Renewable Energy Industry in Bulgaria

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Renewable Energy Industry in Bulgaria: Challenges to Its Development Martin J. Ivanov Abstract: The article discusses the dynamic development of renewable energy sources (RES) in recent years in Bulgaria and analyzes various problems confronting its integration in the Bulgarian electrical grid system, including: the separation of the Electricity System Operator (ESO) from the National Electric Company (NEC), which has been postponed for years, and which, if done, might put a priority on investments in the electrical grid; the failure to introduce the EU Third Liberalization Package, the aim of which is to set the system entirely on market principles; regulations that primarily favour the large and medium RES projects, while leaving a comparatively limited field for genuine local entrepreneurship; lack of possibilities for investments in household installations; political-economic interdependences and lack of transparency, which have characterized a large share of the investment projects. The article devotes attention to the question why environmental organizations, paradoxically and unlike their counterparts in Western Europe, are among the fiercest opponents of RES development in Bulgaria. Keywords: green energy, photovoltaics, actor-network theory, path-dependency, National Electric Company, corruption

I. Introduction and theoretical premises The paradoxes in the development of the so-called green energy industry in Bulgaria, and the tensions that this development has engendered in the last five years in domains such as ecology, the economy, law, politics, technology, etc., justify the question whether the sociology has the necessary methodological and theoretical tools to explain such complex and „hot“ topics; the answer to the question is positive. What other scientific discipline could reveal the complexity and varied aspects of this phenomenon, which is an area of interaction between technical artifacts, natural environment, economic interests, legal subjects, between not only professionals from different spheres of public life but so-called civil society as well, which is the end recipient of these changes that even lead to new daily practices and attitudes? The introduction of new technologies and the challenges this involves are the field in which sociology may unfold its scientific potential; it may first trace and describe, then analyze and understand, and finally explain, the trends, so as to draw 151

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the „big“ picture and thereby provide reference points and assessment criteria not only for stakeholders but for the wider public; it will thereby protect the public from manipulations and also include it in a genuine, active political debate. Moreover, such an engagement of sociology in, socially important issues will begin to change the widespread notion, imposed by a significant part of the scientific mainstream, that scientific issues are divided into technical or engineering-related, natural-science-related, legal, economic and public (political and/or social). Evidently, according to this view, sociology should be occupied with the social interrelations between people living together, and should leave technology and non-living nature to the natural scientists and engineers, or at least should treat technology and nature as external, exogenous factors, upon which sociology has no influence – a black box that it cannot and should not open. In general, this view would have us believe that sociologists do not have the right to intrude in the life of non-humans – the latter is the territory of „hard“ science! But sociologists started to deal with the question as to how science itself is done; they found that science is actually a set of different disciplines which, with their respective repertoires of instruments, arrange the world in which we live together. In this sense, the „social“ is not something beyond and behind; it is the process of creation of collectives , or, as it is called in actor-network theory (ANT), the process of assembly, and the science of sociology should deal with how society is actually kept together. In the Bulgarian sociological tradition, there are already a sufficient number of comprehensive studies that apply this relative new approach to the study of social reality (Tchalakov 1998;Tchalakov, Keskinova 2006; Tchalakov et al. 2008;Tchalakov, Bundzjulov, Hristov2008) and specifically in the field of hydro energy (Mitev 2002, 2006) and energy industry (Tchalakov, Hristov, Mitev 2011), offering an in-depth analysis and a „demythologization“ of many commonly held views about science and scientific research, about copyright industries, but also about the democratic transformation in Bulgaria. These studies proceed from the assumption that technologies are not an exogenous factor but are a specific social phenomenon through which social reality is re-configured and the way of being of what we are used to call „society“ is changed. Hence, the topic of renewable energy sources (RES) in Bulgaria appears as a sociological problem, because by the creation of these radically new mutual connections, or actor networks as they are called in ANT, there actually takes place a re- or co-construction of a new Bulgarian society; this process, as we have recently seen, involves challenges and consequences that affect each and all of us, at least by the fact that every household receives an electricity bill at the end of the month. 152

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What is specific here is that this problem field, as prosaic as it may seem at first glance, is connected with the advance of science and technologies. With the appearance of new technologies created to solve certain problems, ensuing risks and uncertainties actually proliferate (Callon 2009). According to Callon, the so-called production of „excess“ increases the unforeseen effects of the spread of these technologies (ibid.:28). An increasing number of „non-humans“, to use the verbal style of ANT, are speaking out and looking for a place in the world of humans. That is why, on the global scale, we are now talking about risk societies (Beck 1986). In this world-wide production of risks, economy plays an essential role, as it mediates between the two collecting spheres of the modern world – „nature“ and „society“; economy conceives of and calculates nature as an inexhaustible resource; and it sees society as a world in which streams of money circulate. The „economic“ space is actually the mediator between nature and society, as it effectuates the double metamorphosis from the material world (through the turnover of resources and commodities) to the ideal world (through financial streams and legitimations) and vice versa. Hence the role of sociological cognition would be situated in precisely this field, in which the primary amalgams between nature, technology and economy are created, and in which the subsequent (legitimating) purification takes place along the line nature-economy-society, i.e., where the greatest collisions in fact occur and the preconditions for all subsequent crises are engendered. The grounds of this (risk) development lie in the possibility to „harness“ enormous energy resources extracted above all from fossil fuels, oil, gas, coal and their derivatives. On this basis modern Western societies in the last 200 years have built what Mitchell calls „hydrocarbon democracy“ (Mitchell 2009), while Callon has enlarged the concept by using the term „technical democracy“ (Callon 2009). In the concrete case of Bulgarian society, as a result of its integration in recent years into world social-political (EU, NATO) and economic (the global market, WTO standards and principles, IMF) processes, it has implemented a number of reforms aimed at creating social-economic interrelations based on the logic of hydrocarbon democracy and the free market. As part of EU policy, Bulgaria approved provisions to support RES production1. The main question I address in this article is how new forms of collective life are established through the implementation and expansion of new socio-technical actor-networks of RES technologies, how these socio-technical and socio-economic interrelations are stabilized and formatted, and what are the consequences and challenges of this new co-existence of wind turbines, photovoltaic panels, engi1

