German public money is providing finance for a new 660MW lignite (brown coal)-burning plant in Greece that’s due to be built by 2020, according to WWF Greece and Climate Alliance.
The backing comes as the Netherlands announced it would join the US, EU development bank and global lenders in withholding funding from coal projects on climate grounds.
The part state-owned Greek Public Power Corporation (PPC) announced a 739 million Euro bond loan for the Ptolemais 5 plant was signed with a syndicate of foreign banks, in December last year. This loan will part-fund the lignite plant, which is expected to cost 1.4 billion Euros in total.
It’s not certain how big KfW’s slice of the 739 million is yet, though it leads the syndicate. Greek media recently reported 700 million Euros, PPC’s chief executive mentioning the figure of 200 million in 2012, and an initial funding plan KfW would contribute by 44% of the project, around 610 million Euros.
Neither KfW or PPC would confirm any of these figures or reveal the amount KfW is investing. A spokesperson for KfW said: “As a financing bank, we can not comment on the total amount invested [in Ptolemaida 5].”
The PPC said that the insurance for the loan was issued by the German Export Credit Agency Euler Hermes and "all preconditions for utilisation from the Loan are fulfilled". The loan approval has not yet been officially announced.
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Mona Bricke of Climate Alliance Germany said that only 0.8% of KfW’s investment portfolio is coal, but even this thin wedge makes KfW one of the top ten public funders of coal worldwide.
KfW says in a statement that it continues to support high efficiency coal plants because they enable a CO2 reduction - although only compared to older coal plants - and allow security of supply.
International development banks put the brakes on coal
KfW is one of the few Western development banks left that has no policy phasing out new coal investments.
In October last year US president Obama pushed through new guidance from the US Treasury that it wouldn’t finance coal plants abroad - through the World Bank and other international development institutions - unless they had CCS or in very rare cases where there is no other economically feasible option in the world’s poorest countries (which does not include Greece).
A couple of months later, similar plans to halt investment in most coal plants were revealed by the European Bank for Reconstruction and Development (EBRD) and the European Investment Bank (EIB).
The EIB decided not to invest in Ptolemaida 5, ending rumours that it might in January this year.
Existing lignite-burning plants at Ptolemaida
Apart from being in the wrong place to qualify for an investment from the EIB, the plant’s emissions are estimated to be double the threshold allowed by the bank - around 1,000g per kWh, far overshooting the EIB’s Emission Performance Standard of 550g per kWh.
Greek climate promises broken?
Ptolemaida 5, in West Macedonia, will be the first lignite plant to be built in Greece since Meliti 1 in 2003.
If it goes ahead and will emit around 4.6 million tonnes of CO2 each year. The plant will replace a couple of old inefficient units, which the Greek PPC says will mean a significant cut in emissions - but WWF countered that it is a cut of only 300,000 tonnes a year.
There are currently 19 lignite plants in Greece that generated around 23TWh of energy last year, and it makes up a huge tranche of Greece’s energy mix (see below, based on 2010 data). In 2010-2013, lignite was around half of energy produced in Greece.
In March 2009, PPC signed a commitment to help achieve carbon neutral electricity supply by 2050 in a bid to tackle climate change.
But if Ptolemaida 5 get built, it will still be in full operation for around 40 years to 2060 or longer. The same goes for another lignite plant planned by the PPC, a second unit at Meliti (440MW), which it estimates will end construction in 2021.
According to a report published by WWF Greece, if the country stays committed to its 2050 energy and climate policies, Ptolemaida 5 (and Meliti II) will not be economically viable because the penetration of renewables will push away load hours for lignite.
Theodota Nantsou, head of policy at WWF Greece, said: “PPC had a plan to build a 200MW mega solar park on disused lignite mine fields, which would cost 600 million euros and create 200 new jobs, but we’re not seeing the PPC applying for financing for this.”
Jobs vs other human impacts
The report also highlights risks of increased air pollution linked illnesses, scarcity of water and the need to move whole villages.
Lignite mining and burning has already contributed high levels of air pollution in Western Macedonia, with high levels of particulate matter (PM10) resulting in increased cases of respiratory and heart disease compared to less polluted regions.
The plant will generate jobs. PCC says that it will strengthen the Greek Economy and offer many jobs for the high unemployment region - 3,000 during the construction phase and 250 permanently.
Greek village with lignite plant stacks in the not too-distant background
Many villages in the Western Macedonia have had to relocated with the advance of lignite mining in the region over the past 60 years because lignite is mined at the surface of land using diggers.
The latest example of a village moved to get hold of lignite reserves underneath it in the area is the village of Klitos, which was relocated in 2000, but the villagers continue to face many issues due to incomplete infrastructure, according to the WWF study.
There are also issues surrounding the amount of water being diverted to use in the lignite industry in the region. The European Commission has issued a warning about a water management plan for the Aliakmonas River Basin linked to the new plant.