Renewable sources of energy in Bosnia and Herzegovina: issue of (un)sustainability

Author: Nihad Harbaš, Energy and climate change consultant 

Do we really know how much energy we generate and use in B&H?

Consumption or use of energy in Bosnia and Herzegovina (B&H) is unknown, although data on the annual consumption of about 140 PJ can be found. Although this sounds unbelievable at first, the energy balances that are produced on an annual basis confirm that fact. Balances are incomplete and it is difficult to get precise data on the energy mix in B&H, especially when it comes to data on gross final energy consumption for heating and cooling that does not come from electricity. A somewhat different, clearer picture is in the case of the electricity balance, that is, the segment of electricity that is well processed through entity and state annual reports. To overcome this, it is necessary to act multisectorally and involve all relevant institutions in order to obtain precise data, especially in the heating and cooling sectors, and transport. It is necessary to improve the flow of information or data, and to sufficiently provide a key institution for the processing and distribution of data on energy consumption in B&H.

Speaking of renewable energy sources (RES) in B&H, it is very common that there is a lack of understanding of this area in the sense that the opinion is that RES is only related to electricity, which in BH energy mix (estimated) is 30-35% depending on the hydrological years. The heating segment, that is, the production of thermal energy, especially inefficient use of various forms of biomass such as heating wood in households, is very present in B&H.

Planning, goal-setting, defining obligations, etc., requires knowledge of the current situation and trends that one state should go towards in terms of complete energy, and not just certain segments such as electricity. Long-term and comprehensive planning requires a longer period of time (over 1 year) and the involvement of all relevant stakeholders in this field.

What are the potentials for obtaining and using energy from RES in B&H?

B&H is recognizable as a country with significant energy resources, both conventional and renewable. First of all, there is coal  in parts of central Bosnia, as well as in the northeastern part of B&H and eastern Herzegovina. Speaking of the RES, the water flows of large rivers, but also smaller streams across B&H, as well as the energy of sun and wind predominantly in Herzegovina, as well as biomass across B&H, are first of all highlighted. The undeniable fact is that there are RES potentials in B&H, but questions of their capitalization, ie exploitation and overcoming of all barriers, which are many, are raised.

Figure 1. Map of the electric power system of Bosnia and Herzegovina with the operational areas of Elektroprijenos B&H and the distribution areas of the electric power industry (SERC, 2016)

The total installed capacity of production facilities in B&H is 4,352 GW, of which 2,083 MW in larger hydropower plants, and 2,065 MW in thermal power plants. Installed capacity of small hydropower plants, wind, solar and biomass power plants is 112.15 MW, while 91.23 MW is installed in industrial power plants.

From the utilized potential of RES in B&H, water currents and solar energy for generating electricity are the most present, and biomass for the production of conventional forms of biomass such as fire wood, but recently also of fine shapes such as pellets, briquettes and wood chips, used for heating or producing heat energy. Additionally, more and more attention is paid to geothermal or environmental energy for heating and / or cooling. The fact that the potentials of hydropower are used up to 40%, clearly speaks about the potentials that B&H has in both small rivers and on large flows such as the Drina, Bosna, Vrbas, etc. etc. These utilized capacities are reflected in several GWs, so from the current 2.2 GW installed capacity in hydraulics, B&H could rise to 3 GW, utilizing the technically usable, economically justified and environmentally acceptable. By respecting all aspects, such capacities could be capitalized, as in the case of the hydropower plant Brezice on Sava.

Fine forms of renewable energy sources such as pellets and briquettes (around 50 producers in B&H) are mostly exported, and what is being marketed and consumed for the production of heat in the domestic market is of unknown or poor quality. The annual production of pellets and briquettes in B&H is estimated at around 300,000 tons, which, from the point of view of demand, has become insufficient. The needs for the production of pellets in B&H at the annual level are estimated at about 1 million tons. Also, the highest consumption of biomass is recorded as firewood in households or wood chips and other remnants from the wood processing industry in district heating systems.

Therefore, the potential for the use of energy from RES in B&H is significant, and overcoming legal, technical and administrative barriers, as well as by establishing incentive mechanisms for other forms of energy other than electricity, their use can become sustainable and environmentally acceptable. The compromise between a technically feasible, economically viable and environmentally acceptable is the way to the development of the country.

