Pancevo Agro Biomass Supply Study, 2019

AGRO-BIOMASS POTENTIAL AND LOGISTICS STUDY FOR SUPPLYING THE PUBLIC UTILITY COMPANY “GREJANJE-PANČEVO”

Prepared for:

AMBERO Consulting Gesellschaft mbH and Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH DKTI- Development of a Sustainable Bioenergy Market in Serbia Terazije 23/V 11000 Beograd

Prepared by:

Vojislav Milijić, Foragrobio cc doo

Sumska 9-III/1, Subotica

May 2019

______DKTI (GIZ) Programme "Development of sustainable bioenergy market in Serbia": Agro-Biomass Potential and Logistics Study for Supplying the Public Utility Company “Grejanje – Pančevo” ______Table of Contents List of tables List of figures List of charts List of abbreviations

Table of Contents List of abbreviations...... 3 1. Executive Summary ...... 4 2. Definition of Tasks...... 5 3. Methodology ...... 6 4. Status Quo Analysis – Background...... 7 4.1. City of Pančevo ...... 7 4.2. Pančevo District Heating System ...... 8 5. Agro-Biomass Potentials and Realistic Agro-Biomass Supply for Pančevo ...... 9 6. Biomass Demand for District Heating Biomass Plant ...... 15 7. Biomass supply and logistics ...... 16 7.1. Biomass market situation in the supply area of Pančevo ...... 16 7.2. Identification of potential supplies ...... 17 7.3. Technical requirements and machinery for sustainable biomass supply ...... 18 7.4. Supply chain management (contracting, delivery, quality control) ...... 22 8. Biomass storage, preparation and take-in systems and ash disposal ...... 25 8.1. Biomass storage ...... 25 8.2. Straw handling and preparation for combustion ...... 26 8.3. Ash handling ...... 27 9. Legal aspects related to biomass utilization ...... 29 10. Financial analysis and economic indicators of biomass supply ...... 31 10.1. Investment costs ...... 31 10.2. Operational costs ...... 31 10.3. Incomes ...... 31 10.4. Economic indicators (NPV, IRR, BCR, Sensitivity) ...... 32 10.5. Financing options for biomass suppliers ...... 33 11. Conclusions ...... 35 12. Literature and Sources ...... 36 13. Annexes ...... 37 13.1 Annex I: List of interviewed persons ...... 37

List of Tables T-1: Basic information about the City of Pančevo ...... 7 T-2: Basic info on the Pančevo DH system ...... 8 T-3: Relevant types of agro-biomass fuels ...... 9 T-4: Land structure in Pančevo Supply zones ...... 12 T-5: Relevant crops’ structure in Pančevo Supply zones ...... 13 T-6: Production of Relevant crops in Pančevo Supply zones ...... 13 T-7: Collectable agricultural residues in big bale format in Pančevo supply zones ...... 14 T-8: Biomass demand for the Pančevo agro-biomass plants...... 15 T-9: Straw prices in Vojvodina ...... 16 T-10: Straw suppliers in Vojvodina ...... 17 T-11: Period of straw collection and storing ...... 19 T-12: Basic straw supply calculation ...... 21 T-13: Number of balers ...... 22 T-14: Straw mobilization machinery and equipment prices ...... 22 T-15: Straw price correction factors ...... 24 T-16: Period of straw collection and storing ...... 25 T-17: Quantities and timing of straw delivery and consumption ...... 25 T-18: Nutrient content of different ash types from straw combustion ...... 28 T-19: Regulation related to straw combustion ...... 30 T-20: Investment costs ...... 31 T-21: Operational costs ...... 31 Page 2 of 37

DKTI (GIZ) Programme "Development of sustainable bioenergy market in Serbia": Agro-Biomass Potential and Logistics Study for Supplying the Public Utility Company “Grejanje – Pančevo” ______

T-22: Incomes ...... 31 T-23: Costs, incomes, balance, IRR and BCR ...... 32

List of Figures F-1: Position of Pančevo ...... 7 F-2: Pančevo, DH plants Kotež and Sodara and potential locations for the biomass DH plant ...... 8 F-3: Relevant types of agro-biomass fuels: wheat, soya, corn ...... 9 F-4: Map of Pančevo supply zones ...... 11 F-5: Raka Trans Straw Storage Locations and Straw Logistics Activities ...... 18 F-6: Agro-biomass mobilization machinery in action ...... 19 F-7: Agro-biomass mobilization scheme ...... 20 F-8: Straw divider, push feeder and combustion grate manufactured by WEISS A/S Denmark ...... 26 F-9: Straw combustion flow ...... 27 F-10: Ash storage; example picture from Denmark ...... 28

List of Charts C-1: Land structure in Pančevo Supply zones ...... 12 C-2: Relevant crops’ structure in Pančevo Supply zones ...... 13 C-3: Production of relevant crops in Pančevo Supply zones ...... 13 C-4: Collectable agricultural residues in big bale format in Pančevo supply zones ...... 14 C-5: Cash Flow ...... 32 C-6: Sensitivity analysis ...... 33

List of abbreviations

BCR Benefits Cost Ratio BMZ German Federal Ministry for Economic Cooperation and Development DH District Heating DKTI Deutsche Klima Technologie Initiative EUR, € Euro HoB Heat Only Boiler HP Horse Power iRR Internal Rate of Return GIZ Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH GIZ-DKTI Program for the “Development of a sustainable Bioenergy Market in Serbia“ ha hectare kW Kilowatt kWh Kilowatt Hour m³ cubic meter m2 square meter MW Megawatt MWh Megawatt hour NPV Net Present Value OGC Other Grains and Cereals PUC Public Utility Company PPP Public-private partnership Ton, t metric ton

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The City of Pančevo has been approached by a German Company StrawTherm with the initiative to develop a straw based DH plant according to Contractual Public Private Partnership, where StrawTherm would invest in heat production and PUC Grejanje Pančevo would sign a long-term contract for heat takeover. The basic concept of StrawTherm is to install 5x4MW straw boilers using big bales in several phases. The plan is to have 3,000 operating hours and to produce 60GWh of heat per year.

According to the methodology used, quantities of total agricultural residues collectable in big bale format in 25 km radius from Pančevo are around 51,000 tons/year, however in case corn stalk is not included the negative balance of -20,000 tons/year occurs, meaning that all residues of other relevant crops are used for bedding and additional quantities are transported from other regions. Additional 289,000 tons/year are collectable in zone 2 as backup for biomass supply, or 67,000tons/year if corn stalk is excluded. Total amount of operating hours for the new biomass plant should be 3,000 hours. If 85% boilers’ efficiency is calculated and 4 kWh/kg is considered as an average heat value of wheat straw, a total demand of straw would be around 3,500 tons per year per boiler or 17,500 tons per year for 5 boilers planned to be installed by StrawTherm. Calculated biomass demand for 5 boilers represents 25% of total collectable potentials of straw in big bales format on farms larger than 50 ha, not including corn stalk, in the radius of 50 km from Pančevo.

Main demand drivers for straw in the Pančevo area are compost producers using straw for compost, animal farms using straw for bedding and starch producers and local farmers using straw for energy. Only wheat straw and soya straw are in demand. Straw suppliers are usually buying straw on field from agricultural companies or farmers. Straw price is usually determined based on the area – ranging from 14 to 28 EUR per hectare. After mobilization of harvesting residues, straw suppliers are finally selling the straw at the price range of 40 to 50 EUR per ton, delivered to a buyers’ destination in up to 50 km range from straw mobilization point or even 55 EUR per ton for distances of 100 km. On the market there are occasional quantities of straw, which is two or more years old and price of such straw is reduced to around 25 EUR/ton. Such straw is not used by compost producers nor for animal bedding. It is seldom used by biogas producers, but it can be used for combustion. Straw suppliers with adequate capacities to procure, mobilize, transport, store and deliver straw just in time are identified in the Pančevo area and are willing to partake in future supply.

Total investment costs in biomass-based DH plant are set at 5,000,000 EUR in total for 5 modules/boilers of 4 MW each. Operational costs are annual costs related to straw procurement, DH operation and maintenance, set on 1,121,610 EUR. Incomes will derive from sale of heat on the level of 1,620,000 EUR. Benefit cost ratio is 1.18, while internal rate of return is 8.87%. Investment should be repaid in 10 years. Effect of the investment costs on IRR fluctuates from 4% to 21% for change of the investment costs from 130% to 70% of the initial investment value. Effect of the price of straw on IRR reflects in IRR change from 18% to -1% as the price of straw varies from 70% to 130% of initial price. Finally, the price of heat sale has the most significant effect on the IRR value, changing it from -21% to 24% by fluctuating from 70% to 130% of initial price.

Consultants’ recommendation is that straw supply is contracted based on long term contract models presented in the Study, considering specifics and needed investments, know-how, experience and strong local positions needed for development of straw supply. Further improvement may be achieved in reduction of investment costs and in negotiations about straw prices and heat delivery. Cost of straw can be reduced significantly if lower quality, old straw is used instead of fresh one. The investor should schedule the meetings with identified suppliers as soon as possible and start negotiations about long term supply contract.

