This is a best prospect industry sector for this country. Includes a market overview and trade data.
Last Published: 8/23/2017

Overview

Bulgaria’s power sector is diverse, well developed and with universal access to the grid and numerous cross-border connections in neighboring countries. Environmentally friendly, efficient and secure energy is critical to Bulgaria’s productivity, competitiveness and growth.
The country’s primary energy intensity is among the highest observed in EU, and Bulgaria is almost totally dependent on imported fuels from Russia.
 
Bulgaria has 12,668 MW of installed capacity enabling the country to meet and exceed domestic demand -- as well as export energy. The electricity production in 2015 was 49,100,434 Mwh, compared to 47,205 227 Mwh in 2014.
 
The highly regulated Bulgarian electricity market is dominated by a few major players that have built a supply monopoly in the country. Despite the legal unbundling of the three distribution system operators from its vertically integrated undertaking, there is no real competition in the distribution market that could enable consumers to choose their supplier as there is only one licensed supplier in each geographical region. Most observers of Bulgaria’s energy market highlight the high dependency of the country on the importation of Russian gas and technology, the frequent changes in the legislative and regulatory environment, and ‘energy poverty’ as the major challenges in the energy restructuring process.
 
As part of the agreement for EU accession Bulgaria closed two nuclear reactors in Kozloduy. Plans to construct one or possibly two new nuclear power plants started to emerge.  Bulgaria’s energy generation includes nuclear energy, solid fuels, such as lignite, as well as small quantities of gas. The role of renewable energy sources (wind, solar, biomass, and hydro) has increased dramatically in recent years; renewables make up nearly 20 percent of
Bulgaria’s electricity production.
 
The U.S. Department of Energy has an official representative, located in Sofia, who covers Sofia and over 20 other countries.
 
Energy prices on the regulated market are fixed, by reference, or formula- based, indicating low levels of competition in the energy sector. The country’s regulatory regime is unpredictable and American companies have faced problems with enforcing existing contracts.
 
Bulgaria's day-ahead power exchange, the Independent Bulgarian Energy Exchange (IBEX), began in January 2016 as Bulgaria pushed ahead with plans to liberalize its energy market and make it more transparent. In March 2017, IBEX signed an agreement for introduction of intra-day market. The Bulgarian Exchange teamed up with another power exchange in southeastern Europe and launched a platform for trading long-term contracts by Q4 2017.  Bulgaria is working with the EC and the World Bank on a model that will allow it to gradually phase out regulated energy prices for small businesses and households while protecting the most vulnerable consumers.

Sub-Sector Best Prospects

Gas

Bulgaria’s domestic market for natural gas is only 3 billion cubic meters (bcm) per year, of which 90 percent is currently provided by Russia.  Gas production in Bulgaria dropped to an estimated 82mn cubic meters in 2015, down from 181mn in 2014.
 
Potential gas project opportunities (for suppliers, principal contractors, etc.) include:
  • Six companies recently booked capacity in a non-binding market test in the future Greece-Bulgaria gas interconnector (IGB); The EU supports the Interconnector Greece-Bulgaria with an initial annual capacity of 3 billion cubic meters per year
  • Depleted fields are being considered for the construction of underground gas storage (UGS) in the Black Sea
  • Plans exist to expand the only existing Underground Gas Storage located at Chiren. USD 330 million will be needed
  • Bulgaria’s state energy holding company (BEH) and Greek natural gas company Gastrade may participate in an off-shore liquefied natural gas (LNG) terminal in Alexandroupolis (northern Greece). The expected cost is USD 413 million
  • The gas interconnector with Romania is completed and the current Government committed to advance the ones with Greece and Serbia. There is a plan for increased capacity for electricity interconnectivity, primarily with Greece.

Oil

Domestic oil resources in Bulgaria are limited to about 15 million barrels; production is marginal. Import, export, and trade in crude oil and refined products are completely liberalized. All the crude oil and considerable quantities of refined products are imported from Russia. Russia’s Lukoil owns the only refinery in the country. Bulgaria strives to become an oil producer and in 2012 the country awarded licenses for offshore oil and gas exploration.
 
Fueled by the recent oil discovery in the Han Asparuh block by Total, OMV and Repsol and the completion of the seismic work of Silistar block by Shell, the new government commited to support these exploration campaigns, and is also considering re-tendering the third big deep-water block – Teres. With limited geological data to date, the Teres block received little interest in previous bidding rounds.

