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The new law established clear criteria and obligations for investors intending to build energy power installations in Bulgaria and aims to stimulate the energy production from renewable sources.
Key highlights in the new RES Law concerning the construction of RES installations and facilities:
I. Implementation of EU directives and national targets to stimulate production and consumption of energy from renewable sources (RS) in National Action Plan for Energy from Renewable Sources (NAPERS).
II. Determination of power quotas spread by regions and voltage levels.
III. Introduction of deadlines and long-term contracts for purchase of the produced electricity.
IV. Introduction of advance payments to the energy-transmission and distribution companies.
V. Encouraging the investors of small and roof photovoltaic power plants.
VI. Status of projects in development to date of enforcement of the law.
I. Implementation of EU directives and national targets to stimulate production and consumption of energy from renewable sources (RS) in National Action Plan for Energy from Renewable Sources (NAPERS).
NAPERS introduce mandatory objectives for Bulgaria, according EU Directive 2009/28/EO, as by 2020 the proportion of energy from RS in the country should reach 16% of the final gross electricity consumption. Including 10% for energy from RS in transport. NAPERS covers the period from 2010 to 2020 and determine the phased commissioning of energy capacity from RS in this timeframe. The action plan is drawn up for each biennial period, with average values down in law for the proportion of energy from RS in total gross electricity consumption:
- Stage 1. 2011 - 2012 (incl.) – 10.72%
- Stage 2. 2013 - 2014 (incl.) – 11.38%
- Stage 3. 2015 - 2016 (incl.) – 12.37%
- Stage 4. 2017 - 2018 (incl.) – 13.69%
As the most attractive for investors remains Stage 1 – the period 2011-2012 incl., and somewhat Stage 2, since in this period should be commissioned the most of the power plants using RS. However to January 2011 the State Committee on Energy and Water Regulation (SEWRC) has granted conditional licenses to build power plants with capacities as follows:
- Wind power plants – 2017 MW
- Photovoltaic power plants – 230,1 MW
- Power plants on biomass – 15 MW
The question is how many of the manufacturers who took license from SEWRC intend to build energy facilities and how many of them to use other methods of realization, such as: selling the project to another investor, replacement with another investor for shares, etc.
No matter how licenses are issued the fact remains that as of January 2011 SEWRC announced data for the put in operation and working power plants using RS as follows:
- Wind power plants – 465,4 MW
- Photovoltaic power plants – 21,4 MW
As objective for Bulgaria, under EU Directive 2009/28/EO and NAPERS approximate quotas to be achieved by 2020 are:
- For wind power plants – 1256 MW
- For photovoltaic power plants – 303 MW
The FEED-IN TARIFF (FIT) as of January 4th 2011, without VAT is as follows:
Wind power plants
- Running up to 2250 hours – 96.2 € / MWh
- Running under 2250 hours – 88.4 € / MWh
Photovoltaic power plants
- With installed capacity under 5 KW – 388.8 € / MWh
- With installed capacity over 5 KW – 357.4 € / MWh
The current FIT was determined on March 31st 2011, before the enforcement of the new RES Law. Under the new law SEWRC will set preferential prices annually until July 30th, not like so far until March 31st, therefore SEWRC shall determine and declare a preferential price within one month of the enforcement of the law. So now the law “obliges” SEWRC to update the preferential purchase price once more before June 30th 2011.
II. Determination of power quotas spread by regions and voltage levels. Procedure for accession of electricity subject.
With this novelty, the legislature aims to allocate investment intentions for power plants by regions of distribution and voltage levels. As a result of poorly developed electricity-transmission infrastructure, the legislative amendments are intended to prevent construction of large number of energy facilities in regions with low consumption and also to direct the investors to regions, where the new power plants using RS are needed.
Important criteria determining the free quotas for construction will be:
- Objectives of NAPERS
- Concluded preliminary agreements
- Transmission capacity of the grid
- Forecasted and reported consumption of electricity for the state
Proposed by the energy distribution companies quotas, agreed with the National Electricity Company (NEC) and the Minister of economy, energy and tourism, will be finally approved by SEWRC before June 30th each year.
Allowances will be published on internet site of SEWRC. These allowances will stand for one year from 1st July each year. Once approved annual quotas, every investor who wants to build energy facility will submit an application to the relevant grid operator, as its admissibility will be determined within 14 days.
If the application is determined eligible the grid operator will issue statement for terms and conditions of accession, regulated in Ordinance № 6 for accession of consumers and producers to the electricity grid. This statement should be issued within 30 days for projects under 5 MW and within 60 days for projects over 5 MW. Special here is that before the first statement for eligibility the investor must pay a guarantee for participation to the operator of 2,500 Euro for each MW.
Follows request for signing a preliminary contract prepared by the operator - 15 till 30 days for facilities using RS, while its conclusion the manufacturer owes another advance – 12,500 Euro/MW for capacity under 5 MW and 25,000 Euro/MW for capacity over 5 MW. Novelty is the term of preliminary contract – no longer than one year.
When the preliminary contract for accession is already signed, the manufacture assembles the necessary documentation for issuance of building permit in the respective municipality. The fixed period for coordination of project for building permit is 30 days plus additional 7 days for its issuance. Generally construction can start immediately, but the preliminary contract for accession should become final, and that’s necessary.
