An unsolved equation: who needs two more cogeneration power plants for Lithuania?

Two more cogeneration plants are on the cards for Lithuania although it is not clear if there will be enough combustible waste to produce electricity and heat.

That was the decision of the previous Government in 2014 – to build cogeneration power stations in Vilnius and Kaunas with Lietuvos Energija as the developer, a decision that continues to confound some experts and politicians.

DELFI already wrote that the most frequently named persons – the two gray-haired energy industry cardinals – Nerijus Rasburskis a former adviser to the president who is now the director of the Cogeneration Power Plants Project and Tomas Garasimavičius, former adviser on energy to Algirdas Butkevičius and Saulius Skvernelis, could be behind other biomass power plants and “push” Lietuvos Energija projects.

Discussions on the utilisation of plant capacity, cost-benefit and waste incidence have as yet not been addressed. The impression is that only one cogeneration power station was needed – either in Vilnius or in Kaunas although some people with certain interests could have it that two are built.

A decision to build two although the European Commission cautioned against the second

In the government resolution of 2014, one of the clauses states that the appointed developer, i.e. Lietuvos Energija, would realise the electricity projects using its own funds while seeking to use EU structural fund support, as well as by attracting investment from municipalities and / or companies managed by them and / or private partners.

EU support for the Vilnius cogeneration power plant was received. As written on the company’s website, in December 2016 the European Investment Bank (EIB) granted a loan of 190 million euro, which is guaranteed by the European Fund for Strategic Investments (EFSI).

The European Commission warned however, that construction of the Kaunas power plant could create a surplus of waste incineration.

In June 2017, ELTA reported that Kęstutis Sadauskas, the director for the Green Economy at the European Commission’s Directorate General for the Environment, in a letter addressed to the German heating company Danpower GmbH, stated that investment in an additional incineration power station must be carried out in rare and highly justifiable cases only.

In the letter, it was written, “The Commission Services are concerned that the construction of the Kaunas waste incineration plant could lead to excess waste incineration capacities in Lithuania, given the existing amounts of combustible waste. This would lead to a risk of failing to meet the country’s EU waste policy commitments and failure to achieve ambitious recycling targets, which are included in the circular economy action plan”.

The EC did not present an official stance on the need for the Kaunas power station because “European Union financial support for this project was not up for discussion”.

“Lithuania must decide for itself where and what kind of capacity it wants to create in developing an infrastructure like this however it must ensure that there will not be any overcapacity and that decisions related to it will not harm national and EU waste management objectives” wrote EC member Corina Cretu to European Parliament member Valentinas Mazuronis that same year in June after being in charge of the planned construction of the Vilnius and Kaunas power stations.

It’s clear that EU funding for the Kaunas power station will not be obtained as stated in the government resolution for both municipal waste power stations bearing in mind that in Lithuania another waste incineration plant in Klaipeda in no way suffices and that EU funding can be allocated to power stations that are planning to burn municipal waste only.

The question is therefore why does Lithuania need two cogeneration power station projects if it’s a possible economical risk.

The Kaunas cogeneration power station/ Lietuvos Energija website Kogen.lt states that the Kaunas cogeneration power station will increase competition in the Kaunas centralised heating distribution system. Sources however say that in order to ensure the basic demand for heat in Kaunas at the most favorable price, in this way creating a competitive a cartel for other manufacturers, there was no need at all to develop such a huge cogeneration project, and for Lietuvos Energija it would have been enough to acquire one of the heating manufacturers currently operating in Kaunas. Last week during an anti-corruption session in the Seimas, Mr. Butkevičius admitted that once the cogeneration power station starts operation in Kaunas, the price of heating will essentially stay the same.

“According to calculations at that time (the period when he was prime minister – DELFI) and they would probably have changed now, the price of heating in Vilnius could have been reduced by another 20%. In Kaunas, the price of heating would essentially stay the same. The crux of the Kaunas power station is that the state could regulate the prices more and in a better way”, he said.

An unresolved equation

A DELFI source at the EC confirmed that Lithuania does not need another two power stations, excluding the one at Klaipėda, because that would be politically unwise – one suffices.

