CONTENTS
I.INTRODUCTION
A. Introductory part
B. Main positions /problems/
II. MEASURES NECESSARY
FIRST GROUP OF MEASURES - Screening of speculative requests
A. Screening Solar Projects
B. Screening of wind projects
C. Continuation of projects currently active
SECOND GROUP OF MEASURES - State steps to support investments in RES
A. Regulatory measures
B. Elaboration of a national RES strategy by 2020g.
III. CONCLUSION
A. Decision on allocation of RES shares
B. Possible potential and establishment of solar and wind clusters
I. INTRODUCTION
Development of Renewable Energy Sources in Bulgaria.
The Confederation of Employers and Industrialists in Bulgaria (KRIB) once again expresses its concern about the announcements that appeared in the public space about the possible imposition, if not of a moratorium, then at least of a series of restrictive measures for the construction of facilities for the production of electricity from renewable energy sources (RES). Such messages create uncertainty in the industry and lead to an outflow of significant local and foreign investment. The most likely result of their eventual application would be their redirection to other countries in the region. Investments in green energy are emerging as a leading investment stream for the next 10-20 years. In a period of recovery from the crisis, RES are one of the main drivers of economic growth. Due to its favorable geographical position and natural features, Bulgaria has the opportunity to occupy a significant place on the European map of green investments. We expect EUR 3-4 billion investments in the RES sector in Bulgaria in the next 3 years. Therefore, we believe that the state and business should jointly take action in order for Bulgaria to absorb the maximum share of this investment flow by creating a maximally predictable economic and regulatory environment.
A. Introductory part
The development of RES is a priority measure in all EU member states. Their use contributes to environmental protection, energy independence and sustainable development. The national goal of our country, confirmed by Directive 2009/28/EC, is to achieve at least a 16% share of RES in the gross final energy consumption in 2020. For now, Bulgaria is critically behind the schedule of activities for the implementation of this mandatory national goal. Fines, combined with an obligation to import "green energy" from abroad and added costs for transmission, are foreseen for its possible non-fulfilment. It is expected that the amount of the fines will be equal to the price of reduced greenhouse gas emissions from this unrealized production. The import of renewable energy from other countries /for example from overproduced "green energy" in another EU member state/ may also lead to an increase in the final prices of electricity on the Bulgarian market and would constitute an indirect sanction.
Bulgaria urgently needs a flexible energy strategy until 2020. An integral part of it should be the RES development strategy. It must be based on realistic assumptions about energy consumption and about the quantity and quality of the energy mix (the ratio between the amounts of energy produced by thermal power plants, nuclear power plants, as well as by different types of RES such as wind, solar, geothermal, energy from small hydropower plants, biomass). In the National Action Plan for the Development of Energy Production from RES until 2020, which our country must develop by June 30, 2010, Bulgaria will also have to develop an "indicative curve" for the period from the base year 2005 to 2020 and based on it - indicative goals for every 2 years. Their implementation will be controlled by the EU.
We clearly realize that there is a limited and expensive public resource, for which both individual types of RES and different projects within a given type of RES compete. The policy for the development of the RES sector should focus both on the individual types of renewable energy and on the criteria for approving projects in each individual type of RES.
Chaos reigns at the moment because there is no clearly formulated policy and strategy for the development of the RES sector. In our opinion, it is necessary to emphasize a new philosophy for its development, to introduce strict and transparent rules, to increase its efficiency and to stimulate innovation through competition along the lines of the introduction of quotas for the connection of capacities from RES to the electricity transmission and distribution network. It is extremely important to formulate a policy for its development by determining a sustainable cost of accession and identifying sources of funding. The competition in obtaining quotas both between individual types of RES and between individual projects in a given type of RES must be carried out on the basis of rules that take into account the constant decrease in cost, the overall economic benefit and the export potential of the specific RES sector. This will lead to a relatively clear assessment not only of public costs, but also of the public benefits of RES development, such as increasing Bulgaria's GDP and creating new jobs.
