Powering up on coal

While older stations are being overhauled, new projects are in the pipeline in Bulgaria’s coal-mining heartland. The Maritsa East coal mines, located near Stara Zagora in the center of the country, supply coal to power plants in the area. This includes Bulgaria’s largest coal-fired power plant, Maritsa East 2, which has a combined installed capacity of 1450MW, and Italy’s Enel Maritsa East 3 plant, which will have 900MW capacity after renovation.

A new 670MW, $1.5 billion plant, being built over the original Maritsa East 1 by US-based AES, will also get its coal from these mines. On August 6, Maritsa East 2 brought its recently upgraded unit on-line. The renovation, conducted by Japan’s Mitsui & Co, is part of a $312 million program to upgrade four of the plant’s eight units. Another unit had previously been upgraded, boosting its installed capacity by 50MW to 177MW. The increased capacity comes at a challenging time for the Bulgarian energy sector, after two 440MW nuclear reactors at the Kozloduy nuclear power plant (NPP), responsible for 35% of Bulgaria’s electricity output, were closed at the beginning of the year as a prerequisite for Bulgaria’s EU entry.

Prior to the closure, Bulgaria supplied 70% of its neighbors’ energy shortfall, exporting 7.8 billion kWh last year, but exports have been severely curtailed. The shutdown is extremely unpopular in Bulgaria and has become heavily politicized. While the Kozloduy plant will be replaced by a new 2000MW NPP at Belene, this is not expected to come on-line until early 2014. It is possible that Bulgaria’s electricity supply will be further hit by renovation and temporary unit closures at Maritsa East 2 and the Enel plant, as they work to meet tough new EU emissions standards by the beginning of 2008. Maritsa East 2 is a year behind its overhaul schedule and representatives say they hope that if the emissions limits are not met on time, the Government will impose fines rather than enforce unit closures that would further hit profitability and the Bulgarian power sector.

As part of the environmental upgrade to the four units, Maritsa East 2 is looking for a partner for the construction of two desulfurisation plants, a contract worth $110.4 million. The plants reduce output of environmentally unfriendly sulfur dioxide. Companies known to be interested in the project include Poland’s RAFACO, a branch of France’s Alstom Power, and Japan’s Hitachi Power Europe. The renovation of the Maritsa East 2 facilities is indicative of Bulgaria’s determination to keep its coal power sector strong in the wake of the Kozloduy closure. Coal power will be key in keeping the lights on during the period between shutting down Kozloduy and starting Belene, and indeed in securing Bulgaria’s future as an electricity exporter.

In June, the Government gave the go-ahead for the construction of a new lignite coal-fired plant in the basin. The new power station will have an output of at least 600MW. Enel, AES, Germany’s RWE and E.ON as well as a consortium of Czech firm CEZ and a local partner have all expressed interest in the project. International energy firms are drawn to Bulgaria for several reasons. On the supply side, the mines and infrastructure required by large power plants already exist, labor is relatively inexpensive and the lignite coal required for electricity generation is accessible.

On the demand side, Bulgaria is surrounded by energy-hungry neighbors with energy-hungry industries, it is ideally located for exports to the Balkans and beyond (exports to the Middle East are certainly viable in the long term), and electricity liberalization in Bulgaria has freed markets. Several firms are also looking to vertically integrate in the region, that is, to own generation, distribution and sale, to capitalize on economies of scale and reduce overheads.

The state-owned coal-mine in the region, Maritsa East, is one of the largest in Europe. It covers 240 square kilometer and provides more than 32 tons of lignite each year. In the first half of 2007, the mine increased output by 13% year-on-year, taking production to 10.14 million tons, 290 000 tons above its target. It may exceed its plans to mine 21.35 million tons this year, 150 000 tons less than last year. If coal power looks set to be central to Bulgaria’s energy policy in the medium term at least, then Maritsa East’s mines will itself be central to coal power. (sofiaecho)