Macroeconomic study on net effects of import
substitution of fossil fuels with biomass
Prepared for:
Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH
DKTI- Development of a Sustainable Bioenergy Market in Serbia
Bože Jankovića 39, 11000 Beograd
Nenad Stanišić, PhD
Vladimir Dženopoljac, PhD
Faculty of Economics
University of Kragujevac
Kragujevac, October 2015
Table of contents
1. EXECUTIVE SUMMARY
4
2. INTRODUCTION
6
2.1 EFFECTS OF BIOMASS-BASED DISTRICT HEATING PLANTS ON REGIONAL ECONOMY
8
3. METHODOLOGY
11
4. OVERVIEW OF LOCAL ECONOMIES IN SELECTED MUNICIPALITIES
15
4.1 ZLATIBOR DISTRICT
4.2 MAČVA DISTRICT
4.3 RAŠKA DISTRICT
15
27
32
5. DISTRICT HEATING SYSTEMS’ ENERGY OUTPUT AND ESTIMATION OF BIOMASS DEMAND
37
5.1
5.2
5.3
5.4
5.5
5.6
5.7
5.8
5.9
5.10
38
40
42
44
46
48
49
50
52
54
BAJINA BAŠTA
NOVA VAROŠ
PRIBOJ
PRIJEPOLJE
MALI ZVORNIK
NOVI PAZAR
AVAILABLE BIOMASS POTENTIAL
WOOD BIOMASS REQUIRED FOR FUEL SWITCH IN DHS VS. BIOMASS POTENTIAL
POTENTIAL WOOD CHIPS SUPPLIERS
EFFECTS OF FUEL SWITCH TO BIOMASS ON NATIONAL TRADE BALANCE
6. FUEL COST OF HEATING ENERGY PRODUCTION AND POTENTIAL SAVINGS IN CASE OF FUEL SWITCH
TO BIOMASS
57
6.1
6.2
6.3
6.4
6.5
FUEL PRICE FORECAST
THERMAL ENERGY FUEL COSTS WITH DIFFERENT FUELS
COMPARISON OF FUEL COSTS PER ENERGY OUTPUT FOR ALTERNATIVE FUELS
POTENTIAL FUEL COST SAVINGS IN CASE OF FUEL SWITCH TO BIOMASS
NET PRESENT VALUE AND INTERNAL RATE OF RETURN FOR FUEL COST SAVINGS
57
62
65
66
72
7. EFFECTS OF FUEL SWITCH TO BIOMASS ON LOCAL INCOME AND EMPLOYMENT
75
7.1 MODEL DESCRIPTION
77
2
Table of contents
7.2
7.3
7.4
7.5
SOME BENCHMARK CASES
MODEL RESULTS
COMPARISON OF RESULTS WITH BENCHMARK CASES
INDUCED INCOME EFFECT
79
83
91
93
8. THE FINANCIAL VALUE OF CARBON EMISSION REDUCTION
95
8.1 BRIEF OVERVIEW OF THE EU EMISSIONS TRADING SYSTEM (EU ETS)
96
9. CONCLUDING REMARKS
106
10. LIST OF TABLES
111
11. LIST OF FIGURES
114
12. LIST OF ABBREVIATIONS
115
13. REFERENCES
116
14. APPENDICES
118
3
Executive summary
1.
EXECUTIVE SUMMARY
Over 99% of thermal energy in Serbia is produced from fossil fuels. However, there are
economic, social and environmental benefits from a change in favor of greater
participation of biomass as a fuel in district heating systems. Substitution of fossil fuels
with locally produced biomass is in accordance with the Strategy of energetic development
of the Republic of Serbia until 2025, which assumes reduction of the share of coal and
liquid fuel, and increase the share of biomass and natural gas.
Substitutions of fossil fuels with biomass in district heating systems would have the effects
not only from the perspective of district heating system, but also from the perspective of
local, regional and national economy. Total effect of such fuel switch could be observed
from the financial, but also from the social, macroeconomic and environmental standpoint.
Thus, policymakers should have a broad picture of various effects and their net effect.
The most important determinant of decision to implement fuel switch to biomass from the
district heating system perspective is the final cost of produced thermal energy (€/kWh)
provided for the district heating grid, which is the lowest in the case of wood biomass
(compared to coal, gas and heavy oil). Benefits for local community do not end here.
Contrary to fossil fuels, which are predominantly imported from other regions of country
and other countries as well, biomass would be produced locally, thus, raising the local
economic activity and creating the new jobs. Proper estimation of this effect requires the
usage of income and employment multipliers, because every unit of money spent locally
generates more than one unit of local income. Similarly, every new job in biomass
production is going to open more jobs in local community. On the national economic level,
substitution of fossil fuels with biomass represents the substitution of imports with
domestic production. This contributes to lowering of Serbian trade deficit and import
dependency, which is especially high in the energy sector.
This study primarily aims to estimate the impact of substitution of fossil fuels with biomass
in district heating systems (DHS) on regional economy (income and employment) in
municipalities of Priboj, Prijepolje, Nova Varoš, Mali Zvornik, Bajina Bašta and Novi Pazar.
Since fossil fuels substitution with biomass is a long-term decision, it is therefore
necessary to make a dynamic analysis over ten years period. Based on this analysis
decision makers will have a foundation for decision-making, taking into account current
situation and the future trends. This is important from two aspects. First, current world
market prices of fossil fuels are historically low, with the long-term increase forecasts. If
the usage of biomass is economically justified now, then it is going to be even more
beneficiary in the future. Second, if Serbia were going to become the EU member state in
near future, then the EU legislation regarding CO2 emission would pose new financial
4
Executive summary
burden to fossil fuel utilization in district heating systems, increasing, thus, the benefits of
biomass usage.
5
Introduction
2.
INTRODUCTION
In Serbia,57 municipalities are currently operating on district heating systems. Total
energy input and output of Serbian district heating plants are presented in Table 2-1.
Table 2-1 District heating plants energy inputs and outputs1
Total
(In TJ)
24,736
21,664
20,453
1,211
3,044
Input
Total output
For final consumption
For consumption in energy sector
Losses
Total
(In %)
100.0
87.6
82.6
5.0
12.4
Apart from severe energy losses and old equipment, one of the most significant
disadvantages of the district heating systems in Serbia is almost complete reliance on
fossil fuels. Over 99% of thermal energy in Serbia is produced by direct use of fossil fuel
(Table 2-2), contrasted by approx. 15% being produced in this manner in EU 27 countries.
Table 2-2 District heating plants energy inputs by fuel type2
Total
Input (in TJ)
Input (%)
Natural gas
Oil and oil
products
Coal and Coal
products
Wood Fuels
24,736
18,475
3,293
2,889
79
100.0
74.7
13.3
11.7
0.3
There are economic, social and environmental incentives to increase the share of
renewable energy sources in district heating systems in Serbia. This study deals with
these incentives from the macroeconomic point of view. The focus is on the regional
income and employment effects of the switch from fossil fuels to wood biomass in six
district heating systems (DHS) in municipalities of Priboj, Prijepolje, Nova Varoš, Mali
Zvornik, Bajina Bašta and Novi Pazar. The estimated biomass energy potential of these
municipalities is more than enough to meet the long-term needs of their DHS.
1Source:
2
Energy balances 2013, STATISTICAL OFFICE OF THE REPUBLIC OF SERBIA
Ibid
6
Introduction
100%
90%
80%
28,7
22,3
18,6
16,6
14,6
50,1
53
56,4
70%
60%
50%
48,3
50,7
Petroleum products
Natural gas
40%
Coal
30%
Biomass
20%
10%
23
0%
0
2010
20,1
18,3
16,5
11,2
12,1
12,5
2020
2025
2030
23,8
3,2
2015
Figure 2-1 Projection of changes in the structure of energy sources for heat generation in Serbia
The Government of Serbia and local governments have recognized the potential of
biomass as a part of the solution for the problems in district heating systems. According
to the Strategy of energetic development of the Republic of Serbia until 2025, target
changes in the structure of energy sources in this sector assume reduction of the share
of coal and liquid fuel (fuel oil and heating oil), and increase the share of biomass and
natural gas (Figure 2-1). It is necessary in order to ensure participation of the target of
27% of renewable energy sources -RES in gross final energy consumption by 2020, but
also because this sector concerns the EU scheme for emissions trading.
Many business studies have confirmed that there are commercial benefits from wood
biomass usage in DHS instead of fossil fuels, due to lower input prices. However, the
picture of economic effects of switching the district heating plants from fossil fuels to
biomass is not complete yet. The reason for that is the lack of the study, which will analyze
the economic effects not only from the standpoint of heating plant, but also from the
standpoint of entire local economy and national economy, as well. Closing this gap is the
main contribution of this study.
Additionally to fuel costs effect, substitution of fossil fuels with biomass has effects on
local income and employment. This is due to fact that fossil fuels are mainly imported from
other regions and even other countries, while the biomass is locally available. Thus,
biomass production will give rise to the income and employment in the region. Only after
taking into account these effects, decision makers at municipality or state level will be
provided with broad picture of economic effects of fuel switch.
7
Introduction
This study aims to estimate the impact of substitution of fossil fuels with biomass in district
heating systems (DHS) on regional economy in municipalities of Priboj, Prijepolje, Nova
Varoš, Mali Zvornik, Bajina Bašta, and Novi Pazar. Bearing in mind that biomass for the
needs of district heating plants (DHP) is going to be locally produced (contrary to fossil
fuels which are imported from other regions and other countries as well), the economic
impact of fuel substitutions does not end with the potential savings regarding the costs of
fuel. It also lowers the cost of energy supplied by DHPs. The rise in the production of wood
biomass in the region will also have impact on regional income and employment.
Estimation of these effects is the objective of this study.
Next section gives a short summary of various local effects of usage of locally produced
biomass for heating plants (this is also applicable to other potential biomass usage, like
for power plants or cogeneration CHP plants).
2.1 EFFECTS OF BIOMASS-BASED DISTRICT HEATING PLANTS ON
REGIONAL ECONOMY
Advantages of district heating systems based on biomass as a fuel for system customers,
local community and national economy can be summarized in the following:
1. Lower and predictable energy costs
The use of locally grown biomass affects the stabilization of prices and lowers the costs
of produced energy in a district. The price of wood fuel is not linked to world energy
markets or unstable regions, but instead it is determined by local economic factors. For
this reason, biomass systems do not experience the price instability of conventional fossil
fuel systems.
This advantage of biomass fuel is also important on national level because lowering the
fossil fuel imports means lower vulnerability of national economy to external shocks in
price of these fuels.
2. Money remains in the local economy
Unlike fossil fuels, which come from outside the region, wood fuel is a local and regional
resource. The businesses associated with wood supply (logging operations, trucking
companies, and sawmills) tend to be locally owned, so that profits are retained in the
regional economy. These activities contribute to the municipality tax base. Conversely,
the use of fossil fuels creates a net economic drain on a region and country. Additionally,
8
Introduction
income earned in biomass supply chain will be spent in part on local goods and services,
thus multiplying the net income effect on local economy.
On national level, this effect contributes to the improvement in trade balance and lowers
the imports dependency of the country.
3. More local jobs
Conventional energy systems require labor in fuel extraction, processing, delivery,
operation, and maintenance as well as in system construction and installation. Fossil fuel
supply is based on energy resources outside the community (even outside the country),
thus, all jobs associated with extraction and processing are outside the local and regional
economies. By contrast, jobs and most of the raw materials associated with wood fuel
extraction, reforestation, and fuel transport are within the local and regional economies.
Additionally, the biomass fuel production is more labor-intensive and less capital-intensive
then fossil fuels production. Thus, it is relatively easy to enter the biomass production in
comparison with the fossil fuels production, and at the same time, the job creation benefits
are bigger in the case of biomass production.
4. Use of a plentiful and renewable resource
Biomass is a renewable resource that can continue to replenish itself when managed and
harvested sustainably. Wood-fired heating systems provide a market for lower-grade
wood not suitable for furniture or other high profit products. These markets can be
especially critical for restoring commercial and biological quality to harvested forests. In
addition, the use of waste wood for energy can reduce the need for and costs of disposal.
5. Environmental benefits
Carbon dioxide is the major greenhouse gas implicated in global warming. When fossil
fuels are burned, carbon that was sequestered underground (as oil, gas, or coal) is
converted to CO2 and released into the atmosphere. While CO2 is a major component of
the combustion emissions of both fossil and biomass fuels, burning biomass for energy
adds no net CO2 to the atmosphere. For biomass energy to be an effective strategy for
climate change mitigation, the biomass must be harvested in a fashion that sustains the
forest resource and increases its vitality and productivity over time. If a forest is clear-cut
and does not regenerate, there will be no trees to sequester, and carbon and CO 2 levels
in the atmosphere will increase. Lower CO2 emission has not only the ecological, but also
the economic value. This is the case in developed economies where the CO 2 emission
has tradable market value.
9
Introduction
Switching from fossil fuels to biomass has not only global ecological effects, but also local
environmental impact. If the heating systems that use conventional fossil fuels are
replaced with wood fuels, the quality of air and community livability will increase.
10
Methodology
3.
METHODOLOGY
Substitution of fossil fuels with biomass in district heating systems would have a variety of
economic effects. The most obvious one is the change of the price of fuel consumed by
heating plants, i.e. the change of the production cost of heating energy. If proven as
cheaper, usage of biomass as fuel would enable the decrease of the consumer price of
heating energy, and/or the savings in cost of fuel for heating plants, i.e. in local
municipality budget. However, that would not be the all of economic impact. Wood
biomass is locally produced fuel, which is why the increase in biomass demand will
increase the biomass production.
Thus, the first step in complex economic analysis is the calculation of wood biomass that
would be demanded by DHS in case of fuel switch. Based on that and local wood biomass
potential, the increase in wood biomass production in the region can be estimated. The
rise in the production of wood biomass in the region due to fuel switch from fossil fuels to
biomass would have impact on regional income and employment. Estimation of these
effects is the objective of this study.
Total economic effect of fuel switch to biomass on regional income and employment
consists of:
1. Direct impact results from the direct expenditure of goods, services, and labor in
both the feedstock (production of wood chips) and conversion (production of heat
energy) phase. It represents the extra income and employment created or
destroyed within a given sector as it responds to an increase in the final demand
for its product.
2. Indirect impact arises from the increased demand for goods and services, which
directly supply the bio-energy project. The assumption is that any additional
demand will create further activity in the supply chain of indirect goods and
services. It represents the total extra income and employment created or destroyed
as other sectors expand their outputs in order to supply the inputs required for the
output of the given sector, the income and employment created by yet other sectors
as they respond to the demand for their outputs from the sectors supplying the
given sector, and so on. This re-iterative process is captured by the indirect
multiplier. This is calculated as follows:
Indirect multiplier = 1/ (1-x),
11
Methodology
Where x stands for the ratio of the amount of direct expenditure from the project
within the region to the direct expenditure from the project. The ratio of the sum of
indirect and direct income/jobs to direct income/jobs is termed the type I multiplier.
3. Induced effect results from the re-spending the money income and profits within
the region. It represents the income or employment created or destroyed to meet
the extra demands from all sectors arising from spending from the higher
household incomes created by direct and indirect effects, following the initial
increase in final demand for the given sector. The fraction of extra income spent
on goods and services is the crucial parameter and depends on tax rates and
savings rates.
This effect is calculated via the multiplier (commonly known as the consumption
multiplier) which can be expressed as follows:
Induced multiplier = 1/ (1-y),
Where y is the proportion of additional incomes which are spent on goods and
services produced within the region (after allowing for tax payments, savings and
expenditure on goods produced elsewhere, rent payments, etc.).The ratio between
the sum of direct, indirect, and induced jobs to direct jobs is termed the type II
multiplier.
As mentioned above, total economic impact of biomass heating systems (direct + indirect
+ induced) on regional economy can appear both from the feedstock (fuel) production
phase and from conversion (production of heat energy) phase. Economic impact of the
energy conversion phase arises when new heating plants are built, or when switch to
biomass would require new work places in heating plants due to more labor needed for
handling the biomass. This project does not include the building of new heating plants that
previously did not exist. On the other hand, while it is true that biomass handling is more
labor intensive than fossil fuels, we assumed that this will not have the significant effect
on total number of work places in heating plants. This is due to the fact that existing old
boilers (over 20 years old in average) require a lot of work on maintenance, that would not
be required after the new, modern and (to some extend) automated biomass heating
systems are procured. Thus, we will evaluate only the impact of biomass production (and
not the energy conversion) on regional income and employment.
Total regional economic effect of fuel substitution should be calculated as net impact,
meaning that any displacement effect should be considered. Displacement effect occurs
if increased biomass production is going to lead to decrease in some other economic
activity in the region. For example, the production of wood biomass may displace other
farming activities or land use. However, this is true only when the biomass is going to be
12
Methodology
produced from new plantings on the land that is already used for some other purposes.
As this is not going to be the case in this project (i.e. the needed wood chips are going to
be produced from existing forests’ residuals and solid sawmill residuals) we assume that
the displacement effect is going to be very limited (if exists at all).
The net effects on local economy (GDP and employment) will be estimated with adapted
Biomass Socio-Economic Multiplier model (BIOSEM). BIOSEM is widely used for
modeling of biomass usage effects on local economy. The BIOSEM model is a result of
the FAIR Program of DG IV under the European Commission’s Fifth Framework Program.
It is a quantitative economic model that captures the income and employment effects
arising from the deployment of bio-energy plants in rural communities. Using a traditional
Keynesian Income Multiplier approach, the BIOSEM technique makes predictions about
the income and employment effects arising from the installation of a bio-energy plant and
production of bio-fuels. Because BIOSEM models are used very often in similar studies
across Europe, results of this study will be comparable to results of a large number of bioenergy projects done in EU and Western Balkan countries.
Wood Biomass
Demand
By DHS
Increased
production
of
wood Biomass
Direct income
and
employment
Wood
biomass
price
Indirect income
and
employment
Fossil fuel
price
Costs of
produced heat
energy
Induced
income and
employment
DHS’s or
consumers’
budget effect
Total income
and
employment
Total local
economic effect
Figure 3-1The research model implemented in the study
13
Methodology
It is assumed that all boilers in municipalities’ heating plants are old and economically
depreciated and that there is an economically valid need for procurement of new boilers
regardless the fuel that will be used. Bearing in mind that the prices of modern boilers
using heavy oil, coal, and biomass do not differ significantly, the investment needed for
purchasing of boilers does not depend on planned fuel type usage. The only exception is
the price of gas boilers, which is significantly lower, but the selected municipalities (with
exception of Mali Zvornik) are not gasified yet, which eliminates the consideration of
potential gas fueled boilers.
In order to eliminate the short-term fluctuations in fuel prices, this study will be based on
three-year average fuel price. For assessment of economic effects of fuel switch to
biomass in the next ten years, the future fuel prices are estimated based on official World
Bank forecasts. The research model that will be used in estimation of income and
employment effects of fuel switch are presented on Figure 3-1.
Additional to income and employment effects of fuel substitution, this study will estimate
the effects on DHP’s fuel costs. If biomass lowers the fuel costs of DHPs, the lower heating
energy price for consumers and/or lower expense for DHP would emerge. Regardless
who will take the benefits (consumers or DHS) local economy would definitely benefit from
lower fuel cost. All these effects together would provide us a broad picture of regional
economic effects of fuel switch from fossil fuels to wood biomass. Other than regional
effects, potential fuel substitution of fossil fuels with wood biomass would have effects on
national economy, especially regarding international trade balance, due to substitution of
fossil fuels with dominant foreign-added value with wood biomass with dominant nationaladded value.
14
Overview of local economies in selected municipalities
4.
OVERVIEW OF LOCAL ECONOMIES IN SELECTED
MUNICIPALITIES
4.1 ZLATIBOR DISTRICT
The Zlatibor district is located in the
western part of Republic of Serbia, on
the border with Montenegro and Bosnia
and Herzegovina (Figure 4-1). Zlatibor
district covers the area of 6,140.00
square kilometers, out of which 55%
represents agricultural area. The whole
district has 439 estates, which is 7.13%
of all estates in Republic of Serbia. In
economic sense, the district has an
increase in GDP and in GDP per capita.
GDP rose from 727,259,833.55 EUR in
2012, to 821,323,518.21 EUR in 2013,
which is around 13% increase. GDP per
capita also demonstrated an increase,
from 2,554.67 EUR in 2012, to 2,920.88
EUR in 2013. This is 14% increase on a
yearly basis. All of the mentioned data is
presented in Table 4-1.
Figure 4-1 Zlatibor district
Table 4-1 General information about the Zlatibor district
88,499.00
6,140.00
District to
Republic
6.94%
65.80%
55.60%
84.50%
6,158
439
7.13%
GDP 2013 (EUR)
29,240,346,527.78
821,323,518.21
2.81%
GDP 2012 (EUR)
25,671,163,962.62
727,259,833.55
2.83%
GDP per capita 2013 (EUR)
4,085.65
2,920.88
71.49%
GDP per capita 2012 (EUR)
3,562.86
2.554,67
71.70%
Republic of Serbia
Area, km2
Agricultural area
Number of estates
Zlatibor district
According to the data from Republic Statistical Office of Serbia, Zlatibor district has
constant decrease in its population from 1991 until 2013. In 1991, Zlatibor district had
325,997 inhabitants, while this number dropped to 286,825 in 2011 and to 281,475 in
2013. In terms of natural population increase, this district has negative natural increase (15
Overview of local economies in selected municipalities
1,562), or -5.5 people on every 1,000 inhabitants. This negative tendency is also seen at
the national level. The number of people in Serbia was 7,595,636 in 1991, 7,234,099 in
2011, and 7,164,132 in 2013. In other words, natural increase in Serbia is also negative
and weighs around -34,746 people or 4.8 on every 1,000 inhabitants. This data is
presented in Table 4-2.
Table 4-2 Demographic tendencies in Zlatibor district
Republic of
Serbia
Zlatibor
district
District to
Republic
1991
7,595,636
325,997
4.29%
2011
7,234,099
286,825
3.96%
2013
7,164,132
281,475
3.93%
-34,746
-1,562
4.50%
-4.80
-5.50
Natural increase 2013
Natural increase on 1000 inhabitants
When it comes to economic activity in Zlatibor district, in 2013 there were 58.779
employed people, which represent 208.82 individuals employed on every 1,000
inhabitants. On the other hand, in the same year, the number of unemployed was 33,232,
or 118.06 on every 1,000 inhabitants. When comparing this data to national level, Zlatibor
district had more unemployed people than Serbia in general (on every 1,000 inhabitants)
and fewer employed inhabitants. This leads to the conclusion that Zlatibor district has
under average economic activity in comparison to Serbia. This economic data is
presented within Table 4-3.
Table 4-3 Economic activity of Zlatibor district
Total number of employed
Republic of
Serbia
1,715,163
Zlatibor
district
58,779
District to
Republic
3.43%
Number of employed on 1,000 inhabitants
Total number of unemployed
Number of unemployed on 1,000
inhabitants
239.41
208.82
87.22%
769,546
33,232
4.32%
107.42
118.06
109.91%
The municipalities analyzed in this study are Bajina Bašta, Nova Varoš, Priboj, and
Prijepolje.
