During the press conference for the presentation of the report “Decarbonization of the Bulgarian power sector”, several important questions were raised by journalists and guests. Here we summarize the most significant information regarding the report and its subsequent implementation.
Importance of the report
“It is for the first time in Bulgaria that such a detailed and complex analysis of our power system has been made,” said Ivan Tsankov. “This report has been developed by one of the most respected international consultants in the field of energy. The Plexos model has been used for its development. There are several simulation models in Europe which simulate the entire power system of Europe. They take into account both the characteristics of individual countries and their interconnectivity, taking into consideration interdependencies, constraints, etc. These models are used by institutions such as ACER, ENTSO-E, all European associations, and institutions.”
One of the main objectives when starting work on the report is to professionally assist the institutions in their work and analysis. “I believe that such an analysis is a very good basis for the development of the National Energy Strategy prepared by the Ministry of Energy.” Ivan Tsankov pointed out that neither the Chamber’s report nor the future Energy Strategy will be static documents. “With the development of technology and connectivity between countries, these analyses should be revised, and their data should enter the updated Strategy. Of course, taking into account the results of other developments from other organizations,” added Mr. Tsankov.
“This is the most comprehensive report done in the country that is based on data. It has an added value for the debate on the subject,” said Petar T. Ivanov. “We see that certain technologies have been supported – the reason is they could be beneficial for the power system in Bulgaria. Without such an analysis, the state may be misled into spending public money on certain technologies without considering the ultimate effect and thus imbalance the energy system.”
Among the strengths of the report are the companies that have supported it: these are energy companies as well as electricity consumers. All are involved because they understand the need for stability in the sector so that there is a balance in terms of finance, timing, and technology. It is our job, with the presentation of this report, to seek support among institutions, trade unions, and other business associations. Because the green transition has a strong social element.
What does NRRP represent for the Bulgarian electricity sector?
“The NRRP is not Bulgaria`s National Energy Strategy. The plan is a set of projects that Bulgaria has presented to Brussels. With the funds it provides, Bulgaria will be able to finance some of the necessary energy projects. Our report is based on technology neutrality – it does not take into account which technologies the government has chosen to include in the NRRP and which it has not. Although our report does not include a “gas” source, if a favorable investment environment is developed, there may be new gas projects that will not be funded by the NRRP. It must be made clear to all that our energy sector is not limited to NRRP “- said Ivan Tsankov.
In addition, Krassimir Nenov pointed out that in the amended NRRP the removal of the steam and gas power plant was a good decision. “From the investors` point of view, it would be interesting to reduce the risk by providing support for the construction of such capacity. But now is not the time to build steam and gas power. This could be done later. This future moment does not coincide with the horizon of the NRRP. Such a capacity will be more appropriate when there is diversification of gas supply sources and routes, or if it is proven that natural gas can be extracted in the country and it will already be a domestic resource.”
How much will the scenarios cost?
In the more ambitious scenario, there are much higher costs in the first years, and subsequently, these investment costs decrease. The average amount of investments by 2030 is around EUR 600 -700 million per year, and in the increased ambition scenario they are more. Spending between 2030 – 2050 is around EUR 1.3 – 1.4 billion per year on average.
Indeed, the investments required for decarbonization are huge. They go beyond what is foreseen in the NRRP. Thus, we can imagine that investments in the next 10 years will be in the range of EUR 6-7 billion euros, and over EUR 20 billion for the period 2030-2050 for both scenarios.
The difference between the ambitious and alternative scenarios is that the more ambitious scenario has more significant upfront costs, which is challenging because it increases the value of electricity. But on the other hand, as a beneficial effect, it reduces the economy`s exposure to the risk of high carbon prices. On the other hand, the alternative scenario allows for a smoother and more structured transition, as investments are spread over time and the average cost of energy (LCoE is relatively stable over the entire horizon from now to 2050.
Role and cost of carbon emissions in the report
Market prices for carbon allowances have indeed reached over EUR 80 per ton in recent weeks. “The carbon price in the ambitious scenario is part of the input data. At higher emission prices, high emitting industries, such as coal plants, are naturally decommissioned more abruptly and quickly ” – said Krassimir Nenov.
“In the alternative scenario, the implicit emissions prices are the result of the calculation to achieve a 55% reduction in emissions by 2030. So far, Bulgaria has reduced its emissions by 40% compared to 1990,” he explained.