SOFIA (Reuters) - Bulgaria can outshine the Czech Republic as east Europe’s most lucrative solar energy market if the government quickly removes legal pitfalls now blocking investment in the country’s strong sun potential.
Investors are on the lookout for new opportunities in central and southeastern Europe after Spain and Germany, the global industry leaders in photovoltaics (PV) that turn sunlight into energy, have either cut or plan to curtail incentives.
The Czech Republic has so far attracted the lion’s share of investment in eastern Europe due to generous subsidies. But Prague is now expected to reduce the feed-in tariffs from 2010, a move that could make Bulgaria a more promising market in the medium to long-term, analysts say.
The Balkan country has already attracted applications for 1,000 megawatts of new solar parks thanks to its incentives.
“Bulgaria has the potential to become a larger market than the Czech Republic in the long term because of its natural conditions,” said Martin Simonek, London-based solar energy analyst with consultants New Energy Finance.
“Once the economic crisis is over, the growth rates there will be faster, so there will be demand for energy,” he said.
Some industry officials say solar can help recession-hit countries like Bulgaria to return to growth, though Spain offers a warning to those who do not weigh tariffs’ impact carefully.
Tariffs are the solar industry’s lifeblood as long as the so-called grid parity — the point at which renewables cost the same as fossil fuel-based power — has not been reached.
Generous tariffs in Spain caused a bubble and Madrid slashed subsidies and introduced caps on qualifying plants in 2008, which hit the worldwide PV industry that had come to reply on the Spanish market.
Former communist EU member states rely mainly on coal and nuclear power to meet energy consumption needs. Their renewable energy comes mainly from hydro power plants.
The need to raise the green energy share to 16-20 percent by 2020 to meet EU targets on reducing emissions, has prompted some governments in the region to offer support schemes to attract investors in energy from wind, solar and biomass.
Incentives and lower technology costs than the ones for solar have already created a wind power boom in Bulgaria and Romania.
To match its own wind success, Bulgaria must fix the feed-in tariff for already installed solar parks as opposed to the current system, which allows an annual 5 percent drop in prices for both old and new installations, investors and analysts say.
The previous Socialist-led government doubled the duration of guaranteed preferential power purchase prices to 25 years but the varying price in times of crisis makes investors hesitant.
“If there is a change in the law in the light of guaranteeing the price, the interest of both banks and its clients will jump,” said Assen Yagodin, executive director at the Bulgarian unit of Greek EFG Eurobank.
Germany’s Phoenix Solar, Italy’s Petrolvilla, Austrian EVN and dozens of smaller local companies as well as from Spain, Austria and the Netherlands are among those who have already tabled projects.
Bulgaria’s new cabinet, which took power in July, pledges to amend laws to boost green energy but did not give a timetable.
“We will be looking into all possible incentives that can be offered to investors,” said Kostadinka Todorova of the economy and energy ministry.
The lack of fixed prices has kept the installed solar capacity at just 1.4 MW in 2008 compared with 54 MW in the Czech Republic out of a total of 63 MW in eastern Europe, data from the network of photovoltaics in new EU member states showed.
By contrast, Bulgaria’s wind energy capacity jumped to 330 MW so far this year from 103 MW last year.
Analysts say the solar capacity can reach 20 MW this year and up to 140 MW in 2010 if Sofia moved quickly to clear hurdles, including problems of connecting new parks to the existing grids whose demand far outweighs current capacity.
The Czech capacity could reach 200 MW this year as investors rush to connect solar parks to the grid before the government’s likely decision to limit tariffs for new parks, they say.
Additional reporting by Michael Kahn in Prague; Editing by Anna Mudeva and Angus MacSwan