Feasibility Study on Wood Waste Utilization in Serbia - Technologies, logistics, production and certification

Main stakeholders for Supply of Wood Wastes

About 50% of the forest area in Serbia is state owned. The public companies Srbijašume and Vojvodinašume are in charge of managing the state owned forests. The companies conduct actions on afforestation, cutting, development and maintenance of infrastructure, and all other activities related to improvement of forests.

Since great shares of forest are under the management of the public companies Srbijašume and Vojvodinašume they have a very important role in the chain, from biomass waste collecting, to pellet production.

Srbijašume and Vojvodinašume usually have one-year contracts with firms asking for wood and wood wastes from their forests. The price of different assortments of forest wood, after cutting and transportation to the forest road, is defined by the public companies every year. Table 5.1 shows an extract from the price list of the Public Company Srbijašume defined in October 2007.

Having made an agreement with Srbijašume on the purchase of a certain quantity of already cut forest wood, every entity has to organize transportation from a site in the forest to the desired location.

Private forests are divided into relatively small parcels with an average area of 0,5 ha. Therefore, if an entity has demands for a considerable volume of forest wood then that entity has to contact and make agreements with several private forest owners.

Presently, there is not an organization that gathers forest owners into clusters or associations. Gathering forest owners into associations, most likely based on a region, would be useful, not only for the owners, but also for the entities that are interested in cooperating with them.

Generally, private owners do not have the appropriate equipment for professional wood cutting. In addition, they do not have the heavy machines for transportation of stems and logs. Therefore, the purchasing of wood, both commercial round wood or wood waste, from forests in private ownership, is much more complicated than it is with state owned forests.

The managements of municipalities, in the territories that the forests grow, generally do not have responsibilities regarding the forests.

Srbijašume has limited capabilities to carry out the process of wood cutting. Only about 30% of wood cutting in state forests is executed by Srbijašume, while 70% of the cutting in state owned forests and all of the cutting in private forests is executed by other firms [13].

The capabilities of Srbijašume and private owners to transport cut wood and wood wastes are very limited. Therefore, buyers organize the general transportation of purchased wood and wood wastes.

Securing a regular supply of wood waste

According to the actual state, the prospective producer of pellets or wood chips has to make agreements with many entities. The best solution is for the producer to make two agreements: one with Srbijašume, for purchasing wood including wood cutting, and another agreement with a firm to transport the wood.

However, for pellets producers with the remarkable production rate of over 10 000 t/year, this option is not probable. In this case the capacity of Srbijašume to carry out the wood cutting is not high. In addition, the wood wastes in forests are generally dispersed, so the limitation of taking wood wastes from state owned forests only and avoiding private forests could make the transportation costs of wood wastes high.

For a prospective pellet or woodchips producer, it would be more realistic to have several agreements for wood waste purchasing, including state forests, owners of private forests, wood processing companies, with one agreement for cutting, and probably one agreement for transportation (Figure 5.1). This organizational scheme however, seems very complicated.

It should be noted again that Serbia has more than 2,000 wood processing companies. This means that a significant number of them have a small capacity. Most of these companies have wood wastes suitable for pellet producers. Therefore, for full utilization of wood wastes for pellet production, a great number of agreements should be made.

Within the Serbian Chamber of Commerce there is the Association of forestry, wood processing, and pulp and paper industry. In spite of the fact that the Association formally comprises forestry, only state forest representatives are members of the Association. Representatives of wood processing companies are active members of the Association.

Private forest owners are not organized into any association. Forestry specialists recognize that this is a problem for sustainable and successful management of private forests. Therefore, it is anticipated that in the near future an association of forest owners will be established.

Presently, since private forests owners are not organized, prospective producers of pellets can make contacts with municipalities rich in forests. In spite of the fact that municipalities do not have any responsibilities regarding forests, prospective producers of pellets can find forest owners through municipal entities. The municipality, interested in the improvement of its local economy, will surely help investors and forest owners to make agreements on providing forest wood wastes.

STATE OF WOOD WASTE TECHNOLOGIES APPLIED IN SERBIA

Production technologies for solid bio-fuels

There are two main types of solid bio-fuels. One type includes fuel wood, wood chips, and other wood wastes without any preparation. The other type is pellets and briquettes, the bio-fuel, which is produced by increasing the bulk density of wood wastes.

