SOFIA - A rush to cash in on incentives to develop renewable energy projects in Bulgaria could end up in so much new supply it could cause blackouts on the national grid, the operator told Reuters on Tuesday.

Ivan Ayolov, chief executive of the state electricity system operator (ESO) said in an interview the government should impose stricter regulations to bar speculators.

Generous government incentives for electricity produced from wind, solar and biomass has led to an avalanche-like increase in projects which totaled over 11,000 megawatts by September.

This has to be stopped in an intelligent way, otherwise we face a catastrophe, Ayolov said, adding the situation resembled the Klondike gold rush.

At this stage the grid is reliable. It's capacity (for new installations) is 1,800 MW. But it is not reliable when it comes to 10,000 MW. ESO runs Bulgaria's high-voltage grids.

Bulgaria like most other former communist member states of the European Union relies mainly on coal and nuclear power to meet its energy needs.

The need to raise green energy share to 16-20 percent by 2020 to meet EU targets on reducing emissions, has prompted governments in the region to offer preferential prices to attract investors in renewables whose costs are higher than fossil-fuel based power.

This has led to a wind power boom in Bulgaria and Romania and numerous solar projects in the Czech Republic.

Bulgaria's wind energy capacity connected to the grid jumped to 330 MW so far this year from 103 MW last year.

But the existing power grids cannot cope with the demand for connecting new wind parks and state power utility NEK has already imposed a temporary freeze on connecting turbines in the north-eastern region of Varna.

NEK has warned of possible power outages due to the rising applications for new wind parks.

PRIORITY FOR RENEWABLES

Ayolov said apart from offering incentives, Bulgaria should also have a detailed strategy on increasing renewable energy in a sustainable way that did not put a strain on the power grid.

ESO, therefore, suggests investors pay five percent of the value of their project to the state as a deposit to prove they really intend to realize them, which will separate speculators from serious investors.

Under current legislation, NEK and the three regional power utilities -- Czech CEZ, Austria's EVNVI and Germany's E.ON -- are obliged to give a priority to renewables when connecting units to the system.

They must also cover all costs to upgrade their grids to link the new capacity.
Experts say some 40 million levs ($30.49 million) are necessary for connecting a 100 MW unit to the grid, while NEK has so far been able to invest 300-350 million levs a year for maintenance and overhauls.

The Economy and Energy Ministry says it will submit to Brussels a plan by June 2010 which will regulate the capacities and energy sources for linking to the grid.

The document is expected to rein in the negative effect of the preferential prices which saw applications multiplying and will allow utilities to plan in advance their investments in the grid, Kostadinka Todorova, an energy ministry expert, said.

Renewable energy Energy