This report is one of a series on the renewable energy sector in Turkey and central and eastern Europe, including Poland, Romania, Czech Republic, Hungary, Slovak Republic, and—the focus of this issue—Bulgaria. The report summarizes political and market developments in the sector in Bulgaria through end-2013.

Bulgaria gained its prominence in renewable energy due to the industry’s effects on politics. Protests against high electricity bills, largely attributable to costly renewable electricity, toppled the government in Sofia in early 2013. Bulgarian households frequently use electricity to heat, particularly in urban areas—which is a particular feature of the country’s energy system. Bulgaria has to fix more than just the renewable energy problem, having in addition to decide on a heating strategy and make the electricity system operate more on a market basis.

The country enjoys significant wind power potential. Nonetheless, the Feed-in Tariff support system instead encouraged investments in photovoltaic plants—which already exceeded the 2020 target by more than three times. However, residential electricity prices in the country remain low by regional standards (only heating is costly). The overly generous subsidies for renewables and electricity strongly distort the market, some argue. As a result, the planned expansion of the natural gas network to cover 30% of households might not happen. Natural gas is to a small extent produced domestically and is available at market prices.

Consequently, Bulgaria's budget and finance parliamentary committee has included in the draft budget for 2014 a 20% fee on revenue from the sale of renewable energy. The second reading vote on the draft was supposed to take place in early December. The bill passed at first reading on November 14 with the votes of 116 lawmakers from the 240-seat parliament, and investors naturally reacted. It is a conceptually poor fix (which might work nonetheless) to one of the many problems in Bulgaria’s energy/electricity system.

Key Points:

• European national governments, including those in Poland, Romania, Czech Republic, Hungary, Slovak Republic, and Bulgaria, are at a critical point in regard to their renewable energy policies. They have reached the moment when they need to radically reshuffle their support schemas for renewable energy.

• Turkey’s market more recently turned very attractive to investors (even without a national action plan) due to official commitments for renewable energy and particularly with a sharply growing electricity market.

• Bulgaria’s renewable energy sector is probably the least liberalized/functioning market in the region.

• Bulgaria is down on Ernst & Young rankings following its reduction in support for renewable energies.