More about the EU influence of Bulgarian RES policy in Ivanov 2012.

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neers, investors, electricity bills, laws, politicians, European directives, as well as the so-called natural facts (the speed of wind or the sunshine hours), the birds, the fertile lands, the protected territories, etc., represented by their spokespersons the environmentalists. We should not forget to mention the electricity transmission and distribution networks and their managers, the „financially weak and endangered by bankruptcy“ National Energy Company (NEC) and the „bad“ foreign monopolies – the electricity distribution companies (EDC), the foreign „speculators“ and the local oligarchs, and finally, the „poor Bulgarian family with its unbearable electricity bills“… We see that my enumeration is getting „hot“ likewise… How can we unfold the „uncertainties“ (Latour 2007) of Bulgarian RES actor-networks? First of all we will trace what the innovative aspect of these technologies for production of energy from wind and sunshine actually consists in. After that we will touch on the technical-economic tension that these specificities create in the construction of Bulgarian RES actor- networks; the discussion of these tensions will then lead us to the legal-regulation tensions, and finally we will come to the political-economic interdependencies and the actual distribution of property in the RES sector.

II. Technical-economic characteristics of wind and photovoltaic energy industry 1. Wind energy Wind energy is renewable and inexhaustible; it utilizes the kinetic energy of aerial masses in the atmosphere resulting from the difference in their temperatures due to heating by the sun, i.e., wind energy is a result of energy coming from the sun. By means of a technical device called wind turbine, this energy is transformed into electrical energy. Using the mathematical formula by which the obtained power is calculated, it is possible to demonstrate the direct dependence of the amount of energy obtained from the wind on the speed of the wind, the air density, and the surface area of the rotor blades. The power of a given wind turbine, which,through the rotor blades, transforms the power of the wind into rotational momentum, depends on these three components, and above all on the third power of wind velocity: in other words, at a location where wind velocity is twice higher, eight times greaterpower will be obtained. This scientific-technological fact determines a number of investment solutions and errors, as we shall see below. 154

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As a device, modern wind turbines use the principle of lift, familiar from aviation. The standard, most widespread kind of wind turbine is horizontal axis type, consisting of a three-blade rotor, similar to an airplane propeller. Overall, technological development has brought about a 500-fold increase in productivity in just 20 years, since the 1990s until now. At present the standard technology is 5 MW, the height of the mast is 120 m and the blade span is 115 m. Currently it is legally prohibited in Bulgaria to use turbines with a constant velocity and an asynchronous turbine with a cage rotor: since they are directly connected to the electrical grid, they cannot regulate the electric tension and reactive power, and moreover they create frequency disturbances outside the network frequency of 50 Hz – the so-called „harmonics“, which are frequencies divisible by this frequency. Part of the existing tension between the NEC, EDC and the producers of RES began due to the fact that in some places, despite the normative decrees, „second hand“ wind generators were installed, which use this older technology, thereby additionally destabilizing the already outmoded electricity transmission and distribution networks, and creating the potential for disputes and lack of clarity relative to the use of wind energy in general; but we will discuss this later. 2. Solar energy Solar energy is the energy that comes from sunshine; it is the basis of all other kinds of energy, both renewable and exhaustible. The utilization of solar energy is based, for instance, on the use of the sun’s heat energy through so-called solar collectors, or on transformation of solar energy through the natural processes of photosynthesis in plants and their subsequent use as a biomass, or through the socalled photovoltaic effect, where solar energy is transformed into electrical energy by means of photovoltaic panels. Photovoltaic panels consist of separate cells made up of semi-conductors. Over 95% of all photovoltaic cells in the world are produced from silicon. The advantage of this is that silicon is the second most frequently occurring chemical element on earth, after oxygen, and its processing is within admissible environment protection norms. Crystal silicon (c-Si) is used in several forms: monocrystalline silicon, polycrystalline silicon, band or sheet silicon, and thin-film silicon. The first two kinds of photovoltaic cells hold over 85% of the world market. Their lower efficiency is compensated for by their lower price. In Bulgaria, the three kinds most widely used for the construction of photovoltaic electric power station are, in first place, polychrystalline, followed by monocrystalline and thin-film photovoltaic modules; their technical qualities and 155