4.1.1
Bajina Bašta
The municipality of Bajina Bašta geographically belongs to Zlatibor district. It is located in
the western part of Serbia, just under the mountain Tara and near the Drina River. The
position of Bajina Bašta on the territory of Republic of Serbia is presented in Figure 416
Overview of local economies in selected municipalities
2.The municipality covers the area of around 673
square kilometers, which is 10.96% of the Zlatibor
district. In terms of agricultural area, it covers 44.7% of
all of Bajina Bašta municipality area. There are 36
estates in the municipality of Bajina Bašta and they
represent 8.2% of all estates that exist in the Zlatibor
district. All of the data that compared republic, district,
and municipal level are given in the Table 4-4.
In terms of population, Bajina Bašta has shown constant
decrease in its population, since 1991 until 2013, while
the percentage of its population in the population of
Serbia and Zlatibor district remained almost the same
throughout the years. Bajina Bašta accounts for about
9% of district’s population and around 0.4% of Serbia’s
population (Table 4-5).
Figure 4-2 The position of Bajina
Bašta
Table 4-4 Comparison between republic, district, and municipal level, Bajina Bašta
Serbia
Area, km2
Agricultural
area
Number of
estates
Bajina
Bašta
Zlatibor
Compared to
Serbia
Compared to district
88,499.00
6,140.00
673.00
0.76%
10.96%
65.80%
55.60%
44.70%
67.93%
80.40%
6,158
439
36
0.58%
8.20%
When analyzing the natural increase of inhabitants in Bajina Bašta, we can see that the
decline in the population if more obvious in the municipality of Bajina Bašta than in
Republic of Serbia or in Zlatibor district. One of the possible explanations is the decline in
economic activity in this town, which will be presented in the next section.
Table 4-5 Demographics of Bajina Bašta
1991
Republic of
Serbia
7,595,636
Zlatibor
district
325,997
Bajina
Bašta
31,193
Compared to
Serbia
0.41%
Compared to
district
9.57%
2011
7,234,099
286,825
26,074
0.36%
9.09%
2013
Natural
increase 2013
Natural
increase on
1000
inhabitants
7,164,132
281,475
25,491
0.36%
9.06%
-34,746
-1,562
-219
0.63%
14.02%
-4.80
-5.50
-8.60
17
Overview of local economies in selected municipalities
In Table 4-6, we presented the economic activity in regards to employment for Bajina
Bašta in comparison to republic and district level. The table shows that the number of
employed people in Bajina Bašta accounts for 0.26% and 7.44% compared to Serbia and
district respectively. However, when observing the number of employed individuals on
1,000 inhabitants, Bajina Bašta has less people employed than on municipal and national
level. On the other hand, Bajina Bašta has less unemployed people when analyzing the
number on 1,000 inhabitants.
Table 4-6 Number of employed and unemployed
Republic of
Serbia
Total number of
employed
Number of
employed on
1000 inhabitants
Total number of
unemployed
Number of
unemployed on
1000 inhabitants
Zlatibor
district
Bajina
Bašta
Compared to
Serbia
Compared to
district
1,715,163
58,779
4,376
0.26%
7.44%
239.41
208.82
171.67
71.70%
82.21%
769,546
33,232
2,467
0.32%
7.42%
107.42
118.06
96.78
90.10%
81.97%
Table 4-7 Average income excluding taxes
Republic of Serbia
Zlatibor
Bajina
Compared to
Compared to
district
Bašta
Serbia
district
RSD 2009
31,734.00
26,848.00
28,388.00
89.46%
105.74%
EUR 2009
334.62
283.10
299.34
89.46%
105.74%
RSD 2013
43,932.00
37,115.00
36,754.00
83.66%
99.03%
EUR 2013
393.62
332.54
329.31
83.66%
99.03%
Table 4-7 depicts average income (without taxes) in Bajina Bašta in contrast to Serbia
and Zlatibor district. The data is presented for 2009 and 2013, both in Serbian dinars and
in Euros. The mentioned table reveals the fact that Bajina Bašta was a little above average
in 2009 and a little below Serbian and Zlatibor average in 2013. Therefore, we can
conclude that there is decline in this area as well.
The Table 4-8 shows the level of budget revenues and expenditures in Bajina Bašta,
Zlatibor district and Serbia. The presented data reveal that budget revenues and
expenditures in Bajina Bašta are at about 88% of Serbian level, and 102% and 103% in
comparison with the district it belongs. Bajina Bašta achieves more revenues and more
expenditures than Zlatibor district as a whole and therefore has more surplus than the
district.
18
Overview of local economies in selected municipalities
Table 4-8 Budget revenues and expenditures, 2013 (EUR)
Republic of Serbia
Budget
revenues total
Budget
revenues per
capita
Budget
expenditures
total
Budget
expenditures
per capita
Budget
surplus or
deficit
4.1.2
Zlatibor district
Compared
to Serbia
Bajina Bašta
Compared
to district
2,167,330,680.65
73,118,884.40
6,846,208.36
0.32%
9.36%
302.53
259.77
268.57
88.78%
103.39%
2,120,591,631.04
71,572,742.97
6,645,975.59
0.31%
9.29%
296.00
254.28
260.72
88.08%
102.53%
46,739,049.60
1,546,141.43
200,232.77
0.43%
12.95%
Nova Varoš
The town of Nova Varoš is located in Western Serbia, in the
center of highway Belgrade-Bar (Figure 4-3). It is located at
the altitude of about 1,000 m and next to it is mountain
Zlatar. The municipality covers around 581 km2, which is
around 0.66% of total area of Serbia and about 9.46% of
Zlatibor district, to which it belongs regionally.
Compared to its whole territory, Nova Varoš has 61.6% of
agricultural area. It is less than on national level, but when
comparing to Zlatibor district, Nova Varoš is more rural and
more adequate for agriculture.
Nova Varoš has 33 estates within its territory, which is
0.54% of all estates in Serbia, and 7.52% of Zlatibor
district’s estates. This data is shown in Table 4-9.
Figure 4-3 The position of
Nova Varoš
The demographic data is presented in Table 4-10. As is the case with Bajina Bašta, Nova
Varoš also shows steady decline in its population when observing the number of
inhabitants from 1991 and onwards. The natural decrease of population in 2013 is 165.
19
Overview of local economies in selected municipalities
When analyzing this measure on 1,000 people, Nova Varoš is in worse position when
comparing with Zlatibor district and Republic of Serbia as a whole.
Table 4-9 General data about Nova Varoš
Republic of
Serbia
Area, km2
Agricultural
area
Number of
estates
Zlatibor
district
Compared to
Serbia
Nova Varoš
Compared to
district
88,499.00
6,140.00
581.00
0.66%
9.46%
65.80%
55.60%
61.60%
93.62%
110.79%
6,158
439
33
0.54%
7.52%
Table 4-10 Demographics of Nova Varoš
Zlatibor
district
325,997
Nova Varoš
1991
Republic of
Serbia
7,595,636
21,606
Compared to
Serbia
0.28%
Compared to
district
6.63%
2011
7,234,099
286,825
16,659
0.23%
5.81%
2013
Natural increase
2013
Natural increase
on 1000
inhabitants
7,164,132
281,475
16,035
0.22%
5.70%
-34,746
-1,562
-165
0.47%
10.56%
-4.80
-5.50
-10.30
As was the case with Bajina Bašta, one of the main reasons for this is economic situation
in the municipality of Nova Varoš.
Table 4-11Economic activity in Nova Varoš, 2013
Republic of
Serbia
Total number of
employees
Number of
employees on
1000 inhabitants
Total number of
unemployed
Number of
unemployed on
1000 inhabitants
Zlatibor
district
Nova Varoš
Compared to
Serbia
Compared
to district
1,715,163
58,779
2,323
0.14%
3.95%
239.41
208.82
144.87
60.51%
69.37%
769,546
33,232
2,493
0.32%
7.50%
107.42
118.06
155.47
144.74%
131.69%
20
Overview of local economies in selected municipalities
Table 4-11 gives detailed information about economic activity in this town. In terms of total
number of employees, Nova Varoš municipality accounts for only 0.14% and 3.95% when
compared to republic and district level respectively. When analyzing the number of
employed individuals on 1,000 inhabitants, Nova Varoš is far behind republic and district.
This data is additionally verified with larger number of unemployed people on 1,000
inhabitants.
The data about average income without taxes is given within the Table 4-12, and this data
shows that the municipality of Nova Varoš is in slightly worse position then Zlatibor district.
However, Nova Varoš has far less average income when compared to republic average.
This is consistent for both years in question (2009 and 2013).
Table 4-12 Average income excluding taxes, 2009 and 2013
Republic of
Serbia
RSD
2009
EUR
2009
RSD
2013
EUR
2013
Zlatibor
district
Nova Varoš
Compared to
Serbia
Compared to
district
31,734.00
26,848.00
26,277.00
82.80%
97.87%
334.62
283.10
277.08
82.80%
97.87%
43,932.00
37,115.00
35,425.00
80.64%
95.45%
393.62
332.54
317.40
80.64%
95.45%
Table 4-13 Budget revenues and expenditures, 2013
Republic of Serbia
Budget
revenues
total
(EUR)
Budget
revenues
per capita
(EUR)
Budget
expenditures
(EUR)
Budget
expenditures per
capita
(EUR)
Budget
surplus or
deficit
(EUR)
Zlatibor district
Nova Varoš
Compared
to Serbia
Compared
to district
2,167,330,680.65
73,118,884.40
4,912,404.90
0.23%
6.72%
302.53
259.77
306.36
101.27%
117.93%
2,120,591,631.04
71,572,742.97
5,114,564.00
0.24%
7.15%
296.00
254.28
318.96
107.76%
125.44%
46,739,049.60
1,546,141.43
-202,159.12
-0.43%
-13.08%
21
Overview of local economies in selected municipalities
Table 4-13 illustrates the budget revenues and expenditures for 2013. Nova Varoš
contributes to republic budget revenues with 0.23%, while its contribution to district’s level
is 6.72%. Similar values are for budget expenditures in 2013. When analyzing budget
deficit in 2013, Nova Varoš had deficit, which is close to republic average, while it is 13%
more than the district.
4.1.3
Priboj
The municipality of Priboj is located in the southwest of
Serbia (Figure 4-4), and according to the data from 2013,
the municipality has 26,386 inhabitants. Priboj is situated
close to the borders between Serbia, Bosnia and
Herzegovina, and Montenegro. Priboj is surrounded by
high mountains and it finds itself at the altitude of 395
meters. The town of Priboj lies on the river Lim. It is 5 km
away from Uvac, a smaller river that is the border between
Bosnia and Herzegovina and Serbia. It covers the area of
approximately 553 km2, which represents 0.62% of the
territory of Serbia, and around 9.01% of Zlatibor district’s
territory (Table 4-14).Its agricultural area covers almost
the half of municipality’s territory (48.18%). The
municipality itself is divided into 33 estates, which
represent 0.54% of all the estates in Serbia and 7.52% of
all the Zlatibor district’s estates.
Figure 4-4 The location of
Priboj municipality
Table 4-14 General data about Priboj
Area, km2
Agricultural
area
Number of
estates
Republic of
Serbia
88,499.00
Zlatibor
district
6,140.00
553.00
0.62%
Compared to
district
9.01%
65.80%
55.60%
31.70%
48.18%
57.01%
6,158
439
33
0.54%
7.52%
Priboj
Compared to Serbia
The demographics data and trends are presented in Table 4-15. Similar to previous
municipalities, Priboj also shows the constant decline of its population from 1991 until
2013. Priboj is above average when it comes to average republic natural increase
(decrease), but it is slightly in better position when compared to Zlatibor district.
22
Overview of local economies in selected municipalities
Table 4-15 Demographics of Priboj
1991
Republic of
Serbia
7,595,636
Zlatibor
district
325,997
32,753
Compared to
Serbia
0.43%
Compared to
district
10.05%
2011
7,234,099
286,825
27,166
0.38%
9.47%
2013
Natural
increase 2013
Increase on
1000
inhabitants
7,164,132
281,475
26,386
0.37%
9.37%
-34,746
-1,562
-143
0.41%
9.15%
-4.80
-5.50
-5.40
Priboj
Tables 4-16, 4-17, and 4-18 focus on economic activity, average income, and budget
revenues and expenditures in Priboj municipality. The data from these tables are
compared to republic and district level. In terms of employment, Priboj municipality
accounts for 7.62% of all employees in Zlatibor district, and for 0.26% of all employees in
Serbia. However, when looking at the number of unemployed people on 1.000 inhabitants,
Priboj is in significantly worse position than the average in Serbia and Zlatibor district
(Table 4-16).
Table 4-16 Economic activity in Priboj in 2013
Republic of
Serbia
Number of
employees
Number of
employees on
1000
inhabitants
Number of
unemployed
Number of
unemployed
on 1000
inhabitants
Zlatibor
district
Priboj
Compared to
Serbia
Compared to
district
1,715,163
58,779
4,478
0.26%
7.62%
239.41
208.82
169.71
70.89%
81.27%
769,546
33,232
5,178
0.67%
15.58%
107.42
118.06
196.24
182.69%
166.22%
The average income in Priboj is very low when comparing it to republic and district level
(Table 4-17). In 2009, the average income without taxes was 223.41 EUR in Priboj, while
the average income in Serbia was 334.62 EUR and 283.10 EUR in Zlatibor district. Similar
situation was in 2013 (233.41 EUR as opposite to 393.62 EUR on republic and 332.54
EUR on district level).
23
Overview of local economies in selected municipalities
Table 4-17 Average income excluding taxes in Priboj (2009 and 2013)
Republic of
Serbia
RSD
2009
EUR
2009
RSD
2013
EUR
2013
Zlatibor
district
Compared to
Serbia
Priboj
Compared to
district
31,734.00
26,848.00
21,187.00
66.76%
78.91%
334.62
283.10
223.41
66.76%
78.91%
43,932.00
37,115.00
26,051.00
59.30%
70.19%
393.62
332.54
233.41
59.30%
70.19%
In Table 4-18, we presented the budget revenues and expenditures for Priboj municipality
in 2013. Priboj achieved budget surplus in 2013, which accounted for 0.04% to republic
level, and 1.15% to the district level. Both budget revenues and budget expenditures per
capita were lower in comparison to Serbia and Zlatibor district in this year.
Table 4-18 Budget revenues and expenditures in Priboj, 2013
Republic of Serbia
Budget
revenues
total
(EUR)
Budget
revenues
per capita
(EUR)
Budget
expenditures
total
(EUR)
Budget
expenditures per
capita
(EUR)
Budget
surplus or
deficit
(EUR)
Zlatibor district
Priboj
Compared
to Serbia
Compared
to district
2,167,330,680.65
73,118,884.40
5,570,965.40
0.26%
7.62%
302.53
259.77
211.13
69.79%
81.28%
2,120,591,631.04
71,572,742.97
5,553,260.90
0.26%
7.76%
296.00
254.28
210.46
71.10%
82.77%
46,739,049.60
1,546,141.43
17,704.49
0.04%
1.15%
24
Overview of local economies in selected municipalities
4.1.4
Prijepolje
Prijepolje municipality is located the confluence of the
fast-flowing Lim and Mileševka rivers. It is also situated
along the road from Belgrade to the Adriatic Sea, as well
as being a stop on the Belgrade – Bar railway. The
Belgrade – Adriatic road intersects here with the regional
road between Pljevlja, Prijepolje and Sjenica (Figure 45).
It covers the area of 827 km2 that is 0.93% of Serbia’s
territory, and 13.47% of Zlatibor district’s territory.
Agricultural area covers 44.20% of municipality’s
territory. The agricultural area of Prijepolje is significantly
lower in average than Serbia and district’s average. The
Prijepolje municipality is divided into 80 estates that
account for 1.30% of all estates in Serbia, and for 18.22%
of all the estates in Zlatibor district (Table 4-19).
Figure 4-5 Location of
Prijepolje municipality
Table 4-19 General data about Prijepolje
Area, km2
Agricultural
area
Number of
estates
Republic of
Serbia
88,499.00
Zlatibor
district
6,140.00
827.00
Compared to
Serbia
0.93%
Compared to
district
13.47%
65.80%
55.60%
44.20%
67.17%
79.50%
6,158
439
80
1.30%
18.22%
Prijepolje
Table 4-20 Demographics data on Prijepolje
1991
Republic of
Serbia
7,595,636
Zlatibor
district
325,997
43,148
Compared to
Serbia
0.57%
Compared to
district
13.24%
2011
7,234,099
286,825
37,041
0.51%
12.91%
2013
Natural
increase 2013
Natural
increase on
1000
inhabitants
7,164,132
281,475
36,464
0.51%
12.95%
-34,746
-1,562
-82
0.24%
5.25%
-4.80
-5.50
-2.20
Prijepolje
Table 4-21 depicts the data about economic activity in Prijepolje municipality in 2013. The
table clearly shows that the number of unemployed people is higher than the number of
employed (6,571 compared to 5,737). When observing the number of employed people
25
Overview of local economies in selected municipalities
on 1,000 inhabitants, Prijepolje municipality is far below republic and district average.
Prijepolje is also in a much worse position in regards to number of unemployed individuals
on 1,000 inhabitants. This indicates very low economic activity in Prijepolje in 2013.
Table 4-21 Economic activity in Prijepolje in 2013
Republic of
Serbia
Total number
of employees
Number of
employees on
1000
inhabitants
Total number
of
unemployed
Number of
unemployed
on 1000
inhabitants
Zlatibor
district
Prijepolje
Compared to
Serbia
Compared to
district
1,715,163
58,779
5,737
0.33%
9.76%
239.41
208.82
157.33
65.72%
75.34%
769,546
33,232
6,571
0.85%
19.77%
107.42
118.06
180.21
167.76%
152.63%
Table 4-22 Average income excluding taxes in Prijepolje in 2009 and 2013
Republic of
Serbia
RSD
2009
EUR
2009
RSD
2013
EUR
2013
Zlatibor
district
Prijepolje
Compared to
Serbia
Compared to
district
31,734.00
26,848.00
22,422.00
70.66%
83.51%
334.62
283.10
236.43
70.66%
83.51%
43,932.00
37,115.00
32,047.00
72.95%
86.35%
393.62
332.54
287.13
72.95%
86.35%
Average income (excluding taxes) in Prijepolje municipality is lower than republic and
district average in 2009 and in 2013. Prijepolje municipality falls behind republic average
for around 30% and compared to Zlatibor district this fall is around 20% in two analyzed
years (Table 4-22).
Table 4-23 Budget revenues and expenditures of Prijepolje in 2013
Republic of Serbia
Zlatibor district
26
Prijepolje
Compared
to Serbia
Compared
to district
Overview of local economies in selected municipalities
Budget
revenues
total
(EUR)
Budget
revenues
per capita
(EUR)
Budget
expenditures
total
(EUR)
Budget
expenditures per
capita
(EUR)
Budget
surplus or
deficit
(EUR)
2,167,330,680.65
73,118,884.40
7,747,605.28
0.36%
10.60%
302.53
259.77
212.47
70.23%
81.79%
2,120,591,631.04
71,572,742.97
7,746,377.79
0.37%
10.82%
296.00
254.28
212.44
71.77%
83.55%
46,739,049.60
1,546,141.43
1,227.49
0.003%
0.08%
When we analyze budget revenues and expenditures in Prijepolje municipality in 2013,
we can see that budget revenues per capita in Prijepolje reach 70% of Serbia’s revenues
and 80% of Zlatibor district’s budget revenues. Budget expenditures are at 72% of republic
level and at 84% of district level (Table 4-23). In total,
Prijepolje municipality had budget surplus in 2013.
4.2 MAČVA DISTRICT
The Mačva district is located in the western part of
Republic of Serbia, on the border with Bosnia and
Herzegovina (Figure 4-6). The district expands in the
geographical regions of Mačva, Podrinje, Posavina, and
Pocerina. It has a population of 293.598 people
(according to the data from 2013). The administrative
center of the Mačva district is Šabac. Mačva district
covers the area of 3,270km2, out of which 66.5%
represents agricultural area, which is above average
when compared to republic level. The entire district has Figure 4-6 The location of Mačva
district
228 estates, which is 3.7% of all estates in Republic of
Serbia. In terms of economic growth, the district experienced a decline in GDP and in
GDP per capita. GDP decreased from 743,425,150.40 EUR in 2012, to 718,689,437.60
27
Overview of local economies in selected municipalities
EUR in 2013. GDP per capita also demonstrated a decline, from 2,511.95 EUR in 2012,
to 2,446.02 EUR in 2013. The above-mentioned data is presented in Table 4-24.
Table 4-24 General information about Mačva district
88,499.00
3,270.00
District to
Republic
3.69%
65.80%
66.50%
101.06%
6,158
228
3.70%
GDP 2013 (EUR)
29,240,346,527.78
718,689,437.60
2.46%
GDP 2012 (EUR)
25,671,163,962.62
743,425,150.40
2.90%
GDP per capita 2013 (EUR)
4,085.65
2,446.02
59.87%
GDP per capita 2012 (EUR)
3,562.86
2,511.95
70.50%
Mačva district
Republic of Serbia
Area, km2
Agricultural area
Number of estates
According to the data from Republic Statistical Office of Serbia, Mačva district has
constant decrease in its population from 1991 until 2013. In 1991, Mačva district had
344,882 inhabitants, while this number dropped to 299,345 in 2011 and to 293,598 in
2013. In terms of natural population increase, this district has negative natural increase (1,939), or -6.6individuals on every 1,000 inhabitants. This negative tendency is also seen
at the national level. The number of people in Serbia was 7,595,636 in 1991, 7,234,099
in 2011, and 7,164,132 in 2013. In other words, natural increase in Serbia is also negative
and weighs around -34,746 people or 4.8 on every 1,000 inhabitants. This data is
presented in Table 4-25.
Table 4-25 Demographic tendencies in Mačva district
Mačva district
1991
Republic of
Serbia
7,595,636
344,882
District to
Republic
4.54%
2011
7,234,099
299,345
4.14%
2013
7,164,132
293,598
4.10%
-34,746
-1,939
5.58%
-4.80
-6.60
Natural increase 2013
Natural increase on 1,000 inhabitants
When it comes to economic activity in Mačva district, in 2013 there were 50,441 employed
people or 171.80 individuals employed on every 1,000 inhabitants. On the other hand, in
the same year, the number of unemployed individuals was 36,839, or 125.47 on every
1,000 inhabitants. When comparing this data to national level, Mačva district had far more
unemployed people than Serbia in general (on every 1,000 inhabitants) and fewer
employed inhabitants. This leads to the conclusion that Mačva district (like Zlatibor district)
has under average economic activity compared to Republic of Serbia as the whole. This
overview is presented within Table 4-26.
28
Overview of local economies in selected municipalities
Table 4-26 Economic activity of Mačva district
Total number of employed
Republic of
Serbia
1,715,163
Mačva district
50,441
District to
Republic
2.94%
239.41
171.80
71.76%
769,546
36,839
4.79%
107.42
125.47
116.81%
Number of employed on 1,000 inhabitants
Total number of unemployed
Number of unemployed on 1,000
inhabitants
The municipality in Mačva district that will be analyzed in this study is Mali Zvornik.
4.2.1
Mali Zvornik
Mali Zvornik is a town and municipality located in the
Mačva District of Serbia, which lies opposite of the Drina
River from the town of Zvornik, in Bosnia and
Herzegovina (Figure 4-7). Mali Zvornik covers the area
of 184 km2, out of which 41.90% is agricultural area. This
percentage is significantly less than republic and
district’s average. The general data about municipality
of Mali Zvornik is presented within Table 4-27.
The data about demographic tendencies is given in
Table 4-28. Similar to negative tendencies in population
decrease in whole district, Mali Zvornik also follows this
path. The population in 1991 was 14,422 in 2011 it
dropped to 12,492, while in 2013 this number reached
12,169. The total decrease in 2013 was 68 people, while
the natural decrease on 1,000 people was -5.60.
