VZCZCXRO0011
RR RUEHAST
DE RUEHSF #1293/01 2551210
ZNR UUUUU ZZH
R 121210Z SEP 06
FM AMEMBASSY SOFIA
TO RUEHC/SECSTATE WASHDC 2521
INFO RHEBAAA/DEPT OF ENERGY WASHINGTON DC
RUCPDOC/USDOC WASHINGTON DC
RUEHRC/USDA FAS WASHINGTON DC 0985
RUEHZL/EUROPEAN POLITICAL COLLECTIVE

UNCLAS SECTION 01 OF 03 SOFIA 001293 
 
SIPDIS 
 
SIPDIS 
AIDAC 
 
DEPT PLEASE PASS TO USTDA 
 
E.O. 12958: N/A 
TAGS: ENRG ECON ETRD BU
SUBJECT: BULGARIA'S UNTAPPED RENEWABLE ENERGY SOURCES 
 
SOFIA 00001293  001.2 OF 003 
 
 
 
¶1.  SUMMARY:  Bulgaria's alternative and renewable energy 
sources hold great potential, but most will go unrealized 
for the foreseeable future due to a lack of financial and 
manpower resources and a comprehensive national plan. 
Diversification of the energy sector is nonexistent.  In 
2004, 96 percent of Bulgaria's primary energy supply came 
from fossil fuels (mainly coal) and nuclear energy.  Today, 
approximately 60-70 percent of Bulgaria's energy is 
imported, primarily from Russia.  The share of electricity 
produced by renewable energy sources (RES) fluctuates 
between 4 and 11 percent.  In 2005, RES contributed 10.8 
percent of the country's total electricity produced in 
comparison with only 4.5 percent in 2004, primarily due to 
an abundance of rain overflowing local river systems and 
fueling the country's hydroelectric power plants.  Experts 
estimate that the Bulgarian economy has the potential to 
produce 755 million kWh of hydropower, 30.65 million kWh of 
energy from biomass, and 440,000 kWh of geothermal energy. 
However, Bulgaria must further develop and diversify its RES 
if it is to begin to alleviate the country's overwhelming 
dependence on Russian energy imports. END SUMMARY 
 
Hydroelectric Possibilities are Flowing 
---------------------------------------- 
 
¶2. Bulgaria's greatest potential for renewable energy 
generation, as well as investment opportunities, lies in its 
hydroelectric sources.  In 2005, hydroelectric power plants 
(HPPs) were responsible for more than 96 percent of 
renewable energy production.  Although the larger HPPs 
logically generate the majority of electrical power, many of 
them are over thirty years old and must be updated in order 
to restore their peak capacities.  The Government of 
Bulgaria (GoB), in an effort to limit dependence on foreign 
fuel imports, is modernizing many of the larger HPPs. 
Approximately sixty-three small and micro HPPs are located 
on the National Energy Company's (NEK) property and all are 
targets for privatization initiatives in the future.  The 
GoB has also initiated new licensing methods to encourage 
the development of HPPs and associated projects.  Although 
the investment required to build a small hydroelectric power 
plant is between USD 8,000 and USD 1.25 million depending on 
the plant's capacity, the great investor interest in 
constructing and operating these plants is due to the 
guaranteed market opportunity; under Bulgarian law, the NEK 
must buy all the energy produced by HPPs at preferential 
prices. 
 
Biomass Gaining Ground 
----------------------- 
 
¶3.  Biomass may also serve as a good renewable energy source 
in Bulgaria.  Officials from the Ministry of Economy and 
Energy report that biomass officially accounts for 3.7 
percent of Bulgaria's renewable energy production; however, 
they tell us that in reality the percentage is much higher 
since most of it is done in rural areas and is difficult to 
track and measure.  In late September 2006, the Ministry of 
Economy and Energy will present a comprehensive plan for the 
development of biomass and biomass technologies.  Although 
initial steps have appeared promising, a lack of project 
funding has hindered further progress.  We have heard of at 
least two American companies interested in investing in 
biomass facilities. 
 
Wind Technologies Picking Up Speed 
---------------------------------- 
 
¶4.  Development of wind energy projects in Bulgaria holds 
some promise as both the U.S. Trade and Development Agency 
(USTDA) and USAID are funding feasibility studies for wind 
generation.  However, currently there are no operational 
industrial-sized wind energy power plants and only ten small 
wind parks in the entire country. Similar to hydroelectric 
power, current Bulgarian legislation requires that the NEK 
buy all wind-produced electric energy at a preferential 
price.  In addition, there are many favorable financing 
methods for the creation and operation of wind parks.  For 
example, there is a credit line of 20,000 to 1.5 million 
Euros with a 20 percent grant from the European Bank of 
Reconstruction and Development to finance wind power 
projects.  Through the Kyoto Protocol, Bulgaria has 
contracts for grant financing of wind power projects with 
the governments of Holland, Austria, and Switzerland. 
Available wind resource data indicates that there are areas 
throughout Bulgaria with sufficiently strong winds to 
 
SOFIA 00001293  002.2 OF 003 
 
 
generate power economically.  The highest wind resource 
regions are located along the northern Black Sea coast, the 
central mountain range, and the Rhodope Mountains in the 
southwest. 
 
