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Government should introduce contracts for difference

Published

March 23, 2016

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Published:

March 23, 2016

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Bulgaria is to let go of the single buyer model of its regulated electricity market, energy minister Temenuzhka Petkova said during an energy conference held in Sofia on March 22. She also spoke about the improvements at the public supplier – the National Electricity Company (NEK), which is subject, along with its parent structure – the Bulgarian Energy Holding (BEH), of an analysis by the World Bank, Publics.bg portal reported.

Tony Thompson, permanent representative of the World Bank for Bulgaria, who was also among the speakers at the event organized by Economedia, said that the analysis is commissioned by the Bulgarian energy ministry and the state-run BEH. He went on to precise some of the major conclusions.

The World Bank is to recommend that all power plants managed by BEH sell their electricity at the recently established Independent Bulgarian Energy Exchange (IBEX), another BEH subsidiary. The IBEX currently has only a day-ahead platform. Thompson also said the single buyer model should be replaced by contracts for difference (CFD), stressing that this scheme has gained the approval of the United Kingdom and Finland in terms of financing renewables in liberalized markets, while Poland has been using CFD for covering the differences under existing power purchase agreements (PPAs) with coal power plants.

The forum was focused on challenges before the energy market liberalization, steps towards the liberalization of the gas market and the influence of the European climate policy on the Bulgarian energy sector, Focus Information Agency reported.

Minister Petkova explained that there are 32 participants at IBEX, 95% of which were active every day, and over 100 certified traders. “BEH will boost the capital of the Independent Bulgarian Energy Exchange so as to buy a platform for trade under long-term contracts. It will start functioning in July 2016, while a platform for trade within the day will be launched in the beginning of 2017,” she added.

On daily basis, the Independent Bulgarian Energy Exchange trades around 7.5 GWh, Petkova said.

The most responsible challenge in the process of transition to full liberalization is the protection of the vulnerable consumers, she stressed and added criteria are being developed to provide protection to households. “Before launching the transition to full liberalization of the energy market in Bulgaria, the most important was to provide financial stability in the sector through unpopular measures. One year after the legislative amendments, we can see the results. Last year the tariff deficit of the National Electricity Company was BGN 586 million (EUR 299.5 million), while now it is BGN 221 million. For the first time NEK realises positive result from its regulatory activity,” the minister explained.

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