EU FINANCES COAL
Ecoal, Vol 75, August 2011
European development banks are financing new coal projects.The Šoštanj power plant is the largest of its kind in Slovenia. It provides one third of the country's electricity demand, using domestic brown coal resources.
The European Investment Bank (EIB) and the European Bank for Reconstruction and Development (EBRD) will now provide financing for its modernisation, as old combustion units need to be replaced with modern state-of-the-art technology to reduce the carbon footprint of the plant and to extend its lifespan.
Environmental Benefits
Modernisation is necessary for the plant to comply with the EU's environmental regulations. Without efficiency improvements the plant will be forced to significantly reduce power generation by 2017 and to shut down after 2025. The current efficiency rate of Šoštanj power plant is under 30%. A new combustion unit would have an efficiency of 43%, reducing CO2 emissions per KWh by 38% in comparison to the oldest three units. The modernisation would also halve sulphur dioxide and nitrogen oxide emissions.
Energy Security
Although renewable energies are the fastest growing source of electricity in Slovenia, modernisation of the Šoštanj power plant is necessary as the country's energy demand and its primary energy imports increase. On the other hand, Slovenia has vast brown coalreserves and the Velenje coal mine, which is currently supplying the Šoštanj power plant, has the capacity to supply coal until 2040.
Development Banks: Funding Strategy
The energy sector is the major area of activity for the European development banks. Over the last two decades, the EIB allocated over 13% of its resources to energy projects. Today, both the EBRD and the EIB focus on energy efficiency and renewable energy technologies.
In fact, it is now a requirement that 50% of EIB lending for electricity generation is associated with renewable energy technologies. In the area of energy efficiency, projects have to show an increase of at least 20% in energy efficiency, and coalfired power plants financed through the EIB also need to be capture ready. The EIB is also ready to finance CCS demonstration plants and other experimental clean coal technologies and it is now also in charge of the NER300 fund which will provide €4.5 billion of financing for CCS demonstration projects and innovative renewable energy technologies through to 2015.
The EBRD has previously provided financing for coal-fired power generation projects in Serbia, Bulgaria, Turkey and Poland. In those countries, brown coal power plants benefited from EBRD finance to carry out the necessary works allowing higher energy efficiency and lower greenhouse gas emissions.
The EBRD has also provided finance for investments in coal mining operations as a way of stimulating economic growth, enhancing energy security and providing jobs. Successful projects financed by the bank include two coal mining projects in Mongolia, which received funding in 2010.
