31. March 2021Accelerated Delignification – The Status of the Energy Transition in Western Macedonia

Short profile of the region

Western Macedonia is a region in North-western Greece with a population of 290,000, with its economy largely dominated by lignite mining and lignite-fired power plants and district heating systems. Since 2010, there has been a constant decrease in lignite-fired power plants – the 4 oldest units stopped operating-, which has accelerated after 2019, triggered by the increased ETS carbon price which increased the costs to produce lignite-based electricity. In line with its international commitments to climate action and sustainable development, Greece is facing the urgent need to transform its energy system, overcome its technological lock-ins, and transition to a low-carbon economy.  In 2019, the Greek Government as part of its National Energy and Climate Plan has set the goal of withdrawing all lignite plants by 2028, with the majority of units being withdrawn by 2023, while only one plant will continue to operate – the Ptolemaida V bloc, which is still under construction and will burn lignite only until 2028.

Delignification impact within the region

The Western Macedonian energy industry is facing a rapid lignite phase-out schedule, creating socio-economic challenges, as the local economy is built around lignite-related activities, which account for 34% of regional GDP. The region also faces structural weaknesses as it suffers from high unemployment rates, low diversification of the productive model and limited innovation capabilities.

Summarizing the effects of delignification in the Western Macedonia region and having the year 2013 as a reference, the zero-lignite production in 2028 is expected to bring the following consequences:

• Regional GDP would decline by 26% with an annual loss of revenue of €1.2 billion
• Loss of 21,000 direct and indict jobs
• Total income loss for the period 2013 to 2028 of €9 billion

This makes clear that Western Macedonia’s long-term dependence on lignite has created structural economic problems in the region reflected in low productivity diversification and low innovation rates. Moreover, it has created structural socio-economic conditions that cannot be addressed by corrective short-term interventions but require long-term production restructuring policies, which should exploit the competitive advantages of the wider region.

Measures taken by the Government

Recently, a Governmental Committee was established to approve and monitor the implementation of the Just Development Transition Master plan, which is based on five principles: Emphasis on labour-intensive sectors to create local job opportunities, promoting sustainable development, focus on quick-wins, integration of modern technology and innovation, and utilization of the regional advantages. Based on these principles, the Master Plan for the Transition is based on five key development pillars:

• Clean energy development (e.g., PV plants of more than 2.5 GW in abandoned lignite mines, battery production, hydrogen production facility), including gas flowing through the TAP pipeline crossing the region
• Industry manufacturing activities and trade
• Smart agricultural production
• Sustainable tourism
• Technology and education

The total financing needed to implement the Master Plan measures are estimated at €5 bn. The required investment in Western Macedonia will be funded from European funds mainly from the EU Just Transition Fund (JTF) and national sources, public low-interest loans from European sources and other financial instruments, commercial loans and private investment.  In order to ensure that the lignite phase-out will not negatively affect the regional economy, Western Macedonia can build on its strengths and competitive advantages, including the high concentration of specialized human resources, industrial culture, energy infrastructure, a primary agriculture sector with high perspective, existing academic and research structures and a strategic geographic position in South-Eastern Europe.

Current Situation

Overall, the interventions of local stakeholders such as the regional authority, municipalities, academia and business community, chambers and trade unions, so far show a widespread reluctance to accept an accelerated process towards decarbonisation and lignite phase-out.

It is becoming increasingly clear that the energy transition is not just about choosing the best technical solutions but relies heavily on human habits and behaviours and should ensure that no region or worker is left behind (“Just Transition”). This applies especially for Western Macedonia, where the energy transition is accompanied by the demand for a generalized productive reconstruction. Consequently, participatory decision-making, transparency of political commitment and building trust is crucial to a successful and a fair energy transition.

The recent policy developments and the accelerated lignite phase-out have increased the urgency of structural adjustments in the region and therefore enhanced the importance and salience of the CINTRAN research for Western Macedonia in order to overcome the transition challenges related to high unemployment, energy poverty, low innovation rates and limited economic diversification.

 

Figure 1: Satellite view of the Western Macedonia Lignite Centre. The red circles indicating the coal mining areas of Amynteon (NW) and Ptolemaida (SE). Kozani, the Capital, is about 16km away from Ptolemaida’s coal mining. Source: Google Earth/own work.

 

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Authors

Dimitris Ziouzios
Regional Development Fund of Western Macedonia

Evangelos Karlopoulos
Centre for Research and Technology Hellas (CERTH)
Chemical Process & Energy Resources Institute (CPERI)

Panagiotis Fragkos
E3Modelling S.A.