Framework Energy Strategy of Bosnia and Herzegovina Until 2035
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Framework Energy Strategy of Bosnia and Herzegovina until 2035 FRAMEWORK ENERGY STRATEGY OF BOSNIA AND HERZEGOVINA UNTIL 2035 Framework Energy Strategy of Bosnia and Herzegovina until 2035 INTRODUCTION The previous global and European economic crisis, along with the regional socio-political aspect, had a negative impact on the development dynamics for Southeast Europe, including Bosnia and Herzegovina. Being a small open economy, Bosnia and Herzegovina needs smart investments to start economic activity in a more significant and targeted manner, wherein the energy sector plays a prominent role. The local and European energy context is currently full of major decisions, challenges and uncertainty. Western EU member states have been implementing a clean energy policy, thus considerably changing the energy paradigms, regulatory mechanisms and investment needs. Pressures on the wholesale electricity prices in the European power markets make it more difficult nowadays to make important decisions on investments into the energy sector. On the other hand, the EU clean energy agenda requires funds for a long-term adjustment of the generation portfolio and technology towards reduced greenhouse gas emissions. The Framework Energy Strategy provides the context and direction of energy development for Bosnia and Herzegovina, striving towards a true balance in the context of “energy trilemma”. Initiation of right investments, market and regulatory reforms in all energy segments, supported by sound and structural implementation by all key stakeholders, is an imperative for Bosnia and Herzegovina. Guidelines for Bosnia and Herzegovina are based on the sustainable development policies balancing amongst three aspects: a) security of supply, b) price competitiveness, and c) decarbonisation, i.e. clean energy policies. The sector’s targeted efficiency and efficient usage of resources are the only way for Bosnia and Herzegovina to achieve parallel convergence of the assumed commitments and EU policies entirely and to position energy as the engine to drive the economic development stability and feasibility. Secondary effects shall result in employment, public debt decrease and increase in competitiveness. This document (“Framework Energy Strategy”) is aimed at prioritising the key energy strategic guidelines of Bosnia and Herzegovina with clearly set objectives and implementation priorities to be reached in the years to come, bearing in mind the principles of free market and market factors which cannot be centrally controlled. This document’s clear strategic guidelines form a basis, among other things, for the application for and withdrawal of the IPA and WBIF funds for the Bosnia and Herzegovina energy sector. This document is a set of strategic guidelines harmonised with the Bosnia and Herzegovina Working Group, produced in cooperation with the relevant Ministries, institutions, research centres, associations and social partners and other energy sector stakeholders. The final outcome of this document is a strategic analysis and a review of the strategic energy priorities of Bosnia and Herzegovina in its key segments, with a focus on several indicative scenarios for the generation mix development until 2035. | Framework Energy Strategy of Bosnia and Herzegovina until 2035 Content 1 APPROACH AND METHODOLOGY .............................................................................................................................................. 6 1.1 Assignment of institutional competence in the energy sector of Bosnia and Herzegovina ......................................................... 6 1.2 Key information and approach to the development of the Framework Energy Strategy ............................................................ 6 1.3 The Framework Energy Strategy development methodology .................................................................................................... 7 1.4 Data ......................................................................................................................................................................................... 8 2 SUMMARY ..................................................................................................................................................................................... 9 2.1 Input guidelines for the Framework Energy Strategy ................................................................................................................ 9 2.2 Summary of priorities and vision of the Framework Energy Strategy of Bosnia and Herzegovina ............................................. 9 3 GENERAL DATA AND MACROECONOMIC DEVELOPMENTS .................................................................................................. 12 3.1 Structure and general data ..................................................................................................................................................... 12 Gross Domestic Product ............................................................................................................................................... 12 Unemployment ............................................................................................................................................................. 14 Foreign Direct Investment and investment climate ........................................................................................................ 14 4 GLOBAL ENERGY TRENDS ........................................................................................................................................................ 17 4.1 Electricity ............................................................................................................................................................................... 17 Global trends ................................................................................................................................................................ 17 European trends ........................................................................................................................................................... 18 European energy policies ............................................................................................................................................. 20 Current growth of RES generation ................................................................................................................................ 22 Future development scenarios of installed capacity from RES ...................................................................................... 22 Renewable energy technologies ................................................................................................................................... 24 Trends in electricity wholesale and supply segment ...................................................................................................... 25 The impact of trends on the sector transformation and new business models ............................................................... 26 Key implications of global trends for the framework energy strategy ............................................................................. 29 4.2 Oil and gas ............................................................................................................................................................................. 30 Crude oil market ........................................................................................................................................................... 30 Natural gas market ....................................................................................................................................................... 32 Crude oil refining .......................................................................................................................................................... 34 Investment trends and business models of oil companies ............................................................................................. 35 Key implications of oil and gas global trends to the Framework Energy Strategy .......................................................... 37 5 ENERGY SECTOR OF BOSNIA AND HERZEGOVINA ................................................................................................................ 38 5.1 Review of regulatory and institutional framework .................................................................................................................... 38 Energy Community Treaty ............................................................................................................................................ 38 West Balkan 6 initiative ................................................................................................................................................. 42 Energy sector legislative framework ............................................................................................................................. 43 5.2 Electricity sector ..................................................................................................................................................................... 45 Electricity market structure............................................................................................................................................ 45 Installed capacity and power generation ......................................................................................................................