Serbia: Cancellation of coal plant in Serbia’s Kolubara B opens room for decarbonisation

Earlier this week, Serbian media reported that plans for the new 350 MW Kolubara B coal-fired power plant have been suspended. This is a strong demonstration of political will as the Ministry of Mines and Energy seeks to steer the country towards energy transition. It will take some bolder moves to cement this road and make sure no one is left behind.

On Monday, Serbian media reported that the Ministry of Mines and Energy had sent a letter to the state-owned company Elektroprivreda Srbije (EPS) urging it to suspend operations at the planned Kolubara B. coal-fired power plant.

This is not the first time the plant has been placed on shelves. Construction of the plant began in the late 1980s but was halted in 1992 while Serbia was under international sanctions. The plans were revived in 2012 when the EBRD briefly reviewed its funding, but did not proceed.

For several years, Kolubara B seemed to be history. Then in 2018, the project was revived again and in early 2020 a preliminary construction agreement was signed with PowerChina. However, it did not pass the spatial planning phase before this week’s cancellation.

While it was legally and administratively easy, banning Kolubara B was nevertheless politically bold and extremely symbolic in a country where coal supplies about 70 percent of its electricity.

For years, the EPS has largely defined state energy policy, rather than the other way around, while successive governments have depended on electoral support from more than 27,000 of its employees, their families and those who benefit from subcontracts to perform work for the company.

Ever since the new Minister of Mines and Energy, Zorana Mihaljović, took office in October 2020, it was clear that she would take a different approach and try to address the many problems plaguing Serbia’s energy sector. In recent months, it has repeatedly promised to advance Serbia’s energy transition and oversaw the adoption of several new laws, including on energy efficiency and renewable energy.

The cancellation of Kolubara B is a strong step towards coming to the square and a clear statement that Serbia needs to be decarbonized. Taking this step was certainly not easy, but should be followed immediately.

The Minister stressed in a statement that the energy transition is not about closing overnight coal plants, but about investing and creating new jobs, and that planning until 2050 is needed. That’s right, and Serbia has a lot to do to catch up after years of inaction, for example in developing a National Energy and Climate Plan and starting a participatory process to plan the fair transition of coal mining regions In Serbia.

It is clear that Serbia has finally started to do more to increase investment in solar energy, for example, but still some difficult decisions need to be made quickly to stop carbon blockade by closing the space for future maneuvers.

A particularly scorched example is the 350 MW Kostolac B3 lignite-fired power plant, which is currently under construction by the China Machinery Engineering Corporation. Very little information is publicly available on how it is progressing, but in March, Minister Mihaljović announced that neither the speed nor – worryingly – the quality of the equipment was in order.

The project feasibility study itself revealed that it would generate losses at a carbon price of only EUR 5 per tonne. Today’s price in the EU is around 50 EUR per ton.

Serbia may not have carbon prices in place today, but it will have to introduce it in the coming years as a future EU member. Failure to do so could also see it hit by the EU’s planned carbon border adjustment mechanism, which aims to prevent imports from carbon-free countries from the EU’s lowest producers.

A combination of falling renewable energy prices, higher pollution control standards and carbon prices has made coal uneconomical in the EU.

About a decade ago, despite warnings from NGOs and others, Slovenia made the mistake of starting to build the Šoštanj 6 lignite unit, which ended up being twice as expensive as planned, with 12 people charged with criminal offenses. including money laundering.

The unit started commercial operations in 2016, and every year since then, the Šoštanj plant has made huge losses. In April it was reported that this year’s losses could reach EUR 150 million if carbon prices remain high.

Greece failed to learn this lesson and began construction of the Ptolemaida V lignite plant a few years ago. Despite spending 1.4 billion euros on construction so far, coal is now so volatile that the Public Energy Corporation has decided to give up all coal use by 2025, leaving the plant’s future uncertain.

All this means that the Serbian government should seriously consider whether it is still worthwhile to proceed with Kostolac B3. Clearly is definitely a more complicated case than Kolubara B due to its more advanced development. But given the Minister’s comments on the speed and quality of the work, it may pay to stop digging now. /ibna


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