FEASIBILITY STUDY

Fuel switch from gas to a straw-fired steam boiler plant within the company Perutnina Ptuj-Topiko at the poultry processing facilities in Backa Topola

prepared for:

Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH Dag-Hammerskjöld Weg 1-5 Postfach/ P.O.Box 5180 65760 Eschborn

prepared by:

Hermann Wieser Management & Renewable Energy Consultant Annastrasse 19 9210 Pörtschach am Wörthersee Austria

September 2015

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TABLE OF CONTENTS

1. EXECUTIVE SUMMARY ...... 7

2. INTRODUCTION AND DEFINITION OF TASK ...... 8

3. GLOBAL FRAMEWORK CONDITIONS AND BACKGROUND FOR IMPLEMENTATION OF AGRO-BIOMASS PROJECTS ...... 8

4. ECONOMIC AND AGRIBUSINESS SNAPSHOT OF REGION BACKA TOPOLA ...... 12

5. COMPANY PERUTNINA PTUJ-TOPIKO ...... 15

6. EXISTING GAS-FIRED STEAM BOILER PLANT AT PPT PROCESSING FACTORY ...... 18

6.1. ESTIMATION LOAD CURVE ...... 19

HEAT IS USED AS HOT WATER AND SATURATED STEAM WITH A PRESSURE OF 6 - 8 BAR...... 19

6.2. SHORT TERM PEAKS ...... 19

6.3. BASIS FOR CALCULATION OF LOAD CURVE OF TYPICAL PRODUCTION DAY ...... 20

6.4. YEARLY VARIATION / CONSIDERING MINIMAL LOAD ON WEEKENDS ...... 21

6. PROPOSED STRAW-FIRED STEAM BOILER PLANT ...... 22

6.1. ESTIMATION LOAD CURVE FOR AS BASIS FOR BOILER CAPACITY ...... 22

6.2. GENERAL CONSIDERATIONS FOR STRAW STEAM BOILER CAPACITY ...... 23

6.3. PLANT TYPE A: WEISSA/S ...... 24

6.3.1. STRAW BOILER PLANT FLOW CHART ...... 24 ...... 24

6.3.2. GENERAL PLANT DESCRIPTION ...... 25

6.3.3. BOILER DATA ...... 26

6.3.5. STRAW DIVIDER ...... 27

6.3.6. PUSH FEEDER ...... 28

6.3.7. PUSH GRATE ...... 28

6.4. PLANT TYPE B: LIN-KA MASKINFABRIK A/S ...... 29

6.4.1. GENERAL DESCRIPTION ...... 29

6.4.2. BOILER DATA ...... 29

6.4.3. CROSS-SECTION OF STRAW STORAGE AND ATTACHED BOILER HOUSE ...... 29

7. AGRO-BIOMASS POTENTIAL OF REGION BACKA TOPOLA ...... 30

8. SUSTAINABLE POTENTIAL OF STRAW SUPPLY AS AGRO-BIOMASS IN MUNICIPALITY OF BAČKA TOPOLA ...... 30

9. ASSESSMENT OF THE REALISTIC POTENTIAL OF AVAILABLE STRAW FOR COMBUSTION IN BIOMASS PLANTS ...... 31

10. PRINCIPALS TO BE FULFILLED FOR SUSTAINABLE AGRO-BIOMASS PROJECTS ...... 32

11. LEGAL ASPECTS RELATED TO STRAW AND CHICKEN LITTER COMBUSTION AS BIOMASS FUEL FOR STEAM PRODUCTION ...... 34

12. SPECIFICATION OF FUEL TYPE ...... 37

13. AGRO BIOMASS MARKET SITUATION IN BACKA TOPOLA REGION ...... 38 ______2

14. FUEL SUPPLY SYSTEM & LOGISTICS ...... 40

15. FUEL CONTRACTING AND DELIVERY ...... 40

16. FUEL STORAGE ...... 41

17. BUILDINGS ...... 44

17.1. PLANT TYPE A: WEISSA/S - LAYOUT OF CLOSED STRAW STORAGE AND BOILER HOUSE ...... 44

17.2. PLANT TYPE A: WEISSA/S CROSS-SECTION OF STRAW STORAGE AND BOILER HOUSE ...... 45

17.3. PLANT TYPE A: LIN-KA - LAYOUT OF CLOSED STRAW STORAGE AND BOILER HOUSE ...... 46

17.4. LOCATION OF BIOMASS PLANT AT PRODUCTION FACILITIES OF PERUTNINA PTUJ-TOPIKO ...... 47

18. ASH HANDLING ...... 48

19. CONSIDERATION OF PRIMARY ENERGY COST AS BASIS FOR PLANT TYPE DECISION ...... 50

20. FUNDING PROGRAMS ...... 51

20.1. EU-SUBSIDY PROGRAM IPARD 2014-2020 ...... 51

20.2. WESTERN BALKANS SUSTAINABLE ENERGY FINANCING (WEBSEFF) ...... 52

21. INVESTMENT COST...... 53

22. ECONOMIC STRATEGY ...... 55

23. EVALUATION OF ECONOMIC PROFITABILITY ...... 57

23.1. OPTION 3: LINKA TECHNOLOGY, MANUAL STRAW HANDLING, NO GRANT ...... 57

23.2. OPTION 4: LINKA TECHNOLOGY, MANUAL STRAW HANDLING, IPARD GRANT ...... 59

24. CO2 SAVINGS ...... 63

25. INVESTMENT STRUCTURE ...... 63

26. TIME SCHEDULE FOR REALISATION OF THE PROJECT AND NEXT STEPS ...... 64

27. SOURCES ...... 65

ANNEX 1: LIN-KA A/S: ENLARGED VIEW OF CLOSED STRAW STORAGE AND BOILER HOUSE ...... 66

ANNEX 2: LIN-KA A/S: LAYOUT PLAN OF STRAW STORAGE AND BOILER HOUSE ...... 67

ANNEX 3: ECONOMIC PROFITABILITY ANALYSIS OF INVESTMENT OPTIONS 1,2,3 AND 4 ...... 68

LIST OF TABLES

TABLE 1: SOCIAL AND DEMOGRAPHIC CHARACTERISTICS OF BACKA TOPOLA MUNICIPALITY ...... 12

TABLE 2: LAND STRUCTURE OF BACKA TOPOLA MUNICIPALITY ...... 13

TABLE 3: Economic characteristics of Backa Topola Municipality……………………………………………………………….…18

TABLE 4: MOST IMPORTANT AGRICULTURAL COMPANIES IN BACKA TOPOLA MUNICIPALITY ...... 14

TABLE 5: CROP AND LIVESTOCK PRODUCTION IN BACK TOPOLA MUNICIPALITY...... 15

TABLE 6: AVERAGE HOURLY HEAT/STEAM MWHTH CONSUMPTION BASED ON DATA PROVIDED BY PERUTNINA PTUJ-TOPIKO ...... 20

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TABLE 7: *DATA PROVIDED BY COMPANY PERUTNINA PTUK-TOPIKO FOR YEAR 2013; ** …% OF DEMAND OF WEEKEND DAYS COMPARED TO

PRODUCTION DAYS ...... 21

TABLE 8: ESTIMATED YEARLY BIOMASS AND GAS CONSUMPTION FOR PROPOSED NEW STRAW-FIRED BIOMASS BOILER ...... 22

TABLE 9: CROP PRODUCTION AND AGRO BIOMASS POTENTIAL ...... 30

TABLE 10: REGULATION RELATED TO STRAW AND CHICKEN LITTER COMBUSTION ...... 35

TABLE 11: STRAW SUPPLIERS IN VOJVODINA ...... 39

TABLE 12: STRAW PRICES IN VOJVODINA ...... 39

TABLE 13: AGRO BIOMASS MOBILIZATION AND STORAGE TIMING ...... 41

TABLE 14: NUTRIENT CONTENT OF DIFFERENT ASH TYPES FROM STRAW COMBUSTION ...... 48

TABLE 15: DIFFERENT ENERGY CARRIERS IN SERBIA AND THEIR CALORIFIC VALUE AND PRICE IN THE YEAR 2015 (NOT INCLUDING TRANSPORT

COST); SOURCE: DESK RESEARCH OF DIFFERENT STUDIES AND EXPERT TALKS ...... 50

TABLE 16: OWN CALCULATION OF ESTIMATED BUDGETARY INVESTMENT COST BASED ON OFFER PROVIDED BY WEIS A/S ...... 53

TABLE 17: OWN CALCULATION OF ESTIMATED BUDGETARY INVESTMENT COST BASED ON OFFER PROVIDED BY WEISS A/S ...... 54

TABLE 18: OWN CALCULATION OF ESTIMATED BUDGETARY INVESTMENT COST BASED ON OFFER PROVIDED BY LIN-KA MASKINFABRIK A/S .. 54

TABLE 19: OWN CALCULATION OF ESTIMATED BUDGETARY INVESTMENT COST BASED ON OFFER PROVIDED BY LIN-KA MASKINFABRIK A/S .. 55

TABLE 20: OWN CALCULATION OF CURRENT HEAT PRODUCTION COST WITH NATURAL GAS ...... 56

TABLE 21: OWN CALCULATIONS ACCORDING TO PROFITABILITY ANALYSIS IN ANNEX ...... 57

TABLE 22: OWN CALCULATIONS ACCORDING TO PROFITABILITY ANALYSIS IN ANNEX ...... 58

TABLE 23: OWN CALCULATIONS ACCORDING TO PROFITABILITY ANALYSIS IN ANNEX ...... 58

TABLE 24: OWN CALCULATIONS ACCORDING TO PROFITABILITY ANALYSIS IN ANNEX ...... 60

TABLE 25: OWN CALCULATIONS ACCORDING TO PROFITABILITY ANALYSIS IN ANNEX ...... 611

TABLE 26: OWN CALCULATIONS ACCORDING TO PROFITABILITY ANALYSIS IN ANNEX ...... 611

2 2 TABLE 27: CALCULATION OF CO SAVINGS WITHOUT EVALUATION OF CO EMISSIONS OCCURRED BY HARVESTING AND TRANSPORT OF STRAW ...... 633

