Serbia, Investment delays are the main cause of problems in the energy sector

, News Serbia Energy

The delay in the realization of the planned investments in the field of energy in Serbia caused most of the existing problems, apart from the increasingly complex mining and geological conditions, so today our country has found itself in a situation where it will have to import coal. The production of electricity from coal will certainly survive until 2050, and I am convinced that it will continue even after that. In our country, there is a wrong perception that coal production is decreasing in the world, which is absolutely not true, explains Dragan Ignjatović, professor of the Faculty of Mining and Geology at the University of Belgrade, in an interview with Biznis.rs.

He reminds that the current Energy Development Strategy of Serbia defines coal as the basic energy source for electricity production, with a share of more than 70 percent. In an interview for our magazine, Professor Ignjatović talks about late investments in the energy sector, the price of electricity and the continued use of coal, despite the trend of the green agenda and decarbonization.

We are returning to the use of coal in a big way, and now the need for Serbia to import it is highlighted. How did our country find itself in such a situation?

– In the previous (and currently valid) Energy Development Strategy of Serbia for the period up to 2025 and projections up to 2030, coal was defined as the basic basic energy source for the production of electricity with a share of more than 70 percent. The main goals that were determined by the previous strategy were the safe and reliable supply of electric power thermal capacities and the provision of the necessary quantities of coal for final consumption and for the production of thermal energy. Unfortunately, today we have to state that the realization of both goals is threatened, so we no longer have supply of thermal power plants, nor did we provide sufficient quantities of coal for wide consumption.

The reasons for the reduced delivery of coal to thermal power plants could be briefly seen through two causes – failure to realize the planned investments in the opening of replacement capacities, procurement and revitalization and maintenance of existing equipment, as well as increasingly complex mining-geological conditions (clogging of the coal layer, decreasing quality and other ). I say the briefest, because the problems are far deeper and did not arise “yesterday”, but have been present for the past ten or more years, and are related to outdated equipment (age on average over 35 years), failure to realize investments for the acquisition of equipment for opening new (replacement) surface mines, as well as the revitalization and modernization of equipment. In addition, investments for preparatory and auxiliary works (drainage, relocation of watercourses, expropriation, construction of roads) were not realized either.

A special problem is the worsening mining-geological conditions, because the highest quality surface mines have already been mined (Field D, Veliki Crljeni, Tamnava east field), where the overburden coefficients were low, and the coal quality was good. This was known from the aspect of geological research and project documentation, but the corresponding preparation was not dynamically carried out in time. Therefore, there is a period of exploitation of surface mines with a large stratification of the coal layer, with a large content of clay layers and low coal quality. There is quality coal, but at greater depths, and in order to get to it, it is necessary to dig up large amounts of overburden and tailings. If we add to this the catastrophic floods from 2014, which damaged equipment and worsened working conditions (slope stability, system reconstructions…).

In the current conditions, it seems that the primary task is to continue with investments, while repairing the existing situation. How feasible is that and what should be the first thing on the agenda when it comes to Serbian energy?

– Within the framework of the existing Energy Development Strategy, a Strategy Implementation Program was created that defined the key monitoring indicators. If you look at those indicators (degree of realization of investments, coefficients of time and capacity utilization, degree of realization of excavation of tailings, monitoring of coal quality…) it is clear that the crisis was inevitable, because almost all indicators were in decline and it was only a question of when the big ones would occur problems. For example, the backlog in the excavation of overburden and tailings, and therefore the reserves of discovered coal, is measured in tens of millions of tons.

The strategic documentation of the development of surface mines was prepared, as well as the Development Strategy, but the planned works were quickly abandoned, primarily because the investments and planned purchases of new equipment were not realized. EPS regularly made plans and predicted investments, but at some level these plans were corrected and reduced so that the average realization per year was 30 to 50 percent.

Mining requires constant investments, and the effects can only be obtained in three to five years. The Government of Serbia has now allocated funds for the purchase of new equipment for the opening of surface mines in Polje E and Radljevo, but it will take at least three years until the moment of purchase and completion of installation, and in order to obtain full effects, it is necessary for the equipment to work for a certain period of time. The real effects will be obtained by opening the main coal seam in the open pit field E, where there are considerable quantities of excellent quality coal.

What is the impact of electricity prices in Serbia on the development of the electric power system? State officials often repeat that the price of electricity in our country is significantly lower than most European countries.

– It should be noted that the price of electricity in Serbia is below the realistic price that would enable the Electric Power Company of Serbia to develop normally and build replacement capacities. It is safe to say that EPS was the biggest donor to the Serbian economy and citizens due to the long-term misplaced price. In addition, instead of investing, EPS paid large amounts into the budget of the Republic of Serbia.