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Study on Agro-biomass potential and logistics study for supplying the PUC “Grejanje-Pančevo” is ordered by AMBERO Consulting Gesellschaft mbH 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 determination of:

a. Biomass potentials and realistic biomass supply of the City of Pančevo:  Specification of relevant biomass types,  Analysis of potential of agricultural residues (solid types like straw from different crops, corn-cobs, husks, etc.); b. Biomass demand for the heating plant, c. Biomass supply and logistics:  Biomass market situation in the South Banat District,  Identification of potential supplies (specialized agro-biomass mobilization companies, major crop producing companies, cooperatives and farmers, etc..) and their potentials and propensity for supply in terms of quantity, quality and other properties,  Technical requirements and machinery in use respectively necessary for sustainable biomass supply,  Supply chain management (contracting, delivery, quality control); d. Different biomass preparation and take-in systems and ash disposal:  Biomass storage,  Types of straw and other biomass shredder systems including fuel-mix preparation,  Types of take-in systems of different biomass-types (from storage after preparation into combustion chamber), and  Ash handling; e. Legal aspects related to biomass utilization, f. Financial analysis and economic indicators of biomass supply organization and financing options:  Investments in machinery, equipment, storage, quality control,  Operational costs,  Economic indicators (NPV, IRR, BCR, Sensitivity), and  Financing options for biomass suppliers.

Envisaged result of the Study is that Agro-biomass potential and logistics study for Pančevo has been successfully developed, containing essential information and data for potential investors. The study was prepared by Foragrobio CC doo1 and submitted in May 2019.

1 http://www.foragrobio.rs/ Page 5 of 37

The methodology implemented in the preparation of the report consisted of the following steps: - Analysis of related literature, regulations and other sources related to agro-biomass, equipment, logistics and the municipality in question; - Identification of relevant stakeholders to be interviewed and scheduling interviews; - Meetings and/or face-to-face interviews with relevant stakeholders; - On-site analysis of potential locations for DH plant and biomass storages; - Design of biomass supply concept including investment and operational costs assessment; - Financial analysis including economic indicators, and - Reporting.

Literature and sources review was focused on obtaining information about the City of Pančevo and the DH system situation and development. In addition, Serbian regulations related to agriculture, land use, waste, environment, transportation, construction and local administration was also analyzed for definition of adequate biomass supply solutions. Available sources and statistics about agricultural and wood production were also analyzed for determination of biomass potentials.

Open semi-structured interview questionnaire and information checklist were developed for provision of relevant information and additional data from representatives of the heating plant, chamber of commerce, farmers and potential biomass suppliers and other relevant stakeholders. Meetings and face-to-face interviews were carried out on 22nd of April and in the period from 8th to 10th of May, 2019, along with on-site analysis of possible biomass storages’ locations.

Biomass availability for the Pančevo area was elaborated according to 2017. Wieser, H., Milijic, V. “Availability of Agro-biomass in Serbia”2. Agro-biomass supply concept was designed based on the literature review, local conditions, stakeholders’ inputs, logistic preconditions and available best practice examples. Investment and operational costs assessment were also based on the 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 analysis.

The report was prepared and submitted to AMBERO and GIZ DKTI comments on 22nd of May 2019. The report was reviewed and the revised version was submitted to AMBERO and GIZ DKTI on 31st of May, 2019.

2 http://www.bioenergy-serbia.rs/images/documents/studies/20171028_Agrobiomass_Study.pdf Page 6 of 37

The chapter bellow provides basic background information about the City of Pančevo and its district heating supply system.

4.1. City of Pančevo

The map of the City of Pančevo presenting its position in Serbia, along with city borders and major roads is presented in the figure below.

F-1: Position of Pančevo

The City of Pančevo is situated in Southern Banat County – Vojvodina province. Pančevo City borders the municipalities of Opovo, Kovačica, Alibunar, Kovin and the City of Belgrade. Basic information on the City of Pančevo are presented in the table below.

Info/City Pančevo Area km2 756 No of settlements 1 urban+ 9 rural Urban population 76,203 Rural population 47,211 Total population3 123,414

T-1: Basic information about the City of Pančevo

Around 123,000 inhabitants live in the City of Pančevo, from which almost 76,000 live in the urban area of Pančevo. Other inhabitants live in the villages of: Banatski Brestovac, Banatsko Novo Selo, Dolovo, Glogonj, Ivanovo, Jabuka, Kačarevo, Omoljica and Starčevo. The majority of the city

3 According to 2011 Census - http://popis2011.stat.rs/?page_id=2162 Page 7 of 37

DKTI (GIZ) Programme "Development of sustainable bioenergy market in Serbia": Agro-Biomass Potential and Logistics Study for Supplying the Public Utility Company “Grejanje – Pančevo” ______

population (79%) is Serbian, followed by Macedonians (4%), Hungarians (3%), Romanians (3%) and others.

Pančevo is the economic center of the South Banat District. There are many industrial companies in processing of oil, steel, aluminum, glass, corn, grain, in metalworking, in producing petrochemicals, fertilizer, commercial packaging, PET molding machines, clothes, grain mill products, bacon and other food, in construction of aircraft, thermal power stations and buildings of steel beams. Pančevo economy is tied up with Belgrade economy. Belgrade is only 14 km away and Pančevo is considered as Belgrade metro area. In addition, Pančevo is very rich in high quality arable land, and farmers from Pančevo are significant producers of industrial crops, vegetables, grains and cattle.

4.2. Pančevo District Heating System

The district heating system of Pančevo is operated by PUC Grejanje Pančevo. Basic information on the district heating system is presented in the table below.

Info/City Pančevo DH operator PUC Grejanje Pančevo DH distribution PUC Grejanje Pančevo Heat production capacity (MW)/ 93 MW - Natural gas in 2 DH plants – Sodara and Kotež Total heated area 800,000 sqm Heat production/Heat delivery Over 120,000 MWh

T-2: Basic info on the Pančevo DH system

The DH system of Pančevo consists of 2 DH plants Sodara and Kotež, where Kotez is covering 66% of the total heat demand, and extensive pipeline network. The total heat capacity is 93 MW, heating over 800,000 sqm and delivering over 120,000 MWh of heat per year. In 2018, the City of Pancevo has been approached by the German Company StrawTherm with the initiative to develop a straw based DH plant according to Contractual Public Private Partnership, where StrawTherm would invest in heat production and PUC Grejanje Pančevo would sign a long-term contract for heat takeover. The basic concept of StrawTherm is to install 5x4MW straw boilers using big bales in several phases. The plan is to have 3,000 operating hours and to produce 60 GWh of heat per year.

DH Kotez

F-2: Pančevo, DH plants Kotež and Sodara and potential locations for the biomass DH plant Page 8 of 37

Most relevant agro-biomass fuels are presented in the table below.

Water Product/ Heating Ash melting content Collection Ash content Fuel Residue value point when time % ratio MJ/kg C collected % Wheat Straw 1:1 15-20% Jun – July 14.40 5 900 Oat Straw 1:1 15-20% Jun-July 14.40 5 900 Rye Straw 1:1.12 15-20% Jun-July 14.40 5 900 Barley Straw 1:1 15-20% Jun-July 14.70 5 900 Soya straw 1:0.6 15-20% September 15.70 5 1,000 October- Corn Stalk 1:1 15 -30% 13.50 5 1,000 November Depending on Corn cobs 1:0.2 10-15% harvesting 17.00 3 1,000 system Rapeseed Straw 1:2 20-30% June 14.30 8 800 Sunflower harvesting 1:2 15-20% September 14.50 10 800 residues

T-3: Relevant types of agro-biomass fuels

F-3: Relevant types of agro-biomass fuels: wheat, soya, corn

Realistic biomass potentials were analyzed based on 2017. Wieser, H., Milijic, V. Availability of Agro- biomass in Serbia4, a comprehensive study prepared for GIZ DKTI and the Ministry of Mining and Energy, in which agro-biomass potentials have been calculated and presented for all municipalities in Serbia using conservative methodology in case of utilization of small or big bales. In case of Pančevo, big rectangular agro-biomass bales are the only fuel considered.

4 http://www.bioenergy-serbia.rs/images/documents/studies/20171028_Agrobiomass_Study.pdf Page 9 of 37

DKTI (GIZ) Programme "Development of sustainable bioenergy market in Serbia": Agro-Biomass Potential and Logistics Study for Supplying the Public Utility Company “Grejanje – Pančevo” ______

Capacities of the machines used in agro-biomass supply, especially in big bale logistics are determined by the number of balers required for mobilizing the needed quantity of biomass. The capacity of a big bale baler is 20-30 tons per hour or 40 to 60 bales per hour. If an average straw yield for wheat is 3-4 tons per hectare, a baler in one hour processes 6-8 ha, or 50-60 ha per day. Balers cannot be used efficiently on small-scale structured land. Balers are followed by other large- scale machines including straw gatherers, trailers, telehandlers and those cannot be used efficiently as well on small plots, since transport of all these machines to the field is time consuming and costly. Further, straw needs to be transported by trucks or tractors, but volume is needed in order not to transport empty vehicles. Another problem is the harvesting synchronization. Wheat and other grains’ harvesting period lasts for one month. It is very difficult if not impossible to synchronize harvesting of large number of small farmers in a manner that the straw is collected without delays, especially since straw should be collected before the rains to be stored properly. This is the basic reason while big bales are produced on large properties, usually larger than 50 ha or 100 ha.

