Most renewable energy projects in Bulgaria are being developed on agricultural land. This land can be used for non-agricultural purposes, such as Renewable Energy plants, after a change of its designation pursuant to the Law on Protection of Agricultural Lands (“The Law”). The procedure usually requires three months and is completed with a decision for change of designation. Since it is relatively easy to achieve, project developers have been changing the designation of agricultural lands in anticipation of increasing investments in renewables without feasible investment intents.
In order to tackle this trend and, allegedly, to reserve the most fertile land for farming, in 2010 the Bulgarian Government proposed an amendment of the Law on protection of agricultural lands. The amendment banned development of renewables on certain categories of lands. However, the change of designation of the same lands for other purposes, such as resorts or industrial plants, remained unaffected thus raising questions whether the amendment intended to protect agriculture or only to restrict renewables. The amendment was adopted in principle at first reading by the Bulgarian Parliament but remained dormant for almost one year awaiting the second reading.
On 4 May 2011, the parliamentary committee in charge of the amendment approved a revised version of the amendment. Contrary to the general expectations, it is considerably less restrictive compared to the initially approved version as discussed below. Now, in order to become effective, the amendment needs approval at second reading by the Parliament and publication in the State Gazette. Considering that the new Renewable Energy Law completed these steps in two weeks (from 21 April to 3 May), the amendment of the Law might become effective as early as the beginning of June 2011.
Ban on development of photovoltaic parks on certain lands
The revised amendment imposes a ban on the development of photovoltaic parks on the most fertile lands. No change of designation will be allowed of agricultural lands from first to fourth category as well as on irrigated lands for construction of photovoltaic parks, except when they generate energy for own needs of the investor. This ban is in line with the objective of the newly adopted Renewable Energy Law to shift the development of photovoltaic parks to industrial areas and rooftop and façade wall installations as well as to smaller installed capacities.
Automatic expiration of the change of designation
Under the current law if the development of the project has not started within one year after the change of designation, the authorities are entitled to revoke the decision (which is rarely done in practice). According to the amendment the decision for change of designation will be invalidated automatically at the expiration of certain terms: (i) if the fee is not paid with three months after notice that the decision is issued; (ii) if no construction permit is requested within three years after the entry of force of the decision; or (iii) if the construction is not started within six years after the entry of force of the decision.
The pending procedures and the existing projects
Pending procedures will be completed according to the previous regime where the application either for designation of a site (first step of the procedure) or for change of designation are filed with the Ministry of Agriculture or the respective local directorate by the entry of force of this amendment. With regard to existing projects the decisions for change of designation issued under the previous regime will remain valid unless they have been revoked by the authorities by the date of entry of force of the amendment (as commented above). However, if within six years after the entry of force of the decision, the construction of the project still has not started, the decision will be invalidated automatically. For example, if an investor has changed the designation of a plot with the view to build a photovoltaic park in 2008 and no construction has started in 2011 but the authorities have not acted to revoke the decision, the decision will remain valid until 2014. If until then the construction of the photovoltaic park has not started, the decision will be invalidated automatically. Respectively, if the land in question falls within the scope of the above discussed ban, the repeated change of designation will not be allowed under the new regime.
Shifting powers within the administration
Under the current law the procedure for change of designation is generally administered on local level by the district directorates of agriculture except for cases of land with an area of more than 50,000 sqm, which are processed by the commission at the Ministry of Agriculture. The new regime envisages more a centralised approach concentrating all change of designation of lands from first to fourth category as well as on irrigated lands with the commission at the Ministry of Agriculture. Considering the capacity of the administration this might lead to overloading of the commission and, as a result , delays in processing the applications. In addition, the change of designation of land for large projects with area of more than 500,000 sqm on lands from first to fourth category as well as on irrigated lands will require a permission from the Council of Ministers. Under the previous regime such permission was necessary only in case of change of designation for municipal or state purposes of land with area of more than 100,000 sqm. The amendment increases this threshold but also expands the permission requirement to private projects.
Exception for underground cable lines
According to the amendment the construction of underground cable lines on agricultural lands will no longer require change of designation. The waiver of this requirement will enhance the upgrade of the grid as well as the construction of the connecting facilities and is viewed as one of the reasonable improvements of the law.