In September 2019, at the UN Climate Action Summit in New York, the newly-elected Prime minister Mitsotakis announced that Greece would phase out the use of lignite in its energy system by 2028, 10 years faster than Germany. Consequently, the National Energy and Climate Plan (NECP) drafted by the previous SYRIZA-led government was revised to reflect this and other commitments before the plan was sent to Brussels end of 2019 [see previous blog post]. Daniel Argyropoulos has the story.

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Even though the share of lignite has been declining over the years, the ambition is high: Lignite has been the main pillar of the Greek energy system for decades. To understand the importance of lignite one needs to look at the mining regions in Western Macedonia (Kozani, Florina) and Peloponese (Megalopoli) where about 6000 jobs still depend on the industry. These regions, as is the case with many coal regions, do not boast of economic alternatives. Concerns in these regions exist given the expected pace of the phase-out: All plants (which belong to the state-owned Public Power Corporation (PPC)) except for one are to be shut down by 2023. Ptolemaida 5 which is still being built and is scheduled to start operating in 2022, is expected to use lignite as fuel until 2028.

Source: SDAM

In order to address the economic and social repercussions, the government announced a masterplan for the Just Development Transition (Σχεδιο Δίκαιης Αναπτυξιακής Μετάβασης, ΣΔΑΜ/SDAM) and set up a steering committee to coordinate the preparation of the plan. After a draft masterplan was presented in September 2020, it went into public consultation in October-November. The revised SDAM was discussed at government level and in the parliament and was presented to the public by the minister of environment and energy, Kostis Chatzidakis, on 9 December.

The “Vision for the next day”

The intention of the SDAM is to present “a holistic, ambitious but realistic plan […], the implementation of which will make Greece a pioneer in Europe and an international example of best practice for fair development and just transition”. It identifies five development areas:

1. Clean energy
2. Industry, small industry and trade
3. Smart agricultural production
4. Sustainable tourism and
5. Technology and education

Specifically, the masterplan presents 12 measures that shall contribute to a successful transition towards the post-lignite era:

• Installation of a total of 2 GW of solar PV projects in Western Macedonia (in a partnership between PPC and German utility RWE)
• Construction of a 204 MW Solar PV project by the German developer Juwi for Hellenic Petroleum (ELPE) in Kozani
• A voluntary early retirement scheme for PPC staff in the lignite areas
• Immediate start of restoration of lignite mines
• Alternatives for district heating in lignite areas after the shut-down of lignite units
• Spatial planning for the future development of lignite areas which includes accelerated permitting processes
• Maintaining the discount on electricity bills in lignite areas (originally introduced as a compensation for the negative environmental effects of lignite mining).
• Total amount of €130 million stemming from the special levy on electricity consumers for the support of lignite regions (λιγνιτικος πόρος).
• €60 million of financing towards lignite areas from auctioning of CO2 allowances (Green Fund).
• Support of the plans of the local Solid Waste Management Bodies (FODSA)
• Promoting the role of the University of Western Macedonia for the development of the lignite regions
• Request to the European Commission to declare lignite areas as special tax zones

In addition to the above, several large investment projects are proposed which aim at facilitating the energy transition and the decarbonisation of the transport and heating sectors:

• A hydrogen production facility with a generation capacity of 1,5 GW in Western Macedonia. This project is part of the “White Dragon” proposal by 4 EU Member States which is being prepared and shall be submitted to the European Commission for funding under the Hydrogen Europe Programme.
• An energy storage project of 250 MW in Western Macedonia
• Development of an industrial electromobility park and a battery production facility in Western Macedonia.

Through the envisaged investments the masterplan estimates that 8000 new jobs will be created by 2028, i.e. more than compensating the jobs lost in mining and in the operation of lignite power plants.

The masterplan estimates the total financing needed to implement the measures accumulate to €5 bn. According the initial financial plan laid out in the SDAM, the costs shall be covered from the following sources:

• 10% subsidies, mainly from the EU Just Transition Fund (JTF) and from national sources
• 30% low-interest loans from European sources and other financial instruments
• 40% commercial loans
• 20% private investment

Replacing lignite with natural gas: out of the frying pan into the fire?

Although the government is committing to the expansion of renewable energies and new technologies (like storage and hydrogen production) questions remain.

1. Since many households use district heating fed by the lignite plants, there is an urgent need to cover the heating needs very soon. The masterplan stipulates the expansion of natural gas by way of building new gas-fired power units or by converting existing ones. Although this may look like a natural solution in the short term since natural gas is cheaper and cleaner than lignite, replacing one fossil fuel with another clearly makes the decarbonisation of the energy system difficult in a longer-term perspective. Also, financing investments in fossil fuel infrastructure through EU sources will probably not be possible.
2. As almost all lignite plants shall be shut down within the next 3 years, the timeline is very ambitious. Investments basically need to be made immediately to see results materialise by 2023. The masterplan points out this is a challenge since the necessary procedures and mechanisms at national and EU level are still in the process of being elaborated and politically agreed. To secure an implementation without delay, the Greek government announced funding to be made available for the period up to 2022 in the order of €140 m. In times of stretched public budgets due to the pandemic it remains to be seen if this timeline can be kept.

The draft bill for the implementation of the master plan is announced for the first quarter of 2021. For sure a dynamic discussion can be expected in the coming months. Despite the challenges, the SDAM might live up to its own expectation that it could become an international best practice for the just transition to a cleaner future.