For the Study mentioned above, the Consultant developed a methodology which calculated collectable potential determined by applying 60% straw utilization rate but deducting straw which is used for animal bedding – mainly for cows. In addition, considering that all larger straw-based CHP or DH systems are using big bales, collectable potentials on properties larger than 50 ha is assessed. This limit of 50 ha is determined as a minimum land area where it is possible to synchronize crop harvesting and baling, considering working capacities of balers as basic machines engaged in the process. The total collectable potential is finally reduced by the amount of straw required in animal production in a developed pattern.

The following approach was applied in detail: - In the first step, grain to residues ratio5 has been determined for crops taken in consideration. For wheat, oat, spelt, barley and other wheat-like grains, ratio of 1:1 is applied. For rye, ratio of 1:1.12 is applied. For corn, ratio of 1:1.2 is applied, while for soya, ratio of 1:0.6 is applied. For sunflower, ratio of 1:2 is applied. - In the second step, detailed data about areas planted with respective crops (barley, rye, oats, wheat and spelt, other cereals like grains, maize, soya and sunflower) in every municipality in Serbia, according to land size classes (total, below 0.5 ha, 0.5 ha to 1 ha, 1 ha to 2 ha, 2 ha to 5 ha, 5 ha to 10 ha, 10 ha to 20 ha, 20 ha to 30ha, 30 ha to 50 ha, 50 ha to 100 ha, and above 100 ha) are entered into the calculation sheet. The source of the data was Serbian agricultural census from 20126; - In the third step, average yield for respective crops (barley, rye, oats, wheat and spelt, other wheat like grains, maize, soya and sunflower) was calculated for the period from 2009 to 2016, based on the official data on agricultural statistics; - In the fourth step, for every respective crop, for every land size class, for every municipality in Serbia, the total grain production is calculated; - In the fifth step, utilization rate for calculation of collectable potential is set at 60% - starting from the assumption that there are farmers which are ploughing the soil with the residues believing it is improving the quality of soil. For collectable potential on land properties larger than 50ha, utilization rate is set at 60%;

5 Kaltschmitt, Hartmann, Hofbauer. EnergieausBiomasse.Springer, 2009; Prof. Dr. Dusan Gvozdenac. 2010. Study report: “Development of Biomass Market in Vojvodina”, University of Novi Sad, Faculty of Technical Sciences, Provincial Centre for Energy Efficiency, Novi Sad, 2010; Faculty of technical Sciences. Martinov, M., Viskovic, M., Bojic, S., Dumnic, B., Golub, M., Krstic, J. Study report: Study of Spatial Placement of Public Storage for Agriculture Biomass in Vojvodina. Provincial Secretariat for Energy and Mineral Resources of Vojvodina; Faculty of technical Sciences. Martinov, M., Viskovic, Djatkov, Dj, Golub, M., Krstic, J. Study on Collecting, Storing and Processing of Corn Stalk as Energy Source and Biofuel Raw Material in Vojvodina. Provincial Secretariat for Energy and Mineral Resources of Vojvodina; 6 http://popispoljoprivrede.stat.rs/

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DKTI (GIZ) Programme "Development of sustainable bioenergy market in Serbia": Agro-Biomass Potential and Logistics Study for Supplying the Public Utility Company “Grejanje – Pančevo” ______

- In the sixth step, collectable biomass potential on land properties larger than 50 ha is also calculated; - In the seventh step, structure of cattle farms data is entered into the calculation sheet. Data consisted of number of cattle (dairy, meat, other) regarding structure of the farm land according to size classes (total, below 0.5 ha, 0.5 ha to 1 ha, 1 ha to 2 ha, 2 ha to 5 ha, 5 ha to 10 ha, 10 ha to 20 ha, 20 ha to 30 ha, 30 ha to 50 ha, 50 ha to 100 ha, and above 100 ha); - In the eight step, a factor of amount of straw used per cattle of 8 kg per day is set; - In the ninth step, total amount of straw used for animal bedding is calculated and the amount of straw used for animal bedding in the farms larger than 50 ha is calculated. The logic behind is that farmers who produce cattle with land above 50 ha will primarily use all the straw they need for cattle as a bedding material, and the rest they collect could be used for energy; - Finally, in the tenth step, amount of straw used for animal bedding in total and in farms above 50 ha is deducted from previously calculated agro-biomass potential leaving an amount of straw collectable (for all land property classes) and collectable in big bales format (for property sizes larger than 50 ha) which is available.

The City of Pančevo is in the Southern Banat County, Statistical Region of Vojvodina. Cities/municipalities which are in the first zone of supply (radius 25 km from Pancevo) are Pančevo, Palilula and Grocka. Municipalities which are in the second zone of supply (radius 50 km from Pančevo) are Opovo, Kovačica, Alibunar, Kovin, Smederevo, Sopot, Voždovac, Surčin and Stara Pazova.

F-4: Map of Pančevo supply zones

Land structure of Pančevo supply zones is presented in the chart and the table below. According to Agricultural census data, over 86,000 ha of arable land are is in zone 1, and 240,000 ha in zone 2.

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DKTI (GIZ) Programme "Development of sustainable bioenergy market in Serbia": Agro-Biomass Potential and Logistics Study for Supplying the Public Utility Company “Grejanje – Pančevo” ______

Average area of agricultural property is 7.19 ha in zone 1 and 8.01 ha in zone 2. The most abundant ownership category is over 100 ha, where 33,000 ha in zone 1 are in properties larger than 100 ha. In zone 2, over 68,000 ha are in properties larger than 100 ha. The second most abundant category in both zones is from 50-100 ha. Over 52% in zone 1 and 45% of arable agricultural land in zone 2 is in properties larger than 50 ha. Such land structure is favourable for both development of intensive crop production and mobilization of agro-biomass.

Zone Total below 1 ha 1-2ha 2-5ha 5-10ha 10-20ha 20-30ha 30-50ha 50-100ha above 100 ha Average Pančevo zone 1 (ha) 86,923 2,089 3,132 8,582 8,402 8,355 3,933 6,675 11,935 33,821 7.19 Pančevo zone 2 (ha) 240,674 4,027 6,878 22,105 27,552 28,828 17,435 25,135 39,761 68,955 8.01

T-4: Land structure in Pančevo Supply zones

350,000 ha 300,000 250,000 200,000 150,000 100,000 50,000 0 Total below 1ha 1-2ha 2-5ha 5-10ha 10-20ha 20-30ha 30-50ha 50-100ha above 100ha Pancevo zone 1 Pancevo zone 2

C-1: Land structure in Pančevo Supply zones

Land structure data from Agricultural census are confirmed by both the Regional Chamber of Commerce and the representatives of the Agricultural Institute Tamiš. The most dominant agricultural producer is Almex7 doo, which owns several farms acquired in the privatization of former state-owned agricultural companies. Almex owns and manages over 10,000 ha in the Pančevo area and is engaged in meat production, grain production and starch production. Other large-scale companies within the City of Pančevo are PIK Omoljica, PIK Starčevo and PIK Dolovo. All of those companies have animal farms; therefore, they tend to utilize the straw they produce and the applied methodology has considered this fact. Apart from large scale companies, individually processing over 1,500 ha each, there is a number of medium-sized agricultural companies or individual producers, and also new land owners are acquiring land in the restitution process. Therefore, the land structure evolution trend is going toward enlargement of individual properties and changing land structure toward predominance of larger scale properties category. In regard to State owned land – over 20,000 ha in the City of Pančevo is state owned, due to large properties of German citizens, from which land was confiscated after the Second World War. This land is leased to local farmers in a bidding process on yearly lease contract basis. The advantage for leasing of State-owned land is given to animal producers.

The structure of crops relevant for utilization of residues for energy is presented in the table and the chart below.

7 http://www.almex.rs/

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DKTI (GIZ) Programme "Development of sustainable bioenergy market in Serbia": Agro-Biomass Potential and Logistics Study for Supplying the Public Utility Company “Grejanje – Pančevo” ______

OGC Barley Oats Rye Wheat Maize Soya Sunflower Total 8 Pančevo zone 1 (ha) 1,492 79 13 13,027 158 33,941 3,583 10,784 63,077 Pančevo zone 2 (ha) 4,169 957 95 39,851 768 106,664 10,304 27,267 190,075

T-5: Relevant crops’ structure in Pančevo Supply zones

ha 300,000 250,000 200,000 150,000

100,000

50,000 0 Barley Oats Rye Wheat OGC Maize Soya Sunflower Total Pancevo zone 1 Pancevo zone 2

C-2: Relevant crops’ structure in Pančevo Supply zones

Considering the area where the crops are grown, the most important crops by quantities produced are maize, wheat, sunflower and soya. This has also been confirmed by the Agricultural Institute Tamiš and predominance of maize is a long tradition. Maize is also predominantly grown in State owned land, which is leased on yearly basis due to delays in lease auctions procedures, which allows only maize to be grown after spring ploughing and seeding.

