Bosnia and Herzegovina (BH) has embarked on a transformative journey in its energy sector as both Republika Srpska (RS) and the Federation of Bosnia and Herzegovina (FBH) initiated comprehensive amendments of the energy legislative framework in an effort to reshape the country’s energy sector landscape and align the legislation with Energy Community regulations, EU acquis, and international standards and best practices.
RS has led the way by adopting a set of new energy laws, including the RS Law on Electricity in 2021, the RS Law on Renewable Energy Sources in 2022, and comprehensive amendments to the RS Law on Energy, paving the way for a new era of the energy sector.
The FBH followed in late 2023 by adopting a set of new energy sector laws aimed at ensuring alignment with Energy Community regulations, addressing the need for clearer regulation of energy activities, and redefining the renewable energy sector: the FBH Law on Electricity, the Law on Energy and Regulation of Energy Activities, and the FBH Law on Use of Renewable Energy Sources and Efficient Cogeneration.
The recently adopted energy sector regulations in both FBH and RS have dual aims: tackling crucial aspects of energy sector regulation to ensure adequate strategic planning and stability of the energy system while also fostering fast and sustainable growth of the energy industry, with a focus on renewable energy sources. Ultimately, these regulations aim to help meet the 2030 EU targets for greenhouse gas emissions, the share of renewable energy in gross consumption, and energy efficiency. We explore the key novelties introduced and provide an overview of the most recent developments in the adoption and implementation of secondary legislation and their anticipated effects.
Strategic Planning of Energy Sector Development
The new regulatory framework in RS and FBH defines the requirements and procedures for the adoption of long-term energy strategies, action plans, and energy and climate plans, which are expected to enhance energy security, attract foreign investment, and facilitate regional energy cooperation. The new regulatory framework determines the obligation for alignment and adoption of detailed plans for the production of electricity from renewable sources, which is expected to substantially contribute to the strategic and planned development of renewable energy production facilities, optimize the incentive mechanisms, and establish a clear strategic framework which is ultimately expected to attract substantial new investments in the renewable energy sector.
In February 2024, RS adopted the Program for Use of Renewable Energy Sources which defines the overall goals of RS for participation of energy from renewable sources until 2030, sectoral goals by year, total contributions expected from individual technologies, types and methods of incentives, and other matters important to achieving the goals established by the Energy and Climate Plan of RS and BH. Detailed plans for FBH are expected in 2024.
New Incentive Mechanisms for Renewable Energy Sources
The new regulatory framework for renewable energy sources in RS and FBH aims to enhance the renewable energy sector by introducing new incentive mechanisms such as FIT for small power plants (up to 250 kilowatts) and FIP auctions for large production facilities. After a period of delay, RS has recently taken significant steps toward implementing the new incentive mechanisms by adopting the Program for Use of Renewable Sources and the Rulebook on Auctions in January and February of 2024. Although several bylaws required for the implementation of the first FIT auctions in RS are still outstanding, their adoption is expected in the coming months, which should enable the organization of the first FIT auctions in RS in late 2024 or early 2025. So far, bylaws for the implementation of new incentive mechanisms are not adopted in FBH but are expected in the second half of 2024, which implies that the first FIT auctions in FBH could be expected in early 2025.
Unbundling of Electricity Utility Companies and Market Liberalization
New energy legislation sets clear obligations and deadlines for unbundling of electricity utility companies, which is expected to contribute to liberalization and competition in the energy market. New energy legislation envisages the establishment of a day-ahead energy market which, when implemented, will reshape the energy market paradigm, contribute to better flexibility and integration of renewable energy sources, further encourage the participation of independent electricity producers, and stimulate investments in energy infrastructure.
Conclusion
Although reforms of the energy sector in BH are still a work in progress, a new era is on the horizon and the country is on a clear path to unlocking the full potential of its energy sector.
By Nihad Sijercic, Senior Partner, and Ferid Kapidzic, Senior Associate, Independent Attorneys at Law in cooperation with Karanovic & Partners
This article was originally published in Issue 11.3 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.