REPORT ON DESIGN OF WOODY BIOMASS SUPPLY CHAIN … · 2017. 8. 29. · REPORT ON DESIGN OF WOODY...

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REPORT ON DESIGN OF WOODY BIOMASS SUPPLY CHAIN CLUSTER FOR DISTRICT HEATING PLANTS IN

MUNICIPALITIES OF PRIJEPOLJE, PRIBOJ AND NOVA VAROŠ

Prepared for:

Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH DKTI- Development of a Sustainable Bioenergy Market in Serbia

Bože Jankovića 39 11000 Beograd

Prepared by:

September, 2015

Vojislav Milijić, Foragrobio cc doo

Sumska 9-III/1, Subotica

Photos by Foragrobio cc doo © 2015 GIZ DKTI

DKTI (GIZ) Programme "Development of sustainable bioenergy market in Serbia": Report on Design of Woody Biomass Supply Chain Cluster for District Heating Plants in Municipalities of Prijepolje, Priboj and Nova Varoš ________________________________________________________________________________________________

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Table of Contents List of tables

List of figures

List of charts

List of abbreviations

Table of Contents 1. Executive summary ................................................................................................................................ 5

2. Definition of tasks ................................................................................................................................... 6

3. Methodology ........................................................................................................................................... 8

4. Status Quo Analysis – Background ...................................................................................................... 10

4.1. Municipalities Prijepolje, Priboj and Nova Varoš............................................................................... 10

4.2. Fuel switch in district heating systems of Prijepolje, Priboj and Nova Varoš ................................... 11

4.3. Technical Aspects ............................................................................................................................. 12

4.4. Biomass availability ........................................................................................................................... 16

4.5. Legal aspects .................................................................................................................................... 17

4.6. Financial Aspects .............................................................................................................................. 23

4.7. Political Aspects ................................................................................................................................ 23

5. Review of defined individual supply chain modules ............................................................................. 25

5.1. Prijepolje ............................................................................................................................................ 25

5.2. Priboj .................................................................................................................................................. 26

5.3. Nova Varoš ........................................................................................................................................ 27

6. Cluster supply business model............................................................................................................. 28

6.1. Model Concept .................................................................................................................................. 28

6.2. Cluster Supply Models ...................................................................................................................... 30

6.3. Company Establishment and Management Structure ...................................................................... 33

6.4. Biomass Supply and Wood Chips Delivery Contracting ................................................................... 35

6.5. Woody Biomass Central Storage Location ....................................................................................... 39

6.6. Storing, Processing and Logistics of Woody Biomass and Wood Chips .......................................... 48

6.7. Staff ................................................................................................................................................... 50

7. Financial analysis ................................................................................................................................. 52

7.1. Investment ......................................................................................................................................... 52

7.2. Operational costs ............................................................................................................................... 52

7.3. Incomes ............................................................................................................................................. 53

7.4. Economic indicators: iRR, NPV, BCR, sensitivity analysis ............................................................... 53

8. Cluster supply vs. individual supply - Comparison............................................................................... 55

8.1. Economic indicators .......................................................................................................................... 55

8.2. Biomass supply and delivery ............................................................................................................. 56

9. Stakeholder analysis ............................................................................................................................ 57

9.1. Propensity of municipalities to establish cluster supply model ......................................................... 57

9.2. Propensity for biomass supply .......................................................................................................... 59

9.3. Envisaged impediments .................................................................................................................... 60

10. Conclusions ........................................................................................................................................ 62

10.1. Definition of adequate ownership, management and operation structure ...................................... 62

10.2. Impediments removal ...................................................................................................................... 63

11. Sources ............................................................................................................................................... 65

12. Annexes .............................................................................................................................................. 66

12.1 Annex I: List of interviewed persons ................................................................................................ 66

12.2 Annex II: Interview questionnaire ..................................................................................................... 67

12.3. Annex III: Checklist for central biomass storage location assessment ........................................... 71

List of Tables T-1: Basic information about Prijepolje, Priboj and Nova Varoš .............................................................. 10 T-2: DH systems of Prijepolje, Priboj and Nova Varoš ............................................................................ 11 T-3: Technical aspects of fuel switch and biomass supply in DH systems of PP, PB and NV................ 12 T-4: Road network of Prijepolje, Priboj and Nova Varoš - GFMP ............................................................ 15


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T-5: Available quantities of woody biomass in PP, PB and NV ............................................................... 16 T-6: Legal framework for organization of woody biomass collection, processing, supply and incineration .................................................................................................................................................................. 22 T-7: Budgets of municipalities Prijepolje, Priboj and Nova Varoš in 2013 ............................................... 23 T-8: Review of BSS with alternative equipment included for individual supply model in PP ................... 25 T-9: Review of BSS with alternative equipment included for individual supply model in PB ................... 26 T-10: Review of BSS with alternative equipment included for individual supply models in NV............... 27 T-11: Participants in woody biomass supply chain cluster ...................................................................... 31 T-12: Swot analysis of CS1 and CS2 ....................................................................................................... 33 T-13: Woody biomass units, conversion factors and prices .................................................................... 36 T-14: Wood chips units, conversion factors and prices ........................................................................... 39 T-15: Optimal and analysed location for central biomass storage for individual or cluster supply .......... 40 T-16: Required space for fresh woody biomass and wood chips storage, machinery and equipment ... 48 T-17: Examples of adequate wood chippers ............................................................................................ 49 T-18: Examples of adequate telescopic handlers .................................................................................... 50 T-19: Transport dynamics and number of trucks ..................................................................................... 50 T-20: Investment costs ............................................................................................................................. 52 T-21: Unit costs ........................................................................................................................................ 52 T-22: Operational costs ............................................................................................................................ 52 T-23: Operational costs ............................................................................................................................ 53 T-24: Incomes ........................................................................................................................................... 53 T-25: Economic indicators: NPV, IRR, return of investment and BCR .................................................... 54 T-26: Sensitivity analysis .......................................................................................................................... 54 T-27: Comparison of economic indicators of cluster and individual supply ............................................. 55 T-28: Comparison of cluster and individual supply .................................................................................. 56

List of Figures F-1: Position of Prijepolje, Priboj and Nova Varoš ................................................................................... 10 F-2: Position, accessibility and storage potentials of PP DH system future biomass boiler stations ...... 13 F-3: Position, accessibility and storage potentials of PB DH system future biomass boiler stations ...... 14 F-4: Position, accessibility and storage potentials of NV DH system future biomass boiler stations ...... 15 F-5: Wood chips cluster supply model concept ....................................................................................... 28 F-6: Position of analyzed locations .......................................................................................................... 41 F-7: Koran doo storage – google maps .................................................................................................... 41 F-8: Location 1: Koran doo, Priboj............................................................................................................ 42 F-9: Location 2: Omo Prom doo, Bistrica, Nova Varoš Google Maps ..................................................... 43 F-10: Location 2 - Omo Prom doo, Bistrica, Nova Varoš ........................................................................ 43 F-11: Location 3: Branosevac, Nova Varoš Google Maps ....................................................................... 44 F-12: Location 3: Branosevac, Municipality of Nova Varoš ..................................................................... 45 F-13: Location 4: Zlatar Sped doo, Kokin Brod, Nova Varoš, Google Maps ........................................... 46 F-14: Location 4: Zlatar Sped doo, Kokin Brod, Nova Varoš ................................................................... 46 F-15: Location 5: JKP Lim, Prijepolje, Google Maps ............................................................................... 47 F-16: Location 5: JKP Lim, Prijepolje ....................................................................................................... 47 F-17: Example of wood chips shed .......................................................................................................... 49 F-18: Organizational structure .................................................................................................................. 51

List of Charts C-1: Share of the market secured by each partner – share in DH plants wood chips demand .............. 34 C-2: Woody biomass supply and wood chips delivery dynamics ............................................................ 48 C-3: Costs, incomes, balance .................................................................................................................. 53


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List of abbreviations BMZ German Federal Ministry for Economic Cooperation and Development

CHP Combined Heat and Power

BSS Biomass supply studies

COC Chain of Custody

DH District Heating

DIN Deutsches Institut für Normung

DKTI Deutsche Klima Technologie Initiative

EN European Norms

EU European Union

EUR, € Euro

EXW Ex-Works

FSC Forest Stewardship Council

GFMP General Forest Management Plan

GIZ Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH)

GIZ-DKTI Program for the “Development of a sustainable Bioenergy Market in Serbia“

ha hectare

KfW German Development Bank

kg kilogram

mm millimetre

m³ cubic meter

m2 square meter

MW Megawatt

NV Nova Varoš

PB Priboj

PP Prijepolje

PE Public Enterprise

PPP Public-private partnership

srm ster meter

Ton, t metric ton

UNDP United Nations Development Program

UNDPS UNDP Study

VAT Value Added Tax

WB Western Balkans


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1. Executive summary Two basic options of woody biomass supply chain cluster model for district heating plants in municipalities of Prijepolje, Priboj and Nova Varoš have been developed and presented in this report. First perceives the establishment of joint company owned by the municipalities in question, while second option perceives the establishment of public and private partnership between municipalities in question and private partner. Both options perceive similar solutions in terms of woody biomass procurement and processing and wood chips storing and delivery. Both options require same organizational structure. The basic differences are in ownership shares, investment levels and management structure. After determining cluster model operations including recommendations on determination of ownership shares and management structure, along with presenting options for wood contracting, woody biomass supply, wood processing and wood chips delivery contracting and performance, detailed recommendations for central biomass storage locations and procurement of optimal machinery and equipment have been provided. After visiting and analyzing several potential locations for central biomass storage we can recommend areas of Bistrica Village as optimal for locating such storage. However, other potential locations such as Nova Varoš, Kokin Brod or even Prijepolje can be defined as suitable. Priboj is the only location that we can recommend to be avoided for central biomass storage. Capacities of wood chipper, trucks, telescopic handlers and trailers have been determined based on wood chips demand and demand dynamics from Prijepolje, Priboj and Nova Varoš district heating systems, presented in previous studies on logistic concepts for municipalities in question. Optimal wood chipping capacity determined is 10 tons per hour, while it is necessary to procure at least two trucks, equipped with one walking floor and one wood trailer including hydraulic crane. Telescopic handler application for manipulation on storage is recommended. Financial analysis of developed cluster supply model have shown positive economic indicators, including IRR of 26.20 %, BCR of 1.12 and that investment can be returned in fifth year from operation start. Sensitivity analysis is also positive. However, such economic indicators can be achieved if at least 70 % of wood chipper capacity is utilized, meaning that 61 % of total wood chips production should be delivered to DH plants which fulfils their demand and 39 % should be delivered to other buyers. Upon detailed revision of presented individual systems of supply and amendments on proposed equipment solutions, detailed financial analysis was performed. It can be concluded that individual supply for Nova Varoš and Prijepolje can only by profitable as part of larger wood chips production and sale operation and if most of produced wood chips is not delivered to their DH plants but to other buyers. For Priboj individual supply can be profitable if dominant part of the production is delivered to its DH plant, but economic indicators are much lower than in case of cluster supply and sensitivity analysis appeared negative. On the other hand in order to achieve profitable individual supply of all three municipalities in question, much more wood biomass is needed then for achieving profitable cluster supply. Also, combined investment costs for individual supply of all three municipalities are significantly higher than in case of cluster supply. Same conclusion can be drawn for operational costs while cluster supply profitability is much higher than profitability of individual supply. Stakeholders’ analysis have shown that major impediments for development of cluster supply is in propensity of municipal representatives to cooperate. If this impediment can be prevailed and clear commitment for cluster supply is shown, all other impediments related to mutual cooperation including different level of development in fuel switch, slow administrative procedures, complicated decision making process, reduction of number of employees in municipalities, procurement of finances for investment and operations and even possible disputes in ownership shares determination, can be removed. Other impediments such as those related to public-private partnership implementation are identified but not regarded as crucial. Impediments related to forest management practice and increased demand for woody biomass can only limit availability of woody biomass or lead to price escalation which will reflect on the end price of wood chips.


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2. Definition of tasks Report on Design of Woody Biomass Supply Chain Cluster for District Heating Plants in Municipalities of Prijepolje, Priboj and Nova Varoš is developed as activity of the project: “Development of Sustainable Bioenergy Market in Serbia” implemented jointly by KfW and GIZ and funded by German Federal Ministry for Economic Cooperation and Development (BMZ). Objective of Consultants’ assignments in completion of the Report consisted of:

- Creation of the model for common - clustered supply chain for all three municipalities, with central storage and biomass processing, based on the defined requirements of woody biomass (given in developed supply chain models) for municipalities of Prijepolje, Priboj and Nova Varoš;

- Review of individual supply chain models defined in corresponding supply studies; - Comparison of the results for the optimal clustered supply chain model with the individual

solutions; - Provision of the offer for most efficient solutions; - Elaboration of readiness of mentioned three municipalities to participate in the cluster; - Elaboration of possible legal, financial, political and technical impediments to creation of the

cluster; - Elaboration of brief business model for the cluster (upfront investment, operating costs,

required prices for the delivery of wood chips and so on).

Consultant’s tasks consisted of: - Task 1: Survey in the municipalities of Prijepolje, Priboj and Nova Varoš including:

o personal visit to 3 municipalities in order to survey their willingness to cooperate in establishing clustered woody biomass supply chain, to collect and harmonize their inputs and suggestions;

o personal visit and analysis of possible locations for joint cluster supply storage proposed by representatives of municipalities in question;

o interviewing with most important potential wood biomass suppliers (forest managers, forest owners and wood processors) in order to obtain market information, logistic challenges and to assess their propensity for supply;

o investigation of the possibility to jointly invest in and use infrastructure in order to reduce investment costs and lower the costs for operation and compare it to individual solutions on municipal level;

o provision of an overview of all to be removed legal obstacles, detected during the survey, in order to establish optimal clustered biomass supply chain (public procurement, national legislation, PPP, I);

o provision of an overview of the needed investment volume for the required equipment; o Design of the formula for the participation of each municipality in the common

enterprise and how their respective shares should be distributed.

- Task 2: Design and verification of clustered logistic models of biomass supply chains for district heating plants in the municipalities of Prijepolje, Priboj and Nova Varoš including:

o analysis and design of possible models of clustered biomass supply chain and verify an optimal model of biomass supply chain cluster in order to find, collect, chip, dry, store and deliver wood biomass to district heating plants in the most economically efficient way;

o provision of all costs of clustered biomass supply chain (raw materials, collecting, storage, transport, drying, chipping ...);

o comparison of individual supply chains with the clustered chain; o provision of conclusions regarding optimal model of clustered biomass supply chain

as well as recommendations and instructions how to achieve better, cheaper and more reliable logistic concepts;


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o provision of recommendations and instructions regarding models of contract between the cluster and each municipality;

o provision of overview of all to be removed legal obstacles in order to establish optimal logistic models of clustered biomass supply chain;

- Task 3: Results of the assessment including: o summary of findings in an English language written report as well as to provide

electronic version of the Study (WORD, PDF); o provision of a PPT-presentation; o Preparation and provision of all others requested outputs.

Report was prepared by Foragrobio CC doo1 and submitted in September 2015. Survey preparation started in July 2015, while the Survey was conducted in August 2015.

1 http://www.foragrobio.rs/


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3. Methodology Methodology implemented in the preparation of the report consisted of following steps:

- Analysis of related literature, regulations and other sources related to wood biomass, equipment, logistics and municipalities in question;

- Review of biomass supply studies (BSS) on logistic concepts for biomass supply for district heating systems of Prijepolje, Priboj and Nova Varoš2;

- Development of semi-structured interview questionnaire; - Identification of relevant stakeholders’ representatives to be interviewed and scheduling

interviews; - Meeting and/or face to face interviews with relevant stakeholders; - On site analysis of potential locations for biomass storages. - Design of cluster supply concept including investment and operational costs assessment; - Financial analysis including economic indicators; - Comparative analysis of reviewed individual and cluster supply; - Stakeholders attitudes analysis; - Reporting.

Literature and sources review was focused on obtaining information about municipalities of Prijepolje, Priboj and Nova Varoš, their activities in the process of biomass based district heating system implementation. In addition Serbian regulation related to forestry, wood industry, environment, transportation, construction and local administration was also analyzed for definitions of potential impediments in clustered storage and supply of wood biomass. Studies on logistic concepts for individual supply of municipalities in question have been elaborated in details and reviewed. In addition, logistic concept studies and other relevant studies on wood biomass availability were analyzed as well. Open semi structured interview questionnaire was developed for stakeholders attitudes’ analysis and provision of relevant information and additional data. Potential stakeholders were identified as representatives of the following groups:

- local administration (municipal authorities) – decision makers; - district heating companies – consumers of biomass; - public enterprise managing state owned forests (central and regional level) – supply and

contracting wood biomass and information about forest production in state and private forests, forest infrastructure and other potential suppliers;

- existing wood and biomass processors and suppliers – supply and contracting and market information.

Meetings and face to face interviews were carried out in the period of 14th to 20th of August 2015, along with onsite analysis of possible biomass storages’ locations. Cluster supply concept was designed based on the literature review, local condition, stakeholders’ inputs, logistic studies and available best practice examples. Investment and operational costs assessment was also based on review of relevant sources and information provided by interviewed stakeholders, construction standards and equipment distributers. Financial analysis, based on defined investment and operational costs, included application of methods for calculation of net present value, internal rate of return, benefit-cost ratio, period for return of investments and sensitivity

2 Djakovic, D., Gvozdenac Urosevic, B., Urosevic, D. 2015. Design of logistic concepts for wood biomass

supply chains for district heating plants in municipalities of Priboj, Novi Pazar, Bajina Bašta and Nova Varoš. GIZ DKTI;

Djakovic, D., Gvozdenac Urosevic, B., Urosevic, D. 2015. Logistics concept of district heating supply with woody biomass (wood chips) in the municipalities of Prijepolje and Mali Zvornik. GIZ DKTI.


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analysis showing basic economic indicators development in case of input increase and in case of output decrease. Finally, comparative analysis of reviewed individual and cluster supply was performed according to inputs from previous logistic studies, which were reviewed and amended based on investment and operational cost assessments performed for cluster supply in order to achieve comparability. Finally stakeholders’ attitudes analysis was performed based on interview results in order to assess potential wood biomass supplier propensity for cooperation and propensity of municipalities to establish cluster supply model. Additional meetings and analysis of municipal authorities’ view on proposed solution was carried out on 1st of September. Report was prepared and submitted to GIZ DKTI comments on 4th of September.


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4. Status Quo Analysis – Background Chapter bellow provides basic background information about municipalities of Prijepolje, Priboj and Nova Varoš, their fuel switch activities in district heating systems, technical aspects, biomass availability and legal, financial and political aspects related to biomass supply. 4.1. Municipalities Prijepolje, Priboj and Nova Varoš Map of Prijepolje, Priboj and Nova Varoš, presenting its position in Serbia, along with municipal boarders and major roads is presented in a figure bellow.

F-1: Position of Prijepolje, Priboj and Nova Varoš Municipalities of Prijepolje, Priboj and Nova Varoš are situated in South-Western Serbia, bordering Bosnia and Herzegovina to the north and Montenegro to the West and South. Administratively, all three municipalities are a part of Zlatiborski County. Basic information on Prijepolje, Priboj and Nova Varoš municipalities are presented in table below.

Info/Municipality Prijepolje Priboj Nova Varoš

Area km2 827 533 581

No of settlements 1 urban+79 rural 1 urban+32 rural 1 urban+32 rural

Urban population 13,330 14,920 8,861

Rural population 23,729 12,213 7,777

Total population3 37,059 27,133 16,638

T-1: Basic information about Prijepolje, Priboj and Nova Varoš Around 80,000 inhabitants live in municipalities of Prijepolje, Priboj and Nova Varoš, from which around 37,000 lives in urban settlements.

3 According to 2011 Census - http://popis2011.stat.rs/?page_id=2162

Map data © 2015 Google


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4.2. Fuel switch in district heating systems of Prijepolje, Priboj and Nova Varoš District heating systems of Prijepolje, Priboj and Nova Varoš are operated by district heating companies established by local administrations. Basic information on district heating systems of municipalities in question are presented in a table below.


