Major winter air pollution from district heating and individual heating solutions have been the main impediments for Banja Luka, a city with a district heating utility company near financial collapse due to significant debts for heavy fuel oil purchases. Municipal governments, like that in Banja Luka, want to remedy these kinds of financial difficulties but can need technical support such as strategy, independent assessments and finance for early-stage feasibility assessment to overcome barriers. Presentations from partners and champion cities at the 2015 UN Environment-IFC workshop on district heating in Tallinn, Estonia, built interest in the region, and particularly for Banja Luka, to join the Initiative and seek support in identifying tailored solutions and leveraging investments.

National Steering Committee

A national steering committee has not yet been formed for this replication country.

National Partners

• University of Banja Luka, Faculty of Natural Sciences

• Served as a National Designated Entity and Focal Point for CTCN

• Ensured that relevant ministries, UNFCCC focal points, private sector, civil society, and academia representatives are involved

• Ministry of Spatial Planning, Civil Engineering and Ecology of Republika Srpska

• Ensured that the work done in Banja Luka reflects national circumstances and priorities and is coordinated with other processes that address climate change at entity level

Expert Working Group

Expert Working Group for Bosnia and Herzegovina is a group of partners from the Initiative’s global network and includes EBRD, Thermaflex, ENGIE, Tractabel, King&Spalding, Dalkia, Danfoss, Veolia, World Bank. Examples of how our partners contribute to the development of district energy systems in Bosnia and Herzegovina is described below.

EBRD

• Provided a loan of $10.3 million to the City of Banja Luka to construct a new $21.8 million biomass district heating plant

• Provided technical data, analysis and previously undertaken feasibility studies in selected cities in Eastern Europe

• Reviewed in detail the assessments in Banja Luka

• Co-financed a feasibility study in Banja Luka with UN Environment and CTCN

Veolia

• Provided substantive technical input and review of the assessments in Banja Luka

UN Environment engaged the partners of the Initiative, including European Bank for Reconstruction and Development (EBRD), to develop a tailored approach to support the City of Banja Luka. Together with UN Environment, the City submitted a funding proposal to the Climate Technology Centre and Network (CTCN). The Initiative and CTCN proceeded to develop a neutral assessment of the city’s district heating system and its potential, with partners engaged as reviewers to ensure projects proposed in the assessment would be primed for investment. The success of this neutral approach led EBRD to commit funds and, alongside UN Environment and CTCN, to develop a full feasibility study of the City’s district heating system. This study, adopted by the City Council, recommended investments in biomass boilers and large-scale efficiency improvements that would save $1.8 million each year and take the utility from a negative balance sheet to earning $1 million a year, simply from reduced fuel use, and boosting renewables from 15% to over 90% and cutting CO₂ by 68%, NO₂ by 88%, and SO_X by 94%.

Initial assessment leading to cooperation with EBRD

UN Environment provided support to Banja Luka within the framework of the District Energy in Cities Initiative together with the Climate Technology Centre & Network (CTCN) to undertake a city-wide analysis to assess the status of the district heating network. The assessment was then followed by interest from EBRD and a more detailed feasibility study carried out to confirm availability of a sustainable biomass supply, and to identify and assess a detailed priority investment program.

Following the results of the feasibility study, in March 2017 the City decided to venture in a public-private partnership and establish a new district heating company.

In November 2017, EBRD officially approved an €8.4 million ($10M) loan in order for the City to meet its share of a $21.8 million total investment for the plant reconstruction, kicking off the construction of a new 49 MW biomass-powered district heating utility plant and forming a public-private partnership. Total project investment leveraged from Initiative activities: €17.8 million ($21.3M). 

The provided funds were used to develop the new plant and establish a new district heating company with IEE group as a private strategic partner. Private equity was decided to amount to 51% of the share, while the City should remain in possession of the remaining 49%.

Construction of a new plant and outlook

On March 15, 2018 the plant has been officially opened. The switch from oil to biomass will cause the amount of heavy fuel oil used to heat the city to plummet from 16,548 tonnes a year to less than 1,100 tonnes in 2018 and to 900 tonnes by 2033, saving up to €900,000 ($1.1M) in 2018 alone and effectively cutting CO₂ emissions by 91% and sulphur dioxide emissions by 94%.

The Initiative continues to offer the city longer-term support as required, including capacity building trainings and guidance on using Banja Luka as a case study to spread successful energy efficiency replication in the country and region.