The European Commission (EC) has recently approved that Bulgarian state aid supporting the generation of energy from renewable sources (RES) from 2011 is compatible with the internal market. The official announcement will follow shortly upon the completion of the coordination formalities with the related parties.
On 9th of March 2016 the Republic of Bulgaria notified the EC of its RES support mechanism following 5 years of application without the necessary notification on the grounds of Art. 108 (3) of the Treaty on the Functioning of the European Union (TFEU). The EC has requested additional information from the Bulgarian authorities on 12 May, 6 June and 8 June 2016, following which formed its view, which comes as a major relief to over 1000 investors in the Bulgarian renewable energy sector.
The state aid is in the form of a feed-in tariff (FIT) available to certain categories of RES producers. It is defined by the Bulgarian utility regulator based on the actual production costs and a defined rate of return of the investment, being 7% before taxation as of 2012. The FIT is applicable in respect of: small hydro power plants (below 10 MW installed capacity) and PV, wind, biomass, biogas and geothermal power plants. Following certain legislative changes these categories of beneficiaries were reduced and after 1 January 2016 these include only certain RES projects with total installed capacity of up to 30 kW inclusive.
The RES support was necessary for the country to achieve its 2020 targets for a share of RES in its gross energy consumption and it was justified on the grounds of protection of the environment. The estimated total budget of the support scheme is about 6 772 million EUR. Bulgaria has undertaken two important obligations before the EC in this respect. So far it has been applying surcharge for green energy to any customer based on consumed electricity. This surcharge applied also to imported electricity. So, Bulgaria will first release imported RES electricity from such surcharge. Further, the sums already collected from this surcharge to imported RES electricity since 2011 until abolishment thereof will be invested in a new 400 kV interconnector with Greece with capacity of 1,500 MW.
The EC has listed in its decision the complaints and letters it has received: from Bulgarian RES producers claiming that the 20% charge applied on photovoltaic and wind projects is discriminative; from the Bulgarian Utility Regulator claiming that photovoltaic and wind projects are being over-compensated with this state aid; from the Bulgarian Photovoltaic Association complaining about the restricted volumes of RES electricity to which the FIT applies, introduced in July 2015. Most of the complaints have been forwarded to the Bulgarian authorities and the EC has received replies. The EC’s opinion about these complaints is as follows: the EC has stated that its main objective is to assess the compatibility (and above all, the proportionality) of an aid. Further, the EC has stated its support for the right of the Bulgarian State to select the categories of RES projects that would be entitled to the aid; and the EC finds that the surcharge applied only to the energy consumed in Bulgaria (and not applicable to exported energy) is not discriminative.
The RES support mechanism of Bulgaria is approved by the EC as compatible with the internal market, in compliance with art. 107 (3) of the TFEU, the Environment - Environmental Aid Guidelines, 2008-2014 and the Environment and Energy - Guidelines on State aid for environmental protection and energy 2014-2020.