DH operator Public Communal Company Lim Public Company Toplana Priboj

Energija Zlatar doo

Boiler stations/fuel /capacity(MW)/operational status

Apoteka/coal/1x0.5MW/op Brijeg/HFO/2x1.86MW/op Valter/HFO/4x1.86MW/op Pijaca/coal/1x0.69MW/op

Gimnazija/HFO/1x3.5MW/op

1x26MW/HFO/op 1x29MW/HFO/no

Zebrinovac/HFO/2x1.8MW/op

Trikotaza/HFO/2x1.8MW/op Trikotaza/HFO/2x1.8MW/no

Posta/HFO/1x2.9MW/op Posta/HFO/2x1.8MW/op

Branesevac/HFO/2x0.8MW/op

Total area supplied by DH system (m²)

46,000 106,000 53,000

HFO consumption (t/a) 700 1,800 312

Coal consumption (t/a) 400 / /

T-2: DH systems of Prijepolje, Priboj and Nova Varoš Local authorities of Prijepolje, Priboj and Nova Varoš, have clearly expressed their interests and committed themselves in development of biomass based district heating systems. Due to abundance of their forest resources, along with the fact that Municipalities of Prijepolje, Priboj and Nova Varoš use heavy oil or coal in their district heating systems, idea for the fuel switch from fossils to biomass in those municipalities have been present for several years. First studies about potentials of wood biomass utilization for energy production in district heating systems in municipalities in questions were completed by the Faculty of Forestry, Belgrade University supported by UNDP back in 2009 (UNDPS)4. In addition, fuel switch potentials for municipalities of Nova Varoš and Priboj have been elaborated in Pre-Feasibility Studies on 15 Biomass CHP-plants for District Heating Companies in Serbia5 supported by KfW6 in 2014. Based on result of those studies, along with the issues in supply with heavy oil, authorities of municipalities in question started cooperation with GIZ DKTI and in 2015 Studies of logistic concepts of district heating supply with wood biomass have been prepared (BSS)78. Other studies focusing on woody biomass utilization in district heating systems covering all

4 2009. Glavonjic, B., Petrovic, S., Savic, R., Radovic, S., Jovic, D., Sretenovic, P., Pajovic, Lj. Potentials for

Commercial Utilization of Woody Biomass for Energy Production and Economical Development of Municipalities: Nova Varos, Priboj and Prijepolje. Project: Stimulating Renowable Energy Sources on Local Level. Ministry of Forestry, Agriculture and Water Management; UNDP Belgrade Office; Local administration of Nova Varos, Priboj and Prijepolje; Faculty of Forestry, Belgrade University; PE Srbijasume, FE Prijepolje.

5 2014. R. Bahnmüller, B. Brändle, F. Eckert, V. Milijic, D. Orlic, M. Ortner, P.Vasiljevic, M. Watzal. Pre-Feasibility Studies on 15 Biomass CHP-plants for District Heating Companies in Serbia. iC consulenten Ziviltechniker GesmbH, Wienna for KfW.

6 2015. Djakovic, D., Gvozdenac-Urosevic, B., Urosevic, D. Design of logistic concepts for wood biomass supply chains for district heating plants in municipalities of Priboj, Novi Pazar, Bajina Bašta and Nova Varoš. GIZ DKTI

7 2015. Djakovic, D., Gvozdenac Urosevic, B., Urosevic, D. 2015. Logistics concept of district heating supply with woody biomass (wood chips) in the municipalities of Prijepolje and Mali Zvornik. GIZ DKTI

8 2012. USAID. Prefeasibility Assessment of Biomass District Heating Applications in Serbia, which covered Nova Varos and Priboj among other 8 municipalities in Serbia; 2014. NALED. Action Plan for Biomass Co-generation Plant Construction in Nova Varos; 2014. Tri E burro. Expertise for Enhancement and Modernization of Existing District Heating Systems in Nova Varos; 2014. Biomasa Grupa doo. Feasibility Study for District Heating System for Public and Residential Objects in Nova Varos; etc.


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or some of municipalities in question have also been conducted9. At this moment all three municipalities in question closely cooperate with GIZ DKTI and KfW in procurement of financing for the biomass based district heating projects. 4.3. Technical Aspects Technical aspects of fuel switch in district heating systems of Prijepolje, Priboj and Nova Varoš which will be used for analysis of clustered supply chain, are presented in table below.


Boiler stations considered for fuel switch

Gimnazija, Pijaca, Brijeg, shut down of Valter,

Toplana Priboj, Radnicka Street bb

Posta and Branesevac

Current HFO/coal boilers to be replaced with biomass based boilers

HFO/2x1.86MW/op

coal/1x0.69MW/op

HFO/1x3.5MW/op

Shut down of HFO/4x1.86MW/op

1x26MW op/1x29MW out of order

1x2.9MW op/2x1.8MW op/2x0.8MW op

HFO/coal consumption (t/a)

700/400 1.800 312

HFO boiler/biomass boiler efficiency (%)

85/85 85/85 85/85

HFO or coal/woody biomass heat value (kJ/kg)

40,715/12,250

19,400/12,250

40,715/12,250 40,715/12,250

Total Biomass demand in case of fuel switch at M=30% (t/a)

2,458 4,040 1,026

Biomass demand in case of fuel switch at M=30% by boiler stations (t/a)

Gimnazija/Valter = 1.421

Pijaca/Apoteka = 410

Brijeg = 627

4,040 Posta = 796

Branesevac = 230

Biomass plant at new location

Biomass storage capacities on sites

Gimnazija/open storage/2.000 m2/450 t

Pijaca/container/60 m3/16,5 t

Brijeg/storage building/250 m2/90 t

Not resolved Not resolved in case of existing stations

In case of greenfield investment in new boiler station possible close to

location Branesevac/storage building/370 m2/300 t

Time for operation of DH on one storage load

Gimnazija/30days

Pijaca/5days

Brijeg/15days

Not resolved Up to 30 days

Accessibility Gimnazija/ tow truck with trailer (90 m3/24 t)

Pijaca/small truck with trailer (40 m3/11 t)

Brijeg/ tow truck with trailer (90 m3/24 t)

Potentially accessible by tow truck with trailer (90

m3/24 t)

Potentially accessible by tow truck with trailer (90 m3/24 t)

T-3: Technical aspects of fuel switch and biomass supply in DH systems of PP, PB and NV10

Total woody biomass demand for Prijepolje DH system is 2,458 tons per year, which will be required in three separate boiler stations, namely: 1,421 tons per year in Gimnazija/Valter, 410 tons per year in Pijaca/Apoteka and 627 tons per year in Brijeg. Municipality considers to shut down boiler stations

10 2015. Djakovic, D., Gvozdenac-Urosevic, B., Urosevic, D. Design of logistic concepts for wood biomass

supply chains for district heating plants in municipalities of Priboj, Novi Pazar, Bajina Bašta and Nova Varoš. GIZ DKTI

2015. Djakovic, D., Gvozdenac Urosevic, B., Urosevic, D. 2015. Logistics concept of district heating supply with woody biomass (wood chips) in the municipalities of Prijepolje and Mali Zvornik. GIZ DKTI


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of Valter and Apoteka and to equip power stations of Gimnazija, Pijaca and Brijeg with adequate biomass boilers. In addition former DH network connected to Valter should be switched to Gimnazija, while network of Apoteka should be switched to Pijaca. While Gimnazija and Brijeg are accessible by tow truck & semi-trailer, capacity of 24 t/90 m3, Pijaca can only be accessed by small truck and trailer capacity of 10 t/40 m3. Storage capacities in mentioned locations range from container in Pijaca up to 60 m3, through storage building in Brijeg with up to 250 m2 of space, to open storage possible for Gimnazija of 2,000 m2. Map bellow presents spatial distribution, storage potential and accessibility for supply of future biomass based boiler stations in Prijepolje.

F-2: Position, accessibility and storage potentials of PP DH system future biomass boiler stations

Total woody biomass demand for Priboj is 4,040 tons per year which will be required in one boiler station. Location is accessible by truck & semi-trailer with capacity of 24 t/90 m3. Since Toplana Priboj is located in the complex of former FAP factory there still some unresolved property rights issues between Priboj Municipality and former FAP factory, thus storage capacity cannot be defined. Map bellow presents spatial distribution, storage potential and accessibility for supply of future biomass based boiler stations in Priboj.




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F-3: Position, accessibility and storage potentials of PB DH system future biomass boiler stations

Total woody biomass demand for Nova Varoš DH system is 1,026 tons per year, which will be required. Municipality plans to construct a new DH plant and connect it to parts of DH systems now connected to Posta and Branosevac locations. New biomass DH plant is considered to be placed close to Branosevac boiler station. This new location is accessible by tucks & semi-trailers with capacity of 24 t/90 m3 and one of the considered solutions for the storage is 370 m2 closed storage, with capacity of 300 tons of wood chips.




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F-4: Position, accessibility and storage potentials of NV DH system future biomass boiler stations

Very important technical aspect for biomass supply is road network. Table below shows basic road network features important for biomass supply.

Info/Municipality Prijepolje Priboj Nova Varoš Total

Public roads paved (km) 53.05 27.49 42.30 122.84

Public roads unpaved (km) 3..20 9.50 0.00 12.70

Forest roads hard (km) 119.55 88.40 60.14 268.09

Forest roads soft (km) 330.79 252.87 73.51 651.17

Total roads (km) 506.59 378.26 175.95 1,060.80

Total area (ha) 27,690.43 22,017.17 15,665.20 65,362.80

Density of roads (m/ha) 18.30 17.18 11.23 16.23

T-4: Road network of Prijepolje, Priboj and Nova Varoš - GFMP11

Most important road in the region is E763, part of the European route connecting Belgrade with Bjelo Polje. E763 passes through Nova Varoš and Prijepolje, further to the border with Montenegro. Other paved roads connected to E763 are:

- Nova Varos – Sjenica; - Bistrica - Priboj - Visegrad (Bosnia and Herzegovina); - Prijepolje - Pljevlja (Montenego);

11 2009. PE Srbijasume, Forest Management Planning burro. General Forest Management Plan for Limsko

forest area (2010-2019), adopted by the Ministry of Forestry, Agriculture and Water Management.




Page 16 of 71

- Prijepolje – Sjenica.

Network of roads is further expanded with paved or unpaved roads connecting villages. In addition, there is a developed network of forest roads. Until 2019, Public Enterprise Srbijašume, plans to build additional 67.55 km of hard and 34.25 km of soft forest roads. This will increase road density in Limsko forest area covering Prijepolje, Priboj and Nova Varoš from 16.23 m/ha to 17.26 m/ha. 4.4. Biomass availability Total demand for woody biomass heat plants of Prijepolje, Priboj and Nova Varoš determined in BSS is 7,524 tons of wood chips per year at water content M = 30 %. If reserve of 20 % is included, total demand of wood chips of all three district heating systems can be rounded to 9,000 tons of wood chips per year. Biomass availability in Prijepolje, Priboj and Nova Varoš have already been analyzed in several previous studies. Taking into account that 9,000 tons of wood chips is required, possibility to procure such amount of woody biomass, according to biomass availability presented in mentioned studies, should not be questionable. Table below presents calculated biomass availability according to BSS12 and UNDPS13 and basic forestry data according to GFMP14.

Info/Municipality Prijepolje Priboj Nova Varoš Total

Forest area total – GFMP (ha) 40,711 36,058 21,062 97,831

State forest area – GFMP (ha) 22,268 20,204 11,938 54,411

Private forest area – GFMP (ha) 18,443 15,854 9,124 43,420

Annual planned production total – GFMP (m³) 53,149 53,685 32,602 139,436

Annual planned production state forests – GFMP (m³) 34,692 36,052 26,432 97,176

Annual planned production private forests – GFMP (m³) 18,457 17,633 6,170 42,260

Planned production 2015 total – BSS (m³) 46,254 35,539 24,402 106,195

Planned production 2015 state forests – BSS (m³) 30,256 19,734 17,982 67,972

Planned production 2015 private forests – BSS (m³) 15,998 15,805 6,420 38,223

Difference GFMP-BSS2015 total (m³) 6,895 18,146 8,200 33,241

Difference GFMP – BSS2015 state (m³) 4,436 16,318 8,450 29,204

Difference GFMP-BSS2015 private (m³) 2,459 1,828 -250 4,037

Firewood and celluloses wood 2015 – BSS (m³) 21,951 14,815 2,034 38,800

Forest residues 2015 – BSS (m³) 6,738 4,274 3,059 14,071

Sawmill residues 2015 – BSS (m³) 16,369 4,627 14,135 35,131

Total woody biomass – BSS (m³/a) 45,058 23,716 19,228 88,002

Available woody biomass – BSS (m³/a) 19,738 6,764 15,664 42,166

Available woody biomass – BSS (t/a) 11,718 3,956 8,985 24,659

Produced woody biomass – UNDPS (m³/a) 56,100

Woody chips requirements (t/a) 3,000 4,800 1,200 9,000

T-5: Available quantities of woody biomass in PP, PB and NV

According to BSS total available woody biomass in three municipalities in question is around 42,000 m³ or 25,000 tons per year. UNDPS six years ago came to similar conclusion, since according to this




132009. Glavonjic, B., Petrovic, S., Savic, R., Radovic, S., Jovic, D., Sretenovic, P., Pajovic, Lj. Potentials for Commercial Utilization of Woody Biomass for Energy Production and Economical Development of Municipalities: Nova Varos, Priboj and Prijepolje. Project: Stimulating Renowable Energy Sources on Local Level. Ministry of Forestry, Agriculture and Water Management; UNDP Belgrade Office; Local administration of Nova Varos, Priboj and Prijepolje; Faculty of Forestry, Belgrade University; PE Srbijasume, FE Prijepolje;

14 2009. PE Srbijasume, Forest Management Planning burro. General Forest Management Plan for Limsko forest area (2010-2019), adopted by the Ministry of Forestry, Agriculture and Water Management.


Page 17 of 71

Study around 56,100 m³ per year of forest and sawmill residues are produced annually in three municipalities in question. Moreover, when data from BSS based on Forest Estate Prijepolje, PE Srbijašume harvesting plan for 2015 are compared with data from GFMP it is clear that planned harvesting in both state and private forests in 2015 is by 33,000 m³ lower than annual planned average. Such difference is more visible in State owned forests since little bellow 30,000 m³ less than annual average is planned for harvesting in 2015. Difference in privately owned forests is lower, however recording of harvesting in private forests is not so precise, due to existence of unregistered harvested wood by individual small scale private forest owners in rural areas. On the other hand, plans for private forests in Limsko forest area are still not based on forest inventory but an estimation of forest engineers from private forest service within PE Srbijašume. Reasons for harvesting lower than planned by GFMP can be in either in lack of demand in the market or inadequate forest infrastructure. In addition both BSS and UNDPS have not taken into consideration forest resources outside of Limsko forest area and three municipalities in question. There are abundant forest resources outside Limsko forest area, at distances of 40-50 km to DH systems of Prijepolje, Priboj and Nova Varoš. Distances of 50 or even 100 km are considered as financially viable for woody biomass transport, although examples of wood chips transport to even higher distances is recorded. There are very high wood biomass production potentials in neighboring municipalities of Čajetina in Tarsko-Zlatiborsko forest area or Ivanjica and Sjenica at Golijsko forest area. On the other hand, it is important to stress that there are companies with very developed capacities for both wood chips (Jela Star, Prijepolje) and wood pellet production (Jela Star, Prijepolje and Nanix Wood, Nova Varoš) with already developed system of supply for firewood, forest and sawmill residues from not only Limsko forest area, but other areas as well or even neighboring countries such as Montenegro or Bosnia and Herzegovina. There are over 150 sawmills in Limsko forest area utilizing over 200,000 m³ of logs every year. Those sawmills are supplying only 50 % of their logs requirements from limsko forest area and other part is supplied from neighboring forest areas, Montenegro and Bosnia and Herzegovina. Also there is a company developing Combined Heat and Power Plant (CHP) in Priboj (Promoter BBM, Belgrade). Such companies can be regarded as potential competitors for woody biomass supply or partners in woody biomass supply or heat delivery. Nevertheless, availability of wood biomass is higher than according to BSS or in any case several times higher than required 9.000tons per year needed for fuel switch in Prijepolje, Priboj and Nova Varoš DH systems. When competition exist, competitiveness in biomass collection, processing and supply along with propensity of forest owners and forest managers, and sawmill operators to supply with biomass is more important than availability calculations. 4.5. Legal aspects Overview of legal framework which can be related to organization of biomass utilization, including, collection, storage, logistics, supply and incineration of woody biomass in DH systems in municipalities of Prijepolje, Priboj and Nova Varoš is presented in table below. Presented legal framework also includes regulations related to local administration and establishment of future legal bodies performing woody biomass collection, processing and supply.

15 No of Official Gazette of Republic of Serbia regulation is published in.

Topic Regulation Issued by

OGRS No15

Relevance to the task

Pro

pert

y rights

, S

tate

org

aniz

atio

n

and lo

cal

Constitution of the Republic of Serbia Parliament of the Republic of Serbia

98/06 Property rights and territorial organization of the Republic of Serbia

Law on Public Property Parliament of the Republic of Serbia

72/2011 88/2013

105/2014 Public property definition and management

Law on Restitution and Compensation Parliament of the Republic of Serbia

72/2011 108/2013 142/2014

General Restitution – new private land and forest owners


Page 18 of 71

Law on Restitution of Property to Churches and Religious Communities

Parliament of the Republic of Serbia

46/2006 Restitution to Churches and Religious Communities – new private land and forest owners

Law on Local Administration Parliament of the Republic of Serbia

129/2007 83/2014

Local Administration – basic regulations

Law on Confirmation of European Charter on Local Administration


70/2007 Local Administration

Law on Financing of Local Administration Parliament of the Republic of Serbia

62/2006 47/2011 93/2012 99/2013

125/2014

Local Administration – regulating how municipalities are financed

Statute of Municipality of Prijepolje Assembly of Municipality of Prijepolje

Local Administration – basic act of Municipality of Prijepolje

Statute of Municipality of Priboj Assembly of Municipality of Priboj

Local Administration – basic act of Municipality of Priboj

Statute of Municipality of Nova Varoš Assembly of Municipality of Nova Varoš

Local Administration – basic act of Municipality of Nova Varoš

Energ

y, e

nvi

ronm

ent

, fo

rest

ry a

nd w

ast

e

Law on Energy Parliament of the Republic of Serbia

145/2014 Energy – basic regulations

Law on Energy Efficiency Parliament of the Republic of Serbia

25/2013 Implementation of Energy Efficiency

Law on Forests Parliament of the Republic of Serbia

30/2010 93/2012

Basic regulation on forest management and forestry organization

Law on Confirmation of Protocol of Protection and Utilization of Biological and Spatial Diversity


01/2013 Regulation on preservation of bio and spatial diversity affecting forest utilization

Law on Environment Protection Parliament of the Republic of Serbia

135/2004; 36/2009; 72/2009

Basic act regulating prevention, control, reduction and rehabilitation of environment pollution

Law on Integrated Control of Environment Pollution


135/2004 Regulation on pollution – can affect biomass processing

Law on Air Protection Parliament of the Republic of Serbia

36/2009 10/2013

Regulation on pollution – can affect biomass processing in terms of dust

Law on Waste Management Parliament of the Republic of Serbia

36/2009; 88/2010

Regulating waste management – can affect utilization of wood residues

Law on Protection Against Noise in Environment


36/2009 88/2010

Regulation on pollution - can affect biomass processing in terms of noise

Law on Environmental Impact Assessment


135/2004 36/2009

Regulating procedures for environmental impact assessment – can be required for DH plant, storage site and activities in biomass processing

Law on Strategic Assessment of Environmental Impact


135/2004 88/2010

Regulating procedures for impact assessment on environment of plans and programs

Regulation on Activities which affect Environment

Government of the Republic of Serbia

109/2009 8/2010

Regulating for what activities local administration can charge fees for environmental protection and improvement

Regulation on Determination of Types of Project for which it is Obligatory to Perform Environmental Impact Assessment and Types of Project for which Environmental Impact Assessment can be Required


114/2008

Regulating what types of projects are subjected to environmental impact assessment

Regulation on Determination of Heat Energy Price


125/2014 Regulating range and calculation of heating prices

Rule Book on Forest Order Ministry of Agriculture, Forestry and Water Management

38/2011 Regulating activities in forestry and after forest harvesting – define how and when to organize harvesting and how to manipulate with wood products and residues

Rule Book on Categorization, Testing and Classification of Waste

Ministry of Environmental Protection and Spatial Planning

56/2010

Regulating types of waste – wood waste is defied

Pla

nnin

g a

nd

Const

ruct

ion

Law on Planning and Construction Parliament of the Republic of Serbia

72/2009 81/2009 64/2010 24/2011

121/2012 42/2013 50/2013 98/2013

132/2014 145/2014

Regulating construction of objects needed for biomass storage processing and also DH plant


Page 19 of 71

Law on Spatial Plan of The Republic of Serbia form 2010-2020


88/2010 Regulating Spatial Plan

Regulation on Conditions and Procedures for Local Administration to Sell or Lease Construction Land at Lower Price or Without Compensation


13/2010 54/2011 21/2012

121/2012

Regulating Local Administration Sale or Lease of Construction Land – applicable in definition of biomass storage and DH plant location

Rule Book on Technical Requirements for Projecting, Construction and Control of Equipment under Pressure

Ministry for Infrastructure and Energy

87/2011

Regulating construction and control of equipment for steam or hot water production – applicable for DH plant construction

Rule Book on Inspection of Equipment under Pressure

Ministry for Infrastructure and Energy

87/2011 Regulating construction and control of equipment for hot water and steam production – applicable for DH plant construction

Rule Book of Technical and other Requirements for Boiler Facilities

Ministry of Energy and Mining

50/2009

Regulating construction and control of boilers and boiler houses

Rule Book on Information about Location and Content of Location Permit

Ministry of Environment and Spatial Planning

3/2010

Regulating procedure for location permit procurement

Rule Book on Content and Procedure for Construction Permit

Ministry of Environment and Spatial Planning

93/2011 103/2013

Regulating procedure for construction permit procurement

Rule Book on Conducting Unified Procedure

Ministry of Construction, Traffic and Infrastructure

22/2015 Regulating procedures for all permits required for construction

Com

panie

s, p

ublic

-priva

te p

art

ners

hip

s, e

tc.

