Bulgaria to abolish electricity export tariff from 1 July – draft law

LONDON (ICIS)–Bulgaria’s electricity export tariff will be abolished from 1 July, according to a draft proposal for energy law changes.

The changes will also bring 750MW of renewable capacity to the free market, creating more competition and liquidity.

Some changes related to how quotas for the regulated market will be set, and would bring more transparency to the quantities that state-owned generators Kozloduy and Maritsa East 2 will have available to sell to the free market on a monthly basis.

The draft was officially submitted by members of parliament on Friday 22 March and will go through an initial discussion within the energy commission on Wednesday 27 March.

The changes were expected given Bulgaria has been working on fully liberalising its power market.

In 2018, 62% of Bulgaria’s electricity was traded on the free market, while the remainder was on the regulated market through which most households and small businesses pay regulated tariffs, according to information by regulator EWRC.

Export tariff finally scrapped

Market participants have been lobbying for the abolishment of the export tariff for years since Bulgaria is the only EU country that applies it.

The tariff comprises a fee for accessing the transmission system and a fee for distribution through the network and currently stands at €5.03/MWh.

The draft says that these fees will only be paid by the power producers, distribution system operators and the end users but will not apply for other participants from 1 July.

Since Bulgaria is planning to initiate an intra-day market coupling with Romania in June, it was imperative that the tariff was scrapped.

The draft does not mention the abolishment of the 5% revenue fee on imported electricity.

This rule also needs to be removed for market coupling to go ahead as planned.

A source close to the matter said this may have been an oversight in the initial draft and expected the removal of the import fee will be included in the next version.

More renewables come to the market

Bulgaria used to subsidise 701MW wind, 1.04GW solar and 78MW of biomass capacity through feed-in tariffs (FiT).

Utility NEK was the end buyer of all renewable electricity, which was mainly used to supply the regulated market.

In 2018 the energy law was changed, removing the FiT system for producers with 4MW or above installed capacity and replacing it with what was called contracts for premiums.

These generators were obliged to sell all electricity on exchange IBEX, while separately receiving a compensation set by EWRC up to the amount of their initial FiT.

The law will now move all renewable producers of 1MW and over to the premium contracts scheme, effectively bringing 750MW of renewable capacity to the free market.

This is expected to improve competition and liquidity on IBEX.

It also means that renewable forecasts will start to influence Bulgaria’s spot prices more than before.

Regulated quota changed

Currently, state-owned producers Kozloduy nuclear plant and Maritsa East 2 coal-fired plant are obliged to provide certain amount of electricity to utility NEK at a set price, for the purpose of supplying customers on the regulated market.

The price and the quantity is calculated by EWRC for 12 months from 1 July of the current year until 30 June of the following year.

However, the quantities are not broken down by months depending on the expected demand.

This means that NEK may request more or less electricity from the producers on short notice for the purposes of covering demand on the regulated market.

As a result, Kozloduy and Maritsa East 2 tend to be conservative with the quantities they offer on the free market through long term auctions.

The new changes foresee EWRC setting the regulated quotas on a monthly basis, enabling the producers better plan selling activity on the free market.