Figure 4-7 The location of Mali
Zvornik
Table 4-27 General data about Mali Zvornik
Area, km2
Agricultural
area
Number of
estates
Republic
of Serbia
88,499.00
Mačva
district
3,270.00
Mali
Zvornik
184.00
Compared to
Serbia
0.21%
Compared to
district
5.63%
65.80%
66.50%
41.90%
63.68%
63.01%
6,158
228
12
0.19%
5.26%
Table 4-28 Demographics of Mali Zvornik
Republic of
Serbia
Mačva
district
Mali Zvornik
29
Compared to
Serbia
Compared to
district
Overview of local economies in selected municipalities
1991
7,595,636
344,882
14,422
0.19%
4.18%
2011
7,234,099
299,345
12,492
0.17%
4.17%
2013
Natural
increase 2013
Natural
increase on
1,000
inhabitants
7,164,132
293,598
12,169
0.17%
4.14%
-34,746
-1,939
-68
0.20%
3.51%
-4.80
-6.60
-5.60
The economic activity in Mali Zvornik is extremely low if we analyze it through number of
employed and unemployed individuals (Table 4-29). The total number of employed people
in Mali Zvornik in 2013 was 1,505, or 123.67 per 1,000 inhabitants. This number is
significantly lower compared to Serbia (239.41) or compared to Mačva district (171.80).
In addition, the number of unemployed individuals per 1,000 people is 194.10. This is
much higher figure than on a republic or district level (107.42 and 125.47 respectively).
Table 4-29 Economic activity in Mali Zvornik in 2013
Republic of
Serbia
Total number
of employees
Number of
employees on
1,000
inhabitants
Total number
of
unemployed
Number of
unemployed
on 1,000
inhabitants
Mačva
district
Mali Zvornik
Compared to
Serbia
Compared to
district
1,715,163
50,441
1,505
0.09%
2.98%
239.41
171.80
123.67
51.66%
71.99%
769,546
36,839
2,362
0.31%
6.41%
107.42
125.47
194.10
180.70%
154.69%
Additional indicator of low economic activity and low standard of living is average income
(excluding taxes) of employed people (Table 4-30). In 2009, Mali Zvornik municipality had
273.97 EUR of average income, compared to national average of 334.62. Average income
went up in 2013, to 312.49 EUR, but it was still lower than national average, which was
393.62 EUR in the same year.
Table 4-30 Average income excluding taxes in Mali Zvornik in 2009 and 2013
Republic of
Serbia
RSD
2009
31,734.00
Mačva
district
Mali Zvornik
25,998.00
25,982.00
30
Compared to
Serbia
81.87%
Compared to
district
99.94%
Overview of local economies in selected municipalities
EUR
2009
RSD
2013
EUR
2013
334.62
274.14
273.97
81.87%
99.94%
43,932.00
36,875.00
34,877.00
79.39%
94.58%
393.62
330.39
312.49
79.39%
94.58%
Table 4-31 Budget revenues and expenditures in Mali Zvornik, 2013
Republic of Serbia
Budget
revenues
total
(EUR)
Budget
revenues
per capita
(EUR)
Budget
expenditures
total
(EUR)
Budget
expenditures
per capita
(EUR)
Budget
surplus or
deficit
(EUR)
Mačva district
Mali Zvornik
Compared
to Serbia
Compared
to district
2,167,330,680.65
62,384,909.61
3,570,761.07
0.16%
5.72%
302.53
212.48
293.43
96.99%
138.10%
2,120,591,631.04
62,135,926.77
2,865,511.28
0.14%
4.61%
296.00
211.64
235.48
79.55%
111.26%
46,739,049.60
248,982.84
705,249.79
1.51%
283.25%
In Table 4-31, we gave an overview of municipality’s budget revenues, expenditures, and
net effect in 2013. Municipality of Mali Zvornik achieved 3,570,761.07 EUR of budget
revenues and 2,865,511.28 EUR of expenditures in 2013. Thus, the net effect was budget
surplus of 705,249.84 EUR. It is interesting to note that the surplus of Mali Zvornik
municipality was almost three times higher than the surplus of entire Mačva district in
2013.
31
Overview of local economies in selected municipalities
4.3 RAŠKA DISTRICT
The Raška district is located in the southwestern part of
the country, on the border with Montenegro (Figure 4-8).
It has a population of 308.386 people (according to the
data from 2013). The administrative centre of Raška
district is Kraljevo, which lies on the banks of the Ibar
River. Raška district covers the area of 3,923 km2, out of
which 48.3% represents agricultural area, which is
significantly below average when compared to republic
level. The entire district has 359 estates, which is 5.83%
of all estates in Republic of Serbia. In terms of economic
growth, the district had significant increase in GDP and
in GDP per capita. GDP increased from 563,299,775.21
EUR in 2012, to 648,364,260.94 EUR in 2013. GDP per
capita also demonstrated growth, from 1,828.42 EUR in
2012, to 2,105.54 EUR in 2013. The above-mentioned
data is presented in Table 4-32. However, GDP and GDP
per capita of Raška district are only at the level of around
51% of GDP and GDP per capita on national level.
Figure 4-8 The location of
Raška district
Table 4-32 General data about Raška district
88,499.00
3,923.00
District to
Republic
4.43%
65.80%
48.30%
73.40%
6,158
359
5.83%
GDP 2013 (EUR)
29,240,346,527.78
648,364,260.94
2.22%
GDP 2012 (EUR)
Republic of Serbia
Area, km2
Agricultural area
Number of estates
Raška district
25,671,163,962.62
563,299,775.21
2.19%
GDP per capita 2013 (EUR)
4,085.65
2,105.54
51.54%
GDP per capita 2012 (EUR)
3,562.86
1,828.42
51.32%
According to the data from Republic Statistical Office of Serbia, Raška district had growth
in population in the period from 1991 to 2011. In 1991, Raška district had 279,518
inhabitants, while this number increased to 308,928 in 2011. In 2013, the number of
inhabitants in Raška district slightly dropped to 308,386. In terms of natural population
increase, this district had positive natural increase (82) or 0.30 individuals on every 1,000
inhabitants. The number of people in Serbia was 7,595,636 in 1991, 7,234,099 in 2011,
and 7,164,132 in 2013. The natural increase in Serbia is also negative and weighs around
-34,746 people or -4.8 on every 1,000 inhabitants. This data is presented in Table 4-33.
32
Overview of local economies in selected municipalities
Table 4-33 Demographic tendencies in Raška district
Raška district
1991
Republic of
Serbia
7,595,636
279,518
District to
Republic
3.68%
2011
7,234,099
308,928
4.27%
2013
7,164,132
308,386
4.30%
-34,746
82
-0.24%
-4.80
0.30
Natural increase 2013
Natural increase on 1000 inhabitants
When it comes to economic activity in Raška district, in 2013 there were 53,185 employed
people or 172.46 individuals employed on every 1,000 inhabitants. On the other hand, in
the same year, the number of unemployed individuals was 48,429, or 157.04 on every
1,000 inhabitants. When comparing this data to national level, Raška district had more
unemployed people than Serbia in general (on every 1,000 inhabitants) and fewer
employed inhabitants. This leads to the conclusion that Raška district (like Zlatibor and
Mačva districts) has under average economic activity compared to Republic of Serbia as
the whole. On the other hand, there is more employed than unemployed people in this
district, which is positive sign. This overview is presented within Table 4-34.
Table 4-34 Economic activity of Raška district
Total number of employed
Republic of
Serbia
1,715,163
Raška district
53,185
District to
Republic
3.10%
239.41
172.46
72.04%
769,546
48,429
6.29%
107.42
157.04
146.20%
Number of employed on 1,000 inhabitants
Total number of unemployed
Number of unemployed on 1,000
inhabitants
The municipality from Raška district that will be analyzed in this study is Novi Pazar.
4.3.1
Novi Pazar
Novi Pazar is located in the valleys of the Jošanica, Raška, Deževska, and Ljudska rivers
at the elevation of 496 m, in southeast Sandžak (Raška) region. The city is surrounded by
Golija and Rogozna mountains and Pešter plateau lies southeast from the city (Figure 49).
33
Overview of local economies in selected municipalities
The total area of the municipality is 742 km², out of
which the agricultural area represents 48.30%. It
contains 99 settlements, mostly small and spread
over hills and mountains surrounding the city. This
data, compared to national and district level, is
presented in Table 4-35.
Novi Pazar municipality is one of the few
municipalities in Serbia that has growth in
population. In 1991, Novi Pazar had 76,672 people;
in 2011, this number grew to 100,109, while in 2013
the total population was 102,122. Natural increase
in population in 2013 was 874, and natural increase
in population per 1,000 inhabitants was 8.6 (Table
4-36).
Figure 4-9 The location of Novi
Pazar
Table 4-35 General data about Novi Pazar
Area, km2
Agricultural
area
Number of
estates
Republic of
Serbia
88,499.00
Raška
district
3,923.00
65.80%
6,158
742.00
Compared to
Serbia
0.84%
Compared to
district
18.91%
48.30%
48.30%
73.40%
100.00%
359
99
1.61%
27.58%
Novi Pazar
Table 4-36 Demographics on Novi Pazar
1991
Republic of
Serbia
7,595,636
Raška
district
279,518
2011
7,234,099
2013
Natural
increase 2013
Natural
increase on
1,000
inhabitants
76,672
Compared to
Serbia
1.01%
Compared
to district
27.43%
308,928
100,109
1.38%
32.41%
7,164,132
308,386
102,122
1.43%
33.11%
-34,746
82
874
-2.52%
1,065.85%
-4.80
0.30
8.60
Novi Pazar
The number of employed individuals in Novi Pazar in 2013 was 15,289, while the number
of unemployed was much higher, 19,884. When observing number of employed people
per 1,000 inhabitants, Novi Pazar municipality is behind national and district average in
34
Overview of local economies in selected municipalities
2013. In addition, in terms of unemployed people, Novi Pazar is in far more worse position
than Raška district and Serbia as a whole (Table 4-37).
Table 4-37 Economic activity in Novi Pazar in 2013
Republic of
Serbia
Total number
of employed
Number of
employed on
1,000
inhabitants
Total number
of
unemployed
Number of
unemployed
on 1,000
inhabitants
Raška
district
Novi Pazar
Compared to
Serbia
Compared to
district
1,715,163
53,185
15,289
0.89%
28.75%
239.41
172.46
149.71
62.53%
86.81%
769,546
48,429
19,884
2.58%
41.06%
107.42
157.04
194.71
181.26%
123.99%
The low economic activity is usually followed by low average income of employed
individuals. Novi Pazar municipality is no different in this manner. In years of 2009 and
2013, employed people of Novi Pazar had 251.83 EUR and 310.14 EUR average income
(excluding taxes). On the other hand, average income of employed people in Raška
district was 272.44 EUR in 2009, and 324.14 EUR in 2013.
Table 4-38 Average income excluding taxes in Novi Pazar in 2009 and 2013
Republic of
Serbia
RSD
2009
EUR
2009
RSD
2013
EUR
2013
Raška district
Novi Pazar
Compared to
Serbia
Compared to
district
31,734.00
25,837.00
23,883.00
75.26%
92.44%
334.62
272.44
251.83
75.26%
92.44%
43,932.00
36,177.00
34,652.00
78.88%
95.78%
393.62
324.14
310.47
78.88%
95.78%
On national level, average income was 334.62 in 2009 and 393.62 EUR in 2013. This
serves as a good basis for conclusion about general low economic activity and low
standard of living in Novi Pazar municipality (Table 4-38).
35
Overview of local economies in selected municipalities
Table 4-39 Budget revenues and expenditures in Novi Pazar in 2013
Republic of Serbia
Budget
revenues
total (EUR)
Budget
revenues
per capita
(EUR)
Budget
expenditures
total (EUR)
Budget
expenditures per
capita
(EUR)
Budget
surplus or
deficit
(EUR)
Raška district
Novi Pazar
Compared
to Serbia
Compared
to district
2,167,330,680.65
64,118,408.7
15,744,291.96
0.73%
24.56%
302.53
207.92
154.17
50.96%
74.15%
2,120,591,631.04
64,609,986.0
15,802,431.86
0.75%
24.46%
296.00
209.51
154.74
52.28%
73.86%
46,739,049.60
-491,577.38
-58,139.90
-0.12%
11.83%
Finally, according to the data presented in Table 4-39, Novi Pazar municipality had budget
deficit in the amount of 58,139.90 EUR in 2013, which is the result of negative balance
between budget revenues and expenditures in that year. Budget revenues per capita were
lower than budget revenues per capita on a national and district level. The same pattern
is present when observing budget expenditures in 2013.
36
District heating systems’ energy output and estimation of biomass demand
5.
DISTRICT HEATING SYSTEMS’ ENERGY OUTPUT AND
ESTIMATION OF BIOMASS DEMAND
In order to estimate economic effects of fuel switch in district heating systems, we have to
compare the costs of the same heat energy output produced by alternative fuels. Thus,
we have to calculate the quantities of woody biomass that would be enough to produce
the needed energy output of DHS. As all observed district heating systems currently use
fossil fuels (heating oil, coal or natural gas) for production of heat energy, estimated wood
biomass required for fuel switch at the same time presents the estimated new demand for
local wood biomass suppliers.
In this section, we will calculate the quantity of wood biomass that would be enough to
provide the same heating energy output of DHP as the average energy provided in the
last 3 years. Following data are needed as inputs:
1. average fuel consumption in the last 3 years (in order to eliminate whethercondition influence),
2. efficiency of existing and new (biomass-fueled) boiler units,
3. lower heating value of used fuels and wood biomass.
Based on previous assumptions the district heating plants energy output can be calculated
in the following way:
HEO = FQ * NCV * BE / 100,
Where HEO stands for Heat energy output (KJ), FQ is Fuel Quantity (in measurement
units), NCV is Net Calorific Value i.e. Lower heating value (KJ per unit), and BE is Boiler
Efficiency (in %)
Energy output expressed in GJ can be translated in KWh according to formula:
Energy output (KWh) = Energy output (GJ) * 278
Required quantity of wood biomass for the same DHP heating energy output is calculated
as:
BQ = HEO / NCV / BE * 100,
Where BQ stands for Biomass Quantity (in kg).
37
District heating systems’ energy output and estimation of biomass demand
Data regarding fuel consumption, lower heating values and boiler efficiency are collected
from local DHPs’ management. Net calorific values (lower heating values) of selected
fuels are given in Table 5.1.
Table 5-1 Net calorific values and energy density of selected fuels3
Fuel
Net Calorific
Value by
mass
Net Calorific
Value by
mass
Bulk
density
Energy
density by
volume
Energy
density by
volume
GJ/ton
kWh/kg
kg/l.m.3*
GJ/m3
kWh/m3
Wood chips
(m=30%)
Coal
HFO
Natural gas
* l.m. = loose meter
12.5
3.5
250
3.1
0.9
19.4
41.0
37.2
5.4
11.4
10.42
850
845
900
16.5
34.6
33.5
4.6
9.6
9.3
5.1 BAJINA BAŠTA
5.1.1
District heating system overview
Existing district heating system in Bajina Bašta consists of two separate heating plants:
1. “Gradska toplana”, and
2. “Školska toplana”.
“Školska toplana” plant has 3 boilers with the total capacity of 4.8 MW, all in operation and
fueled by coal. “Gradska toplana” plant consists of two parts. One part (2 x 1.84 MW + 1
x 1.76 MW) is located in the central substation in the basement of one of the residential
buildings, and is not in operation due to problems it causes to residents of the building.
These three boilers are used as a backup in emergency cases only. The second part (1 x
6 MW) was built in 2011. New, HFO fueled boiler replaced the older one, which is repaired,
but not installed (Table 5-2).
3Source:
Biomass Energy Centre
38
District heating systems’ energy output and estimation of biomass demand
Table 5-2 Heating plants in Bajina Bašta - main characteristics4
Heating plants
Fuel
“ŠKOLSKA TOPLANA”
3 X 1.6 MW
coal
“GRADSKA TOPLANA”
1 x 6 MW
HFO
Year
Producer
Capacity
(MW)
Status
1985/87/89
“Toplota”
4.8
In operation
2011
“Mip Tim”
6
“Ivar”
5.03
In operation
Out of order
1 x 5.03 MW
HFO
2005
1 x 1.76 MW
HFO
1974
2 x 1.84 MW
HFO
1974
“Đuro
Đaković”
“EMO”
1.76
Not in operation
3.68
Not in operation
Heating plants supply heat to residential, public and commercial buildings. Total supplied
area is about 77,600 m2.Heating plant operates during the heating period only, as no heat
is needed in the summer time because there is no centralized warm water preparation
and air conditioning. Local municipality management plans to connect heating networks
of “Školska toplana” and “Gradska toplana” and to replace two boilers of heating plants
“Školska toplana” with new biomass-fired boilers (2 x 5MW). These boilers would provide
heat energy for all consumers in Bajina Bašta. Total investment is estimated at 2 million
Euros.
5.1.2
Estimation of biomass requirement
DHP energy output in Bajina Bašta is calculated in Table 5-3.
Table 5-3 Calculation of DHP energy output in Bajina Bašta
Fuel type
Coal
HFO
Total
Fuel quantity
(tons)
1,110
1,056
Boiler
efficiency
(%)
70
85
Net Calorific
Value
(GJ/ton)
19.4
41.0
Energy
output
(GJ)
15,074
36,801
51,875
Energy
output
(MWh)
4,190
10,231
14,421
Estimated wood chips quantity required for the same energy output is shown in Table 54.
4Source:
PC “BB Term”
39
District heating systems’ energy output and estimation of biomass demand
Table 5-4 Calculation of wood biomass required for fuel switch in Bajina Bašta
Fuel type
Wood chips
(m=30%)
Required
energy
output
Boiler
efficiency
(GJ)
(%)
51,875
Net calorific
value
Required
quantity in
mass
Required
quantity in
volume
(GJ/ton)
(tons)
(loose m3)
85
12.5
4,882
19,529
This represents the maximum required amounts of woody biomass, meaning that
calculations are based on the assumption that coal and HFO will be completely replaced
by the biomass. Installation and/or operation of new biomass boilers can be done in
several stages. In the first stage only network “Školska toplana” can be connected and in
later stage heating plant “Gradska toplana”. It means less investment and lower required
amounts of woody biomass at the beginning of the project. In addition, in the first year of
operation of the biomass heating plant one part of the total heat generation can be
delivered by the existing HFO fired boiler. Required amounts of woody biomass in this
case are lower.
5.2 NOVA VAROŠ
5.2.1
District heating system overview
Public company “Energija Zlatar” manages
the district heating in Nova Varoš. There are
four heating plants in the system:
“Zebinovac”, “Trikotaža (Sloboda)”, “Pošta”,
and “Branoševac”. There are 11 installed
boilers in these four stations with total
capacity of 18.9 MW (Figure 5-1). Eight of
them are more than 30 years old. One boiler
is out of operation. All boilers are HFO
fueled.
Figure 5-1 Boilers in Nova Varoš
40
District heating systems’ energy output and estimation of biomass demand
Table 5-5 Boiler stations Nova Varoš - main characteristics5
Year
Producer
Capacity
(MW)
Status
1984
MINEL
3.6
operating
1984
1984
MINEL
MINEL
3.6
3.6
operating
out of order
2007
TERMOELEKTRO
2.9
operating
HFO
1984
EMO - Celje
3.6
operating
HFO
2001
MIP Ćuprija
1.6
In operation
Boiler
Fuel
stations
“Zebinovac”
2 x 1.8 MW
HFO
“Trikotaža (Sloboda)”
2 x 1.8 MW
HFO
2 x 1.8 MW
HFO
“Pošta”
1 x 2.9 MW
HFO
2 x 1.8 MW
“Branoševac”
2 x 0.8 MW
Heating plants supply heat to residential, public and commercial buildings. Total supplied
area is about 52,846 m2.Heating plant operates during the heating period only, as no heat
is needed in the summer time because of no centralized warm water preparation and air
conditioning.
5.2.2
Estimation of biomass requirement
Local government plans to replace the boilers at heating plants “Posta” and “Branoševac”
with new biomass-fueled boilers. Following calculations are made based on this
presumption. The local government reached a decision to support the partnership
between public and private company. The private company should finance the equipment
(100%) and it should get long-term contract for supplying the municipality with heating
through wood biomass. However, the private company is left to decide whether it will use
wood chips, wood pellets or some other form of wood biomass. Heating energy output of
these two boiler stations are calculated in Table 5-6.
Table 5-6 Calculation of DHP energy output in Nova Varoš (plants Branoševac and Posta only)
Fuel type
HFO
Total
5Source:
Fuel quantity
(tons)
318
Boiler
efficiency
(%)
85
PC “Energija Zlatar”
41
Net Calorific
Value
(GJ/ton)
41.0
Energy
output
(GJ)
11,082
11,082
Energy
output
(MWh)
3,081
3,081
District heating systems’ energy output and estimation of biomass demand
Estimated wood chips quantity required for the same energy output is shown in Table 57.
Table 5-7 Calculation of wood biomass required for fuel switch in Nova Varoš (plants Branoševac
and Posta only)
Fuel type
Wood chips
(m=30%)
Required
energy
output
Boiler
efficiency
(GJ)
(%)
11,082
Net calorific
value
Required
quantity in
mass
Required
quantity in
volume
(GJ/ton)
(tons)
(loose m3)
85
12.5
1,043
4,172
5.3 PRIBOJ
5.3.1
District heating system overview
PC "Toplana Priboj" was founded in
2012 by the municipality of Priboj,
although the beginning of district
heating goes back to early 90s of XX
century when begun the heating of
Priboj by the boilers at FAP boiler
room (Figure 5-2). There are two HFO
fuelled boilers in one boiler station with
total installed capacity of 55MW.
However, only one boiler is
operational, while other is out of order.
Operating boiler is almost 30 years old
(Table 5-8).
Figure 5-2 Boilers in Priboj
Table 5-8 Heating plant PC “Toplana Priboj” - main characteristics6
Boilers
Fuel
Year
Producer
1 x26 MW
1 x 29 MW
HFO
HFO
1986
1977
“Đuro Đaković”
“Đuro Đaković”
6Source:
PC “Toplana Priboj”
42
Capacity
(MW)
26
29
Status
Operating
Out of order
District heating systems’ energy output and estimation of biomass demand
Heating plant supplies with heat residential, public and commercial buildings. Total
supplied area in 2015 is 105,993 m 2.Heating plant operates during the heating season
only, as no heat is needed during the summer time because of no centralized warm water
preparation and air conditioning. Serbian Ministry of Mining and Energy had performed a
feasibility study of fuel switch to biomass in the past. The study foresaw that the
investment of transferring to wood chips would be around 3.5 million Euros.
5.3.2
Estimation of biomass requirement
The total heating energy produced by DHS in Priboj is calculated in Table 5-9.
Table 5-9 Calculation of DHP energy output in Priboj
Fuel type
HFO
Total
Fuel quantity
(tons)
1,950
Boiler
efficiency
(%)
85
Net Calorific
Value
(GJ/ton)
41.0
Energy
output
(GJ)
67,957
67,957
Energy
output
(MWh)
18,875
18,875
Estimated wood chips quantity required for the same energy output is shown in Table 510.