TABLE 28: OWN ANALYSIS OF THE SERBIAN FINANCIAL MARKET AND FUNDING OPPORTUNITIES ...... 633

LIST OF FIGURES

FIGURE 1: POSITION OF BACKA TOPOLA ...... 12

FIGURE 2: AGRICULTURAL LAND STRUCTURE ...... 13

FIGURE 3: LOCATION OF PERUTNINA PTUJ-TOPIKO ...... 17

FIGURE 4: PERUTNINA PTUJ-TOPIKO BOILER HOUSE ...... 18

FIGURE 5: ESTIMATED DAILY LOAD CURVE BASED ON PROVIDED DATA BY PERUTNINA PTUJ-TOPIKO ...... 19

FIGURE 6: ESTIMATED LOAD CURVE AS BASIS FOR BIOMASS BOILER DESIGN BASED ON DATA PROVIDED BY PERUTNINA PTUJ-TOPIKO ...... 22

FIGURE 7: EXEMPLARY FLOW CHART OF A 3 TONS/HOUR STEAM BOILER PLANT FIRED WITH STRAW BALES PROVIDED BY COMPANY WEISS A . 24

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FIGURE 8: EXAMPLE PICTURE OF STRAW DIVIDER MANUFACTURED BY COMPANY WEISS A/S ...... 27

FIGURE 9: EXAMPLE PICTURE OF PUSH FEEDER MANUFACTURED BY COMPANY WEISS A/S ...... 28

FIGURE 10: EXAMPLE PICTURE OF MOVING GRATE WITH FOUR COMBUSTION ZONES WITH ADMISSION OF PRIMARY AIR MANUFACTURED BY

WEISS A/S ...... 28

FIGURE 11: CROSS-SECTION DRAWING OF STRAW STORAGE AND ATTACHED BOILER HOUSE PROVIDED BY LIN-KA ...... 29

FIGURE 12: PICTURES ABOVE – ILLUSTRATION OF WHEAT, CORN AND SOYA STRAW ...... 38

FIGURE 13: STRAW STORAGE ORGANISATION ...... 42

FIGURE 14: OPEN STRAW STORAGE ORGANISATION AT OWN LAND OF PERUTNINA PTUJ-TOPIKO AT POULTRY PRODUCTION FACILITIES IN BACKA

TOPOLA ...... 43

FIGURE 15: TYPICAL LAYOUT PLAN FOR STRAW STEAM BOILER PLANT PROVIDED BY COMPANY WEISS A/S ...... 44

FIGURE 16: TYPICAL CROSS-SECTION PLAN OF STEAM BOILER PLANT PROVIDED BY COMPANY WEISS A/S ...... 45

FIGURE 17: TYPICAL LAYOUT PLAN FOR STRAW STEAM BOILER PLANT PROVIDED BY LIN-KA MASKINFABRIK A/S ...... 46

FIGURE 18: POSITIONING OF BOILER HOUSE, CLOSED STRAW STORAGE, OPEN STRAW STORAGE AND OPTIONAL ROADS FOR STRAW DELIVERY

AND REMOVAL OF ASH ...... 47

FIGURE 19: ASH STORAGE; EXAMPLE PICTURE FROM STUDY VISIT IN DENMARK 2014 ...... 48

FIGURE 20: OWN CALCULATIONS ACCORDING TO PROFITABILITY ANALYSIS IN ANNEX ...... 58

FIGURE 21: OWN CALCULATIONS ACCORDING TO PROFITABILITY ANALYSIS IN ANNEX ...... 59

FIGURE 22: OWN CALCULATIONS ACCORDING TO PROFITABILITY ANALYSIS IN ANNEX ...... 61

FIGURE 23: OWN CALCULATIONS ACCORDING TO PROFITABILITY ANALYSIS IN ANNEX…………………………………………………………………….62

FIGURE 24: ENLARGED VIEW OF STRAW STORAGE AND BOILER HOUSE PROVIDED BY LIN-KA MASKINFABRIK A/S ...... 666

FIGURE 25: LAYOUT PLAN OF STRAW STORAGE AND ATTACHED BOILER HOUSE PROVIDED BY LIN-KA A/S MASKINFABRIK A/S ...... 677

List of abbreviations BMZ German Federal Ministry for Economic Cooperation and Development BCR Benefit Costs Ration °C Degree Celsius (temperature) CaO Calcium

CO2 carbon dioxide

DKTI Deutsche Klima Technologie Initiative EUR, € Währung (Euro) GIZ Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH) GIZ-DKTI Program for the “Development of a sustainable Bioenergy Market in Serbia“ ha hectare IRR Internal Rate of Return kg kilogramm ______5

km kilometre

K2O Potassium kW Kilowatt kWh Kilowatt hour l litre m meter m² square meter m³ cubic meter MgO Magnesium MW Megawatt MWh Megawatt hour NPV Net Present Value

Na2O Sodium PJ Petajoule

P2O5 Phosphor ROI Return-On-Investment Ton, t metric ton

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1. Executive Summary

Even the present situation on the global energy market is characterised by a price decline of fossil energies, in particular seen with the decrease of the crude oil price below US$ 50 in September 2015, the switch from fossils to renewables is economical feasible for private companies in the food industry. In particular in case the investment is supported by funding programs like the European Union funding program IPARD that is proposed to be in operation by 2016 in Serbia.

The present study is comparing the fuels switch from gas to a straw-fired steam boiler plant in the dimension of 1,7 MWth for the chicken processing company Perutnina Ptuj-Topiko located in Bačka Topola. The initial intention to present technical proposals from Serbian and some other European biomass technology suppliers was not supported due to lack of experience in straw combustion technology. Therefore, it was necessary to revert on technology from experienced Danish companies WEISS A/S and LIN-KA Maskinfabrik A/S.

In terms of security for fuel supply the agricultural land area in the region of Bačka Topola is of 50.000 hectares arable land enabling a sustainable straw-biomass supply of around 64.000 tons per year. Some medium and large-sized agricultural companies that are equipped for straw baling technology are farming land in the region an offer the required straw bales in usual Heston format for a price of € 40,00 per ton delivered to the biomass storage. The yearly demand of around 1.560 tons of straw as renewable fuel can be guaranteed and agreed based long-term supply contracts with local farmers for a period of minimum ten years.

The economic profitability analysis of the straw fired steam boiler plant offered by LIN-KA Maskinfabrik A/S - taking under consideration a contribution of 50% subsidies provided by the IPARD-Fund – shows a feasible investment scenario. The return on investment (ROI) of this investment option is 10,4% and the pay-back time is of 9,7 years whereas the IRR results in 34,40%.

The cost of steam production can be reduced from € 41,0 to € 31,50 per MWhth equivalent to a reduction from € 28 to € 21,50 per ton of steam

In terms of contribution to the climate change the reduction of CO2 is of 1.188 tons per year.

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2. Introduction and definition of task

After the selection process of the most promising agro industrial companies presented to GIZ DKTI in 2014 a potential project for a straw-fired steam boiler plant for the companies Perutnina Ptuj- Topiko, IM Topola and AIK Agro-industrial Company at Bačka Topola was selected for a being analysed within a pre-feasibility study. The results were presented to all participating companies in July 2014. IM Topola and AIK decided to step out of the proposed project, but the new managing board of Perutnina Ptuj-Topiko send a letter of interest to GIZ DKTI in order to adopt the existing pre-feasibility study on a more detailed proposal for a solution, which would include at a first step only the production site of Perutnina Ptuj-Topiko in Backa Topola. The proposed project shall bring strong savings for the company and involve local farmers to increase the local income by being an innovative lighthouse biomass project for the region.

In this context the objective of the assignment is to conduct a feasibility study for a fuel switch from natural gas to agro-biomass (straw-in-bales/chicken litter) for the production facilities of Perutnina Ptuj-Topiko in Backa Topola.

The task of the feasibility study is to evaluate the current situation and to prepare a technical- financial analysis of the planned agro-biomass project as well as to summarize the findings in the present study report and to prepare a PPT-presentation.

3. Global framework conditions and background for implementation of agro- biomass projects

The global energy system is changing. Fossil fuels are still the dominating energy source but in many parts of the world renewable energies are growing rapidly. The UN General Secretary started a campaign Sustainable Energy for All (SE4ALL) with the target to increase the share of Renewables in the gross final energy consumption from 18% in 2010 to 36% in 2030 worldwide.

The European Union decided already in 2008 to increase the share of Renewables Energies from

8 to 20% in 2020 and to reduce the CO2-emissions by 20%. New targets for 2030 are now in preparation. On October 23rd 2014 the European Council decided on new targets for 2030:

 Cut of greenhouse gas emissions by at least 40% as compared to 1990  EU-wide binding targets for renewable energy of at least 27%

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 Indicative Energy Efficiency target of at least 27%

The main drivers for public policies in favor of Renewables Energies are:

 Mitigation of climate change  Energy security  Regional development and creation of new jobs

On the global level – within the United Nations, the World Bank and the International Panel on Climate Change (IPCC) – climate change is seen as the biggest threat for a peaceful economic development of mankind in the decades to come. The IPCC report, published in September 2013, makes clear, that a climate mitigation pathway corresponding to the 2°C target, requires a reduction of global CO2 emissions per capita below 2t

CO2/year as soon as possible. The current CO2 emissions in Europe are above 7t per capita and year. The reduction target of 40% less CO2 in 2030 is therefore a minimum target, the reduction should reach minus 80% as soon as possible in order to comply with the IPCC climate mitigation scenario. Global decision makers are aware of the economic, social and ecological threats linked to climate change. On national level the push for Renewables as part of the climate mitigation scenario differs widely. Leading countries are Sweden with a share of more than 50% Renewables, also Brazil has nearly 50% Renewables, Denmark has ambitious targets for the coming years. Other countries lag far behind. The different public awareness about the problem of climate change is one of the reasons for these different approaches in countries.

