Construction of Kostolac B3 power plant begins

A Chinese company started construction on Monday of a new 350-megawatt unit at Serbia’s second largest coal-fired power plant, the first power plant built in  Serbia in nearly 30 years.

The $613 million project is part of a wider deal between Serbia and China that includes expansion of a nearby coal mine and upgrade of existing capacity in the Kostolac coal-fired plant complex.

Export-Import Bank of China will provide 80 percent of the funding for the entire project of $715 million through a 20-year loan. The Serbian government will secure the rest of the funds.

The construction is expected to be finished in 2020 and will follow the highest environmental standards, Milenko Grcic, CEO of Serbian power utility Elektroprivreda Srbije (EPS), which operates the plant, told reporters.

Serbia generates two thirds of its electricity from ageing coal-fired plants and the rest from hydro power. It urgently needs to upgrade its energy infrastructure to meet rising demand.

The country’s energy sector has been under severe strain since 2014 flooding, when a mine supplying Serbia’s largest coal-fired plant was affected. Serbia’s electricity output fell by more than 15 percent in the first three months this year on a drop in coal production due to freezing temperatures.

Western Balkan countries, including Bosnia, Kosovo, Montenegro and Serbia, plan to invest billions of euros in building new coal-fired plants to meet rising demand for electricity as old plants are being phased out.

But environmentalists fear the investment in coal could backfire as governments may be forced to invest hundreds of millions of euros more to upgrade plants to meet EU environmental standards as the countries progress toward membership of the bloc.

Chinese investors are increasingly targeting projects in the Balkans, boosting their presence and showing a willingness to take bigger risks than European rivals in a potentially lucrative market with good links to the European Union. 

However, not everybody agrees with another coal-powered plant being built in Serbia. An international NGO, Bankwatch, which has members from 12 countries, criticizes the project and says that “the (Serbian) government is deluding itself by doing the same thing and expecting different results. This is the third time it has announced that construction will start at Kostolac B3, in spite of problems at the project persisting since the start of the permitting process. There have been no environmental and social impact assessments of expanding the Drmno mine that will feed the power plant, and the local community’s request to be relocated from the mine borders has not been taken into account.”

Bankwatch goes on to say; “The project is also not in line with the latest pollution standards adopted this year by the EU. With so many countries in Europe announcing a phase out of coal power, Serbia is again thumbing its nose at the EU and its policies, which it would have to follow if it serious about joining the bloc.

Preparations began in earnest on the Kostolac project in January 2015, when the Serbian parliament ratified a loan agreement worth USD 608 million with China’s ExIm Bank for the coal plant’s construction, and since then the project has been dogged by irregularities at every turn.

 The Serbian government took the loan on behalf of its state company EPS, raising issues of compliance with its state aid obligations under the Energy Community Treaty. In addition to concerns about the project’s adherence to state aid rules, the environmental impact assessment process had to be repeated after the original approval expired and the Espoo Convention Implementation Committee [3] criticised Serbia for failing to assess the impacts in neighbouring countries. A new EIA report was then published for consultation in February 2017 and received a final decision in October 2017 [4]. An impact assessment of the mine expansion, which is needed to feed the new unit, was exempted in 2013, a decision potentially at odds with Serbian legislation and the EIA Directive within the Energy Community Treaty.

Moreover, with the European Union updating its legislation governing industrial emissions in November last year, Kostolac B3 would now be obliged to adhere to emissions limits stricter than those set in the EIA decision from October. This means that should Serbia continue towards EU accession, Kostolac would already be saddled with expensive retrofit costs necessary to bring the plant in line with EU standards”.

(Reuters,, 20.11.2017)



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