Bulgaria - Renewable Energy

Summary

After several years of high growth averaging 6%, the Bulgarian economy is expected to expand only by 2.6% in 2011, following a steep decline of 4.9% 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. 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 Invest Bulgaria Agency, 218 American companies invested in Bulgaria last year, with the highest level of FDI in the manufacturing and energy sector (EUR84 million), followed by trade (EUR23 million). Bulgaria has a number of desirable features for suppliers, 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.

National Policy in Renewable Energy Sources (RES)

Bulgaria pursues consistent national policy, focused on the promotion of the production of energy from renewable sources and bio fuels, 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 bio fuels and other 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 bio fuels. 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.

Applicable Legislation

In April 2011, the Bulgarian Parliament has adopted a controversial draft of the long anticipated 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.

Renewable energy facilities such as roof panels and micro plants for the personal use of plants will not be counted in within the annual quotas for new installations.

There are provisions of the law that require a connection fee of BGN 50,000 per planned megawatt at signing a preliminary contract, which should be paid by the investor. These are a harshly restrictive measures designed to limit the number of new projects because of the inadequacy of the outdated power grid to accommodate all of them.

The new law further put off the stricter requirements for the use of bio fuel until January 1, 2012. Thus, after that date, the diesel fuel sold in Bulgaria will have to contain 5% bio diesel, and gas fuel – 5% bio ethanol; and as of June 1, 2012, the percentage for both fuels will be increased to 6%.

Technical Potential of the RES in Bulgaria

The overall technical potential for generating energy from renewable sources in Bulgaria amounts to approximately 4500 ktoe per annum. Its allocation to the various types of sources is uneven, as the highest share is that of the hydro-energy (~31%) and biomass (~36%). The geographic situation of Bulgaria predefines the relatively minimum share of wind energy (~7.5%) and the energy of tides and sea waves. At the same time the country has significant forest resources and well developed agriculture – sources of both hard biomass and raw materials for the production of biogas and liquid fuels. As of 2008 in Bulgaria the most complete use is that of hydro-energy, through hydro power plants and, partially, of the hard biomass, used mainly as fuels for heating of household and public buildings. The production of electric power from wind, geothermal and solar sources is developing swiftly, as well as the use of solar energy for covering the household needs of hot water. Bulgaria has simplified the licensing procedures but the legal framework doesn’t provide for non-discriminatory access to the power grid for independent renewable energy producers.

Shares of Renewable Sources in terms of their technical potential in Bulgaria:

Current Status and Forecast

As an EU-Member State, Bulgaria has committed to reach certain levels of energy generated, including 16% share of RES and 10% share of bio fuels in the gross electricity consumption by 2020. The achievement of these goals is strongly diametrical, as Bulgaria managed to attain currently a level of 14-15% of RES within final energy consumption. GOB declared that Bulgaria only needs some 2 000 MW of renewable energy capacities to meet the 16% green energy target.

It is a satisfactory achievement and it is quite promising that the assigned goal will be met soon. However, at the time being, the share of bio fuels stands for a percentage less than 1% even out of the final fuel consumption. It is extremely worrisome situation, questioning the possibility of the country to fulfil the agreed commitments. The reasons for the current situation are found in a dozen of unsolved problems attributed to taxation of the bio fuels, technical compatibility of the systems for distribution, administrative weaknesses and other miscellaneous issues.

The increase of energy generation from RES, as well as the development of new RES projects in Bulgaria, at different stages of their implementation, indicate that the production of energy from renewable sources in Bulgaria will increase to 1955 ktoe per annum as of 2020, compared to 1097 ktoe in 2005. Currently there is 2640 MW installed capacity in hydro and wind in Bulgaria. At the end of 2010 SEWRC has issued licenses for construction of 2017 MW wind parks and farms; 230 MW photovoltaic complexes, 130 MW small size hydro power plants; and 15 MW from biomass. Last year total capacity of the foreseen RES projects for implementation exceeded 2,262 MW. In 2010, the electricity produced out of 2,655 MW installed capacity was 3, 374,9 GW/h.

Some optimistic interest is also demonstrated in the establishment of small HPP, as their power supply is rising up as well as currently about 10 new HPP sites are under construction.

Expected production of energy from renewable sources in Bulgaria for the period 2010- 2020, by sectors (ktoe):

Green Buildings in Bulgaria

Green building in Bulgaria has been largely nonexistent until very recently, but as the industry begins to expand it will likely offer strong opportunities for companies and investors. This small size of the industry is evidenced by the fact that the second building in Bulgaria with LEED certification was built earlier this year (February 2010), the Sofia Airport Centre Business Park. The U.S. Embassy in Sofia, finished several years before, was the first LEED building.