Wood chips

Wood chips are usually wood wastes in sawmills and other types of wood processing industry, but can be manufactured specifically for use as fuel for electricity or heat production.

Intentional production of woodchips is usually for household demand. The typical technologies for woodchips production are presented in Figure 6.1. There are machines of different capacities and capabilities. Some equipment is for the cutting of tiny branches for domestic purposes (Figure 6.1a) with a capacity of about 6-10 m3/h, while others are for cutting thin stems (Figure 6.1.b) with a capacity of 100 m3/h.

In spite of the forest residues availability, the existence of biomass boilers and the relatively low price of machines for wood chip production, these technologies for woodchip production, have not been applied in Serbia yet. The lack of information and promotion of biofuel use, especially of forest wood wastes, is most likely the main reason this technology has not yet been applied.

Pellets and briquettes

The production of wood briquettes and pellets is in a time of expansion.

Briquettes have a greater dimension than pellets. The typical dimensions of wood briquettes are, diameter 60 -100 mm, and length 20 -200mm. Because of their relatively large dimensions, briquettes, unlike pellets, are not suitable for small and medium boilers with automatic feeding. They are more suitable for boilers and furnaces with manual feeding.

Because of their weights and dimensions briquettes are much more inclined to attrition and breaking than pellets. Therefore, wood pellets are a better material for fuel. Pellets can be used in small boilers with automatic regulation, since the feeding rate can be regulated.

There are producers of briquettes in Serbia, but their volume production is very low.

The production of wood pellets is becoming more frequent in Serbia. There are producers of wood pellet production technology in different countries. And several web addresses of technology producers in China can be found on the Internet, these include, Xuzhou Orient Industry Co., Henan Double Elephant Machinery, Anyang GEMCO Energy Machinery. European technology producers can be found in different countries, Andritz - Austria, Larus Impianti – Italy, Salmatec –Germany, SG Strojirna – Czech, Sweden Power Chippers Ab – Sweden.

The principle of pellet production is the same. Pellets should be produced from pure wood, but it is not obligatory. The usual pellet production practice is to make them without adding glue or resin. The technology of pellet production has to meet the request for resistance of mechanical wear, which include the attrition and breaking of pellets caused by their storage and transport. Some European countries, where pellets are in use in great volumes, have adopted very detailed standards regarding the quality of pellets (Table 4.3 Sweden, Austria, Germany).

Pellets can be produced from non-pure wood wastes and additives. But, if this is done, the pellets must not exceed the acceptable level of maximum value of harmful matters. Since the pellets should have a list of specifications, if the raw material is pure wood, the price of pellets is higher on the market.

The ownership structure of the existing pellet plants in Serbia and those, which will be built in the near future, is mixed. Plants can be owned by either a foreign or a domestic company or they can be owned by a combination of both. The technology used for the production of pellets is from European manufacturers. But, the smaller domestic pellet producers usually have second hand technology from European manufacturers or Chinese technology, which is much cheaper.

Technologies of wood waste use for energy production

The most common way to utilize wood biomass for the purposes of energy production is to burn it in boilers or furnaces. Other technologies, like gasification, are rarely used, and they are experimental.

For combustion of wood biomass in medium scale boilers the typical technology used is grate firing boilers. This means that wood biomass is burning on a static or moving inclined grate or slope. There are several manufacturers of medium scale boilers (0,5 - 20 MW) in Serbia: www.minel-kotlogradnja.co.yu, www.tipokotlogradnja.co.yu, www.podvisterm.co.yu, www.kirka-suri.com. One of the typical solutions for woodchip combustion in a boiler with a temperature-isolated furnace which enables full combustion of biomass fuel is given in Figure 6.2.

In regards to small boilers for biomass combustion, which are typically up to 300 kW, there are several manufacturers in Serbia: www.termomont.co.yu, www.podvisterm.co.yu, www.termingkula.co.yu, www.sukom.co.yu, www.alfaplam.co.yu, www.abcproizvod.co.yu, www.megal.co.yu.

But, only one of them offers the small boiler including the auxiliary equipment explicitly for wood pellet combustion (Figure 6.3). Another producer offers auxiliary automatic fuel feeding equipment but mainly just for wood chips. Others usually produce boilers for biomass combustion but mainly for logs, briquettes or coarse pieces of wood waste (Figure 6.4).