Law on Agency of Commercial Registries Parliament of the Republic of Serbia

55/2004 111/2009 99/2011

Biomass supply company registration

Law on Procedures for Registration at Agency of Commercial Registries


99/2011 83/2014


Law on Companies


36/2011 99/2011 83/2014 5/2015


Low on Business Classification Parliament of the Republic of Serbia

104/2009 Biomass supply company registration

Law on Public Companies Parliament of the Republic of Serbia

119/2012 116/2013 44/2014

Public companies regulations

Law on Public Procurements Parliament of the Republic of Serbia

124/2012 14/2015

Public procurement regulations

Law on Competition Protection Parliament of the Republic of Serbia

51/2009 95/2013

Competition protection

Law on Public-Private Partnership and Concessions


88/2011 101/07 65/08 16/11 68/12 72/12

Public-Private partnership and concessions regulation – applicable in case of PPP

Law on Communal Business Parliament of the Republic of Serbia

88/2011 Communal business regulation

Law on Accounting and Auditing Parliament of the Republic of Serbia

46/06 111/09 99/2011 62/2013

Regulation companies’ accounting and auditing procedures

Law on Audit Parliament of the Republic of Serbia

62/2013 Regulating auditing procedures

Law on Tax Procedures and Administration


80/2002 84/2002 23/2003 70/2003 55/2004 61/2005 85/2005 62/2006 63/2007 61/2007 20/2009 72/2009 53/2010

101/2011 2/2012 93/2012 47/2013

Regulating companies’ taxes and procedures


Page 20 of 71

108/2013 68/2014

105/2014

Law on Value Added Tax Parliament of the Republic of Serbia

84/2004 86/2004 61/2005 61/2007 93/2012

108/2013 6/2014 68/2014

142/2014 5/2015

VAT regulation

Law on Company Profit Tax Parliament of the Republic of Serbia

25/2001 80/2002 43/2003 84/2004 18/2010

101/2011 119/2012 47/2013

108/2013

Regulation on companies’ profit tax

Law on Property Tax Parliament of the Republic of Serbia

26/2001 42/2002 80/2002

135/2004 61/2007 5/2009

101/2010 24/2011 78/2011 57/2012 47/2013 68/2014

Regulation on companies’ property tax

Law on Tax for Utilization of Goods Parliament of the Republic of Serbia

26/2001 80/2002 43/2004 31/2009

101/2010 24/2011

100/2011 120/2012 113/2013 68/2014

140/2014

Regulating taxes for utilization of goods such as vehicles

Law on Obligations Parliament of the Republic of Serbia

29/1978 39/1985 45/1989 57/1989 31/1993 22/1999 1/2003

Regulating contractual relations between legal bodies

Law on Bankruptcy Parliament of the Republic of Serbia

104/2009 99/2011 71/2012 83/2014

Regulating companies’ bankruptcy procedures

Law on Trade Parliament of the Republic of Serbia

53/2010 10/2013

Regulating trade

Law on Payments of Legal Bodies, Entrepreneurs and Private Persons


68/2015 Regulation on bank accounts and conducting financial transactions

Rule Book on Content of the Commercial Registries and Documentation Required for Registration

Ministry of Economy 6/2012

Company registration

Rule Book on Procedures and Content of Registry of Public Contracts

Ministry of Economy 57/2013 Public contracts registration – applicable in

case of PPP

Regulation on Supervision of Realization of Public – Private Partnership Contracts

Government of The Republic of Serbia

47/2013 Public contracts supervision – applicable in case of PPP

Tra

ffic

and

Tra

nsp

Law on Public Roads Parliament of the Republic of Serbia

101/2005 123/2007 93/2012

104/2013

Public roads regulations - important for biomass transport


Page 21 of 71

Law on Safety in Traffic Parliament of the Republic of Serbia

41/2009 53/2010

101/2011 32/2013 55/2014

Traffic and transport regulation – important for biomass transport

Rule Book of Inspection of Vehicles Ministry of Traffic

8/2012 13/2013 31/2013

114/2013 140/2014 18/2015

Control of vehicles – important for biomass transport

Rule Book on Registration of Vehicles and Trailers

Ministry of Traffic

69/2010 101/2010 53/2011 22/2012

121/2012 42/2014

108/2014

Registration and classification of vehicles – important for biomass transport

Rule Book on Conditions for Utilization of Forest Roads

Ministry of Agriculture 22/1998 Forest roads regulations – important for

wood and woody biomass transport

Labor

and S

afe

ty

Law on Labor Parliament of the Republic of Serbia

24/2005 61/2005 54/2009 32/2013 75/2014

Labor regulations – regulating employment and work in biomass supply operations

Law on Employment and Insurance Against Unemployment


36/2009 88/2010

Regulation on employment

Law on Strike Parliament of the Republic of Serbia

29/96 101/2015 103/2012

Regulation on strike

Law on Contributions for Social Insurance Parliament of the Republic of Serbia

84/2004 61/2005 62/2006 5/2009 52/2011

101/2011 7/2012 8/2013 47/2013

108/2013 6/2014 57/2014 68/2014 5/2015

Regulation on social insurance

Law on Arbitration in Work Disputes Parliament of the Republic of Serbia

125/04 104/09

Regulation on peaceful settlement in working disputes

Law on Protection of Whistleblowers Parliament of the Republic of Serbia

36/2010 Regulation on protection of whistleblowers

Law on Protection Against Mobbing Parliament of the Republic of Serbia

128/2014 Regulation on protection against maltreatment of workers

Law on Work Safety Parliament of the Republic of Serbia

101/2005 Work safety regulations – regulating safety in work in biomass processing and supply operations

Law on Protection Against Fire Parliament of the Republic of Serbia

111/2009 20/2015

Anti-fire protection in biomass processing

Law on Procedure for Determination of Maximal Number of Employees in Public Sector


68/2015 Limiting maximal number of employees in public sector including municipalities

Law on Registry of Employed, Appointed and Hired Personnel at Public Fund Users


68/2015 Registering employed and hired at public fund users including municipalities

Rule Book on Special Protection Measures for Work in Forestry

Ministry of Agriculture 33/1988 Safe work in forest operations – harvesting

and transport of wood

Rule Book on Special Protection Measures for Work in Mechanical Processing of Wood or Similar Materials

Ministry of Agriculture 51/2008

Safe work in wood processing

Rule Book on Machine Safety Ministry of Economy and Regional Development

13/2010 Machine safety

Rule Book on Preventive Measures for Safe Work

Ministry of Labor 21/2009

Work safety

Rule Book on Records in Work Safety Ministry of Labor 62/2007 Work safety

Rule Book on Preventive Measures when Protective Equipment is Used


Work safety


Page 22 of 71

T-6: Legal framework for organization of woody biomass collection, processing, supply and incineration

Municipalities are legal bodies which can operate independently in frame of their jurisdiction defined by the Constitution and the Law. One of the basic duties of the municipalities is to provide communal activities in which heat supply is accounted. Municipalities can establish companies and other organizations aimed in fulfilment of local population needs. Municipalities can also contract other companies or persons to provide goods, works and services according to the Law and in transparent manner. Moreover, according to the Law on local administration municipalities can cooperate and associate between each other in order to fulfil their common goals, plans, development programs and other activities of mutual interests. In implementation of these activities municipalities can associate their finances and establish joint companies and other organizations. Considering legal provisions there are no impediments for municipalities to organize joint or cluster supply of woody biomass for their individual district heating systems. Restitution process in Serbia started in 2006 with restitution to churches and religious communities. In continued in 2009 with general restitution. Until now over 650 ha of state owned forests have been returned to previous private owners, while around 1,000 ha are still pending for restitution to Mileseva Parrish of Serbian Orthodox Church. Result of restitution is diversification in supply potentials for woody biomass, moreover new large scale private owners such as parishes of Serbian Orthodox Church can organize forestry and biomass collection operations more efficiently and on larger scale than unorganized individual forest owners. Set of presented energy and environment regulations provide frame for energy production and supply along with provisions of frame for environment protection. Forest Law and related acts provide frame for forestry organization and utilization, which include wood harvesting and collection of woody biomass as well. In terms of environment regulations, they define frame for pollution which can occur in biomass processing in terms of noise and dust, and others impacts on the environment, which assessment may be required for biomass processing. Other important topic presented within environmental regulation is waste. While wood biomass from forests is not considered as waste, wood biomass from wood industry, especially in terms of recycled wood is subjected to regulations related to waste. Set of regulations related to construction and planning is crucial for construction needed for biomass storage and processing, while set of regulations related to traffic provides necessary frame for transport in terms of conditions, vehicles and weight limitations. Set of regulations related to companies’ registration, public companies, public-private partnership (PPP) and procurement provides frame for biomass supply and processing business and operations’ administrations. Finally, presented set of legislation provides frame for labor, work safety and mitigation of risks for safe work, which are all crucial since biomass processing involves manual and machine work, while activities in wood harvesting, wood transport and wood processing are considered as risky operations. In addition there two laws adopted recently related to limitation of employment in public sector.

Rule Book on Inspecting Working Equipment and Working Environment


108/2006 114/2014

Work safety

Rule Book on Safe Work in Manual Transport of Load

Ministry of Labor 106/2009 Work safety

List of Serbian Standards for Personal Protection Equipment

Ministry of Labor 59/2014 Work safety

Rule Book on Risk Assessment in Working Place and Working Environment

Ministry of Labor 72/2006 84/2006 30/2010

Work safety


Page 23 of 71

4.6. Financial Aspects Local administration can procure finances for their activities, according to the Law on financing local administration. Local administration can collect property related taxes, communal administrative and other taxes, while there are additional means of finances including budget transfers and other incomes. All incomes of local administration, except incomes with pre-defined purpose, are part of local administration budget which can be used for the purposes defined by the Law and defined by the decision of local administration budget. Budget income and expenditures of municipalities Prijepolje, Priboj and Nova Varoš for 2013 are presented in table below.


Total budget income (EUR) 7,170,075 6,530,988 6,048,889

Total investments (EUR) 699,718 778,318 1,628,277

New capacities (EUR) 389,644 24,327 901,371

Reconstruction, modernization and enlargement (EUR)

256,500 735,453 570,914

Maintenance (EUR) 53,574 18,539 155,992

Works in civil industry (EUR) 452,653 560,645 1,056,759

Domestic equipment and mounting (EUR) 195,381 197,976 429,657

Imported equipment and mounting (EUR) 37,230 17,837 146,718

Other (EUR) 14,453 1,861 5,143

T-7: Budgets of municipalities Prijepolje, Priboj and Nova Varoš in 201316

Most of the investment costs in Nova Varoš and Prijepolje were related to new investments, while in Priboj most of investment costs were related to reconstruction and modernization. In terms of technical structure most of the investment costs are related to works in civil industry, followed by procurement of domestic and imported equipment. As mentioned, municipalities in question are focused in fuel switch and are also negotiating for loans from KfW for implementation of fuel switch. It is important to stress that according to their budgets, municipalities can have capacities for development of woody biomass storage and development of operations in biomass processing and supply. Nevertheless there are other alternatives including public private partnership in biomass supply or procurement of woody biomass from existing suppliers. Financial viability of the investment options by municipalities in question for woody biomass supply will be elaborated in further chapters of this Study. 4.7. Political Aspects

In Serbia, strategic and regulatory framework and support mechanisms aimed in increased usage of biomass and other renewable energy sources have been developed and are developing further. Political will to support the process is also being repeatedly expressed by the Government representatives. In addition, private investors and local administrations interested for biomass utilization in district heating systems are also active. Moreover there are several projects implemented by organizations such as GIZ DKTI, UNDP, and others, financed by various international donors aimed in development of bioenergy market and biomass utilization. However, despite all the potentials and advantages of biomass utilization and potential investors’ existence, there is not a single operational woody biomass based district heating plant in Serbia. Municipalities





Page 24 of 71

of Prijepolje, Priboj and Nova Varoš among few others can be regarded as pioneers in introducing woody biomass in their district heating systems. But it also necessary to stress that first ideas of municipalities in question to make a fuel switch in their district heating systems appeared back in 2009, or 6 years ago. Major economic goals of Serbian Government politics is to reduce fiscal deficit and budget costs in general. Municipalities in question need to follow this approach. Major political question related to biomass utilization in local district heating systems in Serbia is not related to benefits in CO2 emission reduction, nor directly related to increase of energy independency. Major political concern is in cost reduction for fuel supply and heat provision for end consumers - citizens. And when biomass as fuel is compared to heavy oil, which is dominant in municipalities in question district heating systems, savings are substantial. Woody biomass is harvested and collected in local forest resources or is supplied by local wood processing industry. Therefore other politically important fact is that costs paid for woody biomass procurement will stay in local economies a contrary to costs paid for import of heavy oil. Investments in utilization of woody biomass will make certain number of direct employments in construction, maintenance and operations. Also indirect employments will be created in woody biomass collection, transport, processing and supply. Apart from cost reduction, other economic aspects of woody biomass utilization would be more beneficial for local economies of municipalities in question then utilization of heavy oil, which does not require additional employments for supply. It is important to stress that municipalities in question are not developed municipalities. Nova Varoš and Priboj are classified in category IV, with development below 60 % of Serbian average, while Prijepolje is categorized as a devastated municipality with development level below 50 % of Serbian average17. Their potential joint activities in woody biomass supply, can increase the level of their mutual cooperation and set up the cooperation model for other municipalities as well. Therefore implementation of joint activities in undeveloped region of several municipalities, which can reduce the costs of provision of communal services to citizens (heating), based on utilization of existing natural resources (woody biomass), plus directly (construction, maintenance, operations) and indirectly (biomass collecting, transport and supply) increase the employment, can be expected to be politically supported.

17 http://www.regionalnirazvoj.gov.rs/Lat/ShowNARRFolder.aspx?mi=171


Page 25 of 71

5. Review of defined individual supply chain modules In order to compare individual supply chain solutions presented in BSS with cluster supply model, individual supply chain modules for Prijepolje, Priboj and Nova Varoš have been reviewed in details. 5.1. Prijepolje BSS introduced 4 different models for biomass supply to Prijepolje DH system and they are presented in a table below.

Info/Model PP-1 PP-2 PP-3 PP-4

Biomass production/collection

State forests (PE Srbijašume, FE

Prijepolje), Private forest owners, Sawmills

State forests (PE Srbijašume, FE Prijepolje), Private forest

owners Sawmills


owners Sawmills

State forests (PE Srbijašume, FE Prijepolje)

Biomass processing and supply

Private company delivering wood chips to

DH based on annual contract

New company established by local administration of PCE

Lim

PPP established by local administration and private

partner

PE Srbijašume, FE Prijepolje

Biomass storage and firing

DH company - PCE Lim



partner


Needed Investment

1. No investments in production and collection 2. No investments in biomass processing and supply 3. Investment in procurement of the equipment for manipulation on wood chips storage

1. No investments in production and collection 2. Procurement of woody biomass manipulation and transport equipment, wood chippers, wood chips transport equipment 3. Procurement of equipment for woody biomass manipulation on wood chips storage



Equipment planned by BSS

Tractor with wood chips bucket

Wood chipper 2-3 t/h Truck and semi-trailer (20-22t) 2 x tractor with wood chips bucket

Wood chipper 2-3t/h Truck and semi-trailer (20-22t) 2 x tractor with wood chips bucket

2 x wood chipper 2-3t/h Semi-trailer (20-22t) Covered storage 250 m³ Tractor 2 x wood chips bucket

Alternatives suggested by the Consultant

Telescopic handler Wood chipper up to 10t-h Truck Walking floor trailer Wood trailer with hydraulic crane

Telescopic handler Wood chipper up to 10t-h Truck Walking floor trailer Wood trailer with hydraulic crane

Needed investment BSS (EUR)

60,000 315,000 315,000 295,000

Needed investment (EUR) in alternatives

60,000 190,000 60,000 190,000

Positives BSS

Small investments; Fast for implementation.

Independent supply; Reduced risk of wood chips price escalation

Independent supply; Reduced risk of wood chips price escalation; Cooperation with a private partner who will invest in the equipment and organize the operations

Possibility for procurement of long term supply; Possibility to adapt harvesting system to maximize biomass utilization

Negatives BSS

Possibility of wood chips price escalation due to lack of competition

High investment costs; Complications in development of operations structure

PPP procedures slow and no positive examples so far

High investment costs for both partners

T-8: Review of BSS with alternative equipment included for individual supply model in PP

BSS suggests model PP-1 as optimal due to the small amount of needed investment and a possibility to implement it fast, moreover all relations between participants in woody biomass supply chain according to PP-1 already exist and the model is very similar to the model of supply which currently exist with heavy oil. According to this model wood chips will be supplied by wood chips producers based on the public call according to legal provisions related to public procurements. BSS does not present expected prices for wood chips procurement, but suggests that wood chips price escalation


Page 26 of 71

can occur and leaves an option for local administration to establish new organization for biomass supply in the future as it is not realistic at the moment. 5.2. Priboj BSS introduced 4 different models for biomass supply to Prijepolje DH system and they are presented in a table below.

Info/Model PB-1 PB-2 PB-3 PB-4





owners Sawmills


owners Sawmills





New company established by local administration or PCE

Toplana Priboj


partner



DH company - PCE

Toplana Priboj

DH company - PCE Toplana

Priboj


partner

DH company - PCE

Toplana Priboj Needed Investment









2 x wood chipper 4-7 t/h Semi-trailer (20-22 t) Covered storage 250 m³ Tractor 2 x wood chips bucket


Telescopic handler Wood chipper up to 10 t/h Truck Walking floor trailer Wood trailer with hydraulic crane

Telescopic handler Wood chipper up to 10t/h Truck Walking floor trailer Wood trailer with hydraulic crane


60,000 315,000 315,000 295,000


60,000 190,000 60,000 190,000

Positives BSS





Negatives BSS





T-9: Review of BSS with alternative equipment included for individual supply model in PB

As in case of Prijepolje, BSS suggests model PB-1 as optimal due to the small amount of needed investment and a possibility to implement it fast, moreover all relations between participants in woody biomass supply chain according to PP-1 already exist and the model is very similar to the model of supply which currently exist with heavy oil. According to this model wood chips will be supplied by wood chips producers based on the public call according to legal provisions related to public procurements. BSS does not present expected prices for wood chips procurement, but suggests that wood chips price escalation can occur and leaves an option for local administration to establish new organization for biomass supply in the future as it is not realistic at the moment.


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5.3. Nova Varoš BSS introduced 4 different models for biomass supply to Prijepolje DH system and they are presented in a table below.

Info/Model NV-1 NV -2 NV -3 NV -4





owners Sawmills


owners Sawmills





New company established by local administration of Energija

Zlatar


partner



DH company - Energija

Zlatar

DH company - Energija Zlatar


partner

DH company - Energija Zlatar

Needed Investment







Wood chipper 2-3 t/h Truck and semi-trailer (20-22t) tractor with wood chips bucket

Wood chipper 2-3 t/h Truck and semi-trailer (20-22t) tractor with wood chips bucket

2 x wood chipper 2-3 t/h Semi-trailer (20-22t) Covered storage 250 m³ Tractor 2 x wood chips bucket





60,000 315,000 315,000 295,000


60,000 190,000 60,000 190,000

Positives BSS





Negatives BSS





T-10: Review of BSS with alternative equipment included for individual supply models in NV

As in case of Prijepolje and Priboj, for Nova Varoš as well, BSS suggests model NV-1 as optimal due to the small amount of needed investment and a possibility to implement it fast, moreover all relations between participants in woody biomass supply chain according to PP-1 already exist and the model is very similar to the model of supply which currently exist with heavy oil. According to this model wood chips will be supplied by wood chips producers based on the public call according to legal provisions related to public procurements. BSS does not present expected prices for wood chips procurement, but suggests that wood chips price escalation can occur and leaves an option for local administration to establish new organization for biomass supply in the future as it is not realistic at the moment.


