FBiH to introduce renewable energy auctions in 2021

The Federation of Bosnia and Herzegovina (FBiH), an entity of BiH, plans to introduce renewables auctions in 2021, while the pace of the renewables development will depend on the binding target that Bosnia and Herzegovina will receive for the 2020-2030 period, currently subject to negotiations with the Energy Community, Halko Balavac, assistant energy minister at the FBiH Ministry of Energy, Mining, and Industry, says in an interview with Balkan Green Energy News.

He claims that Unit 7 of the Tuzla thermal power plant (TPP) will meet all environmental protection standards prescribed by the EU. Balavac also spoke about fresh tendering for the construction of the Vranduk hydropower plant (HPP), problems concerning the construction of small hydropower plants (SHPPs), and measures to improve air quality.

How do you comment on the Energy Community’s objections over the construction of Tuzla 7?

The 450 MW unit is to replace Units 3 and 4 – it is therefore not a new capacity, as many have claimed. The old units had a very adverse impact on people and the environment, and investments in their modernization to eliminate the negative effects, for example in flue-gas desulfurization systems and other environmental protection facilities, would have exceeded the cost of building Unit 7. Tuzla 7 will meet all requirements under the EU directives for countries that should become its members, such as BiH. Emissions of NOx will be under 200 mg/Nm3, SO2 under 150 mg/Nm3, and particulate matter (PM) under 10 mg/Nm3.

Tuzla 7 will meet all requirements under the EU directives for countries that should become its members

And all the future standards that FBiH will have to observe in the next 10, 15 years?

Yes. The boiler and turbogenerator for Unit 7 will be supplied by Alstom Power, a state-of-the-art flue-gas desulfurization system (FGD) will be procured, and Siemens Power Plant Automation’s management solution will be applied. The investors are Chinese, but the equipment is from the West. What’s also important, the unit will ensure the security of electricity supply for consumers – businesses and individuals in BiH – as well as the security of heat supply for the cities of Tuzla, Lukavac, and Živinice.

How will a possible introduction of carbon tax affect Tuzla 7’s cost-effectiveness?

Such elements are for certain future considerations, we cannot say at the moment. The market will define it all. Calculations have shown that a EUR 750 million investment in this kind of unit is cost-effective, while it will also drive BiH’s economic development and help create jobs in several sectors, especially on the local level.

The arbitration outcome will not halt the construction of Tuzla 7

The Energy Community has stated that this represents state aid that is not in keeping with regulations?

They interpreted it in their own way. The BiH State Aid Council issued a decision on July 23, 2018 determining that state aid contained in the request for the approval of state aid in the form of a guarantee to public power utility Elektroprivreda BiH (EPBiH) for a loan to carry out the project to build the 450 MW Unit 7 of TPP Tuzla does not represent state aid in the sense of the Law on the State Aid System in BiH, i.e. that EPBiH’s borrowing is in line with BiH regulations. Arbitration in Vienna is under way between the Energy Community and the FBiH Finance Ministry and EPBiH. We are claiming that this is not state aid and that the claim to the contrary is a fallacy.

Can the arbitration outcome halt the construction?

No. Companies to execute preparatory works have been selected in a recently conducted tendering procedure, while a few days ago, the BiH Council of Ministers signed relevant documents that will be sent to China and the Export–Import Bank of China (China Exim Bank), which is the last remaining prerequisite for signing the agreement, and this is expected to take place soon.

Will HPP Vranduk be built?

A consortium of Strabag and Končar won the project, but during execution, they saw that the design they produced was not the best, in what created around EUR 7 million in additional costs, which is why they requested changes to the agreement with EPBiH. However, EPBiH rejected the request, the agreement was terminated, and arbitration in Vienna launched. The arbiters decided that the consortium should pay EUR 5.74 million in bank guarantees to EPBiH. An appeal shall not stay enforcement and we expect the payment by the end of the year. The dispute before the International Court of Arbitration in Paris continues. The power plant will be built but by other contractors.

Can fresh tendering be expected?

Yes. There have been offers by local companies. The question remains whether the European Bank for Reconstruction and Development (EBRD) will stay on as the financier, as it did not wish for a change of contractors. There is an option for the job to involve local companies experienced in the construction of such facilities, with other sources of financing to be obtained by EPBiH.

Why aren’t FBiH’s potentials in the sector of renewable energy sources used?

The FBiH Ministry of Energy, Mining, and Industry, in whose purview it is to issue an energy permit, which is a prerequisite for obtaining a building permit for the construction of a new power generation capacity, has so far issued around 450 energy permits for the construction of power plants with a combined capacity of around 110 MW, of which power plants with a combined capacity of 55 MW have been built. We have issued energy permits for solar power plants with a total capacity of around 45 MW, of which 15 MW in power plants have been built. In the biomass sector, we have an 8 MW power plant built on the grounds of Natron-Hayat in Maglaj, while we have issued five energy permits for a total installed capacity of 0.5 MW, but no power plants have been built.

What is preventing construction?

