How come that a destructive project like that is being approved within a protected area? How can it be that a project within a protected area even receives funding? How is it possible that the funding comes from a European public development bank, the EBRD? Read how that happens in this Bankwatch webstory
Dabrova Dolina, Croatia
Why even small hydropower plants shouldn’t be built in protected areas
by Pippa Gallop, Bankwatch
Webstory published on CEE Bankwatch Network
In 2015, Privredna Banka Zagreb (PBZ), part of Intesa Sanpaolo, extended EUR 1 million to a hydropower plant as part of an EBRD-financed sustainable energy credit line. What at first appeared to be a harmless watermill conversion soon turned into destruction of a priceless habitat.
Meet the river Mrežnica.
It is a remarkable river, teeming with life, from dice snakes to stone crayfish to otters. If you stay still in the water for more than a few seconds, the fish will come and investigate your feet. In its upper reaches it feels distinctly tropical, with a clear blue-green colour and lush vegetation hanging over the water. Before I came to Croatia, I had no idea that rivers like this existed in Europe.
Adding to the Mrežnica’s beauty and biodiversity are more than ninety tufa barriers along its course. Tufa barriers are made by calcium carbonate being continuously deposited in the river. They are mostly shaped by mosses and other microphytes and macrophytes, insect larvae and other invertebrates. This delicate process results in fragile deposits that can easily be destroyed but represent a crucial habitat. Tufa barriers are therefore one of the two habitat types for which the whole river Mrežnica is protected as part of the EU’s Natura 2000 network.
Alongside the waterfall there used to be three watermills. One is now being used as a weekend house, while the other two are in ruins. A few years ago, a company called Kelemen Energija decided to rebuild one and turn it into a small hydropower plant called Dabrova Dolina 1. Although it was in a protected area, the plan didn’t sound particularly problematic considering it was supposed to use the reconstructed millstream and mill building.
Since there was no plan to dam the river, the main issue was to ensure enough water stayed in the river to keep the tufa habitat alive and to avoid damaging the existing tufa barriers.
A biodiversity impact assessment was carried out in 2013 and as a result, the project was approved, but with 23 measures stipulated to reduce harmful impacts on the Natura 2000 network during construction.
For example, construction vehicles and workers were not allowed to come into direct contact with the tufa barriers, the mill was to be reconstructed following a set of conditions to be laid out by the Conservation Department in Karlovac, and no deepening of the riverbed for the water intake was allowed. Only the water which ran over the large waterfall in the direction of the channel of the former mill was to be used. In addition, a sensor was to be installed on the left cascade that would shut off water flow to the plant when the flow went below 1.5 m3/second.
In February 2014, things started to go wrong. An amended biodiversity approval was issued, as the project design had changed, but no new biodiversity assessment had been carried out. Generation had increased from 1.32 GWh to 1.8 GWh annually, the flow diverted to the hydropower plant had increased from 4.5 m3/s to 5 m3/s, and the planned water intake had been moved several metres upstream. The depth of the intake at its entrance was no longer mentioned. It was, however, still clearly written that power generation would be stopped in times of low water and that the old mill would be reconstructed for the powerhouse.
In 2015, Kelemen Energija received a loan of EUR 1 million from Privredna Banka Zagreb as part of an EBRD-financed sustainable energy credit line. No one knew this at the time as the international financial institutions generally do not disclose which projects receive loans through commercial bank intermediaries. To its credit, the EBRD has recently started to disclose some information about projects financed through its Western Balkans Sustainable Energy Financing Facility, but this has come too late for concerns about Dabrova Dolina to be addressed on time.
It is one of at least 61 hydropower investments by the European Bank for Reconstruction and Development (EBRD) in southeast Europe since 2005 revealed in a new report by Bankwatch.
In 2016 construction began, and so did new problems. The old mill was not renovated at all, but instead a completely new building was built. At the same time, the old mill remained unused, and the new channel took much more water than the old mill channel did.
As the aerial picture below shows, the concessionaire also carried out works in the riverbed in order to construct this new, larger intake channel. A large hole was also dug for the turbines, instead of reconstructing the old mill building.
Oddly, the concessionaire did in fact construct another smaller water channel as well, which more closely resembles a millstream. However this does not serve any purpose in relation to the hydropower plant, but merely serves to divert even more water away from the tufa barrier. The creation of its intake also clearly damaged the tufa - as can be seen below.
In May 2016 local environmental group Eko Pan asked the Croatian nature protection inspectorate to investigate whether these developments violated the conditions set out in the biodiversity approval.
Since then, however, the situation has become more and more Kafkaesque. Local and national authorities have carried out several inspections but are acting as if even the most blatant breaches never happened.
The first response from the national nature protection inspectorate to Eko Pan in May 2016 said only that the county-level inspectorate had carried out an inspection and that it was obliged to inform the public about the results.
