۱- Introduction

۲- Methodology

۳- Input assumptions and scenarios

۴- Results

۵- Conclusions

References

Abstract

This Case Study considers generation capacity expansion planning in Bosnia and Herzegovina (BiH) including a range of issues related to renewable, energy efficiency, local emission and carbon reduction commitment policies. In addition, our analysis considers an outlook of wholesale electricity prices in the region. We have also compared our findings with the country’s current official plan (“Indicative Plan”), which includes development of as many as four additional lignite-based plants. Our findings suggest that BiH, as a low-cost producer in the region, has significant opportunities to modernize and expand its current generation system with nearly €۳ billion in new investments. This investment level is much lower than the €۵ billion investment program promulgated in the Indicative Plan. These differences primarily have to do with the treatment of lignite plants. Since the end of the war roughly twenty years ago, the country has progressed quickly. Aspirations to join the EU compose a significant part of the authorizing environment for the power sector.

Context

Bosnia and Herzegovina (BiH) is a small country with a population of roughly 3.8 million. BiH is in the process of creating a foundation for sustainable economic growth after a period of successful post-conflict recovery since the war of 1992–۱۹۹۵٫ The power sector has largely rebounded from its lows during the war. Power generation increased by 50% between 2001 and 2013, per capita generation reached that of other Eastern European countries, distribution losses halved between 2007 and 2010, exports more than quadrupled between 2001 and 2011, and net exports also showed an upward trend [1,2]. Electricity demand growth rates over the past 10 years averaged around 1% pa reflecting sluggish growth largely due to insufficient growth from the manufacturing sector. BiH has about 4000 MW of installed power generation capacity, with generation varying between 14 and 16 TWh pa over the last five years [3]. Coal-fired power plants account for about 60% of total generation, with hydropower plants providing the balance. In 2013, more than 95% of generation capacity was owned by the three vertically integrated state-owned enterprises namely EPBiH, EPRS (for Republic of Srpska) and EPHZB (Hrvatske Zajednice Herceg Bosne) in Mostar. All three companies perform generation, distribution, trade, and supply in their respective license areas and have maintained a reasonable degree of financial sustainability. However, this positive recent performance disguises several problems including inadequate strategic planning and slow pace of sector reforms, one of Europe’s most energy inefficient and carbon-intensive economies, and deteriorating assets and underutilized resources. There is currently no BiH-wide energy strategy, although there is one being designed. Historically, the strategic planning efforts of FBiH and RS have not been harmonized, reflecting a fragmented governance structure and energy market. An electricity market liberalization planned for January 1, 2015, was not fully implemented, and there is no platform to determine electricity prices by the market. Energy tariffs are below cost recovery. Large electricity exports historically are, in part, a reflection of less than perfectly functioning domestic markets, as electricity firms would have to sell to each other internally at below-market prices. With pre-tax residential tariffs at around 7.6 (Euro) cent per kilo-Watt-hour (kWh) at the end of 2013, energy tariffs are also too low to encourage the private sector to finance the construction of new power plants.