Premium tariff (Compensation contracts)
Updated: 23.01.2019
Author: Ivana Naydenova
The Energy Act amendments from May 2018 introduced a new support scheme for the producers of electricity from renewable energy source: From July 2018 all RES-E producers with a total installed capacity of at least 4 MW are obliged to sell their electricity on the exchange (Art. 33a Energy Act). The RES-E producers should sign contracts with the Electricity System Security Fund (ESSF) on the granting of a premium to offset the difference between the stock price and the price in the long-term contracts that RES-E producers have with the National Electricity Company (compensation contracts). The electricity trade takes place only on an organised stock market, except when a producer supplies its own electricity branches, businesses and sites or supplies an object of a client through a direct distribution line. The producers may also sell their electricity through a coordinator of a balancing group.
Eligible technologies
In principle, the premium tariff scheme applies to power plants using renewable energy and co-generation with installed capacity of 4 MW and higher. The RES-E producers below this threshold will continue to be supported by the FiT paid by NEK.
| Wind energy | Eligable (Decision No. C-9). |
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| Solar energy | Eligable (Decision No. C-9). |
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| Geothermal energy | Eligable (Decision No. C-9). |
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| Biogas | Eligable (Decision No. C-9). |
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| Hydro-power | Eligable (Decision No. C-9). |
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| Biomass | Eligable (Decision No. C-9). |
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Amount
The premium tariff is set by EWRC by 30 June annually as a difference between the current fixed feed-in tariff and the forecasted market price. The premiums to be provided by the Security of the Energy System Fund as compensation for the electricity generated up to the Net Specific Generated Electricity set previously by the FiT setting decisions of EWRC for the RES.
For example, if the regulator's analyses show that a manufacturer could achieve an average annual energy price on the exchange market of BGN 80 (approx. EUR 40.9) per MWh and his long-term contract was for BGN 400 (approx. EUR 204.5) per MWh, the premium would be BGN 320 per MWh (approx. EUR 163.1). However, if the stock prices fall below BGN 80 (approx. EUR 40.9) per MWh, the producer will suffer losses compared to the situation when he received FiT.
| Wind energy | The exact amounts are set under I – XVIII of Decision No. C-9. |
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| Solar energy | The exact amounts are set under I – XVIII of Decision No. C-9. |
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| Geothermal energy | The exact amounts are set under I – XVIII of Decision No. C-9. |
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| Biogas | The exact amounts are set under I – XVIII of Decision No. C-9. |
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| Hydro-power | The exact amounts are set under I – XVIII of Decision No. C-9. |
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| Biomass | The exact amounts are set under I – XVIII of Decision No. C-9. |
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Addressees
Entitled party: The premium tariff scheme applies to power plants using renewable energy and co-generation with installed capacity of 4 MW and higher (art. 18 par. 1 item 1 ERSA).
Obligated party: The persons obliged to pay for electricity exported to the grid are the grid operators (art. 18 par. 1 item 1 ERSA).
Procedure
Process flow | The premium shall be paid by ESSF upon if the producer has fulfilled all conditions listed below: - The producer has concluded transactions under Art. 100 par. 4 and/or par. 6 of the Energy Act or on the balancing market for the amount of electric power produced by the installation which the payment of a premium is requested;
- The producer has transferred in favour of ESSF the respective Guarantees of Origin for the amount of electricity produced by the installation;
- The producer has no outstanding liabilities, due and payable towards ESSF as of the date of payment of the Premium;
- As a result of payment of the Premium, the amount of the Premium due for the Specific Net Electricity Production will not be exceeded;
- The producer has a document justifying the expenditure, pursuant to the requirements of the Accountancy Act.
The Producer shall address to ESSF a request for compensation by Premium of the amount of electricity produced by the Energy Facility in the form and with the content of the Application. With the Application, the Producer shall declare: - the amount of electricity, for the month, produced by the Energy Facility,
- that, as a result of payment of the Premium, the amount of the Premium due for the Specific Net Electricity Production will not be exceeded,
- that the representations made by the Producer on the date of conclusion of the Agreement are still true.
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Competent authority | Energy System Security Fund (ESSF) |
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Degression
The tariffs are revised and set by the regulatory authority for energy every year on 30 June. Tariff degression is not regulated by law and the tariff rates can be drastically reduced every year (Art. 21 par. 1 subpar. 8b Energy Act; Art. 32 par. 1 subpar. 1 and Art. 32 par. 4 ERSA).
Eligibility period
The duration of the contract will be determined by the Electricity System Security Fund.
Distribution of costs
| Consumers | The costs arising from the premium scheme are borne by the consumers through the electricity price (art. 31 item 7 Energy Act). |
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| Distribution mechanism | The energy enterprises shall not have the right to claim compensation of expenses ensuing from required obligations to the public, including related to the reliability of supply, protection of the environment and energy efficiency. ESSF shall be entitled to claim compensation for costs arising from electricity purchase obligations at preferential prices and the granting of premiums for electricity from renewable energy sources and from high-efficiency cogeneration of electricity and heat (Art. 35 par. 1 ERSA). |
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Bulgaria
