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Bulgarian PV Operators to Pay for Their Own Feed-in Tariffs

Within the next two weeks, the Bulgarian National Assembly is expected to legitimize a retroactive “grid access fee” for renewable energy producers. The respective amendments to the Energy Act and the Renewable Energy Sources Act were recently adopted by the Committee on Economic Policy, Energy and Tourism.

The new legislation would give a legal basis for “temporary fees” that were introduced by the State Energy and Water Regulatory Commission (SEWRC) in September. The fee complies with a request from the distribution grid operators EVN Bulgaria Electricity, CEZ Bulgaria and Energo-Pro.

PV producers in Bulgaria now pay up to 39% of their monthly PV revenue from feed-in tariffs to the grid operators. The 39% are imposed on PV systems that were connected to the grid between 1 January and 30 June 2012. The respective effective FIT for ground mounted systems of up to 10 MW, for example, dwindles from €0.248/kWh to €0.151/kWh. The fee rate for systems commissioned in 2H’11 is 20%, for systems connected in July and August 2012 it is 5%, and for power plants finished after that only 1%.

The distribution grid operators have based their request for a grid access fee on allegedly increased costs for grid management caused by the high volume of renewable energy systems that became operational this year. In fact, the high FITs for PV systems valid in the first half of this year have resulted in a boom. At least 500 MW of new PV capacity is estimated to have been connected before the tariffs were cut by up to 50% on 1 July.

The declared use of the fee for grid access is controversial though, as all electricity consumers in Bulgaria already pay grid access fees. This means that PV operators would now have to pay twice for the grid access.

Moreover, the argument of increased management costs does not explain the strong correlation between the level of the “grid access fees” with the levels of the respective feed-in tariffs. In fact, SEWRC has already conceded that the main reason behind the fee was to alleviate the FIT payments that have to be made by the three utilities. The very high FIT and the apparently unexpected boom in 1H’12 have allegedly driven the grid operators into the red.

So, PV producers in Bulgaria now have to “subsidize” their own feed-in tariffs, for the benefit of the utilities’ revenues. Lawyers claim this mechanism conflicts with EU Directive 2009/72/EC, which prohibits cross-subsidies between transmission, distribution and electricity supply.

A more just way to finance the PV incentives would have been an increase of electricity prices. However, as prices were lifted by 13.6% in July, another increase is likely to have been considered inconvenient, in particular with national elections coming in 2013.

Observers of European PV markets are not surprised by the painful situation in Bulgaria. Far too high funding levels tend to lead to expensive bubbles that eventually burst. Often then the responsibility is shifted to the PV operators.

A major example was the Czech PV market, which was nearly wiped out by utilities (among them CEZ!) and the Czech government, after high PV incentives caused an unprecedented boom in 2010. Among the measures used to stifle the market was a retroactive tax on feed-in tariffs.

The Bulgarian PV industry is trying to stop the planned amendments, and lawsuits are in preparation. But even if the “grid access fee” can be cancelled, the exposed policy risk in Bulgaria has further affected the already damaged trust in the country as investment location.