Table 5-10 Calculation of wood biomass required for fuel switch in Priboj
Fuel type
Wood chips
(m=30%)
Required
energy
output
Boiler
efficiency
(GJ)
(%)
67,957
Net calorific
value
Required
quantity in
mass
Required
quantity in
volume
(GJ/ton)
(tons)
(loose m3)
85
12.5
6,396
25,583
For wood chips, storage there is large space in the FAP area, which is currently vacant.
43
District heating systems’ energy output and estimation of biomass demand
5.4 PRIJEPOLJE
5.4.1
District heating system overview
Public company “Lim” manages the district heating system in Prijepolje. Five heating
plants connected into district heating system in Prijepolje are: “Apoteka”, “Brijeg”, “Valter”,
“Pijaca”, and “Gimnazija”. These five boiler stations have nine installed boilers with total
capacity of 15.85 MW. All boilers are operational, but old and economically depreciated.
Two boilers use coal and seven boilers use HFO as fuel (Table 5-11).
Table 5-11 Heating plant PC “Lim” main characteristics7
Boiler stations
Installed
boilers
Fuel
Year
Producer
Capacity
(MW)
Status
“Apoteka”
“BrijegStadion”
“Valter”
1 x 0.5 MW
coal
1986
EMO - Celje
0.5
operating
2 x 1.86 MW
HFO
-
EMO - Celje
3.72
operating
4 x 1.86 MW
HFO
-
7.44
operating
“Pijaca”
1 x 0.69 MW
coal
1995
0.69
operating
“Gimnazija”
1 x 3.5 MW
HFO
-
EMO - Celje
RadijatorZrenjanin
Tamstadler
3.5
operating
Heating plants supply heat energy to
residential, public and commercial
buildings. Total supplied area is about
45,658 m2. Heating plant operates
during the heating period only, as heat
energy is not needed in the summer
period because there is no centralized
warm water preparation or air
conditioning (Figure 5-4). Municipality
management plans to restructure the
current 5 heating plants system to 3
heating plant system in the following
way:
Figure 5-3 Boiler station in Prijepolje (Valter)
7Source:
PC “Lim”
44
District heating systems’ energy output and estimation of biomass demand
1. to shut down the heating plant “Valter”, and to connect district heating network of
heating plant “Valter” to the heating plant “Gimnazija”,
2. a new biomass-fired boiler will be installed in the heating plant “Gimnazija” which
will provide the current consumers of both “Valter” and “Gimnazija” district heating
network,
3. to shut down the heating plant “Apoteka”, and to connect district heating network
of heating plant “Apoteka” to the heating plant “Pijaca”,
4. to install new biomass-fired boiler at heating plant “Pijaca” which will provide the
current consumers of both “Apoteka” and “Pijaca” district heating network,
5. a new biomass-fired boiler will be installed in the heating plant “Brijeg-Stadion” will
be designed.
A consulting company from Slovenia prepared a feasibility study on the size of the
investment in wood chips equipment and the investment was assessed at around 3 million
Euros.
5.4.2
Estimation of biomass requirement
Based on previous assumptions and data collected from DHS management, we have
calculated the DHS energy output in Prijepolje and wood biomass quantity required for
fuel switch (Table 5-12).
Table 5-12 Table 5.3: Calculation of DHP energy output in Prijepolje
Fuel type
Coal
HFO
Total
Fuel quantity
(tons)
445
650
Boiler
efficiency
(%)
77
85
Net Calorific
Value
(GJ/ton)
19.4
41.0
Energy
output
(GJ)
6,647
22,652
29,300
Energy
output
(MWh)
1,846
6,292
8,138
Estimated wood chips quantity required for the same energy output is shown in Table 513.
Table 5-13 Calculation of wood biomass required for fuel switch in DHS in Prijepolje
Fuel type
Wood chips
(m=30%)
Required
energy
output
(GJ)
29,300
Boiler
efficiency
Net calorific
value
(%)
(GJ/ton)
85
12.5
45
Required
quantity in
mass
(tons)
2,757
Required
quantity in
volume
(loose m3)
11.030
District heating systems’ energy output and estimation of biomass demand
There is large covered area of about 3-4000 square meters for wood chips storage
purposes in Prijepolje.
5.5 MALI ZVORNIK
5.5.1
District heating system overview
"Drina" is a multifunctional enterprise in charge for water supply, heating, municipal solid
waste collection and deposition, funeral service, service and filling of firefighting
equipment, street lighting, local and non-categorized roads, market services and fishery
in the municipality of Mali Zvornik.
The boiler room organizationally belongs to the heating part of this enterprise. There are
three boilers in the boiler room. Because of the boiler room location (in the basement next
to a residential building) and with no available access road, there is a need to relocate the
boiler room. There are three natural gas fuelled boilers in heating plant.
Table 5-14 Main characteristics of boiler in district heating system at Mali Zvornik8
Boilers
1 x 2.4 MW
1 x 2.4 MW
1 x 1.8 MW
Fuel
Natural
gas
natural
gas
natural
gas
Capacity
(MW)
Year
Producer
Status
1986
Toplota, Zagreb
2.4
operating
1980
Toplota, Zagreb
2.4
operating
1991
EMO, Celje
1.8
operating
The heating plant supplies with thermal energy residential, public and commercial
buildings of Mali Zvornik. Total area supplied by heat produced in DHP is 31,851.44
m2.Heating plant operates during the heating period only, as there is no heat energy
needed in the summer period because of no centralized warm water preparation and air
conditioning. Management of “Drina” plans to build a new heating plant at the entrance of
the town, and to buy new biomass-fueled boilers. Total investment is estimated at 2 million
Euros, including new plant, new substations and heating pipes.
8Source:
“Drina”, Mali Zvornik
46
District heating systems’ energy output and estimation of biomass demand
5.5.2
Estimation of biomass requirement
Energy output and wood biomass required in case of fuel switch are calculated based on
inputs from local DHS management (Table 5-15).
Table 5-15 Calculation of DHP energy output in Mali Zvornik
Fuel type
Natural gas
Total
Fuel quantity
(000 m3)
442
Boiler
efficiency
(%)
92
Net Calorific
Value
(GJ/m3)
33.5
Energy
output
(GJ)
13,620
13,620
Energy
output
(MWh)
3,786
3,786
Estimated wood chips quantity required for the same energy output is shown in Table 516.
Table 5-16 Calculation of wood biomass required for fuel switch in Mali Zvornik
Fuel type
Wood chips
(m=30%)
Required
energy
output
(GJ)
13,620
Boiler
efficiency
Net calorific
value
(%)
(GJ/ton)
85
12.5
Required
quantity in
mass
(tons)
1,282
Required
quantity in
volume
(loose m3)
5,127
Presented calculation assumes that natural gas is completely replaced by biomass.
47
District heating systems’ energy output and estimation of biomass demand
5.6 NOVI PAZAR
5.6.1
District heating system overview
PC “Gradska toplana” in Novi Pazar consists
of three local heating plants: “Centralna”,
“Lug” and “Bor”. Because of small capacities
and inaccessible roads for the trucks for
biomass supply, local authorities and DHS
management plan to switch only heating plant
“Centralna” from fossil to biomass fuels. At
the time of the study, “Centralna” was using
heavy fuel oil (HFO), while “Lug” and “Bor”
were powered by coal (Figure 55).Previously, there were 2 HFO fuelled
boilers in heating plant “Centralna“, both HFO
fueled, 43 and 36 years old (Table 5-17). In
2015, the older boiler was replaced with a
new one of the same capacity and
characteristics. Total capacity of both boilers
is 14MW (2x7MW) and both boilers are fully
functional. However, at the time of the
interview, the new boiler has not been put to
operation.
Figure 5-4 Boiler station in Novi Pazar
Table 5-17 Main characteristics of heating plant PC “Gradska toplana”
Boilers
1 x 7 MW
1 x 7 MW
Fuel
Year
Producer
HFO
HFO
1972
1979
“Minel”
“Minel”
Capacity
(MW)
7
7
Status
Out of order
Operating
The heating plant supplies with thermal energy residential, public and commercial
buildings of Novi Pazar. Total area supplied by heat produced in DHP is 101,000
m2.Heating plant operates during the heating period only, as no heat is needed in the
summer time because of no centralized warm water preparation and air conditioning.
48
District heating systems’ energy output and estimation of biomass demand
5.6.2
Estimation of biomass requirement
Energy output of plant “Centralna” and wood biomass that would be required for the same
energy output in case of fuel switch is calculated in Table 5-18 and Table 5-19.
Table 5-18 Calculation of DHP energy output in Novi Pazar (plant Centralna only)
Fuel type
HFO
Total
Fuel quantity
(tons)
1,119
Boiler
efficiency
(%)
85
Net Calorific
Value
(GJ/ton)
41.0
Energy
output
(GJ)
39,011
39,011
Energy
output
(MWh)
10,845
10,845
Estimated wood chips quantity required for the same energy output is shown in Table 519.
Table 5-19 Calculation of wood biomass required for fuel switch (plant Centralna only)
Fuel type
Wood chips
(m=30%)
Required
energy
output
Boiler
efficiency
(GJ)
(%)
39,011
Net calorific
value
Required
quantity in
mass
Required
quantity in
volume
(GJ/ton)
(tons)
(loose m3)
85
12.5
3,672
14,686
The municipality of Novi Pazar is preparing large site (the location of old textile factory
“Raska”, at the north of the town) for storing the biomass supply in the future. This site is
prepared because the heating plants in Novi Pazar do not have sufficient space for storing
biomass supply.
5.7 AVAILABLE BIOMASS POTENTIAL
Economic impact of substitution of fossil fuels with wood biomass in district heating plants
in selected municipalities largely depends on potential wood biomass supply in the region.
The greater the amount of necessary biomass produced in the region, the higher the
economic effect on the regional income and employment.
Previous DKTI GIZ Program studies have estimated the wood biomass potential in
selected municipalities, and the results regarding the biomass available for the wood chips
production for the needs of DHS are presented in Table6-1 (data from DKTI GIZ studies:
49
District heating systems’ energy output and estimation of biomass demand
“Design of logistic concepts for wood biomass supply chains for district heating plants in
municipalities of Priboj, Novi Pazar, Bajina Bašta and Nova Varoš”, and “Logistics concept
of district heating supply with woody biomass (wood chips) in the municipalities of
Prijepolje and Mali Zvornik”). Available forest residue and solid sawmill residue, both from
broadleaved and conifers, were considered as potential source.
Following assumptions were made in order to calculate total energy potential of available
biomass that could be used for wood chips production for the DHS:





Moisture content 30%
Broadleaved mass density (beech) (M=30%) - 798 kg/m3
Conifers mass density (spruce) (M=30%) - 541 kg/m3
Broadleaved lower heating value (beech) (M=30%) - 12,100 kJ/kg
Conifers lower heating value (spruce) (M=30%) - 12,400 kJ/kg.
Table 5-20 Available woody biomass and its energy potential in selected municipalities
Municipality
Prijepolje
Priboj
Nova Varoš
Bajina Bašta
Mali Zvornik
Novi Pazar
TOTAL
Available quantities of
biomass
m3/a*
19,738
6,764
15,665
21,180
10,995
13,184
87,526
t/a
11,718
3,956
8,985
14,450
8,733
10,308
58,150
Available energy potential
GJ/a
144,335
48,769
110,943
176,387
105,720
124,861
711,015
MWh
40,125
13,558
30,842
49,035
29,390
34,711
197,661
* This should not be confused with loose m3
Wood biomass potential is the highest in Bajina Bašta (more than 175,000 GJ annually),
followed by Prijepolje, Novi Pazar, Nova Varoš and Mali Zvornik. Smallest biomass
potential among selected municipalities is in Priboj (48,788 GJ annually).
5.8 WOOD BIOMASS REQUIRED FOR FUEL SWITCH IN DHS VS. BIOMASS
POTENTIAL
Table 6-2 summarizes the wood chips requirements of local DHS in selected
municipalities. New demand of wood biomass that would be created by fuel switch is
highest in Priboj (approximately 68,000 GJ annually), followed by Bajina Bašta, Novi
Pazar, Prijepolje, Mali Zvornik, and Nova Varoš. It should be recalled that potential wood
50
District heating systems’ energy output and estimation of biomass demand
biomass demand is calculated with the presumption that the local heating systems will be
switched to biomass in whole in Prijepolje, Priboj, Bajina Bašta and Mali Zvornik, but only
partially in Nova Varoš and Novi Pazar.
Table 5-21 Wood biomass required for DHS fuel switch
Municipality
Prijepolje
Priboj
Nova Varoš
Bajina Bašta
Mali Zvornik
Novi Pazar
TOTAL
Required quantities of wood
biomass
3
m /a*
t/a
4,687
2,757
10,873
6,396
1,818
1,043
7,156
4,882
1,614
1,282
4,696
3,672
30,844
20,032
Required wood chips
energy
GJ/a
MWh/a
29,300
8,138
67,957
18,875
13,038
3,625
61,030
16,966
16,024
4,455
45,895
12,759
233,244
64,818
* This should not be confused with loose m3
Table 6-3 compares the wood biomass potential of the selected municipalities and wood
biomass that would be needed for the purpose of fuel switch in district heating systems.
All observed municipalities, except Priboj, have big wood biomass surplus, i.e. bigger
potential supply than demand that would be created by DHS in case of fuel switch (Figure
6-1). On the other hand, biomass-fueled DHS in Priboj would require app. 19,000 GJ more
wood biomass annually than available in the municipality, i.e. app. 40% more than
available.
Table 5-22 Comparison of wood biomass potential and requirements for DHS fuel switch
Potential – required
Municipality
Prijepolje
Priboj
Nova Varoš
Bajina Bašta
Mali Zvornik
Novi Pazar
TOTAL
m3/a*
15,051
-4,109
13,847
14,024
9,381
8,488
56,682
t/a
8,961
-2,440
7,942
9,568
7,451
6,636
38,118
* This should not be confused with loose m3
51
GJ/a
115,035
-19,188
97,905
115,357
89,696
78,966
477,771
MWh/a
31,987
-5,317
27,217
32,069
24,935
21,952
132,843
Required
/
potential
%
24
139
12
35
15
37
District heating systems’ energy output and estimation of biomass demand
However, the problem of supplying of DHP in Priboj with biomass would not exist, because
the neighboring municipalities (Prijepolje and Nova Varoš) have more than enough
biomass surplus (over 200,000 GJ annually), which could be used in Priboj. Due to small
distances between these municipalities, there would be no significant increase in biomass
prices based on transportation costs.
200.000
180.000
160.000
140.000
120.000
100.000
80.000
60.000
40.000
20.000
0
Potential
Demand
Prijepolje
Priboj
Nova Varos Bajina Basta Mali Zvornik Novi Pazar
Figure 5-5 Woody biomass potential vs. demand
The claim that there is more than sufficient potential in wood biomass for district heating
in these municipalities is supported by the fact that the needs of DHS would account for
only 12% of available biomass potential in Nova Varoš, 15% in Mali Zvornik, 24% in
Prijepolje, 35% in Bajina Bašta, 37% in Novi Pazar.
5.9 POTENTIAL WOOD CHIPS SUPPLIERS
Despite developed wood processing industry in Serbia, there are not many wood chips
producers right now. The main reason is currently undeveloped market for wood chips.
Substitution of fossil fuels with biomass in district heating systems would change a lot.
Many wood pellet producers, sawmills and other wood processing enterprises would be
willing to involve the wood chips in their assortment if there is a demand.
52
District heating systems’ energy output and estimation of biomass demand
Figure 5-6 Wood biomass producer in Serbia9
In selected municipalities (Prijepolje, Priboj, Nova Varoš, Bajina Bašta, Mali Zvornik and
Novi Pazar) there are only one wood chips producer right now – “Jela Star” Ltd. in
Prijepolje. Another big wood chips producer in Serbia, Company “Holz-Tim” Ltd., is located
in Ivanjica in Raška district (Figure 6-2).
Current wood chips production in “Jela Star” is app. 135,000 m 3, i.e. 37,000 tons per year.
Annual production of “Holz-Tim” is app. 95,000 m3, i.e. 26,000 tons. As determined in
previous GIZ DKTI studies regarding design of logistic concepts for wood biomass supply
chains for district heating plants, there are wood processing companies or sawmills in
every selected municipality that would be able to start wood chips production if there will
be a sustainable demand.
For the purpose of this study, it is reasonable to assume that all wood chips required for
fuel switch in municipalities’ district heating systems could be regionally produced, which
is of great importance for economic impact of the project on local economy.
9Source:
Branko Glavonjić “Tržište drvne biomase u Srbiji, dosadašnji razvoj, ograničenja i perspektive”
53
District heating systems’ energy output and estimation of biomass demand
5.10 EFFECTS OF FUEL SWITCH TO BIOMASS ON NATIONAL TRADE
BALANCE
Before we estimate the financial effects of substitution of fossil fuels with biomass in
selected DHSs, we should mention the effect that such project would have on national
trade balance. Opposite to fossil fuels, wood biomass is locally (or at least nationally)
produced fuel. Switching the fuels would, thus, has the import substitution effect on the
national level. Giving the large and long-lasting Serbian trade deficit and high import
dependence of national economy (especially in the energy sector), such projects could
partly contribute to improvement of Serbian external economic position. Serbia is net
importer of fuels. Table 5-23 presents the overall trade balance of Serbia in 2013 and
2014, as well as the balance in trade of selected fossil fuels.
Table 5-23Exports, imports and balance of Serbian trade of fossil fuels (in millions Euros)10
Total
export
import
balance
201
3
201
4
201
3
201
4
201
3
201
4
Mineral fuels,
lubricants and
related
products
Coal, coke
and
briquettes
Petroleum,
petroleum
products
and related
products
Gas,
natural
and
manufactured
10996.1
531.3
11.3
290.0
24.7
11158.5
414.0
5.0
317.3
29.6
15469.3
2342.6
69.3
1458.9
693.7
15496.6
2186.0
97.2
1366.7
607.7
-4473.3
-1811.4
-58.0
-1168.9
-668.9
-4338.1
-1772.0
-92.2
-1049.4
-578.1
Average annual consumption of fossil fuels in DHSs in Serbia is presented in Table 5-24.
While coal is predominantly produced in Serbia, fuel oils are produced from imported
crude oil, and natural gas is completely imported. The total annual costs of imported fossil
fuel used by all of the district heating systems in Serbia are estimated at approx. 300
million EUR per annum.
10Source:
Statistical Office of the Republic of Serbia
54
District heating systems’ energy output and estimation of biomass demand
Table 5-24Fossil fuel usage per year in Serbian district heating systems11
Coal
(t/a)
HFO
(t/a)
201,123
Natural gas
(m3/a)
549,609,349
109,374
High energetic import dependence of Serbia can be mitigated by utilization of national
biomass potential. Different sources estimates Serbian biomass energy potential to over
100,000 GJ annually, which is more than 4 times higher than total energy input of all
Serbian district heating systems.
According to the Strategy of energetic development of the Republic of Serbia until 2025,
it is necessary to ensure participation of 27% of renewable energy sources (RES) in gross
final energy consumption by 2020. If we assume the same target in district heating
systems to be achieved, trade deficit of Serbia can be lowered for more than 80 million
Euros per year. In addition, this would be the contribution only from the district heating
systems.
If we take into consideration only the effects of fuel switch to biomass in DHSs in six
selected municipalities (Priboj, Prijepolje, Nova Varoš, Mali Zvornik, Bajina Bašta and
Novi Pazar) the effects on national trade balance is proportionally lower. Table 5-25
presents the three years average amount of fossil fuels used in these heating plants. In
sum, 1,555 tons of coal, almost 5,000 tones of HFO and 442,000 cubic meters of natural
gas are used in selected DHS.
Table 5-25 Quantities of fossil fuels used in selected district heating systems12
Coal
(t)
Prijepolje
Priboj
Nova Varoš
Bajina Bašta
Mali Zvornik
Novi Pazar
Total
HFO
(t)
445
1,110
Natural gas
(1000m3)
650
1,950
218
1,056
442
1,555
1,119
4,993
442
Estimated fossil fuel costs for all six selected DHSs are estimated on over 3 million Euros
per year. In case of substitution of fossil fuels with wood chips, national trade account
would be improved for over 2 million Euros.
11Source:
12Source:
Business Association of Serbian Heating Plants
based on DHS management statements
55
District heating systems’ energy output and estimation of biomass demand
56
Fuel cost of heating energy production and potential savings in case of fuel switch to
biomass
6.
FUEL COST OF HEATING ENERGY PRODUCTION AND
POTENTIAL SAVINGS IN CASE OF FUEL SWITCH TO BIOMASS
The most important incentive to substitute fossil fuels with biomass is the lower cost of
energy output, which can lead to two important benefits: savings in cost of fuel for the
heating plant and/or lower price of heating energy to consumers. Regardless who will
benefit from lower fuel cost, plant or consumers, all benefits remain in local economy.
In order to estimate the potential annual fuel costs savings, we would assume that
biomass (wood chips particularly) will be used to produce the same energy output in
selected district heating plants. Then, we have to forecast the future prices of different
fuels, and to calculate, on that basis, the cumulative fuel costs savings in 10 years period
(from 2015 to 2025) after the potential fuel switch.
Table 6-1 presents the three years average price of fuels used in selected DHSs, as well
as the estimated price of wood chips. Prices of fossil fuels are given by DHPs
management, while the wood chips price estimation is based on previous GIZ DKTI study:
“The development of (I) price algorithm model and price index of wood chips and (II) data
collection and calculation of thermal energy costs produced from four different fuels which
can be used for heat production in Serbia”.
Table 6-1 Fuel prices in Serbia in 201513
Fuel
Coal (Banovići, Breza)
HFO
Natural gas**
Wood chips (m=30%)
Price (2013-2015 average)*
100 Euros/ton
542 Euros/ton
442 Euros/thousand m3
60 Euros/ton
* All prices are with VAT included
** Price of natural gas includes not only the price of cubic meter of gas, but also the fee for capacity
reservation and transport charged by “Srbija gas”.
6.1 FUEL PRICE FORECAST
In order to calculate project effects in next ten years, we need to forecast the future prices
of different fuels used in heating plants in Serbia. For fossil fuels, we will use the forecasts
13Source:
DHS management, and GIZ DKTI study: “The development of (I) price algorithm model and price
index of wood chips and (II) data collection and calculation of thermal energy costs produced from four
different fuels which can be used for heat production in Serbia”, 2015
57
Fuel cost of heating energy production and potential savings in case of fuel switch to
biomass
of World Bank (Commodity Forecast Price Data, July 2015), while the Ea Energy Institute
(Denmark, 2013) forecast will be used for future wood chips price estimation. Figures 6-1
to 6-3 present these forecasts.
110
100
90
80
70
60
50
40
30
20
Nominal USD $/bbl
Real 2010 USDs $/bbl
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Figure 6-1 Crude oil, price forecast14
World Bank predicts that the price of crude oil will be increasing in the next ten years,
following the current historically low price (app. 50 USD per barrel). It is estimated that the
crude oil price in 2025 will be about 103 USD per barrel in nominal terms, and about 83
USD per barrel in real terms (2010 USD). That means approximately 7% price increase
per year in average in nominal terms, and about 5% increase per year in real terms in the
period from 2015 to 2025. Bearing at mind that heavy fuel oil and natural gas price follows
the price of crude oil these data will be used for predictions of future prices of these two
fossil fuels.
