New coal-fired power enjoys support among bankers in Germany and Asia

Eric Marx, EENews, 13th August 2015

In the northern Greek city of Ptolemaida, a new 660-megawatt power plant that burns lignite, a plentiful soft brown coal, is scheduled to be built by 2020. The European Investment Bank has withdrawn funding from the project because of its high CO2 emissions and other pollutants, but the German government-owned development bank KfW, which has a large portfolio of green investments in Germany, is planning to provide half the money needed, roughly €800 million ($888 million) in loan guarantees.

The deal has come at considerable expense to Germany’s reputation as a climate leader. By funding the plant in Ptolemaida, KfW is helping to block the expansion of renewable energy, such as solar and wind power, while cementing coal-fired power into Greece’s grid for decades.

Up until the close of 2014, lignite use had been on the way down while renewables were trending up to roughly 20 percent of Greece’s total energy consumption, three-quarters of which came from wind power. In the last six months, those investments have all but dried up.

The Greek government’s argument for an apparent policy turn toward lignite rests with the conviction that a power plant like Ptolemaida V reduces energy costs. In a time of economic crisis, Greece has to think about immediate needs, Greece’s energy minister Panayotis Lafazanis recently remarked. The minister also argued against renewables on the basis of their intermittency, saying they endanger the country’s future energy security.

“If the minister asks elsewhere in Greece and Europe, they will tell him that the planned lignite plant is a technological relic before it even gets built,” answered Greenpeace Greece. In the face of 48,000 signatures gathered in opposition to the power plant by WWF Greece, Lafazanis turned down the opportunity for a meeting. War has been waged in Greece between environmentalists and the government over the plant. Meanwhile, the big winner would seem to be German industry.

With support from Asia, a ‘green bank’ opts for brown

Some observers say this was an unavoidable result, given Greek mismanagement. Would investors continue to pour billions into wind farms and solar plants without having any assurance on payback? In the world of energy finance, however, such guarantees do exist. More than $73 billion of international public finance was given to coal between 2007 and 2014, according to leaked data published by Reuters in March.

Mitsubishi Hitachi Power Systems Europe, which is based in Duisburg, Germany, received a €20 million export credit from KfW for the Ptolemaida project, thus enabling the deal to go through with coverage guarantees that allowed the company to get low-cost financing from private banks.

“The export guarantee works as insurance in the event the Greek buyers are unable to repay on time,” explained Regine Richter of Urgewald, a German nonprofit environmental group that has tracked 18 of KfW’s most controversial investment projects.

From 2006 to 2013, German taxpayers footed the bill for roughly €3.3 billion in overseas export and development credits linked to coal. The projects include coal-fired plants in Chile and Thailand, coal mines in Macedonia and Serbia, and coal ports in Australia.

The justification for exporting coal technology through so-called export credit agencies (ECAs) is the furtherance of overseas development. Energy security as a means of poverty reduction is the publicly communicated goal, though what these ECAs really do, added Richter, is end up supporting a country’s own domestic corporate agenda by opening up new markets.

Australia is not a developing country. Neither is Greece, though one could say it’s fast heading in that direction.

Countries such as the United States and Great Britain alongside the Scandinavians have now decided to end subsidies for coal technology exports. The World Bank and the European Investment Bank have dropped out of carbon finance. Not Germany, and not Japan or South Korea, estimated to be the world’s biggest financiers of coal through their respective export credit agencies.

According to data compiled by the World Wildlife Fund, Oil Change International and the Natural Resources Defense Council, Japan gave more than $20 billion, with South Korea second at $7 billion. Over the same period, from 2006 to 2014, Germany, through KfW, financed €173 billion ($192 billion) in climate and environmental protection measures. KfW can rightly claim itself a “green bank,” but with roughly €3 billion in coal finance support on the books, it also now finds itself in the uncomfortable position of having to defend policies that run counter to international efforts to limit global warming.

This leaves a black mark on the country’s otherwise clean climate record, said Sebastien Godinot, an economist with WWF’s European Policy Office. “Continuing to provide public subsidies for coal plants overseas is simply indefensible.”

Read the full article here