Longer terms for renewable energy power purchase agreements in Bulgaria

The mandatory terms of Power Purchase Agreements have been extended under recent amendments to the Renewable and Alternative Energy Sources and Biofuels Act.  

They now have mandatory terms of 25 years for geothermal and solar energy and 15 years for electricity from other renewable energy sources (apart from hydro-electric plants with capacity above 10MW). 

Power plants which are already in operation may take advantage of the new terms as long as they renegotiate their contracts by 31 March 2009.  The terms are also available to new producers if they start production before 31 December 2015. 

The extended terms will make it easier for Bulgarian renewable energy projects to secure funding.  However, some investors and developers are still concerned that the off-take price is not fixed for the entire term but is to be set each year by the regulatory body (the State Energy and Water Regulation Commission). 

Bulgaria’s renewable energy targets are set by the European Commission and form part of its new draft energy strategy. This aims to increase the proportion of total energy consumption derived from renewable energy sources to 16% by 2020, which would represent 6.6% growth compared to 2005.  This will largely be achieved through hydro and wind energy (with hydro power expected to play a dominant role in the medium term), although Bulgaria does have other renewable energy sources such as solar, geothermal and biomass.   

Other incentives and measures to encouraging the development of renewable energy include:

• compulsory off-take of all electricity from renewable sources
• preferential off-take prices (to be determined each year under a special formula)
• priority connection to the grid
• long term PPAs
• special investment status

A further incentive for investors and producers is the availability of funding: the Bulgarian Energy Efficiency and Renewable Energy Credit Line, supported by seven local banks, has been already started; while further financing for projects is available from EU energy funds such as “Intelligent Energy - Europe” and framework programmes for scientific research and presentations. 

Law: amendments effective 14 November 2008 to the Renewable and Alternative Energy Sources and Biofuels Act of June 2007