Renewable Energy

An Expert's View about Energy Efficiency in Bulgaria

Last updated: 30 Jun 2011

After several years of high growth averaging 6%, the Bulgarian economy is expected to expand only by 2.6 per cent in 2011, following a steep decline of 4,9 per cent in 2009 when it was hit by the global financial crisis. The unemployment rate climbed to 9.78% After a substantial contraction for two years, Bulgaria's construction sector slightly started growing again in 2011. A moderate energy and construction market recovery in Bulgaria is expected in 2011 with the private sector driving this recovery, amid a wider economic upturn and fiscal constraints on the public sector's ability to fund infrastructure projects.

The recent, pre-crash high growth rates were aided by political stability in Bulgaria and the countries EU accession in 2007, which made significant amounts of money for development available to Bulgaria and facilitated commerce with the European Union and the United States. Bulgaria is generally very pro-American, and a number of US companies have been extremely successful operating and exporting to Bulgaria. The Banks Investments Money Foundation recognized the United States as the country with the largest investments in Bulgaria in 2010.

According to data from the InvestBulgaria Agency, 218 American companies invested in Bulgaria last year, with the highest level of FDI in the manufacturing and energy sector (84 M EUR), followed by trade (23 M EUR). Bulgaria has a number of desirable features for American companies, including the lowest tax rates in the region (10% for both personal and corporate), relatively low wages, and EU membership. Its geographic location in the Balkans between Turkey and Europe gives it significant commercial importance and makes it a potential launching point for sales in Europe, Russia, and the Middle East. 

But while Bulgaria is attractive for investors in many ways, it also presents several significant challenges. Despite significant growth, Bulgaria is one of the European Union’s poorer countries and consequently disposable consumer income is limited.

Bulgaria pursues consistent national policy, focused on the promotion of the production of energy from renewable sources and biofuels, as well as on the promotion of their consumption. The long-term application of this policy is guaranteed by the national legislation in this area, which transposes and reflects the requirements, specified in the documents of the European Parliament and the Council, regarding the production and consumption of energy from renewable sources. Bulgaria’s national policy in the area of production of energy from renewable sources is focused on the following main directions:

_ Promotion of the development and use of technologies for the production and consumption of energy, produced from renewable energy sources and alternative energy sources;

_ Promotion of the development and use of technologies for the production and consumption of biofuels and another renewable fuels in transport;

_ Diversification of the energy supplies;

_ Protection of the environment;

_ Establishing conditions for achieving sustained development at local and regional level.

For their practical realization, a complex of mechanisms has been established, for stimulation of the production of energy from renewable sources and the production of biofuels. The measures, forming the respective mechanisms for stimulation, are subject to annual review and updating, and they are always brought up as subject of public discussions.

In April 2011, the Bulgarian Parliament has adopted a controversial draft of the longanticipated Renewable Energy Act (RE Act) that seems to be designed to reign in the staggering growth of solar and wind energy projects.

Until now, the state was obliged to purchase electricity produced from renewable energy generators at high, fixed prices.

According to the new law, long-termed fixed prices of electricity from renewable energy will be enjoyed only by those investors who manage to get a slice of the annual quotas for installing new production capacities using wind, solar, biomass, and geothermal energy sources. Any investor, left out of the quotas, will have to forgo getting preferential prices for their renewable energy. Every kW of renewable energy that does not get into the recognized quotas will be purchased on prices determined on the basis of the investors' production costs.

The installation quotas for renewable energy sources themselves will be determined by the State Commission for Energy and Water Regulation (DKEVR) each year by the end of June.

According to the new RE Act, electricity produced from biomass, solar and geothermal energy will be bought out by the state with 20-year contracts, while wind energy will be subject to 12-year contracts. Energy from hydropower plants with capacities below 10 MW will be bought through 15 year contracts.

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Posted: 30 June 2011, last updated 30 June 2011

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