Legislative Focus on New Renewable Energy Investments – Amendments to the Energy Act Aiming to Support New Renewable Energy Projects

The new rules of the Energy Act, promulgated in State Gazette on 02 February 2021, release electricity generation projects from renewable sources (put into operation after 1 January 2021) from the obligation to make contributions to the Electricity System Security Fund. This Fund was established back in 2015 with the aim to raise funds for compensation of the expenditures connected with the preferential prices for the renewable electricity and other expenditures connected to the security of the system and the transition to full market liberalization. Currently all electricity generators are obliged to contribute to the Fund 5% of their income, the electricity and gas transmission network operators – 5% from the income from access and transmission fees, and the operators of natural gas storage facilities – 5% from the income from access and natural gas storage.

The mandatory trade on Bulgarian electricity exchange – IBEX – is extended towards all electricity generators with installed capacity 500 kW or more (till the moment the threshold was 1 MW). Pursuant to the forecast new volume of 171 554 MWh/per year is to be offered on IBEX and thus to increase the liquidity of IBEX. The feed-in tariffs under long term power purchase agreements for renewable energy generators will be further compensated through the contracts for premiums concluded with the Fund.

These amendments to the Energy Act for the first time introduce and define in the Bulgarian legislation the term “green hydrogen” and release any green hydrogen projects from future contributions to the Fund.

Further amendments clarifying some key points in development phase of renewable energy projects (especially such located next to large customers) are also to be welcomed – definition of the point of ownership of the grid in case of a direct cable between the renewable energy generator and the customer, explicitly providing for that these facilities are not part of the electricity distribution and transmission networks and therefore the investment into their construction is an obligation of the investor who respectively becomes also owner of the facilities.

Changes in the rules and conditions for ensuring the security of the electricity system are launched as well – namely, it is envisaged that the transactions for the purchase of so called “cold reserve” by the transmission system operator will be dropped. It is envisaged that these transactions will be replaced by transactions concluded on a competitive basis, for the purchase of availability for ancillary services – participation in primary and secondary regulation of the electricity system in accordance with Commission Regulation (EU) 2017/1485 of 2 August 2017 establishing a guideline on electricity transmission system operation.

For further information and assistance, please reach out to Irena Petkova, Partner and Deputy Head of Energy at Kambourov & Partners, [email protected]