|Summary of the new Renewable Sources Energy Act|
On April 21st 2011 Bulgarian Parliament adopted the new Renewable Sources Energy Act (hereinafter referred to as “the Act” for short). The Act was officially announced in the State Gazette № 35 dated 3 May 2011, and became effective from 3 May 2011.
The Act revokes the previous Renewable and Alternative Energy Sources and Biofuels Act, but continues the policy of encouragement of the process of generation and consumption of electric energy produced from renewable sources, which constitutes one of the main objectives of the Act. To this end, the Act establishes a number of incentives enhancing production of electricity from renewable energy sources. Among these, the following major incentives can be mentioned, in particular:
a) Granting of a guaranteed access of the electric energy generated from renewable sources to the transmission and distribution electric grids;
b) Guaranteed transmission and distribution of the electric energy generated from renewable sources;
c) Obligatory purchase of the electric energy generated from renewable sources for a particular term, specified in the Act;
d) Determination of a preferential price (feed-in tariff) for purchase of the electric energy generated from renewable sources.
The Act introduces a new mechanism for connection of plants for generation of electricity from renewable sources to the respective electric grid. Under this mechanism, each year the operators of the distribution electric grids shall, until 28 February, present to the operator of the transmission electric grid the capacities, subject of a forecast for a period of one year, which could be granted for connection to the distribution grids of generation plants. The forecast shall be made in accordance with the respective geographic locations for connection and the relevant currency levels.
Each year the operator of the transmission electric grid shall, on the basis of its 10-year plan for development of the transmission grid, as well as the forecasts under the preceding paragraph, submit until 30 April to the State Commission for Energy and Water Regulation (hereinafter, “the SCEWR”) and the Minister of Economy, Energy and Tourism, the electric capacities which could be granted for connection during the forthcoming one-year period. The capacities approved by the SCEWR shall be effective for the period between 1 July of the current year and 30 June of the next calendar year.
Connection to the Grid
Investors who would like to develop an energy plant for generation of electricity from renewable sources or to expand an existing such plant, shall submit to the operator of the respective electric grid an application for connection as per the locations chosen by them and duly approved by the SCEWR. Upon filing of an application, the investor shall deposit a guarantee for participation in the procedure at the amount of BGN 5,000 for each MW of the particular capacity stated in the application.
Should the operator of the respective electric grid find a particular application admissible, it shall conduct a research and subsequently issue an opinion on the conditions for, and mode of connection to the grid.
It should be emphasized that the above outlined mechanism for connection of plants for generation of electricity from renewable sources to the respective electric grid, shall not be applicable to the following types of energy plants:
1. Plants with total installed capacity up to 30 kW, designed for installation over roof and facade constructions of buildings, as well as in the appurtenant regulated land plots;
2. Plants with total installed capacity up to 200 kW, designed for installation over roof and facade constructions of buildings for industrial and warehouse activities, as well as in the appurtenant regulated land plots;
3. Plants with installed electric capacity up to 1 MW for production of electricity from biomass, designed for construction in urbanised territories, agriculture units or industrial zones.
The above outlined mechanism for connection to the electric grid shall neither be applicable to energy plants for generation of electricity from renewable sources, if upon filing of his application for connection, the investor declares that he will not make use of the applicable feed-in tariff.
As a matter of principle the costs for construction of the equipment necessary for connection of the energy plant to the respective grid to the point of ownership of the electric equipment, shall be borne by the investor. Reciprocally, the costs for construction of the connection infrastructure from the point of ownership of the electric equipment to the point of connection, as well as the costs related to reconstruction and refurbishment of the electric grid, shall be borne by the owner of the respective grid.
Upon conclusion of a preliminary agreement for connection to the grid, the investor shall owe to the transmission company or the respective electric distribution company an advance payment at the amount of:
1.BGN 50,000 for each megawatt (MW) of installed capacity of the future energy plant, when the total installed capacity exceeds 5 MW, or
2. BGN 25,000 for each megawatt (MW) of installed capacity of the future energy plant, when the total installed capacity is up to 5 MW (including 5 MW).
This advance payment shall form part of the price for connection to the grid.