This can happen only after the investor has a building permit, which is one of the compulsory documents to be attached to the request for signing the final contract to join the grid for accession of energy facility. The term by Ordinance is 60 days.
After the acquisition of final contract for accession and based on the building permit the manufacturer may proceed with the implementation of construction site.
After signing the contract for purchase of electricity between manufacturer and operator the price will be fixed to the current rate at the date of drawing up of findings act for degree of completion of the facility (art. 176, par. 1 of Law on Spatial Development), so-called “Act 15”.
III. Introduction of long-term contracts for purchase of the produced electricity and deadlines.
With the new law are introduced long-term contracts for purchase of energy (PPA), the price is fixed and isn’t intended to amend for the entire term of contract. Contract action starts after the procurement of certificate for commissioning (Act 16).
Contracts for purchase of energy will have the following terms:
- 20 years for energy produced from biomass, geothermal or solar power.
- 12 years for energy produced from wind power.
- 15 years for energy produced from hydro power plants under 10MW and other types of RS
IV. Introduction of advance payments to the energy-transmission and distribution companies.
According to the Ordinance regulating the price of electricity, accession fee is individual for each subject and is based on real costs incurred by the operator for construction of connection equipment.
The new law introduces advances from the manufacturer to the operator of electricity system. Yet with the request for statement for eligibility at the beginning of the project the investor shall pay intentions guarantee – 2,500 Euro/MW, which is returned to him within 7 days if the statement is negative.
Next advances are payable with the signing of preliminary contract for accession and the amount is:
- 12,500 € / MW – for capacities under 5 MW
- 25,000 € / MW – for capacities over 5 MW.
Advances are part of the cost for accession of the facility to the electricity grid and remains in favor of the operator in breach of the obligations of the manufacturer.
V. Encouraging the investors of small and roof photovoltaic power plants.
Many of the general obligations envisaged for investors in the law don’t apply for investors in small plants and roofs.
Three types of preference using objects are created:
- Power plants with installed capacity up to 30 KW, build on the roof spaces and facades of buildings and the adjacent immovable properties in urban areas.
- Power plants with installed capacity up to 200 KW, build on the roof spaces and facades of buildings for warehousing and manufacturing and the adjacent immovable properties in industrial areas.
- Power plants with installed capacity up to 1 MW using biomass, build in urban, industrial or agricultural sites.
Most preferred for small investors would be the 30 KW installations on rooftops and facades, as they won’t enter in the annual quotas of SEWRC and therefore won’t pay intentions guarantee and won’t request statement for eligibility, also won’t need approval of the project for a building permit.
VI. Status of projects in development, to date of enforcement of the law.
To law enforcement date there are many developing projects in various stages of readiness. They are basically divided in two stages – projects with preliminary and projects with final contract to join the grid.
The accession of power plants with final contract to date of law enforcement will be done by the previous order (the old law) only if the manufacturer has committed to build the accession facilities for its own expense or paid the price for accessing the plant. If the manufacturer hasn’t paid the accession fee or hasn’t committed to build accession facilities for its own expense, accession will be done under conditions agreed with the operator and the price for accession according the new RES Law.
Accession of power plants with preliminary contract to join the grid is done by the agreed conditions with the operator, but the term of the contract is updated with the law introduced term of one year, but it can’t exceed the term in the original preliminary contract. Also, the connection fee is according to the new law and within a month from the update of the preferential price (June 2011), the manufacturer must:
- provide guarantee or advance of the accession price in the amount of 12,500 € / MW for projects under 5 MW, or 25,000 € / MW for projects over 5 MW.
- present documents for ownership or acquisition of real rights for the properties on which the project will be build.
- present a copy of visa for design or enacted detailed development plan for the energy projects.
Issued statements for accession of projects, which hasn’t signed preliminary agreements to date of enforcement of the law become invalid.
Conclusion: The law was expected some time with hopes to regulate the RS energy market and to establish clear rules for investment in this sector. Many investors had expected FIT to be fixed with long-term contracts for purchase.
Therefore the law was adopted, the FIT is set to June and the rate for purchase of electricity from all facilities will be fixed at relevant FIT at the date of construction of energy facility. No one knows how many investors will build power plants and will obtain Act 15 (protocol for completed construction) by June 2011, to sign contracts for purchase of energy (PPA), fixed to current rate for PV – 0.36 € / KW and 0.09 € / KW for energy from wind power.
After the adoption of the law and regardless the current rate, all investors should expect the new FIT in June, also remains the question of what quotas will be announced for the construction of energy facilities up to June 30th 2012. Investors intending to purchase projects and build them will have to wait at least the announcement of the FIT in June 2011.
To sign a contract for purchase the energy by the new FIT, they will have to finish the project within 12 months from July 1st 2011. Investors intending to develop a project from scratch shouldn’t wait just the new FIT, but also the quotas for 2012, which will focus on areas with great potential and will also show the areas not appropriate for developing energy facilities. It’s also important to consider does the investor can finish the project, started from scratch, on time – 12 months within July 1st 2011, so he can keep the FIT in force for the year. It’s important to know that only the documentation preparation takes about 6 months.
Otherwise, if the investor doesn’t build the project on time, he risk to receive purchase price set by July 1st of next year, which is unknown until the annual decision of SEWRC.
Lawyer`s Office Tomovski
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