Sixth Quarterly Progress Report: USAID Energy Investment Activity Project (EIA)

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. To address the challenges in the BiH energy sector, the USAID Energy Investment Activity Project (EIA) has three main objectives. The first objective is to develop transparent and investor-friendly energy infrastructure construction legislation and regulations, including recommendations for stimulating investment in renewable power plants. The second objective is to establish a functional electricity retail market, where customers can negotiate contracts with the most competitive supplier, regardless of their location. The third objective is to achieve energy savings through regulatory incentives and emission reduction, in 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 BiH regions with potential for generation. In partnership with local authorities, the project will recommend legislative changes consistent with best international practice. The project will also recommend measures to stimulate investment in renewable power plants. Implementation of the project will be carried out through a methodology that encompasses continued joint work through Working Groups and subgroups with all relevant local stakeholders. The project will define Distribution System Operator (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. During the reporting period, the project made significant progress in several areas. Analysis of international best practice and the current permitting regime in BiH led to the development of a comprehensive study on the authorization framework, including findings from EU-funded studies on permitting regimes and relevant EU Directives and Regulations. The project also agreed to cooperate with the Energy Regulatory Commission (EP BiH) on the identification of legal, administrative, and other obstacles for investment, as well as mutual formulation of proposals for their elimination. The new balancing system for balancing and procurement of ancillary services began functioning as of January 1, 2016, and proved to be functional and effective in the first three months of its implementation. The stakeholders expressed their satisfaction with the new system, but also pointed out problems that became evident in the course of its actual implementation. The stakeholders and EIA agreed to continue working on removing the deficiencies and improving the system to ensure better stability of the system while maintaining the liquidity of the balancing market. The final EEO Scheme Outline document was finalized with the EEO Working Group members, containing directions for the development of the EEO Scheme in Bosnia and Herzegovina and serving as a basis for continuing work. The project also completed a report on the current status and BiH potential to build biomass power plants, prepared a methodology recommendation for the selection of the best technology for a biogas facility for the Milkos Dairy Company, and participated in the International Biomass Conference in Novi Sad, Serbia. Additionally, the project proposed and drafted an outline of activities and timeline for the implementation of a Combined Heat and Power (CHP) generating facility instead of a biomass boiler for the National Park Sutjeska.