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their coefficient of useful action is not the only consideration that determines whether investors will stake on them. Investors choose on the basis of their price on world markets, but also in consideration of factors such as dust, intensity of solar radiation, wind velocity, and the supplementary services that producer firms offer, such as training, installation, etc. Polychrystalline photovoltaic modules are a predominant technology due to their relatively good productivity and their smaller surface area compared with competitor technologies, and, of course, above all, due to their competitive price on the world market. According to some specialists, in the last five years, competition on the world market has brought down the price of these panels by more than half. In the next section we will see what the consequences of this are. 3. Path dependence in RES technologies The specific technological characteristic that electric energy cannot be stored, determines the characteristic of energy production, introduced and stabilized on technological level worldwide, that it uses an alternating current network for electricity transmission (at 440/220/110 kV), electricity distribution (at 20/10 kV) and supply (at 220 V), where the production capacity seeks maximum satisfaction of demand. Since the production of electricity takes place simultaneously with its consumption, production varies according to the demand (in daily, weekly, and seasonal cycles). This, in turn leads to the need for excess supply over demand. Thus, in the centralized and quite widely used model, it is necessary to have some companies supplying „base load“ constantly in order to maintain the network, and this involves a generally higher share of fixed costs and the existence of power stations for „mid- and peak load“, which, respectively, have a great share of alternating costs depending on the hours of demand. This is a „standard“ picture of energy industry, which, regardless of the regimes of organization (primarily in terms of property regulation) in the different countries (nationalized, mixed or market), determines path dependence that newly entering technologies must conform to. For instance, the technological trajectory of development of wind energy in Germany, which is one of the leaders in the implementation of this technology, shows a trend of centralization through the development of large technological parks and expansion from on-shore to off-shore zones; as a result, the initial local entrepreneurs, who staked on decentralized use close to the place of consumption, have been replaced by medium-sized stock companies and large producers of electric energy (Ohlhorst 2006). On the other hand, its (decentralized) development and the technological challenges that arise in the course of development bring strong 156

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pressure to bear and contribute to a change of the prevalent perception of centralized energy supply, giving an impetus to the transformation (technological and organizational) of energy networks, specifically, to the development of so-called „smart grids“ (Bruns&Ohlhorst 2011: 59). The development of photovoltaic technology in Germany has followed a similar course. The connecting of the first (decentralized) roof installations to the electricity distribution networks created the conditions for the further improvement of this technology and its successful entry in the market as more than a product niche. Unquestionably, this process has involved political support. By encouraging their development through programmes such as 1000-roofs photovoltaic installations, etc., at the very beginning, subsequently replaced by regional support programmes and finally by a federal programme for market entry with the successful 100 000-roofs installations, the road was opened for the wide use of this technology by households and small and middle enterprises; the trend was additionally supported by the continuing innovations coming from research and applied institutes (Bruns&Ohlhorst et.al. 2009: 28). As a result of this, the decentralized use of photovoltaic panels in Germany came to predominate over the centralized building of large photovoltaic parks on fertile land. Only 7-8% of the installed capacity in Germany consists of groundmounted installations, despite the existence of various legal restrictions and lower, preferential requirements. Over 50% of the installed capacity is owned by households and small entrepreneurs, which considerably raises the public trust and positive image of this technology. We may conclude that the path of development of RES technology in Western Europe, illustrated on the German example has created possibilities for development of genuine entrepreneurship thanks to a well-balanced legal regulation framework and the initial support given to their entry in the market. A good mix was achieved of large corporative capacities, especially in the wind turbine technology, of medium entrepreneurs, and of small and micro capacities, realized by local companies and households.

III. Expansion of the Bulgarian RES actor-networks 1. Prelude Unexpectedly for many, in December 2013 the Bulgarian National Assembly, in the transitional and final provisions of the Budget Law for 2014, introduced a 157

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20% tax on income from wind and photovoltaic power stations; the justification presented before the public was that this would help needy families, but the tacit motive was to save the National Electric Company (NEC), which was in a very severe financial situation, by providing it with an additional revenue of about 150 million leva a year. This act of the parliament was actually preceded by another attempt by the state to return the tax revenues from the disputed and widely discussed preferential feed-in tariffs for photovoltaic and wind energy by means of the temporary price for network access introduced in 2012 by the State Commission on Energy and Water Regulation (SCEWR), a measure that the Supreme Administration Court (SAC) repealed as being discriminatory after a complaint was filed by the RES sector. By the same argumentation the President of the Republic of Bulgaria turned to the Constitutional Court with a request for repealing the new tax as discriminatory and applied selectively only to photovoltaic and wind installations but not to other RES technologies, such as biomass technology or the long used hydroelectric technology. Why was it that the introduction of wind (WEPS) and photovoltaic (PEPS) energy industry suddenly met with such strong resistance in Bulgaria, unlike other technologies using RES, such as small hydroelectric power stations (SHEPS) or those using biomass? The main thesis I am arguing is that, due to the size of capacities installed in photovoltaic and wind turbine installations in the last several years, two kinds of tension, technical and economic, was created, and both were ultimately aimed at NEC. The results were series of legal and political-economic conflicts between different lobbies in the energy sector and the political-economic interdependencies, associated with them. 2. Technological-economic tensions in the RES sector Technology-related tensions in the RES sector have arisen due to the concentration of new capacities primarily in just two geographic regions – northeastern Bulgaria (Shable, Kavarna) for wind energy industry and southeastern Bulgaria for photovoltaic energy. The climatic conditions are more favourable in these regions (in terms of wind velocity and hours of sunshine respectively). This is in fact the path dependence2 of the two technologies; concentration of these industries occurs 2

The separate decisions of investors fail to take into account the fact that the cumulative effect of concentration of all new installations in locations that have the greatest wind velocity or the largest number of sunshine hours may result in losses for all people involved. Therefore, individual decisions are made on the basis of the „travelled path“ of economic rationality.