“Lithuania has started to think that one power station won’t be enough, there’ll be more waste than has been additionally accumulated such as sewage sludge and industrial waste that does not include communal waste.

No one however knows how much industrial waste there is, we have never managed to get exact figures. I think that that would be difficult for Lithuania to calculate because if its industrial waste, i.e. for business, it must then be declared, there is no such formal requirement.

The question then arises that if there is a lot of that waste, must it be recycled or burned? Industry usually recycles this waste because it is more valuable than burning and burning is the second last waste management category after landfill.

Another question arises: if a power station is wanted in Kaunas where will communal waste – and not a lot of it – will also be burned, will the Vilnius cogeneration project be profitable? And vice versa. This equation hitherto has not been solved.

We won’t delve further into this matter but that’s the story and I think that here’s where all the interest lies,” said the source at the EC.

The source nevertheless emphasised that in any case Lithuania will have to adhere to EU directives according to which by 2020 the country will need to recycle up to 50% of its communal waste and by 2035 – 65%. That means that 35% of communal waste will need to be burned and disposed of in landfill.

“The question now is how many tons of waste is 35%? For a long time there’s been much talk as to how much communal waste is actually generated in Lithuania and it is more or less agreed that the figure is approximately 1.3 million tons per year. That means that in 2035 there will be approximately 455 thousand tons of communal waste for burning and disposal of in landfill.

In accordance with current laws and directives in force, however Lithuania must take measures to prevent waste. That means that waste must not increase, i.e. those 1.3 million tons must be reduced. Consequently, that figure in tons will have to be even less and not greater otherwise Lithuania will not comply with EU directives. So the question then was how much capacity is needed after the closing of the Klaipeda power plant?

It was also said that it’s one standard place of incineration. We therefore said to Lithuania that if you want to build one – all well and good. It maybe that there are two power stations for 100 thousand tons of combustible waste, maybe four for 50 thousand tons of waste whatever you want, but those combustion capacities should not be exceeded. Lithuania started to think that this wouldn’t be enough because there’s still sewage sludge and industrial waste. It then decided that the Kaunas power plant is also needed. We said that if the state wants to build up excess capacity for burning let it go ahead, the risk it takes is its business but that’s a waste of money in my opinion,” said DELFI’s source at the EC

If the said figures of municipal waste are what’s meant – 455 thousand tons by 2035 there’ll be less for burning because a specific portion of the waste will be used for landfill so it looks like that waste will not be enough for three cogeneration power stations.

The Klaipėda power station can burn up to 255 thousand tons of municipal waste at an average caloric value of 9 MJ/kg. Usually though less municipal waste is burned as industrial waste is also burned.

The greater the caloric value of the waste the less of that waste can be burned however Fortum Klaipėda press representative Andrius Kasparavičius stated that it’s best to take an average value of 9MJ/kg: “It’s necessary to speak about this specific average caloric value. We cannot burn more than we’re permitted to”.

He also explained that a cogeneration power station can choose freely how much industrial waste it wants to take on, i.e. it could not take it at all, thus covering the need for municipal waste brought from other municipalities, however usually the Klaipėda power station takes industrial waste.

“We have signed an agreement with the Klaipėda Regional Waste Management Centre, which is valid for 20 years. This agreement provides us with 100 thousand tons of municipal waste of Klaipėda landfill alone. We can choose the rest from anywhere else, we can cover the rest with industrial waste, and we can get municipal waste from other municipalities.

For example last year approximately 90 thousand tons of municipal waste was brought from the Klaipėda area as per the current agreement of which 80 thousand tons was comprised of industrial waste and the rest was municipal waste from other municipalities,” he said.

The Kaunas cogeneration plant could burn up to 200 thousand tons of municipal waste including solid fuels, annually, at an average caloric content of 12 MJ / kg.

It was planned to burn up 160 thousand tons of municipal waste at the Vilnius power station at a caloric content of 12 MJ/kg, however last week after a meeting with the prime minister and the managing director of Lietuvos Energija Darius Maikštėnas, there was talk of this amount being reduced by half but at this point in time it’s not clear if the combustible amount will be reduced and by how much. This is why it is difficult to calculate three cogeneration capacities.

