Having a somewhat steady Government and Parliament since mid-2023 has led to more predictability in the Bulgarian regulatory environment for renewables. In October 2023, some important and significant changes to the RES Act entered into force, thus solidifying local support for renewable energy.
Bulgaria’s power generation is still highly dependent on its baseload power capacity coming from lignite-powered thermal power plants (over 3,000 megawatts). Therefore, changes are necessary to allow Bulgaria to decrease its CO2 emission by 55% until 2030 compared to 1990 and reach a net-zero economy by 2050.
At the end of 2023, the Parliament adopted the country’s roadmap for decarbonization (Roadmap). The main milestones envisage (i) successful tenders for storage capacity in 2024, (ii) the phase out of 1,600 megawatts of its thermal power plants until 2026, (iii) new nuclear and RES capacities of 14,000 megawatts, offshore wind capacities of 2,500 megawatts and 2,000 megawatts storage capacities until 2040, and (iv) the refurbishment of the Chaira Pumped Storage Hydropower Plant with a power production capacity of 864 megawatts and pumping capacity of 788 megawatts (a key asset in the energy balancing market).
The Parliament has not yet introduced a tender or other competitive procedures for securing grid connections for new RES projects, and the grid connection agreements are granted on a first-come-first-served basis. By the end of 2023, the Bulgarian Transmission System Operator confirmed that it had received applications for the construction of RES projects with a total installed capacity of over 45,000 megawatts. Therefore, in October 2023, the Bulgarian Parliament introduced stricter rules for grid connection that require developers to pay a deposit/guarantee in the amount of EUR 25,000 per megawatt installed capacity to secure their grid connection, thus urging developers to implement their projects and to terminate speculative applications. In addition, the amendments set out the validity term of the preliminary and final grid connection agreements for two years each, compared to the previous three-year validity term of the final grid connection agreements.
The Roadmap re-affirms the Government’s intention to start the long-awaited grant scheme in accordance with the National Recovery and Resilience Plan for supporting new RES capacity of 1,425 megawatts production capacity and 350 megawatts storage of electricity. The grant scheme shall enhance the RES production (from solar and wind) with storage capacity and envisages investment support only for the storage facilities component of projects, covering up to 50% of expenditures for storage. The legislative framework is favorable for the storage facilities since they are not subject to a licensing procedure and the law treats them as movable objects which benefit from a simplified procedure for their installation. Considering that the projects shall be implemented until August 2026, it is impossible for wind projects to benefit from the tenders.
To allow the enhancement of renewable energy in the regions affected by CO2 emissions reduction, at the end of 2023, the EU Commission approved the Bulgarian Just Transition Budget in the amount of EUR 1.2 billion supporting the coal power plant’s phase-out acceleration, reskilling and upskilling, and creation of new employment opportunities for over 15,000 workers in the affected regions.
Taking into account the phase out of the thermal power plants, the Roadmap envisages commissioning 3,500 megawatts of new renewable energy capacity and 1000 megawatts of new storage facilities by 2026.
Offshore wind appeared on the Parliament members’ agenda in 2024 as an offshore renewable energy draft act was adopted at first voting in early 2024, which aims to regulate how Bulgaria’s offshore wind potential will be exploited to lure major key investors. It is expected that the Parliament will pass the draft act into law in the upcoming months. The draft act proposes 80 EUR per megawatt hour as the minimal strike price under the CfD scheme and, in practice, it may introduce CfD agreements in the Bulgarian energy sector.
Considering that over 1,000 megawatts solar capacity were commissioned only in 2023, it is highly expected that in 2024, the renewables market will retain its vibrant upward trend. Major strategic investors are entering the Bulgarian market, and in early 2024, three photovoltaic projects with a total installed capacity of over 80 megawatts were acquired by a foreign investor.
By Kostadin Sirleshtov, Partner, Borislava Piperkova, Counsel, and Dian Boev, Associate, CMS
This article was originally published in Issue 11.2 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.