A short review of boiler manufacturers in Serbia shows that they already produce boilers for wood and wood wastes combustion. Since the production for the market in Serbia and demand for wood pellets are low then manufacturers of small boilers in Serbia do not have an interest in developing boilers or auxiliary equipment for automatic feeding, just for pellet combustion.

All boilers produced in Serbia meet the national standards regarding safety and efficiency. Unfortunately, the standards and regulations regarding combustion in small and medium scale boilers, were defined twenty years ago, and they do not prescribe contemporary maximum levels of gas emissions, combustion and boiler efficiency. Taking into account that boilers, in addition to similar equipment in many wood processing firms, are old, the standards do not impose high requirements regarding the level of gas emissions and boiler efficiency. The result is that many boilers operate with an average efficiency of up to only 70%.

Therefore, the necessary action is an introduction of updated standards and regulations for emissions from small and medium boilers. This measure will force domestic manufacturers to pay more attention to boiler efficiency.

Biomass fuel can be used not only for heat production but for electricity generation as well. Presently in Serbia, all boilers burning biomass produce only hot air, hot water or steam. There is no plant with electricity generation based on wood biomass.

Most wood processing enterprises, except simple sawmills, have chambers for drying wood. Since they use electricity for the operation of all machines, this means that the wood processing industry has a demand for both the heat and electricity. Therefore, from the technical point of view, wood processing firms are the ideal places for installation of combined heat and electricity power plants – CHP.

The advantage of CHP plants is their overall high efficiency of about 80%, when compared to an efficiency of 85% for separate plants for heat, and 35% for electricity generation plants. Higher efficiency means lower fuel consumption, and the lower fuel consumption for the given available volume of wood wastes means higher production of heat and electricity. The electricity produced in the enterprise can be used for meeting its own demand or it can be sold to the grid. For that reason the enterprise is, in principle, interested in high electricity production, after meeting its own heat demand. A typical, but at the same time modern, solution for a CHP plant based on wood wastes fuel is a steam boiler with a steam turbine. Capacities of CHP plants, which are offered by manufacturers, vary from a few hundred kilowatts up to a few hundred megawatts (Table 6.1).

Plants with relatively low installed power of electricity generation can be purchased on the market. This means, from technical point of view, that even small wood processing companies can install this kind of plant. However, the final answer about the viability of this technical solution will be given after economic evaluation, which takes into account a very important parameter, the electricity price. Even though the electricity price in Serbia is low, and the Energy Law, adopted in 2004, states that CHP plants, especially if they use biomass fuel, belong to a so called privileged producers group, there have been no new acts or rulebooks adopted specifying subsidies for the privileged producers.

Wood wastes can be burnt simultaneously with other fossil fuels within one boiler. This way of biomass combustion is called co-combustion. If the other fuel is coal of a similar size to wood wastes, the existing feeding system can be used for both fuels, and consequently very small investments are needed. This technical solution of using biomass for energy production is the cheapest one, but it implies that the existing boiler already uses technology, which is suitable for combustion of biomass wastes. In other cases it is necessary to carry out some construction changes on the boiler, as it could also burn biomass wastes. For example, if a boiler burns pulverized coal, and a firm has coarse wood wastes, then the structure of the existing boiler has to be adapted so it can efficiently burn coarse particles of wood wastes.

Co-combustion is a good option for wood processing companies with a relatively small volume of wood wastes compared to their needs of fuel and to the already installed boilers, especially if some of them use coal. Some types of co-combustion can be done with biomass and liquid or gaseous fuel, but in this case it is usually necessary to carry out several significant modifications on the boiler structure. However, these modifications are usually cheaper than having two boilers - one for biomass and one for fossil fuel combustion.

Presently in Serbia, the co-combustion of biomass and coal is only used in a few companies. Some of them are not in the wood processing sector, but are located in the region rich in forests and sawmills. Sawdust, as a by-product of small sawmills, is not always used on site, and the mills are willing to give the sawdust free of charge. Companies that take advantage of this opportunity mix the sawdust with the coal used in their boilers. This co-combustion is conducted usually without any modifications of the feeding or combustion systems. Since the biomass fuel is free then the interest in these companies for high combustion efficiency is not expressed.

PRE-PRODUCTION LOGISTICS

Pre-production logistics depend on whether the prospective pellet plant is located within a wood processing company with available wood wastes for pellet production.

