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Sound market structure but a weak grid -- Bulgaria attracts serious interest

Even though Bulgaria only added 28 MW of new wind plant in 2007, the country doubled its installed capacity to end the year with 62 MW. The majority of these were single turbines, many of them veteran machines with rated capacities under 850 kW. The situation looks more promising for 2008, with one 33 MW project slated to start turning plus another 30 MW from small investors.

The national target is for renewables to meet 11% of electricity needs by 2011, compared with just over 9% today. Wind power will account for over 40% of the needed generation, or roughly 600 MW. The Association of Producers of Ecological Energy (AEEP) considers the target unreachable, however, given that some of the biggest projects under development will not break ground before 2009. AEEP estimates installed capacity will reach 150-200 MW in 2010 and hit 600 MW in 2015.

The major event of 2007 was the introduction of a new law to encourage the take-up of renewable energy. "It is a very good law," says AEEP's Velizar Kiriakov, the main points being a more attractive structure for guaranteed purchase prices and a requirement on electric utilities to sign 12-year power purchase agreements rather than the previous 8-10 year term.

The obligatory purchase price now stands at BGN 0.175/kWh (EUR 0.09/kWh) for plant operating at the equivalent of full load for to 2250 hours a year and less, and BGN 0.156/kWh (EUR 0.08) for those above that threshold. Energy produced from second-hand turbines only qualifies for BGN 0.12/kWh (EUR 0.06/kWh), a measure intended to encourage the use of newer technologies, though local owners argue the cost of producing from older machines is almost as expensive.

Renewable energy generators must be connected to the grid within specific deadlines, otherwise the grid operator faces a fine of BGN 30,000 (EUR 15,500). The law applies to all plant coming into service before 2010. After that the government envisages an incentive mechanism involving green certificates. An additional incentive for projects worth more than EUR 36 million is that they are eligible for "first-class investor" status, entitling them to state support for the construction of infrastructure, buying land and a fast-stream permitting process.

Investment target

The sound regulatory structure plus a good wind regime and relatively cheap land have made Bulgaria a target for foreign developers and investors. One such is Denmark's Global Wind Power, which entered the market about a year ago and is due to commission its first 10 MW facility near Kavarna on the Black Sea coast in April. Vestas is supplying the turbines. Global Wind Power expects to build around 60-70 MW over the next three to four years.

"Global Wind Power really believes in the Bulgarian market," says sales director Michael Skov. "We are seeing a lot of interest at the moment, with developers and investors looking for projects, especially from Denmark and Germany," he adds. Because the administrative procedures are slightly complicated, the majority are in search of fully permitted projects with grid connections already secured.

Foreign investors are also behind the 33 MW plant under construction at Kaliakra, near Kavarna. In this case Mitsubishi Heavy Industries has teamed up with local civil engineering company Inos-1. Mitsubishi will supply the turbines, while financing has been arranged through the Japan Bank for International Cooperation.

The Kavarna area of the Black Sea coast is a major focus for developers, despite concerns from environmentalists about the effect on local bird populations. Bulgaria's biggest wind farm to date is under construction near Kavarna, a 120 MW installation being developed by AES Geo Energy, a joint venture between America's AES and Bulgarian-German company Geo Power. Vestas is to deliver 60 of its V90, 2 MW machines mid-2009.

Elsewhere, Spain's Eolica Navarra has formed a joint venture with local firm Industrial Capital Holding to develop 60 MW in Suvorovo, while Germany's WPD and Plambeck Neue Energie, Iberdrola and CapGen (the development arm of turbine manufacturer Clipper), are all active in the market.

Not that everything is hunky-dory. One of the main constraints on development is the state of the grid thanks to years of under-investment. In some areas it is too weak to take any new capacity. Compounded with this, Kiriakov says national power company NEK and other electricity distributors do not provide sufficient information about where connection might be feasible, or about their plans for building new wires. Another issue is the difficulty of obtaining an environmental impact assessment permit, which depends on many different institutions and is not regulated by a single law. More accurate information about the wind power potential in Bulgaria would also help, says Kariakov.

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