In order to calculate the approximate capacity of the three cogeneration power stations, one must consider the same waste caloric content. Since the caloric content of the combustible waste at the Vilnius and Kaunas power stations is envisaged at being 12 MJ/kg, the calculated amount for the Klaipeda power station is not 255 thousand tons, that being at an average caloric content of 9 MJ/kg but rather 190, 3 tons annually at a caloric content of 12MJ/kg as the company has itself specified.

Therefore, the maximum capacity of all three should be about 550 thousand tons or 470 thousand tons if you take into account that the amount burned at the Vilnius power station can be reduced by half. It’s significant that according to the source at the EC, a minimum of 455 thousand tons of waste would go to landfill, so much less of it should remain that’s why we can already see that the figures are balancing on a dangerous threshold.

The Ministry of the Environment’s figures for municipal waste are even more pessimistic. According to the figures of the ministry specialists, including landfills, by 2020 approximately 416 tons of municipal waste will be left and in 2030 approximately 390 thousand tons. These figures were specified in a letter sent to the January 2017 Seimas Energy Commission.

In any event, it is less than the 550 thousand or 470 thousand tons of municipal waste the three power stations would burn.

Suspicion that the data on waste could have been falsified.

Another question is will there in general be enough waste for these three power stations bearing in mind that it is not only municipal waste that will be burned for heating and electricity in the cogeneration plants.

The Vilnius cogeneration power station is to be equipped with one waste boiler capable of burning municipal waste only and two biofuel boilers. The Kaunas power station is to have one waste boiler capable of burning both municipal and industrial waste.

More doubts have been raised about the Kaunas power station however, the Ministry of the Environment finally decided that there will be enough waste for the power station if it burns industrial waste as well although it did emphasise that it’s difficult to forecast an exact amount.

Saulius Skvernelis has doubts regarding the Ministry of the Environment’s figures. He told DELFI that misleading information on waste might have been provided and confirmed that there will be more studies conducted on the amount of waste.

“I think so (that there’ll be studies – DELFI) because I in part and the minister have confirmed those circumstances where any means was attempted to get the amount of that rubbish needed” he said.

Asked if he Ministry of the Environment’s figures could be falsified, he stated, “Taking all of the facts into account – what happened, the final court judgements and other information – there were substantiated questions with respect to whether the amount of rubbish is reasonable and objective. We will have to figure it out. Maybe everything is in order but it is enough that there are doubts along with all the information.

“The Ministry of the Environment’s figures which the prime minister is talking about were presented to the Seimas Energy Commission. DELFI received all of the ministry’s conclusions.

One conclusion for example states that “It is to be understood that after sorting the amount of municipal waste that remains unfit for useful re-use and processing, the amount of incinerated waste and dried sludge generated over the course of economic activity in in 2030 will be enough to exploit the capacity of the three waste incineration plants.”

The Seimas Energy Commission’s chairman Virgilijus Poderys, who also has doubts, was surprised at the first sessions where Ministry of Environment specialists said that there will not be enough municipal waste and later said that there will be.

“There are several things being expressed regarding this project. One is the amount of waste because the information provided is contradictory. At the first and second Commission sessions when we dealt with this issue, the representatives of the Ministry of the Environment said that there won’t be enough waste and that the impression is that we, the Energy Commission itself, was sceptical regarding one of those projects, that being the Kaunas power station.

Thereafter, at the end of the year that very same ministry, but now with a different deputy minister, sent a letter stating that there will be enough waste. Market participants and experts have varying opinions but mostly it’s mostly that there won’t be enough waste,” he said doubting.

Yet Mr. Poderys says the conclusions of the Ministry of the Environment are reliable although there is agreement that further studies are needed on the amount of waste: “There are letters and confirmations and I trust them. I cannot just go and say that I do not trust them and that’s that. There is a letter signed by the deputy minister and I have to trust it”.

“The deputy minister that Mr. Poderys is talking about is Dalius Krinickas who until October 2017 was the head of the Department of Waste and from 26 October 2017 started work as the deputy minister of the Environment.

Mr. Krinickas, not remembering any changes, commented to DELFI on the position of the Ministry of the Environment after hearing these doubts: “The transcripts need to be consulted because all sessions in the Seimas are official. It would be necessary then to take a careful look at the differing positions and see what could have happened.