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6. Cluster supply business model Cluster supply is envisaged as a cooperation model of municipalities of Prijepolje, Priboj and Nova Varoš in organization of woody biomass supply to DH systems in all three municipalities. Considering that all three municipalities in question will supply from same resource base, using same technology for wood chips production and logistic capacities for wood chips delivery, basic assumption is that cluster supply can reduce investment costs, facilitate biomass contracting and increase efficiency. Basic point for supply is readiness of municipalities in question to commit themselves to cooperate in implementation of cluster supply models. BSS have analyzed in brief two cluster models for municipalities of Prijepolje and Nova Varoš and Nova Varoš and Priboj, while cluster supply of all three municipalities in question is not considered. BSS concluded that for cluster supply implementation have to wait for improvement of legal procedures, even though we haven’t perceived major legal impediments in implementation of cluster supply model. Apart from assumed investment value, BSS have not presented further comparisons between cluster supply models and individual supply models. In this chapter woody biomass cluster supply model for Prijepolje, Priboj and Nova Varoš will be elaborated in details. 6.1. Model Concept Woody biomass supply chain cluster model is resented in the figure below:

F-5: Wood chips cluster supply model concept

Following operations are present in cluster supply model concept: 1. Woody biomass production and collection, encompassing:

a. Wood and biomass harvesting – in case of utilizing woody biomass from the forests; b. Wood and biomass extraction to the forest road, or central log storage – in case of

utilizing wood biomass from the forests;


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c. Wood processing with woody biomass produced as residues in primary production – in case of utilizing solid sawmill residues as woody biomass;

d. Woody biomass transport to the central biomass storage; 2. Operations in woody biomass central storage, including:

a. Storing of woody biomass; b. wood chipping c. storing of wood chips; d. woody biomass and wood chips manipulation;

3. Wood chips transport; 4. Wood chips consumption in DH plants including:

a. Wood chips storing in DH storage; b. Wood chips manipulation; c. Wood chips consumption.

Wood and woody biomass production and collection is organized by forest owners and managers. In mountain areas such as South-Western Serbia, harvesting is performed with chainsaws, while wood extraction is performed by skidders or agricultural tractors adapted for skidding operations. This is the practice in both state and private forests and the most significant differences between operations in state and private forests is in density of forest roads and skid line network; and scale of harvesting operations. Individual private forest owners perform harvesting operations in smaller areas, usually at one or several forest owners’ plots, while state forest managers organize operations in one or several sections in forest management units. There are two types of harvests: regenerative and selective harvests. Regenerative harvests can only be performed in the period of dormant vegetation, while selective harvest can be performed throughout the whole year, except in first two months when vegetation starts. In plantations, harvest can be performed throughout the whole year. There are two models of harvesting in general practice, one is wood product method, where wood products are tailored and manufactured at harvesting site and then extracted to the forest roads or delivered to the central storages. When this method is applied, woody biomass needs to be collected at harvesting site and then transported to the processing point, thus costs of woody biomass collection and extraction are higher. However in conifer forests, gathering and pilling of forest residues is obligatory as a preventive measures from bark-beetles, tree diseases and forest fires. This method is in most cases required to be applied in state forests and this is the only allowed method according to the Rule book on forest order. Second method is a part tree or part trunk method, where longer pieces of wood with or without branches are being harvested and transported to wood storage and then wood products are being tailored and produced. In this case woody biomass is delivered with other wood products to the processing point, thus costs of its extraction are significantly reduced. Due to the possibility of damaging other trees and soil, application of this method have been suspended in Serbia. However, in practice, modifications of this method are applied in private forests and in case of buying wood on stump. Moreover, for state forest managers’ application of this method is also interesting especially in harvesting and manipulation of wood for chipboard and wood pellet factories. General application of this method will have positive effect on competitiveness of forest residues for wood chips production. In state owned forests, forest managers in most cases hire harvesting companies as contractors to perform harvesting and extraction of wood to the forest roads or central wood storages. On next phase buyers of logs, firewood or other wood products take over and transport the wood from temporary storages at forest roads or central wood storages. Other option which exist in state forests is selling the wood on stump and in that case wood buyers organize harvesting, extraction and further transport of wood products. In private forests, forest owners themselves organize harvesting, extraction and the transport of wood to their homes, villages or public roads in case of wood sale. It is also very usual that private forest owners sell wood on stump, or the whole forests to entrepreneurs trading with wood, who perform all harvesting, extractions and transport operations. With development of chipboard and pellet factories a practice of delivering wood by entrepreneurs to the factories became developed as well.


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Woody biomass from sawmill residues is being produced during the processing of logs in wood processing factories. In wood processing share of residues are around 50%. Sawmill residues include sawdust, bark, shavings, slabs and other solid sawmill residues. Everything except sawdust is usable for wood chips production. Sawmill residues are usually being stored for selling or further processing at sawmill sites. Before development of chipboard and wood pellet factories sawmill residues where utilized to certain extent for briquette production. Nowadays sawmill residues are being sold to chipboard factories, pellet factories and specialized wood chips producers. Apart from buyers taking over sawmill residues at sawmill site, there is a practice of sawmill operators transporting sawmill residues to chipboard and pellet producers. Woody biomass transport to the central biomass storage encompass loading unprocessed woody biomass to a transport vehicle at forest or sawmill storage and its transport to biomass central storage. Biomass central storage is a storage facility with enough space to store unprocessed woody biomass and wood chips and provide space for manipulation with engaged machinery. At central storage woody biomass is processed by wood chippers into wood chips. Wood chips can be stored at central storage, preferably in sheds, in order to provide drying and protection from further decay. Manipulation and loading of wood biomass is usually performed by telescoping handler or front loaders. However, application of tractors with front loader can also be possible. In case of vicinity of woody biomass to DH plants, an option of moving wood chipper to processing site and direct delivery to DH plants can also be applied. For flexibility it is necessary to include mobile wood chippers in the operations. Transport of wood chips from central storage to DH plants should be performed with vehicles which can be automatically unloaded. Such vehicles needs to be in line with traffic regulations, especially if DH plant is located in the city where truck transport is not allowed. For longer transport distances in location accessible by large vehicles, tow trucks and walking floor trailers with capacity of 90-100 m³ are usually utilized, however in smaller distances kipper trucks or trucks with unloadable container can also be utilized. Tractors with unloadable trailers can also be used for wood chips delivery at smaller distances. In case of existence of the central storage for wood chips, wood chips storage in DH plant, requires space for few days or one week of operation, with perceived reserves in winter time to cover inaccessibility of transport vehicles, due to the unperceived events such as winter storms causing road blockade. However, DH plants in municipalities in questions are located in town where roads are regularly maintained during the winter time. Storage can be, but does not necessarily need to be covered, since delivered wood chips will be already dried and consumed in the short period of time. In case of existence of the shed or unused object under the roof at DH site, this can be utilized as wood chips storage as well. Wood chips manipulation on DH storage and delivery of wood chips to the boiler can be operated with telescopic handlers, frontal loaders or tractors with wood chips buckets. Another possibility is to build a short term wood chips storage from which wood chips will be automatically fed into the biomass boiler. 6.2. Cluster Supply Models BSS presented four different models for individual supply of wood chips to DH plants18 and suggested model one – annual contracting of wood chips supply based on the public procurement procedures as most adequate. We have not included this model as cluster supply model, since it is obviously that potential supplier from whom would be required to provide wood chips at competitive price will need to organize its operations at most efficient way. BSS also presented a model in which state forest managers (PE Srbijašume, FE Prijepolje) produce wood chips and deliver it to DH plant. Considering the fact that core business of PE Srbijašume is forest management and that they have

18 Please see Chapter 4.


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already outsourced all harvesting, wood extraction and wood transport operations, we believe that this option is not realistic. Application of this option would require significant investments of PE Srbijašume not only in wood chipping capacities, but in harvesting and transport operations as well. Therefore this option can only be possible in case of significant changes in the organization of state owned forest company, which are not perceived by company management so far. Models for cluster supply, we suggest are presented in table below. Model CS1 perceives establishment of the joint company owned by Prijepolje, Priboj and Nova Varoš municipalities or their DH companies, while model CS2 perceives public-private partnership between municipalities in question and the private partner. Roles of supply chain participants in both models are very similar, while the major difference is in investments procurement and allocation of obligations between partners.

Info/Model – roles CS1 – Company owned by PP, PB and NV for wood chips supply

CS2 – PPP of three municipalities and the private partner in wood chips supply

Woody biomass production and collection Woody biomass production and collection

Wood and biomass

harvesting

State forests – wood and biomass on the road or central storage, harvesting site, wood on stump - contractors for PE Srbijašume, FE Prijepolje for wood harvesting and extraction; private companies buying wood on stump or collecting woody biomass or PP, PB, NV joint company, contractors for harvesting and extraction;

Private forests – private forests owners, contractors or wood on stump buyers

State forests – wood and biomass on the road or central storage, harvesting site, wood on stump - contractors for PE Srbijašume, FE Prijepolje for wood harvesting and extraction; private companies buying wood on stump or collecting woody biomass or PP, PB, NV PPP, contractors for harvesting and extraction;


Wood and biomass

extraction

State forests – wood and biomass on the road or central storage, harvesting site, wood on stump - contractors for PE Srbijašume, FE Prijepolje for wood harvesting and extraction; private companies buying wood on stump or collecting woody biomass or contractors of PP,PB,NV joint company contractors for harvesting and extraction;


State forests – wood and biomass on the road or central storage, harvesting site, wood on stump - contractors for PE Srbijašume, FE Prijepolje for wood harvesting and extraction; private companies buying wood on stump or collecting woody biomass or contractors of PP,PB,NV PPP joint company contractors for harvesting and extraction;


Collection of sawmill residues

Sawmills Sawmills

Woody biomass transport to the central biomass storage

Joint company PP, PB, NV Contractors of Joint company Private forest owners or wood on stump buyers or woody biomass collectors

PP, PB, NV PPP

Private forest owners or wood on stump buyers or woody biomass collectors

Operations in woody biomass central storage

Storing of woody biomass

Joint company PP, PB, NV PP, PB, NV PPP

Wood chipping Joint company PP, PB, NV

Contracting wood chipping services if needed occasionally

PP, PB, NV PPP

Storing of wood chips

Joint company PP, PB, NV PP, PB, NV PPP

Wood chips transport to DH plants

Joint company PP, PB, NV

Contractors for transport if needed occasionally

PP, PB, NV PPP

Wood chips consumption in DH plants including

Wood chips storing in DH storage

DH plant PP

DH plant PB

DH plant NV

DH plant PP

DH plant PB

DH plant NV

Wood chips manipulation

DH plant PP

DH plant PB

DH plant NV

DH plant PP

DH plant PB

DH plant NV

Wood chips consumption

DH plant PP

DH plant PB

DH plant NV

DH plant PP

DH plant PB

DH plant NV

T-11: Participants in woody biomass supply chain cluster

Woody biomass production and collection should remain to be organized by state forest managers and private forest owners. In State forests, harvesting, wood extraction and the transport to the central log storage if exist should be organized by their contractors – private harvesting companies.


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Implementation of part of the trunk method of harvesting and delivering wood products to a central storage for further processing to logs, firewood and other projects is a preferable solution, which can reduce costs of woody biomass collection. In case of wood on stump sale by state forest managers, Joint Company of PP, PB and NV or PPP can buy the wood on stump and subcontract private companies for harvesting, extraction and possible delivery to the central biomass storage. In private forests, private forest owners, their harvesting contractors or wood on stump buyers will perform harvesting, extraction and possible delivery of woody biomass to a central biomass storage. In similar way, sawmill operators can also deliver sawmill residues to central biomass storage or sell residues ex works to a Joint Company of PP, PB, NV or PPP. Due to the usual practice of state forest managers, woody biomass transport from state forest managers’ forest road or central storage to woody biomass central storage can be organized by Joint Company of PP, PB, NV or PPP. From private forests transport can be organized in a same manner or woody biomass from private forests can be delivered to the central biomass storage by the seller (private forest owner, harvesting company or wood trader). Both ways of transporting operations to central biomass storage can be arranged with sawmill operators as well. All operations on woody biomass central storage including storing unprocessed biomass, chipping, storing wood chips and manipulation with woody biomass and wood chips need to be organized by Joint Company of PP, PB and NV or PPP. If needed in extreme cases, due to equipment brake-downs wood chipping on the central biomass storage can be outsourced for a short period of time until equipment is returned into operations. Wood chips transport to DH plants needs to be organized by Joint Company of PP, PB and NV or PPP. If needed in extreme cases, part of the wood chips transport to DH plants can be outsourced for a short period of time. Finally, wood chips storing at DH plants, further manipulation and consumption should be organized by DH plants. To summarize, roles and responsibilities of potential Joint Company of PP, PB and NV or PPP start with planning of biomass delivery to DH plants and contracting and buying unprocessed woody biomass quantities. Responsibilities continue with takeover (including quantity and quality control) of woody biomass at forest road or central log storage or central biomass storage and transport of unprocessed woody biomass to a central biomass storage depending on procurement agreement with forest owners, managers and sawmill operators. Major responsibility of joint company lies in management and all operations (storing, chipping, manipulation) on central biomass storage and delivery of wood chips to DH plants. Responsibilities of Joint Company PP, PB and NV or PPP cease when wood chips is delivered and accepted by DH plants Prijepolje, Priboj and Nova Varoš. DH plants of three municipalities in question independently perform further wood chips storing, manipulation and consumption. As mentioned, difference between CS1 and CS2 model lies in delegation of roles between partners, reflecting in procurement of finances for investing, basic goals and management. Joint Company PP, PB and NV presented in CS1 is a company founded and owned by municipalities of Prijepolje, Priboj and Nova Varoš. Goal of this company is not to make profit, but to provide most efficient and financially viable solutions for wood chips supply to DH systems of respective municipalities, all resulting in reduction of heating costs for citizens. On the other hand all investments, biomass procurement, operational costs, know how, training and organizational efforts will be bared by municipalities in question, while they will establish control and independency of wood chips supply process. PPP Company presented in CS2 can be a special purpose company established by public and private partners, with major goal of public side similar to company presented in CS1. On the other hand, private partner will have a goal to create profit. Woody biomass procurement, investments, operational costs, know-how and organizational efforts can be bared by private partner, or depending on the arrangement, while the role of public partner is to create a stable market for


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PPP products – wood chips. Major positive and negative sides of both models are presented in SWOT analysis below.

CS1 – Company owned by PP, PB and NV for wood chips supply

CS2 – PPP of PP, PB and NV and private partner for wood chips supply

Strengths

1. Independent wood chips supply

2. Reduction of wood chips supply costs thus heating costs for the citizens

3. Secure market existence

Weaknesses

1. Municipalities will have to invest and organize the company

2. No experience in local administration

3. No good practice examples in Serbia

Strengths

1. Private partner will invest

2. Public partner will procure secure market

3. Public partner will provide community support and private partner will provide know how

Weaknesses

1. No PPP good practice examples in Serbia

2. Slow PPP establishment procedures

3. Unclear framework for PPP development

Opportunities

1. Direct and indirect employments

2. Developing efficient woody biomass contracting options

3. Set up a cooperation model and example

Threats

1. Limited funds for investments

2. Inefficient management in state/municipally owned companies

3. Poor cooperation between shareholding municipalities

Opportunities

1.Employments and profit

2. Developing efficient woody biomass contracting options

3. Set up of cooperation model as example and enlarge the operations for other markets

Threats

1. Different goals of public and private partner

2. Poor cooperation between municipalities

3.Poor cooperation between public and private partner

T-12: Swot analysis of CS1 and CS2 Major strengths of CS1 model encompass secure market existence in future DH plants owned by municipalities and independent position of municipalities in organization of wood chips supply, resulting in reduction of wood chips supply costs, and eventually heating costs for the citizens. Opportunities which CS1 provides are direct and indirect employment, possibility to develop efficient woody biomass contracting options with state forest managers, private forest owners and sawmills. Eventually established model can be set as example for other municipalities in Serbia. On the other hand major weakness is that municipalities will have to invest and organize the company themselves, especially since there is no experience in local administrations in wood biomass processing and supply business and there are no good similar examples in Serbia. Threats for CS1 are in limited funds for investments, possible poor cooperation between shareholding municipalities and inefficient management which is common in state or municipally owned companies. Nevertheless, negative sides can be avoided with clear commitment of partners, expression of interests, adequate management structure and company organization. Major strengths of CS2 model are that private partner will invest and public partner will provide secure market, also public partner will provide community support while private partner will provide know how. Major opportunities CS2 model provides are employments and profit, while developing efficient woody biomass contracting options and setting up a cooperation model as an example. In case of success and demand increase, operations can be enlarged for other woody biomass products (firewood, pellet, etcI) and markets as well (other municipalities, citizens, export). Major weaknesses are related to PPP experience in Serbia. There are no similar or even good PPP examples in heat energy production or fuel supply in Serbia so far, moreover PPP establishment procedures are slow and still the framework for PPP establishment and development is not so clear. Major threats are in different goals of public and private partner, while private partner will pursuit profit, public partner will pursuit employment and efficient supply of wood chips to DH companies. Different goals can lead to problems in cooperation between private and public partners, and also cooperation issues can emerge between public partners – municipalities in question. As in CS1 negative sides can be avoided with clear commitment, expression of interests, definition of specific goals, delegation of responsibilities, adequate management structure and company organization.

6.3. Company Establishment and Management Structure According to CS1, a joint company will be established by municipalities of Prijepolje, Priboj and Nova Varoš. Other similar possibility is that DH companies of Prijepolje, Priboj and Nova Varoš establish a new joint company for wood chips supply. Since DH companies are already owned and financed by municipalities in question and that local administrations has a mandate to make political


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decisions and facilitate cooperation between each-others, we believe that it is much better if local administrations establish joint company. In such manner, additional procedures related to provision of the land, planning and construction, possible environmental impact assessment and other prerequisites can be fulfilled more efficiently. The established company would be small scale, and most common form for such company establishment is a limited liability company – d.o.o, while other forms such as closed shareholding company can also be an option. However, due to the size of the future company (below 10 employees and turnover bellow 0,5M EUR) Limited Liability Company is a most practical and most efficient solution. For determination of partners’ shares we suggest formula bellow: PS (%) = MS (%) * 0,5 + IS (%) * 0,5 PS = share of one partner MS = market share secured by the partner IS = investment share procured by the partner, including provision of central biomass storage location and infrastructure As for the shares of Joint Company’s founders in the Company three basic criteria can be objectively used for the formula:

- Share of the market secured by the partner; - Share of the investment procured by the partner including provision of central biomass

storage location and infrastructre. Share of the market secured by the partner is actually an each partners’ portion in wood chips demand, and it is presented in a chart below.

C-1: Share of the market secured by each partner – share in DH plants wood chips demand

Second criteria for partners’ share in the Company determination is an investment share including provision of the location and infrastructure for central biomass storage. We have analyzed several locations already used by municipal companies, or which also can be usable. However, in this stage for municipalities was too early is too define concrete locations which can be used for central biomass storage. Moreover, we have analyzed a set of locations of private sawmilling companies interested to participate in individual or cluster supply of DH plants in municipalities in question. Location can either be calculated as contribution to the investment (municipality in CS1 or private partner in CS2), therefore the value of the location and its infrastructure can be included in the investment shares. Also, location can be leased or sold by the municipality where is located to Joint Company. In case that suitable location is owned by private party it can also be leased or sold to Joint Company. Share of the investment procured by each partner can be the third criteria for determination of partners’

33%

53%

13%

Prijepolje Priboj Nova Varos


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share in the Joint Company based on partners’ ability to invest. However, investment share can be in direct correlation with local administration budget, which does not have direct correlation with the number of inhabitants and correlation with the heat demand and wood chips demand. Considering those facts in order to avoid possible partnership disputes, investment share can be decided after the partnership shares are initially determined according to previously defined criteria and then negotiated between partners. If CS2 model of PPP is applied, Law on public private partnership and concessions gives a possibility of contractual and institutional PPP. Contractual PPP is a form of the partnership where public partners make contracts with private partners with or without concession for realization of the project. Institutional PPP is a form of partnership in which public and private partner establish joint special purpose company which implements the projects and further activities. Ownership share in institutional PPP is determined by invested stakes or on the basis of acquiring shares in capitalization. Ownership shares and partners’ roles and responsibilities can be determined in negotiations between public and private partners based on the market provision and investment values, while basic formula for determination of shares between private partners can be defined based on formula presented in CS1: market provision and investment provision including central storage location and infrastructure provision. Establishment and management regulations for special purpose company are defined based on the Law on companies, and detailed procedure for PPP establishment is determined by the Law on PPP and concessions. In case of CS2 model implementation, both institutional PPP and contractual PPP can be applied. In case of contractual PPP public partner (DH companies of municipalities in question) will take over the obligation of buying wood biomass based on the long term contract with private partner, while private partner would provide location and infrastructure of the central biomass storage, investment in necessary construction, equipment and machinery and provide delivery of woody biomass according to the contract. In organizational terms, contractual PPP model does not differ significantly from annual biomass contracting based on the public call, however long term contract provides secure market for private partner on one hand and secure woody biomass delivery at constant and predictable price for DH companies. Future Joint Company PP, PB, NV or PPP should be organized in efficient and professional manner. Management board should be established with basic tasks of determining Companies’ goals, adopting the business plan and monitoring of Company performance and goal realization. Board should consists of all shareholders present: representatives of all three municipalities in question in case of Joint Company and all three municipalities plus private partner in case of PPP. In order to prevent disputes and to protect all shareholders’ interests all members of the board should have the same voting rights irrelevant of their share in the ownership. To summarize board in case of Joint Company PP, PB, NV should have 3 members, while the board in case of PPP should have 3 plus members appointed by private partner or partners depending on the mutual agreement. In both cases company should be managed by a professional manager and consider companies goals and activities, different models (Joint company or PPP) do not require different organizational structure of the company. 6.4. Biomass Supply and Wood Chips Delivery Contracting As presented in Table x, Joint Company PP, PB, NV or PPP should contract unprocessed woody biomass supply with state forest manager - PE Srbijašume, private forest owners and wood processors. Wood products that can be considered as unprocessed biomass are long firewood, cuttings and forest residues. Price of wood products in Serbia is usually expressed per volume unit – cubic meter (m³) or steer meter (srm). However, woody and especially woody biomass can also be sold per weight unit (tons). By buying the wood per weight unit, important issue of bulk woody biomass low density compared to logs or firewood can be resolved. In addition, water content of fresh wood and woody biomass is constant 45-55 %, while density of woody biomass bulk is not, therefore energy value of both woody biomass can be calculated circumstantially based on the weight.


