In 2002, Bulgaria ratified the Kyoto Protocol to the United Nations Framework Convention on Climate Change, which imposed certain targets on Bulgaria to reduce greenhouse gas emissions by decreasing reliance on conventional energy sources and encouraging renewable energy production.
In 2003, Bulgaria adopted the Energy Act (EA) seeking to develop its renewable energy sector. This act established general conditions for efficient use and generation of energy from renewable sources, but contained no concrete investment incentives.
Bulgaria joined the European Union on 1 January 2007 and, as part of the accession process, accepted mandatory obligations for the development of renewable energy production. Bulgaria undertook the obligation to achieve an 11% share of electricity from renewable energy sources (RES) in national gross consumption of electricity by 2010.
Accordingly, in 2007, Bulgaria adopted the Renewable and Alternative Energy Sources and Biofuels Act to establish a system for producing electricity from RES and to create a favourable investment climate. Under this law, electricity from RES was supported primarily through a feed-in tariff (FiT) scheme. Eligible producers of electricity from RES were entitled to enter into long-term power purchase agreements (PPAs) with the Public Supplier, the State-owned National Electricity Company, EAD or directly with end-suppliers. The suppliers were required by law to purchase all RES-generated electricity, other than that sold on the free market and that which was used for the plants’ own consumption.
The FiTs were subject to annual review by the Bulgarian Energy and Water Regulatory Commission (EWRC or the Regulator). The law provided a formula by which the Regulator calculated the applicable FiT rate, creating a certain amount of transparency in the system, where FiTs could not decrease by more than 5% per year.
Thus, as of 2008, RES investors in Bulgaria were guaranteed long-term PPAs for the purchase of all the electricity they produced at preferential prices that would not decrease by more than 5% per year.
In 2009, the European Parliament and Council issued Directive 2009/28/EC, which provided that 22.1% of overall energy consumption within the EU should be produced from RES. Bulgaria’s target was to achieve 16% of its total energy consumption from RES by 2020.
The FiT program that Bulgaria developed under the 2007 legislation did not attract enough investment in the renewable energy sector for Bulgaria to meet its new EU obligations. Therefore, at the beginning of 2011, the government approved a draft Energy from Renewable Sources Act (ERSA) to create a more favourable investment climate and to achieve the new EU targets. On 3 May 2011 ERSA entered into force and promoted an attractive and stable FiT support program for renewable energy projects. ERSA confirmed that once a particular FiT applied to an eligible plant, that plant was entitled to the specified tariff for the full duration of its PPA (20 years for solar, geothermal and biomass, 15 years for hydro up to 1MW and 12 years for wind). ERSA also specifically provided that suppliers were required to purchase all electricity produced from RES at the fixed FiT, other than the electricity that producers elected to sell on the free market and that used for the plants’ own consumption.
Thus, the 2011 incentive program resulted in substantial investment and enabled Bulgaria to be ahead of schedule to meet its EU targets by 2013. Furthermore, Bulgaria was ranked second among the top ten emerging markets for renewable energy.
When Bulgaria realised in July 2012 that it would reach its target ahead of schedule and that the incentives programme would continue to attract more investment in the renewables sector, it decided – along with many other European countries – to take measures to withhold further investment, especially in solar and wind. This led to the gradual decrease of the FiTs until their final revocation for RES projects to be developed after 27 December 2013, which in practice put an end to RES investments in Bulgaria for the coming years.
Between 2016 and 2018, the Bulgarian government adopted certain changes to encourage small roof-top power plants and power plants with installed capacity up to 4MW by limiting the FiT application only to these small producers.
In mid-2018, the government changed the legislation in order to arrange for producers with total installed capacity of 4MW and above 4MW to enter into feed-in premium agreements and terminate the long-term PPAs. Such premiums are arranged to be paid by the newly established Bulgarian Energy Security Systems Fund (ESSF).
Currently, only producers with installed capacity up to 1MW can be subject to FiT and this threshold is likely to decrease to 0.5 MW.