Report

Tiny Kosovo Faces a Big Energy Dilemma

The energy-starved Balkan nation needs a new power plant. But is dirty brown coal the best way to build the economy?

KOSOVO-A

Almost everyone agrees that Kosovo, home to 1.8 million people and one of the highest unemployment rates in Europe, desperately needs more energy. The question is how to generate it without doing more damage to a country already battling terrifying levels of pollution — and facing a tough choice between using the energy sources of the past or betting on those of the future.

At issue is a $1 billion coal-fired plant that Kosovo, backed by the World Bank, has spent more than a decade trying to build. The project is meant to bring two things the country doesn’t have and desperately needs: energy and economic development. For just as long, environmental campaigners and many energy experts have been fighting to block the plant’s construction, arguing that cleaner energy has gotten so much cheaper in recent years that it would be better for the impoverished nation already battling dire levels of pollution to build wind farms and solar panels to meet the energy shortfall.

The World Bank is expected to decide this year whether to help finance the very last coal-fired power plant in its global pipeline or to jettison the notion and embrace a swath of cleaner, alternative energy options. The World Bank’s support is crucial because it would underwrite the majority of the financing for the project. A World Bank spokesperson declined to give a timeline or say which way the bank was leaning.

What happens in Kosovo matters not just for the people there who’d like to climb the development ladder and enjoy the comparatively energy-rich lifestyle and incomes of places like Bosnia-Herzegovina and Macedonia. That’s because the success of whichever path it chooses could shape the thinking of policymakers looking to figure out how to bring electricity to the more than 1.2 billion people worldwide that don’t have any without causing environmental damage. It’s a challenge that bedevils international banks, energy companies, and governments from Latin America to Africa to Southeast Asia. Kosovo could offer a look at a possible way forward.

First, though, it has to figure out how to get the energy in the first place. The country has less electricity generation capacity than Albania or Zambia, so it doesn’t have enough energy to power the economy, avoid blackouts, or attract foreign investment. It’s going to get worse next year: The country’s oldest power plant, known as Kosovo A, must be decommissioned because it is one of the dirtiest in all of Europe.

To replace it, the government of Kosovo, the World Bank, and a U.S. company, ContourGlobal, are eyeing a new, $1 billion-plus coal-fired power plant, plus a suite of measures to help Kosovo use what energy it has more efficiently. Kosovo’s prime minister, Isa Mustafa, and U.S. Secretary of State John Kerry both talked up the prospects for the new coal plant late last year, with Kerry calling the facility an “important example of what we can do together.”

International support for a new coal plant, especially from the United States, contrasts with the Obama administration’s increasingly vocal advocacy of clean-energy solutions. On Tuesday at a clean-energy conference in New York, Kerry bemoaned continued reliance on old-school energy solutions like coal and called for the world to “harness the power of clean, renewable sources like the sun and the wind and the ocean.”

Like its predecessors, the new plant, creatively named Kosovo C, would burn lignite, coal’s crumbly brown, toxic, poor cousin. Among the few things Kosovo has in spades are billions of tons of lignite buried underground.

But much of the rest of Europe, with a few notable exceptions, is moving away from coal and toward cleaner energy options. Belgium just became the seventh E.U. state to get off coal altogether. That has critics of the World Bank plan for Kosovo shaking their heads because lignite offers less energy and is even more damaging to the environment than hard coal.

“They are effectively condemning poor, overpolluted, undersupplied people to an energy system that is already out of date in a European Union that they want to join,” said Dan Kammen, a professor of energy at the University of California, Berkeley, and a founder of its Renewable and Appropriate Energy Laboratory. “It’s clear that this is not wise from the point of view of energy, or carbon emissions, or European Union integration.”

His analysis of Kosovo’s energy options concluded that a coal-fired power plant would be both costlier and worse for the environment than relying on renewable energy sources like hydroelectricity, wind power, and solar power, as well as making big improvements in mundane things like energy efficiency.

Other outside analyses have reached similar conclusions. Tom Sanzillo, an expert in energy finance at the Institute for Energy Economics and Financial Analysis, a think tank launched to promote sustainable energy, questions the wisdom of assuming huge debt loads and higher electricity prices to double down on precisely the fuel source that has driven the bulk of Kosovo’s environmental degradation. And if the new power plant is meant to jump-start economic growth, he said, Kosovo and the World Bank should reach for a more modern playbook.

“If the country wants to enter the modern era of economic competitiveness, it’s not by announcing another coal plant,” he said. “It’s by announcing upgrades to the electricity grid. It’s about wind and solar. It’s about, you know, a modern future.”

But even in advanced countries like the United States, making the transition to cleaner and smarter energy systems has been an uphill slog, limited by political opposition, tricky economics, and built-in inertia favoring what has worked so well for decades. That’s one reason that big development banks are hesitant to totally rule out dirtier fuels as an option for energy-starved places.

“If we have a hard time doing it in the United States, it’s no surprise we’re going to have a hard time doing it in Kosovo,” Kammen said.

Kosovo puts the World Bank in a bind. In 2013, the World Bank said it would only finance coal plants in rare cases where no real alternatives exist. Other entities, from the U.S. Treasury to the Organization for Economic Cooperation and Development, have followed suit. Even the Chinese-led New Development Bank and Asian Infrastructure Investment Bank are trying to decide whether and how much to support new coal plants.

The World Bank says that it is still studying the environmental and economic implications of Kosovo C and won’t make a final decision until all those studies are done. It’s not clear exactly when a final decision will be made.

For now, a World Bank spokesperson said, “We remain committed to helping Kosovo resolve its energy shortages through a comprehensive energy strategy that includes increased energy efficiency, development of renewable sources of energy, and support for new power generation.”

Photo credit: DREN POZHEGU/Flickr

Keith Johnson is Foreign Policy’s acting managing editor for news. He has been at FP since 2013, after spending 15 years covering terrorism, energy, airlines, politics, foreign affairs, and the economy for the Wall Street Journal. He has reported from Europe, the Middle East, Africa, and Asia and, contrary to rumors, has absolutely no plans to resume his bullfighting career. @KFJ_FP

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