Expensive carbon emissions will not affect the price of electricity in Bulgaria

In recent months, the price of carbon dioxide (CO2) emissions has increased significantly and is already above the forecast of the Bulgarian Energy and Water Regulatory Commission (EWRC), according to a published report.

At the end of January, NEK requested a review of the price of two of the coal-fired power plants in the Maritsa Basin - TPP AES "Galabovo" ("Maritsa East 1") and TPP "ContourGlobal Maritsa East 3".

The state-owned company said that their costs for buying energy at the two plants are increasing significantly due to more expensive carbon dioxide emissions on world markets. In its price decision of 1 July 2020, the EWRC set an estimated price of allowances of 22 euros per ton, and in the second half of last year the price has already reached 29 euros per ton.

At the moment the price exceeds 30 euros per ton, and at the end of last week it briefly tried a level of 40 euros per ton. Analysts expected an "attack" on this psychological frontier, but later in the year. The forecast is that in the first half of the year the average price per tonne of carbon dioxide will reach 31 euros.

However, EWRC calculations show that the increased CO2 quota prices will not create a deficit in the purchase of energy under the long-term contracts of the two plants, because of the higher revenues in the Electricity System Rescue Fund (EUSF).

According to the expert analysis, the costs incurred for the two plants increase from almost BGN 150 million to BGN 247 million.

However, the additional income in the Fund increased by BGN 159 million to BGN 251.5 million. Based on this calculation, the EWRC refuses to NEK to change the price for the purchase of energy from the two power plants, and accordingly the price of electricity on the regulated market.

The additional costs of NEK in its role of public provider must be covered by the surplus funds, which is formed in the EUSF, the EWRC states in its report.

NEK also pointed out in its request that the plants that produce electricity in a combined way, using gas, benefit from the lower price of natural gas. The problem arises only for condensing plants.

The EWRC also calculates that it is not necessary to increase the price set for the Electricity System Operator (ESO) to provide a  reserve output during this price period. The change in electricity prices during the regulatory period, which expires on 30 June 2021, was discussed during a closed meeting on 12 February.