Barley Oats Rye Wheat OGC Maize Soya Sunflower

Pančevo zone 1 (tons/year) 5,676 207 38 57,995 665 230,450 9,744 27,928 Pančevo zone 2 (tons/year) 15,421 2,514 246 173,363 3,201 721,875 28,038 70,624

T-6: Production of Relevant crops in Pančevo Supply zones

Sunfower Soya Maize OGC Wheat Rye Oats Barley 0 100,000 200,000 300,000 400,000 500,000 600,000 700,000 800,000 900,000 1,000,000

Pancevo zone 1 Pancevo zone 2 tons

C-3: Production of relevant crops in Pančevo Supply zones

8 Other grains and cereals Page 13 of 37

DKTI (GIZ) Programme "Development of sustainable bioenergy market in Serbia": Agro-Biomass Potential and Logistics Study for Supplying the Public Utility Company “Grejanje – Pančevo” ______

Quantities of total agricultural residues collectable in big bale format on properties over 50 ha, from which the amount of straw used by cattle producers operating farms larger than 50 ha is deducted, are presented in the table and the chart below. Around 51,000 tons/year is collectable in zone 1 in big bale format. However, there are significant challenges in corn stalk mobilization and utilization. The water content of corn stalk, to be properly stored, needs to be below 25 %. However, this can be challenging since harvesting of corn occurs in October and stalk is collected afterwards. Drying of stalk is difficult due to lower temperatures and common rainfalls. In addition, corn stalk is heavy so after harvesting it drops directly to the ground.

In case of humid weather, the dust from the soil is stuck onto the stalk, which is significantly increasing ash content of the fuel and does significant damages to baling machines. On the other hand, corn is the most abundant of all crops in Serbia and its residues can represent significant potential for energy production. However, presenting this potential can lead to misleading overestimations, since collection of quality straw is not certain as it is for wheat or soya straw. Other issue in calculating energy utilization potential of corn residues is the yield, which varies significantly (even over 50 %) from year to year due to mid- or late summer draughts which are occasionally affecting Serbia, dramatically reducing production. In case corn stalk is not included the negative balance of -20,000 tons/year occurs, meaning that all residues of other relevant crops are used for bedding and additional quantities are transported from other regions. Additional 289,000 tons/year are collectable in zone 2 as backup for biomass supply or 67,000 tons/year if maize is excluded.

Barley Oats Rye Wheat OGC Maize Soya Sunflower Subtotal Bedding Total

Pancevo zone 1 (tons/year) 2,339 1 0 22,865 109 72,558 3,357 15,439 116,668 -64,912 51,757 Pancevo zone 2 (tons/year) 3,187 352 42 42,161 567 221,759 6,403 39,408 313,878 -24,461 289,417

T-7: Collectable agricultural residues in big bale format in Pančevo supply zones

Total Bedding Subtotal Sunflower Soya Maize OGC Wheat Rye Oats Barley

-200,000 -100,000 0 100,000 200,000 300,000 400,000 500,000

tons Pancevo zone 1 Pancevo zone 2

C-4: Collectable agricultural residues in big bale format in Pančevo supply zones

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6. Biomass Demand for District Heating Biomass Plant

Biomass demand per 4 MW boiler module and in total is presented in the table below.

Operating hours 3,000 Efficiency 85% Capacity of 1 module/boiler 4 MW Energy value of straw 4 kWh/kg Energy production of 1 module/boiler 12 GWh Straw requirement per module/boiler 3,529 tons Straw requirement in total for 5 modules/boilers 17,647 tons

T-8: Biomass demand for the Pančevo agro-biomass plants

According to PUC Grejanje Pančevo, the new biomass plant should operate for 3,000 hours/year. Assuming 85% as boilers’ efficiency and 4 kWh/kg as average heating value of wheat straw, a total demand of straw would be around 3,500 tons per year per boiler or 17,500 tons per year for 5 boilers planned to be installed by StrawTherm. If the share of soya straw increases, the total required amount should be reduced, considering that soya straw has 10% higher energy value compared to wheat straw. Calculated biomass demand for 5 boilers represents 25% of total collectable potentials of straw in big bales format on farms larger than 50 ha, not including corn stalk, in the radius of 50km from Pančevo.

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7. Biomass supply and logistics

7.1. Biomass market situation in the supply area of Pančevo

Agro-biomass market in Vojvodina and Southern Banat is in development. Main demand drivers derive from: compost producers, chicken and cattle farmers, agro-pellet and briquette factories and farmers and companies producing energy from harvesting residues. Compost producers, chicken and cattle farms use wheat straw, while pellet factories prefer soya straw. Demand from compost producers and chicken farms is constant, while cattle farms demand is usually covered by utilizing straw from farms’ own land. In the Pančevo area, there are 2 significant buyers of straw - Champicomp doo9, Pločica and Uča doo10, Vranovo. Both are in the vicinity of Pančevo. Both companies are producing compost for production of mushrooms and utilize only fresh, dry wheat straw. On annual basis they consume over 20,000 tons of straw and tend to supply themselves from all over Vojvodina. Additional consumers of straw are starch factories IPOK Zrenjanin 11and Skrobara Pančevo,12 both owned by Almex doo. Straw is perceived as future energy source for both starch factories and in an interview with the owner of Almex, it is emphasized that all straw the company produced will be used internally and there will be no quantities for contracting supply of DH. Although most of the straw Almex consumes is gathered in their own fields, they do procure straw on the market as well. There are no significant agro-pellet factories in the region and only two biogas plants use smaller quantities of old straw in the process, considering they are predominantly using silage corn. On the other hand, there is a number of medium and small-scale farmers or residents who produce heat by combusting different types of harvesting residues, mostly of soya.

The table below presents straw prices on different parities in Serbia.

Product-parity Price Straw on field, EUR/ha 14-28 Straw on field, EUR/ton 6-8 Straw loaded on truck, EUR/ton 25-30 Straw transported to buyer’s storage up to 50 km, EUR/ton 40-50 Straw transported to buyer’s storage over 100 km, EUR/ton 55

T-9: Straw prices in Vojvodina

Straw suppliers are usually buying straw on field from agricultural companies or farmers. Straw price is usually determined based on the area – ranging from 14 to 28 EUR per hectare. The price depends very much on the straw yield – having in mind usual straw yield of around 3-4 tons per hectare, the price of straw on field ranges from 6 to 8 EUR per ton. Some agricultural companies are selling straw on field per ton with the same price range of around 6 to 8 EUR per ton. After mobilization of harvesting residues, straw suppliers are finally selling the straw at the price range of 40 to 50 EUR per ton, delivered to a buyers’ destination in 50 km range from straw mobilization point. Some suppliers are also selling straw at 25 to 30 EUR per ton loaded into a buyer’s truck. There are examples of occasional straw delivery to the buyers located over 150 km away from straw mobilization point, at the price of 55 EUR per ton.

9 http://www.champicomp.rs/en/contact.html 10 http://ucadoo.com/kontakt/ 11 http://www.almex.rs/index.php/ogranak-ipok.html 12 http://www.almex.rs/index.php/fabrike-skroba/pancevo-skrobara.html

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DKTI (GIZ) Programme "Development of sustainable bioenergy market in Serbia": Agro-Biomass Potential and Logistics Study for Supplying the Public Utility Company “Grejanje – Pančevo” ______

The water content of the delivered straw ranges from 12 to 18%. On the market there are occasional quantities of straw, which is two or more years old, and caught by rain. The price of such straw is reduced to around 25 EUR/ton. Such straw is not used by compost producers nor for animal bedding. It is seldom used by biogas producers, but it can be used for combustion.

7.2. Identification of potential supplies

There are several specialized companies and farmers in Vojvodina (presented in the table below) oriented in the collection of harvesting residues, baling and supplying straw buyers. All of those companies and farmers were interviewed for the purpose of this or previous Studies done by the consultant. Those companies are fully equipped with all straw gathering, baling, manipulation and transport capacities. Their realized annual production varies from 2,000 to over 15,000 tons of straw per year. Some of those companies also have land which they use as open storages for straw. Most of the straw supplying companies are active in Northern Bačka, Western Bačka, Southern Bačka, Nothern Banat, Southern Banat and Central Banat counties.

Straw supplier Location Betacorn doo Sombor Biomove doo Novi Sad Mediland doo Sombor Raka Trans Pancevo Kikiber Farm Vrsac

T-10: Straw suppliers in Vojvodina

Major straw supplier in Southern Banat is the company Raka Trans13 from Pančevo, with its cooperants including Kikiber Farm from Vršac. Raka Trans is a transport and trading company, engaged in straw supply from 2009 and is currently selling 12,000-15,000 tons of straw per year, mostly to compost producers in Pločica and Vranovo. The company is also engaged in straw transport for Almex or other companies in need for straw transport. Together with their cooperants, they use of 15 trucks with specialized trailers for straw transport, 3 large scale Claas straw presses, several telehandlers and tractors, windrowers and other needed machinery. The company is collecting predominantly wheat and soya straw. Corn and sunflower they never baled due to logistic issues. Their practice is to buy straw on field before harvest of wheat or soya and to organize a 2-3- month long campaigns in order to mobilize procured straw, store it or deliver it to buyers. The company also possesses 200 ha of own land in Kačarevo, with over 6 ha where straw storage is possible along with fire safety measures implemented. The company has expressed interest to participate in straw supply of the future biomass DH Plant in Pančevo. Additionally, storage areas can be provided by their cooperators in straw supply business. Due to its capacities, experience, straw supply network, know-how, investment potential and proximity of Pančevo, Raka Trans should be considered as the most serious supplier of the future straw-based DH plant in Pančevo.