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Table below presents basic properties of woody biomass products, units in which they are usually sold along with conversion factors and prices.

Products/Units m³ srm Tons

Definition A volume that is made by a solid cube of wood that is 1 meter on each

side.

A volume of space that is made by a cube of wood with space between

wood pieces included that is 1 meter on each side.

Weight unit

Firewood Measure used by forest management companies

Measure used in private forest owners and usual trade

Measure used by energy wood buyers or wood pellet and chipboard factories

Long firewood Measure used by forest management companies

Not used Measure used by energy wood buyers or wood pellet and chipboard factories

Cuttings Measure used by forest management companies



Forest residues Measure used by forest management companies



Sawmill residues Not used Measure used by sawmills and wood biomass processors


Products/Properties

Water content (%)

Density (t/m³)

Conversion factor srm to m³

Heat value

(kWh/kg) Conifer Broadleaves

Definition

Share of water in total weight of humid wood

Weight of 1m³ of wood

How many m³ of wood are needed for stacking 1srm of wood products

Heat value of 1kg of wood

Firewood 35-45 630 930 0.69 3.00

Long firewood 40-50 680 950 / 3.00

Cuttings 35-45 630 930 0.55 3.00

Forest residues 35-45 630 930 0.40 3.00

Sawmill residues 25-35 540 800 0.69 3.40

Products/Prices

State forests Private forests Sawmills

On stump On forest road/log storage

On stump On forest road/log storage

At sawmill site

Definition Price of wood on stump – in the forest before harvest – buyer bares costs of harvest, wood extraction, loading and

transport. In case of forest residues buyer

bares the costs of extraction, loading and

transport.

Price of wood on forest road or log storage – buyer bares

costs of loading and transport

Price of wood on stump – in the forest before

harvest – buyer bares costs of harvest, wood

extraction, loading and

transport

Price of wood on forest road or log storage – buyer bares costs of loading and

transport

Price of forest residues at

sawmill site – buyer bares costs

of loading and transport

Firewood Con: 2.83 – 12.59 €/m³

Broad: 4.23–19.85 €/m³

Con:16.43 -22.12 €/m³

Broad: 25.09 – 33.06 €/m³

8-12 €/srm or 12-17 €/m³

Broad: 25-28 €/srm or 36-40

€/m³

/

Long firewood Con: 2.83 – 12.59 €/m³

Broad: 4.23–19.85 €/m³

Con:16.43-22.12 €/m³

Broad: 22.65-29.96 €/m³

8-12 €/srm or 12-17 €/m³

Broad:27-28 €/ton or 29 €/m³

/

Cuttings Con: 1.42 – 5.43 €/m³

Broad: 3.08– 11.55 €/m³

Con:10.53 €/m³

Broad: 22.81 €/m³

Sold as firewood Sold as firewood

/

Forest residues Con: 1.22 – 4.6 €/m³

Broad: 1.69 – 7.75€/m³

/ Occasionally 8-10 €/ton

Sold as firewood

/

Sawmill residues / / / / 5-7 €/srm

T-13: Woody biomass units, conversion factors and prices


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With PE Srbijašume, contract for wood supply should be closed with Direction of PE Srbijašume in Belgrade, for all quantities excessing 50 m³. Usual practice of PE is to close annual contracts, where regular buyers have the advantage. PE Srbijašume is some occasions, such as the case of some chipboard and large wood pellet production, practice long term – 10 year supply contracts, but after probation period of few years of annual contracts. Supply can be contracted with takeover on: - Stump; - Next to stump; - Forest road or central log storage.

Sale of wood on stump is an option offered by PE Srbijašume, especially in case of low quality coppice forests for firewood production. Usual practice is that Forest Estates (such as FE Prijepolje) make a public call for wood on stump sale in certain sections of the forests within forest management units. FE Prijepolje sells around 7,000-9,000 m³ of wood on stump per year. Companies interested for wood on stump buying are bidding for the contract, therefore starting price depending on the demand can be increased up to 10 %. In case of wood on stump sale, contract is based on the planned quantities for harvest, however, final payment is made according to the measured quantities of extracted wood. There is a pricelist of PE Srbijašume for sale of wood on stump, where price depends on forest position and forest roads conditions with special categories of wood on stump from forest affected with fires or ice, snow and wind brakes. Prices of wood on stump in different categories of forests, vary significantly and most of the forests in FE Prijepolje are categorized from III-V category. In case of wood on stump sale, all harvesting and wood extraction operations are performed by the buyer, whereas the seller controls and monitors harvesting and extraction. Joint Company PP, PB, NV or PPP can make contract to buy wood on stump from PE Srbijašume and then subcontract logging companies for harvesting and extraction of wood and biomass. Logs and firewood can be sold to the local market, while woody biomass can be transported and processed at a central biomass storage. Sale of wood next to stump is a practice which is in most cases applied for smaller quantities of wood. In such manner forest residues are sold to local population. Forest residues are collected and extracted to the forest road and then measured by forest technicians. This is a retail of wood and small quantities are sold directly by Forest Units and Forest Estates. FE Prijepolje annually sells up to 1,000 m³ of forest residues to local population or biomass processors. Another possibility is to make annual or even long term contract for collection and extraction of forest residues. However, costs of woody biomass procurement in such manner can be substantial, especially in case of selective harvest, steep terrains and without optimal forest roads and skidding roads network. Such operations, also require significant work force, since collection of biomass needs to be manual in cases that harvesting sites are not easily accessible, on the other hand if residues are scattered, it is necessary to pile them manually in order to be collected mechanically. Nevertheless, this option should also be reflected, especially in case of regenerative harvests. Joint Company PP, PB, NV or PPP can make contact to buy forest residues at harvesting site and then subcontract companies or hire addition work force for collection and extraction of woody biomass. Sale of wood on the forest road or central log storage is a most usual practice of PE Srbijašume, especially for logs, long firewood or cut firewood. Sawmills, chipboard and pellet factories usually buy wood in such way. Forest residues, on the other hand are not extracted in case of wood product method application, which is dominant in PE Srbijašume system. Buying forest residues in central storage is a most cost effective option, nevertheless it can be applied in case of the re-introduction of whole tree or part tree method, where wood products are tailored and produced at the storage. If this occurs Joint Company PP, PB, NV or PPP can make contracts for buying forest residues at forest road or at the log storage. On the other hand, if there are extra quantities of long firewood which are not contracted with existing buyers or there is a possibility to increase wood production in FE Prijepolje, Joint Company PP, PB and NV can make buying contracts and organize delivery of that wood to central biomass storage for further processing.


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With private forest owners, or harvesting companies trading with wood from private forests, Joint Company PP, PB, NV or PPP can make contracts for woody biomass delivery to the central storage or contracts for buying long firewood or woody biomass at forest or paved road. It is important to stress that contracting with individual private forest owners can be complicated since most of private forest owners are small scale with small quantities of wood for sale. Nevertheless significant quantities of wood can be procured if a possibility for small scale forest owners of woody biomass delivery and sale at the central biomass storage is opened. On the other hand, there are companies which trade with wood from private forests and annual supply contracts can be concluded with them as well for delivery of woody biomass to the central storage or takeover at forest road or sellers storage. With sawmills and other wood processors Joint Company PP, PB, NV or PPP can establish contracts for sawmill residues supply. It is important to notice that chipboard, pellet and wood chipping companies are already supplying with sawmill residues from the area, so strong competition do exist. Nevertheless, it is still possible to negotiate with sawmills and other wood processors about contracts for buying sawmill residues at sawmilling site, or buying sawmill residues delivered to the central biomass storage. Wood chips delivery from Joint Company PP, PB, NV or PPP to DH plants should be contracted based on long terms contract, with binding obligations in terms of quantities Joint Company should supply to DH plants. Contract should reflect the price, quality, quantity, delivery schedule and mutual responsibilities. Price of wood chips can be determined as an average price with inflation and factors deriving from possible escalation of wood prices, fuels prices and labor prices, or the price can be negotiated every year before delivery or heating season starts. We suggest following formula for price determination, which can be adjusted for every season, or more often in case of above 5 % changes of indexes in question: PVn = ((PVn-1 x In) + PVo ) I = IS x 25 % + IC x 25 % + IT x 25 % + IB x 25 % PVn = Price without VAT (RSD/ton) on the day of price change PVn-1 = Price without VAT (RSD/ton) on the day of previous price change PV0 = Initial price (RSD/ton) from the contract In = Index from previous price change I = Index IS = Index determination change of average salaries and social contributions IC = Index of fuel prices IT = Regional index of transportation costs IB = Index of wood prices (linked to changes of prices according to PE Srbijašume pricelist) Quality of wood chips should be determined based on Serbian wood chips standards19 and requirements of firing technology used. Quantity should be determined by calculated and determined consumption, while delivery schedule should be determined according to heat production monthly demand and capacity of the storage in each of DH plants. Finally, all mutual responsibilities including payments, penalties, dispute settlements and possibility of contract termination, should be defined in negotiations between Joint PP, PB, NV or PPP and each of DH plants. Wood chips on Serbian and Western Balkan market is usually sold per weight unit or bulk volume unit. Transactions based on energy content are still not present. Table below presents wood chips, units, conversion factors and prices. For contracting between envisaged parties we can recommend sale based on volume unit with sample control including quality control, granulation control and water content control.

19 SRPS EN 15234-4:2014


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Products/Units Bulk m³ tons

Definition A volume of space that is made by a cube of bulk wood chips with space between wood chips pieces included that is 1 meter on each

side.

Weight unit

Wood Chips Measure used by chipboard and pellet factories Measure used by pellet factories and wood chips traders

Wood Chips Properties

Water content (%)

Density (t/bulk m³)

Heat value

(kWh/kg) Conifer Broadleaves

Definition Share of water in total weight of humid wood

chips

Weight of 1 bulk m³ of wood chips Heat value of 1kg of wood chips

Wood chips 25-35 223 328 3.40

Wood Chips Prices

Delivered to buyers’ site

Definition Wood chips delivered and unloaded to sellers point

Conifer 10-12 €/bulk m³ or 40-50 €/ton

Broadleaves 15-18 €/bulk m³ or 45-55 €/ton

T-14: Wood chips units, conversion factors and prices

Since wood chips will be delivered to DH plants from central storage, where it will be additional dried, we can recommend 30 % water content as an average water content on which wood chips should be delivered to DH plant. Thus the price can be indicated in RSD per bulk m³ of wood chips with water content ranging from 25-35 %, with penalties in terms of reduction of delivered quantities to be paid for, if water content of delivered wood chips exceeds 40 %.In this manner, detailed calculations by DH companies of delivered heat value of wood chips will be avoided, while supplier will be motivated to sell only dry wood chips, which is in DH companies best interests. 6.5. Woody Biomass Central Storage Location Location for central biomass storage needs to have an optimal position in terms of proximity to woody biomass resource base and wood chips delivery points – DH plants. Location should be close to major roads, which are regularly maintained and cleaned during the winter period and accessible by trucks with maximal loading capacity (up to 40 tons gross weight). Location needs to be positioned at the open area in or out of the industrial zone, but away from residential areas in order to reduce pollution effects of noise and dust. Location needs to be dry, thus away from the rivers, and in preferably windy area to facilitate natural drying of woody biomass. Location needs to be equipped with necessary infrastructure including electricity, water supply and sewerage. Location needs telephone and internet connection as well. Location needs to be covered with materials such as gravel, stone or paved. Storage needs to have enough space to store unprocessed biomass in the open, preferably covered and produced wood chips in sheds. We have analyzed several potential locations owned by private sawmills interested for supplying DH companies with wood chips or municipally owned and suitable for the establishment of central biomass storage in case of individual supply. Due to their position some can also be regarded suitable for cluster supply as well. List of optimal central biomass storage properties and properties of analyzed locations are presented in the table below.

Info Optimal Location 1 Location 2 Location 3 Location 4 Location 5

Position Along the main road between Nova Varoš, Priboj and Prijepolje

Koran doo, Priboj

Omoprom doo, Bistrica

Municipality of Nova Varoš, Branosevac,

Nova Varoš

Zlatar Sped doo, Kokin Brod

JKP Lim, Prijepolje

Municipality Nova Varoš, Priboj or Prijepolje

Priboj Nova Varoš Nova Varoš Nova Varoš Prijepolje

Distance from DH Prijepolje

10-15 km 36 km 16 km 26 km 40 km 1 km

Distance from DH Priboj

15-20 km 5 km 25 km 35 km 35 km 31 km


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Distance from DH Nova Varoš

10-15 km 40 km 10 km 1 km 12 km 26 km

Distance from the railway

1-2 km 2 km

2 km 14 km 20 km 4 km

Distance from major road

At the major road On the major road and border

crossing to B&H

On the major road between Nova

Varoš, Priboj and Prijepolje

On the main road to Prijepolje and Priboj

On the crossroad of road to Nova Varoš and Prijepolje and

road to Priboj

200 m

Closest forest complex in Limsko forest area

5 km 1 km 5 km 5 km 5 km

Distance from other forest areas

45-50 km 65-75 km in Serbia, 10 km

in B&H

45-50 km 35-50 km 24-35 km 60-70 km

Road conditions weight limitations/ other restrictions/ accessibility

No limitations No limitations, accessible

No limitations, accessible

No limitations, 100-200 m of road to

connect to main road are missing



Distance from residential area

Over 1 km 1 km 3 km 200 m 500-1,000 m 200 m

Distance from industrial zone

In industrial zone or outside industrial

zone

In industrial zone

4 km 500 m In industrial zone 4 km

Possible issues with noise and dust pollutions

No No No Possible No Possible

Total area usable for biomass storage

Open area of 4-6,000m2 for woody

biomass Sheds for machinery

– 300-500 m2 Sheds for wood chips

– 1,000-1,500 m2

In closed storages 1,500 m2 in open storages

10,000 m2

5-6,000 m2, possible

to build sheds for wood chips

20,000 m2, possible to build sheds for

wood chips

Total owned land where sawmill is

located is 80,000 m2

2,000 m2 in closed storages

Additional 4,000 m2 in open storage

Existing objects and infrastructures and connectivity

Object usable for sheds, road, water, sewage, electricity,

etcI

Objects, Road, water,

sewage, electricity,

phone

Objects, Road, Water, electricity, phone, own trafo

station shared with Vihor doo, a

sawmill next to Omoprom

Connectivity to existing infrastructure

exist

Objects, Road, water, sewage,

electricity, phone

Objects, Road, water, sewage,

electricity, phone

Location properties

Open, sunny, windy, no floods and

underground waters

Open, sunny, windy, near the river, no

floods, underground

waters

Open, sunny, windy, no floods and underground

waters


underground waters


underground waters

Open, sunny, windy, no floods and underground

waters

Ownership of the location land and objects

100% owned by partner in Joint

Company or PPP

100% Koran doo

100% Omoprom Municipality of Nova Varoš

100% Zlatar Sped

In process of transfer to

Municipality of Prijepolje, who

plans to transfer it to JKP Lim

Legal disputes

None None None None envisaged None None so far

Possibility of lease or sale

If possible for lease or sell to Joint

Company or partners in PPP

Koran is using the location for

logistic operations, interested to

develop wood chips supply

and to use the location as

central storage

Omoprom is using the location for

sawmill operations, interested to

develop wood chips supply and to use the location as

central storage

No plan for using the location, one idea

was to build DH plant

Zlatar sped is using the location for

sawmill operations, interested to develop

wood chips supply and to use the

location as central storage

JKP Lim is using the location as a logistic point for their machinery.

There have a lease contract, plan is to

transfer the location to JKP LIM ownership

Envisaged impediments for using location as a biomass central storage

None None None None envisaged, additional

investments needed for road construction

and infrastructure connection

None If ownership transfer succeeds no impediments

T-15: Optimal and analysed location for central biomass storage for individual or cluster supply


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Positions of analyzed locations are presented in figures bellow.

F-6: Position of analyzed locations

First of analyzed location is storage of Koran doo, positioned near Priboj at border crossing with Bosnia and Herzegovina. Figure bellow presents satellite image of the location.

F-7: Koran doo storage – google maps




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Photo of the location is presented in figure bellow.

F-8: Location 1: Koran doo, Priboj

Koran doo have sawmill capacities in Serbia and Bosnia and Herzegovina, and is interested to participate in supply of DH companies with wood chips, especially DH Priboj. Location have necessary infrastructure space and objects usable for central biomass storage, however this location is not suitable for central biomass storage for supply of all three DH plants and it far from optimal, when its’ position is considered. Even though it is 40 km from the furthest DH plant in Nova Varoš, location is far from raw material base, except to forests near Priboj, compared to other locations. Location is close to raw material base in Bosnia and Herzegovina, however border crossing Uvac in Priboj, does not have phyto-sanitary inspection, so far, so import of woody biomass from Bosnia to this crossing is not possible. Therefore Koran doo does not provide advantages in terms of raw material supply in cluster supply model. Hypothetically most of the locations in Priboj would have similar features and limitations to be used as central biomass storage for closer supply. Second analyzed location is Omoprom in Bistrica, Nova Varoš. Omoprom is sawmill, processing around 40m³ of logs per day. This company sells its forest residues to wood pellet and chipboard factories, however it is interested to develop other ways for utilization of residues. One of the options they envisage is wood chips production and supply to DH plants in the area. Company is very interested for idea of cluster supply. Omoprom location have necessary infrastructure and space usable for central biomass storage. Position is optimal, since it is located in between Prijepolje, Priboj and Nova Varoš. Location is on the main road from Nova Varoš to Priboj and Prijepolje, and also far from residential area. Location is in the middle of limsko forest area and 40-50 km away from other forest areas. Location is also close to Montenegro and Bosnia, from which sawmill already supply part of raw material. Omoprom can be recommended as a potential location for central biomass storage in case of cluster supply. Figures bellow present satellite image and photo of Omoprom location. Hypothetically, other possible locations in vicinity of Bistrica have optimal position in terms of raw material supply from limsko forest area and wood chips delivery to DH plants.

Photo by Foragrobio cc doo © 2015 GIZ DKTI


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F-9: Location 2: Omo Prom doo, Bistrica, Nova Varoš Google Maps

F-10: Location 2 - Omo Prom doo, Bistrica, Nova Varoš

Third location analyzed is Branosevac in Nova Varoš. This location is positioned in town of Nova Varoš close to main road to Priboj and Prijepolje.




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Land is owned by municipality of Nova Varoš and there was an idea to use this land as a location for new DH plant in Nova Varoš. Location is not yet connected to the main road, and infrastructure. Location is also close to residential area leaving possibilities of noise and dust pollution. In terms of position for supply, furthers DH plant is Priboj at 35 km. In terms of raw material supply from limsko forest area location has good position, with furthers forests at 50 km. One of the advantage of the location is proximity of other forest areas such as Tarsko-Zlatiborsko (35 km) and Moravicko (50 km) so part of supply can also be organized from those forest areas as well. Advantage is also in proximity of large number of sawmills in Nova Varoš municipality. If infrastructure and road connection is resolved and If possible issues with noise and dust solutions are resolved by applying protective measures, although not optimal this location can be considered for cluster supply. Other question is the level of investment needed for road construction and infrastructure connections, which should be elaborated in details in case of municipal decision to use this location as a biomass storage. Figures bellow present satellite image and photos from the location. Hypothetically, other location in vicinity of Nova Varoš town, even though not optimal, do have good position for raw material supply and acceptable position for wood chips delivery to DH plants.

F-11: Location 3: Branosevac, Nova Varoš Google Maps

Forth analyzed location if Zlatar Sped in Kokin Brod at the crossroads of main road to Nova Varoš, Prijepolje and Priboj and road to Priboj via Pribojska Banja. Zlatar sped has a sawmill processing over 80m³ of logs per day, supplying from Limsko forest area, Moravicko forest area, Tarsko-Zlatiborsko forest area and also Bosnia and Herzegovina and Montenegro. Zlatar sped is a largest sawmill in the area and one of the largest wood processors. Zlatar sped was also included in development of Nanix wood pellet factory in Nova Varoš, but sold their ownership part recently, although they continue to supply Nanix wood with sawdust and sawmill residues. Nevertheless, Zlatar sped is interesting to participate in wood chips supply to DH plants if this can be profitable. They also have wood chippers and location is fully equipped with all necessary infrastructure and possess more than enough space for storing woody biomass and wood chips.



