SOFIA (Bulgaria), January 20 (SeeNews) – Bulgaria risks losing billions of euros of investment in renewable energy capacities if it fails to quickly adopt clear rules for the sector's operation, industry and government officials say.
Slack control in the sector, whose huge potential has attracted crowds of investors over the past years, threatens to undermine its future development. The huge number of projects for new generation capacities causes fears that the country's power grid will not be able to support them, and gives rise to environmental concerns. In an attempt to put things under control, the government has said it will impose a temporary ban on new projects until it works out a set of new rules.
“Too many wind and solar projects have been announced, most of them are unrealistic and the authorities and grid operators are unable to filter out unrealistic projects which hinders reliable planning for all parties,” Sebastian Noethlichs, managing director of German energy company n-vision energy, told SeeNews on the sidelines of a recent public discussion on the development of the sector organised by the Confederation of Employers and Industrialists in Bulgaria (CEIBG).
So far, 12,000 megawatts (MW) of solar and wind capacities have received environmental approval.
Bulgaria's power grid operator NEK and the electricity distributors have received requests for connecting to the grid 112 wind farms with an installed capacity of 8,950 MW and of 33 solar parks with an installed capacity of 1,898 MW, Kostadinka Todorova, an energy efficiency and environmental protection expert with the energy ministry, said during the discussion.
According to CEIBG, the most which the country can take is 1,000 MW of solar capacities and 1,000 MW of wind capacities.
“In financial terms, these are three-four billion euro ($4.3-$5.7 billion) [of investments] in the next three years,” CEIBG head Ivo Prokopiev said, adding that the money is particularly needed in times of plunging foreign direct investments and absence of domestic investments.
A two-step filter of projects needs to be introduced, according to Noethlichs. First, a technical filter should be applied in the early stage of a project to check if the investor has carried out an assessment of the wind and solar power generation potential of the site of a future wind or solar park.
The second filter should be a financial one, as investors should be required to present a bank guarantee whose size will depend on the size of their investment. This filter should be applied at a later stage, Noethlichs said, adding that the investors should be returned their guarantee at the start of the construction of the electricity-generation capacities.
Noethlichs called on the authorities to review the existing projects and check for possible irregularities over the next six months. “Should any irregularities be found, the authorities may seek to revoke the relevant permits.”
“It's a fact that the system has been functioning in an unsustainable way," Energy Minister Traycho Traykov said during the discussion.
According to Traykov, the current state of the sector is directly connected with the crisis that has hit the real estate sector. After a number of real estate projects failed to happen, investors are converting the vacant land plots to sites for renewable energy projects, he explained.
“There is an enormous speculative element, the system is under pressure,” Traykov said.
A solution to this problem will be sought in the preparation of a strategy for the development of the sector by 2020. The document should be adopted by the middle of the year or in August at the latest, Traykov said.
This strategy will map out the areas where renewable energy projects can be developed. Until then, a temporary ban on all new projects will be introduced.
Levon Hampartzoumian, CEO of the country's largest lender by assets, UniCredit Bulbank, too warned of oversaturation in the renewable energy sector similar to the one that the real estate sector is experiencing. To avoid seeing “the energy equivalent of Slanchev Bryag and Bansko,” projects should be carefully sifted, Hampartzoumian said.
Slanchev Bryag, also known as Sunny Beach, and Bansko are two of the most popular resorts in the country where massive over-construction in the past years has led to a drastic drop in real estate prices.
“Sifting is possible if the investor demonstrates his material interest and contributes own funds,” according to Hampartzoumian.
Despite the problems that need to be addressed, industry officials remain optimistic.
The renewable energy sector has a huge potential for domestic growth and exports of technologies for neighbouring markets, according to Prokopiev.
“The existence of clear rules, of a clear strategy […] should guarantee that the best ones win,” Prokopiev said. “The renewables sector is one of the few anti-cycling sectors which can be a driver of economic growth.”
The sector's development in Bulgaria gained momentum following the country's entry in the European Union in 2007. Bulgaria must cover 11% of its gross domestic energy consumption with electricity from renewable energy sources by the end of 2010, compared to less than 10% now, and should increase this share to 16% by 2020. The country had 330 MW of installed wind farm capacities and three megawatts of solar plants at the end of 2009.
($ = 0.6952 euro)
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