Bosnia, Montenegro… who is next to get rid of small hydro and big problems it creates?

Bosnia, Montenegro… who is next to get rid of small hydro and big problems it creates?

According to the International Hydropower Association, starting in early 2021, the Swiss Government-funded three-year initiative will see IHA Sustainability, the organisation’s non-profit subdivision, work with project developers, alongside regulators, investors and civil society organisations from Albania, Bosnia and Herzegovina, Kosovo, North Macedonia, Montenegro and Serbia. They will try to reestablish good name for “sustainable hydropower”, which is probably a hopeless business given the history of hydropower development and its current reputation in the Balkans. Parliament of Bosnia and Herzegovina blocked all new small hydro project applications last year, now the new government of Montenegro follows the suit.

Protest of environmental activist in Bare Kraljske, Montenegro. Photo: Facebook/Sacuvajmo rijeke Crne Gore

Small hydropower plants boomed under Montenegro’s once-ruling Democratic Party of Socialists. Now the new government is promising a halt, responding to the complaints of local residents and environmental activists.

Steps by Montenegro’s new government to confront the impact of small hydropower plants have been welcomed by environmentalists, but the opposition says they will come at a cost to state coffers.

Environmentalists say the proliferation of small hydropower plants under the Democratic Party of Socialists, DPS, which ruled for three decades until December, has done huge harm to Montenegrin rivers.

The DPS, which is now in opposition, cited the need to increase the proportion of energy consumption from renewable resources, in line with European Union targets,  but the new government is promising a ban on such power plants.

On February 7, the Montenegrin government said they terminated concession contracts for seven hydro plants in the northern part of the country, stressing that five of the investors already filed lawsuits against the state. The Government said they will have to pay compensation to investors, accusing former authorities of making spontaneous hydropower construction planning.

“The spontaneous construction of small power plants, so as social and environmental consequences will have a great negative impact on our entire society. This Government will not grant new concessions for the construction of small power plants”, Ministry for Capital Investments said to Television Vijesti.

The government has already terminated four contracts for the construction of small hydropower plants on the Rastak, Rezevicka and Ljeviska rivers in northern Montenegro, accusing the investors of failing to meet the terms of the deals. It has proposed to cancel another three, review all concession agreements and introduce a ban on such plants in the future.

“So far, only the privileged have benefited from the construction of small hydropower plants – often through corruption and nepotism, by obtaining concessions for the construction of these facilities on our rivers, one of the greatest natural resources of Montenegro,” Prime Minister Zdravko Krivokapic said on December 4.

The opposition says the government faces being taken to court by disgruntled private investors, at a cost to the taxpayer.

“When they talk about the termination of contracts, the government should be careful because the contracts have given some rights to investors and it is certain that the compensation claims would be high and ultimately fall on the citizens,” said Rasko Konjevic, an MP of the opposition Social Democratic Party.

However, he said, “In cases where the contracts were not respected and the termination conditions were not fulfilled, the government has simple options.”

The DPS set a target for 33 per cent of energy consumption to come from renewable sources, surpassing the EU’s own target for member states of 20 per cent by 2020. Montenegro is in negotiations to join the bloc.

But there is widespread unease over the growing reliance on small hydropower plants, their compliance with EU standards and the ultimate beneficiaries of state subsidies for renewable energy production.

In 2014, trying to get away from coal-fired production, the then DPS government introduced a system of subsidies for renewable energy via electricity bills paid by consumers, triggering a boom in privately-run hydropower plants.

Of 85 small hydropower plants for which authorities have signed concession contracts, 42 are privately owned, of which 24 are already in use and 18 are under construction.

Civic activists say that most of the small hydropower plants in Montenegro do not meet EU standards in terms of planning and construction, a claim supported in November 2018 by the European Parliament, which urged Montenegrin authorities to better protect the country’s natural resources.

Activists and some media outlets say many of the investors in such plants are linked to the DPS and its leader, President Milo Djukanovic, a claim that the party has dismissed.

In 2018 alone, the state paid out 7.3 million euros in subsidies for 15 small hydropower plants that provided 2.6 per cent of the electricity that year.

Liljana Brkic, a member of the co-ruling URA movement, said the state saw little benefit from such power plants but the damage to the environment was considerable.

“They caused damage to locals and their villages as well as damage suffered by all citizens of Montenegro because they paid subsidies to investors through electricity bills without feeling any benefit from investing in renewable energy sources,” Brkic to BIRN.

“There is no public interest in the building of small power plants and only investors benefit from their construction”, she added.

There have been a number of protests in the country over hydropower plants in recent years, most recently on the Bukovica river in the central Savnik municipality where local residents are manning protests in shifts and blocking excavators.

Bowing to pressure from environmental groups, in May 2019 the then DPS government decided to stop issuing permits for the construction of small hydropower plants and reconsider those awarded so far.

Under Montenegrin law, the government can review concession agreements and privatizations and terminate contracts if the investor is found to have not met its obligations or the deals were sealed based on inaccurate data. The state officials who signed such contracts can also face criminal charges.

But Cabarkapa of WWF Adria said the legal revision of concession documentation could allow for the termination of most agreements.

“After the revision, the government will be able to make decisions that are in the public interest,” he said.

“Through an independent WWF Adria legal analysis of the Concession Agreements we identified over 20 illegalities,” Cabarkapa told BIRN.

“It casts a big shadow over the overall legal validity of small power plant projects and agreed arrangements, so the government has enough space to terminate those contracts without lawsuits.”