The transition to clean energy: essential but by no means quick and easy

17.07.2018

Energy companies must embrace the transition to clean energy. It is an obligation to future generations AND a business imperative. Any company that does not invest heavily in clean technologies and renewable energy will struggle to survive.

But the transition cannot – sadly – happen overnight. And ironically, the types of energy we have to shift away from, like coal, can actually support the deployment of renewables in some cases. Traditional energy sources can be a bridge to a clean-energy future.

AES has a wind farm in Bulgaria, the country’s largest. While wind is a crucial energy supply for the future it has the problem of intermittency. In other words, when there is no wind, there is no power. Conventional power plants, on the other hand, can quickly boost output to meet spikes in demand or when wind turbines aren’t turning.

At AES, we want to be the world’s leading sustainable power company, but we strongly believe that coal has a part to play in the transition to a low-carbon future. In this short case study on our operations in Bulgaria, we try to shed a light on why.

The Bulgarian energy mix

Bulgaria has two main sources of electricity: coal and nuclear. Coal provides roughly half of the electricity in the country and nuclear another 30%. The rest is covered by renewables (wind, solar, biomass, and hydro) [Source: CEE Bankwatch Network]

 

Figure 1: Bulgaria: electricity sources, CEE Bankwatch Network

 

The EU has a target of at least 32% for renewables by 2030 as well as of course its long-term aim to be carbon neutral by 2050.

Given that the Bulgarian energy market still relies on coal, new thermal power plants that meet the highest possible environmental standards are essential.

Our contribution to the Bulgarian energy market

We run the Maritza East 1 (ME1) power plant in Bulgaria, as well as the Saint Nicola wind farm. We are the largest foreign investor in the energy sector in Bulgaria.

Looking specifically at ME1, its benefits are clear. Unlike any other plant in Bulgaria:

  • It complies with the highest environmental standards to ensure minimal emissions, and ensures optimal waste and water management and soil preservation;
  • Its current emissions will allow Bulgaria to meet its 2030 energy efficiency targets;
  • It is the only plant to have been built since the beginning of Bulgarian market reforms in 1989. Without ME1, Bulgaria would rely on older plants.

ME1’s capacity is essential to ensure security of supply and energy independence in Bulgaria. Indeed, it is most suited to maintain grid balance in Bulgaria: it has a rate of increase/decrease of 6MW/minute, which is the highest speed in the country, and helped prevent blackouts in January 2017 when operating at 99% of capacity during a cold spell.

Moreover, several outdated and energy inefficient conventional power plants will have to close down in the next few years, making ME1 even more important for Bulgaria’s energy security

Next steps: a strong legislative framework

We sincerely hope that the Bulgarian strategy for decarbonisation will help the country contribute to the EU’s energy goals for 2030 and 2050.

But we would urge further action. For instance, Bulgaria should guarantee, for as long as needed, that modern power plants using state-of-the-art technology, such as ME1, can continue to operate in order to ensure security of supply, national transmission capacity and system reliability.

And last but not least, we hope that Bulgaria will provide a stable framework that provides certainty and confidence to all investors, including:

  • Acknowledgment that the power sector is capital-intensive, with long investment cycles, due to the long operation period of power plants (+20 years);
  • Guarantees that investment costs are recovered in reasonable payback times.

Why are we calling for a stable regulatory framework and predictability? We are in the energy business and want to see our investment kept safe. But there is more to it for Bulgaria (and therefore, the EU). From a clean-energy transition perspective, stability and predictability will encourage investment in renewables and clean technologies. Without stability and predictability, we have fewer economic, social and environmental benefits – and ultimately, will endanger the EU’s energy goals.