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similarly in other European countries as well, but with far more foreseeable effects. As mentioned above in the description of the technologies, due to the direct dependence between wind velocity to its third power and the productivity of the turbine, investors prefer geographic regions with wind velocity above 6-7 m/s, and in Bulgaria these are chiefly located in Dobrudzha (northeast Bulgaria) and certain places in Stara Planina mountain (central Bulgaria). Consequently, the difference in productivity between a turbine installed in those regions and turbines in regions with a velocity of 3 m/s is not two-fold but eight-fold. With respect to solar energy, there is no such dependence, but investors prefer regions with a large number of sunshine hours over the year. For Bulgaria, the most favourable regions are in the southeast, due to characteristics of the terrain (comparatively level ground, less dust, lower wind velocity). What is particular in this case is that, due to a combination of circumstances related to the history of Bulgarian energy industry and the industrial infrastructure built during the „golden“ years of this industry, these specific regions happen to be envisaged for domestic consumption rather than production. Also, RES production has specific technological features that make it less predictable in the framework of a day and also of a season, due to the nature of the resources (sunshine and wind) that they utilize. In daily work, this problem proves to be a great challenge and even leads to legal cases over unlawful and/or unjustified disconnection from the electrical grid (newspaper Politika 29.11.2013). On the basis of a field study using participant observation of the work of a wind turbine park, this technical particularity may be characterized as a „reverse salient“ of wind energy, in the sense of Hughes’ term (1983) applied to technological systems. The actors involved interpret this „reverse salient“ in different ways. A representative of NEC, who had come to inspect the wind turbine park in connection with technical problems between the park and one of its electricity transmission substations, called it „a dispatcher’s nightmare“3; according to the technical staff of the wind turbine park, the situation provided the opportunity for the development of alternative technologies, such as batteries, smart grids, etc. Finding adequate technological solutions is difficult primarily due to the lack of investments in the NEC infrastructure, and to some extent because of the electricity distribution companies’ (EDC) systematic neglect for infrastructure (a repre3

Overt participant observation on-site in windpark in northeast Bulgaria conducted during the field study as part of my PhD thesis „Development of green energy in Bulgaria: innovations, technologies and social-economical path dependencies“ (Ivanov 2013)

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sentative of NEC attributed this neglect to the priority importance of other strategic sites, including the atomic power station Belene, large hydro-power facility Tsankov Kamak, etc., which have become bywords for Bulgarian corruption – see Tchalakov, Hristov, Mitev 2011: 17). This leads to large technical disparities between the technology used in wind energy parks, which is usually of the latest kind, and the technology used in the substations of NEC and EDC, which is mostly from the time of so-called „developed Socialism“. Nevertheless, the arguments adduced by NEC and EDC should not be disregarded. The difficult prognostication and the concentration of capacity in single regions increase risks for the network in case of a sudden change of climatic conditions, a possibility that requires maintaining reserve capacity, and disconnection of conventional capacities, especially those of thermal power stations (TPS). This means that, at this stage of technological development and management of the national electrical grid, the wind and photovoltaic power stations do not compete with the Kozloduy atomic power station as a base load capacity; instead, they play the role of substitutes for TPS capacities in the daily balancing of capacities at mid and peak load consumption. This is one of the central areas of conflict that should be traced in order to ascertain for which political-economic circles it is advantageous to block the development of RES and how other political-economic circles counteract against them. Continuing with the „technological“ topic, we find that peak production from RES occurs in certain hour spans, which are discrepant with the actual consumption4– for wind power stations, it is most pronounced early in the morning, and for PEPS, „in the summer season the peak of production does not coincide with the peak of consumption in the household, because the peak of consumption is a little before 22.00 hours, while the peak during the day is around 14.00 hours.“, according to NEC representative, which force them „to disconnect TPS or at least, out of 8 blocks at Maritsa-Iztok, two must work from 14.00 to 16.00. This is a problem for the dispatchers, a very serious problem, due to the circumstance that a cloud might pass at some moment and 300 MW might abruptly drop. That would mean having to immediately put in some other capacity from somewhere“ (In-depth interview with NEC representative5).

4 Electricity is a specific product or commodity that, at this stage of development, cannot be stored for long and requires comparatively close timing between production and consumption. 5 The in-depth interviews are conducted during the field study as part of my PhD thesis „Development of green energy in Bulgaria: innovations, �������������������������������������������������������������� technologies and social-economical path dependencies“ (Ivanov 2013)

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Here the discussion passes from the „technical“ aspect to the „economic“: „This has a hard impact on the end price as well. This is most perceptible to the end consumer. It’s all well and good to have green, green, but the real price is going up“; and then back again to the „technical“: „Their concentration is the problem, because it requires building a network, the usability of which is in fact 20%“; and back again to the „economy“: „because you spend money and in fact it’s working 20% during the year at most, the rest of the time it isn’t working, how many hours can a wind turbine work on a yearly average? It works about 2200 hours, which is 25–28% per year“ (Ibid.). Seemingly evident behind this „technological-economic“ justification on the part of NEC regarding the shortcomings of RES, is the impossibility of NEC to invest either in the electric transmission network or in the construction of substations, new production stations, etc. „If the Electricity System Operator (ESO) were an independent separate firm, but it isn’t… “, says ambiguous one Bulgarian entrepreneur6. According to the provisions of the Energy Industry Act of 2003, ESO should have been made a separate association, like NEC. If that had happened, it would have been more likely to work far more purposefully for modernizing the network, thereby relieving some of the present „tensions“ with respect to the RES sector. At present, in 2014, ESO has still not separated from NEC, although this should have happened long ago according to the requirements of the EU; the company seems to be waiting until the very last moment before the EU starts threatening to take the Bulgarian government to court. A former NEC manager confirmed this supposition: „The National Electric Company is not technologically prepared for a wide-scale introduction of renewable energy obtained from wind and sun panels. Europe is pressuring for the introduction of wind and solar energy, which have different, non-regular parametres; these sources require a system for management of electric energy, new technologies for transmission and distribution, etc., which our system doesn’t have. That is why NEC resists renewable energy and sets various obstacles to it.“7 The economic tension is increased by the way of distribution of the expenditure for feed-in tariffs under which RES function. Most of the installations are in fact connected to the electric distribution network managed by three private electricity distribution associations. The latter, for their part, assume the expenditures from the new installations, but they then charge these expenditures to NEC, which, for its 6