14Source:
World Bank Commodity Forecast Price Data, July 2015
58
Fuel cost of heating energy production and potential savings in case of fuel switch to
biomass
100
90
80
Nominal USD $/t
70
Real 2010 USD $/t
60
50
40
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Figure 6-2 Coal, Australian, price forecast15
Following the World bank forecast, the price of Australian coal (which is the benchmark
price for coals at world market) will increase in the next ten years, but at the lower pace
than crude oil price: approximately 4% yearly on average in nominal terms and 2% yearly
on average in real terms. That means that price of Australian coal will increase in the next
ten years from 62 USD per ton in 2015 to 90 USD per ton in 2025 (in nominal values), and
from 59 to 72 USD per ton (in real 2010 USD values). These trends in coal prices at the
world market will be later used for predictions of coal price in Serbia.
7
6,8
6,6
6,4
real 2010 EUR/GJ
6,2
6
5,8
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Figure 6-3 Wood chips, price forecast16
For the prediction of wood chips price development in the next years, we have used the
Ea Energy Analyses (Denmark) forecasts. Ea Energy Analyses is a Danish consulting
company providing consulting services and performing research in the field of energy and
climate change. According to their analyses, the price of wood chips in Europe will
15Source:
16Source:
World Bank Commodity Forecast Price Data, July 2015
Analysis of biomass prices, Ea Energy Analyses, Denmark, 2013
59
Fuel cost of heating energy production and potential savings in case of fuel switch to
biomass
increase from 2015 to 2025 from 6.2 to 6.8 Euros per GJ, in real terms, which is
approximately 1% increase per year.
180
160
140
HFO/gas price index
120
coal price index
wood chips price index
100
80
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
Figure 6-4 Price indices for different fuels (forecast), 2015 base year17
Thus, although also increasing, the wood chips price will have the lowest growth rate in
the following ten years period. Based on these forecasts, we have calculated the price
indices of predicted fuel prices (Figure 6-4).Assuming that fuel prices in Serbia will follow
the same pattern as fuel prices at the global market, we have predicted the prices of
different fuels in Serbia in next ten years (Figure 6-5 and Table 6-2).
900
800
700
600
coal t
500
HFO t
400
natural gas 000 m3
300
Wood chips t
200
100
0
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
Figure 6-5 Fuel prices in Serbia (in Euros), forecast18
17Source:
18Source:
Own calculation based on previous forecasts of fuel prices
Own calculation
60
Fuel cost of heating energy production and potential savings in case of fuel switch to
biomass
Table 6-2 Fuel prices in Serbia (in Euros), forecast19
Year
Coal
ton
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
HFO
ton
100
102
104
106
109
111
113
116
118
120
542
572
601
631
664
698
733
770
809
851
Natural gas
000 m3
442
467
490
515
541
569
598
628
660
694
Wood chips
ton
60
60
61
62
62
63
64
64
65
65
According to our estimations:
 The price of coal (Banovići, Breza) will increase from 100 to 120 Euros (in real
values) per ton from 2015 to 2025;
 The price of heavy fuel oil will increase from 542 to 851 Euros (in real values) per
ton from 2015 to 2025;
 The price of natural gas will increase from 442 to 694 Euros (in real values) per
thousand m3 from 2015 to 2025;
 The price of wood chips (moisture content 30%) will increase from 60 to 65 Euros
(in real values) per ton from 2015 to 2025.
In relative terms, the highest price increase is expected in the case of heating oil and
natural gas (57% from 2015 to 2025). The price of coal is expected to increase for 20%,
while the lowest price increase is expected in the case of wood fuels (8.5%). Thus, we
expect that incentives to substitute fossil fuels with biomass are going to increase in the
following years. Data from Table 6-2 will be used for the estimations of fuel costs and
savings in the next ten years period in case of fuel switch from fossil fuels to biomass in
selected DHSs.
19Source:
Own calculation
61
Fuel cost of heating energy production and potential savings in case of fuel switch to
biomass
6.2 THERMAL ENERGY FUEL COSTS WITH DIFFERENT FUELS
Based on the data about fuel consumption, heating energy produced and fuel prices
collected from DHS management in selected municipalities, it is possible to calculate the
heating energy fuel costs. Annual fuel cost and fuel cost per energy output (per MWh of
produced energy) are given in Tables 6.3 to 6.8. Same costs are also calculated for the
case if fossil fuels were substituted with wood chips, i.e. we have calculated the fuel cost
(total and per energy output) if the wood chips are used instead of fossil fuels to produce
the same energy output delivered to the consumers.
6.2.1
Bajina Bašta
Average annual fuel cost in DHP in Bajina Bašta is 683,352 Euros. If wood chips were
used instead of HFO and coal, total annual cost for fuel would be 292,920 Euros, thus,
390,432 Euros less per year. The fuel cost for one MWh of produced energy would be
20.31, instead of 41.22. This represents decrease in fuel cost of more than 50%.
Table 6-3 Fuel cost (annual and per energy output unit) in DHS in Bajina Bašta20
Fuel type
coal
HFO
TOTAL
Wood
chips
(m=30%)
6.2.2
Annual
fuel
consumption
1,110
1,056
4,882
Energy
output
(MWh)
Fuel price
per unit
(EUR)
ton
ton
4,190
10,231
14,421
100
542
ton
14,421
60
Unit
Fuel cost per
Annual fuel energy output
cost (EUR)
(EUR per
MWh)
111,000
26.49
572,352
55.94
683,352
41.22
292,920
20.31
Nova Varoš
Table 6-4 Fuel cost (annual and per energy output unit) in DHS in Nova Varoš21
Fuel type
20Source:
21Source:
Annual
fuel
consumption
Unit
Energy
output
(MWh)
Fuel price
per unit
(EUR)
own calculation
own calculation
62
Annual
fuel cost
(EUR)
Fuel cost per
energy output
(EUR per MWh)
Fuel cost of heating energy production and potential savings in case of fuel switch to
biomass
HFO
Wood
chips
(m=30%)
318
ton
3,081
542
172,356
55.94
1,043
ton
3,081
60
62,580
20.31
Average yearly fuel cost of DHP in Nova Varoš is 172,356 Euros, which is equal to 55.94
Euros per produced MWh. If wood chips were used instead of HFO, the annual fuel cost
would be 62,580 Euros in total or 20.31 Euros per MWh output. This represents about
63% decrease in fuel cost.
6.2.3
Priboj
Table 6-5 Fuel cost (annual and per energy output unit) in DHS in Priboj22
Fuel type
Annual fuel
consumption
Uni
t
1,950
ton
18,875
542
1,056,900
Fuel cost
per energy
output
(EUR per
MWh)
55.99
6,396
ton
18,875
60
383,760
20.33
HFO
Wood
chips
(m=30%)
Energy
output
(MWh)
Fuel price
per unit
(EUR)
Annual
fuel cost
(EUR)
DHS in Priboj paid approximately 1,056,900 Euros every year (in average) for heavy fuel
oil. If wood chips were used instead, the fuel cost would be 383,760 Euros per year. This
is 673,140 Euros or 63% decrease in annual cost for fuel. One MWh of produced heating
energy would decrease from 55.99 to 20.33 Euros.
6.2.4
Prijepolje
Table 6-6 Fuel cost (annual and per energy output unit) in DHS in Prijepolje23
Fuel type
coal
HFO
TOTAL
22Source:
23Source:
Annual
fuel
consumption
445
650
Unit
ton
ton
Energy
output
(MWh)
Fuel price
per unit
(EUR)
1,846
6,292
8,138
100
542
own calculation
own calculation
63
Annual
fuel cost
(EUR)
44,500
352,300
396,800
Fuel cost per
energy output
(EUR per MWh)
24.11
55.99
40.05
Fuel cost of heating energy production and potential savings in case of fuel switch to
biomass
Wood
chips
(m=30%)
2,757
ton
8,138
60
165,420
20.33
Average annual fuel cost (3 years average) in DHP Prijepolje is 396,800 Euros, while the
average fuel cost per MWh of produced heating energy is 40.05 Euros. If wood chips were
used as fuel, total annual cost for fuel would be 165,420 Euros, thus, 231,380 Euros less
per year. The fuel cost for one MWh of produced energy would be 20.33. This represents
decrease in fuel cost of more than 60%.
6.2.5
Mali Zvornik
Table 6-7 Fuel cost (annual and per energy output unit) in DHS in Mali Zvornik24
Annual fuel
consumption
Fuel
type
natural
gas
Wood
chips
(m=30)
Unit
Energy
output
(MWh)
Fuel price
per unit
(EUR)
Annual
fuel cost
(EUR)
Fuel cost per
energy output
(EUR per MWh)
442,000
m3
3,786
0.44
195,364
51.60
1,282
ton
3,786
60
76,920
20.32
DHS in Priboj paid approximately 195,364 Euros every year (in average) for natural gas.
If wood chips were used instead, the fuel cost would be 76,920 Euros per year, thus,
118,444 Euros, or 60%, less per year. One MWh of produced heating energy would
decrease from 51.60 to 20.32 Euros.
6.2.6
Novi Pazar
Table 6-8 Fuel cost (annual and per energy output unit) in DHS in Novi Pazar25
Fuel type
HFO
24Source:
25Source:
Annual
fuel
consumption
1,119
Unit
Energy
output
(MWh)
Fuel price
per unit
(EUR)
ton
10,845
542
own calculation
own calculation
64
Annual
fuel cost
(EUR)
606,498
Fuel cost per
energy output
(EUR per MWh)
55.92
Fuel cost of heating energy production and potential savings in case of fuel switch to
biomass
Wood
chips
(m=30%)
3,672
ton
10,845
60
220,320
20.32
Average yearly fuel cost of DHP in Novi Pazar is 606,498 Euros, which is equal to 55.92
Euros per produced MWh of heating energy. If wood chips were used instead of HFO, the
annual fuel cost would be 220,320 Euros in total or 20.31 Euros per MWh output. This
represents about 63% decrease in fuel cost.
6.3 COMPARISON OF FUEL COSTS PER ENERGY OUTPUT FOR
ALTERNATIVE FUELS
Previous calculations have enabled us to compare the fuel costs of energy output for
different fuels used in selected heating systems in Serbia. Figure 7-6 summarizes the
findings.
Fuel costs per energy output
(Euros per MWh)
60
50
40
30
20
10
0
HFO
Natural gas
Coal
Wood chips
Figure 6-6 Fuel cost per energy output for different fuels26(Note: all these costs are based on
current fuel prices in Serbia, see Table 7-2)
A unit of heating energy delivered to consumers (MWh) has the highest fuel cost if it is
produced with heavy fuel oil (55.94 Euros). One MWh of energy produced with natural
gas has fuel cost of 51.61 Euros. If produced with combustion of coal, one MWh of heating
26Source:
Own calculations
65
Fuel cost of heating energy production and potential savings in case of fuel switch to
biomass
energy has fuel cost of 26.49 Euros. If the wood chips were used instead of fossil fuels,
fuel cost of one MWh would be only 20.32 Euros per MWh. Thus, even with current market
prices of fuels (and historically low prices of oil derivates and natural gas), there are
financial incentives to substitute fossil fuels with biomass in district heating systems in
Serbia. The potential savings in fuel costs in case of fuel switch to wood chips are
presented in next section.
6.4 POTENTIAL FUEL COST SAVINGS IN CASE OF FUEL SWITCH TO
BIOMASS
In previous section, the potential savings in fuel cost in case of using wood biomass
instead of fossil fuels were calculated based on current market prices in Serbia. In order
to estimate the total savings in the lifetime of project (ten years in this case), we have to
calculate costs based on the forecasts of fuel prices that we have made in Section 6.1
(Table 6-2).
6.4.1
Bajina Bašta
Table 6-9 Estimation of savings in fuel costs in next ten years, DHS Bajina Bašta27
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
Coal
111,000
113,080
115,349
117,997
120,455
123,102
125,750
128,397
131,044
133,692
HFO
Wood chips
572,352
292,920
604,213
292,920
634,935
297,645
666,796
302,369
700,932
302,369
737,344
307,094
773,756
311,818
813,582
311,818
854,545
316,543
898,923
316,543
Savings Cumulative savings
390,432
390,432
424,373
814,805
452,640
1,267,445
482,423
1,749,868
519,018
2,268,886
553,353
2,822,239
587,688
3,409,926
630,161
4,040,087
669,047
4,709,134
716,072
5,425,206
Fuel costs of DHP in Bajina Bašta would increase in real terms from 683,352 Euros in
2015 up to 1,032,615 Euros in 2024 (calculated for the same quantity of fuel). On the other
hand, significantly lower price and lower expected price growth rate in case of wood
27Source:
Own calculation
66
Fuel cost of heating energy production and potential savings in case of fuel switch to
biomass
biomass would allow increasing savings in total fuel costs in case of substitution of fossil
fuels with wood biomass. Cumulative ten years savings would be up to 5,425,206 Euros.
1.200.000
1.000.000
800.000
fossil fuels
600.000
wood biomass
400.000
200.000
0
2015201620172018201920202021202220232024
Figure 6-7 Fuel costs estimation for ten years, DHS Bajina Bašta28
6.4.2
Nova Varoš
Table 6-10 Estimation of savings in fuel costs in next ten years, DHS Nova Varoš29
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
HFO
Wood chips
172,356
62,580
181,950
62,580
191,202
63,589
200,796
64,599
211,076
64,599
222,041
65,608
233,006
66,617
244,999
66,617
257,335
67,627
270,698
67,627
Savings Cumulative savings
109,776
109,776
119,370
229,146
127,613
356,759
136,198
492,957
146,477
639,434
156,433
795,867
166,389
962,256
178,382
1,140,638
189,708
1,330,346
203,072
1,533,417
Fuel costs in DHS Nova Varoš would increase from 172,356 to 270,698 Euros per year in
the next ten years if the HFO were going to remain the only fuel in DHP. If they switched
to wood chips, annual cost would be from 62,580 Euros in 2015 to 67,627 Euros in 2024.
28Source:
29Source:
Own calculation
Own calculation
67
Fuel cost of heating energy production and potential savings in case of fuel switch to
biomass
Cumulative savings in fuel costs in case of switching to biomass would be 1,533,417
Euros.
300.000
250.000
200.000
fossil fuels
150.000
wood biomass
100.000
50.000
0
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
Figure 6-8 Fuel costs estimation for ten years, DHS Nova Varoš30
6.4.3
Priboj
Table 6-11 Estimation of savings in fuel costs in next ten years, DHS Priboj31
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
30Source:
31Source:
HFO
Wood chips
1,056,900
383,760
1,115,733
383,760
1,172,466
389,950
1,231,299
396,139
1,294,335
396,139
1,361,573
402,329
1,428,811
408,519
1,502,353
408,519
1,577,996
414,708
1,659,942
414,708
Own calculation
Own calculation
68
Savings Cumulative savings
673,140
673,140
731,973
1,405,113
782,516
2,187,629
835,160
3,022,789
898,195
3,920,984
959,244
4,880,228
1,020,292
5,900,521
1,093,834
6,994,355
1,163,287
8,157,642
1,245,234
9,402,876
Fuel cost of heating energy production and potential savings in case of fuel switch to
biomass
Annual cost for HFO in DHS in Priboj is expected to increase from 1,056,900 to 1,659,942
Euros in the next ten years. On the other hand, fuel switch to wood chips would allow
substantially lower fuel cost (with lower pace of growth in the next period). Fuel costs
savings would sum up to 9.402,876 Euros in ten years after the fuel switch to biomass.
1.800.000
1.600.000
1.400.000
1.200.000
1.000.000
800.000
600.000
400.000
200.000
0
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
Figure 6-9 Fuel costs estimation for ten years, DHS Priboj32
6.4.4
Prijepolje
Table 6-12 Estimation of savings in fuel costs in next ten years, DHS Prijepolje33
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
32Source:
33Source:
Coal
44,500
45,334
46,244
47,305
48,290
49,352
50,413
51,474
52,536
53,597
HFO
Wood chips
352,300
165,420
371,911
165,420
390,822
168,088
410,433
170,756
431,445
170,756
453,858
173,424
476,270
176,092
500,784
176,092
525,999
178,760
553,314
178,760
Own calculation
Own calculation
69
Savings Cumulative savings
231,380
267,092
251,825
518,917
268,977
787,894
286,982
1,074,876
308,979
1,383,856
329,785
1,713,641
350,591
2,064,232
376,166
2,440,398
399,774
2,840,173
428,151
3,268,323
Fuel cost of heating energy production and potential savings in case of fuel switch to
biomass
Due to expected substantial increase of fossil prices in the following ten years, fuel costs
of DHP Prijepolje would increase in real terms from 396,800 Euros in 2015 up to 606,911
Euros in 2024 (calculated for the same quantity of fuel). On the other hand, modest
expected increase in wood fuels price would allow increasing savings in total fuel costs in
case of substitution of fossil fuels with wood biomass. Cumulative ten years savings would
be up to 3,268,323 Euros.
700.000
600.000
500.000
400.000
300.000
200.000
100.000
0
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
Figure 6-10 Fuel costs estimation for ten years, DHS Prijepolje34
6.4.5
Mali Zvornik
Table 6-13 Table 6.13: Estimation of savings in fuel costs in next ten years, DHS Mali Zvornik35
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
34Source:
35Source:
Natural gas Wood chips
195,364
76,920
206,239
76,920
216,726
78,161
227,601
79,401
239,253
79,401
251,682
80,642
264,110
81,883
277,704
81,883
291,687
83,123
306,834
83,123
Own calculation
Own calculation
70
Savings
Cumulative savings
118,444
118,444
129,319
247,763
138,565
386,328
148,200
534,528
159,852
694,380
171,040
865,419
182,228
1,047,647
195,822
1,243,469
208,563
1,452,032
223,711
1,675,743
Fuel cost of heating energy production and potential savings in case of fuel switch to
biomass
Annual cost for HFO in DHS in Mali Zvornik is expected to increase from 195,364 to
306,834 Euros in the next ten years. On the other hand, fuel switch to wood chips would
allow substantially lower fuel cost with lower growth rate in the next period. Fuel costs
savings would sum up to 1,675,743 Euros in ten years after the fuel switch to biomass.
350.000
300.000
250.000
200.000
fossil fuels
150.000
wood biomass
100.000
50.000
0
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
Figure 6-11 Fuel costs estimation for ten years, DHS Mali Zvornik36
6.4.6
Novi Pazar
Table 6-14 Estimation of savings in fuel costs in next ten years, DHS Novi Pazar37
2015
2016
2017
2018
2019
2020
2021
2022
2023
36Source:
37Source:
HFO
Wood chips
606,498
220,320
640,259
220,320
672,815
223,874
706,576
227,427
742,749
227,427
781,333
230,981
819,918
234,534
862,119
234,534
905,527
238,088
Own calculation
Own calculation
71
Savings Cumulative savings
386,178
386,178
419,939
806,117
448,941
1,255,059
479,149
1,734,208
515,322
2,249,530
550,353
2,799,882
585,384
3,385,266
627,585
4,012,851
667,439
4,680,290
Fuel cost of heating energy production and potential savings in case of fuel switch to
biomass
2024
952,552
238,088
714,464
5,394,754
Fuel costs in DHS in Novi Pazar would increase from 606,498 to 952,552 Euros per year
in the next ten years if the HFO were going to be used. In case of switch to wood chips,
annual cost would be from 220,320 Euros in 2015 up to 238,088 Euros in 2024.
Cumulative fuel costs savings in case of switch to biomass would be 5,394,754 Euros in
ten years.
1.200.000
1.000.000
800.000
fossil fuels
600.000
wood biomass
400.000
200.000
0
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
Figure 6-12 Fuel costs estimation for ten years, DHS Novi Pazar38
6.5 NET PRESENT VALUE AND INTERNAL RATE OF RETURN FOR FUEL
COST SAVINGS
Although the main objective of this study was not to determine the profitability of the
investment project, this segment deals with net present value (NPV) and internal rate of
return (IRR) for analyzed municipalities in case of switching to heating systems based on
woody biomass. The basic premises of the calculation are as follows:



Initial investment in all of the analyzed municipalities is around 2 million Euros,
which is the average figure we got from interviewing municipal officials;
The discount rate was 5%;
Project duration is 10 consecutive years;
38Source:
Own calculation
72
Fuel cost of heating energy production and potential savings in case of fuel switch to
biomass


The project does not have residual value;
Projected present value of future cash flows are linked to projected present value
of future savings if turning to woody biomass.
Table 6-15 NPV and IRR of investments in biomass
Year
Investmen
t
Bajina Bašta
Mali Zvornik
Novi Pazar
-2.000.000,00
-2.000.000,00
-2.000.000,00
Priboj
-2.000.000,00
Nova Varoš
Prijepolje
-2.000.000,00
-2.000.000,00
Present value of projected savings
1
371.840,00
112.803,81
367.788,57
641.085,71
104.548,57
220.361,90
2
708.266,67
214.864,40
700.549,66
1.177.324,26
199.140,14
452.128,80
3
1.011.809,52
306.949,14
1.000.785,23
1.661.038,76
284.485,91
661.322,97
4
1.284.837,49
389.776,69
1.270.838,39
2.096.015,55
361.251,95
849.568,65
5
1.529.568,44
464.019,87
1.512.902,84
2.485.799,45
430.061,84
1.018.386,57
6
1.748.078,22
530.308,42
1.729.031,82
2.833.708,20
491.499,25
1.169.200,13
7
1.942.309,13
589.231,58
1.921.146,46
3.142.846,05
546.110,28
1.303.341,23
8
2.114.077,97
641.340,49
2.091.043,77
3.416.116,55
594.405,74
1.422.055,74
9
2.265.083,54
687.150,53
2.240.404,04
3.656.234,66
636.863,30
1.526.508,69
10
2.396.913,79
727.143,41
2.370.797,92
3.865.738,09
673.929,41
1.617.789,12
NPV
13.372.784,77
€
2.663.588,33
€
13.205.288,70
€
22.975.907,29
€
2.322.296,38
€
8.240.663,80
€
IRR
45,57%
14,51%
45,19%
65,94%
13,03%
32,49%
Table 6-15 shows the net effect of cost savings when switching to biomass heating in six
analyzed municipalities. This table uses the data from Tables 6-9 to 6-14 and uses the
projected savings in order to determine the present value of these savings at discount rate
of 5% annually.
25.000.000,00 €
20.000.000,00 €
15.000.000,00 €
10.000.000,00 €
5.000.000,00 €
0,00 €
Bajina
Bašta
Mali
Zvornik
Novi Pazar
Priboj
Nova
Varoš
NPV 13.372.784 2.663.588, 13.205.288 22.975.907 2.322.296,
73
Prijepolje
8.240.663,
Fuel cost of heating energy production and potential savings in case of fuel switch to
biomass
Figure 6-13 The NPV of cost savings across municipalities
70,00%
60,00%
50,00%
40,00%
30,00%
20,00%
10,00%
0,00%
IRR
Bajina
Bašta
Mali
Zvornik
Novi Pazar
Priboj
Nova Varoš
Prijepolje
45,57%
14,51%
45,19%
65,94%
13,03%
32,49%
Figure 6-14 IRR of projected cost savings across municipalities
The initial investment will not be 2 million Euros for each municipality, but the presented
model offers the possibility to vary this number in order to obtain more accurate result in
terms of NPV and IRR. If the assumptions of the model are correct, than municipality of
Priboj would benefit the most from switching to biomass fuel in the forecasted ten-year
period.
Figures 6-13 and 6-14 depict the values for net present value and internal rate of return
for selected municipalities in the next ten years, respecting the above-mentioned
assumptions.
74
Effects of fuel switch to biomass on local income and employment
7.
EFFECTS OF FUEL SWITCH TO BIOMASS ON LOCAL INCOME
AND EMPLOYMENT
Economic effects of potential switch from one type of fuel to another in district heating
systems should not be measured only on an investment return, energy cost basis, which
is the usual, and the most common method of numerous studies conducted in Serbia.
