At the end of February, the European commission issued a country report on Bulgaria focused on the prevention and correction of macroeconomic imbalances. The report provides also a review of the current inefficiencies in the energy sector.
Problems with liquidity still linger on the electricity market. This is particularly the case in the forward market where transactions in standardised baseload and flexible products are held back by bilateral trade, despite the energy exchange`s steps to improve liquidity on the day ahead segment and implement market coupling with neighbouring countries. More generally, the Independent Bulgarian Energy Exchange still lacks an operational clearing house to become a central counterparty to transactions and thus reduce risk and improve the credibility of its price discovery mechanism.
Bulgaria is pushing forward with the plan to modernise and strengthen its high-pressure gas network. Important milestones were reached on the cross-border gas interconnector between Greece (Komotini) and Bulgaria (Stara Zagora) and the operation is expected to start in July 2020. On the other hand, Bulgaria still lacks access to diversified sources of gas; bilateral trade and market-based balancing are in their infancy; an organised exchange for standardised gas commodity trading is not yet operational and some problems with the functioning of the internal market remain unresolved.
Retail markets for electricity and natural gas remain price-regulated. Consumers do not have sufficient access to open, transparent and competitive offers and their level of satisfaction with the quality of service received is among the lowest in the EU. There has been little sign of improvement over the years.
Investment needs in the fields of energy and climate are significant. Frequent amendments of the Energy Act are not conducive to creating a stable and predictable investment climate. Likewise, recent transactions in the energy sector have fuelled speculation of political meddling, reducing the sector’s attractiveness and potentially deterring much-needed foreign investment. Bulgaria is expected to adopt the final version of its Integrated National Energy and Climate Plan by 31 December 2019, as required by the Energy Union Governance Regulation, with an overview of investment needs for the different dimensions of the Energy Union until 2030. Having this strategy in place would help improve long-term predictability for investors, and delays in presenting it could lead to investor uncertainty. Also, Bulgaria hosts several Projects of Common Interest which aim at improving security of supply, better integrating the country into the EU energy markets, and integrating renewable electricity.
Bulgaria remains the most energy-intensive economy in the EU by a wide margin. The structure of Bulgaria`s final energy consumption is quite similar to that of the EU. However, in 2016 energy consumption per unit of GDP was three times the EU average. This inefficient use of energy is preventing Bulgaria from fully exploiting the potential of its relatively low energy prices.
Bulgaria is lagging behind in its progress towards its 2020 indicative national target for energy efficiency. In 2017, Bulgaria was off the mark by approximately 8% in terms of primary energy consumption and 15% in terms of final energy consumption, with both gaps increasing compared to 2016 levels. Bulgaria ranked last in the EU in 2011 on energy efficiency, which illustrates that this is a long-standing issue and it negatively affects productivity and competitiveness of businesses in the country. Additional efforts should thus be made to ensure that sufficient energy savings are achieved by 2020. Targeted measures and investment can unlock the huge energy-saving potential in the industrial, transport and residential sectors, improving the economy’s overall competitiveness and people`s quality of life. Attracting investment and unlocking private financing to improve energy efficiency is also crucial for securing the Union`s energy transition targets with a 2020 perspective and beyond.
The complete report is available at: https://ec.europa.eu/info/sites/info/files/2019-european-semester-country-report-bulgaria_en.pdf