Where is BiH today and where it should be; what are the obligations and what is the goal of increasing the share in energy consumption from RES in B&H

B&H target for gross final energy consumption from RES in 2020 of 40% from NREAP was adopted based on the base year 2009, when renewable energy took up 34% in the energy mix of gross final energy consumption in B&H. The trajectory on which B&H is now located is not entirely clear, since B&H has no precise data on the share of energy from RES in gross final consumption. Estimates made by the Secretariat of the Energy Community indicate a percentage of approximately 42% of the RES share in gross final energy consumption. This means that B&H has already fulfilled its goal. However, one should be cautious especially in the segment of energy for the heating and use of biomass, that is firewood in households, where the available data are highly questionable and have a strong impact on the overall balance of gross final energy consumption from RES in B&H. Certain data from energy balances and strategic documents indicate the data on the planned use of biomass for heating in 2020 of 1.081 ktoe of thermal energy, and the use of this power plant for 1,392 ktoe in 2014. Clearly, there is a big difference between these numbers, and consequently, the overview of data is very important.

A somewhat clearer picture is in the segment of electricity where the estimates are that B&H has reached the set target by years, and thus the latest analysis indicates an oscillation in the production and consumption of electricity from renewable sources, mostly depending on large hydro power plants. Progress in the construction of a power generation plant from the RES is visible, mostly to the established incentive system, feed-in tariff – FiT, so currently in B&H 238 plants have been built and connected to networks of total installed power of 106.7 MW, from which 84% of the installed capacity is hydro, followed by solar with 14%, biogas 0.9%, biomass 0.2%, wind 0.3%, and other plants with 0.4%. In addition, Federation of B&H there is a solid biomass plant with an installed capacity of 8.1 MWel as a part of an industrial plant that is not in the incentive system.

Figure 2. Share of OIE technologies in the installed capacity for electricity production in BiH under FiT tariff

The goal of increasing the share of RES use in gross final energy consumption should be the creation of additional value at the domestic level, that is, the use of those forms of RES and technologies that will create jobs at the domestic level and contribute to the sustainable development of the country. That we are on the right path show the figures on employment in the biomass segment, i.e. the production of equipment, boilers and stoves, pellets, briquettes and other forms of biomass, which in the complete supply chain employ the domestic workforce. With the regulated market of this segment, it would surely go towards sustainable development.

How much administrative arrangement of the state and entities contributes to / hinders the promotion of RES in B&H

B&H has a very complex arrangement with several levels of government, from the state level, through the levels of the FB&H and RS entities, the Brcko District, the cantonal levels, to the lowest levels of the local community. B&H has 14 governments, including the Council of Ministers of B&H, with about 180 ministries in charge of various fields. Energy is at the entity level, and the coordination is conducted by the State Ministry of Foreign Trade and Economic Relations of B&H.

Such a complex administrative apparatus in B&H hinders many projects and represents a barrier to investment. Such is the case with OIE, where the biggest barriers are impassibility and lack of information, vertical and horizontal communication between different levels of government, the lack and mismatch of strategic and planning-spatial documents, and the consent of all decision-makers when issuing concessions for natural resources. The simplification of the licensing process, where international organizations in B&H together with local institutions currently operate, would facilitate the promotion and use of RES.

Some of the solutions could be training and creation of professional staff in order to work as effectively as possible on strategic planning at all levels of government, then harmonization of all strategic plans, harmonization of the given time for implementation. For example, the local level is delayed by the harmonization of the entity (cantonal) plans, thus imposing the need for planning at the municipal level (lower level plans), etc.

This would reduce the risks of investing such as technical and management risk, administrative and financial risks. Of course, the risks of sudden changes in the policies and social acceptance of the RES are also very important.

Who “finances” RES in B&H

In order to establish a framework for stimulating energy production from the RES, the segment of electricity was first considered and somewhat resolved. Thus, in order to stimulate the production of energy from the RES in both Entities, a legislative framework has been developed to encourage the generation of electricity from RES: (i) solar, hydro (up to 10MW), wind, biomass (solid and biogas). Interesting thing about biomass is that the action plans define the quotas for solid biomass, but also biogas, however, for incentives in the FBiH, biogas is not foreseen, at least for the moment. The incentive quotas for solar power plants have been completed by 2020 in FBiH, while in the RS there is still something free for power plants over 250kW on roofs. Other emerging technologies are still somewhat accessible, with the biggest interest in small hydropower plants, a wind that is almost completely occupied, although no WE has been put into operation, biogas, and only then solid biomass.

