Uncertainties related to the EWRC's methodology for determining premiums in Bulgaria

The Energy and Water Regulatory Commission's (EWRC) methodology for determining premiums for renewable energy technologies entails a risk for RES producers because of the fixed reference market price set by the EWRC for the year ahead. The way the reference market price is calculated every year is not clear, creating unpredictability for the RES producers. When the EWRC determines the fixed price for the current regulatory period (between July 1st and June 30th of every ear) the premiums can be determined. Accordingly, the premiums  are equal to the difference between the preferential tariffs (under the old feed-in-tariff conditions) and the fixed reference price. However, if actual market prices are lower than the one predicted by the EWRC, RES producers will make less revenue. Conversely, if the RES producers achieve a market price that is higher than the one referenced by the EWRC, they can keep the extra earnings. According to the current legislation, the regulator can revise the premium amount if the forecast deviates by 30%. The wind energy producers consider this threshold too high and which can lead to severe financial problems long before the limit value is reached. For instance, the average market price on the Independent Bulgarian Energy Exchange (IBEX) in the March 16-29 period of 2020 was €23.31 per MWh. For the same period in 2019, the day-ahead market price was €34.64 per MWh, representing a 31% drop. Due to the big difference between the actual market price and the reference price, estimates show that on average RES producers have lost €23 per sold MWh in the two-week period. The transition from feed-in-tariffs to premiums even for RES producers with contracts under the old conditions created additional risks and market exposure.