When it comes to the Public Enterprise for Underground Exploitation, the situation is even more complicated. Long-term and medium-term plan of business strategy and development for PEU Resavica for the period 2017-2027. year, which was adopted by the conclusion of the Government in 2018, the company’s strategic goals in the medium term were determined and some of the measures for its realization are – starting the process of planned closure of poor mines, i.e. mines whose coal reserves are about to be exhausted, starting to change the structure and reducing the number of employees in the company to the optimal number, as well as a step-by-step reduction of production costs per mine and overall.

Outdated technology and machinery are used, and productivity in active mines is extremely low. With very low productivity, costs per product unit are high and the company is not competitive. The price at which JP PEU Resavica sells coal is regulated and is far below costs. Coal brought to the thermal power plant is sold at a price of 33.4 euros per ton, while production costs range from 79 to 124 euros. All this has affected not only the shortage of coal for thermal power plants, but also for consumer and industrial use.

Some experts point out that the Ukrainian crisis and higher allocations for the import of electricity are only one of the problems, and that we did not think about electricity in time. What is your opinion?

– I think the biggest mistake was made at the beginning of the 2000s, when new thermal power plants with higher efficiency should have been built and old and inefficient blocks should have been closed. Then a new block, TENT B3 or Kolubara B, should have been built. By building them, coal consumption would be reduced due to greater efficiency, and losses would also be reduced. In Germany, they closed old units and built new ones, which reduced coal consumption from 1.2 to 0.9 kg/kWh, that is, reduced CO2 emissions by about 30 percent. Along with this, replacement surface mines were to be opened with revitalization and modernization of equipment.

Now we are facing a gradual reduction in electricity production from thermal power plants, first of all by closing the aforementioned old blocks (Morava, Kolubara A and others), with the opening of Kostolac B3. The next phase is the closure of blocks TENT A and Kostolac A. I think there is still hope for the opening of the Kolubara B thermal power plant because there is infrastructure, as well as some equipment, and most importantly, we have enough resources – coal.

Coal electricity generation will certainly survive until 2050, and I am confident that it will continue beyond that. There is a wrong perception in our country that coal production is decreasing in the world, which is absolutely not true. On the contrary, coal production continues to grow. At the moment, a large number of coal-fired power plants are being built in Asia and this trend will continue, so 2050 will certainly not be the last year for the world to burn coal in thermal power plants.

What should we have done and when so that we don’t find ourselves in a situation of worrying about whether we will have electricity?

– As I already mentioned, we missed our biggest chance about fifteen years ago when we should have built new – modern thermal power plants with high efficiency. Back then, it was still possible to get cheap loans and there was no moratorium in the EU on the construction of new thermal power plants. This would reduce coal consumption and CO2 emissions. Of course, it was necessary to open replacement capacities for coal production in parallel and to invest in new equipment. In addition to this, the construction of reversible hydropower plants as well as the construction of wind farms and the installation of solar panels should have been intensified earlier. Of course, it is necessary to reduce the consumption of electricity through energy efficiency measures, better insulation of buildings, introduction of heat pumps, disincentive of heating with electricity…

You mentioned earlier that the problem of coal shortage will last even up to five years. What is the cause of this and how will it affect the economy and society as a whole?

– The delay in the realization of the planned investments caused most of the existing problems. It should be borne in mind that the equipment that was worth 300 million euros two or three years ago is now worth at least 350 million, with a big issue of delivery terms, as well as quality. The war in Ukraine, as well as changes in the global market, first of all the globalization of equipment suppliers, then the issue of procurement of raw materials, their production and the like, calls into question even these deadlines. Nevertheless, we must be optimistic because there are certain reserves in the Electric Power Industry of Serbia, above all when it comes to highly qualified personnel who have extensive experience and knowledge.

Earlier pressures from many quarters to abandon the use of coal seem to have subsided and it is clear that many are returning to, or continuing to use, coal. How long-term can this trend be? What can the current global situation bring in this regard in the future?

– I think that in Europe this will be a temporary stoppage and that the EU will continue with the green agenda and decarbonization after the end of the crisis. It is quite different in the rest of the world, where the production and consumption of coal in thermal power plants will grow, especially in Asian countries, where a large number of thermal power plants are now being built. It is very important that Serbia does not make easy promises for the transition to renewable energy sources and its share in total consumption (no more than 30 percent by 2030), because Serbia neither has the means nor the conditions for such a rapid transition. Our country should use its most important resource (coal) to the maximum, as long as possible, with the gradual introduction of renewable energy sources, building reversible hydroelectric power plants and increasing energy efficiency. I think that the rapid introduction of nuclear energy is not realistic, among other things, because of environmental,

No one can say with certainty what the current situation can bring because it depends on many factors, and above all geopolitical conflicts, both in Europe and in Asia. That is why Serbia must continue to rely on its safe resource – coal, Biznis writes.