Solar power burns bright in Bulgaria

By bne IntelliNews January 24, 2011

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The Japanese are reportedly preparing to build one of the world's largest solar power stations in Bulgaria, but analysts warn the Bulgarian government needs to sort out the legislation governing the renewable energy sector to safeguard the future of such investments.

According to a report in Japan's Nikkei newspaper on January 21, Toshiba and Tokyo Electric Power will team up with the Japanese government to build a solar power station in the eastern city of Yambol by March 2012 at a cost of more than €890m. The plant will start with an output capacity of roughly 50,000 kilowatts, which will be gradually increased to 250,000 KW in five years.

The reported investment comes as the government struggles to update the existing Renewables Act. The Ministry of Economy has been redrafting the policy for over 16 months in an effort to harmonize local legislation with European Commission directives and to meet the EU's 16% target share of renewable sources in gross final energy consumption by 2020. Yet analysts say it is proving difficult to create incentives for investing in the underdeveloped grid, while balancing the needs of renewable energy investors, the distribution companies (which effectively now subsidise the renewables growth), highly price-sensitive consumers and Brussels.

"Legislative uncertainty is likely to persist throughout most of 2011, keeping the brakes on investment," says Ivan Kotev, who works with the New Europe Corporate Advisory.

Kotev says available drafts of the act introduce several changes, such as a guaranteed offtake period with preferential feed-in tariffs of 25 years for solar and geothermal sources, and 15 years for wind, hydro and all others. In addition, entry barriers will be raised through financial and technical filters in order to deter speculative projects, which have caused applications for new renewable projects to soar over 12,000 MW, leading to concerns that such new capacity exceeds what the grid can handle, while removing valuable arable land at a time of rising food prices.

Once the law is adopted, the outlook will be mixed for the various types of renewables. "Hydro, the country's champion in green energy generation, has only limited potential for further development. Hydro projects are also waiting for major changes in the water-related regulatory framework. Wind development is likely to slow down as a result of stricter environmental requirements and grid congestion problems. Solar energy is just taking off and promising to grow fast in the short term," says Kotev.

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