In-depth interview (Ivanov 2013) Interview by Assoc. Prof. Dr Ivan Tchalakov with the former manager of thermal power station Maritsa-Iztok and NEC, 2009. The case and the interview were presented at the Conference „Bulgaria 2020 in Europe 2020“ held in Sofia on 25 October 2012. 7

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part, delays repaying the costs to the EDC, even though the cost of preferences is ultimately paid by the end user. A very complicated financial triangle is formed between EDC, NEC and RES producers, and the last of these are the weak element. So here the technical-economic tensions enter the domain of politics and legal regulations. But here too, we encounter some surprising paradoxes, linked to the growth of technical economic actor-networks. 3. Tensions related to law and regulations The first paradox was predetermined from the very start of RES development and is related to the general regulation of the sector, more specifically to the chosen model of support for RES. At first the legislators had opted for the quota model, better known as a system for trade in green certificates. Under this model the RES producers receive a „market“ price for the produced electricity on the electric energy market (in case there is such a market), and the supplementary sum (subsidy for „green“ production) is obtained through sale of the green certificates, received beforehand, on this same market. On the other side of the equation are the large conventional producers (and polluters of the environment), who must obtain a certain amount (fixed by the legislator) of obligatory quotas of „green“ energy, in buying these green certificates. Within this „market“ mechanism the price of transition to more environmentally friendly energy production is assumed mostly by the thermal power stations, since the atomic power stations are considered an „ecologically“ clean source of electric energy. This system has still not been implemented in Bulgaria, although the Energy Industry Law stipulated it should have been by July 1, 2006. The change occurred after the parliamentary elections in2005 and the replacement of the liberal NSMII government8 with the so-called Triple Coalition9 (with Minister of Energy from the Bulgarian Socialist Party, well-known with his influence within the energy sector and interdependencies especially with the coal and nuclear lobbies10). The system of feed-in tariffs for KW/h of electric energy produced with certificates by RES remained in force, though it was considered a transitional system. How can this legislative change, or rather this disregard on the part of the legislators for the law they themselves have passed, be interpreted? 8 The National Movement Simeon II is a Liberal Party of the former Bulgarian King Simeon SaxeCoburg-Gotha 9 Coalition between the Bulgarian Socialist Party (former Communist Party), the Simeon II Party and the Movement for Rights and Freedom, well-known as a party of the ethnic Turk’s minority. �� See Tchalakov, Hristov & Mitev 2011.

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I shall leave aside the pro-market ideological tenets that some actors in this sector work with. A logical explanation is that it is better for the cost of „green“ energy to be paid by the Bulgarian consumers than by the Bulgarian TPS. It seems the lobby of the Bulgarian consumers, if such there be, has lost the battle with the lobby of Bulgarian TPS, better known as the „coal seller“ lobby (Tchalakov, Hristov&Mitev 2011). Faced with the choice between two models, the „market“ one and the „nonmarket“ one, the political elite at that time chose the lesser evil, the „non-market“ model with feed-in tariffs, a model they could easily manipulate to their advantage, rather than the „market“ model, which is „complicated“ and requires that the costs be at the expense of conventional energy. In the non-market model the costs remain entirely for the end consumer; we are all witnesses to the consequences of this. The tension, preconditioned by the Energy Industry Law of 2003 and affirmed in 2006, reached a peak in the political crisis of February 2012 and the subsequent confrontations between RES, the Ministry of Economy, Energy and Tourism, and the State Energy and Water Regulatory Commission (SEWRC). The second field of tension created by the regulation of the RES sector is related to the law that stipulates mandatory connection of the new RES capacities to the electric transmission (above 5 MW of installed capacity) and electric distribution (up to 5 MW) networks. We will not go into the details of the procedures of connecting, but we should point out that the regulation in this sector created the conditions for corrupt practices, which the RES sector tried to oppose, for instance, by introducing financial guarantees at the initial declaration of investment interest. Before this change, according to the observations of many entrepreneurs working in some EDC and in NEC, a „market“ emerged for approvals of connection, a market that was left to function in peace. Another interesting example of the so-called „trade in capacities“ is given in the following account by a local RES entrepreneur11: „The SEWRC declared it would decrease the prices, but it didn’t decrease them that very moment, but said it would decrease them on 01.07, that is, it was known half a year in advance that the price would be decreased, as if SEWRC was saying to all Western Europeans, do all you can to build power stations. All the people who had already prepared projects, well – they had prepared them a year or two previously, they must have known that this would happen. Their projects were grabbed like hotcakes. The Western Europeans grabbed their projects like hotcakes and implemented them. SEWRC created a market for megawatt projects and many people were paid commissions for this. I don’t exclude that this was planned, be��

In-depth interview (Ivanov 2013)

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cause those 100, 200 or 500 businessmen, who sank 200 000 leva each in this, must have been brave fellows indeed. I don’t exclude that „our“ people had beforehand information… these are people whose business is to create a project and sell it, these are mostly owners of land and owners of connections in the municipality, in the EDC, many of them succeeded in doing various procedures quick and easy, possessors of connections with the right people, and when the project reaches a concluding phase, they sell it to Western companies for 200 000 euros per megawatt was the price and the Western company comes to a ready-made place, gives the money and makes a power station. Under a prepared project the station could be made in a month or two. These are the enormous megawatt projects, 800 megawatt photovoltaic stations were built, yesterday they weren’t there, today they have sprung up like mushrooms… “ These examples demonstrate how the legal-regulatory system is used by certain Bulgarian political-economic interdependencies to decide the destiny of the RES sector. The beforehand information some people had that the preferential system would be preserved, and how the new capacities would be connected, created the necessary „market for capacities“. The boom in the photovoltaic sector, which is technologically easier to operate, is a direct result of these actions. A division of labour was created, where the foreign investors turned out to be buyers of megawatt projects that had been „administratively“ prepared beforehand. The story is similar with regard to some of the wind turbine parks, although we should make a distinction between the local entrepreneurs, the so-called „developers“, who succeed in attracting strategic foreign investors and remain in the management of the park under transparent ownership of the investment, and, on the other hand, the politically interweaved „players“ who realize the „administrative“ part and then resell. 4. Political-economic ties in the RES sector The picture described above raises the question to what extent, after the introduction of RES in Bulgaria, there is still free space for genuine entrepreneurship, or have certain political-economic circles succeeded in mastering the RES sector entirely by using legal-regulatory and financial-administrative levers? I believe there is no simple answer; firstly, because the entry of foreign players on the market has exercised some pressure towards the „normalization“ and „rationalization“ of the business environment, even though some of these players created conditions for the bad schemas described above. 164

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Secondly, and much more importantly, due to the decentralized technological specificity of wind turbines and especially of photovoltaic energy, the possibility was created for the emergence of small and middle engineering companies of local and foreign businessmen. At this stage, what is the picture of installed capacity? By the beginning of 2014, the following capacities had been installed in Bulgaria: 152 small PEPSup to 30 kWpwith a total installed capacity of nearly 3,7MW. 802 middle PEPS up to 5 MWpwith a total installed capacity of682,7MW. 7 large PEPSwith over 5 MWpс with a total installed capacity of 133,3MW. Or, for the photovoltaic sector, a total of 819,7MW.

And for wind energy: 135 WEPSup to 5 MW with a total installed capacity of234,3MW. 7 WEPSover 5 MWwith a total installed capacity of320,5MW. Or, for the wind turbine sector, a total of 554,8MW.12

Based on an own research of publicly available data from the Trade Register as well as some information drawn from investigative reporters regarding nepotism, related to MP´s representatives I can conclude, that cross-parties interdependencies have their economic interests in RES. Of course it is very hard to ascertain whom the RES installations actually belong to. Some reports have reached the conclusion that „(s)ome of the companies are registered in offshore zones: Cyprus, the Seychelles, the British Virgin Islands, Belize, Panama, etc. More than 70% of the companies that are publicly declared as licensed for RES facilities are owned by other companies in a matryoshka-like series. It is hard to a maximum degree to get to the real stock owners and to the names of the partners“ (Economix 2013). The same reporter investigation has reached the conclusion that „over 320 MW are the property of legal entities registered outside Bulgaria. Some of the largest investors in solar energy are Korea (64 MW), Malta (50 MW), Czech Republic (43.85 MW), Cyprus (37.448 MW), Luxemburg(27.189 MW). In top positions by number of owned solar parks are Czech Republic (14), Korea and Luxemburg (10 each), Cyprus and Holland (7 each)“. This means that the other 500 MW of capacities are the property of Bulgarian companies, but the lack of transparency creates suspicion of corrupt practices and interdependencies. In all, the large foreign investments in the RES sector amount to about 400 MW (wind turbines) and 320 MW of installed capacity (photovoltaic energy). The 12

The author has calculated the data on the basis of information from the site www.vei-bg.org.

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rest, amounting to about 650 MW of installed capacity, are local investments; these are about half of all RES capacities in Bulgaria. I find such a division to be rather conditional, since, as mentioned above, for the large foreign investment projects, especially in wind energy, the small and middle Bulgarian entrepreneurs assume the technological maintenance of the installed capacities, through which they achieve the badly needed transfer of know-how. Undoubtedly, the political-economic interdependencies in this sector are evident, which additionally complicates the achievement of a balanced and forwardlooking policy. Nevertheless, the unprecedented unification of all associations representing the interests of RES technologies in Bulgaria indicates their striving for constructive and transparent dialogue with the state, with political parties and with civil society, dialogue that is aimed at improving the business environment but also at cleaning up the negative public image created over the years. In the interaction between RES industries and the civic sector in recent years, there is an evident tension between these industries and the environmentalist organizations, especially in the region of Black Sea Dobrudzha; I will discuss this problem below. 5. Environmental challenges facing the RES sector A particular case that requires more thorough discussion is that of the wind turbine parks built on contested territories such as protected areas and ornithological important sites in northeastern Bulgaria; this situation paradoxically created tension between environmental protection organizations and the companies developing the new technologies; the tension has led to the European Commission’s took Bulgaria before the European Court of Justice for violations of European environmental legislation (Kapital 2013). RES technologies are often labeled „green“ not because they strive to utilize inexhaustible energy resources such as the wind and sunshine but because they have a relatively limited negative impact on nature (in terms of pollution of air, water and soil, greenhouse gas emissions, etc.). But, as in every man-made technology, there are cases when they may have a negative influence on elements of the environment such as natural habitats (under Directive 92/43/EEC) and wild birds (Directive 2009/147/EC). In the course of development of wind parks in the world, there have been several registered cases (Spain, US) of negative impact on biodiversity through statistically significant increase of mortality among certain protected species; this has 166