The duration of FiT in FBiH is 12 years for all technologies, although practice has shown that for some technologies, such as solar, repayment lasts for 5-6 years, and for example, for biomass plants, the repayment period of the investment exceeds 12 years. With this principle, electricity generators from this OIE form are placed in an unfavorable position. In RS there is a slightly longer period for the guaranteed purchase price of 15 years. In BiH, corporate financing is still present, while project financing is only mentioned as an option. Of course, funding through banks, both local and international, such as the World Bank, i.e. the IFC, then the EBRD or the EIB, is present in BiH. Other international organizations provide very important support to domestic institutions through technical assistance, project development and co-financing of infrastructure works, and most important are GIZ, USAID, UNDP, EBRD, WB, Caritas, SIDA, etc. Certain co-financing can also be provided through domestic funds such as environmental protection and energy efficiency funds, grants from higher and lower levels of government, to projects and then to IPA projects.

Considering the standard of B&H society, the fee for RES in the end users’ account is defined so that it is not sustainable to encourage producers only from that fund, nor even politically acceptable. This money is in fact money from the end users’ account collected through the renewable energy system, which amounts to 0.001976 BAM / kWh in the FBiH, while in the RS entity it is 0.0044 BAM / kWh. In translation this means, for example, that each household allocates 1-2 BAM per month for the promotion of renewable energy sources. Of course, there is a need to think about advanced systems of feed-in-premium incentives or auctions, systems that are more market-oriented mechanisms, and at the moment they are considered in B&H on the initiative of international organizations.

Encouraging other forms of energy, such as energy for heating and cooling or biofuels in transport, is not defined in BiH, except in some cases where capital investments are encouraged through certain international or domestic funds, primarily in the public sector.

Public awareness on RES projects and their contribution to the wider local community – association and joint investment through energy cooperatives

Citizens’ awareness that in fact they are those who encourage the generation of electricity from the RES is at a very low level. The information on increasing the fee on the electricity bills in BiH is mostly overlooked because it does not represent a big thing, as with the citizens themselves – the final consumers of electricity, as well as in the media. Probably because one average household at a monthly level allocates only 1 BAM or 50 cents in the form of remuneration for RES and for this there is no benefit in terms of investment as a physical person, possibilities of net metering etc.

Therefore, citizens’ awareness is at a very low level, as well as the media that are insufficiently informed about the importance of this topic, and there is poor communication with the competent institutions and independent experts who would present, in a transparent way, all the details regarding the RES in BiH, the trends of the region, The European Union, the World, but who would also show to people the importance of this topic, its potential and benefit to the wider community. In this way, the RES projects would provide easier social acceptance and realization.

An example of how to make projects socially (un)acceptable

That the projects of the OIE are complex, clearly shows the number of projects realized in relation to the potentials that BiH has. For the realization of an OIE project, it is necessary to act multidisciplinary, ie multisectoral and multi-institutional. This means that it is necessary to include more sectors as well as institutions at the very beginning, and not at some final stage. In addition, it is very important to include all relevant participants, starting with higher levels of government, through the local community, investors, all the way to the non-governmental sector and ordinary citizens who, in a few examples, have been one of the strongest players in approving the construction of the OIE plant.

How to improve the RES sector in BiH?

The conclusion is that the development of the OIE should be of interest to all, and to transparently grant concessions, establish incentive mechanisms, and leave the possibility of investing in the local community and its citizens, as well as the private sector through the ESCO-Public-Private Partnership and other models, as was the case in Pirot or Kruševac.

The larger community should realize its form of benefit from RES projects through various ways such as: promoting the local labor market through the creation of new jobs (eg for the construction of facilities, for deliveries of goods and goods services, etc.), the improvement of local infrastructure , opportunities for formal and informal training, investment in future energy projects (eg Through Local Foundations), lower energy prices (electricity and heat), energy efficiency measures in the housing sector, improvement of the state of the environment (greening of areas, parks, etc.), capturing funds to local institutions for developing new environmental projects.

The most developed countries of the world are guided by these principles and they  enable all interested parties to participate in RES projects.

Figure 3. Share of civil energy in developed countries (N.  Harbaš)