Assets based industrial transition 8th Regional Energy Conference, BEMF 17 May 2019 Julian Popov Fellow, ECF Chairman, BPIE

Maritsa East - 5 key questions What is the future of the European energy sector? How to guarantee the energy supply security of Bulgaria? How to preserve the economic output? How to preserve the employment? How to increase the economic output?

The big €20/t CO2 price surprise The CO2 price has been brewing for at least 30 years. European CO2 trading started before Bulgaria joined the EU. Global CO2 market is emerging. CO2 is becoming global environment currency. €30 2050 CO2 neutral €25 2030 CO2 - 40% €6 2021 ETS Phase 4 2013 ETS Phase 3 2008 ETS Phase 2 2005 ETS Phase 1 2003 European Parliament, ETS Directive 1997 Kyoto Protoco 1992 UNFCCC 1989 Fall of Todor Zhivkov Fall of Berlin Wall UNGA Bulgaria and Romania enter the EU 10 former Communist states in the EU

Surprise was the fall, not the increase of the price

Carbon pricing is becoming global

CO2 is a global currency and is here to stay

The gap between cost of RES and conventional fossil is widening (The 2016 UK government RES cost decline estimates for 2025 were surpassed in 2017) €65 - 2017 Dong Energy €29 – 2017 Siemens Turkey €30/MWh RES is approaching (Chile, India, Saudi Arabia, Turkey, UK) UK – 1st unsubsidised solar €150/MWh conventional is approaching

Maritsa East - 5 key questions What is the future of the European energy sector? How to guarantee the energy supply security of Bulgaria? How to preserve the economic output? How to preserve the employment? How to increase the economic out?

Ten answers to the energy demand security question ME 3 Ten answers to the energy demand security question ME 3.0 can provide full supply security and can further strengthen the national energy security 240 km2 solar PV could provide more power than the national demand (not recommended here) ME is a good place to develop biomass and biofuel 1st, 2nd and 3rd generation, probably wind Small and medium gas power plants can further provide supply security and balancing Integrating short term storage (batteries) will flatten daily peaks Large power to gas (hydrogen) installations can serve as long-term storage Upgrade of hydro power plants in BG to storage could balance high intermittent RES in ME Hydro power could provide dispatchable power for balancing intermittent renewables The regional market will further flatten demand across different time zones Demand response management will reduce the pressure on the system Change will not happen overnight. Let technologies compete.

От презентацията на Иван Костов “От примерите с опитите да се възобнови строителството на АЕЦ „Белене“ и окаяното състояние на ТЕЦ „Марица изток 2“се вижда, че на българската енергетика е необходима стратегия, която минимизира държавната намеса. В стратегията трябва да се предвиди изграждането на заместващи мощности на големите въглищни централи да стане на базата на открит конкурс между инвеститори разполагащи с алтернативни производствени технологии.” Необходими са законодателни промени, които да могат да направят възможни търгове за равна надпревара между алтернативни технологии.

Maritsa East - 5 key questions What is the future of the European energy sector? How to guarantee the energy supply security of Bulgaria? How to preserve the economic output? How to preserve the employment? How to increase the economic output?

Lignite regions have valuable transition assets Large areas of land (ME – 240-460 sq km) Single owner, simple administration Strong grid Transport infrastructure Qualified workforce

The Future of Maritsa East - Summary Maritsa East region can transform from the largest lignite only power generation complex in South East Europe into an economic zone that would combine new clean energy generation technologies with industrial and R&D enterprises associated with the regional and global energy transition. The 3 key principles of the proposal are (a) retain the energy profile and capacity of ME (b) preserve and increase the number, quality and pay grade of the employment in the region and (c) retain and increase the economic output of the region. Maritsa East offers excellent energy and transport infrastructure, human resources and technological development capacity and potential. That creates an opportunity for three scenarios corresponding to three levels of ambition: 1. Employment and energy generation capacity preservation; 2. SEE regional energy technology centre 3. European clean energy technology zone.

Conclusions Lignite regions’ assets have high value for the low carbon industrial revolution. They could be transformed into dedicated low carbon industry industrial zones. And serve as industry “transition super-labs”. Maritsa East region has the perfect low carbon industry assets combination ME can play national, regional, European or even global role ME can be the key from restructuring of the Bulgarian industry and economy

Assets based industrial transition 8th Regional Energy Conference, BEMF 17 May 2019 Julian Popov Fellow, ECF Chairman, BPIE

Energy centre and an exceptional national and international infrastructure crossroad on a vast state owned single plot of land 70 years energy industry history: development started in 1948 240 km2 low quality open cast lignite, high content of sulphur State own land unsuitable for agriculture The largest energy complex in the SEE 3 main lignite power plants, 3.3GW total generation capacity The heart of the Bulgarian national electricity grid Focal point of 3 new electricity Projects of Common Interest Crossroad of 3 EU transport corridors 4, 8 and 9  Located near the main national gas ring By the route of the Bulgaria-Greece gas interconnector Close proximity to the 5th largest city in Bulgaria Relatively close distance to Sofia, Burgas (port) and Istanbul

ME 3.0 could bring together a wide variety of new energy technologies Batteries Hydrogen Gas Biogas EV production EV components Smart meters Inverters Windows Ventilation systems New storage technologies LED 2G and 3G biofuels Cables IT for energy R&D Training Solar Conference centre Distance medicine AQM 3D printing Waste treatment Micro hydro turbines Solar heating Heat pumps Wind Smart building Public transport Wind components Drones Data centres …and many others

Transforming Maritsa East into the “Low Carbon Valley of SEE”. Or EU Transforming Maritsa East into the “Low Carbon Valley of SEE”. Or EU. 9 principle of the ME transformation Preserve the 3.3GW power generation equivalent through competing technologies Protect and expand the current employment level Increase quality of employment and payment Develop an industrial zone in parallel not as substitute of existing capacity Use existing infrastructure Follow the transforming energy economics Build infrastructure for the future Make ME attractive for global strategic investors Diversify the energy technologies - storage, 2nd generation biofuels, wind, solar, gas, etc

Impact – high quality employment and high economic growth ME 3 Impact – high quality employment and high economic growth ME 3.0 could transform South East Bulgaria into a prosperous EU industrial region Employment numbers will be preserved Large share of new employment will need transferable skills from current jobs Employment will rapidly increase in more ambitious scenarios Quality and paygrade of employment will increase significantly Young qualified people will be retained or attracted to the region (reversed brain drain) Regional and national economic growth will increase National and regional competitiveness will increase The region will aquire economic mission and fame ME will become a leading international new technology centre ME could become a strategic EU industrial competitiveness centre

Financing A sound state backed proposal could raise the required funds EU coal regions in transition platform Modernisation Fund Innovation Fund EU cohesion funds European Regional Development Fund (ERDF) EU budget – next MFF at least 25% climate related EU budget – next MFF will increase R&D spending by 60% EFSI 2.0 Carbon trading National budget Long term strategy = private investments Avoided stranded assets