The Green Energy – Urger on Investments in Bulgaria

The increased use of energy from renewable sources, together with energy savings and increased energy efficiency constitute important parts of the package of measures needed to reduce greenhouse gas emissions and comply with the Kyoto Protocol to the United Nations Framework Convention on Climate Change, and with further Community and international greenhouse gas emission reduction commitments beyond 2012.

Directive 2009/28/EC of the European Parliament and of the Council of 23 April 2009 on the promotion of the use of energy from renewable sources and amending and subsequently repealing Directives 2001/77/EC and 2003/30/EC lays down achieving target of 20 per cent share in overall Community energy consumption by 2020 and a mandatory 10 % minimum target by all Member States for the share of biofuels in transport petrol and diesel consumption by 2020, to be introduced in a cost-effective way for produced energy from renewable energy sources. The new Directive takes into account important factors such as promoting the security of energy supply, promoting technological development and innovation and providing opportunities for employment and regional development. The fixed target for our country is 16 per cent of the gross national consumption by 2020. In conformity with Directive 2009/28/EC and in view of the targets stipulated, the Council of ministers of Bulgaria determines the state policy for promoting production and consumption of electricity, heating and cooling from renewable sources, production and consumption of gas from renewable sources, and the production and consumption of biofuels and energy from renewable sources in transport.
For achieving the mandatory national target of the Republic of Bulgaria for 16 percent total share of energy from renewable sources in the gross ultimate energy consumption, including 10 percent mandatory share of the energy from renewable sources in transport, the Minister of Economy, Energy and Tourism develops National Renewable Energy Action Plan (NREAP), covering the period 2010-2020. NREAP includes the average values that have to be reached for two-year periods of the share of energy from renewable sources in the gross ultimate energy consumption.

Production and consumption of RES is regulated in Energy from Renewable Sources Act (ERSA), adopted on 21st April 2011 by the National Assembly and published with the State Gazette copy 35 dated 3rd May 2011, repealing the Renewable and Alternative Energy Sources and Biofuels Act (RAESBA).
The production of electricity from RES is promoted by:

providing guaranteed access of electricity produced from renewable sources to the transmission and distribution electricity grids;
guaranteeing the transmission and distribution of electricity produced from renewable sources;
ensuring the construction of the necessary infrastructure and electricity capacities for the purposes of regulation of the electricity system;
setting as a priority the dispatching of electricity produced from renewable sources;
purchasing of electricity produced from renewable sources for a fixed period of time;
determination of preferential prices for purchase of electricity produced from renewable sources.

State Commission for Energy and Water Regulation (SEWRC) determines annually by 30th June preferential prices for purchase of electricity produced from renewable sources, with the exception of electricity produced by hydroelectric power plants with installed capacity over 10 MW. To facilitate the financing of projects and reaching better predictability of the price of energy from RES it has been introduced fixing of the preferential prices for purchase of energy for the whole term of the purchase contract. The price for purchase is fixed to the moment of issuance of Act 15 in accordance with art.176, par 1 of SPA. According to the repealed RAESBA the preferential price was not fixed for the whole period of the contract, but was set at 80 percent of the average selling price for the preceding calendar year to the public or end suppliers and addition determined by the Commission of criteria depending on the primary energy source, such an addition can not be less than 95% of the addition for the previous year.

For production of electricity from RES are used water, wind and solar energy and biomass. Most of it is produced in big hydroelectric power stations with a total installed capacity of 1 918.9 MW. In recent years mainly small hydroelectric power stations have been built with installed capacity below 5 MW, as during 2010 their capacity was 241 MW or with 12,6 higher in comparison with year 2009.
Compared with the previous years, during 2010 was recorded the highest production of energy from RES, amounting to 5 509 GWh. The total increased capacity of Photovoltaic Plants reached 21,4 MW.

The Energy Act does not require a license to produce electricity from a person holding a power plant with total installed electrical capacity of 5 MW. License is issued to a legal entity registered under the legislation of a Member State of the Union or of another State Party to the Agreement on the European Economic Area, under the same requirements. Procedure for license shall be opened in a written statement which shall apply to all necessary documents. The license is issued for up to 35 years in accordance with the requirements of the Ordinance for licensing of activities in the energy sector.

Compulsory purchase of electricity is carried out under long-term contracts for purchase,signed for a term of:

20 years - for electricity produced from geothermal and solar energy, as well as for electricity, produced from biomass;
12 years - for electricity, produced from wind energy;
15 years - - for electricity produced by hydroelectric power plants with installed capacity up to 10 MW, as well as for electricity produced from other types of renewable sources.

The terms start from the date of entry the energy project into operation. After these terms preferential prices shall not be given. Regarding energy projects entered into operation after the date of entry into force of ERSA, the long-term contracts for purchase remain valid, as the preferential price is the one effective on the day of entry into force of the law. Regarding energy projects for which preliminary or final contracts for connection have not been concluded, the price for purchase is the date of issuance of Act 15 under SDA.

Problems faced by investors:

Lack of uniform coordination of the renewable energy sources development process;
Necessity of coordinated operative management of the renewables;
The process of land purchasing is time-consuming;
Investors have to cover the expenses related with connection to the grid;
The National electricity company is not developing the network fast enough to meet the fast growing interest;

A developed scheme for avoidance of the above problems is the purchase of a developed project for which most of the time-consuming stages are overwhelmed; the market in Bulgaria offers wide range of such projects.

It is worth investing in RES in Bulgaria because:

The geographical position of the country determines it as one of the top countries identified for wind and solar energy development;
The large investors are in position to take advantage of the Encouragement of investment act;
There is a compulsory purchase of electricity at preferential prices;
The profit tax in the country is one of the lowest in the EU – 10%;
The average salaries are one of the lowest in the EU;
The prices of the estates are attractive;

We can offer our clients a complete service for creating and implementing a green energy system in Bulgaria. This includes notably:

General advice on investments in the renewables sector in Bulgaria;
Establishment of company in Bulgaria;
Determination of the legal requirements regarding construction of photovoltaic and wind power plants in Bulgaria;
Purchase or lease of the land, preparing the purchase or lease;
Carrying out the procedure for amending the zoning (conversion) in croplands;
Carry out all necessary approval procedures - environmental, health, fire, etc.
Advice on planning and implementation of grid-connection;
Implementation of the building permit process;
Contract negotiations with the supply network;
Contract negotiations with the public utilities;
Preparation of all necessary contracts in Bulgaria;
Due diligence reports regarding the purchased projects –company and property;

Law Firm Dyulgerova and Penkova

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