Ljubljana - The energy sector is coming under increasing pressure due to the accelerating transition towards carbon-free society, coupled in recent months with high prices, which may invite government action. A coal phase-out is imminent as Slovenia inches closer to building the second unit of Krško nuclear power plant.

In 2033 at the latest, Slovenia is expected to stop burning coal for electricity production in line with the strategy for phasing out coal, which the Infrastructure Ministry says is ready to be adopted by the government.

The strategy will also be the basis for a bill on the closure of the Velenje coal mine and economic restructuring of the region, and local plans for the Savinja-Šalek and Zasavje regions, which will focus on measures financed from the Just Transition Fund.

"It is important for the energy location to remain alive, while the plans for new investment must be presented by the owner of the energy location, HSE," the ministry told the STA.

It is not clear yet how much money will be available for the restructuring. A large part of the funds will come from the national budget.

"If Slovenia opts for an early year, it can expect some extra money, EUR 235 million to be exact, from the Just Transition Fund. But if it closes the Velenje coal mine in 20 years, this will not be seen as coal phaseout and so there will be no money for this purpose," said Ana Vučina Vršnak, executive director of the Slovenian Energy Chamber.

With the closure of the last operating coal mine and the Šoštanj Thermal Power Plant (TEŠ), dependence on imports will significantly increase unless the state provides for other alternative sources. "This is why we believe the decision on phasing out coal must be accompanied by a decision to build new low-carbon electricity production units in Slovenia," she said.

One such option would be to build a second unit of the nuclear power station in Krško (NEK 2), the project that is in the initial phase. After a decision on the investment is to be adopted, presumably by 2027, contracts with suppliers and construction are to follow in the next five years.

"This is the timeline envisaged in the pre-investment plans for NEK 2 that is based on the experience of many new successfully constructed nuclear power stations around the world. NEK 2 is expected to start operation in 2033," the ministry said.

The Energy Chamber supports all activities required for the decision on investment in NEK 2, one of the priority investments of the energy sector, arguing that Slovenia should produce as much electricity as possible to preclude being overly dependent on imports.

"Dependence on energy imports means less security, more vulnerability, and unpredictable prices," it stressed.

Phasing out coal and fossil fuel is a key aspect of the green breakthrough next to a substantial increase in the share of renewables.

But this is where the problem lies, according to Vučina Vršnak, as Slovenia has not even met the target of having 25% of renewables by 2020 although it has been making progress since joining the EU.

Last year, 24.14% of gross end energy use came from renewables, while the country reached an agreement on the statistical transfer of the remaining part of renewable energy with the Czech Republic to meet the 25% goal for drawing EU funds. According to the ministry, this will cost the country almost EUR 5 million.

The most important renewable in Slovenia is wood biomass (accounting for over 8%), followed by hydro energy (almost 6%). In recent years, the solar and biogas markets have been very dynamic as well, and there is also potential in wind energy and geothermal energy. However, each of them contributes around 1% to total energy output or less at present.

The ministry plans to promote development of 2nd and 3rd generation biofuels from non-food materials such as leftovers in the processing of wood biomass, waste or hay. "Because of great access to wooden biomass, biofuels of the second or third generation are a major development opportunity for Slovenia."

The Energy Chamber believes the state should strive to diversify renewable energy sources as much as possible. "We must use all sources available in a sustainable way. We are not only talking about energy efficiency but also about efficient use of resources," said Vučina Vršnak, adding that this was the approach all EU countries were taking.

"We see ourselves as a green country, but in reality we have been extremely slow in raising the share of renewables, and the spatial planning procedures take too long... We consider ourselves to be green, yet many groups oppose wind, hydro energy, thermal processing of waste, etc." she said.

The strategic basis for a green breakthrough is enshrined in the national energy and climate plan and the climate strategy until 2050. The former envisages over EUR 28 billion investment by 2030, which is almost EUR 5 billion more than in the existing scenario and EUR 200-250 million in annual incentives, the ministry said.

The ministry believes the biggest challenge will be to attain the goals of the national energy and climate plan for renewables that have already been adopted, and to prepare for significantly more ambitious goals by 2030.

Howevere, while EU countries, including Slovenia, strive to step up their efforts for green transition, the prices of energy sources on wholesale markets soar, which countries are trying to mitigate with various measures.

Slovenia introduced a temporary regulation of margins for distributors of heating oil in November, which will be in force for three months. The most vulnerable groups will receive aid, while energy companies are to be partly reimbursed their greenhouse gas emissions costs.

The chamber believes that the price hikes should definitely be addressed, as it is not clear yet how long they will persist. "Analysts see no major changes for at least a few more months, as we are in the middle of heating season, when demand peaks. We are entering 2022 in challenging times for everyone. We hope the winter will not be too cold and too long," Vučina Vršnak said.