site.btaEnergy Communities in Bulgaria Face Challenges Galore, Experts Say

Sofia, October 25 (BTA) - The development of energy communities in Bulgaria is hindered by numerous obstacles, according to a report entitled "Scaling-up Energy Communities in Bulgaria" made by experts Toby Couture, Teodora Stoyanova and Toma Pavlov of E3 Analytics.

According to the authors, who specialize in the renewable energy sector, the first thing energy communities face are regulatory barriers. Prosumers and renewable energy communities are not yet legally defined in the current energy legislation. This is expected to change with the transposition of the Renewable Energy Directive, but that would not suffice: there are many laws, bylaws and ordinances that need to be updated and synchronized in order to make these concepts work in practice.

This is likely to require coordinated efforts from many different government agencies and ministries - a task that has proved to be challenging. Additionally, stakeholders are rarely consulted or invited to actively take part in the process of transposition and the development of the governing framework, which is another reason that the current regulatory framework contains so many gaps.

Another important component of the functioning of an energy community is the ability to sell surplus power to the grid. The absence of clear regulations governing these aspects remains a major gap.

Then again, the low level of awareness in the country is a major obstacle to developing energy communities in Bulgaria. Potential participants like households, municipalities, small and medium-size businesses are often overwhelmed by the amount of administrative work associated with the development of a renewable energy project; developing such a project with the cooperation and joint contributions of many different parties, as is the case with energy communities, represents an even greater challenge, the report says.

Access to affordable financing is one of the biggest barriers to developing renewable energy projects, particularly for energy communities. Only a small share of individuals and households have sufficiently high disposable income to invest in renewable energy installations. This makes the ready availability of bank financing (i.e. loans) and/or grants essential to the success of many energy communities. However, banks have not been active in lending to small scale distributed PV/RES and community energy projects in Bulgaria.

There is currently a lack of a clear legal definition and specific legal provisions regarding energy communities both at national and municipal levels in Bulgaria. This discourages potential investors to take the risk to develop an energy community.

To this the experts have added the role of history and local culture, particularly relevant to citizens in post-communist countries where cooperative and community forms often evoke memories of forced collectivization.

The lack of clear rules governing tax rates, and how individual members of an energy community will be taxed, makes it hard to build momentum. Investors with installations that are connected to the grid are required to pay a variety of fees and taxes such as an access fee, a 5 per cent tax on the revenue of selling excess electricity, and/or a 10 per cent corporate tax on the income generated from electricity sales. Unless specific tax provisions are introduced for energy communities, the latter will likely face the same, or similar, issues.

The revised Renewable Energy Directive 2018/2001/EU has set the stage for the widespread development of community-led renewable energy projects in countries throughout the EU. The many positive economic and social benefits of energy communities can be seen in hundreds of projects across the continent. Bulgaria is in a position to take advantage of the lessons and best practices gained from other jurisdictions across the EU, and to tap into valuable know-how and funding.
A comprehensive policy framework for energy communities is needed in Bulgaria, one that is aligned with the EUТs RED-II Directive, and creates policy and regulatory certainty for the sector. This includes the implementation of clear grid-connection procedures, clear rules with regard to tax treatment, a legally sound definition of energy communities, and a one-stop-shop for all energy community projects, the experts conclude.DT/BR