Key findings
- The Bulgarian regulatory framework provides adequate remuneration and incentives for the promotion of RES through active customers.
- However, the administrative hurdles are a show stopper to the rise of prosumers.
- The implementation of the Clean Energy Package could help unleash the vast prosumer potential, while aiding in reducing the enormous pollution levels.
- One-Stop-Shops according to art 25 of the Electricity Directive can exponentially increase the amount of electricity produced by prosumers.
Introduction
In 2016 the European Commission proposed a game-changing legislative package aimed at enabling the decarbonisation of the energy systems. This legislative package consists of several regulations and directives aimed at putting consumers at the heart of the energy transition and turning them into “Active Consumers” or so-called prosumers. That is, allowing end consumers to invest into renewable energy sources for their own consumption and participate in all energy market; meaning less reliance on centralised fossil-fuel powered stations.
Most importantly the European Union, legally, recognized the existence of prosumers through article 2(14) of the Renewable Energy Directive 2018/2001 (RED II) and article 2(8) of the Electricity Directive (EU) 2019/944. Important elements to note are that the two definitions allow for the generation, consumption, storing and selling of excess electricity, but the definition of “Active Customers” also allows for the participation in flexibility or energy efficiency schemes. This participation is the main incentive for prosumers to invest in renewable energy sources whose electricity can then be sold on the liberalised market for a profitable remuneration. The requirement for adequate remuneration as the main driver behind the promotion of “active customers” stems from article 15 of the Electricity Directive, along with article 21 of RED II.
What can Bulgaria gain from the Clean Energy Package?
This opportunity is important for several reasons. Today, around 45.9% of the electricity is produced through burning of coal, resulting in Bulgarian citizens having to “breathe in air that is considered harmful to health”[1]. This pollution from coal leads to the death of 217 per 100,000 people, resulting in the highest rate of premature deaths due to air pollution in the EU[2]. This pollution also leads to health cost amounting to €4.6 billion per year[3]. The problem is exacerbated by the fact that the average household still uses either firewood (63%)[4] or coal (32%)[5] as the main source of heating, further adding to the health and pollution problem. Furthermore, since “coal-fired generation of electricity and heat contributes to over 90% of the GHGs in the sector[6], Bulgaria has to cover carbon allowances under the EU ETS. This expenditure amounts to over 150 million euros for 2019 for coal-fired power plants such as Maritsa East 2[7]. The new regulation stemming from CEP imposing further restrictions on coal means that Bulgaria will face a continuously rising price of producing electricity[8]. This will result in “insufficient electricity and high prices”[9], thus creating a very illiquid market, lower competitiveness and potentially detrimental effects on the security of supply if no alternative is found. It is within this context that prosumption can have a beneficial effect upon the environment, competitiveness and security. By promoting electricity production from RES through prosumers Bulgaria can reduce the net amount of GHG, lowering the amount of additional carbon credits under the EU ETS, and rely less on foreign import of gas, which currently stands at 98% from Russia.
Regulatory framework for prosumers in Bulgaria
The current Bulgarian legislation lacks a clear legal definition of what prosumers are, or a clear demarcation on how they differ from other producers of electricity. Instead, the only legal difference stems from the capacity of electricity producers. Up to 10 kW maximum capacity is considered residential, 10 to 250 kW commercial, and >250 kW industrial. This is shown by the split of support schemes aimed at consumers who wish to produce electricity on a small-scale.
Renewable energy installations with a capacity below 5 kW and up to 30 kW are supported through a feed-in tariff (FIT). The FIT is determined annually by the Energy and Water Regulatory Commission (art. 32 para. 1 of Energy from Renewable Sources Act). These tariffs are revised on 30th June every year, meaning that the tariff rates can drastically differ from year to year. As will be shown below, the FIT is determined and comes into force on the date on which the plant was put into operation. The FIT’s calculations include the balancing cost that may arise during the exploitation of the facility and is subject to change by the Energy and Water Regulatory Commission on the 30th of June every year as mentioned above (art. 31 item 7 Energy Act).
Under the current framework rooftop or façade-integrated small-scale installations will benefit well from the Clean Energy Package. The first scheme is for electricity producers with maximum capacity of up to 5 kW which is set at BGN 0.21181/kWh (€ 0.11/kWh) and maximum amount of 1,261 kilowatt hours per year. The Bulgarian government specifically focuses on PV installations with a maximum installed capacity of up to 30 kW[10]: The support scheme for producers between 5-30 KW amounts to BGN 0.20397/kWh (€ 0.10/kWh) with the same upper limit of 1,261 kilowatt hours per year. This is to say that despite the relatively good incentives for Bulgarian “Active Customers”, the Energy and Water Regulatory Commission expects only 1,119 MW of new capacity until 2030. In terms of self-consumption, Bulgaria does not impose any licensing regimes thus allowing for anyone to establish a solar facility for self-consumption at home.
