Bosnia and Herzegovina (B&H) is located in the so-called "Western Balkans" region, borders the EU, and has an area of 51,209 km2. Its highly favorable geographical location for harnessing energy potentials has positioned B&H as the only country in the surrounding area with a significant surplus in exporting electrical energy. The water potential is represented by a large number of rivers suitable for building hydroelectric power plants, and substantial potential exists in the areas of wind energy (due to the position of the Dinaric mountain range) and solar energy (averaging over 2000 sunny hours per year).
Currently, B&H has three operational wind parks, as well as numerous hydroelectric and solar power plants. However, in recent years there has been a significant increase in the development and construction of renewable energy facilities. According to data from the Independent System Operator of Bosnia and Herzegovina (NOS B&H), the issuance of 11,000 MW of pre-consent approvals for connection to the transmission grid for RES facilities are currently in the process.
- From the perspective of EU Energy law: B&H is part of the European Transmission System Operators (ENTSO) and has concluded the “Energy Community Treaty” with the EU in 2006 – which represents the foundation for one of the largest electricity markets globally. In addition to this Treaty, B&H consistently adopts EU directives on energy and environmental protection within its legislation (e.g., (i) Regulation (EU) 2019/943 on the internal electricity market, (ii) Regulation (EU) 2016/1447 on establishing network codes, etc.).
- From the perspective of investment and tax law: B&H has a well-regulated legal system with clear provisions regarding investment and investor rights protection. The key regulation is the Law on Foreign Direct Investment Policy ("Official Gazette of B&H," No. 4/1998, 17/1998, 13/2003, 48/2010, and 22/2015), defining fundamental concepts of investment and reinvestment of profits, equalizing the rights of foreign investors with those of domestic residents. Furthermore, B&H boasts one of the lowest corporate income tax rates at 10% and the lowest VAT rate at 17%. Import of goods for investment in production is exempt from customs duties. Establishing a company in B&H is straightforward and typically takes around 1 month. A company can be founded by domestic or foreign legal or natural persons, and for the development and construction of renewable energy projects, a limited liability company (LLC) is usually established.
- Feasibility assessments of investments and initial legal analyses: During the development and construction of renewable energy projects, a business plan is generally created to assess investment feasibility (e.g., the average investment cost for developing and building a solar power plant is approximately 700,000-900,000 EUR per MW, depending on location, equipment type, and land development requirements). The average development time from the project initiation to the "ready to build (RTB)" phase is around 9-12 months for solar plants and 18-24 months for wind farms. In the case of “greenfield projects”, three fundamental elements are examined: the possibility for construction according to spatial planning, regulation of land - property rights, and connection to the electrical grid. If an existing RES project is purchased, it can be done through "share purchase" or "asset purchase." Before purchasing, a detailed legal, financial, and technical analysis of the project is typically conducted. The transfer of shares or permits requires previous approval from relevant authorities.
- Permit timelines for the development and construction of renewable energy projects: Due to the legal and political structure, permits for the development of RES facilities are obtained at the B&H level, and/or at the level of the two entities (Federation of B&H and Republika Srpska) and the district (Brčko District B&H), depending on the project location.
Below is a basic overview of permits at all levels in B&H.
|
No. |
FB&H |
RS |
BD B&H |
|
1. |
Concession - representing the right to conduct a specific economic activity using natural resources or public goods, or to engage in activities of general interest. Typically granted for a period of 30 to 50 years. |
Concession - Regulated in the same manner as in the Federation of Bosnia and Herzegovina (FB&H) |
Concession - Regulated in the same manner as in the Federation of Bosnia and Herzegovina (FB&H) |
|
2. |
Regulation of Ownership Relations on Project Land - The construction can be on the state land plots (on the basis of a concession) and/or on private land plots (on which the investor has ownership or a long-term lease) |
Regulation of Ownership Relations on Project Land - Regulated identically as in the Federation of Bosnia and Herzegovina (FB&H). |
Regulation of Ownership Relations on Project Land - Regulated identically as in the Federation of Bosnia and Herzegovina (FB&H). |
|
3. |
Water acts - Depending on the type of facility, the competent authority decides on the need to obtain water acts. |
Water acts - Depending on the type of facility, the competent authority decides on the need to obtain water acts. |
Water acts - Depending on the type of facility, the competent authority decides on the need to obtain water acts. |
|
4. |
Registration in the registry of Renewable Energy Register - in the testing phase. |
Registration in the registry of Renewable Energy Register - Regulated identically as in the Federation of Bosnia and Herzegovina (FB&H). |
Registration in the registry of Renewable Energy Register - Regulated identically as in the Federation of Bosnia and Herzegovina (FB&H). |
|
5. |
Preliminary Approval for Connection - for connection to the transmission grid or Preliminary Electro-Energy Approval for connection to the distribution grid. |
Preliminary Approval for Connection - Regulated identically as in the Federation of Bosnia and Herzegovina (FB&H). |
Preliminary Approval for Connection - Regulated identically as in the Federation of Bosnia and Herzegovina (FB&H). |
|
6. |
Environmental Impact Assessment or Environmental Permit for specific RES facilities. (the competent Ministry decides whether environmental acts are needed) |
Preliminary Environmental Impact Assessment or Environmental Permit, the application process is similar to FB&H, with the distinction that the environmental permit is obtained after Location Conditions. |
Registration in the Renewable Energy Projects Registry - Regulated identically as in the Federation of Bosnia and Herzegovina (FB&H). |
|
7. |
Location Permit - represents the fundamental document from the perspective of spatial planning. |
Location Permit - represents the fundamental document from the perspective of spatial planning. |
Location Permit - represents the fundamental document from the perspective of spatial planning. |
|
8. |
Connection Conditions to the transmission grid - determined based on the Connection Elaborate. |
Connection Conditions to the transmission grid - regulated identically as in the Federation of Bosnia and Herzegovina (FB&H).
