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Bosnia and Herzegovina: The Green Piece

Bosnia and Herzegovina: The Green Piece

Bosnia and Herzegovina
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“Coal still matters” has been the predominant energy policy in Bosnia and Herzegovina over the past decades. It sounds very old-fashioned these days in Europe, but lignite (brown coal) is the most important energy resource in the country. The fact that almost 60% of the electricity generated in the country originates from coal-fired thermal power plants leads to the conclusion that Bosnia and Herzegovina heavily relies on coal.

Joining the Energy Community Treaty, combined with the European green agenda in general, did create something that might be described as renewable sources enthusiasm in the country a decade ago. This enthusiasm produced a wish list of a number of large-scale hydro projects that were expected to be constructed by now. But not much really happened. The only new facility of significance in the past decade was the new 300-megawatt thermal power plant.

The constant failure to meet the expectations of the Energy Community turned the enthusiasm among energy stakeholders into something that may be described rather as passive resistance. Decarbonization in this country was rather seen as a “first world problem” and, literally, as a threat to the national economy, as closing the thermal power plants would decrease the country’s exports (where the export of electricity plays a significant part).

National plans included a number of new coal-fired thermal power plants with capacities of almost 2,000 megawatts, aiming to replace the existing ones, which are considered among the biggest European polluters. But the response from the Energy Community was “No. No. No.” Building new coal-fired energy facilities nowadays is heresy, or at least inappropriate. A dissenting lawyer might argue that replacing old facilities with new coal-fired plants, with lower emissions, may fall under the definition of “decarbonization,” because the ultimate result will be a reduction of the total emissions anyway. It sounds rather like a topic for law students’ debate competitions, but definitely not grounds for a real discussion. In the meantime, the official policy is still silent about new thermal power plants and pretends to follow the (green) mainstream.

This practically means that the country is determined to make the green energy piece of total output bigger, by encouraging investments in renewables and energy efficiency projects. Magic words, such as the “improvement of the regulatory framework,” are echoing through the corridors of power. Luckily, a number of international organizations have been present in the country and offered technical assistance for the improvement of local legislation by sharing best practices.

A new package of renewables legislation was created this year, introducing new concepts for local law practitioners such as prosumers, renewable energy communities, auctions – a plethora of new things for us to learn about in order to be able to guide clients through the countless impediments to the implementation of new renewables projects. No, this is not a matter of pessimism – but rather a call to continue with improving the environment for investments in general – as, in recent months, we have been witnessing an increased interest for foreign investments in renewables in Bosnia and Herzegovina.

Wind and solar projects have been catching the imagination of those investors, but it was similar earlier with the hydro projects, where not much actually materialized in the end. Indeed, that undisputable potential might be lost this time around as well, with investors still missing support along the lines of a one-stop shop that would allow them to avoid going around and dealing with different governmental departments on their own, ultimately discouraging them from engaging with the whole process to begin with.    

Another green piece that deserves equal attention is on the other end: consumption. Or, to be more specific, energy efficiency. This area has been totally neglected by decision-makers and one politician’s comment above all illustrated this: “Why should we save electricity? It’s very cheap here.”

Energy efficiency laws were introduced almost a decade ago, but the energy service company (ESCO) mechanism, as the most exciting part of this new framework, has been left totally unexplored. ESCOs were merely mentioned in those laws but the secondary legislation needed to allow contracting ESCO projects in public sector buildings, as well as tax legislation that will accommodate features of ESCO financing, have yet to be introduced. Consequently, there were no such projects so far.

All in all, there have been some improvements, but it will take much more energy to make this Bosnian green energy piece bigger.

By Davorin Marinkovic, Partner, Dimitrijevic & Partners

This Article was originally published in Issue 9.6 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

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