A simple solution would be locating the pellet plant within a wood processing company and meeting the demand of the pellet plant with available wastes from the company. In that case, wood wastes would move within the company from one site to another close to the pellet plant. For that, transportation could be conducted through pipes, or by conveyor belt with protection from rain and snow.

If the pellet plant is not close to a wood processing company, and the source is raw material which would be collected in the forest, or brought from a remote wood processing company, management of the pellet plant would need a solution to the problem of a reliable supply of raw material. Reliable supply is not a matter of transportation costs and vehicles, but the long- term availability of wood wastes. It is likely investors would install only small pellet plants if they do not have their own wood wastes, at least at some limited volume. In any case, if someone decided to install a pellet plant in agreement with forest owners and wood processing companies, it would be necessary for him to rent or buy a truck for transport. Wood wastes in forests are collected in volume, and stored near roads, while some wastes are left in the forest. Usually this consists of branches smaller than 7cm. All these wastes should be collected manually.

Serbia has 1.98 million ha covered with forests, with 2.58 million m3 wood cutting and about 1.1 million m3 wood residues of different kinds. Taking into account that only approximately 60% of the total volume of wood residues in forests is available for pellet production, and that of all companies dealing with wood processing, only wood wastes from sawmills are available for pellet production, then it can be said that each forest hectare yields an average 0.3 m3 of forest wastes and 0.2 m3 of different wood processing wastes available for pellet production.

Taking into account the largest forest areas only, the conclusion is that the most suitable municipalities for installing pellet plants are: Majdanpek, Kuršumlija, and Prijepolje. According to available information (Public Company Srbijašume, www.ebrdrenewables.com, www.pellets.ua, www.tradekey.com, www.vitalsource.info) six companies with wood pellet production of over 10 000 ton/year will be in operation by 2009. Some are in the final stages before operation and some are under construction. There is not a wood pellet plant with significant production, over 10 000 t/year, in operation.

In Nova Varoš, in southwest Serbia, where a few years ago there was the highest concentration of sawmills, a factory producing wood briquettes and pellets was expected to start in May 2008 with a capacity of 10 000 t/year with the intention of expanding production. A factory with the largest capacity in Serbia will be built in Negotin and is expected to be operational in 2008 with a capacity of 100,000 t/year. Wood pellet factories in Beograd (company Lika system, capacity 60 000t/year), Bajina Basta (in western Serbia on the Drina River), Prokuplje, and Doljevac (30 000 t/year) which is not far from Niš, should have a combined production of less than 150 000 ton/year. It can be expected that the total production of these factories would be up to 250 000 t annually.

According to estimates of the available wood wastes in forests and from wood processing companies, it can be concluded that there is availability for an additional production of 250 000 t of wood pellets, in total about 500 000 t of pellets per year.

In choosing locations for new pellet plants, the vicinity of any of the big aforementioned pellet plants (Prokuplje, Negotin, Beograd, Doljevac, Bajina Bašta, and Nova Varoš) should be avoided. Therefore, seven locations are suggested for potential locations of new plants. These seven locations comprise 16 municipalities. They are selected because they would not be affected by the six existing pellet producers (Figure 7.1). The selected locations would allow for production greater than 10 000 t per year for each. This assumes that most of the raw material for the pellet plant, forest wastes and wood processing wastes, would be collected from the area of the listed municipalities, meaning transport distances would not be longer than 50 km.

The cost of raw materials depends mainly on the plant location. If the plant is located within a wood processing plant, the raw material is free. This is the optimal solution, not only because the price of raw material is zero, but more importantly because its supply is ensured.

If the pellet factory has to provide resources for production, then transportation of wood wastes (sawdust, woodchips, and bark) would be by trucks or tractors, depending on the distance and the type of wood wastes. If the raw material is more compact, such as bark or wood parts, the transportation cost per ton would be lower. If the transportation distance is short, for example up to 10km, then transport can be by tractor, and would be cheaper than by truck. But if the transportation distance is longer, then the capacity of the vehicle is an important factor, and should be done by truck.

The total number of sawmills in Serbia is more than 1500. In Figure 7.1 only the first 100 sawmills with the greatest annual revenue are presented. Other sawmills, obviously small enterprises, are located primarily in the most forested regions.

