First Quarterly Progress Report: Energy Investment Activity Project (EIA) in Bosnia and Herzegovina

In addition to its economic significance, the BiH energy sector has key relevance for the country's accession to the European Union (EU) and energy security in the Western Balkans. Estimates are that BiH has the potential to at least double its electricity production through the usage of its hydro-electrical potential, renewable energy, and possibly through the construction of additional thermal power plants. However, a number of obstacles – political, bureaucratic, and the absence of a fully market-oriented environment – have driven away even the most determined investors. The USAID project, Energy Investment Activity (EIA), works to remove the obstacles to investment in the energy sector, create a friendlier investment environment that will make the BiH energy sector attractive for investors, and help advance the BiH accession process related to energy requirements. In partnership with local and international counterparts, the project has three main objectives: (1) develop a transparent and investor-friendly energy infrastructure construction legislation and regulations, including recommendations of measures to stimulate investment in renewable power plants, (2) 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 (3) achieve energy savings, using regulatory incentives and emission reduction through BiH compliance with the EU Directive on Large Combustion Plants. The project 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, which will help streamline the permitting process and make it investment-friendly and transparent. The project will also identify the links between electricity generation and waste products from agriculture, wood processing, and livestock farming, and recommend measures to stimulate investment in renewable power plants. Working with stakeholders, the project will define DSO processes to make them 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 and develop recommendations for the integration of renewables in the electricity market. Together with key stakeholders, the project will assist in drafting an Energy Efficiency Obligation Scheme suited to the circumstances in BiH, and assist partners to revise the necessary regulatory documents to make an energy efficiency obligation scheme operational. The project will also provide assistance so that BiH and LCP owners develop emission harmonization plans in accordance with EU Directives. The EIA Project will implement all activities by applying a methodology that encompasses continued joint work through working groups and subgroups with all relevant local stakeholders. Additionally, implementation will include cooperation with other USAID programs and donor-funded projects. Where appropriate, the EIA Project will develop case studies in order to better identify the present situation in the sector; assist local authorities to improve the legislative and regulative environment; and assist prospective investors to prepare their projects for permitting procedures. In the first quarter of the project, the EIA project was mobilized, and initial kick-off meetings with USAID were held regarding Finance, Procurement, and Technical issues. The draft EIA Work Plan and M&E Plan were completed and submitted for USAID approval within the required timeframe. USAID EIA organized kickoff meetings and follow-up technical meetings with various stakeholders, including the Ministry of Foreign Trade and Economic Relations of Bosnia and Herzegovina, the Federation Minister for Energy, Mining, and Industry, and the State Electricity Regulatory Commission. All representatives of the stakeholders expressed strong support to the EIA plan and methodology and agreed to designate members for all working groups proposed by EIA. The EIA Project had initial meetings with various USAID projects, international donors, and firms in order to present the EIA Project and discuss future cooperation. USAID EIA representatives attended the USAID Environmental Training and the M&E workshop organized by USAID BiH in order to build the capacity of implementing partners with respect to the design, collection, storage, analysis, and use of performance monitoring data within USAID's program cycle. Meeting with USAID and the Measures Project was held regarding M&E in order to improve EIA's M&E Plan.