Preferring one option to another may have consequences on several aspects of local
economy and the environment. Unlike fossil fuels, biomass is usually produced locally.
Thus, fuel switch from fossil fuels to biomass, through increased demand of biomass,
would create new income and new employment at the regional level, contributing, thus, to
local economic development.
In Part 5 of this study, we have estimated the new demand of woody biomass that would
be required for the use in district heating systems (DHS) in selected municipalities in case
of fuel switch. To estimate effects of new wood biomass production on local income and
employment we will assume that all requirements of DHS regarding wood chips will be
produced locally. Put in other words, the estimations that follow would be conducted by
selected municipality, i.e. separately for each municipality. In reality, it can be expected
that, at least in the first phase, wood chips could be totally or partly imported from some
bordering, or nearby municipality. For instance, DHS in Priboj would need to import at
least 50% of required biomass, according to the estimations made in Part 5, from
neighboring municipalities of Nova Varoš or Prijepolje. The municipality’s import of wood
chips is also likely to emerge in some other cases. Despite more than enough wood
biomass potential, in some municipalities it is likely that a few years have to pass before
new locally based wood chips production emerge and develop enough to be market
competitive. Bearing that in mind, the following estimations should be interpreted with
some caution in respect that estimated income and employment effect could be
redistributed between municipalities, in accordance with wood chips production site.
However, even in that case, new income and jobs projections should be valid at the district
level, rather that municipality level.
To understand how income and employment effects can be better taken into account it is
necessary to recognize the various levels at which impacts may take place:
1. direct effects,
2. indirect effects, and
3. induced effects.
Expenditure on biomass generates direct income and employment in carrying out biomass
production activities. Although easiest to assess, economic effects do not stop here.
75
Effects of fuel switch to biomass on local income and employment
Indirect effects result from purchasing of goods and services from other industries that
assist biomass production. Direct and indirect effects jointly are often called primary effect.
Induced, or indirect effects results from changes in direct and indirect employment and
income. If direct employment and income increases, then there is a ‘multiplier’ effect
because those people directly employed spend their salaries on goods and services. This
can create additional employment and income in the sectors supplying those goods and
services. However, if increased expenditure of biomass means that there is less
expenditure in other sectors, then jobs in those sectors may be lost. This is known as a
‘crowding-out’ effect. The interaction between the direct and indirect effects changes the
structure and composition of the overall demand for labor in the economy. This is termed
as the net economic effect.
Indirect employment/income is that created elsewhere by the net flow of expenditure
generated by the project (changes in the purchasing activities of the renewable and
conventional energy technologies). It is more difficult to measure the number of indirect
jobs that may be created in associated supply and support industries. In order to make
such projections, the income and employment multipliers should be estimated.
:
Figure 7-1 Biomass fuel supply chains for solid bio-fuel
76
Effects of fuel switch to biomass on local income and employment
The net effects on local economy (income and employment) will be estimated in this
Section with adapted BIOSEM (Biomass Socio-Economic Multiplier) model. BIOSEM is
widely used for modeling of biomass usage effects on local economy. BIOSEM-based
models can estimate economic effects of both plant construction and biomass production
parts of the projects. For the purpose of this study, we have used only wood chips
production phase of the project. In other words, our model will estimate the economic
effects of new wood chips production for the purpose of fossil fuel substitution with wood
chips in district heating plants of selected municipalities (Figure 7-1). Brief description of
the used model is given in the next section.
7.1 MODEL DESCRIPTION
Table 7-1 provides the brief explanation of the model calculations used to estimate total
(direct plus indirect plus induced) economic effects on income and employment of woody
biomass production for the purpose of fuel switch in district heating systems in selected
municipalities.
Table 7-1 Model description
Direct aspects
Direct labor
related to process of
preparation of WB,
which is
maintained in the
region (VJdirr+)
Method of calculation
Labor costs in silvi
culture, logging,
harvesting, transport,
manufacture of wood
chips and collection of
wood residues (for WB
which comes from
region)
K1
Tax deduction
Direct labor relating
to process of
NVJdirr+ = VJdirr+*k1
preparation of WB
(NVJdirr+)
Average annual
profit retained in the (3)
region (Pr+)
Profit tax rate
K2
77
Average wages
and the ratio of
wages
Pg
Direct jobs
(Jdir)
Jdir
Effects of fuel switch to biomass on local income and employment
Average annual
profit retained (after
tax) (NPr+)
Indirect aspects
The direct value of
means of
production and
services related to
preparing WB, which
is
maintained in the
NPr+ = Pr+*k2
Total direct costs
of machines (chainsaw,
tractor, transport
means,
Chipper) + cost of
services
Indirect
jobs
(Jind1)
region(VPSdirr+)
Multiplier
Indirect value of the
means of production
and services, which is
maintained in the
M1 (4)
VPSindr+ = VPSdirr+ * m1
Wr (5)
Jind1 (6)
region (VPSindr+)
Revenues from the
production of
biomass
( Spr+)
Multiplier
Indirect labor
expenditure related
The market value of WB
which comes from
region
Indirect
jobs
(Jind2)
M1
to process of
preparation of WB,
which is
maintained in the
LEindr+ = NVJdirr+ * m1
Wr
Jind2
(LEindr +)
Induced aspects
The calculation of induced jobs from direct income related to the preparation of LB in
the region
Share of net
additional profit
K3
Pavgr
Jinduced1
spent in region
The calculation of
induced jobs from
induced
net indirect income
jobs
from LB preparation
in the region
region
78
Effects of fuel switch to biomass on local income and employment
The value of the
newly created
indirect
jobs
Taxing wages
The net value of the
newly created
indirect jobs
(NVJind1+2)
Net total (direct and
indirect) value of
work associated
with the process of
preparation of
WB(NVJsum)
Share of net
additional labor
incomes spent in
region
VJind1+2 (9)
K1
NVJind1+2 =VJind1+2 *k1
NVJsum=NVJdirr++NVJind1+2
K4
Pavgr
Jinduced2
r+ = is retained or derived from the region
r- = does not retain in the region, or does not come from the region
Additional information regarding model equations are provided in Appendix 1 of this report.
7.2 SOME BENCHMARK CASES
As previously mentioned, our model is BIOSEM-based adapted model. As BIOSEM is
widely used model in similar bio-energy studies across Europe, our results could be
compared to results of other relevant studies. In this section, several researches regarding
economic effects of wood biomass production in Finland, Slovenia, and Croatia will be
presented.
79
Effects of fuel switch to biomass on local income and employment
Figure 7-2Employment impact of wood biomass production in Finland39
Finland is chosen due to highly developed wood biomass production and utilization for
energy generation. On the other hand, Slovenia and Croatia are chosen as countries from
the region where production and utilization of bio-fuels are much more developed than in
Serbia, which is why their experience could provide us an important insight into potentials,
effects, obstacles and stimulus needed for developing of bio-energy market in Serbia. We
will use the results of these studies for comparison with our estimations. Figure 7-2 and
Table 7-2 shows the results of the study of wood biomass production’s impact on local
economy (employment and income) in five municipalities in Finland.
Total primary employment effect (direct + indirect) in selected municipalities in Finland
varies from 0.3 work years per 1000 m3 in Pietarsaari to 1.4 work years per 1000 m 3 of
wood biomass produced in Perho. Three main drivers of differences in employment impact
are wood source, technology and scope of production:
1. Wood chips produced from whole trees have bigger employment impact than wood
chips produced from logging residue;
2. Low employment impact in Pietarsaari is the result of high productivity, large-scale
operations (over 200,000 m3 of wood chips annually) and advanced technology.
3. High employment impact in Perho is the result of small-scale operations (under
3,000 m3/a) and a lot of manual work.
39Source:
Röser, D. Forest Biomass - A win for rural Europe, Finnish Forest Research Institute, Metla
80
Effects of fuel switch to biomass on local income and employment
Expected income effect is in correlation with employment effect, because the majority of
the newly created income represents the labor income. Part of income flows out of country
because of purchasing of foreign-produced machinery. This part of income is, thus, bigger
in case of technology-intensive operations compared to labor-intensive operations.
Another important notice is that the production of wood chips from whole trees is
subsidized in Finland. If that were not the case, net income effect of this type of wood
chips production would be significantly lower.
Three important conclusions can be drawn from this research:
1. Large projects tend to have a lower relative impact on employment and earnings
than small projects, due to an economy-of-scale effect for energy plants in general,
as well as for bio-fuel projects.
2. In addition, technologically advanced production processes with specialized
machinery and equipment have relatively lower impact on local employment
compared to labor-intensive, manual methods of wood biomass production.
3. Rural incomes are generated from the huge amount of work force (unskilled labor)
required for harvesting, processing, transporting and trading of the fuels.
Another research form Finland confirmed the previous results. Table 7-2summarizes the
findings of this study of employment effect of wood biomass production.
Table 7-2 An estimate of the employment effect of forest chips production in Finland by 2010
Product
Small tree chips
 whole tree chips,
mechanized cutting
 whole tree chips,
manual cutting
 stem wood chips, selfemployed forest
owners
Logging residues chips
Stump chips
Forest chips, total
Production
1000 m3
Man. years/
1000 m3
Man. years/
annum
600
0.60
360
200
1.20
240
200
2.00
400
2,500
1,500
5,000
0.30
0.35
0.45
750
525
2,275
Although very sophisticated, BIOSEM model in its original form has not proven as
accurate for estimations of the economic effects of new bio-energy projects in Balkan
countries. It first became apparent in Slovenia and Croatia. The technique for socioeconomic analysis is highly dependent on the state of regional development of bio81
Effects of fuel switch to biomass on local income and employment
energy/renewable (Krajnc, N., Domac, J. 2007). Following characteristics of Slovenian,
Croatian, as well as Serbian economy and bio-energy market made original BIOSEM
unsatisfactory in modeling socio-economic aspects of biomass utilization:
1. There are very few, if any, reference plants for the study and so some very basic
modeling is needed in order to facilitate project build. By contrast, in Sweden and
Austria there are numerous fine examples of projects, which are ready for
enhanced consideration. Hence, it is unlikely that one model only can be used for
all countries.
2. The other significant difference is the source of biomass for energy production. Like
in no other country, in Slovenia, Croatia, and Serbia wood fuels, or biomass in
general, originate mostly from natural forests.
3. Finally, Slovenia and Croatia belonged, and Serbia still belongs, to so-called
transition countries and consequently has some specific economic and social
characteristics.
Having all this in mind, researchers from two scientific institutions in both countries, the
Slovenian Forestry Institute and Energy Institute Hrvoje Pozar, started to develop a new
model, named SCORE, for regional-based analysis of socio-economic benefits of
biomass utilization (Krajnc, N., Domac, J. 2007). Table 7-3 summarizes the findings of
SCORE modeling of economic impacts of planned biomass production for utilization in
heat and electricity plants in two chosen regions: Savinjska valley in Slovenia, and
Karlovac district in Croatia.
Table 7-3 Estimated income and employment effects of wood biomass production in Savinjska
valley (Slovenia) and Karlovac district (Croatia)
Slovenia
Croatia
(Savinjska valley)
No. of plants
Heat capacity (MW)
Electricity capacity (MW)
Required wood chips (m3/a)
Dir. labor income, net (EUR)
Net profit (EUR)
Total labor income, net* (EUR)
No. of direct jobs
No. of indirect jobs
No. of induced jobs
No. of total new jobs
* Total = direct + indirect
82
(Karlovac district)
4
13.7
1.0
47,500
4
21.5
3.0
98,000
103,436
27,995
206,432
590,885
103,055
n.a.
15
13
12
40
110
58
38
206
Effects of fuel switch to biomass on local income and employment
Table 7-4 Income and employment effects of wood biomass production in Savinjska valley
(Slovenia) and Karlovac district (Croatia) pre 1000 m3 of wood biomass40
Slovenia
Croatia
(Savinjska valley)
(Karlovac district)
Direct labor income, net
(EUR/1,000 m3)
Net profit
(EUR/1,000 m3)
Total income*
(EUR/1,000 m3)
No. of direct jobs
(per 1,000 m3)
No. of indirect jobs
(per 1,000 m3)
No. of induced jobs
(per 1,000 m3)
No. of total new jobs
(per 1,000 m3)
2,177
6,029
589
1,051
4,345
n.a.
0.32
1.12
0.27
0.59
0.25
0.38
0.84
2.10
* Total = direct + indirect
As shown in Table 7-3, the number of new jobs is higher in Croatia, mainly due to higher
heat and electricity capacity of biomass plants. In Savinjska region, wood biomass
production creates 15 direct jobs, which means that each 3,200 m3 of wood chips creates
one direct job, while each 4,300 m3 of wood biomass creates app. one indirect and one
induced job. In Karlovac district, each 1,000 m3 of wood biomass produced one direct job,
each 1,700 m3 creates one indirect job, and each 2,400 m 3 creates one induced job. In
order to facilitate the comparison of these results with those obtained in Finland and those
that will be obtained in this study, Table 7-4 shows the income and employment effect of
wood biomass production per 1,000 m3 of biomass produced in Savinjska valley and
Karlovac district.
7.3 MODEL RESULTS
This section presents the results of direct, indirect and induced effect of woody biomass
production on local (regional) employment and income.
40Based
on: Krajnc, N., Domac, J. 2007. How to model different socio-economic and environmental aspects
of biomass utilization: Case study in selected regions in Slovenia and Croatia, Energy Policy 35, 6010-6020
83
Effects of fuel switch to biomass on local income and employment
7.3.1
Prijepolje
Table 7-5 presents the results of modeling of economic effects of fuel switch in DHS on
local income and employment in Prijepolje.
Table 7-5 Estimations of local income and employment effects of fuel switch to woody biomass in
DHS in Prijepolje
Direct effect
EUR/year
Wage rates
Direct labor income, gross
24,108
402
Direct labor income, net
17,220
287
Profit, net
No. of jobs
5
4,305
Indirect effects
EUR/year
Direct value of means of
production and services, from the
region
Wage rates
No. of jobs
13,000
Multiplier
1.5
Indirect value of means of
production and services, retained
in the region
Indirect labor expenditures,
retained in the region
Induced effects
19,500
2
36,162
3
EUR/year
Share of net profit spent in region
Wage rates
50
Total indirect labor incomes, gross
27,831
Total indirect labor incomes, net
37,099
Share of net labor incomes spent
in region
No. of jobs
465
50
0
3
Model estimates that wood chips production for the purpose of district heating system in
Prijepolje would generate 13 new jobs (5 direct, 5 indirect and 3 induced jobs). Table 7-6
summarizes the results.
Table 7-6 Summary of effects of fuel switch to woody biomass in DHS on local economy in
Prijepolje
Prijepolje
Direct labor income, net (EUR)
Direct profit, net (EUR)
Total income* (EUR)
17,220
4,305
37,099
84
Effects of fuel switch to biomass on local income and employment
No. of direct jobs
No. of indirect jobs
No. of induced jobs
No. of total new jobs
5
5
3
13
* Total = direct + indirect
7.3.2
Priboj
Table 7-7 presents the results of our modeling of economic effects of fuel switch in DHS
on local income and employment in Priboj.
Table 7-7 Estimations of local income and employment effects of fuel switch to woody biomass in
DHS in Priboj
Direct effect
EUR/year
Wage rates
Direct labor income, gross
39,144
326
Direct labor income, net
27,960
233
Profit, net
No. of
jobs
10
6,990
Indirect effects
EUR /year
Direct value of means of production
and services, from the region
Wage rates
No. of
jobs
20,000
Multiplier
1.5
Indirect value of means of production
and services, retained in the region
Indirect labor expenditures, retained in
the region
Induced effects
30,000
3
58,716
5
EUR/year
Share of net profit spent in region
Wage rates
50
Total indirect labor incomes, gross
44,358
Total indirect labor incomes, net
59,644
Share of net labor incomes spent in
region
50
465
No. of
jobs
1
5
Wood chips production for the district heating system in Priboj would generate 10 new
direct jobs, 8 indirect jobs and 6 induced jobs (Table 7-8).
85
Effects of fuel switch to biomass on local income and employment
Table 7-8 Summary of effects of fuel switch to woody biomass in DHS on local economy in Priboj
Priboj
Direct labor income, net (EUR)
Direct profit, net (EUR)
Total income* (EUR)
No. of direct jobs
No. of indirect jobs
No. of induced jobs
No. of total new jobs
27,960
6,990
59,644
10
8
6
24
* Total = direct + indirect
7.3.3
Nova Varoš
Table 7-9 presents the results of our modeling of economic effects of fuel switch in DHS
on local income and employment in Nova Varoš.
Table 7-9 Estimations of local income and employment effects of fuel switch to woody biomass in
DHS in Nova Varoš
Direct effect
EUR/year
Direct labor income, gross
Wage rates
10,651
444
Direct labor income, net
7,608
317
Profit, net
1,902
Indirect effects
EUR/year
Direct value of means of
production and services, from
the region
2
No. of
jobs
6,000
Multiplier
1.5
Indirect value of means of
production and services,
retained in the region
Indirect labor expenditures,
retained in the region
Induced effects
Wage rates
No. of
jobs
9,000
1
15,977
1
EUR/year
Share of net profit spent in
region
Wage rates
50
86
465
No. of
jobs
0
Effects of fuel switch to biomass on local income and employment
Total indirect labor incomes,
gross
12,488
Total indirect labor incomes, net
16,528
Share of net labor incomes
spent in region
50
1
According to the results, wood chips production for the biomass-fueled district heating
plant in Nova Varoš would result in opening of 5 new jobs in the local economy (Table 710).
Table 7-10 Summary of effects of fuel switch to woody biomass in DHS on local economy in Nova
Varoš
Nova Varoš
Direct labor income, net (EUR)
Direct profit, net (EUR)
Total income* (EUR)
7,608
1,902
16,528
No. of direct jobs
No. of indirect jobs
No. of induced jobs
No. of total new jobs
2
2
1
5
* Total = direct + indirect
7.3.4
Bajina Bašta
Table 7-11 presents the results of our modeling of economic effects of fuel switch in DHS
on local income and employment in Bajina Bašta.
Table 7-11 Estimations of local income and employment effects of fuel switch to woody biomass
in DHS in Bajina Bašta
Direct effect
EUR/year
Wage rates
Direct labor income, gross
44,352
462
Direct labor income, net
31,680
330
Profit, net
No. of
jobs
8
7,920
Indirect effects
EUR/year
87
Wage rates
No. of
jobs
Effects of fuel switch to biomass on local income and employment
Direct value of means of production
and services, from the region
23,000
Multiplier
1.5
Indirect value of means of production
and services, retained in the region
Indirect labor expenditures, retained
in the region
Induced effects
34,500
3
66,528
6
EUR/year
Share of net profit spent in region
Wage rates
50
Total indirect labor incomes, gross
50,514
Total indirect labor incomes, net
67,761
Share of net labor incomes spent in
region
465
50
No. of
jobs
1
6
Table 7-12 summaries the results of modeling the wood chips production in Bajina Bašta.
In total, 24 new jobs would be generated in case of fuel switch to wood biomass.
Table 7-12 Summary of effects of fuel switch to woody biomass in DHS on local economy in Bajina
Bašta
Bajina Bašta
Direct labor income, net (EUR)
Direct profit, net (EUR)
Total income* (EUR)
31,680
7,920
67,761
No. of direct jobs
No. of indirect jobs
No. of induced jobs
No. of total new jobs
8
9
7
24
* Total = direct + indirect
7.3.5
Mali Zvornik
Table 7-13 presents the results of our modeling of economic effects of fuel switch in DHS
on local income and employment in Mali Zvornik.
88
Effects of fuel switch to biomass on local income and employment
Table 7-13 Estimations of local income and employment effects of fuel switch to woody biomass
in DHS in Mali Zvornik
Direct effect
EUR/year
Direct labor income, gross
Wage rates
10,483
437
Direct labor income, net
7,488
312
Profit, net
1,872
Indirect effects
EUR/year
Direct value of means of production
and services, from the region
Wage rates
No. of jobs
2
No. of jobs
6,000
Multiplier
1.5
Indirect value of means of production
and services, retained in the region
Indirect labor expenditures, retained in
the region
Induced effects
9,000
1
15,725
1
EUR/year
Share of net profit spent in region
50
Total indirect labor incomes, gross
12,362
Total indirect labor incomes, net
16,318
Share of net labor incomes spent in
region
Wage rates
No. of jobs
462
50
0
1
Fossil fuel substitution with wood biomass would generate 5 new jobs in Mali Zvornik
(Table 7-14).
Table 7-14 Summary of effects of fuel switch to woody biomass in DHS on local economy in Mali
Zvornik
Mali Zvornik
Direct labor income, net (EUR)
Direct profit, net (EUR)
Total income* (EUR)
7,488
1,872
16,318
No. of direct jobs
No. of indirect jobs
No. of induced jobs
No. of total new jobs
2
2
1
5
* Total = direct + indirect
89
Effects of fuel switch to biomass on local income and employment
7.3.6
Novi Pazar
Table 7-15 presents the results of our modeling of economic effects of fuel switch in DHS
on local income and employment in Novi Pazar.
Table 7-15 Estimations of local income and employment effects of fuel switch to woody biomass
in DHS in Novi Pazar
Direct effect
EUR/year
Wage rates
No. of jobs
6
Direct labor income, gross
31248
434
Direct labor income, net
22320
310
Profit, net
Indirect effects
Direct value of means of production
and services, from the region
Multiplier
Indirect value of means of production
and services, retained in the region
Indirect labor expenditures, retained
in the region
Induced effects
5580
EUR/year
Wage rates
No. of jobs
16000
1.5
24000
2
46872
4
EUR/year
Share of net profit spent in region
50
Total indirect labor incomes, gross
35436
Total indirect labor incomes, net
Share of net labor incomes spent in
region
47631
Wage rates
No. of jobs
454
1
50
4
Table 7-16 summaries the model’s results for DHS in Novi Pazar. Biomass fueled boilers
would generate 17 new jobs in municipality of Novi Pazar (6 direct, 6 indirect and 5
induced jobs).
Table 7-16 Summary of effects of fuel switch to woody biomass in DHS on local economy in Novi
Pazar
Novi Pazar
Direct labor income, net (EUR)
Direct profit, net (EUR)
Total income* (EUR)
No. of direct jobs
No. of indirect jobs
No. of induced jobs
22,320
5,580
47,631
6
6
5
90
Effects of fuel switch to biomass on local income and employment
No. of total new jobs
17
* Total = direct + indirect
7.4 COMPARISON OF RESULTS WITH BENCHMARK CASES
Table 7-17 summaries the results of income and employment effect estimations for 6
selected municipalities. If all six selected DHS would switch from fossil fuels to wood
biomass, 33 new direct jobs would be created in wood chips industry in selected
municipalities. Total estimated number of new local jobs is 88. Thus, every direct job would
create 1.7 new indirect and induced jobs in other industries in the local economy
(estimated employment multiplier is 2.7). On the other hand, fuel switch to biomass in
selected DHS would create 114,276 Euros of new direct labor income annually, and
almost 245,000 Euros of total new labor income annually in local economies. Income
multiplier is, thus, 2.15.