In July 2016 Eko Pan wrote again to the national inspectorate as no answer had been received on the substance of its previous letter. Eko Pan also provided an update on several issues, including the fact that the tufa barriers had clearly been damaged by the works and that the mill had not been renovated at all. The national inspectorate responded that it had forwarded the letter to the county-level inspectorate.
Later in 2016, on 22 November, the national nature protection inspectorate supervised the county inspectorate’s work during a site visit. The minutes from its visit state include, among other things, that the sensor for monitoring water flow would be installed later.
The minutes of the county inspectorate’s site visit, meanwhile, say that the visit was carried out on 23 November, not 22 November. This might be a typo, but they also say - in contrast to the national inspectorate’s report - that the sensor for monitoring water level has been installed already.
In addition, neither the county nor the national inspectorate comments on the construction of a new building, the new and much deeper-than-originally-planned water intake, or the damage done to the tufa barriers.
In March 2017 the Karlovac County Administrative Department for Spatial Planning, Construction and Environmental Protection carried out a technical inspection. In its minutes from the visit, it finds two administrative deficiencies but does not comment on the obvious changes in the project design compared to what has been permitted.
Fast forward to July 2017: the plant had started operating, and Croatia was suffering from a drought. The Šušnjar waterfall was dry, as was the vegetation on the tufa barrier. Yet the water intake for the hydropower plant still appeared to be taking in water.
WWF Adria notified the national nature protection inspectorate. It asked whether a sensor has indeed been installed that would automatically stop water flowing to the turbines when the water level is low, and for the inspectorate to carry out an urgent site visit.
In August the inspectorate responded to WWF with a history of the inspections already undertaken. It claimed that the ecologically-acceptable flow rate of 1.5 m3/second prescribed by the biodiversity approval was being respected. It didn’t carry out any new inspection.
From the inspectorate’s answer it was finally clear that the sensor for measuring the water flow and shutting off generation if it fell below 1.5 m3/s was in the wrong place. It did not measure the flow on the left part of the waterfall, as required by the biodiversity approval, but was set according to the flow 2 kilometres upstream at the Južbašići gauging station. This means that the sensor measured a flow of 1.5 m3/s for the whole river Mrežnica, not just for the left part of this cascade. No wonder the water level never fell below the level that would shut the intake gates.
Only in December 2017 did any of the Croatian institutions finally recognise the problem. However this has still led to no action.
The Croatian Ombudsman approached the Agency for Environment and Nature based on a request from a member of the public and the agency undertook a field visit. It confirmed that the sensor for shutting off generation at low water was in the completely wrong place and needed to be moved to the left side of the waterfall as originally stipulated.
It also confirmed that there were now two water intakes on the left side of the waterfall – one for the hydropower plant and the reconstructed millstream, that now served no real purpose – and that only one was mentioned in the project documentation. Therefore more water was being directed away from the waterfall than was approved. The agency concluded that the entrance to the mill channel should be returned to its previous state so that in periods of low water, water does not enter the channel but flows over the waterfall.
Frustratingly, this does not appear to have resulted in any further action being taken by the county or national level inspectorates.
Given the real possibility that the damage caused in the summer of 2017 will be repeated this year, we believe it is time for the EBRD and PBZ to push Croatian authorities and Kelemen Energija to act.
Lessons also need to be learned for the future. Dabrova Dolina 1 is a prime example of why hydropower development shouldn’t be allowed in protected or other environmentally-sensitive areas, especially in countries with poor environmental governance. Even a project which appears relatively low-impact on paper can turn out much worse in reality. If there is no credible threat from authorities to enforce their decisions, then there is no incentive for hydropower investors to comply with the permitting conditions.
This is also an example of why projects financed through financial intermediaries need to be disclosed to the public in advance of their approval. Such projects may be small but they can still be harmful. Had we or anyone else known that the EBRD was considering financing for this project before it was approved, we could have approached the bank with concerns about the changes in the project’s design. Both nature destruction and a tarnished image for the EBRD and PBZ could have been avoided.
Unfortunately this is not the only such case in Croatia. The Ilovac dam on the river Kupa, was also financed by a European public bank through an intermediary (the EIB via Zagrebačka Banka (Unicredit)). It is also situated in a Natura 2000 area. Although the deficiencies started at a much earlier stage with Ilovac, with insufficient field research undertaken for the environmental impact assessment, the lessons learned are broadly similar: hydropower plants are not compatible with protected areas and environmental assessment and disclosure of information about projects to be financed through intermediaries needs to be improved.
As the EBRD and EIB both undergo revisions to their environmental, social and public information policies this year, both of these issues need to be addressed systematically before even more rivers are damaged.
This case and many others are highlighted in Bankwatch’s new report on financing for hydropower projects in southeast Europe: DOWNLOAD