- Bulgaria will renegotiate the energy section of its Recovery and Resilience Plan with the European Commission
- The process may take months and puts at risk a total of 14 billion levs (7 billion euro) Bulgaria expects to receive under the recovery plan and from the EU's Just Transition Fund.
- Due to a drop in electricity prices, coal-fired power plants are operating at 16% lower capacity compared to last year.
Representatives of the European Union member states often gather for coordination meetings in Brussels. After such a meeting at the end of January, the written statement on Bulgaria read: "The caretaker government openly acknowledges that it is ready to sacrifice some payments under the Recovery and Resilience Plan to extend the life of coal-fired power plants."
This statement quoted by a source of Capital Weekly confirms a suspicion that the caretaker cabinet is on the verge of halting the implementation of the recovery plan, as well as several other financing instruments of the EU in the name of preserving the "sacred cow" - the state-owned Maritsa East 2 coal-fired power plant.
The truth is that the caretaker cabinet appointed by president Rumen Radev does not have much leeway to act under the decision for renegotiation of the energy section of the plan made by Bulgaria's last parliament in January, shortly before Radev dissolved it in preparation for early elections on April 2. But the situation is so dramatic that it requires greater attention.
Coal capacities are declining anyway, with production dwindling as costs rise. The closure of coal-fired power plants and coal mines seems inevitable, and Bulgaria had a chance to receive funds under the Recovery Plan to support its energy transition towards alternatives. However, the authorities do not even want to discuss these opportunities over fear of losing the votes of the people employed there now.
Thus, under the banner of preserving Bulgaria's energy independence and led by desire to please several thousand voters in the regions of Stara Zagora, Pernik, and Kyustendil where coal-fired power plants are located, the political class is betting on a card worth over 14 billion levs for investments (12 billion levs under the Recovery and Resilience Plan and 2 billion levs from the EU's Just Transition Fund). The affected regions need the funding to cope with their transition to low-carbon economy.
Back and forth
The first bomb exploded despite the attempts of the European Commission and the caretaker government to defuse it. In a response to a question from Capital Weekly, European Commissioner for Cohesion and Reforms Elisa Ferreira announced that "the government has informed us that it is not interested in starting the application of Territorial plans for a fair transition this year." This means that in practice, Bulgaria will not say what it wants to do in the three regions by the end of 2023 and will not receive over 1.5 billion levs from the Just Transition Fund in support of their shift away from coal.
Later, Ferreira clarified that she meant "last year." But the situation did not improve much as information from both Sofia and Brussels indicated that the Territorial plans are unlikely to be submitted this year. The reason is simple. At the beginning of 2023, MPs from almost all parties decided that there is a need for a revision of the Recovery and Resilience plan and obliged the cabinet to re-negotiate with the European Commission the requirement to cut energy-related CO2 emissions by 40% by the end of 2025 compared to the 2019 levels.
Negotiations Without Games
The European Commission is currently in the process of negotiating various national recovery and resilience plans, seeking to include in them new commitments related to the ongoing war in Ukraine: energy supply diversification, improved energy efficiency, and clean energy.
Against this backdrop, according to sources from Brussels, Bulgaria's requests will be met with skepticism. The main thesis in negotiations with the Commission will likely be that the goal of reducing carbon emissions from power plants by 40% by the end of 2025 will not be achieved, or otherwise there will be a shortage of electricity. At least that's what transpires from statements made by catetaker energy minister Rosen Hristov in recent months.
But such motives are difficult to defend. In practice, coal-fired power plants have already reduced their activity by 16% on an annual basis in January and February, and by 11% below the level recorded in the same period in the base year of 2019. This means that Bulgaria is practically meeting the requirements of the recovery plan for 2023.
Goodbye to funding and reforms
In addition, the goals for reducing harmful emissions to which Bulgaria has committed in several international and European agreements and policies, will sooner or later have to be achieved, unless the country intends to become a "climate outcast" in Europe. Until the process of re-negotiation is ongoing, however, almost all of the time for investing the money under the Recovery and Resilience Plan will be lost.
The negotiation process took more than 9 months the first time around. This time, the ambition is for the negotiations to proceed faster. According to Deputy Prime Minister Atanas Pekanov, the goal is for the submission of Territorial plans to happen in the autumn of 2023 to avoid the risk of losing funds, but there is no guarantee that the re-negotiation of the recovery plan will be concluded by then.
This is a dangerous gambling with time. At the moment, 35 measures under the Plan remain to be implemented, most of which are related to changes to legislation that need a functioning parliament to make them. A review meeting will take place in mid-April, but some of the changes Bulgaria had promised to Brussels may not receive the necessary support. For example, the idea of a special official to investigate the chief prosecutor, the liberalization of electricity prices, or the closure of coal-fired power plants. It is not clear at the moment whether the rejection of one payment will not lead to the rejection of the entire plan, although both Brussels and Sofia will probably work hard to avoid such a possibility.