"The challenge for Europe is to enable market actors to drive down the costs of renewable energy through improved research, industrialisation of the supply chain and more efficient policies and support schemes. This could require greater convergence in support schemes and greater responsibilities for system costs among producers." (from Energy Roadmap 2050, December 2011)

1. Feed-in tariffs: The legislative
challenges for promoting sustainable
investment in renewable energy
Atanas Georgiev
Assistant Professor, Sofia University
Chief Editor, Publics.bg & Utilities Magazine

2. Contents
1. EU energy policy, legislation and recent changes (~5 min)
3. RES legislation development in Bulgaria (~10 min)
5. Feed-in tariffs vs. Green Certificates (~3 min)
7. Q&A (~2 min)

3. “Assumptions”
to regulate – “to control an activity, process, or industry
officially by using rules”
a regulator – “a person or organization whose job is to be
certain that companies, systems, etc. act fairly and follow
rules”
to overregulate - to make too many laws and rules that
control an activity, especially a type of business or industry
(Source: Macmillan Dictionary)

4. European legislation & recent changes (1/6)
• 2009/28/ЕС – RES Directive (20/20/20)
– “The main purpose of mandatory national
targets is to provide certainty for investors”
– “‘support scheme’ means any instrument,
scheme or mechanism applied by a Member
State or a group of Member States, that
promotes the use of energy from renewable
sources by reducing the cost of that energy,
increasing the price at which it can be sold, or
increasing, by means of a renewable energy
obligation or otherwise, the volume of such
energy purchased.”

5. European legislation & recent changes (2/6)
• 2009/72/ЕС – Electricity Market Directive (3rd Package)
– “A well-functioning internal market in electricity should provide
producers with the appropriate incentives for investing in new
power generation, including in electricity from renewable energy
sources”
– “A Member State may require the distribution system operator,
when dispatching generating installations, to give priority to
generating installations using renewable energy sources or waste
or producing combined heat and power…”

6. European legislation & recent changes (3/6)
• COM(2010) 639 – “Energy 2020. A strategy for
competitive, sustainable and secure energy”
(November 10, 2010)
– “…The move towards renewable energy use and greater energy
efficiency in transport is happening too slowly…”
– “…The optimum energy mix,
including the swift development
of renewables, needs a
continental market at least…”

7. European legislation & recent changes (4/6)
• COM(2011) 885 – “Energy Roadmap
2050 ” (December 15, 2011)
– “Most scenarios suggest that electricity
prices will rise to 2030, but fall thereafter”
– “The biggest share of energy supply
technologies in 2050 comes from
renewables”
– “The challenge for Europe is to enable
market actors to drive down the costs of
renewable energy through improved
research, industrialisation of the supply
chain and more efficient policies and
support schemes. This could require
greater convergence in support
schemes and greater responsibilities for
system costs among producers.”

8. European legislation & recent changes (5/6)
• COM(2011) 885 – “Energy Roadmap 2050 ” (continued)
– “Renewables will move to the centre of the energy mix in
Europe…”
– “This changing nature of renewables requires changes in policy
parallel to their further development.”
– “Incentives in the future, with increasing shares of renewables,
have to become more efficient, create economies of scale, lead to
more market integration and as a consequence to a more
European approach.”

9. European legislation & recent changes (6/6)
• COM(2012) 271 – “Renewable Energy: a major player in
the European energy market”
– “The EC will prepare guidelines to facilitate trade in RES”
– “More convergence, including common joint support schemes,
would ensure more cost-effective exploitation of renewable energy
as well as a more single market-compatible approach”
– Are we going to see a new, EU-wide support scheme with
tradable certificates? What would be the effects for investors?
Feed-in Tariffs
Premium
Quota Oblig.
Investm. grants
Tax Reductions
Financial incent.

10. Bulgarian legislation & recent changes (1/4)
• Energy Strategy of Bulgaria
– Previous version – voted by Parliament in 2002
– New Energy Strategy for the period until 2020
– Perfect example of the “Rock-paper-scissors” game
– Partisan vs. Consensual document
• 5 main priorities:
– Security of supply
– Reaching the 2020 target for RES
– Improving energy efficiency
– Developing competitive energy market
– Strengthen social protection (energy poverty)

11. Bulgarian legislation & recent changes (2/4)
What is missing
• National RES Action Plan (published
in mid-2010) “an overview of necessary grid expansion
– Followed the Energy Strategy, but measures in the German power grid”
preceded the RES law
– Defines distribution of RES types in the
?
coming 10 years, according to the
national target – 16% in 2020
– Smart Grids and Electric Vehicles
support schemes envisaged
– Downside: non-consensual document,
based on one-by-one talks and
comments
– Environmental impact consultations are
being conducted now
– Review by the European Commission
Source:
Germany’s
RES Action Plan

12. Bulgarian legislation & recent changes (3/4)
distribution grids
• Bulgarian Law for grid
Renewable Energy capacity
– Available grid capacities will be info
announced by transmission and transmission grid
distribution grids each year aggregated
– Application procedure for new grid capacity
RES capacities, managed by the info
regulator with participation from
regulator
grid companies
selection
– Approved RES investors will have procedure
to pay a fixed price for connection
of 25 thousand EUR per MW of
installed capacity (for over 5 MW
capacity)
RES investors

