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Western Balkan countries have ambitious plans to increase their electricity generation over the next years. But what will happen if they all become a regional energy hub? Will there be a demand for all the available electricity?
by Pippa Gallop, cross-posted from the Bankwatch blog
Hardly a week goes by without the media in the Western Balkans reporting on some progress with a coal or hydropower plant projects or reporting grand statements from politicians about their countries becoming regional energy hubs. In some cases this seems deeply improbable at first glance, with countries like Albania and Montenegro historically being electricity importers, but for others like Bosnia and Herzegovina and Serbia – already net exporters most years – it seems reasonably plausible.
But what will happen if everyone becomes a regional energy hub? Where will all the electricity go? Is there likely to be a market for it at all?
For a few years, the answer seemed to lay in Italy, which looked like it would have difficulty in reaching its obligatory 2020 renewable energy target. It planned in its National Renewable Energy Action Plan to import significant amounts of renewable electricity from the Balkans. Yet in recent years Italy has pulled ahead (pdf), managing to meet the electricity component of its target already. It also has a large generation capacity surplus with much of its fleet lying idle. This led Germany’s E.On to leave Italy earlier this year and sell its thermal power assets. Presumably it also contributed to ENEL’s welcome decision announced earlier this week, to stop constructing new coal plants. This does not necessarily mean that Italy will not import electricity, but that any imports must be cheap enough to compete with domestic production or other imports.
Since we had already been concerned that some of the planned Balkan electricity generation projects may be uneconomic, (see for example unit 7 at the Tuzla lignite-fired plant (BiH) and the Boskov Most hydropower plant, we decided to investigate with the University of Groningen and the Advisory House consultancy what will happen if the promised electricity generation capacity really materialises. We know what to expect on the environmental side from coal and poorly-sited hydropower plants. But what about the economic side? Could coal and gas plants in the Balkans end up lying idle like their counterparts in Italy?
The first surprise was how difficult it was to find updated and realistic information on planned generation capacity investments. Some of the countries do not have any recent official energy strategy at all while others have but they do not contain sufficient information and/or are internally contradictory.
Not unexpectedly, we found a large gap between government wish-lists of electricity projects and reality.
If no new capacity is built except that which is already under construction or near construction, and nothing is closed except that which is already announced, then the region will need to import electricity starting somewhere between 2018-2023, depending on demand levels.
At the other end of the spectrum, if the countries realise all their planned capacity extensions and demand growth is low, the region will have a 56% electricity surplus in 2024.
In particular Bosnia and Herzegovina could turn into the largest exporter of electricity (up to 20 000 GWh), followed by Serbia (18 000 GWh). The other countries have a much lower potential contribution to the regional surplus, but measured in terms of their domestic demand, their export potential is substantial.
Such significant electricity capacity expansions designed to meet export demand create the danger of becoming dependent upon the export market. The export analysis shows that there will not only be competition within the Western Balkans but also from other nearby competitors such Bulgaria, Romania and the rest of the EU. Given an expected excess supply in Europe, increased competition may put pressure on export prices and increase the risk of incurring stranded assets – power plants that will become simply uneconomic to even operate. For this reason, the study suggests closely examining investments that are directed to serve export markets and to also consider the trade-off of producing or buying electricity. Taking measures to reduce electricity losses is also crucial.Better planning is crucial
No-one knows exactly what the future holds, but several things emerge for me from this study.
First, planning in the energy sector needs to be seriously improved in the region. Strategies need to be better justified, clearer and more coherent. They should avoid including old projects which have already practically failed and take serious note of public comments.
Second, less is more. Why have huge lists of projects that are proving difficult to implement, when with more rational planning and analysis, a much smaller amount of investments would suffice? Energy efficiency should come first, and governments should not be afraid to cancel projects which have been hanging around for decades but never proved worth building.
Third, cross-border co-operation in the region has great potential to save money and natural resources. Making increased use of regional co-operation to meet peak demand would increase stability and lower the overall amount of electricity needed. Peak demand in the Western Balkans for 2024 without cooperation is estimated at approximately 17630 MW in 2024 in the high growth scenario while with cooperation it is only around 15000 MW. So far most of the countries are thinking in very national terms and failing to take advantages of regional synergies.More
By the numbers: where will energy come from in the western Balkans?