The term of the preliminary agreement for connection to the grid shall be no longer than one year, as prior to expiry of this term the investor shall file a written application for conclusion of a connection agreement. The connection agreement shall respectively be signed for a term which shall not exceed the deadline for commissioning of the energy plant and the necessary connection equipment, as in the case of one-phase commissioning this term shall not exceed 2 years.
The electricity generated from renewable sources shall be purchased by the public supplier (currently this is the national transmission company “NEK” EAD) or respectively by the end suppliers (the three electric distribution companies operating on the territory of Bulgaria) at a preferential price (feed-in tariff). It is important to emphasize that the feed-in tariff which shall be applicable towards the particular project shall be the tariff effective as of the moment of completion of the construction works for the plant.
Power Purchase Agreements
The electricity generated from renewable sources shall be purchased by the companies mentioned in the preceding paragraph through signing of long-term power purchase agreements. The terms of these agreements, depending on the type of the renewable source, shall be as follows:
1. Twenty years – for electricity generated from geothermal and solar energy, as well as for electricity generated from biomass;
2. Twelve years – for electricity generated from wind energy;
3. Fifteen years – for electricity generated from hydroelectric power stations with installed capacity up to 10 MW, as well as for electricity generated from other renewable sources.
It is to be further emphasised that, as a matter of principle, the purchase price shall not be amended for the entire term of the power purchase agreement. The only exception to this principle has been envisaged for contracts for purchase of electricity generated from biomass, where the SCEWR shall be authorised to review and amend the applicable feed-in tariff on an annual basis.
Each year, not later than 30 June, the SCEWR shall determine the feed-in tariffs for purchase of the electricity generated from renewable sources, except for the energy generated from hydroelectric power stations with installed capacity above 10 MW. The tariffs shall be determined in accordance with the applicable secondary legislation, taking into account the particular renewable source, the type of technologies, the installed capacity of the plant, the place and mode of installation of the equipment, as well as:
1. the investment costs;
2. the return rate;
3. the structure of the capital and the investment;
4. the output capacity of the installation as per the type of technology and resources used;
5. the costs related to achieving a higher degree of environmental protection;
6. the costs for raw materials for energy generation;
7. the costs for transportation fuel;
8. labour costs;
9. other exploitation costs.
The feed-in tariff for electricity generated from renewable sources shall be fixed for the entire term of the respective power purchase agreement, as after expiry of this term the tariff shall no longer be applied.
Treatment of Current Investment Projects
The Act also addresses current investment projects by re-regulating the conditions for their connection to the electric grid, as well as the applicable feed-in tariff thereto, depending on the stage of completion of the particular project.
Connection of energy plants for production of electricity from renewable sources, for which as of the moment of entry of the Act into effect (Effective Date), there are connection agreements signed, shall be executed as follows:
a) under the statutory provisions effective till the Effective Date, if the investor, as of the Effective Date has paid the price for connection, or has undertaken the obligation for construction of the connection infrastructure, or
b) in accordance with the Act, if any of the conditions under a) above, has not occurred.
In addition to the above, for energy plants (except for hydroelectric power stations with capacity above 10 MW) which have been put into operation as of the Effective Date, the long-term power purchase agreements shall keep their effect, as the applicable feed-in tariff shall be the one approved by the SCEWR as of the Effective Date. For example, for photovoltaic projects which as of the Effective Date have been fully commissioned, the applicable tariff shall be as follows:
- for electric power stations up to 5 kWp: 760.48 BGN/MWh;
- for electric power stations above 5 kWp: 699.11 BGN/MWh.
For energy plants (except for hydroelectric power stations with capacity above 10 MW), for which as of the Effective Date there are preliminary agreements (for which the above listed three conditions have been met) or connection agreements signed, the electricity generated shall be purchased at a price corresponding to the tariff applicable as of the moment of drawing Protocol Act 15 (as clarified in the above paragraphs) for the plant.
The feed-in tariff relevant to the plants under the above two paragraphs shall be applied for the entire term of the respective power purchase agreement.
Within one month as of the Effective Date the SCEWR shall determine and announce the new feed-in tariff applicable for the forthcoming regulatory period (1 July 2011 – 30 June 2012). Until the determination of the new tariff, the current tariff approved as of the Effective Date, shall apply.