There are signs that Bulgaria’s green building industry will grow in the near future. In March 2010, a Building Green conference was held in Sofia. Now that Bulgaria is an EU member it is committed to the organizations environmental goals which will motivate the growth of green building and encourage government support. In the related area of sustainable energy, Bulgaria has already made significant progress as is on track to meet or even exceed its EU mandated goals. Even compared to other areas of the EU, green building in Bulgaria is especially attractive because Bulgaria has the highest energy intensity (energy consumption compared with GDP) of any member country, estimated to be 40-60% above the average. Energy inefficient buildings are largely responsible for this, and so far very few measures have been taken to increase efficiency. With the help of international organizations, some public buildings have been renovated, but there remains significantly more room for improvement. Also, some of the EU funds given to Bulgaria under the Operation Program Regional Development are available for green building investment.

There are several laws relevant to green building to Bulgaria. These include The Energy Efficiency Law, The Law on Multifamily Dwellings, and the Spatial Development Act. However the legal definition for a green building or a low-energy building is not present yet in Bulgaria, contrary to the existing definitions in many EU members.

The energy is relatively cheap in Bulgaria and this factor is a significant drawback for the boost of sustainable technologies in Bulgaria. The price per kW/h is still the cheapest in the EU. Bulgaria has always been a traditional energy exporter and has the ambition to become the energy hub of the Balkans. A potential increase of the supplied energy to businesses and households could have a significant impact on the energy efficiency, but such a move won’t be politically accepted, taking into consideration the limited disposable income of the Bulgarian households.

The energy efficiency awareness was increased with several campaigns and programs, launched by the Energy Efficiency Agency, European Bank for Reconstruction and Development (EBRD) and 6 local banks. These institutions provided a 20% grant and a credit line for building insulations for old buildings. There are no other real financial incentives for the development of green buildings in Bulgaria, such as low-interest rate loans. The current financial schemes are applicable only for old buildings and the construction of new buildings could not be financed through the existing credit lines. However the discussions with local banks showed that the financial institutions are inclined to finance the construction of new buildings even if formal credit lines are not currently available.

Since 2004 all the new buildings are required to be only thermally insulated. The situation will change with the recast of the Energy Performance of Buildings Directive, approved by the European Parliament in May 2010. After December 2020 all the new buildings in Bulgaria will have to be energy independent and use own sources of renewable energy for their own electricity supply. According to European experts, new green buildings in Bulgaria are 10-15% more expensive, compared to conventional buildings. The numerous advantages that the green building gives to the investor pay off for a short period of time.

The first zero emission buildings were built in Bulgaria in 2008 and the hope is that their number will be increased. In 2007 Colliers International announced the launch of the pilot zero-emissions resort village on the Black Sea Coast. The main problem, encountered by the developer, was that the Bulgarian experts were not familiar with a significant part of these new technologies and the village was projected by foreign architects. Currently the number of architects and experts with a good knowledge of the green building concept is growing. The Bulgarian company APXE offers prefabricated passive houses for the price of EUR1,000 per square meter.

There are several pilot projects for zero emission houses. The U.S. company Tishman International built the first LEED business park in Bulgaria called Sofia Airport Centre. The U.S. Embassy in Sofia is the first green U.S. Embassy in the world and the first LEED building in Bulgaria. The existing Anglo-American school in the capital is also a LEED certified building with a LEED new school construction expected to be completed next year. In spite of all the information in the press about LEED, the standard is not so popular in Bulgaria.

The Bulgarian Advisory Council for BREEM was set up in Bulgaria in June 2010. The council includes representatives of the country's leading developers, architectural firms and clients. The Bulgarian company Greenworks will also develop BREEAM schemes as the National Scheme Operator (NSO) under the name BREEM BG in Bulgaria.

The establishment of the organizations in the sector, such as Bulgarian Green Building Council (BGBC) and the Bulgarian Sustainable Building Council was a very important step towards the promotion of green building in Bulgaria. It is supposed to create Bulgarian standards for the construction of green buildings. The main activity will be the issuance of certificates. Triple Green Building Group, LLC has been promoting sustainable building practices in Bulgaria for a couple of years. The group participates in the Bulgarian Green Building Council working on council development, membership and education. Due to joint efforts companies such as Colliers, the Anglo-American School, Tishman International, Dupont and others, have joined the council or are in strategic partnership or in process of joining in order to strengthen the initiatives and guarantee success.

BGBC is currently working with a sub-contractor of Nike on a challenging process of achieving LEED silver on a textile manufacturing facility in the town of Russe. There are discussions with some of the most prominent current new construction projects in Sofia such as Sopharma Towers, regarding possible certification. The German system BGNB has been used until the creation of Bulgarian standards. The main objective of the BGBC is to promote the use of sustainable and green technologies and to increase the awareness of the Bulgarian population.