Power policy

Bosnia and Herzegovina (BiH) is split into two political entities – the Federation of Bosnia and Herzegovina (FBiH) and Republika Srpska. The two regions have separate governments and determine their energy policy independently. Each region has a separate feed-in tariff, with Republika Srpska additionally offering a feed-in premium, although these schemes have only encouraged the build-out of smaller plants so far.

In theory, renewable energy producers with feed-in tariff contracts receive priority grid access. However, it can be a difficult and bureaucratic procedure to secure a connection in practice. In 2019, Republika Srpska removed wind from the technologies eligible for receiving a feed-in tariff or premium, with the government stating that it was too costly for end consumers. State utilities have negotiated deals for larger wind farms directly with the government.

A net metering scheme is used for small producers for up to 50 kilowatts and in Republika Srpska, self-generation is encouraged by offering a premium for the electricity produced.

Power prices and costs

Power prices are still partially regulated in Bosnia and Herzegovina, particularly in Republika Srpska. Prices in the wholesale market in FBiH can be distorted as output from power generation facilities has not yet been optimized. Across the whole country, tariffs are comparably cheap and subsidized for customers that benefit from universal supply tariffs.

Power market

The country’s power fleet is roughly split between just over 2 gigawatts (GW) of coal capacity and about 1.7GW of large hydro. A new coal-fired power station was completed in 2016, beginning the process of replacing the aging coal fleet. Another coal plant, Tuzla 7, is currently under construction, despite the Energy Community – a European energy body – bringing infringement proceedings against the country.

Bosnia and Herzegovina’s renewable energy capacity is minimal, but includes wind, solar, biomass and small hydro. The country’s first wind farm was commissioned in Mesihovina in 2018, and comprises 22 turbines with an installed capacity of 51MW. In 2021, a 15 turbine, 48MW wind farm was completed in Podvelezje.

Most renewables investment has come from international concessional lenders, including the European Investment Bank and European Bank for Reconstruction and Development (EBRD). In addition to domestic funds and government grants, organizations such as the United Nations Development Program and U.S. Agency for International Development (USAID) provide co-financing and technical assistance.

While Bosnia and Herzegovina’s electricity sector is open to private participation, generation and distribution are overwhelmingly undertaken by three vertically integrated public utilities whose remit is geographically distributed. There are, however, some larger wind projects developed by foreign players and local developers have also built small-scale hydro. Distribution system operators are still bundled with electricity retail in FBiH, and with electricity supply in Republika Srpska. There are no corporate power purchase agreements (PPAs) in Bosnia and Herzegovina, as most generators are still enjoying the benefits of feed-in tariffs.

Doing business and barriers

Obtaining a permit is the single largest barrier faced by renewable energy developers in Bosnia and Herzegovina. Approval is required from many different levels of government and the requirements can vary by region. Disagreements between various government departments are hampering the establishment of an adequate electricity transmission system and the construction of power lines to connect wind and solar power plants.

Local opposition is an additional obstacle for renewables projects. The governments of both FBiH and Republika Srpska have accepted the recommendations of the Declaration on the Protection of the Western Balkans’ Rivers, which entails a ban on the construction of small hydropower plants. It also requires that all previously issued approvals for small hydropower plants that have been constructed and those that are under construction be revised.

To meet its climate goals, Bosnia and Herzegovina will need substantial international assistance for technology transfer, setting up financial mechanisms to encourage decarbonization, and financial support for climate-related projects. Working in its favor is a moderate level of indebtedness and the commitment of the international community to the economic stabilization of the country.

EV market

Bosnia and Herzegovina does not currently have a large number of electric vehicles (EVs). Just under three-quarters of the vehicle fleet (74.73%) still consists of vehicles with diesel engines, while the number of vehicles powered by alternative fuel is less than 4%.

Although the country is not a member of the European Union (EU), it adopted the EU’s Euro 4 emissions standard in April 2016. This stipulates that imported vehicles should not be older than 10 years and sets minimum technical standards in line with the EU, incentivizing new and more sustainable cars.

EV policy

The Environmental Protection Fund of the Federation of Bosnia and Herzegovina has co-financed projects worth about 430,000 euros ($491,060) since 2013, including charging infrastructure for electric vehicles (EVs), the introduction of ecological vehicles, and the replacement of petrol and diesel public transport vehicles with more environmentally friendly hybrids. However, this fund has not had a significant impact – in 2020, there were only about 90 EV charging stations in the country.

In November 2020, the government started discussing an amendment to the Law on Value Added Tax, proposing the introduction of VAT exemption on EV imports.

Buildings market

The Federation of Bosnia and Herzegovina (FBiH) enacted the Law on Energy Efficiency in 2017, with the main purpose of reducing environmental impact, ensuring security of energy supply and lowering GHG emissions. FBiH also adopted rulebooks for energy performance requirements for buildings and regular inspections of heating and air conditioning systems in November 2019. Modernization of the country’s district heating systems is ongoing, including several biomass based district heating projects supported by the EBRD.

Buildings policy

The Sarajevo region is preparing a ten-year strategy to limit the use of coal, and promised in 2021 that it would ban the use of coal for heating. According to the region’s Ministry of Utilities, Infrastructure, Physical Planning, Construction and Environmental Protection, the public has shown a great interest in a pilot project offering subsidies to households to replace coal furnaces and boilers with certified wood pellet burners and heat pumps.

The EBRD has supported over €1.1 million worth of green technology investments in Bosnia and Herzegovina through the Green Economy Financing Facility (GEFF), providing a grant for 15-20% of the loan amount through partnering financial institutions. People in BiH have mostly invested in PVC windows and doors, biomass boilers and thermal facades.