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Bulgaria

Bulgaria

Bulgaria - New rules may spark investor exodus

BULGARIA: Prospects for the Bulgarian market are not bright, as legislative changes may make it more difficult for developers to access project financing.

Sentiment has been dampened by potential amendments to the already damaging 2011 renewable-energy law, which established that projects could only secure a feed-in tariff (FIT) for the first 2,250 hours of operation once construction completion is certified. The tariff is currently BGN 0.191/kWh (EUR0.098/kWh) but is revised downwards annually.

Before the 2011 ruling, the FIT was agreed for a project on the signing of a preliminary grid-connection contract. Under an amendment to the law due for discussion early this year, the FIT agreement date would be set further back, after a 72-hour operational test on the wind farm is conducted.

The problem with the current arrangements, according to Bulgarian Wind Energy Association executive director Sebastian Noethlichs, is that there are perhaps 18 months when the sponsor has to take on the full tariff risk and cannot find financing. The new rules could add another three months, he adds.

Yordan Merakov, Bulgarian country manager for Danish developer Global Wind Power, says that while developers try to adjust their strategies to stay in the Bulgarian market, there are investors that are planning to leave.

Merakov notes that uncertainty about the level of FIT that will be available means that larger projects with an implementation period of longer than a year are simply not feasible. As a result, he says, Global Wind Power is focusing on lower-capacity projects. In 2011 the developer commissioned its 10MW Hrabrovo wind farm and was completing a 4MW extension early this year. Depending on legislative developments and the FIT announcement in July, another 6MW project could be completed in 2012, he adds.

Overall, despite the legislative challenges, around 100MW of capacity could be added this year. Projects coming online are likely to include the 60MW Suvorovo wind farm developed by Eolica Bulgaria, a subsidiary of Spanish renewable-energy group Enhol, and a 22.5MW extension of the 50MW Vetrocom wind farm owned by Swiss energy group Alpiq.

This would be an improvement on 2011. Figures from Bulgaria's State Energy and Water Regulatory Commission show the country's installed wind capacity stood at 504MW as of 30 June 2011, up only 15MW from end-2010. "From what we've seen, there was almost nothing in the second half of the year," adds Noethlichs.

Even so, planned capacity still far exceeds available grid capacity. Later this year, the government is expected to roll out a timetable to develop the grid and start indicating how much grid capacity is available on a yearly basis.

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