Liberalization of Bulgaria's Electricity Market: EU Requirements & Market Status

ENERGY AND WATER REGULATORY COMMISSION Liberalization of the electricity market in Bulgaria in the context of EU requirements Assoc. Prof. Ivan Ivanov Ph.D. EWRC Chairperson Sofia, 16 May 2017

Electricity market status 2016 Installed capacity Available capacity 9 595 MW Peak Load 4thJanuary 7 105 MW Off-peak 24thMay 2 662 MW 12 701 MW Gross generation in 2016 in MWh Thermo Power Renewable Energy Sources Industrial Power Plants and CHPP Plants HPP Solar Wind Biomass 40% 8% Nuclear Power 17% Plant 35% 2 ENERGY AND WATER REGULATORY COMMISSION

Electricity market status 2016 Liberalized market 2016 Regulated market 2016 54 % 46% National market 37 % Losses 9 % National market 37 % Export 17 % Customers, who switched off supplier in 2016 85 350 3 ENERGY AND WATER REGULATORY COMMISSION

Electricity market status 2016 Customers on regulated market 97 % Customers on liberalized market 3 % 4 ENERGY AND WATER REGULATORY COMMISSION

Electricity market status 2016 Structure Intra day market (planned for the beginning of 2018) Bilateral contract market Day ahead market market Capacity allocation Ancillary system services market OTC market 5 ENERGY AND WATER REGULATORY COMMISSION

Reforms What was done: Easing the process to enter the market Standardized load profiles Launching PX Nominated NEMO Fair distribution of the costs for public service obligation between all end clients and launching Security of the power system fund Market Rules Amendment 6 ENERGY AND WATER REGULATORY COMMISSION

Reforms What has to be done: Market coupling Market liquidity Energy Act Amendment Market Liberalization Road Map New Market Model 7 ENERGY AND WATER REGULATORY COMMISSION

Common efforts Parliament Regulator IBEX Market participants Government 8 ENERGY AND WATER REGULATORY COMMISSION

European target model The European target model shall ensure the completion of the EU Internal Electricity Market and common standards for each timeframe: Day Ahead (DA), Intra- Day (ID) and Forward Market. FINLAND SWEDEN RUSSIA NORWAY A fair and transparent PX price is a key factor for the models success. ESTONIA LATVIA LITHUANIA DENMARK NORTHERN IRELAND BELARUS Price Coupling of Regions (PCR) IRELAND UK POLAND NETHER- LAND UKRAINE GERMANY Multi-Regional Coupling (MRC) BELGIUM CZECH REPUBLIC LUXEMBOURG SLOVAKIA MOLDOVA The integrated European electricity market is expected to increase liquidity, efficiency, social welfare and transparency of prices and flows. AUSTRIA HUNGARY FRANCE ROMANIA SWITZERLAND SLOVENIA CROATIA SERBIA BOSNIEN & HERZEGOVINA BULGARIA MONTE- NEGRO KOSOVO ITALY MAKEDONIA TURKEY ALBANIA SPAIN PORTUGAL GREECE 9 ENERGY AND WATER REGULATORY COMMISSION

Capacity Calculation Regions In May 2016, EWRC approved the proposal of all Transmission System Operators for Capacity Calculation Regions for "day ahead" and intraday" markets as required by Regulation (EC) 2015/1222. Romania The total number of regions is 11 (eleven) Transelectrica Bulgaria is part of a capacity calculation region: South-East Europe. This region should consist of the boundaries of the bidding zones and should cover the transmission system operators of the Republic of Bulgaria, the Hellenic Republic and the Republic of Romania. Bulgaria S IPTO Greece 10 ENERGY AND WATER REGULATORY COMMISSION

Electricity flows in a coupling market Surplus area Deficit area PRICE [EUR/MWh] PRICE [EUR/MWh] Demand curve Supply curve Demand curve Supply curve 50 EUR/MWh Common price for the two areas = 40 EUR/MWh 30 EUR/MWh VOLUME [MWh] Flow VOLUME [MWh] 11 ENERGY AND WATER REGULATORY COMMISSION

Main troubles concerning the liberalized market 1. PPAs obligations of mandatory energy purchase 2. RES support scheme 3. Encouragement top-up to the price of High Efficiency Cogeneration 4. Lack of competition and lack of conditions for liquid trading on the PX 5. Lack of trust and confidence across the energy market 6. Lack of measures to protect vulnerable consumers 7. Existence of a single buyer 8. Regulated retail prices 12 ENERGY AND WATER REGULATORY COMMISSION

Challenges - Contracts for Difference Return the difference from the producer to the Fund Payment of difference by the Fund to the generator Market price Agreed price 13 ENERGY AND WATER REGULATORY COMMISSION

Energy Strategy 2016 - Need for new, stable and long-term energy strategy The present strategy: Based on unrealistic forecast of electricity consumption growth; Envisages the realization of large energy projects, which due to economic, energy and financial reasons, will not be implemented; Does not take into consideration the new EU targets, set out in the decision for the establishment of the European Energy Union. The set targets should be realistic: With the chronic overgeneration only replacement capacities are needed; 71% of NEK obligations come from megaprojects costs: Belene NPP (1.3 billion leva) and Tsankov Kamak HPP (984 M leva); Focus on energy efficiency enhancement; Energy strategy up to 2030 is needed, with perspective by 2050. 14 ENERGY AND WATER REGULATORY COMMISSION

EWRC's functions in the liberalized market Licensing and supervision of issued licenses; Regulating network tariffs; Setting price for Pubic Service Obligations ; Market monitoring. Supply Transmission and Distribution Power Generation on the wholesale or retail markets Regulation on network tariffs Competition Competition public service obligations 15 ENERGY AND WATER REGULATORY COMMISSION

ENERGY AND WATER REGULATORY COMMISSION Thank you for your attention! Assoc. Prof. Ivan Ivanov Ph.D. EWRC Chairperson