CO2 is the main greenhouse gas causing global warming. It is released by burning fossil fuels. The cited IPCC report explains that 90% of the global CO2 emissions are caused by burning fossil fuels

– coal, oil, gas. Providing 10 kWh primary energy the following quantities of climate relevant CO2 are emitted:

 Coal: 3,3 kg CO2

 Oil: 2,7 kg CO2

 Gas: 1,9 kg CO2

In the case of sustainably produced biomass the climate relevant CO2 could be seen as a neutral emission. The CO2 released by burning biomass has been absorbed previously by the growing

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plants from the atmosphere via photosynthesis and is given back to the atmosphere either by natural decay of by using it.

Successful climate policy means above all a reduction of fossil CO2 emissions, this means reduction in the use of fossil fuels by increasing the use of renewables, better efficiency, less energy consumption.

Biomass plays an outstanding role among Renewables, even in the European Union, where in 2010 more than half of all Renewables, exactly 3 939 PJ, 62% of the total contribution of Renewables to the Final Energy Consumption, came from biomass.

The program ‘Development of a Sustainable Bioenergy Market in Serbia’ is implemented jointly by the KfW (financing component) and GIZ (technical assistance component). It is funded by the German Federal Ministry for Economic Cooperation and Development (BMZ) under the German Climate Technology Initiative (DKTI). The main implementing partner and beneficiary of the technical assistance (TA) component is the Serbian Ministry of Agriculture, Forestry and Water Management (MAFWM). The overall objective of the project is to strengthen capacities and create an enabling environment for the sustainable use of bioenergy in Serbia. The TA component includes the following four activity areas:

1) Policy advice: Assessment of bioenergy potentials and regulatory framework for creating an enabling environment for private sector investment in bioenergy projects etc. 2) Biomass supply: Accompany KfW-supported investments in biomass-fired CHP plants in up to three pilot regions with TA to secure a reliable and cost-effective supply of biomass in a sustainable manner.

3) Efficient firewood utilization at household level: Increase the efficiency of firewood consumption for heating at household level through the promotion of firewood drying and efficient stoves/ovens.

4) Project development: Assist Serbian and German investors in developing and implementing different types of bioenergy projects (biogas, biomass-fired systems for process heat and heating in public buildings etc.).

So far the use of biomass (especially straw) for the production of heat and/or electricity for the use in industries and district heating is not common in Serbia even if there is a big potential. In particular in the Autonomous Province of Vojvodina with predominantly agrarian structures and

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well-managed agricultural companies agricultural by-products could be used for biomass based energy production and district heating. This would have positive economic and environmental effects due to a reduction in the use of fossil fuels. Therefore GIZ DKTI project, component Project development support agro-industry companies to develop and implement such projects with technical assistance like the present document.

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4. Economic and agribusiness snapshot of Region Backa Topola

Cоmpany Perutnina Ptuj-Topiko is situated in Backa Topola, Backa Topola Municipality, Northern Backa County in Northern Part of Serbian Province Vojvodina. Map below shows position of Backa Topola.

Map data © 2015 Google

Figure 1: Position of Backa Topola Basic social and demographic characteristics of Backa Topola Municipality are presented in a table below. Info Data Total area 596km2 Number of 23 settlements Total population 33,321 Urban population 18,748 Rural population 14,573 Backa Topola, Bagremovo, Backi Sokolac, Bajsa, Bogaras, Gornja Rogatica, Gunaros, Settlements Karadjordjevo, Kavilo, Krivaja, Mali Beograd, Micunovi, Njegosevo, Novo Orahovo, Obornjaca, Pacir, Panonija, Pobeda, Srednji Salas, Stara Moravica, Sveticevo, Tomislavci, Zobnatica Table 1: Social and demographic characteristics of Backa Topola Municipality1

1 Serbian Statistical Office, Municipalities in Serbia 2014, http://webrzs.stat.gov.rs/WebSite/Public/PageView.aspx?pKey=711&URL=http://pod2.stat.gov.rs/ElektronskaBiblioteka2/ Pretraga.aspx?pubType=1 ______12

Northern Backa County and municipality of Backa Topola is characterized by predominance of high quality agricultural land and developed agricultural business. Land structure of Backa Topola municipality is presented below.

Total land Agricultural land Info Arable land Forest land other land area Utilized Unutilized Area 57,050 49,378 1,000 48,868 599 6,073 (ha) Share 100% 87% 2% 86% 1% 11% (%) Table 2: Land structure of Backa Topola Municipality2

Around 89% of Backa Topola Municipality is agricultural land, while 86% of total land area is arable land used for crop production. Structure of Backa Topola agricultural land is characterized by large agricultural holdings, since almost half of agricultural land is managed by farmers or companies owning over 100ha, as presented in chart below.

25.000 22.861

20.000

15.000

10.000 7.952

4.438 5.000 4.295 3.296 3.074 2.483 ha 307 672 0 Bellow 1ha 1-2ha 2-5ha 5-10ha 10-20ha 20-30ha 30-50ha 50-10ha over 100ha

Figure 2: Agricultural land structure3

2 Serbian Statistical Office: Agricultural Census, 2012, http://popispoljoprivrede.stat.rs/ 3 Serbian Statistical Office: Agricultural Census, 2012, http://popispoljoprivrede.stat.rs/ ______13

Basic economic characteristics of Backa Topola Municipality are presented in a table below. Most of active population is employed in agriculture or industry, while most of the industry is related to processing of agricultural products. Info Data Total number of employees 6,426 Employed in agriculture 30% Employed in industry 27% Unemployed 3,370 Average net salary 2013 320EUR

Table 3: Economic characteristics of Backa Topola Municipality4

Traditional importance of agriculture production in Backa Topola Municipality is evident. Some of the largest agricultural companies in Serbia based there crop production of agricultural products processing in Backa Topola. Most important agricultural companies in Backa Topola Municipality are presented in a table below. Apart from companies there is a significant number of farmers with developed agricultural production.

Company Core business Meat production and processing and crop IM Topola doo production PIK Moravica AD Crop production Perutnina Ptuj Topico Meat production and processing Doza Djerdj AD Meat production and crop production AIK Backa Topola Rendering Plant Zitko AD Backa Topola Crop storing and wheat grain processing

Table 4: Most important agricultural companies in Backa Topola Municipality

4 Serbian Statistical Office, Municipalities in Serbia 2014, http://webrzs.stat.gov.rs/WebSite/Public/PageView.aspx?pKey=711&URL=http://pod2.stat.gov.rs/ElektronskaBiblioteka2/ Pretraga.aspx?pubType=1 ______14

Most important data on crops and livestock production for Backa Topola municipality in 2013 are presented in table below.

Production (tons) Average yield (tons/ha) Info Family Companies Companies Family holdings holdings Wheat 22,590 39,376 6.640 5.674 Maize 49,256 110,292 6.725 5.755 Sugar bit 34,268 51.764 Sunflower 20,733 3.103 Info Livestock number Cattle 11,767 Pig 114,188 Ship 6,401 Poultry 482,729 Table 5: Crop and livestock production in Back Topola Municipality5

Maize and wheat are most important crops, while poultry and pigs are most important livestock produced in Backa Topola Municipality.

5. Company Perutnina Ptuj-Topiko

Perutnina Ptuj6 is an international group of companies, headquartered in Ptuj, Slovenia. Company was established in 1905 as a poultry station by an Austrian entrepreneur Valentin Reinhard. After the World War 2 the Company was nationalized and Perutnina Ptuj Company was established. During Socialistic period Company developed its chicken farms and meat processing operations. Company was privatized in 1992 and started developing its operations in neighbouring countries. Today Perutnina Ptuj employs over 3,500 workers, and cooperates with over 500 farmers and supplier. Annual revenues of the company exceed EUR 230 million while annual poultry meat production exceeds 77,000 tons.

5 Serbian Statistical Office, Municipalities in Serbia 2014, http://webrzs.stat.gov.rs/WebSite/Public/PageView.aspx?pKey=711&URL=http://pod2.stat.gov.rs/ElektronskaBiblioteka2/ Pretraga.aspx?pubType=1 6 http://www.perutnina.si/choose-your-country/ ______15

Perutnina Ptuj owns following companies and operates in following countries:

1. Slovenia: a) Perutnina Ptuj d.d. b) PP Gostinstvo d.o.o. c) PP Nepremičnine d.o.o. d) PP MI Zalog d.o.o. e) PP - Agro d.o.o. f) Ptujska klet d.o.o. g) Gradbeni remont d.o.o. h) Veterinarska ambulanta PP d.o.o. 2. Croatia: a. Perutnina Ptuj - PIPO d.o.o. 3. Bosna in Hercegovina: a. Perutnina Ptuj d.o.o. Trn – Laktaši b. Klaonica PP S d.o.o. Srbac c. Perutnina Ptuj-BH d.o.o. Breza 4. Serbia: a. Perutnina Ptuj-Topiko d.o.o., Bačka Topola b. »PP BRO ŽIVA« DOO Vajska 5. Macedonia: a. Perutnina Ptuj Dooel Skopje 6. Austria: a. Perutnina Austria GmbH 7. Romania: a. Perutnina Romania S.R.L. Brasov

Activities of Pertutnia Ptuj in Serbia started in 2002, by establishing a trading company in Belgrade. In 2007 Perutnina Ptuj privatized Topiko in Backa Topola and continued its activities in chicken meat processing in Backa Topola as Perutnina Ptuj-Topiko. In 2013 Perutnina Ptuj-Topiko, Backa Topola had over EUR 40 million of revenues and over 700 employees in total. Apart from meat processing factory, company in Serbia owns chicken farms and also cooperates with individual chicken producers, providing them with eggs, complete veterinary care and food for chickens in order to maintain the quality level. Most important products of the Company in Serbia are fresh meat, dried meat, sausages and other meat based products.

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Location of the Perutnina Ptuj-Topiko, Backa Topola is presented below.

