Bosnia and Herzegovina’s electricity sector is exposed to hydrological variability, with an estimated €210mn swing in sector value between particularly wet and dry years. The exposure is linked to the country’s dependence on hydropower for generation.
Hydropower output range across recent years
Large Bosnian hydropower plants generated an average of around 5.3 TWh/year over the past eight years, according to an analysis by energy expert Zijad Bajramovic cited in the report. Actual production can diverge from that average depending on rainfall and river flows. The variation between 2023 and 2020 illustrates the scale of the swings.
In 2023, strong hydrology increased hydropower output to 6.4 TWh, about 21% above the eight-year average. That translated into approximately 1.1 TWh of additional hydroelectricity compared with the average level. The additional volume reduced the requirement for thermal generation and imports while increasing electricity available for export.
Using an assumed wholesale power value of €100/MWh, the incremental generation in 2023 would have been worth around €110mn. In contrast, dry conditions in 2020 lowered hydro output to 4.3 TWh, around 19% below average. The resulting production deficit of approximately 1 TWh would represent about €100mn at the same wholesale price assumption.
Estimated financial impact from wet versus dry hydrology
Taken together, the difference between 2023 and 2020 reaches approximately 2.1 TWh. That amount is equivalent to around 40% of average annual generation from Bosnia and Herzegovina’s large hydro plants. Valued at €100/MWh, it translates into the estimated €210mn difference.
The report notes that financial consequences from poor hydrology can extend beyond a straightforward valuation of lost production. When hydro output falls, utilities may need to replace relatively low-variable-cost generation with more expensive thermal production or imported electricity. This can weaken operating margins and cash flow at the same time companies need investment in networks, generation and decarbonisation.
Conversely, strong hydrological years can improve trading positions by lowering thermal dispatch requirements and creating export opportunities. The volatility therefore affects both system balancing needs and market outcomes across different weather conditions.
Diversifying generation and improving flexibility
The volatility also supports the case for broadening Bosnia and Herzegovina’s generation portfolio, according to the report. Additional wind and solar capacity could reduce the direct link between electricity availability and river flows, though higher variable renewable penetration would require greater flexibility. Battery storage, flexible conventional generation and stronger regional interconnection are identified as increasingly important alongside renewable development.
The commercial focus described in the report is not only increasing annual generation but reducing earnings volatility from a portfolio heavily exposed to one natural resource. For Bosnia’s electricity companies, hydrology remains both a production variable and a material financial risk factor, with annual movements capable of changing the sector’s power balance by terawatt-hours and its economic position by hundreds of millions of euros.
