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Developing Nations Can’t Afford to Go Cold Turkey on #Coal

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The UK recently made headlines by announcing that it had gone for three days without using coal, a new record. During the coal-free 76 hours, the majority of the UK’s electricity supply came from gas, followed by wind, nuclear, biomass and solar. While many commentators touted this, the longest period Britain has gone without coal since the Industrial Revolution, as an important step towards reducing global emissions, the story isn’t so simple.

While the UK has greatly increased its renewable capacity in recent years, the only way it was able to power the country without coal for a few days was by relying heavily on natural gas, which is very, very far from being a green fuel. While burning natural gas does emit less carbon dioxide than coal, it also emits methane, a far more potent greenhouse gas. Studies show leakage rates of methane are about 3 percent—while that might not sound like much, that amount of methane warms the planet more than CO2 does. Yet somehow, public opinion still favours natural gas as a cleaner replacement for fossil fuels.

While congratulating the UK for managing three days without coal, the press also overlooked the fact that Britain can afford to ramp down its use of coal now because it’s reaped the benefits of the fossil fuel for more than 150 years. Coal was the backbone of the modern British economy through most of the 19th and 20th centuries, powering the country’s industrial revolution. This irrefutable fact explains why developing nations are increasingly voicing their frustration that wealthy countries want to deny them the same chance to use their natural resources to bankroll economic growth.

Many African countries, including Mozambique, Botswana, South Africa and Zimbabwe, are known to have vast reserves of coal. South Africa’s state-owned utility Eskom estimates that the country’s 53 billion tonnes in coal reserves are enough to fuel the country for the next 200 years.

The prospect of using these substantial resources is particularly alluring given that large swaths of these countries remain unelectrified. More than 600 million Africans still don’t have access to electricity, causing them to burn dangerous and polluting biomass and undermining their economic growth.

While Africa is making great strides in adding renewable energy capacity, the continent is so energy poor that closing this gap solely with renewables is unrealistic in the medium term. At current rates of growth, Africa won’t achieve full electrification until 2080. Investment in coal-powered plants in these countries could mean the difference for millions of people between being able to turn on the lights at night or living in darkness. These coal-rich countries are looking to capitalise upon their resources – much like the same Western countries who are now pushing a renewables-only model did for more than a hundred years.

This pressure on developing nations to deploy renewable energy solutions they cannot afford is both political and financial. The UK and international organisations such as the European Investment Bank and the World Bank stopped funding coal plants in developing countries. At the time, the World Bank stated it would provide financing in exceptional cases where no viable alternatives existed. Since then, however, only one coal project, in Kosovo, has been considered for a loan.

The consequences of this overly restrictive policy? Developing countries remain in the dark, increasingly frustrated by what India’s chief economic adviser termed the west’s “carbon imperialism”. They have started taking matters into their own hands, as illustrated by the African Development Bank (ADB) recently breaking from other international financial institutions and agreeing to continue funding new coal projects. The President of the ADB emphasized that “Africa must develop its energy sector with what it has” and underscored the fact that “it is almost impossible to start a business, teach or provide healthcare without power and light”.

Developing countries are gaining international support for their right to fully exploit their natural resources, particularly from the United States. In March, US Energy Secretary Rick Perry announced the creation of a global fossil fuel alliance, which would see the US and other partners export clean coal technology to developing nations, allowing them to quickly expand electricity access while keeping emissions relatively low. In what he described as a new policy of ‘energy realism’, Perry emphasised the need to straddle the line between energy needs and investing in emission-free resources, referring to the global shift away from fossil fuels as “immoral” as it denies people in developing countries access to electricity.

This global fossil fuel alliance is only one part of US efforts to help electrify developing countries. Among the Japan-United States Strategic Energy Partnership’s priorities for 2017 and 2018 is deploying highly efficient, low emissions coal technology, as well as energy infrastructure, in South Asia and Sub-Saharan Africa. Under the auspices of the Power Africa 2.0 program, the U.S. is providing financing and technical assistance for 30,000 MW of electricity projects across Africa.