Table 7-17 Summary of the results for selected municipalities
Prijepolje
Direct labor
income, net
(EUR)
Direct
profit, net
(EUR)
Total
income*
(EUR)
Priboj
Nova
Varoš
Bajina
Bašta
Mali
Zvornik
Novi
Pazar
Total
17,220
27,960
7,608
31,680
7,488
4,305
6,990
1,902
7,920
1,872
37,099
59,644
16,528
67,761
16,318
5
10
2
8
2
6
33
5
8
2
9
2
6
32
3
6
1
7
1
5
23
13
24
5
24
5
17
88
No. of
direct jobs
No. of
indirect
jobs
No. of
induced
jobs
No. of total
new jobs
* Total = direct + indirect
91
22,320 114,276
5,580
28,569
47,631 244,981
Effects of fuel switch to biomass on local income and employment
Decision makers should be aware that investments in new biomass-fueled boilers will pay
off not only because of lower fuel costs (annual savings on this basis were estimated in
previous part of the study), but also because this new income and jobs creation. This
effect is a result of induced local production of wood biomass that would be required for
biomass-fueles boilers. If old boilers are going to be replaced with new fossil-fueled
boilers, this effect would not emerge. Thus, effect on local production and job creation is
biomass – specific effect.
Figure 7-3 presents the number of new jobs that would be created in local economies in
selected municipalities if their district heating system would switch to biomass fuel instead
of fossil fuels.
30
25
20
15
10
5
0
Prijepolje
Priboj
Nova Varoš
Bajina Bašta Mali Zvornik
Novi Pazar
Figure 7-3 Estimated number of new jobs that would be created in case of fuel switch
Table 7-18 Comparison of results for Serbia, Slovenia and Croatia
Serbia
Slovenia
Croatia
(selected municipalities)
(Savinjska region)
(Karlovac district)
Direct labor income, net
(EUR/1000 m3)
Direct profit, net
(EUR/1000 m3)
Total income*
(EUR/1000 m3)
92
1,446
2,177
6,029
362
589
1,051
3,101
4,345
n.a.
Effects of fuel switch to biomass on local income and employment
No. of direct jobs
per 1000 m3
No. of indirect jobs
per 1000 m3
No. of induced jobs
per 1000 m3
No. of total new jobs
per 1000 m3
0.41
0.32
1.12
0.40
0.27
0.59
0.29
0.25
0.38
1.10
0.84
2.10
* Total = direct + indirect
In order to compare obtained results with the results of benchmark studies, estimated
cumulative impacts (for all selected municipalities together) are expressed in Euros/jobs
per 1000 m3 of wood chips produced and compared with results from Slovenia and Croatia
(Table 7-18).
In selected Serbian municipalities, one direct job is going to be created for every 2,400 m3
of wood chips produced, one indirect job for every 2,500 m3, and one induced job for every
3,500 m3 of wood chips produced. Estimated employment effects in Serbia are higher
than in Slovenia, but lower than in Croatia. Due to lower wage rates, estimated income
effects are the lowest in Serbia. It is also obvious from table 7-18 that number of new
direct jobs and direct labor income are significantly higher in Croatia than in Slovenia and
Serbia. This is a result of the fact that project in Croatia assumed planting new forests for
the purpose of wood biomass production and creation of new forest management
company. On the other hand, projects in Slovenia and Serbia are based on existing
forests, private owners, and public company Srbija Šume.
7.5 INDUCED INCOME EFFECT
Until now, we have analyzed only direct and indirect income effects that are related with
biomass production. As explained in the previous section, new jobs in local economy
regarding wood biomass production will create new income. However, total income effect
does not end here. In fact, the total fuel costs of district heating plants after fuel switch will
be spent in local economy, rather than spent for fuel imports from other regions, as is the
dominant case with fossil fuels. DHS’s spending on fuel purchase represents income for
wood chips producers. That income will be spent again by producers, partly in local
economy. The whole multiplication process will end leaving the local income increased
much more than the initial wood chips cost was. In this section, we will estimate the
induced income effect using the previously assumed multiplier (1.5) and estimated costs
of wood chips procurement by DHS in selected municipalities. Table 7-19 presents the
results.
93
Effects of fuel switch to biomass on local income and employment
Table 7-19Estimated induced local income effect of fuel switch in selected municipalities41
DHS
Prijepolje
Priboj
Nova Varoš
Bajina Bašta
Mali Zvornik
Novi Pazar
TOTAL
Annual wood chips cost
(EUR)
165,420
383,760
65,580
292,920
76,920
220,320
1,204,920
Induced income effect
(EUR)
248,130
575,640
98,370
439,380
115,380
330,480
1,807,380
Substitution of imported fossil fuels with locally produced wood biomass in DHS would
create approximately 1.8 million Euros of new income in selected municipalities.
Distribution of it by municipality is presented in Figure 7-4.
700.000
600.000
500.000
400.000
Annual wood chips cost (EUR)
300.000
Induced income effect
200.000
100.000
-
Figure 7-4Estimated induced local income effect of fuel switch in selected municipalities42
41Source:
42Source:
Own calculation
Own calculation
94
The financial value of carbon emission reduction
8.
THE FINANCIAL VALUE OF CARBON EMISSION REDUCTION
Savings in energy production costs in DHS in Serbia in case of fuel switch to biomass
would not emerge only because of lower price of fuel. Additional to that, savings could be
a result of Serbian membership in EU emissions trading system (EU ETS) when became
a EU member state. The EU emissions trading system (EU ETS) is a cornerstone of the
European Union's policy to combat climate change and its key tool for reducing industrial
greenhouse gas emissions cost-effectively.
In the process of joining the EU, power sector of the Republic of Serbia will be faced with
mandatory and financially burdensome costs of CO2 emissions. The Republic of Serbia,
as a developing country, does not have international obligations to reduce emissions of
greenhouse gases (GHG) right now, but most likely, at the time of joining the EU will be
obliged to accept the commitments regarding the limitation/reduction of GHG emissions.
I accordance with this, Strategy of energetic development of the Republic of Serbia until
2025 predicts changes in the structure of energy sources and assumes reduction of the
share of coal and liquid fuel, and increase the share of biomass and natural gas. Serbian
strategy is in line with EU strategy to ensure target share of 27% renewable energy
sources in gross final consumption by 2020.
If we assume that Serbia will become an EU member state, and thus obliged to accept
the EU GHG emission targets and EU ETS system, fuel switch to biomass would allow
DHPs in selected municipalities to achieve additional savings due to lower CO 2emission
of biomass fuels. These possible savings will be analyzed and predicted in this section.
Calculations in this study part will be based on previously determined fuel requirements
(Section 5), forecast of future CO2emission price in EU ETS system and carbon emissions
of different fuels (Table 8-1).
Table 8-1 Carbon emissions of different fuels
Approx. life cycle emissions
(including production)
Fuel
kg/GJ
Coal
HFO
Natural gas
Wood chips
kg/MWh
115
87
63
2
95
360
280
227
7
The financial value of carbon emission reduction
It is clear from data in Table 8-1 that wood chips added almost none of carbon in
atmosphere when burned, i.e. it is “carbon neutral” fuel. Carbon neutrality is a result of the
fact that carbon emitted when wood is burned is the same as carbon extracted from the
atmosphere during the growing process. Biomass fuels only release the carbon they
extracted, thus not adding any extra carbon than was already there. The only issue with
this is that there are associated carbon issues with the harvesting, processing and delivery
of the biomass fuel with carbon being used from fossil fuel sources at all points.
This does not mean that the wood fuels do not emit carbon in atmosphere when burned.
In fact, biomass-burning power plants emit 150% the CO2 of coal, and 300 – 400% the
CO2 of natural gas, per unit energy produced. The difference is that, prior to burning, wood
has absorbed the carbon from atmosphere, thus lowering the amount of CO 2, and the
wood is renewable source of energy.
Figure 8-1 Carbon neutrality of biomass
8.1 BRIEF OVERVIEW OF THE EU EMISSIONS TRADING SYSTEM (EU ETS)
The first - and still by far the biggest - international system for trading greenhouse gas
emission allowances, the EU ETS covers more than 11,000 power stations and industrial
plants in 31 countries, as well as airlines. EU ETS operates in the 28 EU countries and
the three EEA-EFTA states (Iceland, Liechtenstein and Norway). It covers around 45% of
96
The financial value of carbon emission reduction
the EU’s greenhouse gas emissions. The EU ETS is being implemented in three phases:
a pilot phase (2005–2007), a five-year commitment period (2008–2012), and an eightyear commitment period (2013–2020).The EU ETS works on the 'cap and trade' principle.
A 'cap', or limit, is set on the total amount of certain greenhouse gases that can be emitted
by the factories, power plants and other installations in the system.
The cap is reduced over time so that total emissions fall. From 2013 onwards, the cap on
emissions from power stations and other fixed installations is reduced by 1.74% every
year. This means that in 2020, greenhouse gas emissions from these sectors will be 21%
lower than in 2005. By 2030, the Commission proposes, they would be 43% lower. Within
the cap, companies receive or buy emission allowances, which they can trade with one
another as needed. They can also buy limited amounts of international credits from
emission-saving projects around the world. The limit on the total number of allowances
available ensures that they have a value. Each allowance gives the holder the right to emit
one tone of CO2, the main greenhouse gas, or the equivalent amount of two more powerful
greenhouse gases, nitrous oxide (N2O) and per fluorocarbons (PFCs).
After each year a company must surrender enough allowances to cover all its emissions,
otherwise heavy fines are imposed. If a company reduces its emissions, it can keep the
spare allowances to cover its future needs or else sell them to another company that is
short of allowances. The flexibility that trading brings ensures that emissions are cut where
it costs least to do so.
The need to purchase or draw on their reserves of allowances and credits creates a
permanent incentive for companies to reduce their emissions. However, companies can
also sell allowances and credits, for instance if they judge they have more than they are
going to need. These flexibilities in the system allow companies to choose the most costeffective options to address their emissions. The main options can be broadly summarized
as:
•
•
•
Investment in technology that is more efficient and/or a shift to less carbonintensive energy sources in order to reduce emissions;
Purchase of extra allowances or credits on the market;
A combination of the above
Allocation
The total number of permits issued (either auctioned or allocated) determines the supply
for the allowances. The actual price is determined by the market. Too many allowances
compared to demand will result in a low carbon price, and reduced emission abatement
efforts. Too few allowances will result in too high a carbon price. Whereas the vast majority
of emission allowances were previously given away free by governments, from 2013
97
The financial value of carbon emission reduction
auctioning is the main method of allocating allowances. This means that businesses have
to buy an increasing proportion of their allowances at auction.
The EU legislation sets the goal of phasing out free allocation completely by 2027.
Auctioning is the most transparent method of allocating allowances and puts into practice
the principle that the polluter should pay.
From 2013, power generators must buy all their allowances: experience shows that they
have been able to pass on the notional cost of allowances to customers even when they
received them free. However, eight of the member states which have joined the EU since
2004 - Bulgaria, Cyprus, Czech Republic, Estonia, Hungary, Lithuania, Poland and
Romania - have made use of a provision allowing them to continue granting limited
numbers of free allowances to existing power plants until 2019. In return, they will invest
at least as much as the value of the free allowances in modernizing their power sector.
Eighty-eight per cent of the allowances to be auctioned are allocated to states based on
their share of verified emissions from EU ETS installations in 2005. Ten per cent are
allocated to the least wealthy EU member states as an additional source of revenue to
help them invest in reducing the carbon intensity of their economies and adapting to
climate change. The remaining 2% is given as a ‘Kyoto bonus’ to nine EU member states
which by 2005 had reduced their greenhouse gas emissions by at least 20% of levels in
their Kyoto Protocol base year or period. These are Bulgaria, Czech Republic, Estonia,
Hungary, Latvia, Lithuania, Poland, Romania and Slovakia.
Auctions are held by companies appointed by national governments but are open to
buyers from any country participating in the EU ETS. Most governments use a common
‘platform’ for their auctions, but Germany, Poland and the UK have opted to use their own
platforms.
Under the relevant EU legislation at least half of auctioning revenues, and all of the
revenues from auctioning allowances to the aviation sector, should be used to combat
climate change in Europe or other countries. Member states are obliged to inform the
Commission of how they use the revenues. Germany, for instance, is spending a large
part of its auctioning revenues on climate change projects in developing countries and
emerging economies.
Allocation can act as a means of addressing concerns over loss of competitiveness, and
possible "leakage" (carbon leakage) of emissions outside the EU. Carbon leakage is the
term used to describe the situation that may occur if, for reasons of costs related to climate
policies, businesses transferred production to other countries that have laxer constraints
on greenhouse gas emissions. This could lead to an increase in their total emissions. The
risk of carbon leakage may be higher in certain energy-intensive industries.
98
The financial value of carbon emission reduction
EU ETS: Development in phases
Phase I
In the first phase (2005–2007), the EU ETS included some 12,000 installations,
representing approximately 40% of EU CO2 emissions, covering energy activities
(combustion installations with a rated thermal input exceeding 20 MW, mineral oil
refineries, coke ovens), production and processing of ferrous metals, mineral industry
(cement clinker, glass and ceramic bricks) and pulp, paper and board activities.
The price of allowances increased more or less steadily to a peak level in April 2006 of
about €30 per ton CO2. In late April 2006, a number of EU countries (the Netherlands, the
Czech Republic, Belgium, France, and Spain) announced that their verified (or actual)
emissions were less than the number of allowances allocated to installations. The spot
price for EU allowances dropped 54% from €29.20 to €13.35 in the last week of April 2006.
In May 2006, the European Commission confirmed that verified CO2 emissions were
about 80 million tons or 4% lower than the number of allowances distributed to installations
for 2005 emissions. In May 2006, prices fell to under €10/ton. Lack of scarcity under the
first phase of the system continued through 2006 resulting in a trading price of €1.2 per
ton in March 2007, declining to €0.10 in September 2007.
In 2007, carbon prices for the trial phase dropped to near zero for most of the year.
Meanwhile, prices for Phase II remained significantly higher throughout, reflecting the fact
that allowances for the trial phase were set to expire by 31 December 2007.
Phase II
The second phase (2008–12) expanded the scope of the scheme significantly. In 2007,
three non-EU members, Norway, Iceland, and Liechtenstein joined the scheme. The
carbon price within Phase II increased to over €20/tCO2 in the first half of 2008. The
average price was €22/tCO2 in the second half of 2008, and €13/tCO2 in the first half of
2009. CCC gave two reasons for this fall in prices:
1.
2.
Reduced output in energy-intensive sectors caused by the recession. This
means that less abatement will be required to meet the cap, lowering the carbon
price.
The market perception of future fossil fuel prices may have been revised
downwards.
Projections made in 2009 indicate that like Phase I, Phase II would see a surplus in
allowances and that 2009 carbon prices were being sustained by the need to 'bank'
allowances in order to surrender them in the tougher third phase. In December 2009,
carbon prices dropped to a six-month low after the Copenhagen climate summit outcome
99
The financial value of carbon emission reduction
disappointed traders. Prices for EU allowances for December 2010 delivery dropped 8.7%
to 12.40 Euros a ton.
In March 2012, according to the periodical Economist, the EUA permit price under the EU
ETS had "tanked" and was too low to provide incentives for firms to reduce emissions.
The permit price had been persistently under €10 per ton compared to nearly €30 per ton
in 2008. The market had been oversupplied with permits. In June 2012, EU allowances
for delivery in December 2012 traded at 6.76 Euros each on the ICE Futures Europe
exchange, a 61 percent decline compared with a year previously.
In July 2012, Thomson Reuters Point Carbon stated that it considered that without
intervention to reduce the supply of allowances, the price of allowances would fall to four
Euros. The 2012 closing price for an EU allowance with a December 2013 contract ended
the year at 6.67 Euros a metric ton. In late January 2013, the EU allowance price fell to a
new record low of 2.81 Euros after the energy and industry committee of the European
parliament opposed a proposal to withhold 900 million future-dated allowances from the
market.
Phase III
For Phase III (2013–20), the European Commission has proposed a number of changes,
including:
•
•
•
•
the setting of an overall EU cap, with allowances then allocated to EU
members;
tighter limits on the use of offsets;
limiting banking of allowances between Phases II and III;
and a move from allowances to auctioning
Ahead of its accession to the EU, Croatia joined the ETS at the start of Phase III on 1
January 2013. This took the number of countries in the EU ETS to 31. On 4 January 2013,
European Union allowances for 2013 traded on London's ICE Futures Europe exchange
for between 6.22 Euros and 6.40 Euros.
100
The financial value of carbon emission reduction
Figure 8-2 Price per metric ton of CO2 (2005-2015)
8.1.1
Fuel consumption in district heating plants in Serbia –strategic targets
According to Energy balances of the Republic of Serbia, over 99.5% of thermal energy in
Serbia is produced by direct use of fossil fuel (Figure 9-3). Total energy input in DHPs in
Serbia (approximately 25,000 TJ annually) is mainly from natural gas (75%), followed by
oil products (13%) and coal (12%). According to the Strategy of energetic development of
the Republic of Serbia until 2025, target changes in the structure of energy sources in this
sector assumes reduction of the share of coal and liquid fuel (fuel oil and heating oil), and
increase the share of biomass and natural gas. The primary resource required for making
the shift to a renewable, affordable and sustainable fuel – biomass – is abundantly and
locally available. Different sources estimates Serbian biomass energy potential to over
100,000 GJ annually, which is more than 4 times higher than total energy input of all
Serbian district heating systems.
101
The financial value of carbon emission reduction
20.000
80
74,7
18.000
70
16.000
60
14.000
50
12.000
TJ 10.000
40 %
8.000
30
6.000
20
13,3
4.000
11,7
10
2.000
0,3
0
0
natural gas
oil and oil products
coal
wood fuels
Figure 8-3 Serbian district heating plants energy inputs by fuel type43
Target change in the structure of energy sources in this sector is necessary, not only
because of the requirements related to the protection of the environment and in order to
ensure target share of 27% renewable energy sources in gross final consumption by 2020,
but also because this sector concerns the EU scheme for emissions trading.
In the process of joining the EU, power sector of the Republic of Serbia will be faced with
mandatory and financially burdensome costs of CO2 emissions. The Republic of Serbia,
as a developing country, does not have international obligations to reduce emissions of
greenhouse gases (GHG), but most likely, at the time of joining the EU will be obliged to
accept the commitments regarding the limitation/reduction of GHG emissions. Projected
changes in the structure of energy sources for electricity generation, the withdrawal of old
and inefficient plants, commissioning of new and efficient lignite-fired power and reducing
losses in distribution and transmission will lead to significantly lower GHG emissions from
this sector. However, still high share of coal in production will require significant
preparation to companies in power sector for implementing EU ETS Scheme.
43Source:
Energy balances 2013, STATISTICAL OFFICE OF THE REPUBLIC OF SERBIA
102
The financial value of carbon emission reduction
8.1.2
Forecast of EU ETC CO2 price
In order to estimate potential savings of fuel switch to biomass, if Serbia becomes a
member state of EU and EU ETS system, we have to predict the future prices of
CO2emission allowances (EUA). Analysis of market trends and developments lead us to
CO2 price forecast presented in Table 8-2.
Table 8-2 Price of CO2 emission allowance in EU, forecast
Year
EUA price (€/t)
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
10.8 9.9
10
11.2 11.9 15.3 19.8 25.7 29.1 31.5
It is expected that a price per metric ton of CO2 will increase in the next ten years, form
approximately 11 to 31 Euros in 2025. Relatively steadily, price until 2020 will be followed
by sharp increase. Carbon price, which will be more than tripled in the next ten years, will
have a strong financial effect for Serbian DHSs, in case of Serbian membership in EU and
EU ETS system.
8.1.3
Carbon emission decrease and financial effects in selected district
heating systems
Due to significantly lower carbon emission of wood fuels compared to fossil fuels, fuel
switch in selected district heating systems would lead to significant reduction in CO 2
released in the atmosphere. Table 8-3 compares the annual carbon emissions with fossil
fuels and with wood chips as a fuel for selected DHS.
Table 8-3 Carbon emission of fossil fuels and wood chips in selected DHS
Annual CO2 emission (in kg)
MWh/a
Fossil fuels
Prijepolje
Priboj
Nova Varoš
Bajina Bašta
Mali Zvornik
Novi Pazar
Total
10,695
20,627
3,625
18,023
4,116
12,759
69,845
3,160,947
5,775,455
1,014,878
5,525,284
934,241
3,572,471
19,983,276
Woodchips
74,863
144,386
25,372
126,159
28,809
89,312
488,901
Annual CO2 emission
reduction
(in kg)
3,086,084
5,631,069
989,506
5,399,125
905,432
3,483,159
19,494,375
Total CO2 emission in six observed DHS is approximately 20,000 metric tons per year. If
the wood chips would be used, annual emission would be only 490 metric tons, i.e. more
than 40 times lower. Reduction in carbon emission would be as high as about 19,500 tons.
103
The financial value of carbon emission reduction
Figure 8-4 provides the graphical presentation of comparison of carbon emissions in
selected municipalities in case of fossil fuel usage and in case of wood chips usage as a
fuel in heating plants.
7.000.000
6.000.000
5.000.000
4.000.000
Annual CO2 emission (in kg)
Fossil fuels
3.000.000
Annual CO2 emission (in kg)
Woodchips
2.000.000
1.000.000
0
Prijepolje Priboj
Nova
Varoš
Bajina
Bašta
Mali
Zvornik
Novi
Pazar
Figure 8-4 Annual carbon emission in selected DHS (comparison of fossil fuels and wood
biomass)44
Right now, there are no financial penalties for carbon (and GHG) emission in Serbia.
However, if Serbia will become the member of EU and, thus, be obliged to ETS rules,
financial value will be given to carbon emission.
Table 8-4 Values of carbon emission reduction in case of fuel switch (in Euros)45
Year
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
44Source:
45Source:
Prijepolje
33,330
30,552
30,861
34,564
36,724
47,217
61,104
79,312
89,805
97,212
Priboj
Nova Varoš Bajina Bašta
60,816
10,687
58,311
55,748
9,796
53,451
56,311
9,895
53,991
63,068
11,082
60,470
67,010
11,775
64,250
86,155
15,139
82,607
111,495
19,592
106,903
144,718
25,430
138,758
163,864
28,795
157,115
177,379
31,169
170,072
Own calculation
Own calculation based on EU ETS membership of Serbia
104
Mali Zvornik Novi Pazar
9,779
37,618
8,964
34,483
9,054
34,832
10,141
39,011
10,775
41,450
13,853
53,292
17,928
68,967
23,270
89,517
26,348
101,360
28,521
109,720
The financial value of carbon emission reduction
Total
540,682 986,563
173,361
945,927
158,632
610,249
Based on CO2 price forecast (section 8.3), we have calculated the financial value of
carbon emission reduction in case of fossil fuels substitution with biomass (Table 8-4 and
Figure 8-5). These amounts could be treated as additional savings to DHPs in case of fuel
switch.
Financial value of carbon emission reduction would increase from 33,330 in 2016 to
97,212 Euros in 2025 in DHS Prijepolje. For next ten years, financial value would be more
than 540,000 Euros. Total savings in Priboj would be more than 986,000 Euros, more than
173,000 Euros in Nova Varoš, more than 945,000 Euros in Bajina Bašta, more than
158,000 Euros in Mali Zvornik and more than 610,000 in Novi Pazar! It is more than
obvious that these financial effects would be a significant savings in total energy
production costs, and that effect of carbon emission reduction could not be overlooked by
decision makers when considering fuel switch effects.
200.000
180.000
160.000
140.000
Prijepolje
120.000
Priboj
100.000
Nova Varoš
80.000
Bajina Bašta
Mali Zvornik
60.000
Novi Pazar
40.000
20.000
0
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
Figure 8-5 Values of carbon emission reduction in case of fuel switch (in Euros)
105
Concluding remarks
9.
