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Europe’s Coal Rebirth Driven By High Energy Prices

Stefan Nicola and Ladka Bauerova, Bloomberg

Europe’s appetite for cheaper electricity is reviving mines that produce the dirtiest type of coal. Alarmed at power prices about double U.S. levels, policy makers are allowing the expansion of coal mines that were scaled back in the past two decades.

Across the continent’s mining belt, from Germany to Poland and the Czech Republic, utilities such as Vattenfall AB, CEZ AS and PGE SA are expanding open-pit mines that produce lignite. The moist, brown form of the fossil fuel packs less energy and more carbon than more frequently burned hard coal.

The projects go against the grain of European Union rules limiting emissions and pushing cleaner energy. Alarmed at power prices about double U.S. levels, policy makers are allowing the expansion of coal mines that were scaled back in the past two decades, stirring a backlash in the targeted communities.

“It’s absurd,” said Petra Roesch, mayor of Proschim, a 700-year-old village southeast of Berlin that would be uprooted by Vattenfall’s mine expansion. “Germany wants to transition toward renewable energy, and we’re being deprived of our land.”

Lignite demand worldwide is forecast to rise as much as 5.4 percent by 2020, according to the International Energy Agency. At the same time, it estimates consumption must fall 10 percent over that period to achieve goals endorsed by EU and world leaders to hold global warming to 2 degrees Celsius by the end of this century.

Mining machines the size of skyscrapers stand just to the north of Proschim ready to swallow up the town of 330 residents near the German border with Poland. Vattenfall, which is owned by the Swedish government, is seeking approval to knock down buildings in the town to expand its Welzow-Sued lignite mine.

Middle Ages

In Poland, PGE, which is the nation’s largest power producer, is upgrading a lignite-burning unit at its Turow plant. In the Czech Republic, a plan to relax mining limits may annihilate Horni Jiretin, a 750-year-old village that survived everything from plagues in the middle ages to the last two world wars.

Lignite’s revival is concentrating attention on the drawbacks of the fossil fuel and may actually bolster support for renewables such as wind and solar power, according to Barry O’Flynn, a director in the environmental finance and clean technology team at Ernst & Young LLP.

“There will be increasing emissions restraints and controls in the years ahead,” O’Flynn said. “Lignite is not a threat to renewables. It could benefit them, since the emissions from lignite-fired plants will need to be offset” under EU pollution restrictions.

Open-Pit Mining

Geologically younger than hard coal, lignite is mostly found near the surface of the Earth, making open-pit mines the most economical way to extract it. Lignite use fell 40 percent from 1990 to 2010 as governments across the former Soviet bloc nations closed aging industrial plants.

Now, Poland, which gets almost 90 percent of its electricity from coal, is stepping up use of the fuel as a way of ensuring energy security and maintaining employment in some of the nation’s poorest regions.

Lignite power production rose 3.7 percent last year in Poland, while output from hard coal plants fell 7 percent, according to PGE, the state utility. In late 2011, it started a 858-megawatt unit at its Belchatow plant, Europe’s largest thermal power generation facility. The company’s strategy from 2012 assumed long-term reliance on lignite due to its low costs and the prospect of building new mines.

In the Czech Republic, Severni Energeticka AS is seeking to expand its mine past limits imposed in 1991, two years after the collapse of communism.

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