The resource for wood pellet production can come directly from the forest or from sawmills. If the pellet producer has to provide some wood wastes directly from the forest, the price of wood wastes would be a maximum 25 €/t. This is the value from the price list of the public company Srbijašume (Table 5.1). It is anticipatedthat wood wastes from private forests would be cheaper.

Assuming that the transport of wood wastes by truck would be similar to the transport of coal, the price would be within the range of 0,7 and 1,4 €/km for distances up to 50km for trucks with a capacity of 25 tons. Converting this to the cost per ton of pellets, the price is between 1,8 and 3,6 €/t. The price greatly depends on the density of the wood wastes when transported. If the wood wastes are wood chips and sawdust, with a low bulk density, then the transport price would be higher than for thin branches and stumps.

PRODUCTION PROCESS Production technologies for wood pellets

The simplest pellet plant is one installed within a sawmill enterprise, where sawdust and cutter shavings are biomass wastes. In that case, the raw material is dry, the plant does not need a dryer and grinder, and the greatest attention has to be paid to protect biomass wastes from impurities (metal). In addition, if the capacity of the pellet plant is small, for example up to 300 t per year (1 t per day), then the only equipment is a pelletizing machine. All other tasks can be executed more or less manually, such as packing, internal transport, and storage.

If the raw material is wood wastes consisting of bark or other coarse pieces of wood, wet sawdust, and wood chips, and the capacity is relatively large, over 10 000 t per year (30 t per day), then the pellet plant should consist of more machines with considerable level of automation.

The main processes in a pellet plant are (Figure 8.1):

• Reception of raw material - unloading of road or rail vehicle;
• Storage system – enabling optimal conditions for further steps in manipulation;
• Cleaning - before grinding, sieving machines and magnetic separators remove various impurities such as stones or metal particles;
• Conveying – an internal transport system for horizontal and vertical conveying of the raw material;
• Grinding – necessary if the raw material is not sawdust or wood material with dimensions under the upper limit, usually up to 3mm, but at least less than the diameter of pellets.
• Conditioning – prepared in appropriate size, sawdust and woodchips are heated, usually by steam, releasing the lignin contained in the wood, which is then available as a binding material during the pelletizing process; also, the raw material should be dried up to a maximum 20% of moisture, and then can be pressed in order to produce pellets;
• Grinding or milling and drying of raw material can be combined, if drying is necessary. In a miller-dryer the crusher changes the particle size of sawdust, which is dried. Crushing makes the process of drying considerably easier, and dried wood particles are easily crushed. The particles should be of equal size and equal moisture content. As the moisture content of all particles is homogeneous, the pellets are more durable.
• Hot gas generators are used for drying. Usually they use sawdust and other biomass wastes as fuel.
• Pelletizing – pellets are produced unde very high pressure in pellet mills. After the particles of wood wastes are prepared for pellet production, they are put in a press. The process of pressing is carried out in a drum with small holes, through which the crushed wood wastes are pressed, producing pellets. A typical drum with holes for pellets is pictured in Figure 8.2. On the left side of the main perforated drum in Figure 8.2, there is a rolling cylinder for executing the press.
  
• Cooling under appropriate conditions for obtaining qualitative pellets
• Bagging – bagging lines prepare the pellets for onward transportation
• Loading of road and rail vehicles

If a pellet plant uses round wood (timber) as a raw material, the first step in the process is making wood chips from timber, then grinding the chips to a size appropriate for pellet production. Mobile machines for making wood chips from timber are presented in Figure 6.1b, while stationary machines applying the same technology can process even larger timber.

Costs of production process

The price of pellets is based on investment costs, operational costs, cost of transport to consumers, tax, and business profit.

Operating costs consist of: the cost of providing wood waste, the costs of energy (electricity and heat), salaries, maintenance, and insurance. The different operating costs are presented in Figure 8.4. If, for example, a pellet factory gets wood waste from the public company Srbijašume for the average price of 15 €/t, which is lower than its list price (Table 5.1), then the greatest share in operating costs is the cost of wood waste (51%). Since the maximum price of wood waste offered by Srbijašume is 25€/t, the share of costs for wood waste could be much higher.

Energy consumption costs are of second level importance of operating costs. The process of drying and milling wood wastes as a preparatory phase for production requires electricity for milling and manipulation and the heat for drying. The press, as the main facility for pellet production, also requires electricity. If the price of wood waste is low, then the energy cost can rise to above 50% of the total production cost. This is under the conditions in Serbia, where the price of electricity is three times less than in Austria.