“He confirmed that municipal waste at least will definitely not be enough for three cogeneration power stations”.

“I’ll say exactly the same thing that we’ve said before. If we compare the three installations and are dealing with a municipal waste stream then there won’t be enough of that waste. Already in 2014, we had to make that forecasts and so maybe that’s why there are differing versions because at one stage there was talk of municipal waste. At another stage, if I remember correctly, there was talk about another stream. All the details are in those calculations that were made and so there are different conclusions,” he explained.

He did however acknowledge that it is difficult to determine the amount of industrial waste. Mentioning the Ministry of the Environment’s letter to the Energy Commission that states that there will enough waste for three cogeneration power stations, he did say, “This is where the biggest opinions are”.

“If we’re talking about the municipal waste stream only, then in that case we can truly say, and everyone it seems knows this, that there is not enough capacity for three installations. We’ve said that more than once both in the Seimas and to the government as well as at negotiations with the EC.

And negotiations with the EC continue about the quantity of municipal waste and nothing else” he said.

Mr. Krinickas said that a new waste management phase is being drawn up in which the amounts of municipal waste in Lithuania will be calculated and determined. This will be done by the Ministry of the Environment’s Department of Waste, which since March 2018 has been headed by Agne Bagociute.

DELFI notes from 2013 she was the dedicated member of the Lietuvos Energija Supervisory Board. She also worked in the ministry as a senior consultant until January 2018 when this post was abolished. At the end of August 2017, she was in the Lietuvos Energija council again, however several days later she withdrew. At that time there was an investigation by the Special Investigation Service on the leaking of information in which Ms. Bagociute was implicated.

It was confirmed to ELTA that Agnė Bagočiutė distanced herself from questions related to the power stations when the news on her new positon in the Department of Waste came out.

“I am obliged to and will do just that – distance myself from these questions. Due to the fact that I was a member of the Lietuvos Energija Supervisory Board I believe it would be unethical of me to participate in the steering or coordination of this project and I declared that on my job application form,” she said.

The amount of industrial waste is unclear as is industry’s will to burn it in Kaunas

Mr. Krinickas acknowledged that although businesses, contrary to what the EC source said, have to provide an annual report on how much was industrial waste was accumulated, it would nevertheless be extremely difficult to predict an amount of industrial waste.

“It can happen that, for example, in one year there won’t even be a ton of industrial waste which could be removed and burned but the next year, depending on new raw materials and technologies, that amount could be greater. The amount of industrial waste is rather dynamic and can differ significantly each year”.

According to data provided by the Ministry of Agriculture, estimates show that industrial waste can remain at up to 10%, that being around 100 thousand tons in 2030 if I’m not mistaken,” he said.

Furthermore, it’s worth noting that not all industrial waste can be burned so its combustible amount can be further reduced.

“It’s here then that the talk must be about non-hazardous industrial waste only because these installations are not meant to burn dangerous waste. In Klaipėda, Kaunas and Vilnius, both in project proposals and in future releases, hazardous waste is banned because the boilers are different. We have the other boilers (in which hazardous industrial waste can be burned – DELFI) in Šiauliai.

All other construction and inert waste that is not suitable for burning, waste from metal processing, the medicine industry or the like is excluded or would have to be excluded from the overall amount of waste” he noted.

Finally, he acknowledged that the Kaunas cogeneration project does in fact seem like a risky investment. “Yes. Our main subject of negotiation with the EC was the Vilnius cogeneration project, leaning towards the combustion boiler. That was our point of negotiation with which we went to the EC”.

The Kaunas project was a total business risk. It was not included as a topic of negotiation on EC support. It’s a total business risk,” he said.

DELFI however notes again that 51% of the shares in the Kaunas cogeneration project are held by the state-managed Lietuvos Energija and so there is not only a risk to private business.

Moreover, it is unclear if industry in general wants their waste burned at the Kaunas power station.

In June 2017, the Energy Committee of the Lithuanian Confederation of Industrialists (LCI) consulted Government on the planned construction of the cogeneration plant and expressed its doubts on the Kaunas cogeneration project.

