2014: New Rules for Wind and Solar Energy Producers in Bulgaria

From 1 January 2014 there is a new state fee in Bulgaria that applies to wind and solar energy producers. Another legislative change limits the applicability of the Feed-In-Tariff (FIT) for all renewable energy producers and threatens their financial stability.

The new state fee

The new state fee is equal to 20 % of FIT, applicable to wind and solar producers. However, the financial burden of this fee will be higher than 20% of the incomes of the wind and solar energy producers. This is due to: (i) the formula for the calculation of the fee and (ii) the newly introduced limitation of the FIT applicability. According to the formula, the new state fee is equal to:

FIT x QEP x 20 %, where “QEP” means the quantity of electricity, purchased from a producer.

However, as a result of the other change, reviewed below, not the whole electricity, produced by a wind or solar energy producer, will be purchased at the FIT level.

The limitation of the FIT applicability

According to the other change, the grid companies will no longer purchase the whole renewable energy at the FIT level. The FIT will apply only to such annual quantity of electricity, which is approved by a resolution of the Bulgarian energy regulator. The electricity, produced in excess of the approved quantities, will be purchased at a much lower price: the price at which the public supplier sells electricity to end suppliers and distribution companies.

The adoption of the changes and the effect

It is interesting that both changes have been introduced into the Bulgarian renewable energy legislation through the approval of the 2014 State budget. While it is logical for a state fee to originate from the State Budget Act, the limitation of the FIT applicability does not have anything in common with the fiscal laws. The FIT is the price, paid by the grid companies (private and state owned entrepreneurs) to the renewable energy producers for the energy produced by the latter. These proceeds are not directly related to the State budget.

Furthermore, both changes have been proposed at the last moment and approved by the Parliament without any grounding and without any preliminary feasibility study. However, apart from the fact that Bulgarian officials claimed in the media that the new state fee will bring only EUR 80 million into the state budget of EUR 9.8 billion. No motives have ever been disclosed by any official with respect to the limitation of the FIT applicability.

The President of Bulgaria announced that he will appeal the new rules as unconstitutional. Such appeal is the only local mechanism for protection of the affected investors. Regardless of the President’s opposition against the changes, it is widely accepted that these have already affected the investment climate in Bulgaria.