13 https://www.facebook.com/search/top/?q=raka%20trans%20mis&epa=SEARCH_BOX https://www.facebook.com/Poljoprivredno-gazdinstvo-Rakocevic-976086189151974/

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DKTI (GIZ) Programme "Development of sustainable bioenergy market in Serbia": Agro-Biomass Potential and Logistics Study for Supplying the Public Utility Company “Grejanje – Pančevo” ______

F-5: Raka Trans Straw Storage Locations and Straw Logistics Activities

7.3. Technical requirements and machinery for sustainable biomass supply

Large rectangle or big bales are used as bedding material source, but also in energy production. All automatized straw-based CHPs or DH systems in Denmark, Germany and other countries use large rectangular bales in fuel supply. Usual dimensions of large rectangular bales are 1.2 m x 1 m x 2.4 m with density of 180-220 kg/m3.

To efficiently collect harvesting residues deriving from crops such as wheat, soya, sunflower and corn, adequate machinery is necessary, especially in case of big bale production. All medium to large scale commercial usage of agro-fuels in bales relies on big bale supply. The process of agro- biomass mobilization consists of: - Crop harvesting; - Straw gathering - windrowing and baling, and - bale loading and transport.

The basic principle in the mobilization of harvesting residues is to perform baling right after harvesting if water content level of residues is below 20%. Baling of residues with higher water content depending on storage conditions can increase microbes’ activities and chemical oxidation and lead to increase of temperature, which could result in self-ignition or accelerates the decay of bales. If the water content of the harvesting residues is higher than 20%, baling should be performed after drying period on the field. The main challenge in straw collection of wheat, soya and sunflower is to collect it fast when it is dry and before the rain. In most cases, it is a chase with weather conditions. To be more efficient large-scale machinery is used in agro-biomass mobilization:  Harvesters for harvesting crops;  Straw collectors for straw gathering and balers for bailing;  Self-loading trailers or telescopic handlers for loading and manipulations, and  Tractors or trucks with adequate trailers for transport.

After crop harvesting, the residues are scattered on the field. To increase efficiency of balers, straw gathering is performed with mechanical gatherers.

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DKTI (GIZ) Programme "Development of sustainable bioenergy market in Serbia": Agro-Biomass Potential and Logistics Study for Supplying the Public Utility Company “Grejanje – Pančevo” ______

Gatherers need to be pulled by tractor with a power of at least 140 hp. After gathering, harvesting residues are baled into square bales, which depending on balers, can weight from 450 to 550 kg.

Usual dimensions of large rectangular bales are 1.2 m x 1 m x 2.4 m with density of 180-220 kg/m3. Balers need to be pulled by tractors with a power of at least 220 hp. Loading and first phase of transport of the bales from the field can be performed with self-loading trailers or telescopic handlers. Self-loading trailers load and group bales and carry them to the temporary storage which is near the field on the road accessible for trucks. The main challenge in agricultural biomass storage is in the fact that harvesting residues are collected in a short period of the year and need to be stored until consumed – this means that one or several storages need to have enough space to provide storing of annual biomass demand. Thus, storing agricultural biomass – straw in bales require plenty of space. The table below presents the biomass mobilization and storage period for soya, wheat and corn harvesting residues.

Month/ Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Biomass Wheat Soya Storage

T-11: Period of straw collection and storing

The Rule Book on Special Fire Prevention Measures in Agriculture defines that straw can be kept in open field storage at least 100 meters away from electrical lines, power stations, other storages, flammable materials, objects with open fire and similar objects with increased risk of fire. Straw should be stacked in maximum 20 x 6 meter piles, with a 20 meter distance in between or 50x8 meters piles with a 50 meter distance in between. The maximum height of a pile is 8 meters. This leads to land demand of over 20 ha for storing 10,000 tons of straw throughout the year. One way to organize a cost-effective storing of such quantities of biomass is on the fields on edges of agricultural land, or on lower quality agricultural land which is owned or used by straw suppliers.

F-6: Agro-biomass mobilization machinery in action

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F-7: Agro-biomass mobilization scheme Page 20 of 37

DKTI (GIZ) Programme "Development of sustainable bioenergy market in Serbia": Agro-Biomass Potential and Logistics Study for Supplying the Public Utility Company “Grejanje – Pančevo” ______

Basic goal of the following analysis is to determine necessary capacities for mobilization of required quantities of biomass. Also, this analysis will elaborate data on machinery procurement costs. Capacity requirements for baling and transport of harvest residues are assessed depending on quantities of biomass to be mobilized for CHP production or heat only production.

Determined biomass demand for DH in maximal capacity will be 17,500 tons/year of wheat straw. In case that 20% of soya straw is used in a mix, the total demand will be 3,500 tons of soya straw and 14,000 tons of wheat straw14. Sunflower and corn are not considered.

Harvest period for wheat starts in July, while straw collection is performed in July and August and then continues after soya harvesting in September.

High pressurized baler for rectangular bales can produce bales weighing from 450-550 kg. For basic calculation it is adopted that bale weight will be 450 kg. Gathering, baling and bale transport should be realized in a short period of time, depending on the time of harvest. Speed of the process is affected by time conditions, since they affect water content of straw. Harvesting residues should be baled if straw water content is below 20%, and in favourable weather conditions water content can be below 15%. If water content of straw is low, baling should be performed right after harvest, and contrary some time is required for straw to dry.

For straw collecting machinery 130-140HP tractors can be used, while for balers tractors have to be stronger than 220HP. The choice of machinery should be optimized based on the distance of bale transport. High pressurized balers (CASE, Massey Ferguson, New Holland, John Deer etc.) in optimal working regime when straw is collected can bale 25 tons of straw per hour or 60 bales.

Option/Crop Wheat Soya Total

Heat only, tons 14,000 3500 17,500

Share of different types of harvesting residues

Option/Crop Wheat Soya Total

Heat only 80% 20% 100%

Option/Crop Wheat Soya Total

Mobilization time July – August September July – September Residues yield, 3 1.5 t/ha Needed crop area

Option/Crop Wheat Soya Total

Heat only, ha 4,667 2,333 7,000

Needed number of bales - minimum weight 450kg

Option/Crop Wheat Soya Total

Heat only 31,111 7,778 38,889

T-12: Basic straw supply calculation

On a 10-hour working day such baler can bale 250 tons of straw or 500 bales from 100 ha. The number of days for collecting the straw, baling and transporting the bales should be around 20-30

14 Although soya straw has 10% more energy value than wheat straw, we haven’t taken it into account in this calculation in order to maintain a conservative approach Page 21 of 37

Number of Option Tons/year Bales/year Ha/year 1 2 3 balers HoB 17,500 38,889 7,000 Number of days 78 39 26

T-13: Number of balers

Since dynamics of collecting the straw is highly dependent on organization and choice of machinery, if productive machinery is utilized or additional machinery is included, the number of balers can be adapted correspondingly. If 6-meter header harvesters are utilized in harvesting of all crops, distance from the lines will be 6 meters. In order to provide optimal conditions for a baler (in average yield of 3-4 tons per ha, excluding soya) it is necessary to collect straw with straw collectors. The number of straw collectors should be equal to the number of balers. Tractors working on collecting the bales with self-loading trailers should be utilized for gathering the straw as well. Depending on the yield of straw and harvesting method, on one hectare it is possible to produce 5 to 15 bales weighing 450 kg. Depending on the number of bales, self-loading trailers can be used for bale delivery to central field loading point, in which telehandlers load it to transport trailers. In case of a large number of bales and poor weather conditions, transport trailers can be loaded directly on the field. For manipulation it is necessary to procure 2 telehandlers while self-loading trailers are optional. One telehandler can be used for loading on the field and second for unloading. Transport trailers and tractors can be used for bale delivery to the DH plant considering the distance, alternatively bales can be transported by trucks.

The table below presents market prices of straw mobilization machinery and equipment.

Machinery & equipment Market price (EUR) Tractor 220 HP 110,000 - 140,000 Baler 90,000 - 120,000 Straw collector 40,000 - 80,000 Tractor for straw collector 140 HP 40,000 – 80,000 Telehandler 70,000 – 90,000 Self-loading trailers 40,000 – 50,000 Tractor for self-loading trailers 140 HP 40,000 – 80,000 Trucks for bale transport 50,000 – 100,000 Trailers for bale transport (for trucks) 15,000

T-14: Straw mobilization machinery and equipment prices

Detailed financial calculations are presented in Chapter 10 of the Study.

7.4. Supply chain management (contracting, delivery, quality control)

The City’s and PUC Grejanje Pančevo’s interest is to take over the agreed amount of heat produced in the biomass heating plant, completely operated by the Private Partner. Therefore, private partner can organize straw mobilization alone, having contracts of straw takeover on the field and delivering straw to the plant; or private partner can make contracts for straw delivery on site with existing or new companies specialized for straw mobilization. Considering that main business of the private partner is to produce boilers and energy and specific features of straw supply, more favourable option is to make long-term contracts for straw delivery. Price for negotiations in straw delivery should be in range with the market price of 40-50 EUR/ton for 15-20% water content for straw in big bales (1 x 1.2 x 2.4 meters). Straw delivery can be contracted annually or long-term. The usual request of financial institutions for investment loans in biomass energy production process is to have a long-

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DKTI (GIZ) Programme "Development of sustainable bioenergy market in Serbia": Agro-Biomass Potential and Logistics Study for Supplying the Public Utility Company “Grejanje – Pančevo” ______term biomass supply contract, covering at least the period of contracted energy sale (10-12 years). In case of long-term contracting of straw, the following formula can be used for price change determination.