B. Basic positions /definition of current problems in the RES sector/
At the moment, investors (both internal, but mostly external) are deterred by the high degree of uncertainty of the business environment for RES development in Bulgaria, which is due to the following reasons:
- Lack of a clear strategy of the state for the development of RES and broadcasting of contradictory signals from the administration, including a possible moratorium on investments in RES;
- Unclear tariffs for the purchase of energy from RES (variable components in the tariff), which prevents investors from making a real assessment of the return on their invested funds and deters banks from financing such projects;
– Uncertainty regarding the connection of RES power plants to the energy transmission and distribution network, as well as a lack of transparency and a clear strategy for the development of the energy infrastructure in accordance with the goals for the development of RES. Although unspoken, NEC and ERP have effectively already imposed a moratorium on the connection of new RES for 3 months.
In order for Bulgaria to attract the maximum possible investments in RES, it is necessary:
- to have a clear strategy for the development of the sector, developed and accepted by all interested parties - government, business, environmental organizations. A state administration is needed to answer clearly and unequivocally the questions of when, how much and what capacities Bulgaria will have, and where the regions are, where they are expected to be located;
– To be clear on redemption tariffs and pricing so that funding institutions and investors can assess their risks;
- NEK/ESO, MIET and ERP to create the necessary conditions for these investments, developing a clear strategy for adequate development of the energy infrastructure in Bulgaria.
This is the logical way, the implementation of which, however, is a matter of time, which we do not have. The state cannot afford to block investments, especially in the conditions of a global economic crisis. On the other hand, we are witnessing a huge interest, unfortunately for the most part speculative, which is blocking the process.
We propose several simple practical measures in two directions, with which we believe it is possible to introduce the investment process in RES within normal limits, without stopping or limiting it.
II. MEASURES NECESSARY
FIRST GROUP OF MEASURES: Screening of speculative requests / reduction of requests for connection of potential objects to the network:
Problem – Too many stated investment intentions.
We are currently witnessing a huge/ and unreal/ for the scale of Bulgaria, number of requests for the construction of solar and wind power plants / from various sources between 9000-12000 MW/. For Bulgaria, the realization of such a volume of renewable energy sources would lead to serious imbalances in the energy system and tariffs and to the need for huge investments in the energy infrastructure, which are unfounded. This is completely unacceptable, both for the state and for NEK and ERP. Because of this, for three months we have been witnessing an unspoken moratorium on the part of ERP and NEK. The large volume of requests practically blocks the investment process and hinders business, to the extent that real investments are also blocked. A large part of the stated investment intentions are purely speculative, especially in the field of solar installations, most "projects" are actually attempts to sell real estate.
We estimate that applying the measures below, the submitted projects will "shrink" to around 1000 MW of installed capacity for wind farms and 1000 MW for PV projects. In this material, we do not comment on water capacities, since there is no public information about them.
A. Screening Solar Projects.
For solar projects, the investment in the preparatory phase is small. This determines the higher percentage of speculative projects, since their preparation is easy and the expected realization is fast. In view of all this, most PV projects are developed to the "design visa" stage and offered for sale, with only a small number proceeding to the design and implementation stage.
Decision:
1. Introduction of a requirement for the payment of an advance guarantee payment at the price for requested capacity or "power conservation" by NEK/ERP, as a precondition for continuing the procedure, which will subsequently be deducted from the connection price. In this way, on the one hand, pure speculators will be weeded out and effective applications will be sharply reduced, and on the other hand, this resource will be used by ERP and NEC for more recent renovation of energy facilities and strengthening of the network, so that at the moment of investments in RES and the relevant network operator to be technically ready for connection. This presupposes the unification of the procedures for the accession of the separate ERP and NEK, probably with an ordinance.
2. Introduction of a period of validity of the written opinions on joining - for example 6 months for solar plants.
3. Payment of an advance payment must also be introduced for already existing projects, which will receive a grace period of 3 months for its payment, and if it is not paid within this period, they will lose the power reserved by them. All new projects should make an advance at the price for "capacity conservation" when submitting a preliminary investment intention to the NEK/ERP.
4. Existing projects with stated intentions and stated capacity more than a year ago, which have not received a construction permit, to be canceled.
5. To cancel the requests of projects that do not have secured (as ownership or long-term lease) the required amount of land (25 acres for 1 MWp/).
Problem: a large amount of fertile land is being industrialized
The problem is controversial, as even if all the requested capacities are built, which is unrealistic, the land that will be used will be in the amount of about 120 thousand decares, which would be 0.4% of the agricultural land in the country. A further argument from environmental organizations is that the higher /worse/ categories of land represent barren and mountainous land and directing investment there would have more severe consequences for biodiversity. However, below we have listed measures to limit the industrialization of agricultural land.
