Opinion - 18/November/2019

Coal regions could drive European competitiveness

Coal is dying in Europe, but lignite regions possess assets that could transform them into competitive power houses of low carbon industries, argues Julian Popov, Fellow at the European Climate Foundation and former Bulgarian Minister of the Environment

Europe needs a coal regions strategy that combines local assets with favourable state aid rules, simplified bureaucracy and support for major industry R&E centres

 

European coal is in terminal decline. Coal consumption in the EU today is half of what it was 30 years ago while the economy is three times larger. According to Sandbag, a London and Brussels based think tank, in the last six years EU coal consumption declined by a third and shrunk by 19% in the first six months of 2019.

All this has happened before new tighter industrial emissions requirements for large combustion plants (known as LCP BREF) come into force in 2021 and before the current EU ambitions for a 55% greenhouse gas reduction by 2030 and climate neutrality by 2050 are formally adopted.

Europe is under pressure to act fast to mitigate the social, economic and energy security consequences of the closure of the coal industry. Public and political instincts suggest two interlinked approaches — burden sharing and compensation. We need to share the hardship of the transition and compensate those who would lose and suffer most. There should however be a third approach.

While coal is dying, coal regions don’t need to die. They could thrive. Their economic prospects come precisely from the death of coal. Coal, particularly lignite, regions could be not only the main beneficiaries of the carbon neutral transition, they could be one of its key drivers.

Lignite regions have several essential assets that could transform them into competitive power houses of future low carbon industries.

The large areas of land unsuitable for agriculture are an obvious opportunity. A recent study by the Joint Research Centre, the European Commission’s science and knowledge service, estimates that EU coal regions in transition occupy more than 7570 km2 of land. If covered with photovoltaic plants they could generate the same amount of electricity that coal in Europe generates today. This is not the only land available in the coal regions and the study does not include the significant coal areas in neighbouring Energy Community countries, namely the Western Balkans and Ukraine.

Of course nobody is suggesting that all this land should be fully covered with photovoltaic panels, but a large part of this low cost energy potential could be used. An industrial solar power contract in Portugal reached €14.76 a megawatt hour this year, well below the wholesale average market price in Europe. While this price was unusually low, it points at a consistent downward trend of prices for utility solar and wind generation.

Land in the coal regions is typically owned or controlled by a single owner, often the state, that could provide it for free and waive administration fees and barriers with a single government or parliamentary decision reducing further the cost of installation.

 

 

STRONG GRIDS

Coal regions usually have the strongest power grids in a country because of their large generation capacities, significantly reducing grid connection costs and shortening the power system integration process that can be long, painful and expensive.

Turning coal regions into solar, and in some cases wind generation, centres is only part of the industrial potential of coal areas. Most of those in the labour force in mining regions are engineers and technicians with high level qualifications and extensive experience. Maritsa East, the largest lignite generation region in southeast Europe, employs around 15,000 people, 20% of those working on the mines and 25% of those in the power plants are university graduates.

This is the type of workforce that we should worry not how to compensate, but how to keep. Developing low carbon industrial clusters in coal regions could absorb, retain and expand this valuable expertise which otherwise could be dispersed and lost.

Along with industrial size renewables, expansion in coal regions could attract new pilot and commercial hydrogen installations, a wide variety of storage plants, battery manufacturing, electric car and bus plants, production of electric micromobility vehicles, cables, insulation materials, LED lighting, solar and wind energy components and dozens of other enterprises that would need primarily regulatory and political support rather than heavy subsidies.

Turning coal regions into zero carbon industry hubs will also respond to the idea of building so-called European industry transition “super-labs” as proposed last year in the Final Report of the High-Level Panel of the European Decarbonisation Pathways Initiative set up by the European Commission’s Directorate-General for Research and Innovation in 2016.

 

SLOW PROGRESS

To some extent this transformation is happening, but in a slow and random way, battling with constant big and small barriers at a local, national and EU level.

Since the 1960s, the Ruhr turned from a major coal region employing half a million miners into one of the drivers of Germany’s low carbon transition. The Katowice Economic Zone in Poland was established in 1996 and since then has created more than 80,000 new jobs and attracted more than 390 companies. In 2013, the former coal region of Nord Pas de Calais in the north of France adopted a roadmap with the ambition to become a leading centre of the Third Industrial Revolution. Greece recently announced its ambition to transition from coal to solar and hydrogen. There are other examples.

To accelerate and focus this process, we should replace the burden and compensation paradigm with one defined by competitiveness and innovation. We need a transition that seizes opportunities and uses the assets of coal regions to drive Europe’s net zero carbon strategy.

Europe needs a dedicated coal regions strategy that combines relevant assets with favourable state aid rules, simplified bureaucracy and support for major industry research and development centres that could catalyse the transition further. We need a combined effort from policy makers, industry and investors to encourage breakthrough technologies, both for start-ups and large companies, and absorb some of the financial risks of innovation.

The ambition to turn the European Investment Bank into a “climate bank” and setting high emission reduction standards are good initial steps. Channelling efforts towards the coal regions should follow.

In this way, coal regions will not only reduce their transition bill, but will become the main drivers and beneficiaries of the transition, contributing to Europe’s global industrial competitiveness and strengthening European energy and political security.

 


The views expressed in this opinion are those of the author and do not necessarily reflect the position of FORESIGHT Climate & Energy

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