13. Bulgarian legislation & recent changes (4/4)
• Bulgarian Law for Renewable Energy
– Approved RES investors will receive a fixed feed-in tariff which
will not be diminished during the period of the long-term contract
– Wind capacities – with a 12-year PPA
– Hydro (<10 MW) & other RES – with a 15-year PPA
– Solar, geothermal & biomass capacities – with a 20-year PPA
– A new Agency for Sustainable Energy Development issues RES
certificates (up to now issued by energy regulator); the agency
inherited the former Energy Efficiency Agency
– The regulator sets annual RES FiTs without limits for the
price-decreases

14. Current status of capacity & production (2011)
The TSO’s analyses show, that a total of
2400 MW wind+solar could be connected
to the national grid.
At end’2011 the following RES capacities
are connected:
- Wind – 607 MW
- Solar – 254 MW
- Total – 861 MW
Additional new capacities expected to be
connected according to the law:
- Wind – 2113 MW
- Solar – 1599 MW
- Total – 3712 MW (!)
The grid is “short” with ~2120 MW
Current inst. generation is ~12000 MW
Current min. consumption is ~2579 MW
Current max. consumption is ~7444 MW

15. FiT, proposed by Bulgarian regulator for 2012/3
2012/2013 2011/2012 Change
Type of capacity EUR/MWh EUR/MWh %
Wind (up to 2250 h/p.a.) 76.03 97.66 -22.14%
Wind (over to 2250 h/p.a.) 67.85 88.48 -23.32%
Solar (up to 30 kW on rooftops) NEW 169.71 309.45 -45.16%
Solar (30-200 kW on rooftops) 153.54 304.99 -49.66%
Solar (200-1000 kW on rooftops) 145.46 298.48 -51.27%
Solar (up to 30 kW) 137.37 294.76 -53.39%
Solar (30-200 kW) 133.33 290.11 -54.04%
Solar (200-10000 kW) 121.20 248.28 -51.18%
Solar (over 10 MW) 120.80 248.28 -51.35%
• Feed-in tariffs are proposed according to projected costs
• Would be active for the new capacities, which enter the market in
the period July 1, 2012 – June 30, 2013

16. Current status of Bulgarian RES market
• Old over-regulations created over-supply and over-expectations
• The radical change in legislation will lead to uncertainty and will
diminish investment (with possibility for legal procedures – BITs)
• The national grid is not ready to accommodate all current RES
projects and is practically closed for new ones. The TSO may also
refuse taking part of the energy of some capacities in order to protect
security of the grid
• The national support scheme (FiT) should be gradually merged with
the support schemes in SEE (in order to implement market coupling)
• Price implications may be severe, as deregulation and liberalization
of the market for households and SMEs is currently on the way (in
2012/2013) + carbon quotas + stopped project for nuclear base-load
• Still no national discussion on the Energy Roadmap to 2050
• Investors are not willing to develop new projects

17. An alternative to over-regulation
• Current Feed-in Tariffs formed by:
– A fixed base price (80% of average end price in “Year-1”)
– A fixed green component, depending on the RES technology
• Alternative RES support schemes:
– Base price formed by market price of electricity
– Green component, based on market price of green certificates
Electricity
y ene
e nerg Market rgy
Green
gr n
cer t een Certificates g r ee t es
i f i ca i ca
producer tes Market c er t i f supplier
Market Platform
defines PRICES

18. Feed-in Tariffs vs. Green Certificates
Green Certificates Feed-in Tariffs
Positive features: Positive features:
• Promoting efficient use of capital • Long-term guarantees diminish
• Reaching 20/20/20 by setting investment risks and financing costs
targets for suppliers • Most of the EU countries use FiT and
• Defining the real price of their effect is well known
consumers’ “green energy” • Economic efficiency if prices are set
demand wisely
Negative features: Negative features
• Green certificates markets are • Long-term contracts
complicated
• No GC market is possible without • Uncontrolled growth of RES and high
an electricity market (power market costs for society
exchange) • Risk of over-regulation - too much
• Still no single EU-wide scheme for
trading GC is present administratively-set prices

19. Case Study: Green Certificates in Romania
• National target for RES (2020) – 38%
• Green Certificates since 2005
• Market operator: OPCOM
• Participants: 73 suppliers and 44 producers
• Electricity is traded separately from Green Certificates
• Quota requirements for suppliers – up to 20% in 2020
• Price floor & ceiling: 27-55 EUR (updated with inflation)
• Fine tuning instruments: Prioritizing RES (GC per MWh)
– Number of GCs per MWh - Wind 1-2
– Quotas - Biomass/Biogas 3-4
– Price floor & ceiling - Photovoltaic 6 (up from 4)

20. Towards common RES regulation
“…guaranteed payments have become more or less
harmonised in the different jurisdictions without regulative
interference from the EU…”
Source: the study “Comparative study on the main renewable energy
support mechanisms in European jurisdictions” conducted by CMS
Cameron McKenna LLP (http://bit.ly/RES-support).
_______________
• An additional incentive for common EU RES support
schemes – transfer of RES obligations from “leaders” to
“followers” (and the 90 EUR/MWh fine for non-compliance)

21. The Bulgarian road to grid parity
• Improve legislation on a systematic basis, considering
separate documents (strategies, plans, laws, ordinances,
etc.) simultaneously;
• Coordinate institutional actions (ministries, regulator,
other agencies);
• Improve infrastructure – through public review of the 10-
year transmission & distribution grid development plans;
• Introduce market principles to both electricity and RES
markets in order to achieve better efficiency.

22. Thank you for your kind attention!
Atanas Georgiev
Assistant Professor at the Faculty of Economics
and Business Administration, Sofia University
Managing Editor of publics.bg
email: ageorgiev@publics.bg
mobile: +359 888 466 450