A new President: what does this mean for Bulgaria’s energy sector?

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Insight by 
Emma Wilson
17 January 2012

On 23 January 2012, Bulgaria’s new President, Rosen Plevneliev, will start his new job. Plevneliev, of the right-wing ruling party Citizens for European Development of Bulgaria, was elected to power in October 2011 beating the incumbent Georgi Parvanov.

Energy is at the heart of speculation about Plevneliev’s plans. Will he keep relations with Russia strong, including support for new Russian energy projects (the South Stream gas pipeline and the Belene Nuclear Power Plant)? Or will his pro-Western leanings lead to greater support for Bulgaria’s renewable energy sector – encouraged by the European Union?

And what does all this mean for this country of 7.3 million that is ranked 58th in the Human Development Index (the lowest ranking for a European country), where the average monthly salary is £426 and unemployment is nearly 12%?

Bulgaria plays a vital role in European energy security. It is a key transit route for oil and gas pipelines, and has two major new natural gas transit projects that will provide lucrative tariff-gathering opportunities. The South Stream pipeline – a Russian energy project due to start construction in 2012 and come online in 2015 – will transport Russian natural gas across the Black Sea to Burgas, on the Bulgarian coast, and onwards to Europe. The Nabucco pipeline – an EU-backed rival project expected to start in 2013 with first gas flowing by 2017 – will transport natural gas from the Caspian Sea region and the Middle East to Europe.

Despite limited hydrocarbon reserves, Bulgaria is a major exporter of electricity to Southeast Europe. It has about 12,668 MW of installed power generation capacity, including thermal, nuclear and hydro-power. The government is now seeking foreign investment to expand the power sector. As Bulgaria imports over 70% of its fuel for power generation, it is also keen to develop local resources.

Bulgaria could become a leading generator of power from renewable sources. The European Bank for Reconstruction and Development (EBRD) has identified Bulgaria as a leading country for wind power. The country also has substantial potential for generating power from biomass (with 90% of land being arable, agricultural or forested), as well as hydro and geothermal sources.

Public support for nuclear power

Currently public opinion is, however, in favour of nuclear power, which is seen as the reliable, lower cost option for households, due to the relatively low cost of production from the country’s only nuclear plant, the Kozloduy nuclear power plant. Nuclear power is up to ten times cheaper for the end consumer than wind power, but that doesn’t take into account the heavy subsidization required to set up the nuclear facility in the first place.

Among the conditions for Bulgaria’s accession to the EU (in 2007) was the progressive closure of Kozloduy, as the plant is outdated. Controversy surrounds the construction of its replacement – the Belene nuclear power plant (using Russian company Atomstroyexport as a contractor, with loans from Russia and the EU). Some argue that the environmental impact assessment is inadequate, and some – including the Prime Minister’s cabinet – question its ability to deliver a return on its investment.

To meet EU requirements under the EU 2020 strategy Bulgaria must ensure that 16% of its energy consumption is generated from renewable sources by 2020. Currently this stands at 10%. The government is financing various renewable energy projects, while several foreign investment projects are under construction or in operation. Yet in May 2011 the government reduced policy support for wind farm projects. Many believe that this is a political decision, to please the electorate, with funds likely be re-allocated to construction of the Belene nuclear power plant.

Nevertheless, the huge potential for green power generation, combined with a young market offering competitive prices, makes Bulgaria an attractive destination for foreign investment, which is expected to increase significantly. To make the business environment more welcoming for international partners, the new President needs to push for stronger anti-corruption efforts, promote transparency and informed public participation in decision-making, and support technical capacity building.

2012 is both Plevneliev’s first year in power and the UN International Year of Sustainable Energy for All. He should seize the opportunity to boost development of Bulgaria’s indigenous energy sector, which will reduce dependency on fossil fuel imports and create new investment opportunities, benefit the environment and provide more secure and sustainable long-term energy systems for the local population.

Read Bulgaria's big energy challenge for more information and recommendations.

This blog was written by Emma Wilson, a Senior Researcher in the Sustainable Markets Group at IIED, and Teodora Todorova, an independent researcher who wrote the above briefing.