Renewable energy producers in Bulgaria are preparing legal action against the state energy regulator over the introduction of a new fee for access to the national grid, which will delay the return on their investments and, according to them, may even cause bankruptcies in the sector.
Citing the new Energy Act, the State Energy and Water Regulatory Commission (SEWRC) decided on September 13 that renewable energy producers will have to pay a temporary fee for access to the transmission and distribution networks in order to balance a rise in end prices for consumers imposed as a result of the massive connection to the grid of new renewables, photovoltaics in particular, in recent years.
In July, the energy regulator raised the price of electricity for consumers by over 13%, saying the Bulgarian state must pay more than planned for connecting new renewable energy sources to the grid. The center-right government of the GERB party led by Prime Minister Boyko Borisov, which is facing general elections next year, blames its predecessors for granting too many permits for access of renewables to the grid without keeping proper account of its capacity and of the price which the state power grid operator NEK will have to pay for "green electricity".
According to green energy producers the regulator's decision is illegal as it changes the rules in the middle of the game, reduces their income, makes difficult the repayment of the loans they have taken out, and destabilizes the electricity market. They said they plan to file a claim seeking to cancel the regulator’s decision and demanded the resignation of its chairman Angel Semerdzhiev.
The dispute is likely to proceed to the European Commission. The Bulgarian Association of Producers of Ecological Energy announced on September 19 that the European Wind Energy Association had pledged to support its position. There are 1,400 Bulgarian producers of energy from renewable sources, most of them grouped into four associations. At a news conference on September 19, they said that they would file a complaint with the European Commission and would inform the EU Energy Commissioner Günther Oettinger about the dispute.
The Bulgarian energy regulator has calculated the temporary fees for acccess to the grid as percentage of the feed-in tariff, or the preferential price at which NEK and the distribution companies buy electricity produced from renewable sources. This price is much higher than the price of electricity produced from traditional sources such as Bulgaria's nuclear power plant in Kozloduy and the thermal power plants because it aims to stimulate the increase of the renewables' share in electricity generation.
According to EU requirements, Bulgaria should achieve a 16% share of renewables in its gross final consumption of electricity by 2020. The target for 2012 is set at 10.72% but according to official data from the Electricity System Operator (ESO) made available to SeeNews, this share was 10.88% already at the end of July 2012.
The temporary access fees introduced by the energy regulator affect mostly the producers of electricity from photovoltaic plants and, to a lesser extent, the owners of wind farms. They will be paid monthly and will remain in force until final fees are set.
Owners of roof and facade photovoltaic power plants with installed capacity of 30 kilowatts-peak, put into operation in the first half of this year, will have to temporarily pay a fee of 236.04 levs (120.7 euro) per megawatthour(MWh), which is equivalent to 40% of the feed-in tariff for their electricity set earlier by the regulator. For photovoltaic plants connected to the grid in the second half of last year, the access fee is set at 121.05 levs/MWh, or about 20% of their feed-in tariff.
For photovoltaic plants with a feed-in tariff set on June 28, 2012, the access fee is 20.04 levs/MWh, while for those having their feed-in tariff set on August 29, 2012, it is 2.90 levs/MWh. The difference in prices is mainly due to the investment costs which were different in the indicated periods.
The decision of the regulator is completely illegal and should be annulled, the chairman of the Bulgarian Association of Producers of Ecological Energy Velizar Kiryakov said at a press conference on September 19.
Green energy producers are adamant that the regulator's decision violates the European Commission Regulation № 833/2010, which contains information on the compensation mechanism between transmission system operators and on the regulatory approach towards transmission charging.
Sebastian Noethlichs, chairman of the Bulgarian Wind Energy Association, said during the same press conference that the decision of the regulator could cause serious financial crisis in Bulgaria, as green energy producers would be unable to repay their loans to banks. "It's a credit resource of 2.0 billion levs the producers of "green energy" can not service because of the introduced fee, which is not only illegal but also high," he said.
According to Noethlichs, all wind farms will lose up to 10% of their income, and the photovoltaic plants will lose between 29-30%. "It's like you have taken out a bank loan for housing, you provide rental housing and the state tells you that you will not receive the rent for five months," he said.
Nikola Gazdov, chairman of the Bulgarian Photovoltaic Association, said the proceeds of the new fee estimated at 220 million euro per month would go to the electricity distribution companies and ESO, a claim that Semerdzhiev described as "manipulation."
"These funds are going to balance the final price of electricity. More than 500 MW from renewable sources have been hooked to the national grid since the beginning of June. This is more than planned, it is a stress to the power system and leads to higher costs than expected for both ESO and the distribution companies," Semerdzhiev told reporters on September 20.
A day earlier, during the press conference of producers of "green electricity", the president of the Association of Italian Entrepreneurs in Bulgaria, Pietro Luigi Ghia, said that renewables account for 5.0% of Bulgaria’s GDP but frequent regulatory changes create market instability, which affects the banking system. He said that if the decision of the regulator is not canceled, it will negatively impact the renewables’ sector, and will lead to a loss of jobs and know-how. "This decision affects the energy independence of Bulgaria and raises concerns for the stability of the energy market," he said.
The regulator’s chairman, however, says the decision is correct and "should not lead to bankruptcy. "Feed-in tariffs remain in force, and return on investment will take a little longer," said Angel Semerdzhiev.
At the request of ESO the regulator adopted in June a limit for connecting large renewable energy projects to the grid for a certain period of time. Electricity distribution companies, however, do not have a similar restricting mechanism, which exposes them to the risk of exceeding their costs approved by the regulator for the current regulatory period. The price of electricity for the regulated market in the election year will depend on the additional costs, by which distribution companies will exceed their cost limits. When the rise in electricity prices by 13% was announced on July 1, the regulator vowed there would be no such surges in prices next year.
NEK and the electricity distribution companies had to spend 280 million levs above plan to connect new renewable energy sources, in particular solar parks, to the grid, Semerdzhiev told reporters on September 25. He made it clear that the temporary access fees will remain in force until these additional costs are covered.
(1 euro=1.95583 Bulgarian levs)
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