Bulgarian energy regulator deals blow to biomass projects

New developments of biomass facilities in Bulgaria were dealt a heavy blow by a recent Decision (C-1) by the State Energy and Water Regulatory Commission (SEWRC) to reduce the main incentive for renewable energy projects in Bulgaria - the feed-in tariffs (FITs) for new biomass power plants in Bulgaria by between 11% and 28%, depending on the technology used (see table here).

The Decision is based on an analysis conducted by SEWRC's Legal and Pricing directorates that there has been a substantial reduction in the price-forming elements (ie the raw biomass) and also an increase in the availability of plants. It assumes (without referring to any statistical or scientific research on which the assumption may rest) that, in the past year, there has been a substantial decrease in the price of wood and wood waste.

The effects of reducing the FIT are to increase significantly the uncertainty of the regulatory climate for potential investors in Bulgaria, and thereby to deter them from investing in future renewable projects using biomass.

As well as reducing government incentives for biomass projects, the Decision puts the future development of the Bulgaria's entire renewable energy sector in doubt, as new renewable generation facilities applying for connection to the grid after December 2013 will not be eligible for any form of FIT. The compulsory offtake (currently 20 years for biomass projects) and FIT available to new renewable energy projects under the Bulgarian Energy from Renewable Sources Act is not available to those applying for connection to the grid after 27 December 2013. This is the date on which the Bulgarian Minister of Energy produced a report stating that the 16% national aim for overall energy consumption from renewable energy sources had been achieved. The report in question was the Second National Report by the Minister of Energy filed with the European Commission stating that consumption had reached 16.4% in 2012 and thus that the national aim had been reached.

Decision C-1 is currently being challenged before the Bulgarian Supreme Administrative Court. This challenge is likely to succeed, given the unsupported assumptions on which the decision is based. However, if the court overturns Decision C-1 but not the underlying assumptions, the SWERC may still continue to apply the same legal logic and deny any FIT and compulsory offtake incentives to new renewable generation facilities applying for connection to the grid after 27 December 2013.