A plant for wood pellet production with a maximum 30 000 tons per year is taken as an example for the economic analysis. This maximum production can be reached only if the plant operates in three shifts.

Investment costs are estimated at 1 million €. It assumes a green-field investment and comprises the following main items: cost of equipment (dryer, press, boiler for heat production), cost of purchasing the land, cost for construction of buildings for storage and operation, connection to the electricity grid, and vehicles for internal transport.

A brief analysis of investment and annual operating costs shows that operating costs are very high, and can be higher than the investment cost. Even when costs of raw material are low, the annual operating costs are very close to the total investment cost. Also, an important fact is that the domestic price of electricity is low. It means that investment cost does not play an important role in the assessment of the viability of the project of wood pellet production.

The two main operating parameters for attaining the financial viability of wood pellets production are the costs of raw materials and electricity. Two additional important parameters are the number of shifts for the plant operation and the cost of transport, especially for long distances.

In the case of pellet plants located in Serbia, salaries do not make up a significant share of the total operating cost. Even in developed countries, salaries would not present a significant share of the total operating cost.

The following parameters for techno-economic analysis are adopted:

Investment cost: 1 million €

Annual production: 20 000 tons (2 shifts, 5 working days per week)

Price of wood waste: 27 €/t (including transport cost from forest to plant)

Price of electricity per 1 ton of wood pellet: 7,84 €/t

Annual salary: 6 000 € per worker

Working staff: 6 workers for 1 shift

Transport costs of pellets within Serbia: 6 €/t

Transport costs of pellets to Europe: 36 €/t (truck + ship)

Price of pellets in Serbia: 80 €/t (without VAT, transport included)

Price of pellets in the EU: 120 €/t (without VAT, transport included)

Discount rate: 10%

Operating life: 15 years

The annual income under the above conditions of the pellet plant is 1,6 million € for the Serbian market, and 2,4 million € if pellets are exported to the EU. The annual income exceeds the total investment.

Since the investment cost is relatively low compared to the operating costs, a simple payback period and internal rate of return (IRR) are not relevant to the financial assessment. A simple payback period for a typical pellet plant is not longer than two years, and under some other assumptions it is less than one year. Internal rate of return relates to the value of the total investment and it cannot give a right answer on the financial viability of wood pellet plant.

The relevant financial parameters for assessment of the viability of the project are: the ratio of the total benefit versus total cost (B/C) and profit (B-C). Benefit (B) and cost (C) are the present values of total discounted income and costs for the total period of the working life of the plant.

If wood pellets are sold in Serbia (Figure 8.5) the use of wood wastes with a price of 25 €/t leads to a total profit during the whole working life (B-C) of 3,58 million € present value, and the ratio B/C is 1,46. If the wood pellet producer purchase get wood wastes for a lower price, for example only 8 €/t, then the pellet production would achieve better financial parameters: the total profit during the working life of the plant is 6 million € and the ratio B/C is 2,11. In both cases, the internal rate of return is very high, 38% and 49% respectively.

A similar analysis can done assuming the pellets are exported to Europe with the price of 120 €/t including transport cost (Figure 8.6). Since the transport cost to the international market is a significant share in the total costs, the wood waste price has less influence on B/C ratio and profit. The decrease of the raw materials price from 25 €/t to 8 €/t leads to an increase of profit from 5 to 7,44 million €. The ratio B/C is increased from 1,41 to 1,77, while the internal rate of return (IRR) is again very high, 45% and 54% respectively.

The previous analysis was conducted based on the wood pellet price in EU of 120 €/t. This price includes transportation by truck (within Serbia) and ship (from Serbia to the EU). According to information from the Serbian company JRB dealing with transportation over rivers and seas, the ship transport to 1000 km distance is 30 €/t including loading and unloading. Then the total transport cost, including transport by truck in Serbia, is 36 €/t.

A potential problem is that the Belgrade port does not have the appropriate equipment for loading pellets onto ships. In that case another option is to use trucks for all transportation. But this option is much more expensive.

