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Bulgaria boosts regulatory support for new renewables

In line with Bulgaria’s legislative support of new renewable energy projects, lawmakers in Sofia adopted a series of amendments to the Bulgarian Energy Act, which boosts support for new renewable energy projects.

In light of governmental estimates for tripling the installed capacity of new photovoltaic (PV) projects by 2030 to 3-3.5 GWp of installed capacity, the amendments made to the energy act eliminate some existing barriers to new renewable energy projects with Feed-In Tariff (FiT) support.

One of the main regulatory steps in the amendments that support new renewable projects in Bulgaria is found in art. 36e, para. 1, point 1 to the Energy Act, where the following sentence was added: “The renewable energy producers, whose projects entered into production after 1 January 2021… shall not pay the contribution to the fund” (i.e. – the Security of electricity supply find (SES) fund – https://www.fses.bg).

The SES Fund was created following a recommendation in the 2016 World Bank Report on stabilising the electricity sector in Bulgaria as a quazi CfD-counterparty for the newly established contracts for premiums (CfP), which replaced the renewable power purchase agreements (PPAs) on FiT.

The SES Fund will continue its support of renewable energy projects under the CfP scheme, but new renewable energy projects will not have to contribute to it since these will be developed on the free market (i.e. the renewables market). Exposure to market risk will no longer contribute to a CfP-counterparty in Bulgaria since the liquidity of the SES Fund is likely to be increased in the coming years with the gradual development of wind projects and independent power producers with PPAs operating on lignites. By means of this amendment, new renewable energy projects will be released from the obligation to contribute 5% of its future income to the SES Fund.

For the first time ever, Bulgarian legislation defines “green hydrogen” and releases any green hydrogen projects from future contributions to the SES Fund.

The 2021 amendments to the Energy Act also clarify some of the former provisions of this 2019 act that provide for regulatory support of new renewable energy projects. For instance, the 2021 amendments clarify the point of ownership of the grid in case of a direct cable between the renewable energy producer and the consumer, pointing out that these electricity networks are not part of the electricity distribution and transmission networks and therefore the investment into these facilities is an obligation of the private investor who retains ownership of them. In other words, the electricity distribution companies and the transmission system operator are not obliged to buy these back in the future.

This amendment clarifies some of the regulatory points raised in practice and streamlines the investment process for new renewable projects that are located next to large consumers (e.g. industries, factories) and have direct connection with these facilities.

These amendments to the Energy Act are likely to be parliament’s last major reform in the sector given that Bulgaria will have general elections on 4 April 2021. The amendments, nevertheless, clearly demonstrate Bulgaria’s focus on renewable energy investment and its desire to eliminate some of the direct and indirect barriers to such investments.

For more information on the new regulations and their potential impact on your business, contact your regular CMS source or local CMS experts: Kostadin Sirleshtov, Borislava Piperkova, and Elena Yotova-Yordanova.

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