Power policy

The renewables share in the gross final consumption of energy is set at 27% by 2030. At the end of 2020, Bulgarian installed capacity of renewables was almost 1,890GW (not considering large hydro) with a significant growth seen in solar PV installations. The share of renewables in the total power mix doubled in less than 10 years due to a generous feed-in tariff that fueled a solar investment boom.

As of July 1, 2018, feed-in tariff contracts with Renewable Energy (RES-E) producers with at least 4MW capacity were terminated. Other RES producers that were getting feed-in tariffs have been offered feed-in premium contracts. Pre-existing renewable electricity producers with a plant below 4MW, new rooftop or facade photovoltaic installations with a maximum installed capacity of 30kW and certain installations using combined cycle and indirect use of biomass are still eligible for a feed-in tariff. As part of the ongoing reform of the Bulgarian energy sector, on November 11, 2020, the parliament’s Energy Commission filed a new Bill for amending and supplementing the Energy Act. This continues the policy of pursuing full liberalization of the wholesale energy market and integration of the national market into the common European energy market. The Bill proposes two main changes: the replacement of cold reserve transactions with auctions, and conclusion of feed-in premium agreements for renewable producers with total installed capacity of between 0.5MW and 1MW.

Power prices and costs

Bulgaria is among the last countries in Europe to liberalize its power markets, with residential customers paying fixed tariffs and state-owned generators continuing to sell electricity on a regulated basis directly to some of the country’s largest consumers. The wholesale power exchange went live in 2016, but sales volumes have remained below 25% of final electricity consumption. From October 2020, all non-residential customers have been purchasing their electricity through the free market but the state utility NEK is still the industry's default supplier. In early-2019, several state-owned generators directed more of their output to the grid in response to rising power prices. The government's decision to switch existing renewables and other regulated generation to a contract-for-difference remuneration system is also intended to increase liquidity in the market.

Power market

Bulgaria’s energy market is dominated by state-owned players which include: Bulgarian Energy Holding (BEH), Kozloduy NPP, National Energy Company (NEK), Electricity System Operator (ESO), Bulgargaz, Bulgartransgaz and many others. However, liberalization and unbundling reforms rolled out since 2010 have opened up the generation, distribution and retail sector to “competition”. Despite the legal unbundling of the three distribution system operators from the vertically integrated undertaking, there is no real competition in the distribution market. There is only one licensed supplier in each geographical region. The investment company Bulgaria Energy Holding owns both transmission and generation capacity. The Independent Bulgarian Energy Exchange was sold to the Bulgarian stock exchange and is not owned by BEH since 2017. Generally, all electricity produced in Bulgaria is sold through IBEX. The wholesale market operates on a non-discriminatory basis. The transmission system operator ESO can refuse to purchase/transmit renewable electricity if there is no grid capacity or if it could compromise grid stability.

The Bulgarian electricity market is currently in transition, but nuclear power is expected to remain dominant. Construction of the Kozloduy nuclear power plant could provide a significant opportunity for investment, although the government is gradually decreasing its coal power capacity to replace it with renewables. This has put pressure on retail prices and attracted international investors such as CEZ from Czechia or Energo-Pro. In 2021, CEZ won regulatory approval to sell its Bulgarian assets to local financial group Eurohold, after a long-delayed 335 million euro ($406.22 million) deal. Bulgaria Energy Holdings remains the only entity that can sell electricity directly to customers at below-market prices and without going through the power exchange. The government is continuing to take slow steps toward the full liberalization of the power markets, with the support of the EU Commission and development banks.

The country has recorded no significant volume of clean energy asset finance since the government imposed retroactive cuts to renewables subsidies in 2012. The government did not allocate any new budget for clean energy investment before 2020 as the country was ahead of its target, but has announced that small-scale solar (< 30 kW) will be supported after July 2020.

Doing business and barriers

The state capture of the energy sector, the high dependency of the country on imports of Russian gas and technology, the frequent changes in the legislative and regulatory environment and energy poverty are the major challenges in the energy restructuring process. Confidence in the renewables space remains fragile due to the retroactive policy intervention in 2012. Changes in the FiT scheme increased political uncertainty and hurt investor confidence. Domestic policy has focused on adding new small hydro capacity, but the country's damaged ecosystem is unlikely to be able to support the volume of small hydro projects that have already received permits. Support for small-scale solar PV could restore some of the lost faith in the Bulgarian renewables sector.

2019 updates to legislation standardized and simplified the rules for connecting new projects to the grid.

The Bulgarian coal power fleet does not meet current EU emissions standards. The interim cabinet proposed - in the National Recovery and Resilience Plan - to direct 970 million euros in grants and 1.12 billion euros in financing to the energy sector. Most of the free funds would back solar power projects with battery storage (449 million euros), followed by electricity and gas transmission and hydrogen and geothermal energy plants.

There have been barriers to renewables regarding dispatch times and forecasts: NEK was sanctioned for abusing its dominance in the balancing market for renewables in early 2020.

EV market

The main sources of financing of ‘green’ public transport projects in Bulgaria are the EU Structural Funds and the Cohesion Fund disbursed via different operational programs. The biggest support scheme for renewable energy sources used in transport is a biofuel quota system. This scheme obliges companies importing or producing petrol or diesel to ensure that biofuels make up a pre-defined percentage of their annual fuel sales. In 2020, EV sales grew by over 77%.

EV policy

Since 2012, Bulgaria has a national action plan for the promotion and uptake of green vehicles. One of the benefits is that, in some cities, electric and hybrid vehicles can park for free in special green and blue spots. Electric vehicles have been exempt from the annual vehicle tax since 2013.

In terms of charging infrastructure, a legislation was drafted in 2019 for hydrogen fueling stations. The ministry of Public Development and Public Works guaranteed that under the best-case scenario, Bulgaria would have 50 stations by 2030. The main sources of financing are the EU Structural Funds and the Cohesion Fund. The share of renewable energy in transport is set at 14.2% in 2030 in the final plan and can be achieved through a mix of EVs, biofuels and hydrogen.

Buildings market

Bulgaria offers strong incentives for renewable heating policies with at least three strategic documents for buildings beside the National Energy Efficiency Action Plan 2014-2020. Apart from that, obligations related to the use of renewable sources to produce energy in buildings are defined in the national legislation. Bulgarian energy performance standard is directly connected to tax credit incentives, since the improvement of renewable energy in buildings is promoted through a tax rebate granted for class A or B energy performance certificate. Also, machinery and equipment acquired that increases energy efficiency secures an accelerated tax depreciation benefit.

Buildings policy

The share of renewables in heating and cooling is projected to reach almost 43% by 2030. The plan estimates an annual increase of renewables in heating and cooling of 1.15 percentage points. In order to achieve these targets, the central government released a soft loan scheme for renewable heating systems covering new high-efficiency boilers, separate domestic hot water heaters for summer usage, high efficiency fossil fuel or electric-powered heat pumps, among others.