The electricity market in Bulgaria - small renewables to enter the free market

Bulgaria

As part of the ongoing reform of the Bulgarian energy sector, on 11 November the parliament’s Energy Commission filed a new Bill for amendment and supplement of the Energy Act, which continues the policy for introducing of full liberalisation of the wholesale energy market and integration of the national market into the common European energy market. 

The Bill contains amendments and supplements in two main areas: the replacement of cold reserve transactions with auctions, and conclusion of Feed-In Premium Agreements for renewable producers with total installed capacity of between 0.5 MW and 1 MW.  

The motivation behind the Bill is as follows: eliminating transactions for the purchase of cold reserve is expected to ensure the security of the electricity system. Commission Regulation (EU) 2017/2195 of 23 November 2017 on electricity balancing outlines the operation of the electricity transmission system. According to this Regulation, each transmission system operator must manage its control area with sufficient reserves to increase and decrease the active capacity in order to deal with imbalances in its control area from any mismatch between supply and demand and emergencies. 

The Bill aligns national legislation with the EU Regulation by explicitly stipulating that the operator provide the necessary reserves by concluding contracts for additional services on a competitive market principle (i.e. through an auction). 

The Bill also requires producers of renewable energy with installed capacity of between 0.5 and 1 MW to conclude Feed-In Premium Agreements with the Energy System Security Fund (ESSF). This transition from Feed-In Tariff to the so called “premium agreements” has already been implemented in two stages: 2018 for producers with installed capacity of over 4 MW; and 2019 for producers with installed capacity of between 1 and 4 MW. 

This amendment will launch an additional 136 producers of energy from renewable sources onto the free market with a total installed capacity of almost 94 MW. According to the Bill, small renewable producers will have until 1 July 2021 to conclude the premium agreements with ESSF after which time their current long-term power purchase agreements will no longer be valid. The Energy and Water Regulatory Commission will determine premiums for each regulatory period. 

This draft legislation continues the changes and reforms of recent years in the Energy sector in line with the goal to fully liberalise the Bulgarian energy market. Still, some recommendations of the 2016 World Bank Report appear not to have been taken into sufficient consideration. As a result, cold reserve and capacity will probably be addressed in greater detail in the future. 

Parliament has not yet scheduled the first hearing of the Bill. 

For more information on the Bulgarian energy industry, contact our local CMS experts: Kostadin Sirleshtov, Elena Yotova-Yordanova and Borislava Piperkova. The article is co-authored by Diyan Georgiev.