OVERVIEW

2. OVERVIEW Bulgaria is one of the regional leaders in installed wind capacity Many problems still hinder the growth of the industry • With over 300MW of wind capacity already built, Bulgaria should be becoming a mature wind market • However, the challenges to the wind industry are still numerous • The different obstacles to the success of a wind project could be categorized as follows: • Technical & environmental • Market & economic conditions • Regulatory and institutional • The public image of renewables is not very good. People view renewable generation as a burden, and associate the industry with high electricity prices. Within the control of the developer Within the control of the administration

3. CHALLENGES TO WIND DEVELOPMENT • Technical Barriers • Grid: the grid lacks capacity to connect new generation • Environmental: Natura 2000 & bird migratory routes • Wind • difficult to find undeveloped windy locations • high uncertainty of wind resource analysis (due to lack of reliable long-term data) • Access: difficulty of getting cranes and/or turbines to site • Market and economic (or financial) barriers • Uncertainty of financial results (dependence on imperfect support schemes) • Effects of economic crisis • Lack of project finance • Banks and investors are cautious of the region • High upfront costs means wind projects are dependent on bank financing • Market saturated with half-developed projects that block the way for new entrants • Competition from other countries

4. CHALLENGES TO WIND DEVELOPMENT • REGULATORY AND INSTITUTIONAL BARRIERS • Changing Framework • Lack of transparency • Lack of proper institutions and local capacity • Overall resistance to change • EU directive  2009/28/EC (Directive 20/20/20) • Pressure from National Electricity Company • Pressure from Transmission System Operator • Pressure from Regulator • Pressure from Ministry of Environment • Pressure from Ministry of Agriculture • New Renewable Energy Law • New Energy Law • New Law on Agricultural Land • New Environmental Procedures (e.g. moratorium on renewables)

5. CHANGING FRAMEWORK NEW LAW ON RENEWABLE ENERGY A maximum of 1800MW of wind power will get built in Bulgaria by 2020? • New RES law to go through Parliament by 05.12.2010 • Latest draft aims to bring order and raise the bar for developers • Auctions for spare capacity • Grid connection fee of €20K per MW, payable at time of signing the preliminary grid connection contract. The fee will go into a fund with an unclear purpose. • Grid connection deposit (€2.5K per MW), payable at the time of signing the preliminary grid connection contract. • The proposed legislation also limits the capacity of new renewable generation that will get connected up to 2010 to: • 1800MW of wind • 600MW of solar • Tariff is locked-in for the term of the PPA at time of connection (no inflation!) • Balancing

6. CHANGING FRAMEWORK NEW LAW ON RENEWABLE ENERGY – WHAT DOES IT MEAN? The proposed law on renewables will make it almost suicidal to develop wind farms in Bulgaria • Until a project obtains a preliminary grid connection contract (PGCC) the investor won’t know whether the project will be connected (both because of auction & because of the 1800MW limit on wind) and what the feed-in tariff will be • Before a project gets to that stage, it needs the following : • Basic design & layout • Land acquisition • Bird & bat monitoring (at least a year) • Environmental Impact Assessment • Environmental Permit • Wind monitoring (at least a year) • Geology • Detailed Zoning Plan • At PGCC, the investor needs to spend another €22.5K per MW for a project that has decreased but still significant risk and is probably still a year away from breaking ground • Last but not least, this legislation doesn’t solve the problems that NEC & TSO have Takes about 2 years and a significant investment

7. PUBLIC IMAGE ARE RENEWABLES PERCEIVED AS BAD? The wind energy industry needs to work on its public image Wind is not expensive when you put it in the context of current costs of other generation technologies • The general public has very limited knowledge on wind energy. It needs to be educated on the following: • What is wind energy? • Why is it important and why do we need it? • How will it affect our energy system and energy bills? • What advantages will it bring to the country? • What are the drawbacks? • Wind is not expensive; wind is cheap and will become cheaper! It needs to be differentiated from other, more expensive renewable sources of electricity. • Compared to conventional electricity generation, wind is one of the cheapest: Source: David Milborrow

8. WAY FORWARD HOW TO OVERCOME THE CHALLENGES Bulgaria needs to embrace the green revolution not view it as a burden • A viable legislation that inspires confidence in investors; projects have to be bankable; wind should be given advantage over solar as it is the cheapest technology. • Expanding the capacity of the grid in the areas that have the best wind resource. • Clear environmental legislation that is based on EU norms. Guidelines for all should be set into place, no cutting corners allowed! • Administration that doesn’t hinder wind development and courts that allow for quick resolutions . • General support of the public – awareness that wind energy is not expensive and will have negligible impact on people’s electricity bills. Furthermore, it will preserve Bulgaria’s beautiful nature. • Bulgaria’s geographical position together with inexpensive labour costs make it ideal for turbine manufacturers and other companies in the sector to setup a base here to serve expanding neighbouring markets (Serbia, Romania, Bulgaria, Turkey). • Bulgaria could potentially develop its market in advance and become an exporter of green electricity. • Problems need to be quantified not just qualified. Wind has drawbacks (e.g. intermittency) but that has a price that can be factored in and wind energy will still come out as the best technology for new generation.