts.

World Bank officials did not respond last week to requests for comment about the new analysis. But William Pizer, associate director of public policy at Duke University and former deputy assistant secretary for environment and energy in the U.S. Department of the Treasury, said helping a poor country like Kosovo meet its energy and also development needs is a critical priority.

Case is made for coal, not renewables

"There's never a great time to do certain things," Pizer said. But, he argued, even the U.S. position urging a scaling down of World Bank coal loans recognized that in very poor or credit-constrained countries, coal would have to remain in the mix. In the case of Kosovo, he said, renewable energy will certainly play a large role in the future but can't meet the country's immediate needs in the way that coal can.

"Economic development is the mission of the bank, and if this is what Kosovo needs, they've got to be figuring out how to move it forward. And I think the case continues to be pretty good," he said. "Maybe out of this will come some emphasis on trying to get wind development if it is cost-effective, but that doesn't obviate the need for the lignite plant."

Environmental groups maintain that entrenched support for the coal project within the State Department has obscured thinking about new, cleaner possibilities. They argue that the new analysis shows no near-term need for additional baseload capacity and note that analysts have not actually calculated all of the costs involved in the plant or addressed Kosovo's needs for peaking power.

Justin Guay, with the Sierra Club's International Climate Program, noted that the new analysis ultimately agrees with environmental groups' two long-standing critiques: that supporters of the Kosovo lignite plant had lowballed the cost of building it and erroneously dismissed clean energy capacity. He attributed the unchanged conclusion to politics.

"There is no way you can look at it technically and say, 'Yes, we need this exact kind of project,'" Guay said. "The U.S. has been relatively good on other coal plants, and now it's as if they are closing their eyes to the glaring flaws in this project. It doesn't make any sense."