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The position of Zlatar Sped location in terms of delivery to DH plants is not optimal but acceptable with Prijepolje DH plants being furthest point of delivery at 40 km. On the other hand the position in terms of raw material supply is very good. Furthest forest complexes in limsko forest area are 50 km away from the location, however forests of other areas such as Tarsko-Zlatiborsko and Moravicko are 25-40 km away. Another advantage of this location is proximity of other sawmills in Nova Varoš municipality. Location is also close to Montenegro and Bosnia, from which sawmill already supply part of raw material. Although not optimal for delivery Zlatar Sped can be regarded as a feasibly location for central biomass storage in case of cluster supply. Figures bellow present satellite image and photo of Zlatar Sped location. Hypothetically, other possible locations in vicinity of Kokin Broad can be regarded as feasible locations for central biomass storage.

F-12: Location 3: Branosevac, Municipality of Nova Varoš

Fifth analyzed location is JKP Lim in Prijepolje. This location is positioned in Prijepolje close to main road to Priboj and Nova Varoš. Land is owned by private owner, and object are leased by JKP Lim. However municipality of Prijepolje is in negotiations of buying the land and objects and plan is to transfer the ownership to JKP Lim. Location is connected to the main road and fully equipped with necessary infrastructure. Also there is enough space and objects which can be used for storing woody biomass and wood chips. Location is also close to several houses and one hotel which is currently out of operation, leaving possibilities of noise and dust pollution. In terms of position for supply, furthest DH plant is Priboj at 31 km. In terms of raw material supply from limsko forest area location has good position, with furthest forests at 50 km. Other forest areas such as Tarsko-Zlatiborsko, Moravicko and Gornje Ibarsko are 60-70 km away. Advantage is also in proximity of large number of sawmills in Prijepolje municipality and Montenegro. One of the disadvantages is in competition in woody biomass supply with Jela Star doo, the largest woody biomass processor in the area. If ownership is resolved and If possible issues with noise and dust solutions are resolved by applying protective measures, although not optimal this location can be considered for cluster supply. Figures bellow present satellite image and photos from the location. Hypothetically, other location in vicinity of Prijepolje town, even though not optimal, do have good position for raw material supply and acceptable position for wood chips delivery to DH plants.



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F-13: Location 4: Zlatar Sped doo, Kokin Brod, Nova Varoš, Google Maps

F-14: Location 4: Zlatar Sped doo, Kokin Brod, Nova Varoš




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F-15: Location 5: JKP Lim, Prijepolje, Google Maps

F-16: Location 5: JKP Lim, Prijepolje




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Jela Star doo, Prijepolje, which is also regarded as potential supplier in BSS, have already developed large woody biomass processing operation and storage capacities. Although company developed wood chips production and very strong position in woody biomass supply, most of wood chips they produced is transported to their own wood pellet factory in Prijepolje. Jela Star pellet factory recently increased their production capacities to 50,000 tons per year, creating annual wood chips demand of over 100,000 tons. Although they were previously interested for supply of wood chips to DH plants, it is very questionable if the company will now be interested for DH plants supply. Jela Star now have very large demand for wood chips in their own pellet factory and supplying their own pellet factory with wood chips is much more profitable due to the added value of wood chips created in wood pellet production. After the interview with Jela Star doo owner and director, we decided not to include Jela Star doo as a potential location of central biomass storage. 6.6. Storing, Processing and Logistics of Woody Biomass and Wood Chips Unprocessed biomass should be delivered to central biomass storage. As mentioned, Joint Company PP, PB, NV or PPP should be equipped with transport capacities to deliver unprocessed biomass, but also it is important to leave the option of unprocessed woody biomass takeover at central biomass storage. Considering annual demand of wood chips at DH plants of 9,000 tons per year at 30 % water content, around 10l,000tons per year of fresh woody biomass at water content 35-45% should be processed. Detailed schedule of unprocessed biomass delivery should be organized during or after contracting woody biomass supply. Table below presents envisaged dynamics of woody biomass supply and wood chips delivery considering wood chips demand.

C-2: Woody biomass supply and wood chips delivery dynamics

Considering presented delivery dynamics, central biomass storage should have enough open space to store up to 7,300 tons of fresh woody biomass to be delivered from May to September, where there is no delivery to DH plants. On the other hand most of forest and wood industry residues can be supplied in this period. Central biomass storage also needs enough closed space to store up to 1,500 tons of wood chips to be dried before delivery to DH plants.

Info Tons Tons to srm or bulk m³ Height of pile (m) Needed area (m2)

Fresh Woody biomass 7,300 0.25 5 - 7 4,000 – 6,000

Wood Chips 1,500 0.25 4 - 6 1,000 – 1,500

Machinery and equipment 300 - 500

T-16: Required space for fresh woody biomass and wood chips storage, machinery and equipment


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Central biomass storage needs to have close access to major road, without weight restrictions. Storage should be equipped with necessary infrastructure including: electricity, water, and sewage and telephone connection. Storage surface should be paved or asphalted in order to prevent mixing gravel with woody biomass which can cause damages to wood chipping machines. Open part should be used for storing fresh woody biomass. Open part should have enough space for manipulation with trucks and other machines. Wood chips shed should also be built for storing wood chips. Sheds should have enough capacity to store 0.5 to 1 month of wood chips production. However, in case of providing location with existing objects, those can be adapted and used as wood chip sheds. Cost of wood chips shed construction can vary significantly depending on size, height, materials and design used, therefore the construction should be adapted to investment potential of the partners. Shed should be covered with roof and opened from the front and sides, to enable ventilation and natural drying of wood chips. Picture below present one example of the wood chips sheds. Central biomass storage also needs a machinery garage and an office container.

F-17: Example of wood chips shed

Processing of woody biomass should be performed by mobile wood chipper with production capacity of 1,500 to 2,000 tons per month, or enough to cover wood chips demand of DH plants in peak winter months. This capacity is 10-15 tons per hour. Wood chipper can be PTO driven or self-propelled and it can be equipped with optional electric engine. If possible, wood chipper with own diesel or electric engine can be recommended. Wood chipper also needs to be equipped with feeding crane for wood and to have infeed possibility for wood diameter of 20-40 cm. Several examples of adequate wood chippers are presented in the table and pictures below.

Info/Brand Heizohack Mus Max Eschlböck Jenz

Model 8-400EM/E-500EM Wood terminator 7lZ Biber 7/Biber 7plus HEM 360 Power 55-140 kW 55-125 kW 44-125 kW 74-150 kW Hourly Capacity 60 bulk m³/h 60 bulk m³/h 60 bulk m³/h 60 bulk m³/h Maximal diameter 50 cm 50 cm 35 cm 36 cm

T-17: Examples of adequate wood chippers



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Manipulation with woody biomass and wood chips, including wood chips loading, should be operated with telescopic handler. Telescopic handler should be equipped with fork lifter and loading bucket. Telescopic handler should have elevation possibility for loading or stacking of 6 - 8 meters. Several examples of adequate telescopic handlers are presented in the table and pictures below.

Info/Brand Claas Manitou JCB Caterpilar

Model Scorpion 9055-6030 MLTX 735 120 PS 531-70 Agri TH407C Power 115 kW 125 kW 75 kW 75 kW Maximal load 3-5 t 3.5t 3.1t 3.7 t Maximal lifting height 6,.-8.5 m 6.9m 7 m 7.3 m

T-18: Examples of adequate telescopic handlers

In accordance to woody biomass supply and wood chips delivery dynamics two trucks are needed for transport operations (table below).

Month/info Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Fresh woody biomass supply (w=35-45%)

200 300 300 500 1,000 1,500 1,500 1,500 1,800 1,000 200 200

Wood chips delivery (w=30%)

1,500 1,500 1,500 500 0 0 0 0 0 1,000 1,500 1,500

Truckloads woody biomass 20t

10 15 15 25 50 75 75 75 90 50 10 10

Truckloads wood chips 20t 75 75 75 25 0 0 0 0 0 50 75 75

Truckloads per day 4 4 4 2 2 3 3 3 4 5 4 4

Number of trucks 2 2 2 1 1 2 2 2 2 2 2 2

T-19: Transport dynamics and number of trucks

Adequate trailers for transport of woody biomass and wood chips are also required. We can recommend procurement of two walking floor trailers with capacity of 90-100 m³; two trailer with crane for wood and stacked sawmill residues transport. Adequate trucks and trailers are presented in picture below. Depending on DH wood chips storages accessibility we can recommend a kipper trailer or container trailer of 50-60 m³ for wood chips delivery to locations with restricted accessibility for large trailers. 6.7. Staff Chart below presents the organization of future Cluster Supply Company.


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F-18: Organizational structure Manager of the company should be appointed by the board. Manager should be a professional in the field of forestry, wood processing or other similar fields, with relevant experience (at least 5 years) in company management and business administration, organization of harvesting, biomass processing or sawmilling operations and wood products trade. Manager should have excellent knowledge of English, drivers’ license and computer skills. Manager should also have strong managerial, communication and interpersonal skills. Manager’s tasks and duties should encompass: representation of the Company and communication with all other legal bodies; reporting to the board; coordination and planning of the activities; selection of employees and delegation of duties; provision of woody biomass supply and wood chips delivery contracts; increase of economic efficiency of the company and control of legality of company business procedures; organization of woody biomass delivery and organization of wood chips transport; woody biomass and wood chips quality control; and other duties in line with his core tasks. Two skilled and experience truck drivers with necessary licenses should be employed. Their main tasks are to drive trucks or other vehicles transporting woody biomass to the central biomass storage and wood chips transport to DH plants, along with basic control and maintenance of the trucks, trailers and other vehicles. Truck drivers should also be trained for operations with telescopic handler and wood chippers in case of need. One operator of wood chipper and telescopic handler (preferably with truck drivers’ licenses) should be employed. His main tasks will be operating with telescoping handler in woody biomass and wood chips manipulation, loading or unloading and operating wood chipper. Manager and all employees should be additionally trained for work in woody biomass processing, storing and logistics along with quality control. Also the Manager and all employees need to be trained in work safety with special attention to anti-fire measures, safety of machinery handling, safety in transport, and safety in wood processing.


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7. Financial analysis Financial analysis presents overview of envisaged investment and operational costs and incomes along with calculation of basic financial indicators for cluster supply. 7.1. Investment Investment costs are presented in table below. Investment costs are related to required construction and machinery procurement presented in chapter 6.6.

Investment €

Storage, pavement/asphalt, infrastructure installation 200,000 Trucks - (2*50,000€) 100,000 Wood chipper - (120,00€) 120,000 Telescopic handler - (60,000€) 60,000 2 trailers wood transport trailer with cranes and 2 walking floor - (2*8,000€, 2*12,000 €) 40,000 Total Investment costs 520,000

T-20: Investment costs

Investment in storage, pavement/asphalt and infrastructure installation is estimated based on the optimal size of the storage. Procurement of used trucks and trailers is calculated on one side and procurement of new wood chipper and telescopic handler.

7.2. Operational costs Operational costs are related to woody biomass and wood chips prices presented in chapter 6.4. Unit costs are presented below.

Unit costs specification Costs

Woody biomass average price (€/t) 24.62 Wood on stump average price (structure 70% firewood, 20% cuttings and 10% forest residues) (€/t) 15.00 Woody biomass on forest road (€/t) 27.00 Sawmill residues (€/t) 24.00 Wood harvesting and extraction costs (€/t) 10.00 Wood chips and woody biomass transport (€/t) 3.00 Wood chips manipulation and loading (€/t) 1.50 Wood chipping (€/t) 4.00 Gross salary Manager (€/month) 1,300.00 Gross salary truck drivers, wood chips and telescopic handler operators (€/month) 900.00

T-21: Unit costs

Quantities, capacities and performance is presented below. Since transport and chipping capacities are dimensioned based on DH demand in peak months, optimal utilization of that capacities in other months can be achieved if those capacities are utilized for wood chips production for other buyers as well. Demand for wood chips is increasing with development of wood pellet capacities, initiatives for CHP development, and other DH systems and there is additional wood chips utilization growth potential in individual users such as touristic capacities and the industry.

Info Quantity

Wood chipper capacity (t/h) 10.00 Wood chipper capacity (t/a) 21,120.00 Wood chipper capacity utilization (%) 70 Wood chips production for DH plants Prijepolje, Priboj and Nova Varoš (t/a) 9,000.00 Wood chips production for other buyers (t/a) 5,784.00 Share of wood chips production for DH plants Prijepolje, Priboj and Nova Varoš (%) 61 Share of wood chips production for other buyers (%) 39 Woody biomass (t/a) 16,474.00 Optimal mix – wood on stump (%): wood on forest road (%): sawmill residues (%) 10:10:80

T-22: Operational costs

Annual operational costs based on above mentioned inputs are presented below.


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Costs €

Salaries - (1x1.300 € gross + 3x900 € gross)*12 months 48,000 Woody biomass 405,580 Woody biomass transport 49,421 Manipulation, loading unloading 22,176 Wood chips transport 44,352 Wood chipping 65,894 Indirect costs including utilities and maintenance - 10% of operational costs 63,542 Total Operational costs 698,966

T-23: Operational costs

7.3. Incomes Unit prices for wood chips sale and planned incomes are presented in table below.

Info Price

Conifer wood chips (€/bulk m³) 12.27 Broadleaves wood chips (€/bulk m³) 18.04 Average price at 50%:50% conifer: broadleaves mix (€/bulk m³) 15.15 Average price of wood chips (€/t) 55.00 Incomes from wood chips sale to DH companies (€/a) 495,000 Incomes from wood chips sale to other buyers (€/a) 318,120 Total revenues from wood chips sale (€/a) 813,120

T-24: Incomes

7.4. Economic indicators: iRR, NPV, BCR, sensitivity analysis Cash flow for 20 years of operation, along with incomes and costs is presented in chart below. Cash flow is based on the assumption that production capacities will not grow, that machinery will be replaced on the middle of the cycle and that infrastructure and object will retain their value at the end of 20 year cycle.

C-3: Costs, incomes, balance Table below presents Net present value (NPV), internal rate of return (IRR), payback period and Benefit-cost ratio (BCR).


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year=n Incomes (€) Costs (€) Balance (€) PV (€)

0 813,120 -1,218,966 -405,846 -405,846

1 813,120 -698,966 114,154 90,459

2 813,120 -698,966 114,154 71,682

3 813,120 -698,966 114,154 56,802

4 813,120 -698,966 114,154 45,011

5 813,120 -698,966 114,154 35,668

6 813,120 -698,966 114,154 28,264

7 813,120 -698,966 114,154 22,397

8 813,120 -698,966 114,154 17,748

9 913,120 -1,018,966 -105,846 -13,040

10 813,120 -698,966 114,154 11,145

11 813,120 -698,966 114,154 8,831

12 813,120 -698,966 114,154 6,998

13 813,120 -698,966 114,154 5,546

14 813,120 -698,966 114,154 4,394

15 813,120 -698,966 114,154 3,482

16 813,120 -698,966 114,154 2,759

17 813,120 -698,966 114,154 2,187

18 813,120 -698,966 114,154 1,733

19 1,013,120 -698,966 314,154 3,779

∑

16,562,400 -14,819,311 1,743,089 0

BCR 1.1176228 IRR 26.20%

T-25: Economic indicators: NPV, IRR, return of investment and BCR

Investment can be returned in the fifth year of operations. Benefit cost ratio is 1.1176, while internal rate of return is 26.20 %. Table below present sensitivity analysis in terms of economic indicators oscillations in case of input growth by 10 % - increase of costs and output drop of 10 % - decrease of incomes.

year=n

Input grow 10% Output drop 10%

Incomes (€) Costs (€) Balance (€) Incomes (€) Costs (€) Balance (€)

0 813,120 -1,340,862 -527,742 731,808 -1,218,966 -487,158

1 813,120 -768,862 44,258 731,808 -698,966 32,842

2 813,120 -768,862 44,258 731,808 -698,966 32,842

3 813,120 -768,862 44,258 731,808 -698,966 32,842

4 813,120 -768,862 44,258 731,808 -698,966 32,842

5 813,120 -768,862 44,258 731,808 -698,966 32,842

6 813,120 -768,862 44,258 731,808 -698,966 32,842

7 813,120 -768,862 44,258 731,808 -698,966 32,842

8 813,120 -768,862 44,258 731,808 -698,966 32,842

9 913,120 -1,120,862 -207,742 821,808 -1,018,966 -197,158

10 813,120 -768,862 44,258 731,808 -698,966 32,842

11 813,120 -768,862 44,258 731,808 -698,966 32,842

12 813,120 -768,862 44,258 731,808 -698,966 32,842

13 813,120 -768,862 44,258 731,808 -698,966 32,842

14 813,120 -768,862 44,258 731,808 -698,966 32,842

15 813,120 -768,862 44,258 731,808 -698,966 32,842

16 813,120 -768,862 44,258 731,808 -698,966 32,842

17 813,120 -768,862 44,258 731,808 -698,966 32,842

18 813,120 -768,862 44,258 731,808 -698,966 32,842

19 1,013,120 -768,862 244,258 911,808 -698,966 212,842

∑ 16,562,400

-16,301,242 261,158

14,906,160

-14,819,311 86,849

IRR 3.47% IRR 1.278%

BCR 1.02 BCR 1.01

T-26: Sensitivity analysis

Sensitivity analysis confirms profitability of cluster supply companies operations.


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8. Cluster supply vs. individual supply - Comparison Comparison of individual and cluster supply is performed based on economic indicators and business operations including biomass supply and delivery. 8.1. Economic indicators Basic indicators for cluster and individual supply are compared in table below. Calculations for individual supply are based on data presented in the review of individual supply in chapter 5. Basic points for comparison are equal prices of woody biomass and wood chips, equal wood chipping capacity utilization and equal unit costs of workforce with reduced number of workforce compared to cluster supply. Wood chipper capacities for individual supply are reduced according to individual DH demand, therefore their price of wood chipper is reduced as well, but costs of wood chipping operations are increased. Number of trucks and investment in storage is also reduced in individual supply compared to cluster supply. However, in order to utilize capacities of wood chippers and other machinery necessary for independent operations in individual supply for individual supply we have made an assumption that part of wood chips is sold to other buyers as well.

Supply

Wood chipper capacity

t/h

Capacity utilization

Woody biomass

demand t/a

Share of DH

demand in total wood

chips sale

IRR BCR

Sensitivity

Output drop 10% Input grow 10%

IRR BCR IRR BCR

Prijepolje individual

3 70% 4,942 67% -6% 0.94 -16% 0.86 / 0.84

4 70% 6,589 50% -1% 0.99 -14% 0.9 -15% 0.89

5 70% 8,237 40% 5% 1.03 -11% 0.91 -13% 0.92

Priboj individual

4 70% 6,589 82% -1% 0.99 -13% 0.9 -15% 0.89

5 70% 8,237 66% 4% 1.03 -11% 0.93 -13% 0.92

6 70% 9,884 55% 10% 1.05 -9% 0.95 -10% 0.94

Nova Varoš individual

3 70% 4,942 27% -5% 0.95 -16% 0.87 / 0.86

4 70% 6,589 20% 0% 1.00 -13% 0.91 -15% 0.91

5 70% 8,237 16% 7% 1.04 -11% 0.94 -12% 0.93 Cluster supply 10 70% 16,474 61% 26% 1.12 3% 1.02 1% 1.01

T-27: Comparison of economic indicators of cluster and individual supply

According to parameters included individual supply for Prijepolje can be profitable only if wood chipper capacity of 5 t/h is used and its capacity is utilized for 70 %. This also means that operations in individual supply of Prijepolje should result in sale of 60 % of produced wood chips to other buyers and 40 % to Prijepolje DH operator. However, sensitivity analysis is negative in this case as well. According to parameters included individual supply in Priboj, can be profitable is wood chipper capacity of 5 t/h or 6 t/h is used and capacity is utilized for 70 %. This also means that operations in individual supply of Priboj should result in sale of 34 – 45 % of produced wood chips to other buyers, or 55 % - 66 % to Priboj DH operator. However, sensitivity analysis is negative in both cases. Finally, according to parameters included individual supply of Nova Varoš can be profitable if wood chipper capacity of 5 t/h is used and its capacity is utilized for 70 %. This also means that operations in individual supply of Nova Varoš should result in sale of 84 % of produced wood chippers to other buyers and only 16 % to Nova Varoš DH operator. Like in previous cases sensitivity analysis is negative. Based on analysis of economic indicators we can conclude that independent organization of individual supply focusing on procurement of wood chips for DH plants is not profitable and can be sustainable only as a part of larger operations which dominantly focus on supply to other buyers, except in the case of Priboj. In case of individual supply for Priboj it is possible to dominantly supply DH operator, but there is a profitability in question. On the other hand cluster supply is profitable and sustainable. Apart from stable supply cluster supply should also create profit for Joint Company of PP, PB, NV or PPP.


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8.2. Biomass supply and delivery Apart from profitability, individual supply model needs more biomass to be processed for wood chips supply of DH systems and other buyers in order to be profitable. As presented in table below, on order to achieve minimal level of profitability three separate individual systems of supply need to process around 26,000tons of woody biomass. In case of cluster supply, with processing 16,000tons much better economic indicators are achieved.

