site.btaIn Bulgaria, Europewide Problem of Non-Market Policies in Energy Sector Is Compounded by Structural Problems - Expert

In Bulgaria, Europewide Problem of Non-Market Policies in Energy Sector Is Compounded by Structural Problems - Expert

Sofia, September 25 (BTA) - Mixing the free market of
electricity with non-market methods like greenhouse emission
trading and green electricity purchasing is a Europewide
problem, but in Bulgaria it is compounded by structural
problems, Energy Management Institute Management Board Chair
Ivanka Dilovska commented for BTA.

"The desire to achieve a low-carbon electric power industry
through the pursuit of government policies rather than through
market mechanisms leads to an increase of electricity prices and
poses a risk to Europe's competitiveness, as well as to a
destabilization of the electricity systems and investors are put
off from building conventional power plants," Dilovska argued.

A market model of bilateral agreements, a balancing market and
subsequent establishment of a power exchange was created in
Bulgaria in 2002, the expert said. "This model was selected as
appropriate to the then structure of the energy sector, with a
large number of generating plants subject to privatization, i.e.
numerous players on the electricity market as a prerequisite
for competition," she explained.

"In 2007, however, the Bulgarian Energy Holding was set up and
the competitive producers' market was replaced by a monopoly
which produces 95 per cent of the electricity on the free
market. Non-transparent prices have appeared on the free market,
without clear rules for conduct of auctions, and the
established model no longer works," Dilovska said. She sees the
lack of competition in electricity production as the principal
problem at present.

Asked by BTA whether Bulgaria can count on support from the
European Commission for a renegotiation of the long-term
agreements on purchase of the electricity produced by the
thermal power plants and renewable energy sources, Dilovska said
that the Commission would not intervene in contractual
relations between energy companies either in respect of the
agreements with the power plants or with the green electricity
producers. "In principle, the European Commission opposes
retroactive measures, i.e. whatever is done about the policy
towards the renewable energy sources sector, it is not supposed
to affect existing contracts," the expert said.

"A balancing electricity market was launched in Bulgaria in June
2014, but this cannot be described as a market proper because
the only seller of balancing electricity is NEK," Dilovska
commented. "When balancing is in the hands of a single market
participant, the State Energy Regulatory Commission should
obviously not allow prices that are punitive to the rest of the
participants, but this is what is happening now," the expert
said. "All participants in this market say that purchase prices
now range from 2,000 leva/MWh for injections of electricity to
20 leva for withdrawals. Thus, the balancing market is driving
small producers and market participants to bankruptcy instead of
redressing the imbalances in the system," the expert argued.