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During the 1990s, Bulgaria was in transition from a centrally planned to a market-based economy. The country underwent drastic changes in its social and economic structure. Reduction and subsequent elimination of national energy subsidies led to sharp increases in energy prices. This situation strongly promoted energy conservation. Consequently, in the late 1990s, the government of Bulgaria, in cooperation with a number of international agencies, initiated a number of activities aimed at increasing the efficiency of the country’s energy use, and began developing a new national energy efficiency policy.

In 1998, the United Nations Development Program (UNDP), U.S. Agency for International Development (USAID), and national and local governments of Bulgaria initiated a pilot project to demonstrate opportunities for implementing energy efficiency in municipal settings and, ultimately, to develop a network of energy-efficient municipalities in Bulgaria. The total cost of the six-year pilot project, called “Strategy to Mitigate GHG through Energy Efficiency -- Demonstration Zone in Gabrovo,” is estimated at about US$7 million. The Bulgarian non-governmental organization, Center for Energy Efficiency (EnEffect), was established to implement the project. Several demonstration measures in street lighting, district heating, and building retrofits were conducted, and a number of bankable projects were identified as future prospects.

In 1999, the country adopted a “National Strategy for Energy Sector and Energy Efficiency Development until 2010.” That same year, the Bulgarian government passed a law creating a basis for a legally binding state policy for energy efficiency and elevating energy conservation to the status of “most favored energy source.” In addition, the law specified The State Energy Efficiency Agency (SEEA) as the main implementation arm of national energy efficiency policy.

Also in 1999, the U.S.-based company, Electrotek Concepts, began implementation of the USAID/Bulgaria Municipal Energy Efficiency Program (MEEP), following an agreement between USAID and the United Bulgarian Bank (UBB). Under the program, local municipalities and industries are able to get loans for implementing energy efficiency projects using a “Development Credit Authority” mechanism (DCA is a guaranty line established by the U.S. government which insures, without charge, 50% of collateral for loans taken from UBB for energy efficiency projects). As of mid-2003, more than 30 projects had been initiated under MEEP. The total cost of these projects amounted to roughly US$11 million, 40% of which was devoted to municipal initiatives. Projects have been conducted on central heating systems in schools and other public buildings, in addition to municipal street lighting. These municipal projects have thus far demonstrated an impressive return, with an average payback period of three and a half years.

In 2000, under the United Nations Economic Commission for Europe’s (UNECE) Energy Efficiency 21 Project, energy efficiency demonstration zones in Blagoevgrad, Bourgas and Pernik regions were established. The project supports local municipalities’ initiatives for energy efficiency in street lighting, as well as in lighting and heating systems in schools, hospitals, and other public buildings. The Alliance to Save Energy (ASE) won a contract from UNECE to develop business plans for, and provide training to, the three municipalities; it then hired EnEffect to help it provide some of the in-country work. Several other cities besides the three demonstration zone municipalities were also invited to participate in the training, which emphasized the utilization of energy service companies and outside financing. The following table provides descriptions, costs, and statuses (as of Fall, 2003) of some of the resulting projects:

Project Description

Cost in million BL (million $US)

Project Status

Moderization of the trolleybus system in Pernik
(demonstration zone)


Under discussion

Street lighting in Bourgas
(demonstration zone)


Under discussion

Street lighting in Blagoevgrad
(demonstration zone)


Under discussion

Energy efficiency in municipal buildings, Dobrich
(training only)


Investment 95% secured

Street lighting in Russe
(training only)


Investment 100% secured

Gassification of municipal buildings in Novi Pazar
(training only)


Investment 100% secured

The Dobrich project provides a good example of the breadth of these projects. Nine school buildings are to be connected to the city’s natural gas distribution network, and modern gas-fired burners will be installed in existing boilers, replacing naptha burners. In addition, forty municipal buildings will be retrofitted, with measures including fuel-switching (from oil to natural gas, in nearly 80% of the sites), introduction of automatic control systems for space heating, repair of windows (including weatherstripping, alignment, and restoration of double glazing), addition of thermostatic valves on radiators, augmentation of roof insulation, and installation of efficient lighting systems.

In 2002, the European Bank for Reconstruction and Development (EBRD), the World Bank and the Sofia municipal district heating company, Toplofikacia AD, jointly started the Sofia District Heating Rehabilitation project. The project includes installation of new sub-stations, rehabilitation of critical parts of Sofia’s district heating plant, and other institutional and policy measures. It is expected to generate energy savings of around 15% per connected household. The total cost of the project is estimated at 114 million EUR (US$130 million), to be split fairly evenly among the three organizations.

In 2002, the government approved a new energy strategy that views energy efficiency as a tool for entrance into the European Union. A new law was drafted that contains a provision for the establishment of a Bulgarian energy efficiency fund (BEEF). The fund would finance energy efficiency projects, including those in the public sector, on a revolving basis. In the spring of 2003, the World Bank and the government of Bulgaria reached an agreement on the basic structure of BEEF, which would be implemented through the Global Environment Facility (GEF). The projected cost of the targeted cost-effective measures is nearly US$80 million. US$10 million would come from GEF, with another US$35 million from commercial banks and private investors; the rest would come from the funds accumulated by repayments from borrowers over the ten-year life of the fund. After this period, the belief is that private investors, convinced of the concept’s viability, will be willing to finance further energy efficiency projects in the country without subsidies.