EU's biggest polluter invests to cut emissions

BELCHATOW, Poland (Reuters) - The European Union's biggest polluter, a lignite-fired power plant in Belchatow, will need to buy up to 20 million tonnes of CO2 emission permits by 2013, its chief Jacek Kaczorowski told Reuters on Friday.

Belchatow, located in central Poland, released the equivalent of nearly 31 million tonnes of carbon dioxide into the atmosphere last year, topping by 4 million tonnes its EU-set ceiling as part of the bloc's attempts to curb global warming.

Despite the global economic crisis, which has significantly curbed demand for power and led to fewer polluting emissions, Belchatow will still see a big deficit in carbon permits it needs in the next few years.

"Our emissions in coming years of the 2008-2012 accounting period will stand at similar levels. So at the end of the whole period, we will be short some 14-20 million tonnes of CO2 permits," Belchatow's recently-named head, Kaczorowski said.

"And this is what we are interested in buying."

The bloc's CO2 permits trade at around 17 euros per metric ton and Kaczorowski said in 2009 the plant would lack only a handful fewer permits than a year ago.

"We have already bought 15,000 certificates for CO2 emissions last year. We have created a reserve for the deficit of 2008 permits (...) and there is no need to buy needed permits now as its all accounted in the five-year period," he said.

But the emissions of the EU's biggest coal-fired plant -- a 4,450 MW facility employing 10,280 people -- will rise by 5-6 million tonnes annually in 2013 when a new, 858 megawatt block becomes fully operational.

By 2013 all installations under the EU's emissions trading system will also have to buy all of its pollution permits on the free market and some analysts say their price will grow significantly. For now, some permits are granted for free.

Nowadays, Belchatow consumes some 32-35 million tonnes of highly polluting lignite brown coal every year and will be using an additional 5-6 million tonnes with the new block.

To avoid huge costs in the future, Belchatow is working on Poland's first carbon capture and storage (CCS) installation and plans more investments to limit greenhouse gas emissions.

CCS

The installation which may get co-financing from Brussels as a pilot-project, would catch one-third of the emissions generated by the plant's newest block.

The European Commission has earmarked 180 million euros for the CCS, but still has two months before a final decision.

"But even if we don't get the EU money, we will have to go on with the project because of the need to cut emissions," Kaczorowski said. "We have to go on developing more CCS to remain competitive."

"Even with the today's CO2 prices it's beneficial. When the price grows, it becomes even more profitable."

Belchatow, owned by Poland's leading utility PGE, is set to have an IPO later this year and has signed preliminary deals with France's Alstom and Finland's Fortum to cooperate on the CCS.

RESTRUCTURING, NUCLEAR

Belchatow, which is the pillar of PGE's conventional energy division, is now responsible for restructuring its power-generation operations and is looking to nuclear energy.

It has to integrate PGE's mines, power plants and heat and power plants to cut employment and streamline decision-making.

It also has to seek permission to extend its lignite deposits as it will be excavating around 1 billion tonnes of lignite left in a nearby mine until 2032-2040.

"We are also working intensively to get concession for a new excavation site in Zloczew, which has 450 million tonnes. (...) But the power plant was designed to reach its retirement age when there is no more coal available nearby," Kaczorowski said.

"It's also possible to start developing nuclear units, while the conventional plant is still working."

(Editing by Michael Kahn and Keiron Henderson)