Blog post | March 19, 2015
Electricity export ambitions may prove risky for Western Balkans, shows new study
Press release | March 19, 2015
By Andrew Murphy, aviation policy officer at Transport & Environment
Ending the generous tax exemptions aviation enjoys would create a level playing field between all transport modes, help meet our 2030 climate targets, and answer the EU’s call for a shift away from labour taxation.
The Commission’s country-specific recommendations in its European Semester report last month highlighted that need for a shift away from high labour taxation and towards environmental and consumption charges. As a means of creating employment, the recommendation is a no-brainer, however precious little progress has been made since the Commission made the exact same recommendation last year.
The problem of high labour taxation is a distinctly European one. The OECD 2014 report on taxation as a percentage of labour costs finds that EU member states occupy the 14 top spots, with Belgium heading the table with taxation accounting for 55.8% of average labour costs.
As the EU struggles to bring down its high unemployment rate of 10%, a tax-shift offers one of the most effective means of both creating employment and achieving our long-stated environmental goals. One rough rule of thumb is that for every €1 billion in labour tax reductions, 10,000 jobs can be created.
In looking for concrete ideas for an environmental tax shift, aviation is the most obvious source. It is 10 times more carbon intensive than other forms of transport and within the EU is it expected to grow almost twice as fast as its lower-carbon competitor, rail.
Despite this, aviation receives some of the most favourable tax treatment of any industry. Due to EU rules, it is exempt from both VAT and fuel duty; exemptions not afforded to other transport modes. These exemptions add up to €40 billion every year – meaning member states are missing out on labour tax cuts that could create 400,000 jobs.
Ending these exemptions would create a level playing field between all modes of transport, help the EU meet its 2030 climate targets and provide a reliable basis for a shift away from labour taxation. Few policies can be said to achieve so many different objectives.
These exemptions originate not at member state level, but in complex and unworkable EU legislation in the fields of VAT and fuel duty. So rather than reprimand member states once a year for failing to act, the Commission should propose amendments to these laws that will allow countries to introduce job-creating environmental taxes.
This blogpost by Carlos Calvo Ambel, energy policy analyst at Transport & Environment, was first published by EurActiv
The global picture is clear: both demand for surface transport and resulting CO2 emissions are going to skyrocket by 2050. Even for those who analyse transport on a daily basis the figures are startling – an increase of up to 110% in carbon emissions from passenger transport and up to a whopping 600% from freight.
Even more worrying than these figures, contained in the 2015 Transport Outlook of the International Transport Forum (ITF), an OECD think tank, is the fact that, by assuming existing climate obligations will be honoured, the ITF research presents an optimistic scenario for the development of global passenger mobility, freight volumes and CO2 emissions up to 2050. Aviation and shipping emissions are also expected to multiply by 2050. Reversing these trends will be essential to stave off the most dangerous effects of climate change.
And Europe too has a problem. In order to achieve the EU 2050 goal of at least a 80% decrease in greenhouse gas (GHG) emissions compared to 1990 levels, the European Commission established in the White Paper on Transport that at least a 60% reduction in transport emissions is needed compared to the 1990 baseline. That’s around 70% below 2008 levels.
The ITF outlook clearly demonstrates that Europe is on course to completely miss this goal. Indeed, even in the most optimistic scenarios (public transport-oriented urbanisation, modal shift, decreasing freight intensity) Europe is set to miss the -60% goal by a wide margin.
This means that other sectors like industry or agriculture will have to do more, or we will simply fail to avoid catastrophic climate change. While it’s true that scenarios are not forecasts, they do help to identify trends and to focus our thinking about the future. But it is obvious that decisive action is needed to set us on a more sustainable track.
