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Stable framework sparks lots of activity -- Triple jump for Bulgaria

Bulgaria nearly tripled its installed wind capacity last year to take the total to 157.5 MW at the end of 2008 from 57 MW a year earlier. This year it is set to do the same, says the Association for Producers of Ecological Energy (APEE), which forecasts cumulative capacity in 2009 rising to 426.5 MW. Progress is not likely to stop there. Requests to connect some 6 GW of wind power to the grid have been filed with Bulgaria's National Electric Company (NEK). Although APEE's Velizar Kiriakov believes around 90% of these may be outdated, even if just 10% proceeds, Bulgaria's wind market could pass 1 GW in the next few years.

Interest in Bulgaria from wind project developers is coming from far and wide -- and is growing. Bulgaria's economics and energy ministry revealed in February that US firm General Electric is considering plans for a 120-500 MW wind farm and has identified the municipality of Mirkovo as a potential site.

"We see Bulgaria as a very positive and growing market," says Michael Skov of Denmark's Global Wind Energy, which hopes to bring 50-78 MW of wind plant into operation in the country this year. The company is using turbines from Danish Vestas for the various projects, just as it did for a 10 MW wind farm that came into operation last year at Kavarna on the Black Sea coast.

Kavarna is Bulgaria's wind development hotspot. Last year Kaliakra Wind Power, a joint venture between Japan's Mitsubishi Heavy Industries (MHI) and local construction company Inos-1, also completed a 35 MW project using MHI 1 MW turbines at Kaliakra Cape, Kavarna (Windpower Monthly, October 2008). Further ambitious plans for Kavarna are underway, but it is Vestas, not MHI, which is set to dominate the supply market in the near future. Project developer AES Geo Energy, majority-owned by American utility AES, is now building the 156 MW St Nikolas wind farm using 52 Vestas turbines, having recently secured a EUR 198 million, 15-year non-recourse financing deal for the project, covering nearly 75% of the EUR 270 million project cost (Windpower Monthly, January 2009). Bulgarian-German company Geo Energy is the other partner in the company.

Vestas 2 MW turbines are also being used for a 50 MW wind farm at Balgareva, Kavarna, which is being developed by Austrian utility EVN and German wind developer Enertrag. The turbines are due to be up and running by the end of this year. That project is just the first phase of what will eventually be an 80 MW development.

Other companies actively developing wind projects in Bulgaria include Italian utility Enel, Spain's Eolica Navarra, Austria's Raiffeisen Energy and Environment, Germany's Plambeck and local players, such as investment vehicle Disib. Neko, a Greek-registered company majority owned by NEK, is also reportedly entering the market with a 72 MW wind project in southern Bulgaria.

A stable market framework lies behind the surge in activity. Bulgaria's utilities are obliged by law to buy all wind produced electricity at a fixed rate for 15 years, raised in November from 12 years previously. At present, the rate is BGN 0.186/kWh (EUR 0.096) for electricity produced during the first 2250 hours of operation at the equivalent of full load each year (equivalent to a capacity factor of 25.7%). Once the production cap is reached, the purchase rate drops to BGN 0.168/kWh (EUR 0.086) for the rest of the year. The cap avoids the trap associated with fixed power purchase prices of paying overly generous sums for electricity from turbines in windy locations while not paying enough to make less windy locations profitable. Significantly, wind farms that begin operating in Bulgaria by 2015 are now eligible to benefit from the premium price. Until last year, only projects online by 2012 were eligible.

On the downside, market players agree that Bulgaria's power grid needs bolstering. "NEK has to fund investments in a nuclear power plant and they get very little money for investments in the grid," says Ken Lefkowitz of New Europe Corporate Advisory, a finance and advisory firm based in Sofia. "They are regulated on a cost-plus basis, with a two to three percent return on assets, so they do not have a real incentive to invest quickly in the grid."

Environmental and wildlife protection issues have also delayed or put a stop to some projects. An important bird migration route, Via Pontica, crosses the wind-rich Black Sea coast. While some Bulgarian wind farms have been located in protected areas, litigation is likely to be par for the course. One solution might be to favour projects a bit further away from the sea, says Lefkowitz. "Especially within ten kilometres of the Black Sea Coast, the bird issue is particularly sensitive, but if you go a bit inland, wind is still good and bird issues fall off quite a bit," he says.

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