by Nikos Mantzaris

During his recent visit to the region of Western Macedonia Greece’s new minister for energy Panayiotis Lafazanis declared his support for the construction of the new lignite plant “Ptolemaida V”. He also emphasized that he will re-negotiate the construction cost in order to reduce the burden for the Public Power Corporation (PPC) and Greek citizens. According to the contract agreement, signed two years ago, the construction of the new 660 MW lignite plant will cost 1.4 billion euro. With the exception of the 739 million euro bond loan, supported by the German Export Credit Agency Euler Hermes and arranged by the KfW IPEX Bank in 2013, PPC has been unable to secure additional funding. Recent articles in the press also mention the need for payments of 400 million euro in the first 6 months after construction begins. The situation is further complicated by the decision of the new minister to freeze the privatisation of part of the PPC and the Independent Power Transmission Operator (IPTO), which would offer the PPC funds for the construction of the new plant.

In addition to financing problems, WWF Greece in its recent report, argued that the new lignite plant will see its income shrink due to the recently adopted changes in the ETS (MSR, increase in the linear reduction factor) which will greatly increase the production cost. The argument is based on the PPC’s own calculations, which show that at the CO2 prices of approximately €30/tn (predicted for 2025-2030), Ptolemaida V will be displaced in the electricity market by natural gas plants. More importantly, the new report has shown that hybrid systems consisting of RES (wind- PV) and pumped hydro energy storage (PHES) are capable of covering the same base load as Ptolemaida V while also having lower levelised cost of energy (LCOE). Key in all this is the conversion of existing PPC-owned pairs of hydropower stations into PHES.

The Ptolemaida V case bears a striking resemblance to the 600 MW TES6 unit in Sostanj Slovenia, which was also declared to be the “Slovene energy future”. The new lignite unit which started test operation in 2014, although significantly more efficient compared to Ptolemaida V (46% vs 41,5%) is expected to have €70-80m annual losses that will burden Slovenian citizens, 226 jobs less than those promised, and a total €1.4b of installation costs compared to €690 million that was initially budgeted. 

In addition to Ptolemaida V, Panagiotis Lafazanis also promised that he will re-open the old Ptolemaida III lignite unit and extend its operation beyond 2015. The 125 MW lignite unit which started its operation back in 1965 (the oldest one still not officially retired) caught fire last November. A prerequisite for issuing its environmental permit 4 years ago was that it will be retired by the end of 2015 at the latest as part of the entire thermal power station (TPS) of Ptolemaida consisting of 4 units. The “excuse” for this is that the Ptolemaida III unit will complement Kardia III and IV in providing district heating to the city of Ptolemaida. The entire TPS Kardia consisting of 4 lignite units is scheduled to enter the Limited Lifetime Derogation (LLD, article 33 of the Industrial Emissions Directive) starting 1/1/2016. Hence, the idea is for Ptolemaida III to join them in this derogation and continue to operate beyond 2015. 

However, things are not that simple. The operation cost of TPS Ptolemaida is high and it will get even higher if Ptolemaida III operates without Ptolemaida IV. More importantly, the deadline for declaring a TPS in the Limited Lifetime Derogation is surpassed by more than 16 months. Thus, the Ptolemaida III were to operate beyond 2015, it would have to comply with the stricter emission limit values of the Industrial Emissions Directive. This would in turn mean expensive and extensive retrofits, since TPS Ptolemaida as a total is in violation of its own environmental permit in terms of SO2 emissions and its dust emissions are on average more than 4 times higher than the current limit of the Large Combustion Plants Directive (2001/80/EC). Unit III in particular has exceeded the limit corresponding to it for dust emissions according to Greece’s National Emissions Reduction Plan (NERP) every year since 2009, by at least a factor of 2. 

This may be the right time for Greece's energy ministry to discover renewables-based solutions for district heating. 

This was originally posted on WWF Crisis Watch, and is reposted here with permission

Read moreWWF Greece – announcement, WWF Greece – report on Ptolemaida V, Bankwatch on Sostanj, PPC-announcement on Ptolemaida V bond loan (in Greek)