Overview
Electric power generation is a key sector of economic activity in BiH. Electric power is primarily generated in coal-fired thermal and large-scale hydro power plants and the country is a net exporter of electrical energy. The generating capacity is about 17,000 GWh. BiH historically had a comparative advantage in electricity, particularly because of its natural hydropower resources and coal reserves. However, as the EU looks to implement a carbon border tax and phase out financing for new fossil fuel projects, BiH needs to develop a strategic plan to transition away from coal. BiH is in the process of finalizing a National Energy Climate Plan (NECP) to address energy efficiency, renewables, greenhouse gas emissions reductions, interconnections, and research and innovation. An approved NECP with a clearly laid out decarbonization strategy is essential for BiH to secure further access to international and EU financing in the energy sector. In the long run, the World Bank estimates that BiH’s energy sector would require more than $6 billion in investment for modernization, life extension, and new generation facilities for the power generation and coal mines sectors.
BiH has significant renewable energy potential, particularly in hydropower and wind power capacity. Hydropower provided 29 percent of the country’s total electricity production in 2022 and there is room for additional growth. Recently, solar and wind power plants have emerged but remain a small percentage of the overall energy mix at about 6 percent. According to a study conducted by the German government, BiH could generate up to 2000 MW of wind energy per year, primarily in the areas of Livno, Tomislavgrad, Mostar, and Trebinje. This nascent industry still faces several regulatory and financial challenges.
After the 1992-1995 war, the once-unified power system in BiH was divided into three vertically integrated companies split along geographic/ethnic lines. The three government-owned electric power generation and distribution companies are: Elektroprivreda BiH (EPBiH), Elektroprivreda Republike Srpske (ERS), and Elektroprivreda Hrvatske Zajednice Herceg Bosna (EPHZHB). The companies were created along ethnic/geographic lines rather than for technical reasons, and there are significant generation disparities between them:
| Energy Type | Hydro | Thermal | Wind |
|---|---|---|---|
| EPBiH | 20 percent | 80 percent | 2 percent |
| EPHZHB | 89 percent | 0 percent | 11 percent |
| EPRS | 29 percent | 71 percent | 0 percent |
Although BiH has made some significant steps toward the liberalization of the electricity market, including establishment of independent regulator market opening and competitive market processes, there remains a lot to be done in terms of organization of the internal electricity market so that it can be fully transparent and ready to join the regional electricity market. BiH has been slow to implement reforms to make the power sector more attractive, efficient, transparent, independently regulated, and free from corruption. Thus, the governments of the Federation and the RS have not fully capitalized on potential energy investment projects and have no unified strategy to address structural issues such as extensive permit and contract processes, antiquated incentive systems, and inadequacies in the transmission system.
Leading Sub-Sectors
- Desulphurization equipment/technology
- Emission control equipment and systems
- Generation equipment for hydro and thermal (coal) power plants
- Generation equipment for wind and solar farms
- Energy efficiency
Opportunities
BiH’s electrical grid has suffered from decades of neglected maintenance and a lack of investment. The European Bank for Reconstruction and Development (EBRD) has provided a corporate loan of up to EUR 20.1 million to Elektroprenos BiH (Transco) for the modernization and upgrading of its telecommunication system. The project should lead to improvements in cross-border trade through better management of the transmission network. The project will facilitate the purchase and installation of a new telecommunication system for the entire transmission network in BiH; the delivery and installation of backup power supplies for substations; reconstruction of data centers; and provide advisory services for the Project Implementation Unit. The tendering process is ongoing.
Most of the Yugoslav-era coal-fired plants in BiH will age out of their useful life in the next 5-10 years; thus, BiH is looking for opportunities to upgrade existing infrastructure and build new infrastructure primarily in hydro and wind power but also in coal. Chinese and Russian companies have expressed interest in many power generation projects but only one has been completed. In 2016, the Chinese company Dongfang International Corporation completed construction of the Stanari coal-fired power plant in the RS. The project was a collaboration of the Chinese Development Bank (CDB), the energy company EFT Group, Dongfang International Corporation, and the RS government. The CDB provided EFT Group with a structured loan of $455 million, accounting for 65 percent of the project’s total estimated cost of $715 million. In April 2014, EPBiH chose a consortium consisting of China’s Gezhouba Group and Guangdong Electric Power Design Institute for the construction of a 450-megawatt (MW) coal-fired unit known as “Tuzla 7” at its Tuzla power plant; construction costs were estimated at around $850 million. The construction of this largest post-war investment in BiH’s energy sector has been delayed and is still on hold. It remains unclear when or if the project will be restarted.
In January 2023, the RS Government granted the ETMAKS company from Banja Luka a 50-year concession for the construction and use of the Nevesinje solar park, a project worth KM 880 million ($483 million). The total power of the solar park will be 500 megawatts, and it will be made up of one power plant of 200 and six power plants of 50 megawatts. The RS Government awarded in March 2020 a 50-year concession for the construction and use of a solar power plant in the Bileća municipality to EFT International Investments Holding Limited, based in London. The power plant will have an installed capacity of 60 MW and an estimated annual production of 84 GWh. The estimated value of the investment is EUR 53 million ($62 million). The RS Government also awarded in October 2020 to the Public Utility Elektroprivreda RS a concession for the construction of a solar power plant in the city of Trebinje, with an installed capacity of 100 MW and an average annual production of 147.7 GWh. Estimates of the investments are around KM 134 million ($86 million). All three concessionaires are interested in cooperating with potential partners from the United States as investors, or with suppliers of technology and equipment for planned solar parks.
In November 2019, the Federation energy ministry launched its first competitive round for bidding on oil and gas exploration and exploitation licenses at four blocks in the Dinaric and Panonian basin regions. According to estimates of the geology institute of the Federation, the territory of the Dinaric Alps could potentially contain deposits of about one billion barrels of oil. However, there has been little investor interest in pursuing these licenses.
In 2021, the share of natural gas in BiH was approximately 3 percent of total available energy with the majority used to heat homes in the winter in Sarajevo. Gazprom is BiH’s only natural gas supplier through BiH’s single pipeline, which is connected to Serbia. The Federation has long expressed interest in building a second pipeline, the Southern Interconnection, to connect to Croatia’s gas network to diversify and increase its gas supply. USAID financed and EBRD completed a feasibility study on the pipeline in 2021. However, the project has not moved forward since 2022 due to political obstruction in the Federation. The RS government has plans to build an additional natural gas pipeline connection with Serbia. While the project has been approved by the Council of Ministers, there has been no publicly available feasibility study and project details remain nontransparent. At the same time, BiH lacks a state-level legislative framework and regulatory body in the gas sector as well as other necessary regulation to increase the attractiveness, competitiveness, and transparency of the sector. Without making long-overdue legislative and regulatory changes, BiH will not likely be able to move forward with the necessary investment in natural gas to utilize it as a transition fuel to reduce its reliance on coal.
Resources
Elektroprivreda Republike Srpske (ERS)