Fifteenth Quarterly Progress Report: Energy Investment Activity Project in Bosnia and Herzegovina

The sector has key relevance for the country's accession to the European Union (EU) and energy security in the Western Balkans. Estimates suggest that BiH has the potential to at least double its electricity production through the usage of its hydroelectric potential, renewable energy, and possibly through the construction of additional thermal power plants. However, a number of obstacles, including political, bureaucratic, and the absence of a fully market-oriented environment, have driven away even the most determined investors. The Energy Investment Activity (EIA) project has three main objectives: to develop transparent and investor-friendly energy infrastructure construction legislation and regulations, including recommendations for stimulating investment in renewable power plants; to establish a functional electricity retail market, in which a customer will be able to negotiate contracts with the most competitive supplier, regardless of their location; and to achieve energy savings, using regulatory incentives and emission reduction through BiH compliance with the EU Directive on Large Combustion Plants. In addition, EIA will assist the State Ministry of Foreign Trade and Economic Relations (MOFTER) to perform its coordination role for compliance with the Energy Community Treaty. EIA will identify and document obstacles to investment in the electricity sector, including the legal framework for permitting in the BiH regions with potential for generation. In partnership with local authorities, it will recommend legislative changes consistent with best international practice. EIA will also recommend measures to stimulate investment in renewable power plants. Furthermore, EIA will define Distribution System Operator (DSO) processes so they are neutral retail market facilitators; assist regulators to fully develop a balancing settlement mechanism for the retail market; enhance quality of services standards; and identify obstacles to and develop recommendations for the integration of renewables in the electricity market. The Fourth Energy Summit 2018 was held on April 25-27, 2018, in Neum, Bosnia and Herzegovina, under the auspices of the Ministry of Foreign Trade and Economic Relations of BiH (MOFTER), State Electricity Regulatory Commission (SERC), Republika Srpska Energy Regulatory Commission (RSERC), and Federation Electricity Regulatory Commission (FERC). The Summit featured six panels and four technical sessions with more than 450 participants, addressing topics such as sustainable development of the energy sector in BiH, energy market, construction of power infrastructure in BiH, and regulators' position in the energy sector and their role in energy efficiency. The Summit received significant media attention and set a new benchmark for energy-related events in the country. Following the commitment by the BiH parliamentarians to discuss energy sector issues in the BiH Parliament, USAID EIA developed recommendations for energy sector reform. The recommendations were further adapted to suit the required parliamentary format and nominated by this respective group of parliamentarians as an agenda item for the 62nd session of the BiH parliament. Once adopted by the Parliament, the recommendations will give a clear signal to the legislative authorities that the reform process in the energy sector must continue and that some immediate steps need to be taken. The Energy Community Secretariat organized the 17th Energy Efficiency Coordination Group Meeting in Belgrade, Serbia, on June 6-7, 2018. The meeting was attended by all Energy Community contracting parties, EBRD, WB, GIZ, and UNDP. USAID EIA was invited to present the Energy Efficiency Obligation (EEO) Scheme Model for Bosnia and Herzegovina. The presentation was followed by numerous questions as the regional countries are interested in also implementing EEOs. EIA participated in the International Energy Fair "Energa" on June 19-21, 2018. In an opening panel, EIA presented the key recommendations for energy sector reform and stressed the need for the country to continue the stalled reform. EIA also participated in panel discussions regarding energy and climate politics in BiH, establishing an organized electricity retail market in BiH, and security of gas supply in BiH. The Energa Fair was organized under the auspices of the BiH Ministry of Foreign Trade and Economic Relations, which also organized a Donor Coordination Meeting during the Fair with the purpose of strengthening coordination, collaboration, and partnership between different donors and MOFTER. A Letter of Intent was signed between USAID BiH and regulatory commissions on the development of the Electricity Price Comparison Tool. The Letter of Intent sets out the principal terms for the development of the tool, which will enable customers to compare electricity prices and make informed decisions about their energy suppliers.