Twentieth 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 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 – political, bureaucratic, and the absence of a fully market-oriented environment – have driven away even the most determined investors. The Energy Investment Activity (EIA) has three main objectives: develop transparent and investor-friendly energy infrastructure construction legislation and regulations, including recommendations of measures to stimulate investment in renewable power plants; 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 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. In the natural gas sector, the project works to remove obstacles to investment and to assist BiH in diversifying its sources of supply to enhance energy security. 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. 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 Republika Srpska Government has sent a positive opinion on the Draft Law on Electricity and Gas Sector Regulator and Electricity Transmission System and Market. The potential adoption of the Law requires also the approval from the FBiH side, the BiH Council of Ministers, and the prescribed parliamentary procedure. The FBiH Government adopted the FBiH Energy Sector Restructuring Program on its 188th Session, held on August 22, 2019. The adoption of the Restructuring Program entails functional and legal unbundling of electricity distribution and supply activities within EP BiH and EP HZHB (currently vertically integrated utilities). EIA repeatedly lobbied for the adoption of the FBiH Restructuring Program that was halted in the House of Peoples of the Federation Parliament since 2014. EIA developed the Report on the Activities Pertaining to Implementation of Recommendations for the Removal of Obstacles to Investment in Energy Sector in BiH (the Investment Implementation Report). The Investment Implementation Report outlines and explains the status of implementation of recommendations up to now, which EIA agreed to implement with its partner ministries. In addition, it highlights the key activities on implementation initiated by other partner institutions. The Government of Brcko District of BiH adopted USAID EIA's recommendations for removing obstacles to investments in Brcko District of BiH.