“Many doubts were raised regarding the Kaunas project which, without enough waste, the optimal capacity of the plant to be built would not be reached. What’s more, the burden on consumers would increase. <…> In this case the company management model chosen is completely incomprehensible in which at least 51% of the shares are managed by a state enterprise” the letter stated.

It has also been proposed to “critically evaluate” the possible amounts of combustible waste in the Kaunas project because if incorrect future amounts of waste are incorrectly evaluated, suboptimal operation can become a burden to the Kaunas region and its inhabitants”.

“After analysing the feasibility study on the installation of the cogeneration plants in question, we find that the opportunity to utilise unsuitable waste for sorting and processing by engaging enterprises with similar operations, has not been examined,” the letter stated.

“After analyzing the feasibility study on the installation of the cogeneration plants in question, we find that the opportunity to utilize waste that is not suitable for sorting and processing through the use of similarly active enterprises has not been investigated,” the letter reads.

In an interview with DELFI the LCI confirmed that the industrialists support the Vilnius cogeneration plant but not the Kaunas one namely because of the reasons stated in the letter.

“The Kaunas cogeneration plant wouldn’t be interested in the incineration of the industrial waste of industrial enterprises because, firstly, recycling of waste is the first priority and burning is the last.

Secondly, the likely figures for incinerated waste could fall short and so there’s a risk that the potential alternative waste management methods will be limited, forcing enterprises to burn waste at one enterprise at prices that it dictates.

Thirdly, the possibility for sorting and processing unsuitable waste for utilisation in ways other than burning, for example preparation of high SRF (solid recovered fuel – DELFI) high caloric content and selling it, hasn’t been investigated” said the LCI explaining its position.

In a letter to the government, the LCI expressed its concern that in the future there will be no restrictions on alternative waste management options forcing enterprises to burn waste at one enterprise only at prices that it dictates and expressed as much in a letter to the Government.

In the letter, it is emphasised that when waste incineration costs rise accordingly, industrial enterprises will be even more motivated to reduce the amount of waste generated. Therefore, the decline in waste in the industry should be evaluated in advance when planning waste incineration plants.

The Prime Minister will not back down

Last week it was reported that Prime Minister Skvernelis agreed with Lietuvos Energija to burn 50% less municipal waste than planned, i.e. up to 80 thousand tons by transferring a portion of it to the Kaunas cogeneration plant.

It is said that this will allow for a reduction of industrial waste burned at the Kaunas power station meaning that more municipal gas would be burned there while at the Vilnius power station two biofuel boilers would be utilised more without utilising full waste boiler capacity.

ELTA reported that after a meeting on Wednesday with Lietuvos Energija’s managing director Darius Maikštėnas, Prime Minister Skvernelis, Energy Minister Žygimantas Vaičiūnas and Minister of the Environment Kęstutis Navickas, it was announced that there would be additional investment in the Vilnius power station and additional environmentally-friendly technology installed which will reduce nitrogen oxide emissions by two and a half times more.

Only the municipal waste left over after priority waste sorting and recycling from the Vilnius and Utena regions will be used at the Vilnius power station. Some of the remaining waste will be sent to Kaunas. It is stated that the total amount of waste burned at Kaunas will not change, as commitments do not allow for that.

However, a decision like this raises questions: by how much will waste burning go up when transporting it to Kaunas and approximately, how much waste boiler capacity will be utilised at the Vilnius power station in which the EU has invested?

Furthermore, due to the applicable “gate fee” the power station will receive funds for the waste and the biofuels will have to be purchased by the power station.

It is however difficult to understand what will happen with the waste and the burning thereof and Mr. Skvernelis told DELFI that in fact nothing concrete was agreed upon at the meeting.

“There was no agreement because there were no topics to be agreed upon. Issues by the head of Lietuvos Energija were discussed, first around safety or what can be done to ensure the safety of everyone. Here the head presented possible alternatives.

We also discussed what’d happen if we met the indicators after sorting and recycling and if after four or five years the rubbish is depleted. The answer to that was very important,” he said.

He confirmed however, that at the meeting, the possibility of reducing the amount of combustible waste at the Vilnius power station or not burning it at all was discussed and it immediately became apparent that not burning the waste at all at the Vilnius power station would be impossible because the facility would have to be maintained.