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necessitated the raising of standards for investors with respect to the choice of location and the exploitation of facilities. In Bulgaria, the Black Sea Dobrudzha region, due to its climatic features, has proven to be the most favourable area for the building of wind turbine parks. The procedure of building requires a mandatory assessment of effects for the environment – the so-called Environmental Impact Assessment (EIA), which is issued by the Regional Inspection for Environmental Protection (RIEP) – in this case, the inspection in Varna. The main claims of the environmental organizations (not only regarding RES but with respect to many other investment plans in recent years, both for the Bulgarian Black Sea coast and for mountain resorts) concern the reliability of EIAs and whether the assessments have taken into account the protected territories and the areas included in the European Natura 2000 network. In many cases these claims proved valid and their presentation before the court led to the suspension of construction; but in other cases the plaints were rejected by the judicial authorities. In the case of the wind parks, there have been no successful court cases in our country to date against companies that had fulfilled their investment intentions, but in several cases projects have been stopped at an earlier stage; one such case, which provoked much public attention, was related to a project in a protected territory near lake Durankulak, which is the habitat of the red-breasted goose, a protected species (Bulgarian Society for the Protection of Birds 2013). There is evidently a need for stricter control over pre-project proposals, and for more precise assessment of environmental impact not only on the part of the state authorities but also by the investors themselves. It remains an open question what to do regarding the already built capacities, especially when court proceedings have been initiated by the European Court of Justice with respect to them. The losses for Bulgaria might prove enormous, not only in terms of penal provisions but especially in terms of the trust of (foreign) investors that the central and local administration is capable of creating a business environment that is transparent, predictable and, of course, harmonized with environmental requirements.

IV. Conclusion As explained in the beginning of this article, the emergence of RES technologies occurred in competition with, and amidst the crises (environmental and financial) caused by, the world hydrocarbon economy based on fossil fuels. The environmental crisis became the object of scientific-technological cognition, and a field of 167

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new economic action. The strategic pioneering role in this respect was assumed by EU (especially Germany, Denmark, and Spain); quick progress was made by China, and this soon led to trade conflicts with the EU because of subsidized production of photovoltaic panels. In the Bulgarian case, the development of RES technologies was achieved by importand application of market-ready products. This was facilitated by the advantageous regulatory conditions established by common EU policy (in the framework of its pre-accession process, Bulgaria was obliged to introduce into its legislation the requirements of the initial Directive 2001/77/EU, which was later replaced by Directive 2009/28/EU). In the framework of European agreements, Bulgaria received an obligatory share of 16% energy from RES as part of the gross energy consumption for 2020. The large-scale introduction of RES technologies (wind turbines and photovoltaic installations) in Bulgaria was strengthened by technological-economic advances made in the technologies themselves. In the last few years the productivity of wind turbines has grown considerably, and according to a study by the World Energy Council (Greentech.bg 2013),in some countries this has led to grid-parity, i.e. equalizing their levelized costs with those of traditional energy sector. In Bulgaria, a relatively stable basis for these technologies was established by the choice of feed-in tariffs as a mode of legal regulation, which made possible the entry of considerable investments in the RES sector. In the last five years alone, a total capacity of over 1300 MW has been installed in wind turbines and photovoltaic generators, comparable with the capacity of the three of four shutdown units of the nuclear power plant in Kozloduy. What were the main challenges of this accelerated development? The basic problem of wind power stations and photovoltaic power stations in Bulgaria is that, while on one hand they have proven to be technologically (in)compatible with the local electricity transmission and distribution system, on the other hand they are a technology that is taking the place of electric energy production from thermal power stations in the mid- and peak load consumption (the purchase of this energy is obligatory by law). In addition, this line of conflict is interwoven with the financial problems that NEC and EDC already have as a result of the unfulfilled reforms in energy sector in general. For instance, the separation of the electricity system operator (ESO) into an independent organization that might develop its own strategy for investment and network development has been delayed, and this has complicated the operative interaction between RES and ESO. 168