When it comes to wind power plants, the Ministry has received requests for the issuance of energy permits for 700 MW, but a cap was in place over grid connections. Back in 2012, a study showed that wind power plants, i.e. intermittent energy sources connected to the grid cannot exceed 10% of BiH’s overall installed capacity, which at the time stood at 350 MW, of which 120 MW was assigned to the entity of Republika Srpska and 230 MW to the entity of FBiH.

The Ministry has received requests for the issuance of energy permits for 700 MW of wind power plants

In FBiH, 5 investors were awarded energy permits for 230 MW, with another 6 investors put on hold, for a further 190 MW. Of the five projects for which permits have been issued, two have been built so far – the 50.6 MW Mesihovina wind farm, which started trial production in March 2018 and received the operating permit in November 2018, and the 36 MW Jelovača wind farm, whose construction began in August 2018 and which received the operating permit in June this year. For the remaining three, we did not get bank guarantees for construction, and this was the limiting factor for the development of renewable energy sources. The firms that received these three permits later submitted requests for the three-year energy permits to be extended, as they had expired. Also, a new transmission network code has been applied, and the owners of the three energy permits have to produce new grid connection studies. The issue of balancing when power plants using intermittent primary energy sources are connected to the grid should also be noted.

The construction of two wind power plants and the Stanari thermal power plant (TPP) increased the overall installed capacity in BiH, so DERK, at the proposal of NOS, increased connection quotas to 460 MW for wind power plants and 400 MW for solar power plants, which means we can resume the procedure concerning the six requests on hold. The quota has again been distributed between the two entities, though requests can now switch from solar to wind and vice versa within the RS quota or the FBiH quota, if there should be more requests for solar than wind or vice versa.

We are witness to major discontent over small hydropower plants’ (SHPPs) adverse environmental impact in the entire region. Will you ban their construction or change something concerning the permitting procedure?

The FBiH has an action plan for renewable energy sources that states which renewable energy sources will be incentivized each year. In the 2015-2020 period, feed-in tariffs are envisaged, and all those that have met the requirements have received them. In the 2020-2030 period, as we approach the EU, we will have to apply the bloc’s regulations, which envisage different incentive schemes, and we will introduce auctions with premiums. This model requires changing laws, and it is planned to be applied from 2021. This refers to large projects, while feed-in tariffs will be in place for smaller ones, as will the net metering model that would enable the development of energy cooperatives.

Everything stays the same with SHPPs?

There is nothing to change. They get conditions from local authorities they must meet, then they need to obtain an environmental permit and zoning approval, and secure a concession, and everything is defined in these documents.

But we see on the ground that regulations are not observed. We know of the Brave Women of Kruščica.

Local authorities are responsible for this and they will answer if there have been oversights. This is a topic for them, not for us. Sometimes part of a local government supports construction and part does not, and the outcome depends on who comes out on top. When it comes to Kruščica, these are their rights. It is now being investigated how the public consultation process was conducted, how many participants were involved… Something that needed to be done much earlier is being considered now. It is not in our purview.

The entire region has a problem with air quality. It is clear that the main causes lie in the production of energy from fossil fuels and transport. What will you do to improve air quality?

Some say that the problem is with small combustion appliances, some that it is with power plants, some that it is with transport, and they are all right. The idea is to introduce electric vehicles to urban transportation, especially in large towns. The idea is also to reduce the number of small combustion appliances because people burn all sorts of things – coal, tires, plastic. In line with that, Zenica plans to implement gasification and switch the heating plant from coal to a combination of recovery gas from ArcelorMittal and natural gas, which would result in a cogeneration facility. TPP Kakanj is implementing a flue-gas desulfurization and particulate matter control project to reduce pollution.

The FBiH government has recently adopted a restructuring plan for its two power utilities, EPBiH and EPHZHB. When do you expect the launch of restructuring?

The deadline for the plan to be implemented is within 30 months of the FBiH Parliament giving its approval. The plan also envisages the restructuring of mines in line with thermal power plant and market needs. Mines will have to be reorganized and restructured financially and technologically. Those that can continue with market-based operations will survive, while repurposing will be sought for others. The question is how the process will proceed.

Mines that can continue with market-based operations will survive, while repurposing will be sought for others

It is clear what fate awaits coal in energy transition, which is in focus of the entire world. The region is lagging behind. Are relevant FBiH institutions aware of the change? Are steps being taken for the FBiH to use cleaner energy sources more in the future?

BiH, as a country seeking EU membership, has certain obligations. The Energy Community sets goals in this area, but it remains to be seen what they will be for the 2020-2030 period. The goals will be discussed, we need to see whether we can reach them. It is certain that increased use of renewables is the direction. Based on these goals, targets for the FBiH power system will be defined. Our target for 2020 is to increase the share of renewables in final consumption from 35% to 40%, and we will achieve it. Discussions between representatives of the BiH Ministry of Foreign Trade and Economic Relations and the Energy Community on the targets for the period ahead are under way. It remains to be seen whether the target will be raised from 40% to 48%.