PVn = PVn-1 x In In = IS x 25% + IC x 25% + IT x 25% + IB x 25%, where the variables in the formula are as follows:

PVn = New Price (RSD or EUR/ton), PVn-1 = Old Price (RSD or EUR/ton), In = Price change index, IS = Salary index, IC = Fuel price index, IT = Transport cost index, and IB = Fertilizer cost index.

Contracted quantities need to be guaranteed, meaning that contract should be backed by sellers’ provision of bank guarantee or a bill. Value of bank guaranty or a bill should be at least 10% of contracted wood chips quantities. Failure to fulfil delivery of contracted quantities needs to be subjected to penalties. The formula below can be suggested for calculation of penalties for non- delivery of contracted quantities:

P = (Pfoss – Pwc)x Q, where the variables in the formula are as follows:

P = Penalty, Pfoss = Unit price of fossil fuel counterpart, Pwc = Unit price of straw, and Q = quantities of contracted yet undelivered straw.

Safeguard mechanism should also be installed for sellers in order to secure timely payment from the buyer. Buyer should provide a bank guarantee or a bill for at least of 10% of contracted quantities. Buyer also needs to be subjected to penalties in case of not taking over contracted quantities. The formula below can be suggested for calculation of buyers’ penalties for not taking over contracted quantities:

P = 0.5 x (Qcon-Qdel), where:

P=Penalty, Qcon=contracted quantities, and Qdel= actually delivered quantities.

Delivery schedule, based on contracted quantities, should be determined based on buyers’ storage capacities, and possibility of sellers to accept the obligation of storing the straw and organizing just in time delivery, or delivery on monthly basis. This needs to be indicated in the contract. Penalties can be linked with failure to fulfil monthly supply according to the contract. Except penalties, contract cancelation with the supplier can also be included if the supplier significantly fails to deliver contracted quantities for two months in a row.

Quality of straw to be combusted depends significantly on the technical features of installed boilers. Measurement procedures and quality control should be determined by the contract, along with units used for straw measurement. We suggest utilization of tons as a unit for straw measurement. Application of this unit does require an investment on truck scales needed for weight measurement. Control of water content can be efficiently organized with application of probe-based water content portable measuring devices15. Every shipment of straw can be controlled by probe insertion into a

15 http://www.humimeter.com/foods/humimeter-fl1-hay-moisture-meter/ Page 23 of 37

DKTI (GIZ) Programme "Development of sustainable bioenergy market in Serbia": Agro-Biomass Potential and Logistics Study for Supplying the Public Utility Company “Grejanje – Pančevo” ______straw bale at every corner of the trailer used for transport. Average of measured water content values should be determined and used for price evaluation. Additional quality control should include ash content and presence of dirt or foreign particles inside straw bales. For non-compliance with contracted quality reclamations and reduction in terms of straw volumes to be paid should be applied.

As mentioned, contracted price of straw should be indicated in EUR or RSD per ton at 15-20% water content, therefore price should be linked to an average water content of every straw bales shipment. For reduction or increase of price we suggest the method presented in the table below.

Water content % Correction factor Below 10 1.2 10-15 1.1 15-20 1.0 20-25 0.9 25-30 0.8

T-15: Straw price correction factors

Correction factors should be applied on contracted price to determine actual price of straw for every individual shipment and also to motivate suppliers to supply drier straw with higher energy content.

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After mobilization, biomass needs to be stored and prepared for combustion. After combustion, ash needs to be removed and disposed of.

8.1. Biomass storage

The main challenge is in the fact that harvesting residues are collected in a short period of the year and need to be stored until consumed – this means that one or several storages need to have enough space to provide storing of annual biomass demand. Thus, storing agricultural biomass – straw in bales requires plenty of space. PUC Grejanje Pančevo clearly emphasized that straw storage at the biomass DH plant should not have capacities exceeding 2-3 days of straw consumption – this is up to 300 tons. The table below presents biomass mobilization and storage period for soya and wheat harvesting residues.

Month/ Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Biomass Wheat Soya Storage

T-16: Period of straw collection and storing

Delivery time with quantities and time of consumption in the case of Pančevo Agro-Biomass DH plant is presented in the table below.

Month/info Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Total Straw supply to storage, 0 0 0 0 0 0 10,000 4,000 3,500 0 0 0 17,500 tons

Loads per day 0 0 0 0 0 0 32 13 12 0 0 0 to straw storage

Trucks needed 0 0 0 0 0 0 11 4 4 0 0 0

Straw supply to Consumption 3,500 3,500 3,500 0 0 0 0 0 0 0 3,500 3,500 17,500 point, tons Loads per day 11 13 11 0 0 0 0 0 0 0 12 11 to DH plant

Trucks needed 4 4 4 0 0 0 0 0 0 0 4 4

T-17: Quantities and timing of straw delivery and consumption

According to calculated delivery timing and consumption, maximum storage space is required in October when 17,500 tons of straw should be stored. In terms of straw supply to the storage point, a total of 32 loads per day or 11 trucks will be needed to complete operations in July as a peak month. When it comes to delivering the straw from the storage point to the consumption point, 4 trucks need to circulate every day in order to make 11 to 13 loads per day.

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The system of handling and preparation for combustion and combustion itself should be provided by straw boiler producers. One of the examples for these technologies is presented in the following paragraphs.

Handling of straw bales can be carried out using an automatic crane system operating inside the fuel storage (crane span = 12 m and crane run way= 42 m). The crane provides automatic feeding of bales to the bale conveyor. Unloading of the trucks arriving with the bales is done manually by an operator using a forklift truck to position the bales inside the storage. Humidity control of the bales arriving is also done manually by the same operator working in the fuel storage area. This system has been used successfully in district heating plants in Denmark.

F-8: Straw divider, push feeder and combustion grate manufactured by WEISS A/S Denmark

Straw bales are transported from the fuel storage to the boiler area, by means of a single bale conveyor, to the straw feeding system located near the boiler. The straw fuel feeding system provides continuous feeding by means of shredding the straw and feeding it into the boiler through a cooled chute. The feeding line consists of a string remover, a straw shredder, a rotary gate valve for preventing back fire and a cooled screw feeder. The straw-divider loosens the press layers without actually cutting but by an efficient loosening and dividing of the straw. This ensures even and continuous feeding of the boiler in which way constant combustion with optimum efficiency is obtained. The straw divider includes string cutter. The straw bale string cutter provides a maintenance-free operation and does not require manpower. The push feeder is used for transporting loose straw from the straw divider and feeding it into the combustion grate. Combustion of straw takes place on a moving grate which has four combustion zones with admission of primary air, and the combustion chamber is designed to achieve the most efficient combustion possible. The moving grate is prepared for installation of a mechanical ash removal system.

The figure below shows straw combustion flow in a straw boiler plant using proven technology. The main components of the straw biomass plant that need to be adapted for a specific project consist of:  Automatic crane-operated straw storage,  Straw divider,

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DKTI (GIZ) Programme "Development of sustainable bioenergy market in Serbia": Agro-Biomass Potential and Logistics Study for Supplying the Public Utility Company “Grejanje – Pančevo” ______

 Straw in-pusher,  Moving grate,  Boiler,  Primary and secondary air fans,  Ash redler - conveyor for bottom ash transport to ash containers,  Bag filter system, and  Flue gas system with sound damper and stack.

F-9: Straw combustion flow

8.3. Ash handling

The bottom ash from the combustion grate is falling into a wet ash conveyor system. The ash from the bag filter is collected under the filter and transported in a screw conveyor to the bottom ash system, where the two ash fractions are mixed. Finally, the mixed ashes go into a container and can be directly taken over by the farmers for re-distribution on the field or can be temporarily stored in a storage building.

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DKTI (GIZ) Programme "Development of sustainable bioenergy market in Serbia": Agro-Biomass Potential and Logistics Study for Supplying the Public Utility Company “Grejanje – Pančevo” ______

F-10: Ash storage; example picture from Denmark

The ash from the combustion of uncontaminated agricultural residues is a valuable fertilizer and can be distributed back to the fields. The table below shows the average nutrient content of ash types remaining from combustion of straw.

Nutrient matter Bottom ash Cyclone ash Micro fly ash in % of dry matter Calcium (CaO) 7.8 5.9 1.2

Magnesium (MgO) 4.3 3.4 0.7

Potassium (K2O) 14.3 11.6 48.0

Phosphor (P2O5) 2.2 1.9 1.1

Sodium (Na2O) 0.4 0.3 0.5

T-18: Nutrient content of different ash types from straw combustion

Returning the ash back to the land ensures that part of the plant nutrients stays in the cycle and reduces the use of mineral fertilizer. The only missing nutrient is nitrogen which is almost completely released during combustion with the exhaust gas. The general principle is that the distribution of ashes is approved in an amount per hectare that is in correspondence to the ash content in the quantity of straw before harvested from the field. The average amount of ash remaining after combustion is in the range of 4-10%. In case of the envisaged use in the Pančevo DH plant this will be 600-1,500 tons per year.