These moves from the US are a sign that the country has recognised that there is no one-size-fits-all path to a clean energy future. A practical model would be one that takes into consideration the stage of economic development in a country, in conjunction with the social and environmental impacts of proposed power plants. By so doing, carbon can be used more responsibly without unfairly penalising developing countries, whose emissions are already a very small part of the global total.

The UK may well pat itself on the back for going three days without coal, but it should remember that not all countries have that luxury.

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Commission approves support scheme for energy-intensive companies in Spain

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The European Commission has approved, under EU state aid rules, a Spanish scheme to partially compensate energy-intensive companies for the costs incurred to finance support to (i) renewable energy production in Spain, (ii) high-efficiency cogeneration in Spain, and (iii) power generation in Spanish non-peninsular territories. The scheme, which will apply until 31 December 2022 and will have a provisional annual budget of €91.88 million,  will benefit companies active in Spain in sectors that are particularly energy-intensive (hence with high electricity consumption relative to the value added of production) and more exposed to international trade.

The beneficiaries will obtain compensation for up to a maximum of 85% of their contribution to the financing of support to renewable energy production, high-efficiency cogeneration and power generation in Spain's non-peninsular territories. The Commission assessed the measure under EU state aid rules, in particular, the Guidelines on State Aid for environmental protection and energy 2014-2020, which have been extended until the end of 2021. The Guidelines authorise reductions – up to a certain level – in contributions levied on energy-intensive companies active in certain sectors and exposed to international trade, in order to ensure their global competitiveness.

The Commission found that the compensation will only be granted to energy intensive companies exposed to international trade, in line with the requirements of the Guidelines. The measure will promote the EU energy and climate goals and ensure the global competitiveness of energy-intensive users and industries, without unduly distorting competition. On this basis, the Commission concluded that the measure is in line with EU state aid rules. In connection to this scheme, the Spanish authorities have also notified to the Commission a measure granting guarantees in relation to long-term power purchase agreements concluded by energy-intensive companies for electricity from renewable energy sources, the so-called Reserve Fund to Guarantee Large Electricity Consumers (FERGEI).

This guarantee scheme aims to facilitate the production of energy from renewable sources. The Commission assessed the measure under EU state aid rules, in particular, the 2008 Commission Notice on state aid in the form of guarantees, and concluded that the state guarantee scheme does not constitute aid within the meaning of Article 107(1) TFEU. More information will be available on the Commission's competition website, in the State Aid Register.

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Northern German state plans foundation to help complete Nord Stream-2 gas link

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The German state of Mecklenburg-Vorpommern plans to set up a foundation to help the completion of the Nord Stream-2 (NS2) pipeline to bring Russian gas to Germany and to fend off the threat of increased US sanctions that halted work last year, writes .

The Gazprom-led $11 billion pipeline would double the existing Nord Stream-1 pipeline’s capacity and has become a focal point of Russia’s confrontation with the West.

The United States has said Europe is undermining its energy security by increasing its reliance on Russian gas, while Russia says the United States is using sanctions to block the pipeline and protect its own natural gas industry.

State premier Manuela Schwesig told reporters in Schwerin that the local coalition, made up of Chancellor Angela Merkel’s conservatives and Social Democrats, decided to launch a public sector climate foundation.

Similar to two foundations around Nord Stream-1, it would boost the role of renewables and gas as a bridging technology towards cleaner fuels.

It could shield the companies involved in construction and operations of the pipeline from US sanctions by acquiring, holding and releasing necessary hardware in its name.

“We believe that it is right to build the pipeline,” said Schwesig, adding she hoped the sanctions would be removed.

Approval by the state parliament for €200,000 of public money for the foundation was expected to be obtained on Thursday (7 January). This would be topped up by €20 million from the NS2 consortium.

The foundation is to be headed by ex-state premier Erwin Sellering, former Member of the European Parliament Werner Kuhn and Katja Enderlein, an entrepreneur in the town of Greifswald, on an unpaid basis.

It will be far harder for the United States to target a state-backed foundation with measures such as freezing funds, than private companies as it has no interest in commercial activity beyond NS2, which is more than 90% completed.

The consortium is expected to start laying a remaining stretch in Danish waters from 15 January while the final stretch in German waters was finished last month, Refinitiv Eikon data tracking movements of pipe-laying ships indicated.