The increase of transport costs from 36 €/t to 50 €/t leads to the decrease of profit (B-C) from 5 million € to 3 million €. If the transport costs increase to 60 €/t then the profit for the whole working life of the plant is only 1,58 million € present value (Figure 8.7). The ratio B/C is going down from 1,41 (for the price of 36 €/t) to 1.10 (for 60 €/t). The internal rate of return (IRR) is very high (45%) for relatively low transport cost of 36 €/t, but for higher price of 60 €/t, IRR is decreased 26%.

It can be concluded that increase of transport costs dramatically influences the viability of wood pellet production. Therefore, it is necessary to carefully investigate different transportation methods and carefully select the destinations for selling the pellets.

Since the operating costs are dominant for assessment of the viability of the project, it is necessary to investigate every possibility of reducing any operating costs elements.

The factory can operate in one, two or three shifts. The change in number of shifts does not change the consumption of any resource such as, raw material and energy, nor the transport costs expressed per volume of products such as, tons of pellets, but the investment is better utilized. If the operation is in three shifts, the plant is more intensively engaged and should have a higher profit. But, the investment cost has very limited influence on the profit of wood pellet production.

The increase of shifts from one to two or three shifts would increase the number of employees, but not linearly. The night shifts have no need for workers who receive the raw material and workers who deliver wood pellets.

The tariffs for paying electricity take into account not only the energy consumed and the power engaged as well. Therefore, the electricity price per ton of wood pellets decreases, as the time of engagement of electric machines is longer. For plant operation in one shift the overall electricity price is 9.9 €/t, while for operation in three shifts the overall price is 5,76 €/t.

Therefore, the increase of operation of three shifts instead of two shifts leads to a decrease of costs of electricity and probably salaries. And vice verse, if number of shifts is decreased from two to one, then the electricity costs increase. With increased shifts the production rate is increased. The overall financial parameters change with a variation of working shifts. With the change from one to three shifts the profit of the plant increases from 1,75 million € to 8,5 million € (Figure 8.8). The ratio B/C is slightly increased from 1,26 to 1,49, while internal rate of return increases from 27% to 57%.

The minimum price, with tax excluded, of wood pellets, including transport costs by truck within Serbia and by ship to the EU, is 66 €/ for the Serbian market and 96 €/t for the EU market. These prices are for one shift plant operation. For three-shift operation, the minimum prices are: 51 €/t for the Serbian market and 81 €/t for the EU market. The term minimum price understands that the profit (B-C) equals zero during the operational life of the facility which is 15 years.

Financial parameters, simple payback period and the internal rate of return cannot be real measures of financial viability for wood pellet production. Investment costs are relatively low when compared to operating costs. For the operation of three shifts with a production of 30,000 tons per year the annual operating costs can be higher than total investment costs.

As a final result of the economic analysis it can be concluded that an investment in wood pellet production in Serbia would be an attractive option. The conditions for success are as low as possible operating costs, especially costs of wood wastes and transport.

Therefore, all enterprises dealing with wood processing have a remarkable advantage, since they have wood wastes as a by-product, and for them the price of raw material is zero.

For others who plan to build plants for pellet production without ensuring at least a part of the raw material from their own wood processing plant, there is a risk of providing raw material at unacceptable price. With an increase in demand, the price of wood wastes will be higher. On the other hand, a large demand for wood pellets in the EU, and a further increase in demand would increase the price of wood pellets on the market, which would eliminate the negative effects of the increased price of the raw material.

POST-PRODUCTION LOGISTICS TO MARKET

In general, pellet producers in Serbia have two possibilities; to export pellets to European countries or to sell them on the domestic market.

Presently wood pellets produced in Serbia are mainly exported. But in the future, after adoption of measures for promotion of renewable energy sources and support measures for their use, it can be expected that wood pellets will be used in Serbia as well.

The main destinations for the export of pellets are, Italy, Greece, Germany, the Netherlands and other northern European countries. The main routes for the prospective export of wood pellets are given in Figure 9.1. There are two main routes for exports to Italy. One option is by road, through Croatia, and the other option is by train to the port Bar in Montenegro and then a ship for transport via the Adriatic Sea to ports in Italy. The closest port is Bari, but Ancona on the north can be used as well. The problem with the second option is the inefficiency of loading an unloading many transportation vehicles. Therefore, it is necessary to have available facilities at the ports, so the wood pellets can be moved from trains or trucks to a ship and vice versa.

If the export destination is for example Germany, there is a possibility to transport wood pellets by ships along the Danube, by train through Hungary or Croatia and then via Austria to Germany.