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Overview on Serbian legislation related to straw utilization as a fuel for energy production is presented in table below.

OGRS Regulation Issued by Relevance No16 Parliament of the Republic of 145/2014 Law on Energy Regulating energy production and distribution Serbia 95/2018 135/2004 36/2009 72/2009 Parliament of the Republic of Regulating prevention, control, reduction and rehabilitation Law on Environment Protection 43/2011 Serbia of environment pollution 14/2016 76/2018 95/2018 36/2009; Parliament of the Republic of 88/2010 Law on Waste Management Regulating waste management Serbia 14/2016 95/2018 Law on Environmental Impact Parliament of the Republic of 135/2004 Regulating procedures for environmental impact Assessment Serbia 36/2009 assessment Law on Strategic Assessment of Parliament of the Republic of 135/2004 Regulating procedures for impact assessment on Environmental Impact Serbia 88/2010 environment of plans and programs 72/2009 81/2009 64/2010 24/2011 121/2012 Parliament of the Republic of 42/2013 Law on Planning and Construction Regulating construction of objects Serbia 50/2013 98/2013 132/2014 145/2014 83/2018 31/2019 Regulation on Determination of Types of Project for which it is Obligatory to Perform Government of the Republic of Regulating what types of projects are subjected to Environmental Impact Assessment 114/2008 Serbia environmental impact assessment and Types of Project for which Environmental Impact Assessment can be Required Regulation on Activities which Government of the Republic of 109/2009 Regulating for what activities local administration can affect Environment Serbia 8/2010 charge fees for environmental protection and improvement Regulation on Incentives for Electricity Production from 56/2016 Government of the Republic of Renewable Sources and from 60/2017 Regulating incentives for renewable energy production Serbia Highly Efficient Combined Heat 91/2018 and Power Production Regulation on the Contract for Government of the Republic of 56/2016 Regulating contracting models for sale and guaranteed Electricity Takeover Serbia 61/2017 takeover of electricity Regulation on conditions and Government of the Republic of 56/2016 Regulating status of privileged producers of electricity from procedures for acquiring the status Serbia 60/2017 renewable sources of privileged electricity producer Rule Book on Categorization, Ministry of Environmental Testing and Classification of 56/2010 Regulating types of waste Protection and Spatial Planning Waste Rule Book on Technical Requirements for Designing, Ministry for Infrastructure and Regulating manufacturing and control of equipment for 87/2011 Manufacturing and Control of Energy steam and heat production Equipment under Pressure 87/2011 Rule Book on Inspection of Ministry for Infrastructure and Regulating construction and control of equipment for steam 75/2013 Equipment under Pressure Energy and heat production 44/2018 Rule Book of Technical and other Regulating manufacturing and control of boilers and boiler Ministry of Energy and Mining 50/2009 Requirements for Boiler Facilities houses Rule Book on the Contents of the Ministry of Environment and Information about Location and 3/2010 Regulating procedure for location permit procurement Spatial Planning Content of the Location Permit Rule Book on Contents and Ministry of Environment and 93/2011 Regulating procedure for acquiring the construction permit Procedure for Construction Permit Spatial Planning 103/2013

113/2015 Rule Book on Conducting Unified Ministry of Construction, Traffic Regulating procedures for all permits required for 96/2016 Procedure and Infrastructure construction 120/2017

111/2009 Parliament of the Republic of It is strictly forbidden to burn agricultural harvesting residues Law on Fire Protection 20/2015 Serbia on the field 87/2018

16 No of Official Gazette of Republic of Serbia regulation is published in. Page 29 of 37

DKTI (GIZ) Programme "Development of sustainable bioenergy market in Serbia": Agro-Biomass Potential and Logistics Study for Supplying the Public Utility Company “Grejanje – Pančevo” ______

OGRS Regulation Issued by Relevance No16

Rule Book on Special Fire Ministry of agriculture 27/1984 Regulating fire prevention measures on straw storage Prevention Measures in Agriculture

T-19: Regulation related to straw combustion

Law on Environmental Protection is a basis Law, from which other regulations related to waste management and environmental impact assessment are derived.

Law on Waste Management, article 4, is defining straw and other non-dangerous agriculture residues as exceptions in implementation of the Law on Waste Management. The same Law in article 5 defines incineration as a method for waste utilization or disposal. Law gives basics for waste determination which is further elaborated in the Rule Book on Categorization, Testing and Classification of Waste. This Rule Book classifies all residues from agriculture in group 2, and straw is classified as 020103 - residues of plant tissue.

Law on environmental impact assessment defines procedures for environmental impact assessment of implemented projects and activities. According to the Regulation on Determination of Types of Projects for which it is Obligatory to Perform Environmental Impact Assessment and Types of Projects for which Environmental Impact Assessment can be Required, for all facilities for steam and hot water production from 1 to 50 MW of power capacity, environmental impact assessment can be required. The Law on Planning and Construction, along with: Rule Book on the Contents of Information about the Location and the Content of Location Permit; Rule Book on Contents and Procedure for Construction Permit; and Rule Book on Conducting Unified Procedure, determines procedures necessary for construction or adaptation of objects, while: Rule Book on Technical Requirements for Designing, Manufacturing and Control of Equipment under Pressure; Rule Book on Inspection of Equipment under Pressure; and Rule Book of Technical and other Requirements for Boiler Facilities define requirements for equipment for biomass combustion and steam production.

The Regulation on Incentives for Electricity Production from Renewable Sources and Highly Efficient Combined Heat and Power Production, Regulation on the Contract for Electricity Takeover and Regulation on conditions and procedures for acquiring the status of privileged electricity producer are regulations defining the conditions for acquiring the privileged producer status in renewable energy production and incentive measures.

The Law on fire protection, in article 50, strictly forbids burning of harvesting residues on the field after harvest. Finally, the Rule Book on Special Fire Prevention Measures in Agriculture defines conditions for straw storage. Rule Book on Special Fire Prevention Measures in Agriculture defines that straw can be kept in open field storage at least 100 meters away from electrical lines, power stations, other storages, flammable materials, objects with open fire and similar objects with increased risk of fire. Straw should be stacked in maximum 20 x 6 meter piles, with 20 meter distance in between or 50x8 meters piles with 50 meter distance in between.

There is no legal provision which presents obstacles or challenges for mobilization of agricultural harvesting residues.

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Financial analysis elaborates in detail investment costs, operational costs and economic indicators related to efficient organization of heat production from straw. Also, some financial options are presented for participants in the straw supply chain.

10.1. Investment costs

Investment costs for the procurement of straw-fired DH modules/boilers are presented in the table below. Investment costs related to straw mobilization machinery and equipment have been presented in chapter 7.

Machinery and equipment No Cost (EUR) Total (EUR) Straw DH plant module 5 1,000,000 5,000,000 Total 5,000,000

T-20: Investment costs

According to the PUC Grejanje Pančevo and StrawTherm, the total investment per 4 MW agro- biomass DH module/boiler with piping connection to existing hot water pipelines should be up to 1,000,000 EUR, which is 5,000,000 EUR in total for 5 modules/boilers.

10.2. Operational costs

Operational costs are annual costs related to straw procurement, DH operations and maintenance. Price of delivered straw to the DH plant is set at 50 EUR/ton. The total number of employees in the new DH plant is set to 4, with gross salary of 900 EUR/month. Maintenance costs are perceived as 3% of the investment costs annually, while indirect costs are set at 5% of total operational costs.

Operational costs Quantity Unit cost Total (EUR) Straw delivered to the DH 17,500 tons 50 EUR/ton 875,000 Workforce 4 employees 12 months*900 EUR 43,200 Maintenance 3% of investment costs 150,000 Indirect costs 5% of operational costs 53,410 Total per year 1,121,610

T-21: Operational costs

Total annual operational costs have been estimated at 1,121,610 EUR.

10.3. Incomes

Incomes will derive from heat sales. A total of 60 GWh should be delivered to PUC Grejanje Pančevo, with perceived price of 0.027 EUR/kWh, making annual incomes on the level of 1,620,000 EUR.

Incomes Quantity kWh Unit price (EUR/kWh) Total (EUR) Heat sales 60,000,000 0.027 1.620,000

T-22: Incomes

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Cash flow for 20 years of operation, along with incomes and costs is presented in the chart below. Cash flow is based on the assumption that production capacities will not grow, and that machinery will be replaced every five years. Table below presents the internal rate of return (IRR) and Benefit- cost ratio (BCR).

year=n Incomes Costs Balance 0 1,620,000 -6,121,610 -4,501,610 1 1,620,000 -1,121,610 498,390 2 1,620,000 -1,121,610 498,390 3 1,620,000 -1,121,610 498,390 4 1,620,000 -1,121,610 498,390 5 1,620,000 -1,121,610 498,390 6 1,620,000 -1,121,610 498,390 7 1,620,000 -1,121,610 498,390 8 1,620,000 -1,121,610 498,390 9 1,620,000 -1,121,610 498,390 10 1,620,000 -1,121,610 498,390 11 1,620,000 -1,121,610 498,390 12 1,620,000 -1,121,610 498,390 13 1,620,000 -1,121,610 498,390 14 1,620,000 -1,121,610 498,390 15 1,620,000 -1,121,610 498,390 16 1,620,000 -1,121,610 498,390 17 1,620,000 -1,121,610 498,390 18 1,620,000 -1,121,610 498,390 19 1,620,000 -1,121,610 498,390 ∑ 32,400,000 -27,432,200 BCR 1.18 IRR 8.87%

T-23: Costs, incomes, balance, IRR and BCR

8,000,000

6,000,000

4,000,000

2,000,000

0 1 2 3 4 5 6 7 8 9 1011121314151617181920 -2,000,000

-4,000,000

-6,000,000

total costs (€/a) total incomes (€/a) Balance (€/a)

C-5: Cash Flow

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DKTI (GIZ) Programme "Development of sustainable bioenergy market in Serbia": Agro-Biomass Potential and Logistics Study for Supplying the Public Utility Company “Grejanje – Pančevo” ______

Benefit-cost ratio is 1.18, while internal rate of return is 8.87%. Investment should be repaid in 10 years.