In order to achieve an optimal effect, the specifics of the two types of investments for which excessive interest has been declared must be taken into account and a differentiated approach applied to them.
Decision:
1. Under a certain category, land is not reassigned at all - from I to III category.
2. Priority should be given to the construction of RES installations on industrial zones and polluted terrains. as well as abandoned military sites. Projects on such terrains should be exempted from an advance fee and be considered with priority in the SEWRC, RISW and, respectively, ERP/NEC if there is a restriction on joining. Only then should permits be issued for the construction of projects on agricultural lands of IV category and above.
B. Screening of wind projects.
Problem: The bulk of projects are at the idea level.
The design of a wind farm is different from that of solar plants. In order to start the implementation of a project, it is necessary to measure the wind for at least 1 year (only the investment for one measuring mast is over 20 thousand euros, and for projects with more than 10 wind generators, 2 - 5 masts are usually used). Doing such a project takes 2 to 3 years and involves significant funds. The land used is significantly less than that for photovoltaic installations - no more than 0.5 decares/MW. Most of the projects are of significant volumes, a large part of them have received a class A investor certificate. In view of all these features, the wind farm projects are either at the idea level (the main mass of projects) or in an advanced phase. In this regard, we propose the following measures for screening the projects:
Decision:
1. Power conservation to be allowed after presenting measurements proving the wind energy potential, with a measurement period of at least 1 year.
2. Power applications from projects that cannot submit wind measurement data to be cancelled.
3. As in the case of photovoltaic plants, introduction of a requirement to pay an advance guarantee fee at the price for requested capacity or "power conservation" by NEK/ERP, as a precondition for continuing the procedure, which will subsequently be deducted from the price for Joining.
C. Continuation of projects currently active.
With the implementation of the measures above, a large part of the requested projects will be dropped. According to our estimation, no more than 10-15% of the investment intentions submitted so far will remain active.
Projects that already have certain permits – EIA, design visa, building permit, should not be subject to restrictions. A substantial resource has already been invested there, the land for them has long been reassigned and removed from agricultural land, and stopping them would have severe economic consequences for investors and would worsen the already not particularly good image of Bulgaria as an investment destination.
Simultaneously with the screening of the submitted projects, in a very short period of time, a public register of RES projects should be created at the State Environmental Protection Agency, containing the type and size of the installation, the region in which it is located /at the municipality level/, the stage of realization of the project and the validity periods of its permits.
SECOND GROUP OF MEASURES: State support for RES investments.
A. Regulatory measures.
Problem - predictability of the tariff
Decision:
1. The tariff for the purchase of electricity generated by RES must be fixed for the entire period of the project at the time of joining.
2. Introduction of diversification of the tariff for ground, roof, facade installations, as well as a separate (different) preference for households and companies that install solar installations for their own needs. The wide penetration of this type of small installations is particularly useful, as it does not load the grid (installations are very scattered territorially, consumption is at the producer) and reduces the daily consumption of electricity. For such installations, simplified administrative procedures should be developed and applied, such as a notification regime (as is the practice in Germany).
Problem - very expensive electricity
Decision:
1. If the cost-determining principle for determining the tariff for the purchase of energy from RES and the tendency to reduce the prices for the construction of power plants is preserved, this problem will be regulated by current reductions in the tariffs for the construction of future power plants. The trend should be the following: stimulating innovation and taking into account the expected increase in the price of electricity in the domestic market, to achieve grid parity in 5-10 years. The logic should be similar with wind energy.
Issue - energy infrastructure development and financing options
Decision:
1. The development of the infrastructure should begin to take place in the light of the modern concepts of the so-called "energy Internet" smartgrid /intelligent grid/. This implies the development of decentralized energy production, including in the households themselves or small and medium-sized companies, as close as possible to the point of consumption through small photovoltaic and cogeneration installations, biomass thermal boilers and small wind generators instead of investments in expensive and complex transmission facilities for high tension. The application of smart grids improves the security of energy supply, minimizing the likelihood of breakdowns and power outages. In this regard, part of the overall policy of the state should be to assess the potential for promoting investment in RES and especially biomass and solar installations on the lands of smaller settlements, instead of expensive transmission facilities to supply these settlements with electricity. Funds under the National Rural Development Program and other programs can be used to finance such an approach.