¶5.  Progress is being made in the construction of Bulgaria's 
first industrial-size wind park. Forty-four wind generators 
with an estimated combined force of over 100 megawatts are 
being built on Mount Murgash in the Balkan Range by the 
Bulgarian firm "Eco-Source Energy."  The project is 
underway, and the first twenty generators are slated to be 
active by the end of the 2006.  The entire project is 
estimated to be worth near USD 110 million.  However, the 
project is currently awaiting an environmental impact 
evaluation by the Ministry of the Environment, which may 
take anywhere from several months to a year to complete. 
 
¶6.  USAID/Sofia, working with EnCon Services International, 
General Electric and the Utility Wind Interest Group is also 
implementing a two year project to develop and operate a 5- 
10 MW pilot wind farm in partnership with a local government 
and local energy services company.  The project structure 
requires the establishment of a public-private partnership 
with a municipality and private energy services company that 
will be responsible for operation and maintenance of the 
wind farm.  The municipal leasing approach is designed to 
overcome many of the financial obstacles that currently 
impede private power projects, and should help provide a 
needed source of revenue to cash-strapped municipal 
governments. 
 
¶7.  Several foreign firms are also awaiting licenses for 
potential projects along the northern Black Sea coast to 
develop wind technologies.  "Bulgarian Wind Plants," a 
subsidiary of the French "Electricit de France," has plans 
to construct a wind park in Kavarna.   The Japanese firm 
"Mitsui" also has plans to construct a wind electrical plant 
in Burgas.  Despite growing investor interest, several 
ecological and bureaucratic challenges remain.  For example, 
wind parks pose a danger to migrating birds. Mitsui's 12 
million Euro project near the city of Burgas has been 
temporarily frozen due to arguments with environmental 
groups.  From a bureaucratic standpoint, many administrative 
obstacles such as excessive licensing and formal 
documentation requirements nullify any favorable and 
preferential financing given to investors. 
 
Geothermal Possibilities are Untapped 
------------------------------------- 
 
¶8.  Bulgaria has a sizable reserve of geothermal energy 
which has gone untapped and unexplored.  According to 
Kostadinka Todorova, the Director of the State Energy 
Efficiency and Environmental Protection Directorate, the 
country is positioned on top of "a large geothermal sea" and 
only utilizes a small percentage of its potential.  Although 
there are no active geothermal energy production sites in 
Bulgaria, there are a number of state organizations that 
have performed research into the exploitation of this 
resource.  All activities regarding the use of geothermal 
reservoirs for energy purposes are channeled through 
governmental agencies such as the Ministry of Energy (ME), 
State Energy Regulatory Commission (SERC), State Energy 
Efficiency Agency (SEEA), and the Ministry of Environment 
and Waters.  Recent legislative reorganizations have also 
led to the possibility of foreign investment to develop 
geothermal sites.  Similarly, the World Bank is financing a 
project for the development of heating utilities at eight 
geothermal sites. 
 
 
Solar Prospects are not Bright 
------------------------------ 
 
¶9.  The prospects for solar energy generation in Bulgaria 
are minimal, since only a relatively small portion of its 
terrain receives sufficient levels of solar radiation.  The 
opportunities for solar technologies are greatest for low 
temperature thermal applications, such as solar thermal 
systems for residential, public and agricultural use, hot 
water passive solar systems for heating, and systems for 
drying wood material and agricultural products.  However, 
the GoB's Energy Efficiency and Environmental Protection 
Directorate would like to develop solar energy beyond 
household application.  But all parties agree that due to 
the high cost of solar technology, with the exception of a 
few experimental and prototype photovoltaic projects, the 
 
SOFIA 00001293  003.2 OF 003 
 
 
prospects for further exploitation are not very bright. 
 
¶10.  COMMENT: The Ministry of Economy and Energy and the 
Energy Efficiency and Environmental Protection Directorate 
are working on legislation that will provide a comprehensive 
strategy and plan for developing Bulgaria's renewable energy 
sources.  A secondary objective is to provide future 
investors with additional concessions and incentives to 
exploit these largely underutilized energy resources. 
Although the GoB currently lacks a comprehensive national 
plan, officials told us that Bulgaria is working to achieve 
11 percent of its total energy production from RES by 2010, 
with an eventual target of 40 percent sometime in the 
future.  Although Bulgaria clearly recognizes its over- 
reliance on foreign energy imports, it does not yet have the 
financial resources to adequately exploit its RES potential. 
In a country faced with competing economic priorities, RES 
has not yet made it into the top tier.  Nevertheless, 
opportunities abound for U.S. investors entering the energy 
efficiency and RES sectors market early. 
 
KARAGIANNIS