Map data © 2015 Google

Figure 3: Location of Perutnina Ptuj-Topiko

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6. Existing gas-fired steam boiler plant at PPT processing factory

In the boiler house attached to the processing facilities two already gas boilers are installed. The gas boiler in main operation was fabricated in year 1991 by a Hungarian company. The boiler capacity is of 3.000 kW. The second installed gas boiler with similar capacity is of older fabrication and is used as a back-up and during maintenance. For the envisaged new energy concept the main gas boilers shall be used for peak load demand and as back-up for maintenance. The second old boiler will be replaced from the boiler house.

Main technical data of the existing heat/steam supply As an overview the following basic data had been provided by the processing plant manager during the meetings at factory site in Bačka Topola:  Capacity of gas boiler in main use 3.000 kW  2 gas boilers in use of which one will remain as back-up/one will be removed  Yearly gas consumption around 500.000 m3 (see also Fehler! Verweisquelle konnte nicht gefunden werden.)Steam is maintained by on/off control of gas burner. Starts around 6 bar – raises pressure.  Required pressure: 6-8 bar  Common steam header with existing boiler  Heating of technological water consumption (meat processing)  06:00 – 14:00 hour high consumption. 2 shifts, 5 days/week operation. Cleaning in between weekend.

Photo by H. Wieser © 2015 GIZ DKTI

Figure 4: Perutnina Ptuj-Topiko boiler house ______18

6.1. Estimation load curve

Figure 5: Estimated daily load curve based on provided data by Perutnina Ptuj-Topiko

Heat is used as hot water and saturated steam with a pressure of 6 - 8 bar.

6.2. Short term peaks

No information on short term peaks (>> 1h) are available. But they cannot be significantly because otherwise the current operation regime (start at minimum pressure / stop on maximum pressure) would not function at all. For the production this issue is no risk because the gas boiler remain in operation for emergency reasons (must be kept warm for this). For the design of the biomass boiler it is also not of main interest due to the fact, that a biomass boiler anyhow cannot follow fast load changes.

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6.3. Basis for calculation of load curve of typical production day

Basic data  Boiler size 3MW (2. Boiler stand-by)  Gas burner has no load modulation (regulates by start / stop cycles)  Up-time of gas burner over one typical production day in September; data provided by company Perutnina Ptuj- Topiko

With the uptime we calculated how many MW have been consumed as hourly average Hours Processing only Complete production

minutes MWhth minutes MWhth Total 18,93 AV 0,67 0,79 MIN 0,21 0,39 MAX 1,02 1,26 1 9 0,45 2 10,8 0,54 3 12,6 0,63 4 11,4 0,57 5 9,6 0,48 6 9 0,45 7 15 0,75 8 13,8 0,69 9 13,8 0,69 13,2 0,66 10 10,2 0,51 22,2 1,11 11 12,6 0,63 13,2 0,66 12 15,6 0,78 16,2 0,81 13 9 0,45 23,4 1,17 14 10,8 0,54 19,8 0,99 15 16,8 0,84 16,2 0,81 16 20,4 1,02 22,2 1,11 17 19,8 0,99 25,2 1,26 18 8,4 0,42 24,6 1,23 19 19,8 0,99 21 1,05 20 11,4 0,57 20,4 1,02 21 19,8 0,99 19,8 0,99 22 9 0,45 7,8 0,39 23 4,2 0,21 7,8 0,39 24 13,8 0,69 14,4 0,72 Table 6: Average hourly heat/steam MWhth consumption based on data provided by Perutnina Ptuj-Topiko For the further evaluation we used only the normal production day due to the following reasons:  It is the only full 24h dataset which is available  No information available of which part of the plant and heat/steam consumers are in operation at what time To evaluate this approach we made on this basis the estimation on the monthly gas consumption (only working days) and checked the result with the measured gas consumption provided by the customer (see table 11 below).

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6.4. Yearly variation / considering minimal load on weekends From the given monthly gas consumption following calculation was done:

 Estimation of gas consumption (demand) on weekends compared to normal working days (for room heating, etc). This demand has been calculated linear  Based on the monthly gas consumption a load factor for every month has been calculated (compared to September 2013 data)

Days Days (Total) (Prod.) Gas* Gas Weekend Production 1000m³/m MWh/m Demand** MWh/m MWh/d MW MWh/m MWh/d Factor January 31 17,1 50,871 526,515 15% 31,591 2,280 0,0950 494,924 28,871 118% February 28 20,0 48,053 497,349 10% 19,894 2,487 0,1036 477,455 23,873 114% March 31 22,1 54,303 562,036 10% 22,481 2,538 0,1058 539,555 24,367 128% April 30 21,4 45,659 472,571 5% 9,451 1,103 0,0459 463,119 21,612 110% May 31 22,1 40,871 423,015 5% 8,460 0,955 0,0398 414,555 18,722 99% June 30 21,4 42,292 437,722 5% 8,754 1,021 0,0426 428,968 20,018 102% July 31 22,1 42,124 435,983 5% 8,720 0,984 0,0410 427,264 19,296 102% August 31 22,1 43,026 445,319 5% 8,906 1,006 0,0419 436,413 19,709 104% September 30 21,4 41,473 429,246 5% 8,585 1,002 0,0417 420,661 19,631 100% October 31 22,1 32,083 332,059 5% 6,641 0,750 0,0312 325,418 14,696 77% November 30 21,4 41,939 434,069 10% 17,363 2,026 0,0844 416,706 19,446 99% December 31 17,9 43,809 453,423 15% 27,205 2,070 0,0862 426,218 23,868 101% Table 7: *Data provided by company Perutnina Ptuk-Topiko for year 2013; ** …% of demand of weekend days compared to production days Data in above table 12 for October to December is marked yellow because they are compared to other month significantly too low. The reason for this is unclear and cannot be seen from the data.

Disclaimer: All estimations are based on data provided by company Perutnina Ptuj-Topiko. Since there are no long-term measurements available the load curve of the installation can only be estimated roughly. Long-term measurements are recommended before investment.

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6. Proposed straw-fired steam boiler plant

6.1. Estimation load curve for as basis for boiler capacity

Load curve (hourly) in MW 1,8

1,6

1,4

1,2

1

0,8

0,6

0,4

0,2

0

1

226 451 676 901

1351 4501 1126 1576 1801 2026 2251 2476 2701 2926 3151 3376 3601 3826 4051 4276 4726 4951 5176 5401 5626 5851 6076 6301 6526 6751 6976 7201 7426 7651 7876 8101 8326 8551

Biomass Gas

Figure 6: Estimated load curve as basis for biomass boiler design based on data provided by Perutnina Ptuj- Topiko

During the production time the heating demand is estimated between 0,5 – 1,6MWth (hourly average). Therefore the sizing of 1,7MWth for the straw-fired steam boiler seems to be suitable. Only on weekends the boiler might be too large and there is the opportunity that during this time the gas boiler will run (here ~3%).

The table below shows the estimated demand of biomass and gas in MWhth for based taking yearly production under consideration

Demand Biomass Gas % 97% 3% MWh 5246 5067 179

Table 8: Estimated yearly biomass and gas consumption for proposed new straw-fired biomass boiler

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6.2. General considerations for straw steam boiler capacity

According to the above presented estimated load curve the steam boiler plant is proposed for the capacity of 1,7MWth supplying the demand for the average heat/steam consumption. The existing gas-fired boiler shall stay in work and supply sudden peak load demand that may occur from parallel operation of different heat/steam consuming devices during chicken slaughtering and processing activities. Slaughtering happens on two or maximum three days per week. Therefore, the peak steam demand may occur only in sudden short periods.

At this point is shall be mentioned, that sudden appearing peak loads do not justify designing the straw steam boiler capacity for a larger capacity. As the general characteristic of a straw boiler plant is a quite slow reaction time for immediate steam demand during intensive production the combined operation with the existing gas boiler is proposed to be the most economical solution. Another important argument for designing the boiler capacity for the average heat/steam demand is the fact, that the below described straw steam boiler plant can be operated on minimum 40% of the boiler capacity. In context with the 5 days operation per week in two shifts and stop of the processing facilities on Saturday and Sunday it means, that the boiler most probably doesn’t need to be shut down at least over the weekend in winter times when hot water for room heating is used permanently.

In periods when over the weekend the heat demand is low, most probably in April to October, the straw boiler may be shut down and the gas boiler, that always shall be kept warm, can supply the required heat. This shut-down time of the straw boiler can be used for cleaning and maintenance.

Evaluations for final design of the boiler capacity in terms of peak and base load heat/steam demand and in context with related investment cost shall be subject to more long-term measurements. Adapted from provided data and experience with comparable projects in the agro- food industry additional measurements may only proof insignificant different results and just underline the present boiler capacity planning.

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6.3. Plant type A: WEISSA/S 6.3.1. Straw boiler plant flow chart

Figure 7: Exemplary flow chart of a 3 tons/hour steam boiler plant fired with straw bales provided by company WEISS A

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6.3.2. General plant description

The following description explains the main equipment for producing steam to the existing poultry factory at Perutnina Ptuj-Topiko in Bačka Topola. The steam boiler is designed to be fired mainly with wheat straw collected in Heston bales. The use of soya and corns straw bales need to be analysed separately with combustion tests. This test is offered by the technology suppliers companies. The samples have to be provided by the local straw suppliers.

Fuel handling of the straw bales is proposed to be carried out using an automatic crane system operating inside the fuel storage (crane span= 12m and crane run way= 42m). The crane provides automatic feeding of bales to the bale conveyor.

As the automatic crane system is quite expensive for a small boiler plant witch need only 1 bale per hour, the alternative solution could be to install a chain buffer conveyor with a capacity of 6 hours between loading of bales. The bales are then loaded manually. The budgetary cost of an automatic crane system is EUR 180.000 whereas the budgetary cost of a manual straw handling system is of EUR 70.000.

The manually loading on the conveyor acting as a buffer with straw bales by a fork lift is needed in time periods of 6 hours between loading. The loading time of approximately six straw bales with the fork lift is 15 – 20 minutes. The price difference of EUR 120.000 may justify the implementation of a manually system but the decision finally need to be done by the production manager of the company

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.

The straw bales are transported from the fuel storage to the boiler area by means of a single bale conveyor to the straw fuel 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.

