Power policy

Bosnia and Herzegovina is split into two political entities – the Federation of Bosnia and Herzegovina (FBiH) and Republika Srpska. The two regions have separate governments and determine their energy policy independently. Each region has a separate feed-in tariff, with Republika Srpska additionally offering a feed-in premium, although these schemes have only encouraged the build-out of smaller plants so far.

In theory, renewable energy producers with feed-in tariff contracts receive priority grid access. However, it can be a difficult and bureaucratic procedure to secure a connection in practice. State utilities have negotiated deals for larger wind farms directly with the government.

Both FBiH and Republic of Srpska have auctions in place, although transparency is lacking. A net-metering scheme is used for small producers for up to 50 kilowatts and in Republika Srpska, self-generation is encouraged by offering a premium for the electricity produced.

The country aimed to achieve a 40% share of renewable energy in total final consumption 2020, although poor transparency over the projects that received government support means it remains unclear whether these planned quotas were fulfilled. There are several smaller and more specific targets for 2025, 2030 and 2050 in the “Framework Energy Strategy of Bosnia and Herzegovina by 2035”.

Power prices and costs

Power prices are still partially regulated in Bosnia and Herzegovina, particularly in Republika Srpska. However, a new Law on Electricity in this region has imposed a gradual phase-out of the regulated generation price from 2022 until 2024.

Across the whole country, tariffs are cheap compared to the rest of the Balkans and average prices in 2021 were even lower than those in 2020.

Power market

Bosnia and Herzegovina’s power fleet is roughly split between just over 2 gigawatts (GW) of coal capacity and about 1.6GW of large hydro. A new coal-fired power station was completed in 2016, beginning the process of replacing the aging coal fleet. Another coal plant, Tuzla 7, is currently under development, despite the Energy Community – a European energy body – bringing infringement proceedings against the country.

Renewable energy capacity in Bosnia and Herzegovina is minimal, but includes wind, solar, biomass and small hydro. The country’s first wind farm was commissioned in Mesihovina in 2018, and comprises 22 turbines with an installed capacity of 51 megawatts (MW). In 2021, a 15 turbine, 48MW wind farm was completed in Podvelezje.

Most renewables investment has come from international concessional lenders, including the European Investment Bank and European Bank for Reconstruction and Development (EBRD). In addition to domestic funds and government grants, organizations such as the United Nations Development Program and US Agency for International Development (USAID) provide co-financing and technical assistance.

While Bosnia and Herzegovina’s electricity sector is open to private participation, generation and distribution are overwhelmingly undertaken by three vertically integrated public utilities whose remit is geographically distributed. There are, however, some larger wind projects developed by foreign players and local developers have also built small-scale hydro.

Distribution system operators are still bundled with electricity retail in FBiH, and with electricity supply in Republika Srpska. The EU initiated an infringement case against Bosnia and Herzegovina for its lack of progress in utility unbundling, saying it presented a substantial obstacle to competition. There are no corporate power purchase agreements in the country as most generators are still enjoying the benefits of feed-in tariffs.

Doing business and barriers

Obtaining a permit is the single largest barrier faced by renewable energy developers in Bosnia and Herzegovina. Approval is required from many different levels of government and the requirements can vary by region. Disagreements between various government departments are hampering the establishment of an adequate electricity transmission system and the construction of power lines to connect wind and solar power plants.

Local opposition is an additional obstacle for renewables projects. Only companies that have location and environmental permits can apply for auctions and premiums.

To meet its climate goals, Bosnia and Herzegovina will need substantial international assistance for technology transfer, to set up financial mechanisms to encourage decarbonization (gas is currently subsidized in Sarajevo), and financial support for climate-related projects. Working in its favor is a moderate level of indebtedness and the commitment of the international community to the economic stabilization of the country.

EV market

The electric vehicle (EV) market in Bosnia and Herzegovina is in the early stages. Passenger EVs represented less than 1% of the total passenger vehicle fleet in 2021.

EV policy

Although the country is not a member of the EU, it adopted the bloc’s Euro 4 vehicle emissions standard in April 2016. This stipulates that imported vehicles should not be older than 10 years and sets minimum technical standards in line with the EU, incentivizing new and more sustainable cars.

In May 2022, BiH introduced purchase grants for EVs, amounting to 5,000 convertible marka ($2,520) for plug-in hybrids and 10,000 marka for battery-electric models. This incentive is scheduled to be in force until at least December, or until the 1 million marka allocated for the program is spent.

Buildings market

The Federation of Bosnia and Herzegovina (FBiH) enacted the Law on Energy Efficiency in 2017 with the main purpose of reducing environmental impact, ensuring security of energy supply and lowering emissions. FBiH also adopted rulebooks for energy performance requirements for buildings and regular inspections of heating and air conditioning systems in November 2019. Modernization of the country’s district heating systems is ongoing, including several biomass-based district heating projects supported by the EBRD.

Buildings policy

The Sarajevo region is preparing a 10-year strategy to limit the use of coal and promised in 2021 that it would gradually ban the use of coal for heating. According to the region’s Ministry of Utilities, Infrastructure, Physical Planning, Construction and Environmental Protection, the public has shown great interest in a pilot project offering subsidies to households to replace coal furnaces and boilers with certified wood pellet burners and heat pumps.

The EBRD has supported over €1.1 million worth of green technology investments in Bosnia and Herzegovina through the Green Economy Financing Facility (GEFF), providing a grant for 15-20% of the loan amount through partnering financial institutions. People in Bosnia and Herzegovina have mostly invested in PVC windows and doors, biomass boilers and thermal facades.