Energy represents one of the most important factors in daily life, as well as a fundamental driver of economic development, political events, and the financial market of every state. Almost every day, we can see information and news related to the energy sector, specifically the transition from fossil fuels to renewable energy sources. European Union (EU) directives anticipate that by 2030, the EU will produce 45% of its energy from renewable sources, and by 2050, energy production should be 100% from renewable sources (RES).

The reasons behind this shift are the high cost of fossil fuels with their constant increase and significant environmental pollution negatively impacting climate change. Renewable energy sources include hydropower, wind energy, biomass, solar radiation, and geothermal energy. RES typically share a common link, which is solar energy contributing to energy production from solar power plants, wind energy potential, and hydropower potential.

Bosnia and Herzegovina have a very favorable position for utilizing renewable energy sources. The country has a significant number of rivers suitable for building hydroelectric power plants, substantial wind energy potential (due to the location of the Dinaric mountain range), and abundant solar energy (averaging over 2000 hours of sunshine annually). Currently, there are three wind farms in operation in Bosnia and Herzegovina, as well as a large number of built hydroelectric and solar power plants. However, in recent years, there has been a strong increase in the development and construction of RES facilities. According to data from the Independent System Operator of Bosnia and Herzegovina (NOS BiH), there are currently permits in the process of approval for 11,000 MW of grid connection. A significant incentive for investing in RES is the security of return on investment, considering the international electricity market, mandatory regulations requiring the use of “green energy,” and the readiness of end consumers to steer their businesses and economic development by purchasing electricity generated from RES. Additionally, guidelines for investing in RES include CO2 taxes, which are already in effect in the EU, with the ultimate deadline for introducing CO2 taxes in Bosnia and Herzegovina being January 1, 2026. The mentioned tax renders the production of electricity from fossil fuels almost unprofitable.

Taking into account the legal system in Bosnia and Herzegovina, permits for the construction of RES facilities are obtained at the level of Bosnia and Herzegovina, as well as at the entity level, namely the Federation of Bosnia and Herzegovina (FB&H) and the Republic of Srpska (RS), and at the level of the Brčko District of Bosnia and Herzegovina (BD B&H). It is important to note that permits in the FB&H are also obtained at the cantonal level.

The complex permit issuance procedure is accompanied by intricate legal regulations, which are sometimes even contradictory, leading to legal uncertainty and slowing down the development and construction of RES projects.

In July 2023, the FB&H adopted a set of new energy laws that follow EU legislative trends, aiming to simplify the process of obtaining permits for RES facilities and introduce additional benefits and incentives:

1. Energy and Regulation of Energy Activities in the Federation of Bosnia and Herzegovina Act (“Official Gazette of FBiH,” No. 60/2023), which regulates the method of determining and implementing energy policy. This law has not been previously enacted and serves as the overarching law in the regulation of energy activities. Some key provisions of this law include:

• Establishing energy policy goals with an emphasis on renewable energy sources.
• Specifying energy policy acts and energy strategy.
• Prescribing an Action Plan as the foundational document for implementing energy policy.
• Defining energy activities, including: i. Electricity production. ii. Electricity distribution. iii. Electricity supply. iv. Electricity trading. v. Electricity storage. vi. Aggregation of distribution resources in the field of electricity. vii. Other energy-related activities.
• Regulating and overseeing energy activities through the Regulatory Commission for Energy in the Federation of Bosnia and Herzegovina (FERK).

This law, as previously mentioned, governs the energy sector through the establishment of general energy policy.

2. Federation of Bosnia and Herzegovina Electricity Act (“Official Gazette of FBiH,” No. 60/2023), which regulates the construction of power plants, electricity production and distribution, as well as the supply and trade of electricity. This law amends the previous Federation of Bosnia and Herzegovina Electricity Act (“Official Gazette of FBiH,” No. 66/2013, 94/2015, 54/2019, 1/2022, 61/2022). Some of the key changes in this new law include:

• The possibility of constructing power plants for electricity production up to 1 MW (except for hydropower plants) without the need for an energy permit. Obtaining an energy permit involves a complex process that requires the project owner to gather over 20 different documents and permits. The deadline for obtaining an energy permit is 3 months (with the option to extend it for an additional 2 months), and it requires approval not only from the competent Federal Ministry of Energy, Mining, and Industry (FMERI) but also from the Government of the Federation of Bosnia and Herzegovina and the Parliament of FB&H (the latter is required for power plants with a capacity exceeding 30 MW). The new Electricity Act will significantly shorten the overall time required to obtain permits for these power plants up to 1 MW.
• Introduction of new categories of participants and activities in the electricity market: o Aggregator, referring to a market participant engaged in the aggregation of distributed resources. o Aggregation of distributed resources, representing the commercial function of jointly managing the production, storage, and consumption of electricity for multiple users on the grid with the aim of selling electricity or providing ancillary services. o Active customer, denoting an end customer or a group of end customers who collectively generate, consume, or store electricity produced on-site or sell excess electricity they have generated themselves (an active customer does not necessarily have to be a legal entity). o Energy community of citizens, signifying a legal entity established in accordance with laws governing the formation of associations and foundations. The purpose of forming an energy community of citizens is to ensure environmental protection, economic and social benefits for its members, without generating profits. For the needs of its members, an energy community can produce electricity, supply, manage, aggregate, store electricity, and engage in other related activities. o Energy storage, indicating the delay in the final use of electricity.
• Simplification of administrative procedures for the construction and operation of facilities using RES, primarily for small solar power plants.
• Creating a legal framework for the introduction of electric mobility: o Specifying conditions for the installation of publicly accessible private electric vehicle charging points. o Providing electric vehicle charging services.

  3. Renewable Energy and Efficient Cogeneration Use Act, currently in the final legislative process, which anticipates the following significant changes:

• Defining the concept of “Administrative barrier,” which represents any obstacle that arises when competent authorities fail to ensure efficient realization of the rights and interests of individuals and legal entities concerning the prompt, complete, and quality resolution of administrative matters in administrative proceedings. The Administrative barrier is determined by the Operator for Renewable Energy and Efficient Cogeneration Use (Operator OIEIEK), with the consent of FMERI, based on the request of a potentially privileged producer.
• Establishing new incentives for RES facilities and introducing auctions: o An auction is a competitive non-discriminatory bidding process in which participants compete to obtain incentives. o “Feed-in tariff (FIT) Auction” is a bidding process in which the winner is granted the right to sell electricity generated from small OIEIEK facilities at a guaranteed purchase price. o “Feed-in premium (FIP) Auction” is a bidding process in which the winner is granted an incentive in the form of a fixed premium per delivered MWh of electricity from large OIEIEK facilities. o Electronic auction or e-auction represents the method of conducting a part of the auction process, involving the submission of bids electronically. o Prosumer refers to an end customer of electricity who generates electricity from OIEIEK for part of their needs from their own energy facility, with the possibility of delivering surplus electricity in the form of energy or monetary credit. The law also defines co-financing for prosumer facility construction. o Monetary credit denotes the monetary value of the difference between the delivered electricity produced by the prosumer and the electricity taken from the grid during the accounting period, in accordance with net metering.
• Improving the legal framework for the efficient implementation of the new incentive system (issuing bylaws regulating technological quotas and auction volumes, as well as regulating the auction procedure in the law itself).
• Expanding the responsibilities of the Operator OIEIEK (determining Administrative barriers, etc.).
• Introducing new categories of participants using renewable energy sources in line with the new Electricity Act.

CONCLUSION

Economies worldwide are facing an energy transition due to imperative legal norms imposing CO2 taxes and the recognition of the importance of national energy independence and reducing negative climate impacts.

The primary intention of legislators in all countries is to establish a clear and straightforward procedure for obtaining permits necessary for the development and construction of RES facilities. By adopting the aforementioned laws, namely the Energy and Regulation of Energy Activities in the Federation of Bosnia and Herzegovina Act, the Federation of Bosnia and Herzegovina Electricity Act, and the draft Renewable Energy and Efficient Cogeneration Use Act, which is in the final stage of the legislative process, Bosnia and Herzegovina has taken a crucial step towards aligning its energy legislation with international standards and setting the conditions for energy transition and stronger energy independence. Key changes include a simplified permit issuance procedure for RES facilities, the ability of individual citizens to generate, consume, or feed surplus electricity into the grid, the reintroduction of financial incentives for electricity generation through auctions, and the right and ability of citizens to be informed about all important circumstances regarding the protection of their rights. Additionally, these adopted laws will provide added security to investors, as the legal solutions are in line with international standards in the field of RES development and construction.