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The combustion of the 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 boiler type is a horizontal boiler in three-pass execution with open bottom in the furnace and two flue gas passes including steam drum with two flue gas passes in smooth pipes. Wet ash system consists of mechanical ash conveyor designed as wet scraper for transportation of ash and cinders from boiler to ash room/container. The ash must be able to settle in water.

Flue gas treatment system is included by means of a bag filter system for reduction of particle emission.

The flow chart on the following page provides an overview for the functioning of straw boiler plant.

6.3.3. Boiler data . Boiler output at 18% moisture in fuel: 1,7 MW . Flue gas temperature: 180°C . Design boiler pressure: 8,3 bar . Modulation within output: 40-100 % . Max fuel volume at max moisture: 466 kg/h (~1 Heston bale/hour) . Min fuel volume at min moisture: 186 kg/h . Boiler efficiency at 100% boiler load: 87 %

6.3.4. Furnace and fuel data . Calculated for 100% boiler output. . Max. allowed boiler input at 18 % moisture in fuel: 1.889 kW . Fuel type: Wheat straw pressed in bales type "Heston" square bale. . Origin biomass without halogen-organic compounds, without plastic material, coating or other, nitrogen content max. 0,3% . Calorific value dry and ash free, min.: 18,8 MJ/kg . Lower Calorific value, min.: 14,6 MJ/kg . Water content, max.: 18% . Ash melting point: >800<1000°C . Bale type "Heston": - Weight per bale: 400-500 kg - Bale width: 1.200 mm - Bale height: 900 mm - Bale length: 2.500 mm

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The fuel must be homogenous and without harmful components like PVC, chloride etc., foreign matters, and pollution. Moisture content in a single bale that is above the specified is not allowed at any point.

6.3.5. Straw divider

The straw-divider loosens the press layers without actually cutting but by an efficient loosening and dividing of the straw. This ensures an even and continuous feeding of the boiler in which way a constant combustion with the 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.

Figure 8: Example picture of straw divider manufactured by company WEISS A/S

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6.3.6. Push feeder The push feeder is used for transporting the loose straw from the straw divider and feeding it into the combustion grate.

Figure 9: Example picture of push feeder manufactured by company WEISS A/S

6.3.7. Push grate Push grate for combustion of straw fuel mentioned in the above fuel data specification.

Figure 10: Example picture of moving grate with four combustion zones with admission of primary air manufactured by WEISS A/S

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6.4. Plant type B: LIN-KA Maskinfabrik A/S

6.4.1. General description

LIN-KA Maskinfabrik A/S features for more than thirty years of experience on the combustion of biomass with biofuel heating and steam plants, particular within the utilisation of straw. In terms of plant types the experience of the company is in the range between 200 kWth and 5.000 kWth for steam plants. Heating plants are offered up to dimension of 10.000 kWth.

The system offered is a 1,7 MWhth steam boiler plant fired with straw in bales. The scope of supply is based on 24 hour operation where the straw have to be load manually respectively with a loader on the conveyor once a day.

6.4.2. Boiler data

. Maximum continuous output 1.700 kW . Maximum steam output 2.500 kg/h . Working pressure: 8 bar (o) . Minimum feed water temperature 105°C

Further data as well as technical conditions and the scope of supply can be found in the offer attached to the annex of the study report.

6.4.3. Cross-section of straw storage and attached boiler house

Figure 11: Cross-section drawing of straw storage and attached boiler house provided by LIN-KA

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7. Agro-biomass potential of Region Backa Topola

In the region of Bačka Topola, where the implementation of the straw-fired steam plant for agro- industrial complex Bačka Topola is foreseen, the agricultural framework conditions strongly support the sustainable supply of agro-biomass. The table below shows the agricultural data related to the main crops planted in the years 2009 – 2013 in Bačka Topola Municipality. The table also presents potential for agro biomass production.

Agro biomass Average Production (t) Grain - Straw Info Total straw yield (t) potential (t) 2009-2013 proportion (30% of straw yield) Wheat 51,454 1:1 51,454 15,436 Corn 153,610 1:1 153,610 46,083 Soya 4,563 1:2 9,126 2,738 Total 214,190 64,257

Table 9: Crop production and agro biomass potential78

8. Sustainable potential of straw supply as agro-biomass in Municipality of Bačka Topola

In the region of Bačka Topola the total agricultural land area is around 50,000 hectares. Considering the crop varieties of wheat and other cereals, corn and soya are grown on over 40,000 hectares in a radius of approximately 30 km around the project location as the main and relevant resources for the supply of agro-biomass the realistic and sustainable yearly potential in the region of Bačka Topola is around 64,000 tons of wheat, corn, soya and sunflower straw.

The yearly fuel demand of straw for the envisaged straw-fired steam boiler plant for Perutnina Ptuj is of around 2.000 tons, which is around 1,2 % of the yearly supply potential in the region. It is important to stress that Perutnina Ptuj is already buying around 430 tons of straw annually and

7 Serbian Statistical Office, Municipalities in Serbia 2010-2014, http://webrzs.stat.gov.rs/WebSite/Public/PageView.aspx?pKey=711&URL=http://pod2.stat.gov.rs/ElektronskaBiblioteka2/ Pretraga.aspx?pubType=1 8 Kaltschmitt, Hartmann, Hofbauer. EnergieausBiomasse.Springer, 2009; 2010. Razvoj tržišta biomase u Vojvodini. Fakultet Tehničkih nauka, Novi Sad, Centar za energetsku efikasnost. ______30

using it as bedding for chicken farms. These figures show, that the straw supply in the region of Bačka Topola can be guaranteed long-term for the straw-fired steam boiler plant.

9. Assessment of the realistic potential of available straw for combustion in biomass plants

An issue that in Central Europe and in Serbia has still remained unsolved throughout the years is the question of how much quantity of agricultural residues can be taken from the field for energy or any other purposes.

Following the findings of different studies9 and expert talks with farmers as well as with representatives of Universities, Chambers of Agriculture and agricultural experts the discussion how much of the available agricultural residues are sustainable available the opinions are quite controversial. Mainly the following arguments are given:

 Crop farmers believe that agricultural residues should be ploughed in order to increase the quantity of humus in the soil and consequently the soil fertility.  Livestock farmers partially are using the straw as bedding material thus producing the manure which is applied on the field.  Straw with a high calorific value is still burned on the fields in Vojvodina without further use.  Furthermore the use and yields of straw are depending on the varieties, the climate and soil conditions as well as on the applied harvesting technologies and experience of the farmers.  And of course also the market price of straw is a major decisive factor.

In context with the above mentioned arguments the share of 30% - 50% of the total estimated biomass quantities can be sustainable considered to be taken from the agricultural land. In order to follow a conservative approach and taking under consideration, that minor experience of straw supply for biomass plants exists in Vojvodina, the percentage of 30% as realistic sustainable agro- biomass potential is considered in this study to be on the safe side.

9 Study report:“Razvoj Trzista Biomase u Vojvodini”, University of Novi Sad, Fakultet tehnickih nauka, Prokajinski centar za energetsku efikasnost, Prof. Dr. Dusan Gvozdenac, Novi Sad, 2010 ______31

10. Principals to be fulfilled for sustainable agro-biomass projects

In order to guarantee a sustainable biomass project the following principals shall be taken into account:

Regional use If biomass is used in the region where it grows, the logistic cost can be minimized and the customer´s expenditures for energy can be kept in the region thus creating regional economic growth. Therefore local and regional production and utilization of biomass should be given a first priority.

Efficient conversion of biomass to bioenergy Although biomass is renewable it is not unlimited available. Therefore as much as possible of the primary energy available in biomass should be converted to final energy that is used as heat, electricity or fuel. The efficiency in the conversion of biomass to energy should reach 75% or more, e.g. including electricity generation. In case of the envisaged straw-fired steam boiler plant the efficiency is 87%.

Sustainable production of biomass The supply of biomass has to follow the rules of sustainability. For energy purposes, just residual biomass like straw material should be taken while simultaneously the fertility of the soil, the water supply and the biodiversity has to be safeguarded.

Coordination with the research community The accelerated development of the biomass to energy chains will cause different questions closely related to the agricultural and forest conditions of Vojvodina. A close cooperation with the research community should be realized to solve new problems on the basis of a scientific approach.

Reducing CO2 emissions Biomass from sustainable production burns most carbon neutral. Yet not more biomass must be used than being currently produced. This is one of the basic rules of sustainable biomass production.

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The envisaged project for the implementation of a straw-fired steam plant at the agro-industrial complex Bačka Topola fulfils all above mentioned principals with the sincere intention of the investors to enter in collaboration with the research community.

Fine dusk, flying ash and particle emission The legal provisions related to fine dusk, flying ash and particle emissions are different in European Union and Balkan countries and in many cases are subject to regional or even local regulations. In this context the issues in this respect may only be viable considered related to a certain location for a particular project.

In the sense of renewable energies and climate protection the aim of public authorities and public and private investors shall be to avoid these types of emissions as much as possible. In many cases the solution to avoid emissions will be a compromise between economic viability and the implementation of latest advanced technologies.

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11. Legal aspects related to straw and chicken litter combustion as biomass fuel for steam production

Serbian legislation related to usage of straw and chicken litter as a biomass fuel for steam production is presented in table below.