Electro-Energy Approval for facilities connecting to the distribution grid. |
Connection Conditions to the transmission grid - regulated identically as in the Federation of Bosnia and Herzegovina (FB&H).
Electro-Energy Approval for facilities connecting to the distribution grid - regulated identically as in Republic of Srpska (RS). |
|
9. |
Energy permit for facilities exceeding 1 MW. |
- |
- |
|
10. |
Building permit |
Building permit |
Building permit |
|
11. |
Registration in the registry of Renewable Energy Register – during the construction. |
Registration in the registry of Renewable Energy Register – during the construction - regulated identically as in the Federation of Bosnia and Herzegovina (FB&H). |
Registration in the registry of Renewable Energy Register - during the construction - regulated identically as in the Federation of Bosnia and Herzegovina (FB&H). |
|
12. |
Electro-Energy Approval for facilities connecting to the distribution grid. |
- |
- |
|
13. |
Connection Agreement to the transmission grid or Connection Agreement to the distribution grid. (depending on which grid the project is connected) |
Connection Agreement to the transmission grid or Connection Agreement to the distribution grid - regulated identically as in the Federation of Bosnia and Herzegovina (FB&H). |
Connection Agreement to the transmission grid or Connection Agreement to the distribution grid - regulated identically as in the Federation of Bosnia and Herzegovina (FB&H). |
|
14. |
Approvals for connection to the transmission grid. |
Approvals for connection to the transmission grid - regulated identically as in the Federation of Bosnia and Herzegovina (FB&H). |
Approvals for connection to the transmission grid - regulated identically as in the Federation of Bosnia and Herzegovina (FB&H). |
|
15. |
Contracts/Permits for temporary commissioning |
Contracts/Permits for temporary commissioning |
Contracts/Permits for temporary commissioning |
|
16. |
Use permit |
Use permit |
Use permit (preceded by Declaration for the connection of a power plant up to 1 MW).
|
|
17. |
Registration in the Registry of Renewable Energy (OIE) Projects - for constructed facilities |
Registration in the Registry of Renewable Energy (OIE) Projects - for constructed facilities |
Registration in the Registry of Renewable Energy (OIE) Projects - for constructed facilities |
|
18. |
Electricity generation permit |
Electricity generation permit |
Electricity generation permit |
|
19. |
Status of a qualified electricity producer |
Certificate for a production facility |
Certificate for a production facility |
|
20. |
Power Purchase Agreement (PPA) (it's possible to conclude a pre-contract in the earlier stages of project development, depending on the buyer's conditions). |
Power Purchase Agreement (PPA) (it's possible to conclude a pre-contract in the earlier stages of project development, depending on the buyer's conditions). |
Power Purchase Agreement (PPA) (it's possible to conclude a pre-contract in the earlier stages of project development, depending on the buyer's conditions). |
Investments in RES projects in Bosnia and Herzegovina have been ongoing for several years, and there is a clear and unambiguous approach to the market, investment, and investor rights protection. The Law firm "Ibrahimović&CO" successfully guides and advises domestic and international clients in RES investments, and at the beginning of 2024, it issues a detailed Investment Guide for RES facilities, practically containing identical provisions as this presentation, with detailed instructions on steps and guidance on practical circumstances that arise during the development of RES projects.
By Tomislav Tomas, Attorney at Law, Ibrahimovic & Co
