There is No Feasible Alternative to Maritsa East Complex, Able to Guarantee The Security of the Energy System

Interview of Atanas Georgiev, Editor-in-Chief of The Utilities Magazine, November 2018 with Krassimir Nenov, CEO, ContourGlobal Maritsa East 3

Mr. Nenov, which are the main challenges which Maritsa East 3 faces with regard of implementation of the new, stricter norms for Sulphur dioxide, NOx and mercury emissions?  

It is really a relevant topic as it directly concerns all the power plants from East Maritsa Basin, which generate about 45% of electricity in Bulgaria. I would like to remind that ContourGlobal Maritsa East 3 TPP is the second largest thermal power plant in Bulgaria, which provides 10% of annual electricity generation, thus contributing to the power security and independence of the country. Moreover, it is the first Power Plant in South East Europe, which has been in operation in full compliance with all European environmental norms for the past 10 years. The emission levels from the power plant meet the existing norms due to the significant investments made to date.

As far as the new and stricter norms are concerned for sulphur dioxide, NOx and mercury emissions, I believe it is important to note that these present a serious but hardly insurmountable challenge.  We have been working jointly on this project with the other Maritsa East Basin power plants in search of an optimal solution. Once again, the priority is given to guaranteeing the security of the power supply and ensuring that the plant remains in operation after the new norms have come into force in 2021.

We have assigned to an internationally renowned and experienced consultant to prepare a cost – benefit study of the investments required to achieve the new emission standards in comparison to the benefits for the environment. This study allowed us in February 2018 to apply for modification of our environmental permit and we expect the Environment Executive Agency to issue its decision in the coming months.

The modern lignite power plants in the Maritsa East complex have no real alternative for ensuring the security of the national electricity system.

What is the future of the coal-fired power generation in the country, more precisely the future of Maritsa East Complex?  

The Power plants from Maritsa East Complex are of key importance for the security of the power supply and independence and they contribute significantly to Bulgaria’s leading position on the Balkan Peninsula, reinforcing the country’s position as a net electricity exporter. Besides, Bulgaria’s resource of lignite should not be underestimated as it ensures the operation of the Complex for a period of more than 20 years, which needs to be taken into consideration for the short term and long term planning of the power strategy of the country.

We also have the most up-to-date lignite coal-fired power stations in the region that are able to provide a smooth transition to low-carbon power generation in the future. That is why I think that in the foreseeable future, the sustainable operation of the power plants in Maritsa East is beneficial for the country’s energy and economy.

What regulatory and legal decisions need to be made in connection with the liberalization of the electricity market and the existing long-term contracts between your power plant, AES Galabovo TPP and NEK?

It is well known that one of the main priorities of the government in the energy sector is the full liberalization of the electricity market in line with the policies of the European Union. ContourGlobal Maritsa East 3 shares this position and has always worked closely with the Bulgarian Government, strictly following all project and financing agreements, including the Power Purchase Agreement with NEK. You will recall that in 2016 ContourGlobal Maritsa East 3 made significant concessions, reducing the capacity price by 15%, which in turn led to NEK saving over BGN 40 million every year for the period until the expiration of the power purchase agreement.

Transitioning to a new market model may require certain changes in the existing long-term contracts. In this case, it is important that the integration of the long-term contracts into the liberalized market takes into account the legitimate interests of all parties, including investors.

In my opinion, a sustainable solution would be to integrate the long-term contracts as part of the introduction of a modern market design with the appropriate mechanisms, taking into account the specificities of the Bulgarian electricity market. In this way the existing modern power plants in the Maritsa East complex will be able to continue to fulfill their role in a sustainable way and ensure the security of the electricity supply.

Krassimir Nenov, CEO, ContourGlobal Maritsa East 3 on the cover of the November 2018 issue of The Utilities Magazine
What can be the parameters of the so-called capacity mechanisms in Bulgaria? Do you expect the introduction of such a mechanism in the national energy market?

We are ready to participate actively in the development of an appropriate capacity mechanism in Bulgaria.

There are many regulatory and market imperfections, which are not unique for Bulgaria, which do not allow the producers to recover their fixed and capital costs on the electricity market and thus may undermine security of supply. Moreover, the Bulgarian free market is influenced by specific factors that further distort market prices and create a real risk for the operation of the lignite plants in the absence of additional support mechanisms. Here we have the example of the severe financial situation of Maritsa East 2 TPP. Therefore, in many European countries, there have been for many years ways to ensure the financial sustainability of conventional producers to guarantee the security of supply. For example, capacity mechanisms were introduced in the UK, and earlier in 2018 the EC approved similar mechanisms in Germany, Italy, Poland, Belgium and Greece.

The responsible institutions openly declare both the importance of the producers in the Maritsa East Complex for the security of supply and social security of the region, as well as the need for measures to overcome the challenges of the free energy market, for example the working group set up for TPP Maritsa East 2. I am encouraged that the debate has already begun and therefore I am confident that an appropriate mechanism can also be introduced in Bulgaria, in line with the European practices and rules.

The carbon market has seen its highest prices for the past few years. What will be the effect on coal and energy as a whole?

The cost of carbon emissions directly affects the cost of electricity from conventional sources, while at the same time we see that the free market prices in Bulgaria can hardly cover even the costs of coal and carbon emissions. In the event that market prices for electricity continue not to reflect the rising price of carbon allowances, conventional producers will not be able to remain in operation.

The modern lignite power plants in the Maritsa East complex have no real alternative for ensuring the security of the national electricity system. It is well known that in many other EU Member States the situation is similar and in the foreseeable future the importance of coal capacities should not be underestimated. Because of the key importance of the Maritsa East Complex for the security of our power system, appropriate measures need to be taken to ensure its sustainable operation during the transition to a functioning electricity market.

Who is Krassimir Nenov

Krasimir Nenov has been ContourGlobal Maritsa East 3 Executive Director since March 2017. He joined Maritsa East 3 TPP Executive team in 2003 and was responsible for the company’s commercial activities until 2013. In 2014 and 2015, he worked as a director of a thermal power plant and led gas generation function in Enel Russia, where he was responsible for three large gas-fired power plants. In 2016, he became Commercial Director and Deputy Executive Director and deputy executive director of ContourGlobal Maritsa East 3.

Mr. Nenov holds a Master’s degree from Cornell University, USA, a Master of Business Administration from the Catholic University in Leuven, Belgium and a bachelor’s degree in Economics from Arkansas University in the USA.