OGRS Regulation Issued by Relevance No10

135/2004; Law on Environment Parliament of the Republic of Regulating prevention, control, reduction and 36/2009; Protection Serbia rehabilitation of environment pollution 72/2009

Parliament of the Republic of 36/2009; Law on Waste Management Regulating waste management Serbia 88/2010

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 Parliament of the Republic of 135/2004 Regulating procedures for impact assessment on of Environmental Impact Serbia 88/2010 environment of plans and programs

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

Law on Planning and Parliament of the Republic of 121/2012 Regulating construction of objects Construction Serbia 42/2013 50/2013 98/2013 132/2014 145/2014

Regulation on Determination of Types of Project for which it is Obligatory to Perform Environmental Impact Government of the Republic Regulating what types of projects are subjected to 114/2008 Assessment and Types of of Serbia environmental impact assessment Project for which Environmental Impact Assessment can be Required

109/2009 Regulating for what activities local administration Regulation on Activities which Government of the Republic 8/2010 can charge fees for environmental protection and affect Environment of Serbia improvement

10 No of Official Gazette of Republic of Serbia regulation is published in. ______34

Rule Book on Categorization, Ministry of Environmental Testing and Classification of Protection and Spatial 56/2010 Regulating types of waste Waste Planning

Rule Book on Classification and Disposal of Residues of Animal Origin, Veterinary and

Sanitary Conditions for 31/2011 Construction of Object for Ministry of Agriculture, 97/2013 Collecting, Processing and Forestry and Water Regulating possibilities and conditions for utilizing Disposal of Residues of Management; Ministry of 15/2015 chicken litter and other animal based residues Animal Origin, Ways of Agriculture and Environment Conducting Official Control and Self-control, and conditions for Animal Cemeteries and Pits

Rule Book on Technical Requirements for Projecting, Ministry for Infrastructure and 87/2011 Regulating construction and control of equipment for Construction and Control of Energy steam production Equipment under Pressure

Rule Book on Inspection of Ministry for Infrastructure and 87/2011 Regulating construction and control of equipment for Equipment under Pressure Energy steam production

Rule Book of Technical and Regulating construction and control of boilers and other Requirements for Boiler Ministry of Energy and Mining 50/2009 boiler houses Facilities

Rule Book on Information Ministry of Environment and Regulating procedure for location permit about Location and Content of 3/2010 Spatial Planning procurement Location Permit

Rule Book on Content and 93/2011 Ministry of Environment and Regulating procedure for construction permit Procedure for Construction 103/2013 Spatial Planning procurement Permit

Rule Book on Conducting Ministry of Construction, 22/2015 Regulating procedures for all permits required for Unified Procedure Traffic and Infrastructure construction

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

Table 10: Regulation related to straw and chicken litter combustion

Law on Environmental Protection is a basis Law, from which other regulations related to waste management and environmental impact assessment are defied. 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. Same Law in article 5 defines incineration as a

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method for waste utilization or disposal. Law give basics for waste determination which is further elaborated in Rule Book on Categorization, Testing and Classification of Waste. This Rule Book all residues from agriculture classifies in group 2, straw is classified as 020103 as residues of plant tissue, while waste straw and chicken litter is classified as 020106 – animal feces, urine and litter (waste straw included). According to Rule Book on Classification and Disposal of Residues of Animal Origin, Veterinary and Sanitary Conditions for Construction of Object for Collecting, Processing and Disposal of Residues of Animal Origin, Ways of Conducting Official Control and Self-control, and conditions for Animal Cemeteries and Pits (article 7), chicken litter is classified as Category 2 material which can be used (article 13) as renewable energy source for energy production or co-incinerated as a way of disposal. The rule book also defines hygienic terms for collecting and storage, transport and labelling.

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 Project for which it is Obligatory to Perform Environmental Impact Assessment and Types of Project 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. However Regulation on Activities which affect Environment, does not define steam production facilities as subjected to environmental impact assessment. Law on construction along with, Rule Book on Information about Location and Content of Location Permit; Rule Book on Content 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 Projecting, Construction 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.

Finally, Rule Book on Special Fire Prevention Measures in Agriculture defines conditions for straw storage.

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12. Specification of fuel type

Wheat straw, corn stalk and soya straw can be used for combustion in steam production boiler. Basic characteristics of listed agro biomass fuels are presented below. Having in mind that Perutnina Ptuj operates chicken farm as well, chicken litter was also considered as a possible solution which can be used according to Serbian regulations. However due to the fact that the factory process food and required investments in storage for chicken litter, this solution was omitted by Perutnina Ptuj representatives.

Wheat straw

. Average grain yield: 6.5 tons/ha . Average straw yield: 5.2 tons/ha . Grain straw proportion: 1 : 0,8 . Straw yield Vojvodina: ~ 2.5 tons/ha

. Heating value: ~ 4 kWh/kg

. Mostly baled field crop in Europe . Advanced harvesting technology and experience available . Experience for energetic use due to clear biomass directives in Denmark, Great Britain and Spain . Energetic use in Germany, Austria, Southeast Europe and in particular in Serbia at beginning

Corn straw

. Average grain yield: 6.8 tons/ha . Average straw yield: 8.9 tons/ha . Grain straw proportion: 1 : 1.3

. Straw yield Vojvodina: ~ 5.5 tons/ha . Heating value: ~ 4.1 kWh/kg

. Second mostly used field crop in Europe; commonly used in Southeast Europe and particular in Vojvodina . Advanced harvesting technology and experience available – similar technology as for wheat straw . Higher water content of corn straw at harvest but this depends on local conditions . Used for production of agro-pellets

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Soya straw

. Average grain yield: 3.5 tons/ha . Average straw yield: 2.3 tons/ha

. Grain straw proportion: 1 : 0,6

. Straw yield Vojvodina: ~ 2 tons/ha . Heating value: ~ 3.8 kWh/kg

. Increasing demand for growing of soya in Danube Region area . Baling similar to wheat straw with bale presses . Experience of soya straw baling in Vojvodina . Slightly lower heating value than wheat and corn straw

Figure 12: Pictures above – illustration of wheat, corn and soya straw

Wheat and soya straw are already utilized in Europe and Serbia and there are plenty of positive examples. On the other hand, according to Serbian experiences,11 corn straw mobilization is often burdened with technological issues. Main problem in corn mobilization is harvesting period in October and November and rain falls which disable natural drying of corn straw on field after harvest. Also wet straw is harder to be handled by baling machines. In general corn straw is used if necessary and can be used in this case for Perutnina Ptuj-Topiko as well. Nevertheless, quantities of wheat and soya straw can be regarded as sufficient for supply of future steam boiler.

13. Agro biomass market situation in Backa Topola region

Agro biomass market in Backa Topola region and Vojvodina in general is in development. There are several specialized companies and farmers (presented in table below) oriented in harvesting residues collection, baling and supplying straw buyers. Those companies and farmers were interviewed for the purpose of this Study. Those companies are fully equipped with all straw gathering, baling, manipulation and transport capacities. Their realized annual production varies from 2,000 to over 10,000 tons of straw per year. Some of those companies also have land which they use as straw open storages.

11 Straw baling companies and pellet factories. ______38

Straw supplier Location Betacorn doo Sombor Mediland doo Sombor Vasa Poljanski Vrsac Sreckov Dragan Novi Sad Bun Petar Ada Table 11: Straw suppliers in Vojvodina Most important straw buyers in Backa region are:

 Compost producers  Chicken and cattle farms  Agro pellet and briquette factories  Companies producing energy from straw

Compost producers, chicken and cattle farms use wheat straw, while pellet factories prefer soya straw, but also use wheat and occasionally corn straw as well. Companies producing energy for their own production process are also using soya, wheat and occasionally corn straw. Table below presents straw prices on different parities in Serbia. Product-parity Price Straw on field EUR/ha 12-24 Straw on field EUR/ton 6-8 Straw loaded on truck EUR/ton 25-29 Straw transported to sellers’ storage up to 50km EUR/ton 38-42 Straw transported to sellers’ storage over 100km 50 EUR/ton Table 12: 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 12 to 24 EUR per hectare. Price depends very much on the straw yield, and having in mind usual straw yield of around 2-3 tons per hectare price of straw on field ranges from 6 to 8 EUR per ton. Some agricultural companies are selling straw on field per ton with 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 38 to 42 EUR per ton, delivered to a buyers destination in 50km range from straw mobilization point. Some suppliers are also selling straw at 25 to 29 EUR per ton loaded into a buyers truck. There are examples of occasional straw delivery to the buyers located over 150 km away from straw mobilization point, at the price of 50 EUR per ton.

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The water content of the delivered straw ranges from 12 to 18%. So far there is only one buyer which is paying for straw according to its energy value, thus linking the price with water content of delivered straw.

14. Fuel supply system & logistics

Agro biomass mobilization consists of following phases: Crop harvesting; Straw gathering and baling; and bale loading and transport. Following 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  Tractors or trucks with adequate trailers for transport

Straw baling is performed right after the harvesting if water content level of residues is below 20%. In order to increase efficiency of balers, straw gathering is performed with mechanical gatherers. After gathering, harvesting residues are baled into square bales, which depending on balers, can weight from 400 to 500 kg. Usual dimensions of large square bales are 1.2 m x 1 m x 2.4 m with density of 180-220 kg/m3. Loading and first phase of transport of the bales from the field can be performed with self-loading trailers or telescopic handlers. Finally straw bales are transported by tractors or trucks with adequate trailers for bale transport.

Considering that Perutnina Ptuj-Topiko does not own nor manage agricultural land and do not possess necessary machinery for agro biomass mobilization, straw supply should be contracted with local straw suppliers. Agro biomass delivery to Company straw storage-site, should be organized by contractors.

15. Fuel contracting and delivery

Total fuel – straw demand for steam boiler in Perutnina Ptuj-Topiko is set around 2.000 tons of straw per year. As mentioned there are several specialized companies for harvesting residues collection which can be contracted by Perutnina Ptuj-Topiko for straw delivery. In addition Perutnina Ptuj-Topiko is already buying 430 tons annually of wheat straw in small bales for their chicken farms. Current price of straw delivery including stacking and application of straw in chicken farms is 45 EUR per ton.

Having in mind position of Backa Topola in the centre of Backa region and a number of potential straw suppliers operating in municipality in question or in municipalities in vicinity, after discussion with several potential suppliers, we can regard the average straw price of 40 EUR per ton at 15% ______40

water content, for straw in big bales (1 x 1.2 x 2.4 meters) delivered to Perutnina Ptuj-Topiko storage as realistic.

Straw delivery to Perutnina straw storage in Backa Topola can be contracted on annual basis. Straw with water content higher than 20% should not be accepted. Measurement of straw quantity should be done with truck scale, while water content can be measure by probe based devices12.

16. Fuel storage

Agro biomass has very specific storage requirements, since it is mobilized and transported in very short period after harvesting and then it has to be stored throughout the whole year until consumed. Table below presents biomass mobilization and storage period for soya, wheat and corn harvesting residues.

