Renewable energy in Bulgaria

Bulgaria’s electricity transmission and distribution remains highly regulated. The high voltage transmission grid is operated by the state-owned Electricity System Operator EAD (‘ESO’) certified as an Independent System Operator in 2015 by the Energy and Water Regulatory Commission (‘EWRC’) being the national regulatory authority for utilities. Distribution is performed by three distribution companies, each licensed for specific territories. 

Generation projects with installed capacity of 5 megawatts and above are connected to ESO’s transmission grid, while projects with lower capacity connect to one of the licensed distribution operators. At present, Bulgarian legislation does not facilitate a formal tender process for securing grid connection for new renewable energy projects. Grid connection contracts are provided on a first come first served basis to greenfield projects. 

Renewable projects exceeding 20 megawatts require licensing by EWRC. In July 2021 the European Commission adopted the "Fit for 55" legislative package as part of the European Green Deal to reduce net greenhouse gas emissions by at least 55% by 2030,  transforming Europe to a climate-neutral continent by 2050.  

However, Bulgaria relies heavily on thermal power plants, with over 3,600 megawatts in capacity. In terms of renewable capacity, around 2,100 megawatts hydropower and 2,600 megawatts renewable energy (solar – 1700 megawatts, wind – 800 megawatts and biomass – less than 100 megawatts) are in operation. 

To achieve net-zero emissions, renewables must replace thermal power plants, which contributed 45% of electricity production in 2022. Bulgaria exported 11,639 gigawatt hours but imported 1,154 gigawatt hours of electricity in 2022. 

The National Recovery and Resilience Plan (‘NRRP’) of Bulgaria aims to decommission thermal capacity and invest in renewables, targeting 30,33% renewable energy by 2030.  The Integrated Energy and Climate Plan of Bulgaria 2021 – 2030 (the ‘Integrated Plan’) envisions adding 2,600 megawatts of renewable capacity by 2030. 

In 2023, ESO confirmed applications for renewable energy sources (‘RES’) projects totalling 40,000 megawatts. They anticipate adding 5,000 megawatts by 2031. Bulgaria may introduce a tender process for grid connections by the end of 2023. 

Despite Bulgaria’s limited areas with high wind energy potential, there is a potential to generate more than 3 gigawatts wind power energy which could meet a third of the country’s consumption demand. Offshore wind projects are not yet a focus, despite significant potential in the Bulgarian Black Sea. Currently, Bulgaria operates over 800 megawatts of wind projects 

Bulgaria has an annual average of 2,100 hours of solar irradiation. As of 2023 over 1,700 megawatts project are operational in Bulgaria and it is growing substantially. 

Geothermal energy is gaining attention, with legislative proposals to harness Bulgaria's geothermal potential. New assessments are planned with World Bank assistance, studies have indicated Bulgaria has potential of more than 700 megawatts geothermal heating capacity. 

In mid-2018, the parliament amended legislation to liberalise the energy sector for renewable energy producers, integrating them into the free market. Producers with total installed capacity of 4 megawatts had their long-term power purchase agreements (PPAs) terminated by law, and premiums were introduced, funded by the Bulgarian Energy Security Systems Fund (‘ESSF’).  

EWRC determines the premiums that producers receive from ESSF as a top-up up to the respective Feed-in-Tariff for each regulatory period (30 June – 1 July). In addition, ESSF pays premium based on the net specific production for a respective power plant (e.g. 1 188 megawatt hours per 1 megawatt installed capacity on annual basis for most of the operation solar plants). Thus, electricity produced in excess of that threshold is not subject to premium. 

Currently, only producers with installed capacity with less than 0,5 megawatt are subject to FiT. 

In terms of sales of electricity, several types of transactions are applicable to RES producers:  

• at freely negotiated prices by means of bilateral contracts – RES producers with plants commissioned after 1 January 2019 may execute bilateral corporate PPAs to sell the electricity produced;  
• on an electricity exchange market;   
• on the balancing market of electricity through a PPA in combination with balancing agreement; the most common approach for producers with plants commissioned before 1 January 2019 is to sell a part or all the electricity produced through a coordinator of a balancing group; usually such coordinator of a balancing group is a licensed electricity trader where such trader is obliged under the law to sell the electricity produced on electricity exchange market; 
• direct power line – an uncommon approach that secures a supply of electricity through a direct power line by a producer to a customer. 

Regarding cross-border sales, Bulgaria participates in Single Day-ahead Coupling (SDAC) and Single Intraday Coupling (SIDC) with Greece and Romania. 

As of 2023, renewable energy plants with total installed capacity up to 20 megawatts are no longer subject to licencing procedure, reducing administrative burdens on investors. Simplified regimes were introduced for small-scale (rooftop and façade) renewables and storage with total installed capacity of up to 5 megawatts. 

In 2023, the Bulgarian Parliament introduced specific legislative amendments regulating the electricity storage. The rationale behind the amendments is to provide balance and flexibility to the power system. Energy storage is a crucial step for low-carbon economy since it enhances the security of supply and the development of renewables capacity. Moreover, the storage can facilitate managing fluctuations in both price and consumption of electricity. 