2. To use the following sources of financing for the development of the network, in addition to the income from paying the price for power conservation - NEC /as part of the national energy strategy/, ERP /for the smaller projects/, private investors in RES, European funds after 2013, the Energy Efficiency Fund, the International Kozloduy Fund or a combination of the funding sources listed above.
3. Part of the state's quota of carbon dioxide emissions should be contributed to the "Energy Efficiency" fund and used for RES and infrastructure. This is an important component of the implementation of a policy to promote RES based on the carbon footprint - preferential treatment of large industrial polluters who, through the construction of RES projects, balance their emission chain.
4. Using the opportunities offered by Directive 2009/28/EC for the development of the RES sector such as participation in joint projects with other EU member states and third countries and joint schemes to support the use of energy from RES, which could to be implemented by two or more EU member states on the territory of Bulgaria.
Problem - lack of a policy for the territorial distribution of the various renewable energy sources.
Decision:
1. To simplify the procedures for the construction of solar installations on roof spaces, facades and surrounding urbanized spaces on and around domestic and industrial buildings as much as possible. In these cases, the costs of joining and developing the network are virtually non-existent or minimal. Energy is produced at the point of consumption and transport losses are avoided. With solar energy, the production curve copies the consumption curve and reaching gridparity is possible in a significantly shorter time.
2. Additional promotion of energy consumption from RES for own needs - in households, in small and medium-sized enterprises, through installations of roof spaces, facades through: preferential financing and/or tax reductions for persons using energy from RES. This promotion is of the utmost importance because at virtually no additional cost or with minimal cost to society, it will support the fulfillment of not only the goal of increasing green energy consumption, but also the other two mandatory goals, namely: reducing carbon emissions and increasing energy efficiency. In the case of solar power plants, it is necessary to clearly define and distinguish the production of electricity for own needs from its production for sale. The potential of renewable energy production for own needs is extremely large and makes it possible to relieve the grid in periods of greatest load.
B. Development of a national RES strategy until 2020.
Such a strategy should be developed on the basis of a broad discussion and consensus on the main issues between the interested parties - the state, NEK/ESO/ERP, business and environmental organizations. It is necessary to follow clearly defined criteria, to take into account all aspects and the overall costs of all participants in the process of implementing RES projects, so that the set goals are implemented as efficiently as possible - with minimal final costs for society/consumers. The strategy must be developed in an extremely short period of time and answer at least the following questions:
– What are the expected installed RES capacities by types of energy?
– What is the expected consumption of electricity generated by RES?
– Clear forecast and formula for applied tariffs.
- Determining regions in which to prioritize investing in RES - regions with high wind potential, regions with a high concentration of conventional capacities, regions with a high density of users, regions with unfavorable conditions for agriculture - presence of contaminated soils, tailings ponds, barren and mountainous lands, etc.
– Development of the infrastructure of the RES sector and definition of the sources for its financing.
- Comprehensive alignment of RES investments with the "Natura 2000" network.
– Possibilities and costs for the development of the RES connection networks.
III. CONCLUSION
A. Decision on allocation of RES shares
In addition to the quantitative target of 16% of final energy consumption from RES in the total mix, the economic effect of different types of RES must be taken into account - what part of the added value remains in the country, how many new jobs are created, sought and reported the possibilities for the effective implementation of the three political goals 20-20-20 for Europe (by 2020, a 20% reduction in greenhouse gas emissions, a 20% share of RES in final energy consumption and 20% savings in future energy consumption) with minimal costs. Projects related to energy production from domestic, industrial and agricultural waste are of considerable importance.
B. Possible potential and establishment of solar and wind clusters
Bulgaria can be the leader of Southeast Europe in the field of RES, but for this purpose the creation of solar and wind clusters must be stimulated, respectively in Silistra and in the Varna region. This is already in the process of being implemented - for example, in the Silistra region there is a solar panel factory, glass manufacturers, glass processing factories, engineering companies, metal element processing companies, and in the Varna region there are engineering companies and specialized construction companies companies.
Determining the expected shares of the various renewable energy sources, their export potential must also be assessed - Bulgaria will only serve as a starting point for creating capacity and accumulating know-how, and the potential of the regional market is huge.
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