A cheaper solution is to transport wood pellets in bulk, without packing them in bags. However, in that case, ports and railway stations must have installed facilities for pneumatic transport of wood pellets from one vehicle to another. Since the use of wood pellets in Serbia and Montenegro is not developed, these types of facilities in railway stations or ports are not developed either.

Pneumatic transport for wood pellets manipulation in ports and railway stations could be avoided if wood pellets are packed in big bags, for example 1/2 ton. In that case, typical machines for loading can be used. However, the producer of wood pellets would have to be equipped with the appropriate facilities for packing pellets and for the manipulation of them.

The only way to transport wood pellets in Serbia is by trucks. Transportation by truck is more expensive when compared with trains and ships.

The current price of wood pellet transportation by a truck with a capacity of 25 t capacity at a distance of 200 km would be about 0,7 €/km, or about 6 €/t including insurance. The distance of 200km is assumed as an average distance between prospective pellet producers and the market in Serbia, or the port in Belgrade or Prahovo on the Danube.

If transportation is by the Danube River, the transportation price would be about 30 €/t for distance of about 1000 km, including insurance, loading and unloading.

CERTIFICATION OF FORESTS IN SERBIA

The public companies Srbijašume and Vojvodinašume are in charge of managing all of the forests within Serbia. Vojvodinašume is responsible for forests in the province of Vojvodina, while Srbijašume is responsible for forests in the rest of the territory.

There are however, four national parks, which are not under the care of these two companies. These parks are Fruska Gora in Vojvodina Province, and Tara, Djerdap, Kopaonik, which are located in the western, eastern and southern parts, respectively. National parks are in charge of management of forests on their territory.

Almost 50% of the forests in Serbia are located on private property. But private owners do not have the freedom to cut trees of their own accord. The Law on Forests [12] states that, in private forests, Srbijašume is entitled to mark trees for cutting. Every year, the personnel of Srbijašume mark the trees to be cut in forests, which are both private and state owned.

In the province of Vojvodina almost all forests are under state ownership.

This means that despite the fact that the forest is under private ownership, wood cutting is defined by Srbijašume and Vojvodinašume. Every year these companies define the volume of wood cutting in forests. This is how the sustainable use of forests in Serbia is sustained.

In regards to the international certification of forests (FSC – Forest Stewardship Council) Srbijašume intends to certify all their forests. Presently, only one forest organizational unit of Srbijašume, the forest estate Boranja in eastern Serbia, is certified by the FSC. The certificate was obtained in 2007. Currently, five forest estates within Srbijašume are in preparation for obtaining the FSC certificate by the end of 2009. Srbijašume intends for all 17 forest estates within its company to receive their FSC certificate within the next several years.

The international certification of private forests would be much more complicated, taking into account that the average area of private forest is about 0.5 ha.

Note: This text is an excerpt from the document-guide for investors Feasibility Study on Wood Waste Utilization in Serbia.

The project is implemented with the support of the USAID Serbia Competitiveness Project.

ALSO READ THE TEXT ABOUT ANALISYS OF PRIMARY BIOMASS RESOURCE SUPPLY, AND THE TEXT ABOUT CURRENT MARKET ANALYSIS.

USAID Srbija Projekat za razvoj konkurentnosti Beograd

JP Srbijašume Beograd

JP Vojvodinašume Petrovaradin

Privredna komora Srbije

JP Nacionalni park Fruška gora Sremska Kamenica

Nacionalni park Tara Bajina Bašta

Nacionalni park Đerdap

Rudnap group Minel kotlogradnja a.d. Beograd

Alfa-Plam doo Vranje

Termomont d.o.o. Šimanovci

Podvis-Term Knjaževac

TERMING KULA

Šukom d.o.o. Knjaževac

ABC Proizvod d.o.o. Užice

Megal sistemi d.o.o. Petrovaradin

Feasibility Study on Wood Waste Utilization in Serbia

Djerdap

biomass

biogas

pellet

Spatial Plan of the Republic of Serbia

wood waste

cellulose

cut wood

briquet

Law on Waste

Law on Forests

Kyoto Protocol

wood chips

Andritz

Larus Impiant

Salmatec

SG Strojirna

Sweden Power Chippers

Lika system

National Park Kopaonik

Forest Stewardship Council

FSC

Boranja

FSC certificate

kirka suri

podvisterm

termomont