Surface passenger and freight transport were responsible for more than 80% of transport emissions in the EU in 2010 and will still be in 2050, according to the European Commission. The EU has made a start on surface passenger transport by setting CO2 emission standards for cars and vans and maintaining a minimum level of excise tax on fossil transport fuels. This helps explain why the ITF forecasts that passenger transport CO2emissions will decrease by between 7% and 35% by 2050. This is, however, nowhere near the level of reductions that will be required. Tighter CO2standards starting in 2025, higher fuel taxes and specific policies to accelerate the shift to e-mobility are the key ingredients of what needs to be done.
For freight emissions, the EU doesn’t have a plan and it shows. The ITF estimates that by 2050 surface freight CO2 emissions will increase by between 28% and 55% on 2010 levels. Clearly, no long-term climate plan, let alone a climate plan for transport, can be credible without addressing the increase in freight volumes and emissions. A credible policy mix would include CO2 standards for trucks to stimulate a shift to hybrid drivetrains, the roll-out of km-based tolling all over the EU and policies to shift freight away from conventional trucks. Rail freight has a big role to play but electrifying parts of the road network (for example, through overhead catenary or induction) could be another solution.
It is clear from this report that the EU needs radical and far-reaching changes in its transport policies – transport is already the sector with the highest levels of GHG emissions and is 95% dependent on one source of energy that is becoming ever more dirty: oil. The new European Commission has the opportunity to diverge from the expected path by including transport in all dimensions of the nascent Energy Union. Low-carbon transport should be a priority for security of supply, decarbonisation of our economy, and research and innovation. Putting a strong emphasis on higher efficiency and electrification of transport would be a step in the right direction.
This blogpost by Bill Hemmings, bunkers manager at Transport & Environment, was first published by EurActiv
The UNFCCC negotiating text took an important step forward last week with the inclusion in the text of wording calling for the setting of emission reduction targets for international shipping and aviation, in the context of the objective of the agreement – which is to limit any temperature increase to 2 degrees.
The coming months represent an opportunity for a dialogue between parties on why this wording should be included in the Paris Agreement at COP 21.
The importance of this development is clear. Shipping and aviation each account for nearly 3% of annual global CO2 emissions. After taking account of non-CO2 indirect aviation impacts, cirrus cloud formation and nitrogen oxides (NOx), these two fast growing sectors almost account for 10% of the global warming problem.
Recent estimates have stated that business-as-usual emissions will increase by up to 250% for shipping and 270% for aviation by 2050. These would account for one-quarter of all allowable emissions under a 2-degree scenario in 2050 and one-third under a 1.5-degree scenario.
Despite this reality, United Nations bodies, IMO [International Maritime Organisation] and ICAO [International Civil Aviation Organisation], have a long record of inaction.
IMO don’t even have discussions of a target on the agenda and have refused since 2011 to advance discussions on a market-based measure. The IMO’s one step – an energy efficiency standard for new ships introduced in 2013 (the so-called EEDI) – will require a generation before it impacts the whole fleet.
ICAO has promised to agree by 2016 the details of a measure to deliver carbon neutral growth in 2020. But progress is slow and the “jury remains out” as the negotiations for agreeing a global deal among ICAO’s 190+ member states are being held by a small group of states in total secrecy.
If agreed, any ICAO measure will depend heavily on the quality of offsets used and in any case carbon neutral growth will be insufficient to meet a 2-degree scenario.
A key concern of parties to the UNFCCC is to ensure that any measures adopted by IMO or ICAO conform to their view of an appropriate application of the principles they hold dear.
The text proposed doesn’t prejudge this – it merely requires each organisation to identify an emission reduction pathway, and leaves it for parties to each organisation to ensure that any measures adopted are done so in a way that is fair and equitable.
Transport & Environment (T&E) is convinced that solutions exist for emission reduction measures for aviation and shipping that can respect and reconcile the principles held by parties to the relevant UN bodies.
Workable proposals to address differentiation and incidence have been advanced for both sectors, including ‘route-based’ differentiation for aviation, and for shipping a financial mechanism that ensures that revenue from any carbon price or levy is allocated in a manner that differentiates between developed and developing countries, in accordance with their capabilities, responsibilities, and circumstances, particularly for SIDS [Small Island Developing States] and LDCs.
As discussions continue, the wording may need to be strengthened and improved. However, its intent is clear – all sectors must play their part and all emissions sources must be covered.