Show stopper: Bureaucracy
The main legal challenges to the green transition are cumbersome administrative procedures that do not facilitate the rapid promotion of RES by prosumers. In order to build a RES facility up to 30 kW for the purpose of selling excess electricity on the liberalised electricity market, the prosumer has to go through numerous administrative hurdles.
Firstly, filing an application to one of the three DSOs. Based upon this application, the DSO determines whether they want to conclude a contract with the “Active Customer”, the conditions under which the said contract will be executed and how the “active customer” is to be connected to the grid. The application to the DSO must include “a granted permission from the local authorities”. In order for this permission to be granted, the “Active Customer” has to present the local municipal authorities with an opinion from an engineer detailing exactly how the installation is to be constructed. Within the engineer’s opinion, the drawings, schemes, calculations, instructions, brands and models of the installation in consideration have to be included. In addition , the “Active Customer” has to present a notary statement of ownership of the land or building on which the installation is to be constructed. When presenting the proof of ownership the “Active Customer” has to attach a proof that the installation is not placed upon ‘arable land’ – a certificate which is acquired through the local municipality after another time-consuming process. There are multiple municipalities, each with different rules, regulations, and conditions on the exact documents required for the granting of building permission.
Once the permission from the local authority is gained, the “active customer” can apply at the DSO in order to draft a contract. It is within this stage that the FIT is determined between the DSO and the Energy and Water Regulatory Commission. When the application is launched, the DSO contacts the Energy and Water Regulatory Commision presenting a prediction of the total RES electricity the DSO anticipates for the current year. Based upon this prediction, the FIT for the individual “Active Customer” is determined, followed by the conclusion of the contract for a period of 20 years. Upon conclusion of the contract, the “Active Customer” may begin construction of the installation. Once the installation has been completed and the connection between the “Active Customer” and the DSO is made, the local municipal authorities must test and inspect the facility whether it complies with the plans as presented at the permission granting stage.
By general estimates, from the moment the “Active Customer” applies for the construction permission to the local authorities to the day when she or he is able to sell electricity it takes between 90 to 120 days for installations up to 5 kW. The costs for the engineer’s opinion, application for construction permission, proof of ownership and that the land is not arable amounts to 6501 BGN ( € 3317,39 ). For installations between 5-30kW the administrative time is around 180 days. Regarding the costs, it is important to know that Bulgaria is the poorest member of the European Union.
Prosumer-Booster: One-Stop-Shop
As presented by article 25 of the Electricity Directive “Member States shall ensure the provision of single points of contact”. Considering the massive bureaucracy Bulgaria can exponentially increase the amount of electricity produced by “Active Customers” by implementing the so-called one-stop-shop. Having one governmental agency that is responsible for the whole administrative process, the time invested by “Active Customers” will significantly decrease. With this stimulus, more and more people will thus invest in RES in order to benefit from the attractive feed-in-tariffs. By doing so, Bulgaria can begin the gradual phasing-out of coal-fired power plants by June 2021, rather than the current deadline of 2050 as establish in Bulgaria’s Integrated Energy and Climate Plan[11].
[1] (Env-health.org, 2020) <https://env-health.org/IMG/pdf/heal_briefing_air_bulgaria_eng.pdf> accessed 12 June 2020.
[2] Ibid.
[3] Ibid.
[4] Frances Fahy, Gary Goggins and Charlotte Jensen, Energy Demand Challenges In Europe (Springer International Publishing 2019).
[5] Ibid.
[6] Bulgaria’s National Energy and Climate Plan 2021-2030
<https://ec.europa.eu/energy/sites/ener/files/documents/bg_final_necp_main_en.pdf>.
[7] Energiewende Team, ‘Why Can’T Bulgaria End Its Coal Addiction? | Energy Transition’ (Energy Transition, 2020) <https://energytransition.org/2019/01/cant-bulgaria-end-coal/> accessed 12 June 2020.
[8] Igor Todorović, ‘Delaying Coal Phase Out Would Be Expensive For Bulgaria, Romania And Greece’ (Balkan Green Energy News, 2020) <https://balkangreenenergynews.com/delaying-coal-phaseout-would-be-expensive-for-bulgaria-romania-greece/> accessed 12 June 2020.
[9] Ibid.
[10] http://www.res-legal.eu/search-by-country/bulgaria/tools-list/c/bulgaria/s/res-e/t/promotion/sum/112/lpid/111/
[11] https://ec.europa.eu/energy/sites/ener/files/documents/bg_final_necp_main_en.pdf, page 26
