The Electric Power Company of Montenegro (Elektroprivreda - EPCG) has announced an XNUMX-month closure of the Pljevlja thermal power plant (TPP) to complete an ecological reconstruction project, contracted with a Chinese firm for XNUMX million euros, excluding VAT. In a recently published article in Vijesti, EPCG estimated that this closure will result in a loss of electrical energy worth XNUMXmillion euros (“Hope that the power plant will operate for another XNUMX years”, Vijesti).
In previous statements, EPCG also announced that an additional 20 million euros would be required for the relocation of the Ćehotina River to ensure continued access to coal for the plant’s operation. Altogether, if cost overruns are avoided, the ecological reconstruction project will cost EPCG and citizens approximately 200 million euros.
Since XNUMX, the heads of EPCG and the Montenegrin government have assured the public that the European Union would approve the ecological reconstruction, confirming that it fully meets EU regulations and technical standards. This would enable the TPP to obtain a license for operations, which have been illegal since the expiration of its permitted XNUMX operating hours at the end of XNUMX. According to the Vijesti article, they even expressed hope that “the reconstruction will convince the Energy Community (EnC) to allow the TPP to operate for another XNUMX years.”
For a state investment of this magnitude, a comprehensive cost-benefit analysis covering the project’s economic, technical, environmental, and legal aspects, along with an inclusive public debate on its feasibility, was required but has not been conducted. In the absence of such analyses, representatives of the Government and EPCG simply claim that this significant investment in the TPP will lead to a profitable long-term operation. I also do not have access to these analyses, but would argue that the TPP will neither operate for long nor profitably, and that the ecological reconstruction project is therefore unjustified and detrimental to EPCG, the state, and the citizens of Montenegro. To support my argument, I will highlight several key shortcomings of the project.
Economic Weaknesses of the Project:
It is difficult to envision a scenario in which the operation of the TPP would be economically profitable after the ecological reconstruction, even if it complied with all European regulations and standards. The production costs of the TPP are significantly higher than the price at which its energy is sold on the market. As a result, its survival to date has required support from EPCG through internal cross-subsidization, made possible by the low production costs of hydropower plants.
Investing 200 million euros into a reconstruction that does not increase the productivity of the TPP—combined with a substantial additional penalty of 75 euros per MWh for exported energy, to be imposed in 2026 through the CBAM mechanism—will push the production costs of the TPP to levels that EPCG will no longer be able to bear. It will also be unable to offset these costs with revenue from hydropower plants. EPCG will be reluctant to pass these additional costs onto consumers through higher prices, as this would likely drive them to competitors offering lower prices and who have so far shown no interest in supplying the Montenegrin market.
Technical Shortcomings of the Project:
The service life of the Pljevlja thermal power plant, built in 1982, has effectively expired. After 40 years of continuous operation, its outdated and worn-out technology cannot be thoroughly overhauled but instead requires complete replacement to meet EU technical standards. Consequently, despite the massive 200-million-euro investment in ecological reconstruction, the project would remain incomplete, as the TPP would fail to reach the mandatory energy efficiency of 38-40%, which is a requirement for obtaining an operating license.
Environmental Shortcomings of the Project:
The thermal power plant cannot count on long-term future due to its significant environmental impact, emitting approximately half of Montenegro’s CO2 (carbon dioxide) emissions, which contribute to climate change. As is well known, Montenegro has committed to reducing CO2028 emissions by 55% by 2030, in line with the Paris Agreement, the European Green Agenda, and its pledge to join the EU by 2. However, achieving such an ambitious goal in the short term will require substantial reductions in TPP operations. The ecological reconstruction project directly conflicts with this objective, as the newly introduced technology would not reduce COXNUMX emissions but, on the contrary, will increase them significantly.
As a result, it is expected that the Energy Community and the European Union will raise serious objections to the submitted draft of Montenegro’s National Energy and Climate Plan, which envisions that the TPP would continue operating at full capacity. This plan asserts that the CO2 reduction goal would be met solely through rapid afforestation and drastic cuts in other sectors of the economy, such as transportation and tourism—industries vital to the livelihood of a large portion of the population.
EPCG and the Government are hopeful that they can convince the EnC and the EU to support the TPP’s long-term survival, arguing that the ecological reconstruction, aside from CO2, will lower emissions of other harmful gases and dust particles. However, this is highly questionable. The EU’s Industrial Emissions Directive mandates regular reviews and tightening of emission standards every three years. In other words, the 200 million-euro investment does not guarantee compliance with future, stricter emission standards. Therefore, it could soon become apparent that the money spent on this reconstruction was ultimately in vain.
Legal Aspects of the Project:
The optimism among EPCG and government decision-makers that European institutions will support the long-term operation of the TPP due to ecological reconstruction is not supported by the legal regulations and policies of these institutions. The Energy Community (EnC), an organization composed by the regional countries and the EU, has already expressed its objection to the ecological reconstruction project. At the Ministerial Council meeting on December 14, 2023, the EnC concluded that the TPP failed to comply with the more lenient technical standards outlined in the European Directives for the operation of existing thermal power plants. Consequently, the TPP must adhere to much stricter standards applicable for development of new, technologically advanced power plants, a goal that, unfortunately, cannot be achieved with an incomplete ecological reconstruction of our 40-year-old facility.
It is crucial to note that the EU representative supported this conclusion at the EnC Ministerial Council meeting after the highest EU bodies, including the European Council and the European Commission, endorsed the position through appropriate resolutions.
The EnC Ministerial Council's conclusion was subsequently forwarded to the EnC Legal Advisory Committee for an opinion on its legal basis. At the next EnC Ministerial Council meeting, scheduled for December 12, 2024, this conclusion was expected to be translated without discussion into a legally binding decision, determining that Montenegro had violated the Energy Community Treaty, leading to potential sanctions. However, at the meeting, the then Minister of Energy, Mujović, in collaboration with regional ministers who form the voting majority within the EnC, successfully managed to postpone the decision on this and several other similar and "inconvenient" agenda items until the next meeting.
While regional ministers may continue to delay the adoption of decisions, this will not compel the highest EU bodies to abandon the application of their regulations or revoke the resolutions in which they concluded that Montenegro had violated them.
Corruption?
Based on the facts outlined above, it is clear that the ecological reconstruction project will not achieve the goals for which it was initiated: (i) bringing the operation of the TPP into compliance with binding EU regulations and standards, and obtaining a license for its operations, and (ii) ensuring the continuity and security of electricity supply to citizens in the long term.
On the contrary, continuing the project will only exacerbate the significant material damage already caused to EPCG, the state, and the citizens of Montenegro, and is therefore not in the public interest. This raises concern that corruption may be a key driver behind the project. In light of this, I once again call on the Agency for the Prevention of Corruption to initiate an investigation and take all necessary steps to prevent further gross violations of the public interest.
Alternatives
Electric power company deserves commendation for its investments in solar and wind energy projects, particularly for its intention to acquire advanced inverter batteries capable of storing energy, which would help address the limitations of solar and wind power plants. However, the ecological reconstruction project will significantly diminish EPCG's financial capacity to implement such initiatives.
Therefore, rather than proceeding with the ecological reconstruction, decision-makers in EPCG and the Government should prioritize further investments in renewable energy plants and a just transition program. This program would ensure new employment opportunities for the workers at the TPP and the Coal Mine, as well as for the citizens of Pljevlja. Prime Minister Spajić promised long ago that 500 million euros would be allocated for such projects. It is now time to fulfill that promise.
The author is an economic analyst
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