Bulgaria Seeks EU Scrutiny of RES Incentives, PPAs with Two TPPs

Bulgaria Seeks EU Scrutiny of RES Incentives, PPAs with Two TPPs

The Bulgarian energy regulator said it has notified the European Commission that the long-term power purchase agreements (PPAs) signed with two coal-fired power plants owned by U.S. companies may be in breach of community rules on state aid.

The energy regulator said in a statement it has asked the Commission to stay the provision of the state aid until the EU executive issues a final position on the matter.

In a separate statement, the State Energy and Water Regulatory Commission (SEWRC) said it has also notified the Commission that the incentive schemes afforded to local power producers using renewable energy sources (RES) could constitute excessive state aid in breach of community law.

The regulator said it has asked the Commission to stay partially or fully the provision of state aid to RES producers until it comes up with a final position on the issue at hand.

An investigation into the PPAs signed with the ContourGlobal-owned Maritsa Iztok 3 and the AES-owned Maritsa Iztok 1 thermal power plants (TPPs) performed by SEWRC has indicated that the mechanism obliging state-owned power utility NEK to purchase the entire electricity output of the two power stations is not in line with the provisions of the Third Energy Package while providing them with a competitive edge over both existing and potential new market players.

The regulator said it has concluded that both PPAs - signed between the two power stations and NEK in 2011 - constitute unlawful state aid under the Treaty for the Functioning of the EU.

Earlier this year, the EU’s statistics office said Bulgaria has already achieved its 2020 target of 16% for the share of energy from renewable sources as that type of energy accounted for 16.3% of gross final energy consumption in the country in 2012.

On this backdrop of RES overcapacity, the feed-in-tariff (FiT) scheme afforded by the Bulgarian legislation overincentivizes RES producers, SEWRC said.

In May, SEWRC proposed to the energy minister to table legal amendments allowing the regulator to set annual caps on the amount of FiT-eligible electricity which NEK buys from renewable energy producers.

Under the current legislation all RES output is FiT-eligible and must by purchased by NEK and that, coupled with the fact that RES producers are guaranteed long-term PPAs and excessive investment return rates, constitutes excessive state aid, the regulator said.

ContourGlobal acquired a 73% stake in the 908 megawatt Maritsa Iztok 3 TPP from Italy's Enel in June 2011.

In 2011, energy group AES launched the Maritza East 1 TPP with a 670 megawatt capacity.

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