USAID Energy Investment Activity Project (EIA) Annual Summary Report 2017-2018

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 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: (1) develop 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 its location, and (3) 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. 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. 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. Further, the legislation gap analyses will point out what primary and secondary changes are needed to enable gas market functioning. All activities will be coupled with a strong public outreach and awareness program, targeting all the key stakeholders to advance the achievement of the EIA objectives. The project has made significant progress in achieving its objectives. The entities' governments have approved the analyses and recommendations for the removal of obstacles to energy sector investments. A conference on "Security of Gas Supply in BiH" was held, gathering around seventy experts from all relevant companies from BiH, Serbia, and Croatia, and decision-makers from the competent Ministries. A Memorandum of Understanding (MoU) was signed between USAID and BH Gas, defining cooperation in terms of improving the infrastructure permitting regime, monitoring the procedures for obtaining approvals, consents, and permissions on investment projects, and a common approach when submitting proposals to the competent authorities and monitoring them. The BiH National Energy Efficiency Action Plan (NEEAP) for 2016-2020 was adopted, providing guidelines, new measures, and programs for increasing energy efficiency. The NEEAP implementation will create conditions for new investments. One of the NEEAP programs is the establishment of the Energy Efficiency Obligation Scheme (EEO) mechanism, which has been developed by EIA. Recommendations for energy sector reform were adopted by the House of Representatives of the BiH Parliamentary Assembly, and the BiH Council of Ministers was informed of the adoption and charged MOFTER with the implementation of the recommendations and actions in relation to this notification. The Framework Energy Strategy for Bosnia and Herzegovina was adopted, with USAID EIA contributing to the quality of the Energy Strategy through the development of documents, including the Report on the Permitting Regime in BiH, National Emissions Reduction Plan, Energy Efficiency Obligation Scheme, Road Map for Bosnia and Herzegovina to implement the West Balkan 6 Initiative. USAID EIA also provided critical expertise during the Energy Summit and bilateral meetings with parliamentarians, thus contributing to the adoption process. A round table with political parties was hosted by EIA, in cooperation with the National Democratic Institute (NDI) and the International Republican Institute (IRI), to present the results and recommendations from two project components in an understandable way: the Energy Efficiency Obligation Schemes and the Impediments to Investment in the electricity sector.