The chart below presents the sensitivity analysis in terms of IRR oscillations in case of reduction or increase of investment, reduction or increase of straw costs and reduction or increase of heat selling price. Effect of the investment costs on IRR fluctuates from 4% to 21% for change of the investment costs from 130% to 70% of the initial investment value. Effect of the price of straw reflects in IRR change from 18% to -1% as the price of straw varies from 70% to 130% of initial price. Finally, price of heat sales has the most significant effect on IRR value, changing it from -21% to 24% by fluctuating from 70% to 130% of initial price.

30%

25%

20%

15%

10%

0% 70% 80% 90% 100% 110% 120% 130% -5%

-10%

-15%

-20%

-25%

iRR logistics Straw Heat price Investment

C-6: Sensitivity analysis

10.5. Financing options for biomass suppliers

Apart from commercial banks’ credits for agricultural machinery that are generally available, there are several other financing options for biomass suppliers for procurement of straw mobilization machinery and equipment: grants and favourable credits awarded by the Ministry of Agriculture, IPARD Program, support of Guarantee fund of Vojvodina and grants and credit lines from Hungarian Governments, available for Hungarian farmers in Vojvodina.

The Ministry of agriculture provides grants and subsidized credits for procurement of crop production equipment17. In addition, there is an active EU subsidy program “IPARD II PROGRAM FOR 2014- 2020” (IPARD = Instrument for Pre-Accession for Agriculture and Rural Development). Within the IPARD II sub-measure “Investment in physical assets of agricultural holdings” - the sector of crop production and milk and meat production, the project may be eligible for submitting a project proposal to support the investment in procurement of tractors, machinery and equipment for baling. It is also eligible to support procurement of the tractors, but only up to 100 kW. Aid intensity is around 60%, with maximum expenditures of 700,000 EUR-1,000,000 EUR. Total budget of this program for this measure is around 170,000,000 EUR. The payment of the grant is done according to the financial agreement that needs to be concluded after approval of the project.

17 More info on: http://subvencije.rs/vesti/13156/ Page 33 of 37

DKTI (GIZ) Programme "Development of sustainable bioenergy market in Serbia": Agro-Biomass Potential and Logistics Study for Supplying the Public Utility Company “Grejanje – Pančevo” ______

The disbursement of the grant to the beneficiary takes place after implementation of the project based on the proof of paid invoices18.

Guarantee fund of Vojvodina provides support in providing credits and procuring guarantees for procurement of agricultural machinery in partnership with commercial banks which provides more favourable interest rate for machinery procurement. Those support measures are available for registered agricultural holdings with conditions defined in public calls19.

Hungarian Government has also provided support for entrepreneurs and farmers having Hungarian and Serbian citizenship via Prosperitati foundation. According to announcements around 160,000,000 EUR will be available in favourable credit lines and grants for procurement of machinery and equipment, land purchase and production improvement20.

18 More info on: http://uap.gov.rs/ipard-ii-u-srbiji/ 19 More info on: http://garfond.rs/%D0%BC%D0%B5%D1%85%D0%B0%D0%BD%D0%B8%D0%B7%D0%B0%D1%86% D0%B8%D1%98%D0%B0/ 20 More info on: http://www.prosperitati.rs/sr Page 34 of 37

 Development of straw supply for DH in Pančevo is technically and financially viable.  Required quantities of straw are available both in the vicinity of Pančevo and other areas of South and Central Banat, despite existing and future competition.  PUC Grejanje Pančevo is only interested in heat offtake, while private partner should be involved in development of biomass-based DH and its operations.  Consultants’ recommendation is that straw supply is contracted based on long-term contract models presented in the Study, considering specifics and needed investments, know-how, experience and strong local positions needed for development of straw supply.  Straw suppliers with adequate capacities to procure, mobilize, transport, store and deliver straw just in time are identified in the Pančevo area and are willing to partake in future supply.  According to presented calculations, the project can achieve IRR in the range of 9% and be repaid in 10 years.  Further improvement may be achieved in reduction of investment costs and in negotiations about straw prices and heat delivery.  Cost of straw can be reduced significantly if lower quality, old straw is used instead of fresh one.  Consultant’s recommendation for the investor is to schedule the meetings with identified suppliers as soon as possible and start negotiations about long-term supply contract.

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Agricultural Census for Serbia. Serbian Statistical Office - http://popispoljoprivrede.stat.rs/ Brkic, M. Costs of biomass preparation for energy production. http://agrovizija.rs/teme/obnovljivi_izvori.php?subaction=showfull&id=1379932648&ucat=6&template=agr ovizija& Eptisa. 2012. Prefeasibility Studies for construction of CHP plants in Pancevo, Krusevac and Ruma. Eptisa for Project: Promotion of Renewable Energy Sources and Energy Efficiency. IPA Faculty of technical Sciences. Martinov, M., Viskovic, M., Bojic, S., Dumnic, B., Golub, M., Krstic, J. 2016. Study report: Study of Spatial Placement of Public Storage for Agriculture Biomass in Vojvodina. Provincial Secretary for Energy and Mineral Resources of Vojvodina; Faculty of technical Sciences. Martinov, M., Viskovic, Djatkov, Dj, Golub, M., Krstic, J. 2016. Study on Collecting, Storing and Processing of Corn Stalk as Energy Source and Biofuel Raw Material in Vojvodina. Provincial Secretary for Energy and Mineral Resources of Vojvodina; Faculty of Technical Sciences Novi Sad, Center for Energy Efficiency. 2010. Development of Biomass Market in Vojvodina Gvozdenac, D. 2010. Study report: “Development of Biomass Market in Vojvodina”, University of Novi Sad, Faculty of Technical Sciences, Provincial Centre for Energy Efficiency, Novi Sad, 2010; Kaltschmitt, Hartmann, Hofbauer. EnergieausBiomasse.Springer, 2009; Milijic, V. 2016. Study on Agro-Biomass Potentials and Logistics for Supplying Heat Only Production in Senta and/or Hear and Power Production in Senta. Foragrobio CC doo for GIZ DKTI. Ocokoljic, S. Milijic, V., Vuceljic, B. 2014. Feasibility Study for CHP Padinska Skela. Masinoprojekt Kopring for Swiss Cooperation. Regulation on Specific Measures on Fire Protection in Agriculture, Official Gazette of The Republic of Serbia No.27/84. Statistical Office of the Republic of Serbia, www.stat.gov.rs Wieser, H., Milijic, V. 2017. Availability of Agro-biomass in Serbia. GIZ DKTI http://www.bioenergy- serbia.rs/images/documents/studies/20171028_Agrobiomass_Study.pdf http://agrovizija.rs/teme/obnovljivi_izvori.php?subaction=showfull&id=1379932648&ucat=6&template=agroviz ija& http://garfond.rs/%D0%BC%D0%B5%D1%85%D0%B0%D0%BD%D0%B8%D0%B7%D0%B0%D1%86%D0 %B8%D1%98%D0%B0/ http://subvencije.rs/vesti/13156/ http://uap.gov.rs/ipard-ii-u-srbiji/ http://ucadoo.com/kontakt/ http://www.almex.rs/ http://www.almex.rs/index.php/fabrike-skroba/pancevo-skrobara.html http://www.almex.rs/index.php/ogranak-ipok.html http://www.champicomp.rs/en/contact.html http://www.foragrobio.rs/ http://www.humimeter.com/foods/humimeter-fl1-hay-moisture-meter/ http://www.prosperitati.rs/sr https://www.facebook.com/Poljoprivredno-gazdinstvo-Rakocevic-976086189151974/ https://www.facebook.com/search/top/?q=raka%20trans%20mis&epa=SEARCH_BOX

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13.1 Annex I: List of interviewed persons

Person Position, organization Zoran Božanić Technical Manager of PUC Grejanje Pancevo Miroslav Aleksa Owner of Almex doo Bojan Andjelovski Raka Trans doo Djura Rakočević Raka Trans doo Vasa Foljanski Kikiber Farm Ljiljana Jelenković RPK Pancevo Zoran Cernoh RPK Pancevo Bogdan Garelejić Agriculture Institute Tamis Pancevo Nikola Škrbić Agricultural Institute Tamis Pancevo Slavisa Belca Transporter Živan Ristić Slovan Komerc Jan Sirka Slovan Komerc

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