Info/supply model Individual Prijepolje

Individual Priboj

Individual Nova Varoš

Individual PP+PB+NV

Cluster supply

Woody biomass (t/a) 8,237 9,884 8,237 26,358 16,474 Wood chips production (t/a) 7,392 8,870 7,392 23,654 14,784 Chippers 1 x 5 t/h 1 x 6 t/h 1 x 5 t/h 3 x 5-6 t/h 1 x 10 t/h Trucks 1 1 1 3 2 Trailers 2 2 2 6 2 Telescopic handlers 1 1 1 3 1 Employees 3 3 3 9 4 Investment costs (€) 340,000 340,000 290,000 1,030,000 520,000 Operational costs (€/a) 382,124 450,364 382,124 1,214,612 696,966 Incomes (€/a) 406,560 487,872 406,560 1,300,992 813,120 (Incomes-Operational costs) per ton of produced wood chips (€/t)

3.31 4.23 3.31 3.65 7.86

T-28: Comparison of cluster and individual supply

In addition in individual supply model, more personnel needs to be employed and more machinery needs to be procured, resulting in larger combined investments needed than in case of cluster supply. Finally, total annual costs of individual supply when combined for three municipalities is higher than in cluster supply. Also incomes are higher in case of individual supply than in cluster supply, however operation profit of individual supply separated and combined is far lower than in case of cluster supply. We can conclude that cluster supply is economically and operationally more advantageous than individual supply.


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9. Stakeholder analysis Stakeholder analysis was based on the interview survey conducted with municipalities’ of Prijepolje, Priboj and Nova Varoš representatives (including DH representatives), state forest managers and most important wood processors (table below). We have identified individual private forest owners pending for restitution of over 500ha, however since they still do not own and manage the forests we have not included them in the analysis. Also, Serbian Orthodox Church which owns over 600ha does not manage the forests, but have management contract with PE Srbijašume. List of interviewed organizations and representatives is presented in Annex I. Questionnaire is presented in Annex II. Different parts of the questionnaire is used for different groups – municipalities; state forest manager and wood processors. 9.1. Propensity of municipalities to establish cluster supply model Municipalities’ representatives, have similar opinion on political context of biomass utilization. All have agreed that effects of biomass utilization include reduction of energy dependence, reduction of CO2 emissions and reduction of heat costs. Biomass based heating will also introduce 24-7 heating for customers, and possible reduction of heating price after investment is repaid. This can have positive effect on expansion of town’s district heating networks. Municipalities’ representatives agree that mutual cooperation between municipalities is very important. However they have also stressed that it is hard to establish functional cooperation and that they have experience in cooperation in Joint regional waste management company Banjica doo (owned by Prijepolje, Priboj, Nova Varoš and Sjenica) which is still not operational. Also it was stressed that cooperation can be possible only if politics is set aside and clear rules for professional management are established. Municipalities’ representatives agree that PPP is a good model if clear rules are set, and interest are expressed in very beginning. Private partner is much more flexible that public administration or companies, therefore it can represent an efficient solution. However it is also stressed that PPP procedure is very slow and that municipality of Priboj lost one private partner for PPP in DH development due to very slow procedures. Municipalities are in different phases of fuel switch development. Prijepolje and Nova Varoš still do not have clear concept of boiler houses in which biomass will be introduced. Also they do not have clear concept about investment, loan or introduction of PPP. Priboj on the other side have clear concept and idea to apply for loan for DH construction. On the other hand Priboj is faced with unresolved property issues between Priboj municipality and FAP former company which is in restructuring process and negotiations on privatisation. Those property issues already resulted in postponing credit applications and not utilizing funds for the DH construction planned by the Municipal Budget for 2015. Nevertheless, all municipalities’ representatives expect to continue fuel switch process and all perceive savings and increase of heating quality as most significant effects of the fuel switch. Municipalities’ representatives believe that there is more than enough woody biomass to cover the demand of existing buyers and new demand emerging from future DH systems. All studies performed so far have confirmed woody biomass availability and according to interviewees it is evident that sanitary harvest and collection of forest residues is not performed adequately. Also, in case of Priboj, potential lack of woody biomass can be compensated with import from Bosnia and Herzegovina or Montenegro. In regard to cooperation with PE Srbijašume, FE Prijepolje as forest manager, municipalities’ representatives claim they do not have problems, but also the communication and cooperation is not intensive. Most claimed, that it would be good if cooperation can be improved, but some claimed it is not acceptable that municipalities have no jurisdiction over state owned forest and just the costs related to road repairs and damages caused by forest management and wood transport operations. In regard to possible separation of operations related woody biomass supply from heat


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production representatives agree that this can be one concept, although most considered to use existing DH companies’ structures for woody biomass supply. In regard to mutual cooperation between Prijepolje, Priboj and Nova Varoš, municipalities’ representatives confirmed that they have good relations and that cooperation should be improved and that mutual problems should be resolved in joint actions. Off course every municipality needs to find and protect its own interested in this cooperation. However, experience with Banjica doo, shows that development of joint company is very slow. Company is established in 2013 and it is still not operational with unresolved financing. One of the problems lies in procedures determined by the Law on municipalities, Law on communal business and Law on public procurement, since al the plans from financing to public procurements for every year or in case of amendments need to be adopted by assemblies of all municipalities involved, which complicates the process. It is also stressed that there are no legal or political impediments for establishment of joint companies between municipalities, but it is very hard to make them functional. Also, they agree that there are no legislative impediments for including private partner in joint company with several municipalities. They had similar example in case of Banjica doo, where private partner expressed interest to invest and there were no impediments identified. However, one of the opinions expressed is that in case of institutional PPP between municipalities and private partner, same functional impediments will occur, since all decisions and plans would need again to be adopted by municipalities’ assemblies. On the other hand in case of contractual PPP with private partner this impediments would be prevailed, since technically there will be no joint company between municipalities and the private partner, but cooperation will be implemented via long term contract for services. Again it was repeated that PPP process is very slow, and both private partners and municipalities do not have much time. All representatives agreed that there are no political impediments for implementation of joint projects between Prijepolje, Priboj and Nova Varoš. In terms of financial impediments situation is ambivalent, some claimed that there are no finances, while other claim that it is possible to procure finances for DH switch and woody biomass supply. All have also confirmed that they can be interested in cooperation in woody biomass supply especially if it can be efficient than individual supply. All municipalities are interested also in including private partners in wood chips supply. Municipalities’ representatives do not think that is really possible that each of the municipalities’ in question establish own company for wood chip to DH individual supply. For all municipalities it is realistic to organize supply within DH system operators. Additional problem is in limited number of employees in local administration and local public companies, imposed by recently adopted Law on Procedure for Determination of Maximal Number of Employees in Public Sector, which requires reduction of existing number of employees. In order to establish a public company municipality first needs to reduce the number of existing employees and create space for new employees in new company, which is very difficult. In regard to municipalities’ interest for participation in establishment of a company which will supply all three district heating systems with biomass, representatives have different attitudes. For Prijepolje and Priboj, it is possible if there are economic benefits and if town’s assembly accept this decision, while for Nova Varoš this seems impossible due to restrictions in future employments in public sector. For Prijepolje and Priboj representative basic precondition for establishment of such company is definition of shares, investments and organization, while for Nova Varoš representative, basic precondition would be to reduce number of existing employees, which is hardly feasible. In regard to municipalities’ interest to develop a joint company (Prijepolje, Priboj, Nova Varoš) with private partner included, Prijepolje representative would like to assess the benefits of such organization, while Priboj representative finds PPP as a very slow process. On the other side, Nova Varoš, representative PPP makes sense in case of contractual PPP for energy production, where private partner would produce the energy (including wood chips supply) and Nova Varoš Company Energija Zlatar doo would perform energy distribution. In order to facilitate the impediments of PPP development, municipalities’ representatives claim it is necessary to define clear rules and obligations between partners and to improve regulation related to PPP in terms of speeding up the procedure. Also, legislative framework for local administration needs to be improved.


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9.2. Propensity for biomass supply Interviews with PE Srbijašume representatives and wood processors (Jela Star doo, Prijepolje; Koran doo, Priboj; Omoprom doo, Bistrica; Zlatar Sped doo, Kokin Brod) was performed in order to determine propensity to participate in woody biomass supply or partnership with municipalities in cluster supply organization. Most important data about forestry and wood production is already presented in chapter 4.4 of this Report. It is obvious that harvesting is lower than planned according to General Forest Management Plan for Limsko forest area. According to PE Srbijašume representative, reasons behind are in inadequate road network which is developing. Every year FE Prijepolje builds around 9-10 km of hard forest roads. Prijepolje is one of the rare forest estates in PE Srbijašume system which poses all mechanization necessary for road construction and maintenance. Fulfilment of road construction plan will eventually increase harvesting for 15-20 % in next few years. Representative of FE Prijepolje claims that potentials for utilization of forest residues in state forests are very limited. Conifer stands and selective harvest is dominant, and it is very hard to organize cost efficient mobilization of forest residues in such management system and existing harvesting practice. In private forests utilization of forest residues can be feasible, especially in case or regenerative harvests in beech forests, which are dominant in private forests. Another issue in woody biomass mobilization lies in application of wood product method in state forests, and according to representative of FE Prijepolje it is unlikely that application of whole tree or part of the tree method would be allowed recently. Even though it would be beneficial for woody biomass utilization, since costs of mobilization could be significantly lower. Part tree method is occasionally used in private forests, where applicable. It is confirmed that demand for wood and woody biomass is very high, and that only 2-3,000 tons of forest residues per year can be supplied to DH systems. Even though costs of those residues mobilization would be substantial. According to representative of FE Prijepolje, cooperation with municipalities of Prijepolje, Priboj and Nova Varoš is good and FE Prijepolje pays all taxes and other obligations toward local administration. FE Prijepolje is opened for discussion about supply of municipalities’ district heating systems only if market conditions are met, and in this case they see no impediments for cooperation. Also, representative of FE Prijepolje expressed his opinion on supply from private forests to DH systems – it can be possible but only if DH systems are buying wood at same or better prices then private forest owners or wood traders already get for firewood and if DH systems can pay private forest owners immediately upon delivery. As confirmed by representative of FE Prijepolje, most important wood processors in Limsko forest area are: Jela Star doo; Zlatar Sped doo; Makom; Nanix wood; Sucevic; Omorika and Omoprom. We have managed to interview several of them. Interviewed wood processors claim that demand for sawn wood is much lower than for sawmill residues. Most of sawmills rely on log supply from forest areas other than Limsko, and all of the interviewed claim Limsko forest area can provide less than 40 % of their demand, so they rely on log supply from Bosnia, Montenegro, Tarsko-Zlatiborsko and Moravicko forest area. Demand for sawmill residues is constantly growing, due to increase of production capacities of existing wood pellet factories (Jela Star and Nanix wood) and chipboard factory (Kronospan Srb doo). There are over 100 wood processors in the area, however pellet factories such as Jela Star cannot satisfy its demand from local producers. They supply with around 50 % of woody biomass from Montenegro and significant quantities they deliver from Moravicko forest area, National Park Kopaonik and National Park Tara. Apart from Jela Star doo, Zlatar Sped doo also have an experience in biomass processing, since they have participated in development of Nanix Wood pellet factory, however they do not participate as owners of Nanix Wood anymore but continue to supply the factory with sawdust and solid sawmill residues. Omoprom also supplies Jela Star with sawmill residues and Kronospan with sawdust and have considered wood pellet production, while Koran claim they supply Kronospan with forest residues form their sawmills in Bosnia.


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As the largest wood chips producer in Serbia, Jela Star have been trying to establish cooperation with municipalities in DH systems supply with wood chips. However, Jela Stars’ interest in wood chips supply is significantly reduced since they have increased their wood pellet production capacities. Their annual requirements for pellet production is over 100,000 tons of wood chips and they are already under pressure for procuring needed quantities. Koran is interested for wood chips supply, especially for Priboj, while Omoprom is interested to participate in individual and cluster supply. Omoprom also have excellent location, usable for central biomass storage in case of cluster supply. Zlatar Sped can be interested for DH supply, especially on long term or PPP basis, both cluster and individual depending on wood chips prices. Zlatar Sped also already have wood chippers and storage capacities. As a major impediments Jela Star perceive slow decision making process inside local administration, while other interviewed companies’ representatives do not see major impediments.

9.3. Envisaged impediments Most important identified impediments for establishment of cluster supply model are following:

- Different level of propensity to partake in Joint Company establishment and/or PPP by municipalities of Prijepolje, Priboj and Nova Varoš;

- Possible disputes between potential partners (PP, PB, NV or PPP) about ownership shares and financial obligations;

- Different development level of fuel switch implementation in municipalities of Prijepolje, Priboj and Nova Varoš;

- Financial impediments for investments by municipalities; - Slow decision making process in local administration; - Potential issues in functionality of future Joint Company PP, PB, NV or institutional PPP; - Impediments for staff employment in public sector; - Time consuming procedures for implementation of PPP projects; - Attractiveness of contractual PPP for heat production; - Inadequate cooperation between PE Srbijašume and local administration; - Low propensity of PE Srbijašume to facilitate development of woody biomass mobilization; - Existing forest management practise and harvesting methods in state and private forests; - Increased demand for woody biomass, especially sawmill residues from Limsko forest area; - Possible price escalation for woody biomass and sawmill residues as a result of increased

demand and competition. Due to different reasons, municipalities of Prijepolje, Priboj and Nova Varoš expressed different level of propensity to partake in establishment of Joint Company or PPP which will organize cluster supply. There seems to be no consensus in terms of basic points such as concept of cooperation between municipalities and PPP. Even those who are opened for this kind of cooperation, might have disputes about ownership shares and financial obligations. In addition Prijepolje, Priboj and Nova Varoš are in different level of fuel switch implementation in their DH systems, which means they will probably make the switch in different time thus some would need wood chips supply sooner than others. Even though it is not expressed by all municipal representatives, financial impediments for investments and operations financing should always be taken into account. One of the impediment lays in slow decision making process in local administration and dependence of political support in the municipal assemblies. Slow decision making process and need for approval of future company’s decisions in municipal assemblies imposed by Law on local administration, Law on public companies, Law on public procurement and Law on communal business is perceived as an impediment which can affect functionality of future Joint Company or institutional PPP. Another envisaged impediment is in limitation of number of employees in public sector, which can disable establishment of new companies, in municipalities that have more employees per capita then required by the Law. Next impediment is related to slow procedures for implementation of PPP projects required by the Law on PPP and concessions. Also, if PPP is what municipalities are after contractual PPP for heat


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delivery with only one private partner and one municipality can be more attractive than PPP in wood chips procurement and cluster supply, due to no investments required from the municipality for fuel switch in DH plants. On the other side, for some municipalities it can seem that such PPP can offer an individual and complete solution. Inadequate or insufficient cooperation between municipalities and PE Srbijašume can also be regarded as an impediment for woody biomass supply in general and cluster supply. In addition it seems that PE Srbijašume have very low propensity to facilitate development of woody biomass mobilization. Reasons for this may lay in increased demand for low quality wood or in inadequate condition of forest infrastructure or in nonexistence of PE Srbijašume's own capacities for harvesting. Nevertheless, existing forest management practise and harvesting methods in both state and private forests are one of the major impediments for woody biomass supply in general. On the other hand increase demand of available biomass, such as sawmill residues from Limsko forest area can also be regarded as impediment for development of cluster supply. Such demand and competition can result in escalation of woody biomass and especially sawmill residues prices in future.


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10. Conclusions Cluster supply model presented in this Report can be implemented by two, three or more municipalities with or without a private partner. Also, such model can be implemented in other municipalities as well, or private companies can use the model if organizing wood chips delivery to DH systems, CHPs, pellet factories or other buyers. Prior to the implementation mutual consensus of partners on the concept, ownership, management and operation structure needs to be achieved and most important envisaged impediments need to be removed.

10.1. Definition of adequate ownership, management and operation structure First of all municipalities need to decide about the concept – Joint public company established by municipalities or PPP established by municipalities and a private partner. It is also possible to start with establishment of joint company and include private partner later. In case of Joint public company, municipalities should procure financing for investments and start of operations, however profit will remain inside the public company. In case of institutional PPP municipalities may probably not need to procure financing, however most of the profit will remain at private partners’ depending on ownership share, while benefits for municipalities will be in secure supply. Benefits for private partner is in development of secure market for wood chips. In case of contractual PPP municipalities can count on possible savings in fuel procurement and secure supply. Adequate ownership structure in Joint Company whether public or established in PPP needs to be defined in negotiation process between partners. Formula on ownership structure presented in chapter 6.3 of this report encompassing shares determination based on secured market – DH demand and investment level including location can be a starting point in negotiations. If municipalities have more influence on forest management woody biomass origin can also be included in the formula, however in current forest management system, where municipalities are not included or consulted about forest management, this does not make sense. Considering that location for central storage provision should be included in the ownership formula determination, location needs to be defined. In case of joint company, established only by municipalities, adequate location on municipal or state owned land should be defined. In case of PPP location can be provided by private partner or also by one of the municipalities involved. Locations presented in chapter 6.5 of this Report can be taken into considerations and other existing potential locations need to be analyzed as well. After initial negotiations between partners (municipalities and/or private parent) in case of joint company or PPP, final decision needs to be adopted by municipalities’ assemblies, thus can be influenced by local political process. Nevertheless in case of mutual consensus and presentation of benefits, this process can be facilitated, though it takes time. In case of joint company established only by municipalities, company should be registered according to defined procedures within the Agency of Commercial Registry and according to the Law on public companies, however in case of PPP the whole project needs to be submitted for evaluation of PPP commission according to Law on PPP and concessions. Management and operation structure should be determined by the partners and later on confirmed by municipalities’ assemblies, along with financial plan and procurement plan. In case of Joint Company and institutional PPP the company will be subjected to the Law on public procurement, from procurement of loans to procurement of machinery. Machinery presented in chapter 6.6 of this Report can be procured, however other adequate solutions can also be achieved, however level of investment can influence economic indicators on one side. On the other side, procurement of inadequate of insufficient machinery can reduce production output or increase operational costs thus again affecting economic indicators. Considering staff and organizational structure presented in chapter 6.7, it also can be amended to a certain point if not significantly increasing defined budget and affecting economic indicators. Operations of woody biomass supply and wood chips can be organized as presented in chapter 6.4 or amended depending on woody biomass producers’ practice and market situation.


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10.2. Impediments removal Municipalities have different level of propensity to partake in Joint Company establishment and/or PPP by municipalities of Prijepolje, Priboj and Nova Varoš and this is a crucial impediment for development of cluster supply. Such impediment can be removed if positive aspects of cluster supply are presented in adequate manner and compared with individual supply. This impediment can also be removed if cluster supply concept is widely communicated and obtains support from other stakeholders on local or national level. If propensity to partake in joint company establishment is achieved, and clear commitment exist, than possible disputes between partners’ shares and financial obligations can be mitigated in negotiation process. Municipalities in question already have experience in joint company establishment, where they managed to negotiate partnership shares. Different development level of fuel switch implementation in municipalities in question, can be resolved if municipalities commitment for cluster supply is achieved. In case one of municipalities perform the switch earlier it can supply based on annual contract with individual suppliers, or cluster supply can be organized and started supplying one DH plant at the beginning and adding the others as they make progress in fuel switch. Financial impediments for investments by municipalities can be resolved either in loan procurement or in PPP where private partner bares most of investment costs. In case of loan procurement, repayment can be financed from the profit made in cluster supply operations. Another way is to apply for the financial means for projects at EU or other available funds. There are examples of waste management companies owned by municipalities in Serbia, which have managed to procure finances for development. Slow decision making process in local administration and potential issues in functionality of future Joint Company or PPP is an impediment which can be resolved in case of clear commitments of the partners involved. There are examples of successful operations of joint companies owned by several municipalities in Serbia20. Change of legislation oriented to improvement of efficiency of local public companies and local administration can help in resolving this impediment. As for impediments for staff employment in public sector, Law on Procedure for Determination of Maximal Number of Employees in Public Sector does not relates to public companies. In addition joint company should be profitable and self-sustainable and mentioned Law advises local authorities to conduct rationalization by associating with other local administrations in order to achieve joint and rational conducting of affairs in municipalities’ jurisdiction if it does not result in increase of number of employees not the budget. Compared to individual supply, cluster supply is more cost efficient. Time consuming procedures for implementation of PPP projects is envisaged as an impediment. However, it is a new Law and it does take time for the administration to find most efficient way for its implementation. The only way to remove this impediment is to change regulation related to PPP in order to speed up the procedures. It is questionable though if speeding up procedures can have a negative effect on protection of public or private interests. Contractual PPP for heat production seems as an attractive solution for some municipalities. Major benefits for local administration is in the fact that private partner will invest and produce heat and municipality will get secure supply of heat. However, maintenance of the network and distribution will remain to be operated by municipal DH Company and it is questionable if in poor network condition, quality of heat supply can be improved. Private partner will make its profit based on the savings made by lower costs of woody biomass based heating compared to fossil fuels, and the price of heat for end consumers will probably remain the same. The biggest issue lies in payment of end consumers and the fact that DH distributer needs to procure finances for buying the energy, but also maintenance and improvement of DH network. Inadequate cooperation between PE Srbijašume and local administration exist from the establishment of centralized state forest management company. It would be beneficial if local administration but also other local stakeholders are included in forest management planning process,

20Such as Regional Waste Management Company in Subotica http://www.deponija.rs


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but in existing forest management system it is impossible to include local administration representatives in forest management decisions. Until 1991, forest management system in Serbia was decentralized where forest companies were established at municipal or regional level and local administration was included in decision making related to forestry. Decentralization in general can bring significant benefits for local and regional development, including decentralization of forestry. In addition, PE Srbijašume and other state forest management companies so far expressed a little effort to facilitate development of woody biomass mobilization. Maybe they have not recognized the potential of woody biomass as a product, although most of produced wood is eventually sold to wood pellet or chipboard factories. State forest management companies are also faced with other problems such as non-existence of forestry mechanization and poor condition of forest infrastructure. There are examples in the region such as Croatia where state forest management company Hrvatske šume doo established a specialized company for woody biomass mobilization and managed to significantly improve biomass utilization and increase wood chips production. Nowadays Hrvatske šume are developing DH projects together with municipalities and procure biomass needed. Existing forest management practise and harvesting methods in state and private forests is another impediment for increase of forest residues utilization. Introduction of whole tree or part of the tree method, where woody biomass is extracted in trunk along with logs and other products to be produced at the central storage will bring benefits not only for woody biomass supply but cost efficiency of harvesting operations in general. This method was applied in Serbia until the nineties and possible damage application of this method can bring to the forests are far lower than economic benefits. In addition significant volumes of woody biomass are in young forest stands, especially conifer plantations. Those plantations need first selective cuttings, which are usually not performed since they are not considered as profitable. Even subsidies from the Ministry of agriculture existed until recently, but have not been utilized. Application of first selective cuttings in young forest stands as a silviculture measure should again be subsidised thus increased, and material can be used for wood chips production. Finally, impediment faced in increased demand for woody biomass, especially sawmill residues from Limsko forest area can be resolved if production of both private and state forests is increased. In order to achieve increase of production it should be invested in forest infrastructure. Possible price escalation for woody biomass and sawmill residues as a result of increased demand and competition can occur. One of the ways to tackle with this impediment is to make partnerships with wood processing private partners or make long term supply contract and competitive prices to suppliers. Also, price escalation of wood needs to be included in price correction when wood chips is sold to DH plants.


