Energy Community urges BiH to scrap feed-in tariffs for hydropower

Renewable energy installations of a maximum of 500 kW and demonstration projects are the only ones eligible for feed-in tariffs as state aid, the Energy Community Secretariat told officials in BiH, pointing to continued government support for larger hydropower projects.

The Federation of Bosnia and Herzegovina proposed the reduction of feed-in tariffs for renewables, which is a step forward, but BiH needs to abolish “selective advantages” for hydropower projects, the Energy Community Secretariat said. In a letter to state and entity governments, the institution expressed concern and offered assistance, suggesting a meeting “to agree on the practical modalities.” It also called for auctions and obligatory balancing responsibility.

The decree on supporting the production of electricity from renewable energy sources and efficient cogeneration and determining the incentive fee still envisages feed-in tariffs for hydropower plants with up to 10 MW of installed capacity over a period of twelve years, the document reads.

Governments can only grant premiums

The secretariat noted only operating aid to energy from renewable sources granted as a premium on top of the market price is considered compatible. Only installations with an installed electricity capacity of less than 500 kW or demonstration projects can be excluded and still be supported by feed-in tariffs, the letter says.

BiH supports almost 200 MW in hydropower plants up to 10 MW in size with feed-in tariffs

The Federation of Bosnia and Herzegovina’s action plan envisages feed-in tariffs for hydropower plants with 25 MW in total that have the capacity of up to 1 MW and a quota of an overall 55 MW for hydropower plants with the capacity between 1 MW and 10 MW. The Republic of Srpska, BiH’s other entity, set support for 17.88 MW in an equivalent policy document for the smaller category and feed-in tariffs for 94.48 MW in hydropower plants between 1 MW and 10 MW.

Transparent auctions are necessary

The Energy Community Secretariat said hydropower plants with an installed electricity capacity of more than 500 kW should be subject to standard balancing responsibility, linked to the establishment of a liquid intraday market. As for auctions, it underscored all renewable energy installations stronger than 1 MW should be granted support only “in a competitive bidding process on the basis of clear, transparent and non-discriminatory criteria” so that state aid is “limited to the lowest possible level.”

Auctions are the way to limit government support for renewables to the lowest possible level

“The tenders should generally be technology-neutral unless specific circumstances require technology/technologies-specific tenders (e.g. the longer-term potential of a given new and innovative technology; the need to achieve diversification; network constraints and grid stability; system (integration) costs or the need to avoid distortions on the raw material markets from biomass support),” the secretariat stressed.

Hydropower’s environmental issues

Compliance with rules including nature protection and environmental impact is essential in the Energy Community, the letter reads. The secretariat warned of complaints by the representatives of the civil society in that regard.

It praised the adoption of the declaration by the Parliament of FBiH in which it bans the construction of small hydropower plants.

The Energy Community Secretariat said it can help in the reform of legislation and administrative practices, in implementing and monitoring auction systems, reviewing environmental assessments for hydropower plants including cumulative impacts and implementing the ban.

The letter was sent to Minister of Foreign Trade and Economic Relations of BiH Staša Košarac, Minister of Energy, Mining and Industry of FBiH Nermin Džindić, Minister for Industry, Energy and Mining of the Republic of Srpska Petar Đokić, Head of the State Aid Council Secretariat Ranko Lučić and to the Parliament of FBiH.