A Fully Functioning, Integrated and Transparent Market is Essential for Bulgaria’s Energy Transition

18.06.2019

 

Investors and Operators Need a Predictable Regulatory Framework

Bulgaria enjoys significant opportunities for developing its energy sector as the country moves ahead with implementing the EU’s clean energy strategy. According to the International Renewable Energy Agency (IRENA), Bulgaria has the potential to produce up to 35% of its energy consumption from renewable sources.

To achieve this, however, policymakers in Bulgaria will need to make the right decisions to ensure that the energy transition takes place with the minimum social, economic and environmental impact, and without threatening energy security.

The EU has set a joint target for 2030 for its 28 members as a whole to reduce greenhouse gas emissions by at least 40% compared to 1990 levels and for renewable energy sources to make up at least 32% of energy consumption.

Bulgaria has a target for the share of energy from renewable sources of 25% by 2030. The country is off to a good start as renewables already account for 19% of energy consumption. Bulgaria is the second EU country to achieve its 2020 renewable target.

Expanding the country’s use of renewables will require overcoming some obstacles. Campaign groups are concerned about the effect that increasing the number of wind turbines could have on the country’s birds. In Bulgaria, a third of the land falls under the EU’s Natura 2000 network which includes special protections for bird habitats.

There is an answer to this challenge: AES Bulgaria has pioneered a state-of-the-art bird monitoring system at its St Nikola wind farm. The system warns operators to switch off the turbines to minimize the risk to birds. In 2018, we shut down the turbines for a total of 59 hours. The system is so efficient that last year 12 wind energy producers in the Kavarna region used it as the basis for a system that covers the whole region.

Increasing the share of renewables in the energy mix will require major investment in new transmission and distribution infrastructure as well as in turbines or solar panels themselves.

The stability in the regulatory climate for renewables will be key in attracting investment. In Bulgaria, as in many other EU countries, measures designed to incentivize the development of renewables drove up consumer energy prices and led the regulator and law makers to make changes to lower the burden on consumers. While the measures have generally been quite successful in addressing this challenge, this created uncertainty for investors and energy companies.

In Bulgaria, the level of investment in the energy sector has for example slumped (from 4.1 % of GDP in 2012 to 0.7 % in 2017).

Increasing the use of renewable energy sources should also be done only in a way that does not harm the security of supply.  State-of-the-art plants such as AES Galabovo, the only plant of this type built in the last 30 years in Bulgaria, play an essential role in the security of supply during the transition period. They provide the flexibility necessary for grid security when there is higher share of renewables in the energy mix. As renewables cannot always produce power when it is needed, AES Galabovo can quickly ramp up output to meet demand.

So what can be done to create the right conditions for investment in Bulgaria’s energy sector and ensuring that existing energy assets are used in the most efficient way?

A fully functioning, integrated, transparent and liquid market is essential for the development of renewable projects. It is also necessary to give certainty to investors and operators that their investments will deliver the expected returns. Regional markets also need to be linked up to boost security of supply and help competitive prices.

Taking the right decisions to incentivize investment in energy generation, transmission and distribution will ensure that Bulgaria meets its targets for the energy transition while protecting energy security and maintaining competitive prices for households and businesses. The sooner those decisions are taken, the sooner Bulgaria’s economy and citizens will enjoy the benefits.