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11. Sources 2015. Djakovic, D., Gvozdenac Urosevic, B., Urosevic, D. 2015. Logistics concept of district heating

supply with woody biomass (wood chips) in the municipalities of Prijepolje and Mali Zvornik. GIZ DKTI

2015. Djakovic, D., Gvozdenac-Urosevic, B., Urosevic, D. Design of logistic concepts for wood biomass supply chains for district heating plants in municipalities of Priboj, Novi Pazar, Bajina Bašta and Nova Varoš. GIZ DKTI

2009. Glavonjic, B., Petrovic, S., Savic, R., Radovic, S., Jovic, D., Sretenovic, P., Pajovic, Lj. Potentials for Commercial Utilization of Woody Biomass for Energy Production and Economical Development of Municipalities: Nova Varoš, Priboj and Prijepolje. Project: Stimulating Renewable Energy Sources on Local Level. Ministry of Forestry, Agriculture and Water Management; UNDP Belgrade Office; Local administration of Nova Varoš, Priboj and Prijepolje; Faculty of Forestry, Belgrade University; PE Srbijašume, FE Prijepolje.

2009. PE Srbijašume, Forest Management Planning burro. General Forest Management Plan for Limsko forest area (2010-2019), adopted by the Ministry of Forestry, Agriculture and Water Management.

2014. R. Bahnmüller, B. Brändle, F. Eckert, V. Milijic, D. Orlic, M. Ortner, P.Vasiljevic, M. Watzal. Pre-Feasibility Studies on 15 Biomass CHP-plants for District Heating Companies in Serbia. iC consulenten Ziviltechniker GesmbH, Vienna for KfW.

2012. USAID. Prefeasibility Assessment of Biomass District Heating Applications in Serbia, which covered Nova Varoš and Priboj among other 8 municipalities in Serbia; 2014. NALED. Action Plan for Biomass Co-generation Plant Construction in Nova Varoš; 2014. Tri E burro. Expertise for Enhancement and Modernization of Existing District Heating Systems in Nova Varoš; 2014. Biomasa Grupa doo. Feasibility Study for District Heating System for Public and Residential Objects in Nova Varoš; etc.

http://app.claas.com/2013/scorpion/en/

http://popis2011.stat.rs/?page_id=2162

http://www.cat.com/en_GB/products/new/equipment/telehandlers.html

http://www.deponija.rs

http://www.eschlboeck.at/en/

http://www.foragrobio.rs/

http://www.heizomat.de/int/holzhackmaschinen.php?id=heizohack&lang=DEU

http://www.jenz.de/hersteller-fuer-biomasseaufbereiter-mobilhacker-stationaerhacker-chippertrucks-nachzerkleinerer/

http://www.manitou.com/en/

http://www.regionalnirazvoj.gov.rs/Lat/ShowNARRFolder.aspx?mi=171

http://www.terra-srbija.co.rs/RS/default.aspx


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12. Annexes

12.1 Annex I: List of interviewed persons Person Position, organization

Dimitrije Paunovic President of Municipality of Nova Varoš

Emir Hasimbegovic President of Municipality of Prijepolje

Sasa Vasilic President of the Assembly of Municipality of Priboj

Nenad Todorovic Director of Zlatar Energija, Nova Varoš

Besim Hadzalic Head of DH system in JKP Lim, Prijepolje

Milan Baranac Director of FE Prijepolje, PE Srbijašume

Djordje Ljujic Owner of Jela Star doo, Prijepolje

Kosta Ranitovic Owner of Koran doo, Priboj

Dusan Stojic Owner of Omoprom doo, Nova Varoš

Slavko Jevremovic Production Manager of Zlatat Sped doo


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12.2 Annex II: Interview questionnaire

Ispitanik/Organizacija/vreme intervjua

Interviewee/Organization/Time of the interview

Lokalna Administracija/Local administrations

1.1. Opšte informacije, površina, stanovništa (seosko, gradsko)/General info

1.2. Koji su najvažniji zakonski okviri za rad lokalne samouprave?/Most important legislative framework for local administration

1.3. Finansije/Finances

1.3.1. Koliki je ukupan realizovan budžet Vaše opštine za 2013 ili 2014?/Realized budget in 2013 or 2014

1.3.2. Investicije/Investments

1.3.3. Novi objekti/New objects

1.3.4. Rekonstrukcije/Reconstructions

1.3.5. Održavanja/Maintenance

1.3.6. Građevinski radovi/Contruction work

1.3.7. Domaća oprema i montiranje/Domestic equipment and mounting

1.3.8. Strana oprema i montiranje/Imported equipment and mounting

1.4. Kavon je Vase viđenje političkog konteksta korišćenja biomase u toplanama?/What is you view on political context of biomass utilization in DH plants?

1.5. Kakvo je Vaše viđenje političkog konteksta međusobne saradnje više opština?/What is your position of political context of cooperation between municipalities?

1.6. Kakvo je Vaše višenje političkog konteksta saradnje opština sa privatnim partnerima?/What is your view on political context of PPP?

1.7. Kakva je trenutna situacija vezana za promenu goriva u toplani u Vašoj Opštini? Kakav je plan?/What is the fuel switch situation in you municipality? What is the plan?

1.8. Šta bi, po Vašem mišljenju trebalo da bude glavni efekat promene goriva u toplani u Vašoj Opštini?/What should be the most important effect of fuel switch in DH plant in your municipality?

1.9.

Da li su šumski resursi limskog šumskog područja, dovoljni da zadovolje trenutnu tražnju na tržištu drveta, i da pritom obezbede dovoljno energenata u slučaju da toplane PP, PB i NV pređu na biomasu kao dominantan energent?/Are forest resources in Limsko forest area abundant enough to fulfill current demand of wood market and future demand in case DH plants in PP, PB and NV make fuel switch?

1.10. Kakva je saradnja lokalne samouprave sa preduzećem za gazdovanje šumama?/How would you describe cooperation between local administration and state forest management company?

1.11. Kakav je stepen saradnje između opština Prijepolje, Priboj i Nova Varoš?/What is the level of cooperation between municipalities of Prijepolje, Priboj and Nova Varoš?

1.12. Da li smatrate da je moguće odvojiti organizaciju proizvodnje toplotne energije of organizacije snabdevanja drvnom biomasom?/Do you think it is possible to separate organization of heat production from woody biomass supply?

1.13.

Da li su opštine Prijepolje, Priboj i Nova Varoš učestvovale u sprovođenju zajedničkih projekata? Ako da, opišite na koji način? I kakvi su rezultati ostvareni? Da li bilo problema u saradnji?/Have municipalities of Prijepolje, Priboj and Nova Varoš already participated in implementation of joint projects? If yes, please describe. What were the results? Were there any problems?

1.14. Da li postoje zakonske ili administrativne prepreke za sprovođenje zajedničkih projekata više opština u Srbiji?/Are the any legislative or administration impediments for implementation of joint projects between municipalities in Serbia?


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1.15. Da li postoje zakonske ili administrativne prepreke za sprovođenje zajedničkih projekata više opština u Srbiji sa privatnim partnerima?/Are there any legislative or administrative impediments for implementation of joint projects between several municipalities and private partners in Serbia?

1.16. Da li postoje političke prepreke za sprovođenje zajedničkih projekata opština Prijepolje, Priboj i Nova Varoš?/Are there any political impediments for implementation of joint projects between municipalities of Prijepolje, Priboj and Nova Varoš?

1.17. Da li postoje finansijske prepreke za sprovođenje zajedničkih projekata opština Prijepolje, Priboj i Nova Varoš?/Are there any financial impediments for implementation of joint projects of municipalities of Prijepolje/Priboj and Nova Varoš

1.18. Da li je Vaša opština zaintersovana za saradnju sa drugim opštinama u organizaciji snabdevanja drvnom biomasom za toplane?/Is your municipality interested to cooperate with other municipalities is woody biomass supply for DH system?

1.19. Da li je Vaša Opština zainteresovana za saradnju sa privatnim partnerima za snabdevanje drvnom biomasom za toplane?/Is your municipality interested to cooperate with private partners in woody biomass supply for DH plants?

1.20. Da li smatrate da postoji realna mogućnost da Vaša Opština osnuje preduzeće za snabdevanje toplana drvnom biomasom?/Do you think it is realistic that your municipality establish a company for woody biomass supply?

1.21. Da li postoji interes Lokalne Samouprave da osnuje preduzeće za snabdevanje toplana drvnom biomasom sa druge dve opštine?/Does local administration have any interest in establishment of company for woody biomass supply with other two municipalities?

1.21.1. Pod kojim uslovima bi to bilo izvodljivo?/In what circumstances will it be feasible?

1.22. Da li postoji interes Lokalne Samouprave da osnuje preduzeće za snabdevanje toplana drvnom biomasom sa druge dve opštine i privatnim partnerom?/Does local administration have any interest in establishment of company for woody biomass supply with other two municipalities and the private partner?

1.22.2. Pod kojim uslovima bi to bilo izvodljivo?/In what circumstances will it be feasible?

1.23. Na koji način se mogu, po Vašem mišljenju prevazići navedene prepreke?/How can envisaged impediments be prevailed?

dodatne informacije/additional info

2 Toplana/DH company

2.1. Operator/Operator

2.2. Stanice i kotlovi/Stations and boilers

2.3. Kolika je grejna površina koju toplotom snabdeva Vaša toplana?/What is the total heating area your DH company supplies?

2.4. Kolika je godišnja potrošnje mazuta?/What is annual consumption of heavy oil?

2.5. Kolika je godišnja potrošnja uglja?/Consumption of coal?

2.6. Kolika je starost i efikasnost postojećih kotlova?/Age and efficiency of existing boilers?

2.7. Koliki su godišnji troškovi nabavke energenata?/Annual costs of fuel procurement?

2.8. Koliki su godišnji troškovi održavanja i ostali troškovi?/Annual costs of maintenance and other costs?

2.9. Kolika je cena grejanja za krajnje potrošače?/Heat price for consumers?

2.9. Kolika je potrebna količina biomase da zameni fosilna goriva u Vašoj toplani?/Needed biomass quantity for fuel switch?

2.10. Da li postoje i kolike su površine za skladištenje biomase pored toplana i stanica?/Are there any areas next to DH plant suitable for biomass storage?

2.11. Kakve je mogućnost pristupa za kamione do toplana?/Accessibility to DH plants?

2.12. Da li postoji i kolika je spremnost toplane za dodatne investicije u skladištenje i manipulaciju biomasom?/Are DH systems ready for additional investments in biomass storing and manipulation?

3. Šumski resursi i snabdevanje biomasom/Forest resources and biomass supply

3.1. Površina pod šumom limskog šumskog područja?/Forest area

3.1.1. Državne/State

3.1.2. Privatne/Private

3.2. Struktura površina po poreklu?/Origin

3.2.1. Struktura površina po poreklu (visoke, izdanačke) državne/state


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3.2.2. Struktura površina po poreklu (visoke, izdanačke) privatne/private

3.3. Prosečna planirana godišnja proizvodnja?/Average annual planned production


3.2.2. Privatne/private

3.3. Prosečna realizovana godišnja proizvodnja?/Average realized production



3.4. Planirana proizvodnja za 2015?/Planned production in 2015



3.5. Realizovana proizvodnja u 2014/Reaized production in 2014



3.6. Šta je razlog smanjenja plana za 2015 u odnosu na OOGŠ - po ŠU i u PŠ (tržište, infrastruktura, smanjenje prinosa zbog ranijih slučajnih prinosa)?/what is the reason for reduced production compared to GFMP in state and private forests (market, infrastructure, natural hazards)?

3.7. Putna mreža/Road network

3.7.1. Glavni putni pravci u limskom šumskom području?/Major roads in Limsko forest area

3.7.2. Asfaltni putevi/Paved

3.7.3. Neasfaltirani putevi/un paved

3.7.4. Tvrdi šumski putevi/hard forest roads

3.7.5. Meki šumski putevi/soft forest roads

3.7.6. Vlake/ skidding lines

3.7.7. Otvorenost/Density of forest road network

3.8. Sortimentna struktura (četinari/lišćari/tehničko/ogrev/ostatak)?/Structure of wood products

3.8.1. Državne /State


3.9. Kakve su po Vašem mišljenju mogućnosti korišćenja šumskog ostatka?/What are the posibilities for forest residues utilization?



3.10. Struktura prinosa po vrsti prinosa - slučajni, glavni, prethodni?/Structure of production?

3.11. Metod seče (sortimenta, delovi debla) u državnim šumama?/Harvesting method?

3.12. Da li je moguće i pod kojim uslovima preći na deblovnu metodu?/Is it possible to implement whole tree or part tree method?

3.13. Metod seče u privatnim šumama?/Harvesting method in private forests?

3.14. Da li sami vlasnici PŠ vrše seču ili angažuju izvođače ili prodaju drvo na panju?/Do private forest owners perform harvest or hire contractors or sell wood on stump?

3.15. Preduzeća koja izvode radove za ŠG Prijepolje/Which companies perform harvest for FE Prijepolje?

3.16. Cene usluga seče i izrade/Prices of harvest and wood extraction

3.17. Uslovi i načini prodaje drveta i biomase/Conditions for wood sale

3.17.1. Na panju - procedura/Procedure for wood on stump sale

3.17.2. Pored panja - procedura/Procedure for wood next to stump sale

3.17.3. Na stovarištu - procedura/Procedure for wood on the storage sale

3.18. Cena prevoza drveta/Price of wood transport

3.19. Glavni kupci/Major buyers


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3.20. Stanje na tržištu - ogrevno i celulozno drvo i šumska biomasa/Market situation firewood and woody biomass

3.21. Kolike su realne količine drvne biomase i ogrevnog drveta koje se mogu obezbediti za toplane iz državnih šuma?/What are realistic annual woody biomass quantities which can be procured from state forests?

3.22. Kako biste opisali saradnju ŠG Prijepolje sa opštinama PP, PB i NV? How would you describe cooperation between FE Prijepolje and municipalities PP, PB and NV?

3.23. Da li i pod kojim uslovima bi ŠG Prijepolje bilo zainteresovano da se uključi u snabdevanje toplana drvnom biomasom (ili drvnom sečkom)?/On what conditions would PE Prijepolje be interested to participate in woody biomass or wood chips supply to future DH plants?

3.24. Da li vidite prepreke i koje u saradnji sa opštinama PP, PB, NV u snabdevanju toplana drvnom sečkom?/Do you see any impediments in cooperation with municipalities of PP, PB and NV in wood chips supply?

3.25. Na koji način se mogu prevazići ove prepreke?/How can those impediments be prevailed?

3.25. Da li vlasnici privatnih šuma i preduzetnici (trgovci drvetom iz privatnih šuma) mogu obezbediti određene količine biomase?/Can private forest owners provide certain quantities of woody biomass?

4 Prerada drveta i biomase/Wood and woody biomass processing

4.1. Ko su najznačajniji prerađivači drveta u limskom šumskom području?/Which are most important wood processors in Lim forest area?

4.2. Koje su cena prevoza drveta?/What are prices of wood transport?

4.3. Kakvo je stanje na tržišti drvnih proizvoda, a kakvo pilanskih ostaka?/What is the situation on wood products market and sawmill residues market?

4.4. Ko su kupci pilanskih ostataka?/Who are sawmill residues buyers?

4.5. Da li ste upoznati sa cenama pilanskih ostataka?/What are sawmill residues prices?

4.6. Ko su prerađivači drvne biomase (proizvodnja sečke, peleta, briketa) u limskom šumskom području?/Who are most important woody biomass processors in Limsko forest area?

4.7. Da li ste upoznati sa cenama proizvoda na bazi biomase - sečka, pelet, briket?/Do you know local prices of wood chips, pellet and briquette?

4.8. Da li ste zainteresovani za preradu pilanskih ostataka? I na koji način?/Are you interested for processing of your sawmill residues and how?

4.9. Da li ste zaintersovani za snabdevanje toplana drvnom biomasom?/Are you interested to participate in wood chips supply to DH plants?

4.10. Da li ste i pod kojim uslovima zainteresovani za partnerstvo sa opštinama PP, PB, NV u osnivanju preduzeća za snabdevanje toplana drvnom sečkom?/Are you and on what terms, interested for partnership with municipalities of PP, PB and NV in establishment of the company for wood chips supply to DH plants?

4.11. Da li vidite prepreke i koje u saradnji sa opštinama PP, PB, NV u snabdevanju toplana drvnom sečkom?/Do you see any impediments in cooperation with PP, PB, NV municipalities in wood chips supply to DH plants?

4.12. Na koji način se mogu prevazići ove prepreke?/How can those impediments be prevailed?


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12.3. Annex III: Checklist for central biomass storage location assessment

1 Location name, address, coordinates Lokacija, adresa, koordinate

2 Municipality Opština

3 Distance from DH PP Udaljenost of toplane Prijepolje

4 Distance from PB Udaljenost od toplane Priboj

5 Distance from NV Udaljenost of toplane Nova Varoš

6 Distance from major roads and railways Udaljenost od glavnih puteva i železnice

7 Closest forest complex in Lim forest area Najbliži šumski kompleks limskog šumskog područja

8 Furthest forest complex in Lim forest area Najudaljeniji šumski kompleks limskog šumskog područja

9 Distance from other forest areas Tarsko zlatiborsko/Moravicko/Gornje Ibarsko Udaljenost od drugih šumskih područja

10 Road conditions weight limitations/other restrictions/accessibility Stanje puteva/ograničenje opterećenja/ostala ograničenja/pristup

11 Distance from residential area Udaljenost od stambenih objekata

12 Distance from industrial zone Udaljenost od industrijske zone

13 Possible issues with noise and dust pollutions Mogući problemi zbog zagađenja bukom ili prašinom

14 Total area usable for biomass storage Površina koja se može iskoristiti za centralno skladište biomase

15 Existing objects and infrastructures and conectivity Postojeći objekti i infrastruktura i mogućnosti priključka na infrastrukturu

16 Location properties (open/closed, sunny/shady, windy/not windy, underground or flooding waters) Osobine lokacije (zatvorena/otvorea, osunčana/senovita, vetrovito/bez vetra/podzemne ili poplavne vode

17 Ownership of the location land and objects Vlasništvo nad zemljištem i objektima

18 Legal disputes Pravni sporovi

19 Possibility of lease or sale Mogućnost iznajmljivanja ili prodaje

20 Envisaged impediments for using location as a biomass central storage Prepreke za korišćenje lokacije kao centralnog skladišta za biomasu

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REPORT ON DESIGN OF WOODY BIOMASS SUPPLY CHAIN … · 2017. 8. 29. · REPORT ON DESIGN OF WOODY...

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