($1 = €0.8107)

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Turkish Stream extended to the Balkans

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While the passions around the Nord Stream-2 are not subsiding, and Washington is looking for new ways to stop the project, Russia has launched the second part of the Turkish Stream (TurkStream) in the Southern Balkans. Thus, this large-scale project takes its final shape, writes Alex Ivanov, Moscow correspondent.

On 1 January, Serbian President Aleksandar Vucic launched the Serbian section of the Turkish Stream - an interconnector gas pipeline that expanded the Serbian national gas transportation system.

In the new year, 2021, Serbia joined a number of Balkan countries that use one of the main Russian energy resources, overcame dependence on Ukrainian gas transit and ensured energy stability.

“The number of European countries that receive Russian gas with the help of Turkish Stream has grown to six. Now, along with Bulgaria, Greece, Northern Macedonia and Romania, Serbia, Bosnia and Herzegovina have provided themselves with such an opportunity, said Alexey Miller, Chairman of the Gazprom Management Board. From Russia, gas is supplied via the Turkish Stream offshore gas pipeline to Turkey, from there to Bulgaria, and through the national gas transportation system of Bulgaria, it enters Serbia and Bosnia and Herzegovina.

Two lines of the Turkish Stream will supply 15.75 billion cubic metres of gas per year, about 3 of them will be received by Serbia. Russian gas will allow the Serbs to attract foreign investors, help improve the environmental situation in the country and raise the standard of living of citizens. The festive launch of gas went like clockwork, but Russia and Serbia took a long time to reach this strategically important moment.

According to the initial plan, the entire volume of gas from the second line was planned to serve by transit through Turkey to the border with Bulgaria, where it would be done in the upgraded Bulgarian gas transport system, which is capable of transmitting 12 billion cubic meters of gas on border with Serbia. After the distribution of gas through its territory, the rest of the gas was to be supplied to the border with Hungary. By 2019, it was planned to synchronize all work on the construction of the Turkish Stream branches and simultaneously modernize the Bulgarian and Serbian gas transmission systems.

However, when the gas pipeline was already built by the Russian company Gazprom in 2019, work had only just begun in Serbia, while in Bulgaria it was not carried out at all. Gazprom, as a reliable supplier, booked additional capacities for gas transportation through the Ukrainian corridor for gas supplies to Serbia in 2020, although this was not profitable for Russia either in terms of the economy, or even more so in the political aspect.

In 2020, work on connecting Serbia and Bulgaria to the Turkish Stream was intensified, but in the fall of 2020 it turned out that Serbia (for various reasons) does not have time to fulfill its obligations before March-April 2021. This meant that in order to organize Russian gas supplies to Serbia in 2021, Gazprom would again have to ask Ukraine, contrary to its political and reputational interests, to sell additional transit capacity to deliver gas to Serbia. President Aleksandar Vucic personally had to solve the problem.

Already in November 2020, a Russian-Serbian working group was established, working under the direct control of the Serbian leader. After President Vucic took the situation into his own hands, the construction of the gas pipeline in the country began at a new pace. The round-the-clock work of specialists and builders of the two countries has brought a corresponding result.

In total, about 6 billion cubic metres of gas will be supplied to the domestic markets of these countries. The corresponding amount of fuel can be excluded from the alternative flow in transit through Ukraine. For the Serbian consumer, the launch of the "Balkan Stream" is especially important because the price of a cubic meter of gas will now drop from $ 240 to $ 155 at the exit from Bulgaria (the cost of internal transit will be added to them, about $ 12-14). This also means a revision of the cost of connecting households to gas. Alexander Vucic called this event "great and important for Serbia" and sincerely thanked the Russian leadership. "This is an important day for our country. I would like to thank our Russian friends who participated in the construction of the gas pipeline together with us. I congratulate you on your great work, it is of great importance for the industry, the development of the Serbian economy, as well as all the inhabitants of Serbia," he said at the launch ceremony of the gas pipeline.

Russia is completing its ambitious project in the Balkans. All the countries that wanted to get gas already have it. Turkish Stream is there in the Balkans. At the time, it was not possible to implement the South Stream, but now there is another route and it works.

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