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As a result, there has been a general delay of reforms related to liberalizing the energy sector, and an additional aggravation of the financial condition of NEC. The engagement of NEC in large investment projects such as the Belene nuclear power plant and the corruption schemes that have generally been typical throughout the whole period of liberal democracy transformation (Tchalakov 2008) were factors that destabilized energy industry as a whole and, in particular, made more difficult the introduction and establishment of RES technologies. The other line of conflict is related to the share of the RES sector in the total production of electricity. The NEC and the EDCs are obliged by law to purchase the so-called green energy; because of this, within the annual cycle of electric energy production, the interests of the RES sector clash with the interests of the so-called „coal seller“ lobby. Due to overproduction of electricity within the limits of the day/ season, the ESO is forced to stop, or respectively reduce, the feeding of electricity coming from thermal power plants, and this increases the expenditure for the producers themselves. These conflicts, which stem from the bad management of the whole process of legislation and regulation, and from established conditions favourable to corruption pressure, have additionally complicated the situation, especially in regions that attract intense investment interest; the conflicts in question have led to tension between RES and the environmental protection organizations, which, paradoxically, have entered in confrontation with the growth of these technologies. Such confrontation first occurred in northeastern Bulgaria, where wind energy was primarily developed, and later in southeastern Bulgaria, where photovoltaic parks sprang up in a very short time. Some of the decisions of SEWRC, for instance, had the effect of establishing a „market“ for permits, while the fact that many owners of RES installations still remain unknown (thanks to registration of the firms in off-shore zones, or other means) indicates the presence of corruption and indirectly shows that the political-economic dependencies traditional for energy industry have moved into this new sector as well. The development of the sector has generally had a chaotic history. Investments are chiefly made in large and medium enterprises, and this leaves little space for genuine local entrepreneurship. The possibility of investing in household installations is not being promoted in any way. Supporting programmes, such as the German „1000 Roofs“, or programmes that might combine this with the widely publicized energy efficiency measures, have never been set in place here. All this has led to the emergence of a market for small firms specialized in insulation, not in energy technology. What is more, the complicated administrative path that a small 169

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photovoltaic installation must follow (as the law considers it to be an electric power plant) has not encouraged investors to prefer it to the large-capacity installations. The latest reporter investigations and the evident conflicts between different energy lobbies have brought into the open a number of political-economic crossparties dependencies. The share of foreign investors has proven very large, amounting to nearly half the installed capacities. The available data show that the small and medium entrepreneurs have also invested in capacities and are in fact using a total capacity approximately amounting to that of a small reactor of the Kozloduy nuclear power plant. In general, we may conclude that the development of RES energy in Bulgaria has duplicated and strengthened many of the defects of the overall political-economic development of Bulgaria after 1989.

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Martin J. Ivanov Renewable Energy Industry in Bulgaria: ... _________________________________________________________________________________ Bruns, E., D.Ohlhorst. 2011. Wind power generation in Germany – a transdisciplinaryview on theinnovationbiography. In: The Journal of Transdisciplinary Environmental Studies, vol.10, no.1. Callon, M. et. al. 2009. Acting In An Uncertain World. An Essay On Technical Democracy, Cambridge: MIT-Press. Hughes, T. 1983. Networks of Power: Electrification in Western Society, 1880–1930, Baltimore: John Hopkins University Press. Mitchell, T. 2009. Carbon Democracy. In: Economy and Society, Vol. 38, Nr. 3. Ohlhorst, D. 2006. Windenergie – eine Innovationsbiographie aus interdisziplinärer Perspektive. In: Reiche, D., M. Bechberger (Hg.) Ökologische Transformation der Energiewirtschaft. Erfolgsbedingungen und Restriktionen. Berlin: Erich-Schmidt Verlag. Tchalakov, I., M. J. Ivanov. 2012. Bulgaria: Power and Resistance of Electricity, Presentation at the Conference „Bulgaria 2020 in Europe 2020“, Sofia, 25.10.2012. Online Sources Капитал (2012) Топ 10 на най-големите вятърни паркове в България. 14.10.2012.Extracted on 01.03.2014, from http://www.capital.bg/biznes/kompanii/2012/10/14/1925561_top_10_na_ nai-golemite_viaturni_parkove_v_bulgariia/.[Kapital.2012. The Top 10 Largest Wind Parks, in Bulgaria (in Bulg.)] Капитал (2013) ЕС съди България заради еконарушения в Калиакра. Exracted on 11.12.2014 from http://www.capital.bg/politika_i_ikonomika/bulgaria/2013/10/17/2163082_es_sudi_bulgariia_zaradi_ekonarusheniia_v_kaliakra [Kapital. 2013, The EU is Bringing Bulgaria to Trial for Environmental Violations in Kaliakra (in Bulg.)] Политика (2013) „Енерго-Про“ отнесе глоба от над 1 млн.лева. 29.11.2013. Extracted on 10.03.2014 from http://www.politika.bg/article?id=34866. [Politika. 2013. „Energo-Pro“ Was Fined over 1 Million Leva (in Bulg.)] Economix (2013) Кои са големите инвеститори във ВЕИ? 03.12.2013. Extracted on 01.03.2014 fromhttp://economix.bg/koi-sa-golemite-investitori-vav-vei. [Economix. 2013. Who are the big investors in the RES? 03.12.2013. Extracted on 01.03.2014 from http://economix.bg/koisa-golemite-investitori-vav-vei (in Bulg.)] Public register of the RES installations in Bulgaria, available on www.vei-bg.org/bg/projects (in Bulg.) Biographical note: Martin J. Ivanov was born in 1974 in Ruse. He graduated in political science at the Johann Wolfgang von Goethe University in Frankfurt am Main. Since 2007 he has worked in the field of non-formal education at the International Elias Canetti Society. Since 2011 he has been the chairman of the Federation of Social Associations in Bulgaria. In 2013 he obtained his PhD in sociology at the Institute for the Study of Societies and Knowledge, BAS. His interests are in the field of energy industry, environmental technologies and innovations, education, and the social policy of the Church. Contact: [email protected]

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