Energy Efficiency and Nuclear Debate: Bulgaria Policy Mixes

1. Energy Efficiency and Nuclear Debate: Bulgaria Policy Mixes Krassen Stanchev, Institute for Market Economics (www.ime.bg; stanchev@ime.bg )

2. Bulgaria A more artificial economic structure More trade with Comecon More difficult restructuring Slower export growth CEE Less rents at the start Faster export growth (6-7 times) Greater share of services in GDP Background: Bulgaria and Central Europe in 1990-2006

3. The Region • Limited coal reserves which meet only 20% of the needed primary fuels; • Limited output of oil and gas; • About 40% of the primary energy sources used in the Region are imported; • About 25% of the electric power is generated by HPP; • About 8% of the electric power is generated by NPP; • A relatively high energy intensity of GDP. • The lowest average annual growth of electricity demand in 1990-2005 period is in Bulgaria and Romania - between 1 and 2.5%, and the highest – in Turkey, between 5.6 and 6.5%.

4. Primary energy sources per unit of GDP (tons oil equivalent/$1000)

5. Reasons for the above constellation • Background • Delays in reforms, particularly price adjustments • Lack of restructuring • Acting as “lender of last resort” • Property rights

6. Primary Fuels – Gross Consumption

7. Consumption of Primary Energy Sources (1990-2002)

8. Period 1997 - 2002, Primary Energy Sources

9. History of macroeconomic conditions Source: National Statistics, IME.

10. What exists is possible *Source: NSI, BNB statistics, IME forecast

11. EU and Bulgaria (Eurostat, BNB)

12. Bulgaria: Structure of GVA (BNB)

13. NMS Structure of GVA (Eurostat)

14. Where Bulgaria stays? Source: BNB

15. Demand • The gross electricity demand in the country in the last years has been between 36 and 37 TWh. In 2003 it was 37.1 TWh - 2% higher than in 2002. • The electricity demand structure is as follows: industry - 56%; households - 35%; trade, services and agriculture - 9%. • In 2001 and 2002 the electricity generation was about 43 TWh - the highest generation so far. In 2003 it was 0.4% less than in 2002.

16. Second nuclear power plant and efficiency • The need for additional plant has not been proved. • Energy consumption in Bulgaria (consumed energy per one unit of GDP) is several times higher compared to EU average or Eastern Europe countries’ average. • Therefore potential savings are a serious alternative to building new power facilities.

17. Belene NPP background • Second nuclear power plant - Belene NPP, which building started in 1988. The infrastructure was built at the site and the construction of the first 1000 MW unit began. • Subsequently the plant building was stopped. Now the Bulgarian government has undertaken steps for resuming the construction of Belene NPP. • “Belene” and the closure of “Kozloduy” 3 & 4.

18. Alternatives? • It has not been proven if there is a need of any additional electricity production at all and that it should be nuclear. • Rehabilitation of existing thermal and building additional hydro plants appear to represent a serious alternative to nuclear projects. • There is no cost and benefit analysis of different alternatives, including dependence on Russia.

19. Wasting energy • Electricity distribution losses in Bulgaria are from two to three times higher compared to Germany or Italy. • Thus it is not clear why efforts are not focused on transportation saving technologies instead of building additional powers.

20. New “Belene”and old “Kozloduy • There is no cost and benefit analysis of building NPS at “Belene” but not at old site of Kozloduy. • For instance the costs for the secondary infrastructure may turn to be considerable higher than all existing expectations. The same issue exists with waste disposal.

21. Liberalization • Energy Strategegy of 2000: Liberalization should happen if electricity imports do not undermine local producer price; i.e. local consumers are requested to support more costly electricity bills, if imports are cheaper. • Tacit concept to protect local producers at discretion. • Power distribution has been privatized (in 2004) but not yet the production.

22. Privatization stages in the power sector • Sale of the 7 electricity distribution companies - 2004 • Sale of non-subsidized regional district heating companies and all companies that serve these sectors - maintenance companies, motor transport, etc.; - ongoing • Subsequent gradual privatization of the electricity generation companies (power plants) according to a new strategy – pending.

23. The 2004 options for “Belene” • The decision is to use the already built infrastructure and the equipment delivered more than 17 years ago for a 1000 MW reactor from Skoda. • Construction of one unit with a capacity of 1000 MW according to an improved project and construction of one 600 MW unit. • Completion of the construction of the existing 1000 MW and construction of another 1000 MW unit. • Construction of a new installation according to a new project for two 600 MW units on the site of Belene NPP.

24. Justification • GOB: there’s a need another 1000 MW nuclear unit to be commissioned before 2017. • The necessity of a new nuclear capacity will appear in the period 2012 - 2018. • A report to the Parliament of June 2004 stated that the preparation of the project has to begin after 2008 there will be electricity shortage (if three large projects are not completed by then: Maritsa East 2 TPP, a new 600 MW power plant and Tsankov Kamak HPP).

25. Financial justification (?) • Talks IMF and EU on state guarantee for Belene NPP of 51 to 80% of the project costs. • Legally, they would come from 1000 MW units 5 and 6 of Kozloduy NPP submission as in-kind state contribution of the state to the new company. • Originally, the idea was to established it in 2005. For the time being the already built-up infrastructure and the 1990’s 1000 MW reactor are apart of the new company.

26. Productivity dynamics (BNB, NSI)

27. Fixed capital formation (BNB)

28. Seven Recent Winners Legend: Production factors, Demand characteristics, Industry, strategy, rivalry, Clustering characteristics, Government policies/regulations

29. Seven Recent Winners Legend: Production factors, Demand characteristics, Industry, strategy, rivalry, Clustering characteristics, Government policies/regulations

30. Five Expected Winners Legend: Production factors, Demand characteristics, Industry, strategy, rivalry, Clustering characteristics, Government policies/regulations

31. Three-year plan for electricity saving (implemented) Measures (incentives) and dimensions:: • ● Investments - 762 million BGN • ● Saved fuels - 202 ktoe/year • ● Saved electric power - 754 GWh/year • ● Saved heat energy - over 1020 GWh/year • ● Saved electric power capacities - 151 MW/year • ● Annual economic effect - 217 million BGN • ● Reduced emissions - 1318 kt/year • The idea to launch renewables’ development - to 8% relative share of the total energy balance by 2010.

32. Improving Economic Freedom: Performance over Index History (Heritage)