Renewable Energy Sources (RES) Policy and Laws in Bulgaria

Renewable energy sources today contribute about 20% of gross energy consumption in the EU. The 2020 targets were set in the Renewable Energy Directive 2009/28/EC and reviewed with a new RED. To further reduce carbon emissions and promote clean energy, the EU has set higher renewable energy targets for 2030 of at least 32%.

This initiative is supported by legislation changes and policies focused on creating favourable investment conditions in the EU. As part of the global trend, investments in new energy capacity are projected to reach $13.3 trillion by 2050, predicts Bloomberg. Expectations are that 77% of these investments will go to renewables.

The renewables sector is growing rapidly, and Bulgaria is among the EU countries with huge energy potential for RES due to its:

• favourable geographical location
• low taxes
• policies and legislation aimed at attracting investments in renewable and efficient energy systems.

This article will present an overview of the legislation and the current policy for RES in Bulgaria. If you need further legal advice, do not hesitate to contact our experts. 

Renewables: Overview

Renewable energy comes mostly from carbon neutral sources like wind (onshore and offshore wind) and solar (sunlight), tides, waves, and geothermal heat. Biomass is also included although its carbon emissions status is still unclear. These sources are seen as a sustainable and green energy alternative to fossil fuels, which are depleted faster and contribute to global warming.

Renewable energy from hydro and wind-energy (onshore wind turbines and offshore wind farms), biomass and solar power is used mainly for:

• Electricity generation
• Air and water heating and cooling
• Transport
• Rural energy services

All policies and changes to the legislation aimed at promoting renewable energy are in line with these uses. RES investments are mainly supported through feed-in-tariffs (FITs) and power purchase agreements (PPAs). Many countries later seek new market-driven mechanisms to support RES energy.

RES policy in Bulgaria

Electricity

Electricity from RES is promoted mainly through premium agreements in Bulgaria. These are signed with the Electricity System Security Fund (ESSF). The scheme includes all power plants using renewables and CHP with installed capacity of 4 MW or higher. The premium offsets the difference between the stock price and the price in the contracts RES producers sign with the National Electricity Company.

RES producers with a capacity below the 4 MW threshold are supported through FIT schemes. This threshold for new long-term agreements under FIT was reduced to 1 MW and is expected to be further lowered to 0.5 MW. Currently FIT is applied mainly to new rooftop solar panels or façade photovoltaic (solar pv) installations with low capacity.

Preferential prices under FIT are set and regulated by the Energy and Water Regulatory Commission (EWRC).

RES producers are not given priority access to the grid. Connecting their systems is subject to the general provisions of the energy legislation. 

Heating and cooling

In this case the use of renewables is promoted through:

• a subsidy from the European Regional Development Fund
• several loan schemes
• exemption of building owners from property tax.

Transport

The main support scheme for renewables in transport is a quota system. Under the current requirements, biofuels must make up a definite percentage of the annual sales of companies that import or produce petrol or diesel. Additionally, a fiscal regulation mechanism is in place to support biofuels further.

Further support

A professional training programme is offered to RES installers  to help promote the development and usage of RES power plants.

For further information and professional legal advice at the local level regarding RES investment policy in Bulgaria, contact our experts.

RES in Bulgaria: legislation timeline

2002 - Bulgaria signs the Kyoto protocol

2003 - Bulgaria adopts the Energy Act to promote clean energy

2007 - Bulgaria joins the EU

The Renewable and Alternative energy sources and Biofuels Act is adopted to promote RES power and the use of biofuels in transport. This is no longer in force.

2008 - Bulgaria implements a national energy efficiency obligation standard. This applies to all sectors and covers electricity, natural gas, heat, and liquid and solid fuel. The government offers training in energy efficiency management.

2010 - National Renewable Energy Action Plan (NREAP) is adopted. Under RED 2009/28/EC, Bulgaria sets renewable energy targets for 2020:

• Overall: 16% share of power generated from RES in gross final energy consumption 
• Electricity - 21%
• Heating and cooling - 24%
• Transport - 8%.

New measures are introduced to achieve this goal, such as:

• A Feed-in-tariff system
• Guaranteed connection of RES power plants to grid
• Long-term PPAs
  • 20 years for geothermal energy, biomass and solar energy
  • 15 years for hydropower up to 10 MW and biogas
  • 12 years for wind power
• Guaranteed purchase of RES produced electricity

2011 - Feed-in tariffs (FITs) for electricity from RES.

Preferential price (FIT) is set by the state-owned Energy and Water Regulatory Commission and reviewed annually. Support is guaranteed for the whole period of purchase contracts (outlined above).

Energy from Renewable Sources Act (ERSA) is adopted.

2012 - A certification/ training programme for installers is introduced. The regulation of education for technicians in the energy sector is based on ERSA.

2013 - Bulgaria comes 2nd in Top 10 emerging markets for renewable energy. FIT scheme proves effective in attracting investments in RES.

A new energy efficiency target of 25% for 2020 is set under EU Directive 2012/27/EU.

A new Energy Act is adopted to regulate grid connections, electricity transmission and prices. FIT costs are to be borne by electricity consumers.

2014 - A balancing market is introduced. RES producers become part of a balancing group. They have to pay monthly settlements to the group coordinator.

2016 onward - Bulgaria has reached its target before the deadline and needs to limit investments.

FIT is phased out for new investment projects. New legal changes are made limiting purchased energy from RES producers. New fees are imposed on investors in the sector, including a 5% on revenue fee paid to ESSF. 

2018 - Purchase grant programme for electric vehicles is adopted.

With the termination of the FIT programme (currently offered only to small-scale producers) a new premium scheme is introduced. Producers with installed capacity of 4 MW and more conclude special premium agreements.

Future trends

In recent years the sector has been stable and has seen an increased M&A activity and sale of RES projects. Due to the decreased interest rates refinancing of RES projects is also currently under way.

The Bulgarian energy strategy 2020-2030 focuses on:

• Systems for energy storage
• Development of Smart Grid systems
• The electric car market

New legislation is expected to require electricity distribution companies to develop stations for electric cars. The 5% fee on revenues of RS electricity producers is expected to be abolished. Legislation amendments are planned to facilitate the liberalisation of the energy market.

Also, substantial growth in installed capacity is projected. PV installed capacity is expected to triple by 2030. Under the Bulgarian Integrated plan, the RES sector is projected to grow to 27% of gross end consumption.

Legal advisory services for RES investors in Bulgaria

Our expert team offers comprehensive support in the area of RES such as:

• Legal and tax consultations related to energy legislation in Bulgaria
• Consultations in the selection of a suitable site for the construction of RES installations
• Legal support during the planning and construction phase of all RES projects
• Negotiations with electricity distribution companies
• Preparation of all types of legal documents and draft contracts.

For any investment related questions or RES project issues and consultations, contact us.

“Danailova, Todorov and Partners'' Law Firm provides top-quality legal services on all aspects of trade law and contractual law. Our experts also specialize in administrative law, tax law and employment law.