Smart Grids

Bulgaria’s energy strategy foresees the replacement of ordinary power transmission networks with smart grids by seeking EU funds for the replacement of conventional electricity meters with smart ones. The issue how to deal with overcapacity in the electricity market is critical for the integration of renewables into the electricity grid in Bulgaria. Priority of the new Government should be A) increasing the transmission capacity and B) introducing of a smart grid development as solutions handling the overcapacity in the power market.

Nuclear Energy

Project opportunities may exist in the following areas:
  • Maintenance and upgrade of steam turbines at the Kozloduy NPP
  • Considering the building of one, or two new NPP units
  • Activities related to the decommissioning of four NPP reactors; two units have already started to be decommissioned
  • Dry-cask storage of spent fuel from 5 and 6
  • Nuclear safety and radiation protection
  • Technical support for the regulatory body, and
  • Working with Bulgaria’s universities to train nuclear engineers

Biomass

With recent changes to the law and strong government support for the biomass sector, Bulgaria could become a promising biomass energy market in the next few years. In view of maturing biomass markets in numerous EU countries Bulgaria represents a unique and stable investment environment in Southeast Europe with clear rules and fair FIT rates. Bulgaria’s total installed biomass capacity for electricity generation is less than 7 MW, presenting huge growth opportunities, however legal challenges have cut support for biomass with the exclusion of biomass from waste. Potential investors should make sure that the technology they intend to utilize is supported by local policies.
 

Energy Efficiency and Energy Market Liberalization

Bulgaria’s energy intensity remains the highest in the EU, four times the EU average.  Energy saving opportunities exist across the whole economy and energy chain, but challenges to the efficient transformation and use of energy have been persistent in the transport, residential, and industrial sectors. Bulgaria is currently ranked as number 44 on the Energy Architecture Performance Index Report 2016 with a benchmark of 126 countries, and Bulgaria has improved its energy efficiency compared to previous years.
 
The Bulgarian government received the World Bank’s report on Bulgaria’s Energy Liberalization aiming to help the country move forward and achieve specific measures including: 
  • plan to proceed with the transition to a competitive market and reforms needed for full electricity and gas liberalization in the country
  • ensure protection of the vulnerable people, and
  • require state-owned generators to participate fully in the power exchange
World Bank experts believe that Bulgaria's energy sector needs to repay a significant amount
of debt, in the coming years, to achieve sustainable financial recovery. 
 
To meet that objective, Bulgaria should reduce the cost of repaying the accumulated debt by refinancing Bulgarian Energy Holding's bonds on better terms and increase the obligation to society fee for all consumers by about 5% per year until 2019, a World Bank team of experts said in a summary report entitled 'Bulgaria Power Sector: Making the Transition to Financial Recovery and Market Liberalization' published on the Energy Ministry's website.
 
Bulgaria also needs to address several challenges to form a fully competitive electricity market: the structure of the current single-buyer model for the regulated sector, which has reached its limit; the insufficient liquidity of the market; and the concentrated market structure, which leaves it open to potential abuse of market power.
 
World Bank experts indicate that regulated tariffs are not based on market prices. The commodity component of regulated tariffs is determined by EWRC (The Energy &Water Regulatory Commission) based on the revenue required for NEK to cover its purchase costs.
 
About 444,000 households in Bulgaria are highly vulnerable to increases in electricity prices, while another 149,000 households are income-poor and could quickly become energy-vulnerable should energy prices increase. The existing social assistance programs are inadequate to cover households at risk.

Web Resources

 
Power Generation, Oil & Gas, Renewable Sources of Energy and Energy Efficiency
 2014
 
2015
 
2016
/estimates/
Market size =
Imports from the US
457362
Local Production1,282 1,682 1,900
Total Exports
2,461
2,509 2,300
Total Imports 2,787 2,658 2,900
Total Market Size1,608 1,830 1,500
Exchange Rate: 1USD n/a1.75 BGN
Notes: Publicly available statistical data in Bulgaria is scarce and unreliable. These figures have been taken from the Bulgarian Industrial Association and other industry contacts.

 

U.S. Commercial Service Sofia Contact Information
Name:           Ms. Emily Taneva
Position:        Commercial Specialist 
Email:           Emily.Taneva@trade.gov
Phone:          +359-2-939-5770
 

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Bulgaria Energy Trade Development and Promotion