Moth/ Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Biomass

Wheat

Corn

Soya Storage

Table 13: Agro biomass mobilization and storage timing

According to 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 meters piles, with 20 meters distance in between or 50x8 meters piles with 50 meter distance in between. For open storage we recommend 20 x 6 meter stacks with 6 meter height of pile.

12 http://www.humimeter.com/foods/humimeter-fl1-hay-moisture-meter/ ______41

Scheme below presents open storage organization. Total space required for storage is 32 x 260 meters, covering the area of 0.832ha.

Bale dimensions w=1.2m, l=2.4m, h=1m Bale weight = 400kg Required amount of straw = 1,300t Number of bales = 3,250 Stacking height = 6 meters Bales in one pile = 240 Number of piles = 14 Total area required for storage = 32 x 260 m or 0.832 ha

Figure 13: Straw storage organisation

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Open straw storage area

Map data © 2015 Google

Figure 14: Open straw storage organisation at own land of Perutnina Ptuj-Topiko at poultry production facilities in Backa Topola

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17. Buildings

17.1. Plant type A: WEISSA/S - Layout of closed straw storage and boiler house

The layout proposal below shows the biomass storage with 3 lines for storage of straw bales in Heston format and with automatic crane system installed.

 The dimension of the closed straw storage is 42,16 x 12,81 meter in total: 540 m2.

 The dimension of the boiler house is 16,0 x 7,5 meter in total: 120 m2.

 Total dimension of closed straw storage and boiler house is: 660 m2

Figure 15: Typical layout plan for straw steam boiler plant provided by company WEISS A/S

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17.2. Plant type A: WEISSA/S Cross-section of straw storage and boiler house  Height of boiler storage building and boiler house 8,44 m

Figure 16: Typical cross-section plan of steam boiler plant provided by company WEISS A/S

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17.3. Plant type A: LIN-KA - Layout of closed straw storage and boiler house

The layout proposal below shows the biomass storage with conveyor that can be fed for 24 hours operation. The straw bales stored in the biomass storage can be manually lifted on the conveyor with loader or forklift. Attached to the straw storage is the boiler house.

 The dimension of the closed straw storage is 18 x 35 meter in total: 630 m2.

 The dimension of the boiler house is 7 x 718 meter in total: 126 m2.

 Total dimension of closed straw storage and boiler house is: 756 m2

Figure 17: Typical layout plan for straw steam boiler plant provided by LIN-KA Maskinfabrik A/S

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17.4. Location of biomass plant at production facilities of Perutnina Ptuj-Topiko

Map data © 2015 Google

Figure 18: Positioning of boiler house, closed straw storage, open straw storage and optional roads for straw delivery and removal of ash

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18. 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 interims stored in a storage building.

Photo by H. Wieser © 2015 GIZ DKTI

Figure 19: Ash storage; example picture from study visit in Denmark 2014

The ash from the combustion of uncontaminated agricultural residues is a valuable fertiliser and can be distributed back to the fields. The ash from the combustion of uncontaminated agricultural residues is a valuable fertiliser and can be distributed back to the fields. The table below shows the average nutrient content of the 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 Table 14: Nutrient content of different ash types from straw combustion13

13 Kaltschmitt, Hartmann, Hofbauer. Energie aus Biomasse, Springer, 2009 ______48

Returning the ash back to the land ensures that part of the plant nutrients stays in the cycle and reduces the use of mineral fertiliser. The only missing nutrient is nitrogen which almost completely passes off during the combustion with the exhaust gas.

In a further feasibility study the national legislation of Serbia in this respect need to be analysed in detail. Usually, the legal conditions require analysis of ash samples few times a year.

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 of 4-10%. In case of the envisaged use of around 1.560 tons straw the quantity results in around 62-156 tons ash per year.

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19. Consideration of primary energy cost as basis for plant type decision

According to recent market analysis the prices of different energy carriers in Serbia are compared with €Cent per kWh calorific as shown in the table below:

Price per unit Price per kWh Calorific value in Energy carrier Unit kwh per unit EUR in Euro Cent

Straw in bales ton 3,900 40.00 1.03 (wc = 30%)

Electricity kWh 1 0.06 5.50

Natural gas m3 10 0.37 3.70

LPG litre 10 0.91 9.06

Diesel litre 9.8 1.16 11.83

Fuel oil (Mazut) kg 11.8 0.35 2.97

Wood chips ton 3,500 55.00 1.57 (wc = 30%)

Pellets, briquettes ton 4,800 150.00 3.13

Coal Vreoci mine ton 5,210 75.00 1.44

Table 15: Different energy carriers in Serbia and their calorific value and price in the year 2015 (not including transport cost); Source: Desk research of different studies and expert talks

In context with considerations to switch from fossil natural gas to renewable biomass in form of straw bales at company Perutnina Ptuj-Topiko in Bačka Topola, the price difference of 2,67 Ct./kWh between natural gas (3,7 Ct./kWh) and straw bales (1,03 Ct./kWh) already justifies to analyse the potential investment in an agro-biomass plant in this study.

As alternative renewable energy carriers mostly agro-pellets from corn straw are available in Vojvodina area. The actual price of agro-pellets is appropriately 150 €/t in Vojvodina, equivalent to primary energy cost of 3,13 Ct./kWh, which is triple the price compared to straw bales. Wood chips with primary energy cost of 1,57 Ct./kWh would be a price competitive biomass fuel, but are more available in the South of Serbia in forestry area and have a higher sensitivity to transport costs due to the low energy density.

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In addition, it shall also be pointed out that the production of straw as fuel for renewable energy production is a long-term sustainable business field and provides additional income for the farm companies in the region of Backa Topola. The potential investment in the agro-biomass plant can also be seen as a first step in direction of energy independence. Especially, related to the present insecurities in context with the supply of natural gas from Russia via Ukraine, the issues of energy independence and increase of gas prices become more and more important in the future.

20. Funding programs

The following two funding programs from European Union (IPARD) and the EBRD European Bank for Reconstruction and Development (WeBSEFF) may be eligible for supporting the investment in the new straw-fired steam boiler plant:

20.1. EU-Subsidy Program IPARD 2014-2020

According to information provided by the Serbian Ministry of Agriculture and Environment Protection the EU subsidy program “IPARD PROGRAM FOR 2014-2020” (IPARD = Instrument for Pre-Accession for Agriculture and Rural Development) will be operational in year 2016.

Within the IPARD sub-measure “Investment in physical assets concerning processing and marketing of agricultural and fishery products” the sector of meat processing (poultry production of Perutnina Ptuj-Topiko)may be eligible for submitting a project proposal to support the investment in renewable energy production used for own consumption of the processing factory.

Aid intensity Aid intensity, expressed as the share of public support in the eligible expenditure of an investment amounts up to:

 50% of total eligible expenditures  Maximum eligible investment expenditure is EUR 1.000.000

In context with the potential investment of Perutnina Ptuj-Topiko the maximum eligible investment expenditures are over EUR 1.000.000. This means that the maximum of EUR 500.000 could be gained in case of successful approval of a project proposal. The payment of the grant effects ______51

according to the financial agreement that needs to be concluded after approval of the project. The disbursement of the grant to the beneficiary takes place after implementation of the project based on the proof of paid invoices.

20.2. Western Balkans Sustainable Energy Financing (WeBSEFF)

Within the Western Balkans Sustainable Energy Financing Facility (WeBSEFF) the EBRD is providing financing of up to EUR 2mn to private businesses looking to invest in

■ Modern technologies that cut energy consumption or CO2 emissions by at least 20% ■ Retrofitting of buildings, provided the investment will make them at least 30% more energy efficient ■ Stand-alone renewable energy projects

Such investments help businesses

■ Reduce costs and make enterprises more competitive ■ Provide opportunities to replace old equipment and modernize production ■ Expand output, or the range of production ■ Improve quality standards and meet demands of export markets

Grants Businesses will receive investment incentives of 5% - 10% of the loan amount upon successful completion and verification of eligible projects. The percentage applied is based on the environmental impact of the project measured either by the reduction of CO2 emissions or the choice and scale of technology (for projects in the Building Sector).

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21. Investment cost

In following the investment cost of both technologies from WEISS A/S and LIN-KA Maskinfabrik A/S based on budgetary offers will be presented. The calculation of the buildings facilities (straw storage and boiler house) is based on estimated local construction cost. The concept of the buildings may be optimised in the final stage of project development. One option would be to implement the new straw boiler in the existing boiler house and to attach the straw storage to the boiler house. This option would also save investment cost but need to be evaluated in more detail in finale stage after basic decision for the investment.

Plant type A

Option 1: WEISS A/S technology, automatic crane system, no grant

Investment cost EUR Project development / permitting 50.000

Buildings (660 m2 x 258 €/m2) 170.000 Straw handling (crane/fork lift) 190.000 Machinery and equipment 900.000 Miscellaneous 90.000 Total estimated investment cost 1.400.000

Table 16: Own calculation of estimated budgetary investment cost based on offer provided by WEIS A/S

Option 2: WEISS A/S technology, manual straw handling, IPARD grant

As already mentioned in the general description of the biomass plant the automatic crane system is quite expensive for a small boiler plant that needs only 1 bale per hour. The alternative solution would be to install a chain buffer conveyor with a capacity of 6 hours between loading of bales. The bales are then loaded manually. The investment cost savings for a manually solution is of around EUR 120.000. The investment cost analysis below therefore considers the use of a manually system.