The prime minister also confirmed that he is still of the firm opinion regarding the cogeneration plants:

“We and the people of Vilnius are raising very important issues regarding health and safety. Economic feasibility is another issue”.

Since there is information in which the amount of waste is being questioned, one wants to address all of these issues because the government is responsible for implementing these projects and the resolution has yet to be been revoked. We are therefore proceeding with it however, we do see that the project would really be useful to the country and the people.

The decisions made by the previous government raise serious doubts when circumstances reveal how these projects and, to put it mildly, all other strange situations are forging ahead. I think it is obvious that these projects were given a green light and it was simply decided to remove any obstacles from their path.

I therefore do not have any real guarantee that there’ll be assurances around the safety issue,” said Mr. Skvernelis.

When DELFI spoke to Lietuvos Energija’s head of Corporate Communications project manager Janina Sabaitė Melnikovienė, she confirmed that the amount of combustible waste at the Vilnius power station would in all likelihood not be reduced however that possibility was discussed.

“Lietuvos Energija has stated its position that both the construction of both the Kaunas and Vilnius cogeneration projects will continue as planned.

There are however technological and organisational options if need be in the event that there isn’t enough waste and which will operate at half of the estimated normal power fulfilling the strictest of environment requirements. This would mean that instead of the project’s 160 thousand tons of waste, 80 thousand tons could annually be returned to the power station.

That is less than half of what remains today after sorting combustible waste from the Vilnius region only and which has been disposed of in landfill. There have been no decisions made regarding the transport of waste or the modification of specific regulatory or power station business models.

“From the point of view of Lietuvos Energija a balanced government regulation must be found, one that ensures that the lowest amounts of combustible waste go toward landfill, and costs of heating waste utilisation, at the same time maintaining the financial sustainability of the projects” she said.

Issues over the prime minister’s house near the power station

Yet the fact that a possible reduction in the amount of combustible waste at the Vilnius power station was discussed at the meeting raised suspicion among some politicians.

For example, the chairman of the Homeland Union – Lithuanian Christian Democrats Gabrielius Landsbergis in his Facebook page made the suggestion that Mr. Skvernelis wants a two-fold reduction in the amount of waste at the Vilnius power station because the prime minister’s house is nearby.

“Today it’s turned out that the prime minister’s house us right near (2 km away from) the Lietuvos Energija rubbish-burning power station in Vilnius. And this situation has started to get interesting. The prime minister agreed and asked that rubbish not be burned in Vilnius, ostensibly for fresh air.

Personally, I sympathise with the prime minister; it wouldn’t be fun for anyone to live near a place where rubbish is burned. It is understandable even for someone who has been elected and in a single-mandate fight against rubbish burning. The person elected in Lazdyniai is fighting for fresh air for the people who live there. He may be worried, for example, that the weather in Žvėrynas will supposedly (!!!) be worse.

But this situation is a conflict of interests. By using his duties, the prime minister has made sure that his backyard does not lose any market value because of rubbish being burned at a neighbouring plant. He is not even bothering to hide it – yes, I do not want rubbish to be burned in Lazdyniai. So what about in Kaunas? What’s more, transport to Kaunas entails costs. We the people living in Vilnius will pay for everything because garbage rubbish doesn’t get to Kaunas by itself” he wrote.

DELFI asked the prime minister about his house and he laughed saying “Anyone who knows physics understand that there’ll be emission over a large part of Vilnius. And saying that my house is nearby… what does nearby mean? For some nearby is a few kilometres for others several”.

When asked what the distance is from the future Vilnius power plant to his house is, Mr Skvernelis said that he doesn’t know exactly.

“Let Mr. Landsbergis measure it, I really haven’t. My house has nothing to do with these projects. Several hundred thousand inhabitants of Vilnius live close by and for them it is a huge problem. I can choose where to live, they can’t,” he said.

The Prime Minister also mentioned that, in essence he did not refute what was said at the time in May in the Seimas that the Vilnius and Kaunas cogeneration projects are “corrupt” and that they can be “stopped”.

“All versions are possible but again I realise that stopping the projects would have its consequences because processes that that the previous government “put in place” have gone quite far” he told DELFI.