The electricity storage facilities of any size are not subject to licensing procedure as explicitly stipulated by EA. 

Only energy storage facility operators are entitled to perform the energy storage activities, where the energy will be stored at facilities constructed to (i) a new or existing power production storage or (ii) independent facility. 

In early 2023, legislation introduced an exchange market for guarantees of origin, expected to commence operation by year-end, promoting transparency in 'green' certificate values. 

The government has proposed several amendments and supplements to the EA and ERSA, which are expected to become law when passed by Parliament: 

• Streamlined grid-connection procedures include a universal agreement for greenfield projects, replacing preliminary and final agreements. In case of lack of availability or partial availability of grid connections, temporary grid connection is proposed whereby the grid operator is obliged to invest into its grid in parallel with the investment of the producer. The agreement is finalised upon the investor's advance payment or bank guarantee.  This approach ensures early grid reservation, project clarity, and sets a 6-month deadline for project completion, preventing delays by grid operators. 
• Transitioning from FiT to premium contracts for renewable energy producers with a capacity of 0.5 megawatts or more, the proposed amendments grant EWRC the authority to adjust premiums quarterly, requiring changes if the estimated market price varies by more than 5% from the achieved and estimated price for the remaining term. EWRC would be obliged to change the premiums more frequently reflecting the electricity market price (i.e. once every three months) and allow the EWRC to apply a quantitative criterion (i.e. a more than 5% difference). 
  In addition, producers will receive a compensation from ESSF if during the previous calendar year, the total amount of their revenue from energy sold and premiums did not reach the value calculated based on their determined net specific production and the Feed-in-Tariff determined on this basis. 
  This top-up compensatory mechanism would benefit investors and encourage producers to seek an offtake price for their produced electricity that is close to the exchange market levels. 
• One of the most advantageous and awaited proposals is the introduction of tenders. According to the proposed changes, annual tenders would be published by ESO for connection to the transmission grid of future producers which shall enhance the development of the grid and allow a connection to the grid under economically viable and favourable conditions. 
• The easement rights for extension and construction of renewable energy power plants would arise in favour of the person exploiting the power plant by the power of law which shall significantly reduce the administrative burden for investors to have the necessary easement rights granted; 
• The development of agrivoltaic projects is on the agenda where power production facilities from solar energy will be treated as movable objects without the necessity of change of designation of the agricultural land under a simplified zoning procedure; 

Given upcoming legislative and market changes, international investors must commit to swift action in Bulgaria due to evolving regulations. It is very likely that the current investment ‘window of opportunity’ in Bulgaria will be short, following which there will be tenders for allocation of new capacities.  

CMS has advised on more than a half of the operational PV projects in Bulgaria. In addition, CMS successfully advised on the sale of the biggest greenfield PV project in Bulgaria (229 megawatts) and is highly active in numerous greenfield PV and wind projects. 

Tenders worth around EUR 1 billion (of which EUR 342 million from the Recovery and Resilience Facility) are envisaged in the NRRP to develop in Bulgaria 1,4 gigawatts total capacity renewable energy production and storage installations. The tender shall be divided into 5 tender procedures each for at least 258 megawatts. To meet the requirement, at least 30% of storage capacity installations must last a minimum of 4 hours. These power production sites with integrated storage facilities are designed to promote energy system decentralisation -  a crucial factor in achieving sustainability and energy system independence. 

Additionally, the NRRP envisages national storage infrastructure with 6,000 megawatts hours storage capacity worth EUR 800 million wholly financed from the Recovery and Resilience Facility.  

Bulgaria plans electricity storage projects to enhance system balance, strengthen its export position, and ensure cross-border flexibility. Bulgaria has a unique asset in its energy portfolio being Chaira Pumped Storage Hydropower Plant (‘PSHPP’), with a production capacity of 864 megawatts and a pumping capacity of 788 megawatts. Currently it is out of operation and the couple of governments have been trying to restart it. The PSHPP could play important balancing role by securing flexibility in the power system since (1) it can exploit its pumping capacity to balance the excess production and (2) produce power in the event of shortages. According to the Integrated Plant future investments of EUR 200 million are envisaged to enable the restart of its generation capacity. 

Bulgaria is considering introducing a tender system for connecting greenfield renewable energy projects, a reform not yet implemented in the country. 

Depending on the various sources of information (official or commercial), Bulgaria is envisaging at least 2 645 megawatts peak renewable capacity increase by 2030 (2,174 megawatts solar and 249 megawatts wind). The National Recovery and Resilience Plan of Bulgaria envisages 3,500 megawatts new capacity from renewable source of energy are envisaged to be put into operation, while ESO envisages new RES capacities of total capacity over 4,8 gigawatts to be connected until 2031, of which over 4,4 gigawatts solar and around 340 megawatts wind. These ‘green energy’ capacities would allow Bulgaria to retain its net electricity export position in the region.