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Investment cost EUR Project development / permitting 50.000

Buildings (660 m2 x 258 €/m2) 170.000 Straw handling (crane/fork lift) 70.000 Machinery and equipment 870.000 Miscellaneous 90.000 Total estimated investment cost 1.250.000 IPARD grant (max. grant) -500.000 Investment cost after IPARD grant 750.000

Table 17: Own calculation of estimated budgetary investment cost based on offer provided by WEISS A/S

Option 3: LINKA technology, manual straw handling, no grant

Investment cost EUR Project development / permitting 50.000

Buildings (756 m2 x 258 €/m2) 196.000 Machinery and equipment including straw 590.000 handling Miscellaneous 90.000 Total estimated investment cost 926.000

Table 18: Own calculation of estimated budgetary investment cost based on offer provided by LIN-KA Maskinfabrik A/S

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Option 4: LINKA technology, manual straw handling, IPARD grant

Investment cost EUR Project development / permitting 50.000

Buildings (756 m2 x 258 €/m2) 196.000 Machinery and equipment including straw 590.000 handling Miscellaneous 60.000 Total estimated investment cost 896.000 IPARD grant (50% of investment) -448.000 Investment cost after IPARD grant 448.000

Table 19: Own calculation of estimated budgetary investment cost based on offer provided by LIN-KA Maskinfabrik A/S

22. Economic strategy

The clear target of the potential investors is to reduce the energy cost by implementing an agro- biomass steam boiler plant. The environmental issues related to the change from fossil to Renewable Energies shall be considered as a contribution for the “greening” of the company which more and more becomes an important issue as a marketing instrument.

According to the provided data from the company the estimation of the actual heat/steam production cost on basis of the existing gas boilers results in an actual heat price of 45,00 €/MWh calorific.

The calculation is based on following assumptions:

 Gas consumption 5.400 MWh  Gas price 37 €/m³  Gas boiler efficiency 90%  Price of electricity 60 €/MWh el  Electrical consumption 1% of heat demand  Staff 10.000  Depreciation / interest None – due to existing depreciated gas boiler plant

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Heat/steam production 5.400 MWh

€/MWh Gas price 37 cal 222.000 Electricity 1,0% 60 €/MWh 3.240 staff 10.000 € 10.000 Maintenance 11.000 depreciation 0 interest 0 total 41 €/MWh 246.240 28 €/t

Table 20: Own calculation of current heat production cost with natural gas

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23. Evaluation of economic profitability

In order to shows-up the most feasible and economic investment opportunity the options 3 and 4 of technology supplier LIN-KA Maskinfabrik A/S is presented in following. The economic profitability analysis of option 1 and 2 is not satisfactory and therefore not presented in detail but it is attached to the annex of the study report.

23.1. Option 3: LINKA technology, manual straw handling, no grant

The economic evaluation below shows the profitability of the project assuming the actual price of the existing heat production with natural gas of 41,00 €/MWh heat/steam as income for the sale of the heat. Furthermore, the following assumptions are basis for the calculation:

Investment EUR 926.000 Equity 40% 370.400 Grant 0% 0 Loan 60% 555.600 Interest rate / period 6% 10 years Persons employed / cost per year in € 1 15.000

Installed plant capacity (heat) MWth 1,7 Operation time hours/year 3.200 Heat output per year MWh 5.440 Heat price EUR/MWh 41,00 Input materials (straw bales) tons 1.563 Cost of straw bales EUR/ton 40,00

Table 21: Own calculations according to profitability analysis in Annex

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The project shows following IRR, NPV ROI and pay-back time

ROI – Return on Investment in % 7,3

Payback time in years 13,9

Table 22: Own calculations according to profitability analysis in Annex

Figure 20: Own calculations according to profitability analysis in Annex

Comparison of production cost in MWh and per ton of steam: Existing New agro-biomass Difference gas boilers steam boiler plant Cost per MWh 41,00* 34,00** -7,00 heat/steam Cost per ton of steam 28,00* 23,00** -5,00 Table 23: Own calculations according to profitability analysis in Annex

*) Cost including expenses for fuel, production, operation, no depreciation and interest due to existing plant **) Cost including expenses for fuel, production, operation, depreciation and interest

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Sensitivity analysis

The sensitivity analysis shows-up the variation of the IRR internal rate of return of the project in case the parameters for the investment cost the gas prices as well as the straw price is changing in comparison to the initial value.

30%

25%

20%

15%

10%

IRRInternal rateof return 5%

0% 70% 80% 90% 100% 110% 120% 130% Change in comparison to the initial value INVESTMENT COSTS Gas price Straw price

Figure 21: Own calculations according to profitability analysis in Annex

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23.2. Option 4: LINKA technology, manual straw handling, IPARD grant

The economic evaluation below shows the profitability of the project assuming the actual price of the existing heat production with natural gas of 41,00 €/MWh as income for the sale of the heat. Furthermore, the following assumptions are basis for the calculation:

Investment EUR 896.000 Equity 40% 358.400 Grant 50% 448.000 Loan 10% 89.600 Interest rate / period 6% 10 years Persons employed / cost per year in € 1 15.000

Installed plant capacity (heat) MWth 1,7 Operation time hours/year 3.200 Heat output per year MWh 5440 Heat price EUR/MWh 41,00 Input materials (straw bales) tons 1.563 Cost of straw bales EUR/ton 40,00

Table 24: Own calculations according to profitability analysis in Annex

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The project shows following IRR, NPV ROI and pay-back time:

ROI – Return on Investment in % 10,4

Payback time in years 9,7

Table 25: Own calculations according to profitability analysis in Annex

300.000

200.000

100.000

0

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 -100.000 -200.000 200,00% 171% -300.000 155% 154% 150,00% 100,00% -400.000 34,40% 50,00% 26,50% 25,75%

-500.000 0,00%

-600.000

Incomes Costs Balance

EUR NPV NPV - Costs increase 10% NPV - Income decrease 10%

Figure 22: Own calculations according to profitability analysis in Annex

Comparison of production cost in MWh and per ton of steam:

Existing New agro-biomass Difference gas boilers steam boiler plant Cost per MWh 41,00* 31,50** -9,50

Cost per ton of steam 28,00* 21,50** -6,50

Table 26: Own calculations according to profitability analysis in Annex

*) Cost including expenses for fuel, production, operation, no depreciation and interest due to existing plant **) Cost including expenses for fuel, production, operation, depreciation and interest

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Sensitivity analysis

The sensitivity analysis shows-up the variation of the IRR internal rate of return of the project in case the parameters for the investment cost the gas prices as well as the straw price is changing in comparison to the initial value.

80%

70%

60%

50%

40%

30%

20% IRRinternal rate ofreturn

10%

0% 70% 80% 90% 100% 110% 120% 130% Change in comparison to the initial value INVESTMENT COSTS Gas price Straw price

Figure 23: Own calculations according to profitability analysis in Annex

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24. CO2 savings

In terms of the effect to the climate change the replacement of natural gas by Renewables using straw bales as residues from agricultural land accounts for around 1.560 tons of CO2 reduction per year.

Energy carrier Calorific value CO2 output CO2 savings 1 m3 gas 10 kWh/m3 2 kg/ m3 - 1 ton straw 3.900 kWh/ton - 0,76 kg/ton 1.563 tons straw 3.900 kWh/ton - 1.188 tons*14 Table 27: Calculation of CO2 savings without evaluation of CO2 emissions occurred by harvesting and transport of straw

25. Investment structure

The table below shows the possible financial sources and the structure of investment of the agro- biomass plant project. The present study shall be the basis for negotiations with Energy Funds and Commercial Banks as well as with the National and Regional Government in order to finally agree on an adequate financing solution.

Financial sources – Structure of investment Type of contribution

 Investor: Perutnina Ptuj-Topiko Equity, land for construction of biomass plant

 Energy fund Equity and/or loan financing/eventually grants

 Commercial banks Loan financing

 EU IPARD Program Grant

 EBRD WeBSEFF Grant, loan

 National/regional Government Grants, investment incentives, tax exemptions

 Others Needs to be determined during financing negotiations

Table 28: Own analysis of the Serbian financial market and funding opportunities

14 The calculation is based on the assumption of 0,76 tons CO2-reduction by using one ton of straw (calorific value 3,9 kWh/kg, water content 15%) instead of 1 m3 natural gas (calorific value 10 kWh/m3 and CO2 output of 2 kg/m3) muliplied with 1.563 tons of straw (1.563 * 0,76 = 1.188). The calculation doen´t include CO2 emissions related to the harvesting and transport of straw.

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26. Time schedule for realisation of the project and next steps

The project for a new straw-fired steam boiler plant can be realised after assignment of the feasibility study and project engineering works until operation within a time frame of 8 to 16 month.

The main necessary steps within this time frame are the following:

 Basic decision for project realisation by management board of company Perutnina Ptuj-Topiko  Clarification of financing in terms of equity, bank loans and applying for project funding  Obtaining offer from straw boiler producers and decision for boiler technology and ordering of machinery and equipment  Project development . Assignment of architect for designing of buildings and achieving of construction permit based on decision for boiler technology . Assignment of environmental engineering company for applying of environmental permit based on decision for boiler technology

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27. Sources

Serbian Statistical Office, Municipalities in Serbia 2010 - 2014, http://webrzs.stat.gov.rs/WebSite/Public/PageView.aspx?pKey=711&URL=http://pod2.stat.gov.rs/Ele ktronskaBiblioteka2/Pretraga.aspx?pubType=1

Serbian Statistical Office: Agricultural Census, 2012, http://popispoljoprivrede.stat.rs/ http://www.perutnina.si/choose-your-country/

Kaltschmitt, Hartmann, Hofbauer. EnergieausBiomasse.Springer, 2009;

Study report:“Razvoj Trzista Biomase u Vojvodini”, University of Novi Sad, Fakultet tehnickih nauka, Prokajinski centar za energetsku efikasnost, Prof. Dr. Dusan Gvozdenac, Novi Sad, 2010 http://www.humimeter.com/foods/humimeter-fl1-hay-moisture-meter/

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Annex 1: LIN-KA A/S: Enlarged view of closed straw storage and boiler house

Figure 24: Enlarged view of straw storage and boiler house provided by LIN-KA Maskinfabrik A/S

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Annex 2: LIN-KA A/S: Layout plan of straw storage and boiler house

Figure 25: Layout plan of straw storage and attached boiler house provided by LIN-KA A/S Maskinfabrik A/S

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Annex 3: Economic profitability analysis of investment options 1,2,3 and 4

Economic profitability analysis provided with separate MS-Excel sheets

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