CONCLUDING REMARKS
Over 99% of thermal energy in Serbia is produced from fossil fuels. However, there are
appealing economic, social and environmental benefits from a change in favor of greater
participation of biomass as a fuel in district heating systems. Substitution of fossil fuels
with locally produced biomass is in accordance with the Strategy of energetic development
of the Republic of Serbia until 2025, which assumes reduction of the share of coal and
liquid fuel, and increase the share of biomass and natural gas.
Substitution of fossil fuels with biomass in district heating systems would lead to economic
benefits for:



district heating plants, in form of lower costs of fuel and thus lower cost of
produced heating energy,
local economy, in terms of new jobs and income created in biomass supply
chain, due to the fact that biomass is generally locally produced, in contrast with
fossil fuels which are dominantly imported from other regions or countries, and
national economy, in terms of reduction of trade deficit and import dependency
Other than financial, fuel switch to biomass would also create important social benefits (in
terms of unemployment reduction) and ecological benefits (lower greenhouse gases
emission). Latter also has its financial value, bearing at mind that EU regulations puts
financial fee to carbon dioxide emitted to the atmosphere in various sectors including
district heating systems.
Bearing at mind all of the above, policymakers should have a broad picture of various
effects before making the final decision regarding fuel that will be used in production of
heating energy. The objective of this study was to examine the key economic determinants
of such decision. Study was conducted in six selected municipalities: Prijepolje, Priboj,
Nova Varoš, Bajina Bašta, Mali Zvornik and Novi Pazar.
The most important determinant of decision to substitute fossil fuels with biomass is the
final cost of produced thermal energy (€/kWh) provided for the district heating grid, which
is the lowest in the case of wood biomass (compared to coal, gas and heavy oil). A unit of
heating energy delivered to consumers (MWh) has the highest fuel cost if it is produced
with heavy fuel oil (55.94 Euros). One MWh of energy produced with natural gas has fuel
cost of 51.61 Euros. If produced with combustion of coal, one MWh of heating energy has
fuel cost of 26.49 Euros. If the wood chips were used instead of fossil fuels, fuel cost of
one MWh would be only 20.32 Euros per MWh. Thus, even with current market prices of
fuels (and historically low prices of oil derivates and natural gas), there are financial
incentives to substitute fossil fuels with biomass in district heating systems in Serbia.
106
Concluding remarks
Financial benefits will be even higher in near future, as fossil fuels price is expected to
grow in next ten years. The costs of fossil fuels, compared to cost of biomass, could
become higher in the following years not only as a result of market trends, but also as a
result of implementation of EU greenhouse gases emission regulations in Serbia.
Apart from this aspect, substitution of fossil fuels with locally produced wood biomass will
create significant employment and income effects in local economies. These
macroeconomic effects should be of great importance for local governments in selected
municipalities, bearing at mind high unemployment rate and income per capita below
Serbian average. Total employment and income effect consists of direct, indirect and
induced effects. The adopted BIOSEM model was used in this study to estimate these
effects. BIOSEM is widely used for modeling of biomass usage effects on local economy.
The BIOSEM model is a result of the FAIR Program of DG IV under the European
Commission’s Fifth Framework Program. It is a quantitative economic model to capture
the income and employment effects arising from the deployment of bio-energy plants in
rural communities. Using a traditional Keynesian Income Multiplier approach, the BIOSEM
technique makes predictions about the income and employment effects arising from the
installation of a bio-energy plant and production of bio-fuels. Because such adopted
BIOSEM models are very often used in similar studies across Europe, results of this study
are comparable to results of a number of bio-energy projects done in Europe and region.
We have estimated that fuel switch to biomass would create 88 new jobs in all selected
municipalities (33 direct, 32 indirect and 23 induced). These new jobs are related to local
production of wood chips that will be demanded by district heating plants. If compared
with similar studies, employment creation effect in Serbia (1.10 new jobs per 1,000 m3 of
wood chips) is higher than in Slovenia (0.84), and lower than in Croatia (2.1).
Although district heating plants in selected municipalities would spent annually
approximately 1.2 millions of Euros in sum for wood chips purchase (expressed in current
prices), total induced local income effect would be 1.8 millions of Euros per year. Together
with 88 new jobs, we should say that this is the true economic value of the project from
the standpoint of local governments.
On the other hand, this project has its value from the standpoint of national economy, as
well. In case of substitution of fossil fuels with wood chips in six selected district heating
systems, national trade account would be improved for over 2 million Euros, and Serbian
import dependency would be slightly lower. If the participation of renewable energy
sources in gross final energy consumption in Serbian district heating plants would be 27%,
as targeted in the Strategy of energetic development of the Republic of Serbia until 2025,
trade deficit of Serbia can be lowered for more than 80 million Euros per year. This would
be the contribution only from the district heating systems. The study results will be
presented byeach municipality that was analyzed.
107
Concluding remarks
Bajina Bašta
The district heating plants in Bajina Bašta (“Gradska toplana” and “Školska toplana”) use
around 1,110 tons of coal and 1,056 of heavy fuel oil per one heating season. This amount
of fuel costs approximately 683,352 Euros (VAT included). When comparing this
consumption of fossil fuels to potential usage of wood chips in this municipality, Bajina
Bašta would require around 4,882 tons of this woody biomass in order to achieve same
energy output per season (51,875 GJ). However, the projected costs of biomass heating
would reach no more than 292,920 Euros, which is 390,432 Euros in cost savings per
year. If we take into account that there are expectations regarding increase in fossil fuel
prices in the next period relative to wood biomass price, than in ten years the savings in
fuel costs would account for 5,425,206Euros (2015-2024). The net present value of this
saving is 13,372,784.77 Euros, which justifies the estimated investment of 2 million Euros
for new boilers procurement and heating network adaptations.
When analyzing the impact of switching to wood biomass, the impact on the local
municipality economy is significant (provided the biomass be produced in the municipality
area). With locally produced wood chips 24 new jobs will be created and 67,761Euros of
new local income annually in Bajina Bašta. After switching to biomass heating system,
annual CO2 emission would decrease in Bajina Bašta for 5.400 tones. Right now, there
are no financial penalties for carbon (and GHG) emission in Serbia. However, if Serbia
will become the member of EU and, thus, be obliged to ETS rules, financial value will be
given to carbon emission. Based on current CO2 price in EU and forecast for the next ten
years (2016-2025), the financial value of this emission reduction would be 58,311 Euros
in 2016 and 945,927Euros in the course of the next ten years.
Nova Varoš
When it comes to DHPs in Nova Varoš, they use around 318 tons of heavy fuel oil per
season. This amount of heavy fuel oil costs approximately 172,356 Euros (VAT included).
On the other hand, if Nova Varoš switches to wood chips in its DHPs, the heating season
would require around 1,043 tons of woody biomass in order to achieve same energy
output per season (11,082 GJ). In terms of projected costs of biomass heating, they would
be 62,580 Euros, which is more than 100,000 Euros in cost savings per year. If we take
into account that there are expectations regarding increase in fossil fuel prices in the next
period relative to wood biomass price, than in ten years the savings in fuel costs would
account for 1,533,417Euros (2015-2024). The net present value of this saving is over
2,322,296.38 Euros.
Regarding the impact of switching to wood biomass on local economy, this impact is
significant if the required biomass is produced in the municipality. This would generate 5
new jobs and 16,528Euros of new local income annually. After switching to biomass
heating system, annual CO2 emission would decrease in Nova Varoš for almost 1,000
108
Concluding remarks
tones. Based on current CO2 price in EU and forecast for the next ten years (2016-2025),
the financial value of this emission reduction would be 10,687Euros in 2016 and
173,361Euros in the following ten years.
Priboj
The annual consumption of local heating plants in Priboj consists of 1,950 tones of heavy
fuel oil, which costs the municipality 1,056,900 Euros (including VAT). If the municipality
heating system transfer to wood biomass (wood chips), this cost would decrease to
383,760 Euros per year. This is the cost of heating when aiming to reach the same energy
output, which is 67,957 GJ per year. In other words, the costs of biomass heating would
account for just the third of the costs of fossil fuel heating. With expectations of fossil fuel
prices increase in the next period, ten savings in fuel costs would be 9,402,876Euros
(2015-2024). The net present value of the cumulative saving is 23 million Euros, which
more than justifies the estimated investment in new boilers and heating network
adaptations.
Used BIOSEM model concludes that substitution of fossil fuels with locally produced wood
chips would generate 24 new jobs and 59,644Euros of new local income annually in Priboj
municipality. In addition, annual emission of CO2 would decrease for around 5,600 tones.
Based on current CO2 price in EU and forecast for the next ten years (2016-2025), the
financial value of this emission reduction would be 60,816Euros in 2016 and
986,563Euros in sum for the next ten years.
Prijepolje
Local district heating plant in Prijepolje uses approximately 445 tons of coal and 650 tones
of heavy fuel oil in average per heating season, with total annual fuel costs of about
396,800 Euros (with included VAT). If wood chips were going to be used instead, the
amount of 2,757 tones would be required for the same energy output (29,300 GJ per
year). Biomass cost would be 165,420 Euros, i.e. 231,380 Euros less than fossil fuel cost.
Bearing in mind expectations that fossil fuel prices will increase in the next period relative
to wood biomass price, ten years decrease (savings) in fuel costs would be 3,268,323
Euros (2015-2024). The net present value of this saving is 7.2 million Euros, which more
that justifies the estimated investment of 2 million Euros for new boilers procurement and
heating network adaptations.
BIOSEM modeling suggests that substitution of fossil fuels with locally produced wood
chips would generate 13 new jobs and 37,099 Euros of new local income annually in
Prijepolje. As the result of making fuel switch to biomass, annual CO2 emission would
decrease in Prijepolje for more than 3,000 tones. Based on current CO2 price in EU and
109
Concluding remarks
forecast for the next ten years (2016-2025), the financial value of this emission reduction
would be 33,330 Euros in 2016 and 540,682Euros in sum for the next ten years.
Mali Zvornik
Local district heating plants in Mali Zvornik uses natural gas as the heating agent. Those
DHPs consume approximately 442,000 m3 of natural gas on average per one heating
season, with total annual fuel costs of about 195,364 Euros (with included VAT). If
switched to wood chips, the amount of 1,282 tones would be required for the same energy
output (13,620 GJ per year). Biomass cost would be 76,920 Euros or 118,444 Euros less
than natural gas cost. With reasonable expectations that fossil fuel prices will increase in
the next period when compared to wood biomass price, ten years decrease in fuel costs
would be 1,675,743 Euros (2015-2024). The net present value of this cost savings would
be around 2.7 million Euros.
The BIOSEM model predicts that substitution of natural gas with locally produced wood
chips would generate 5 new jobs and 16,318 Euros of new local income annually. As the
result of making fuel switch to biomass, annual CO2 emission would also decrease in Mali
Zvornik for more than900 tones. Based on current CO2 price in EU and forecast for the
next ten years (2016-2025), the financial value of this emission reduction would be
9,779Euros in 2016 and 158,632 Euros in the next ten years.
Novi Pazar
The DHPs in the municipality of Novi Pazar (“Centralna”, “Lug”, and “Bor””) use around
1,119 tons of heavy fuel oil per one season. The annual costs of used heavy fuel oil are
606,498 Euros (VAT included). When comparing this consumption of heavy fuel oil to
potential usage of wood chips in this municipality, Novi Pazar would need 3,672 tons of
wood chips in order to gain the same energy output per season (39,011 GJ). The projected
costs of biomass heating would reach only 220,320 Euros, which is 386,178 Euros in
annual cost savings. If we take into account that there are expectations regarding increase
in fossil fuel prices in the next period relative to wood biomass price, than in ten years the
savings in fuel costs would account for 5,394,754 Euros (2015-2024). The net present
value of this saving is 13,205,288.70 Euros, which justifies the estimated initial investment
in new boilers procurement and heating network adaptations.
When applying BIOSEM modeling, the projected impact on local municipality economy is
evident (in case the biomass is produced in Novi Pazar area). With locally produced wood
chips,17 new jobs will be created as well as 47,631Euros of new local income annually.
After switching to biomass heating system, annual CO2 emission would decrease in Novi
Pazar for around 3.500 tones. Based on current CO2 price in EU and forecast for the next
ten years (2016-2025), the financial value of this emission reduction in Novi Pazar would
be 37,618 Euros in 2016 and total of 610,249 Euros in the following ten-year period.
110
List of tables
10.
LIST OF TABLES
Table 2-1 District heating plants energy inputs and outputs ......................................................................................... 6
Table 2-2 District heating plants energy inputs by fuel type .......................................................................................... 6
Table 4-1 General information about the Zlatibor district ........................................................................................... 15
Table 4-2 Demographic tendencies in Zlatibor district ................................................................................................. 16
Table 4-3 Economic activity of Zlatibor district ............................................................................................................ 16
Table 4-4 Comparison between republic, district, and municipal level, Bajina Bašta .................................................. 17
Table 4-5 Demographics of Bajina Bašta ..................................................................................................................... 17
Table 4-6 Number of employed and unemployed ........................................................................................................ 18
Table 4-7 Average income excluding taxes .................................................................................................................. 18
Table 4-8 Budget revenues and expenditures, 2013 (EUR) .......................................................................................... 19
Table 4-9 General data about Nova Varoš ................................................................................................................... 20
Table 4-10 Demographics of Nova Varoš ..................................................................................................................... 20
Table 4-11 Economic activity in Nova Varoš, 2013 ...................................................................................................... 20
Table 4-12 Average income excluding taxes, 2009 and 2013 ...................................................................................... 21
Table 4-13 Budget revenues and expenditures, 2013 .................................................................................................. 21
Table 4-14 General data about Priboj .......................................................................................................................... 22
Table 4-15 Demographics of Priboj .............................................................................................................................. 23
Table 4-16 Economic activity in Priboj in 2013 ............................................................................................................. 23
Table 4-17 Average income excluding taxes in Priboj (2009 and 2013) ....................................................................... 24
Table 4-18 Budget revenues and expenditures in Priboj, 2013 .................................................................................... 24
Table 4-19 General data about Prijepolje .................................................................................................................... 25
Table 4-20 Demographics data on Prijepolje ............................................................................................................... 25
Table 4-21 Economic activity in Prijepolje in 2013 ....................................................................................................... 26
Table 4-22 Average income excluding taxes in Prijepolje in 2009 and 2013 ................................................................ 26
Table 4-23 Budget revenues and expenditures of Prijepolje in 2013 ........................................................................... 26
Table 4-24 General information about Mačva district ................................................................................................. 28
Table 4-25 Demographic tendencies in Mačva district ................................................................................................ 28
Table 4-26 Economic activity of Mačva district ............................................................................................................ 29
Table 4-27 General data about Mali Zvornik ............................................................................................................... 29
Table 4-28 Demographics of Mali Zvornik ................................................................................................................... 29
Table 4-29 Economic activity in Mali Zvornik in 2013 .................................................................................................. 30
Table 4-30 Average income excluding taxes in Mali Zvornik in 2009 and 2013 ........................................................... 30
Table 4-31 Budget revenues and expenditures in Mali Zvornik, 2013 ......................................................................... 31
Table 4-32 General data about Raška district .............................................................................................................. 32
Table 4-33 Demographic tendencies in Raška district.................................................................................................. 33
Table 4-34 Economic activity of Raška district ............................................................................................................. 33
Table 4-35 General data about Novi Pazar .................................................................................................................. 34
Table 4-36 Demographics on Novi Pazar ..................................................................................................................... 34
Table 4-37 Economic activity in Novi Pazar in 2013 ..................................................................................................... 35
Table 4-38 Average income excluding taxes in Novi Pazar in 2009 and 2013 ............................................................. 35
Table 4-39 Budget revenues and expenditures in Novi Pazar in 2013 ......................................................................... 36
Table 5-1 Net calorific values and energy density of selected fuels ............................................................................. 38
111
List of tables
Table 5-2 Heating plants in Bajina Bašta - main characteristics .................................................................................. 39
Table 5-3 Calculation of DHP energy output in Bajina Bašta ....................................................................................... 39
Table 5-4 Calculation of wood biomass required for fuel switch in Bajina Bašta ........................................................ 40
Table 5-5 Boiler stations Nova Varoš - main characteristics ........................................................................................ 41
Table 5-6 Calculation of DHP energy output in Nova Varoš (plants Branoševac and Posta only) ............................... 41
Table 5-7 Calculation of wood biomass required for fuel switch in Nova Varoš (plants Branoševac and Posta only) . 42
Table 5-8 Heating plant PC “Toplana Priboj” - main characteristics ............................................................................ 42
Table 5-9 Calculation of DHP energy output in Priboj .................................................................................................. 43
Table 5-10 Calculation of wood biomass required for fuel switch in Priboj ................................................................. 43
Table 5-11 Heating plant PC “Lim” main characteristics ............................................................................................. 44
Table 5-12 Table 5.3: Calculation of DHP energy output in Prijepolje.......................................................................... 45
Table 5-13 Calculation of wood biomass required for fuel switch in DHS in Prijepolje ................................................ 45
Table 5-14 Main characteristics of boiler in district heating system at Mali Zvornik ................................................... 46
Table 5-15 Calculation of DHP energy output in Mali Zvornik ..................................................................................... 47
Table 5-16 Calculation of wood biomass required for fuel switch in Mali Zvornik ....................................................... 47
Table 5-17 Main characteristics of heating plant PC “Gradska toplana”..................................................................... 48
Table 5-18 Calculation of DHP energy output in Novi Pazar (plant Centralna only) .................................................... 49
Table 5-19 Calculation of wood biomass required for fuel switch (plant Centralna only) ........................................... 49
Table 5-20 Available woody biomass and its energy potential in selected municipalities ........................................... 50
Table 5-21 Wood biomass required for DHS fuel switch .............................................................................................. 51
Table 5-22 Comparison of wood biomass potential and requirements for DHS fuel switch ........................................ 51
Table 5-23 Exports, imports and balance of Serbian trade of fossil fuels (in millions Euros) ....................................... 54
Table 5-24 Fossil fuel usage per year in Serbian district heating systems.................................................................... 55
Table 5-25 Quantities of fossil fuels used in selected district heating systems ............................................................ 55
Table 6-1 Fuel prices in Serbia in 2015 ......................................................................................................................... 57
Table 6-2 Fuel prices in Serbia (in Euros), forecast ....................................................................................................... 61
Table 6-3 Fuel cost (annual and per energy output unit) in DHS in Bajina Bašta ......................................................... 62
Table 6-4 Fuel cost (annual and per energy output unit) in DHS in Nova Varoš .......................................................... 62
Table 6-5 Fuel cost (annual and per energy output unit) in DHS in Priboj ................................................................... 63
Table 6-6 Fuel cost (annual and per energy output unit) in DHS in Prijepolje .............................................................. 63
Table 6-7 Fuel cost (annual and per energy output unit) in DHS in Mali Zvornik ......................................................... 64
Table 6-8 Fuel cost (annual and per energy output unit) in DHS in Novi Pazar............................................................ 64
Table 6-9 Estimation of savings in fuel costs in next ten years, DHS Bajina Bašta ....................................................... 66
Table 6-10 Estimation of savings in fuel costs in next ten years, DHS Nova Varoš ...................................................... 67
Table 6-11 Estimation of savings in fuel costs in next ten years, DHS Priboj ............................................................... 68
Table 6-12 Estimation of savings in fuel costs in next ten years, DHS Prijepolje .......................................................... 69
Table 6-13 Table 6.13: Estimation of savings in fuel costs in next ten years, DHS Mali Zvornik .................................. 70
Table 6-14 Estimation of savings in fuel costs in next ten years, DHS Novi Pazar ....................................................... 71
Table 6-15 NPV and IRR of investments in biomass ..................................................................................................... 73
Table 7-1 Model description ......................................................................................................................................... 77
Table 7-2 An estimate of the employment effect of forest chips production in Finland by 2010 ................................. 81
Table 7-3 Estimated income and employment effects of wood biomass production in Savinjska valley (Slovenia) and
Karlovac district (Croatia) ............................................................................................................................................ 82
Table 7-4 Income and employment effects of wood biomass production in Savinjska valley (Slovenia) and Karlovac
district (Croatia) pre 1000 m3 of wood biomass .......................................................................................................... 83
112
List of tables
Table 7-5 Estimations of local income and employment effects of fuel switch to woody biomass in DHS in Prijepolje
..................................................................................................................................................................................... 84
Table 7-6 Summary of effects of fuel switch to woody biomass in DHS on local economy in Prijepolje ...................... 84
Table 7-7 Estimations of local income and employment effects of fuel switch to woody biomass in DHS in Priboj .... 85
Table 7-8 Summary of effects of fuel switch to woody biomass in DHS on local economy in Priboj ............................ 86
Table 7-9 Estimations of local income and employment effects of fuel switch to woody biomass in DHS in Nova Varoš
..................................................................................................................................................................................... 86
Table 7-10 Summary of effects of fuel switch to woody biomass in DHS on local economy in Nova Varoš................. 87
Table 7-11 Estimations of local income and employment effects of fuel switch to woody biomass in DHS in Bajina
Bašta ............................................................................................................................................................................ 87
Table 7-12 Summary of effects of fuel switch to woody biomass in DHS on local economy in Bajina Bašta ............... 88
Table 7-13 Estimations of local income and employment effects of fuel switch to woody biomass in DHS in Mali
Zvornik .......................................................................................................................................................................... 89
Table 7-14 Summary of effects of fuel switch to woody biomass in DHS on local economy in Mali Zvornik ............... 89
Table 7-15 Estimations of local income and employment effects of fuel switch to woody biomass in DHS in Novi
Pazar ............................................................................................................................................................................ 90
Table 7-16 Summary of effects of fuel switch to woody biomass in DHS on local economy in Novi Pazar .................. 90
Table 7-17 Summary of the results for selected municipalities .................................................................................... 91
Table 7-18 Comparison of results for Serbia, Slovenia and Croatia ............................................................................. 92
Table 7-19 Estimated induced local income effect of fuel switch in selected municipalities ....................................... 94
Table 8-1 Carbon emissions of different fuels .............................................................................................................. 95
Table 8-2 Price of CO2 emission allowance in EU, forecast ........................................................................................ 103
Table 8-3 Carbon emission of fossil fuels and wood chips in selected DHS ................................................................ 103
Table 8-4 Values of carbon emission reduction in case of fuel switch (in Euros) ....................................................... 104
113
List of figures
11.
LIST OF FIGURES
Figure 2-1 Projection of changes in the structure of energy sources for heat generation in Serbia .............................. 7
Figure 3-1The research model implemented in the study ............................................................................................ 13
Figure 4-1 Zlatibor district ............................................................................................................................................ 15
Figure 4-2 The position of Bajina Bašta........................................................................................................................ 17
Figure 4-3 The position of Nova Varoš ......................................................................................................................... 19
Figure 4-4 The location of Priboj municipality .............................................................................................................. 22
Figure 4-5 Location of Prijepolje municipality .............................................................................................................. 25
Figure 4-6 The location of Mačva district ..................................................................................................................... 27
Figure 4-7 The location of Mali Zvornik ........................................................................................................................ 29
Figure 4-8 The location of Raška district ...................................................................................................................... 32
Figure 4-9 The location of Novi Pazar .......................................................................................................................... 34
Figure 5-1 Boilers in Nova Varoš .................................................................................................................................. 40
Figure 5-2 Boilers in Priboj ........................................................................................................................................... 42
Figure 5-3 Boiler station in Prijepolje (Valter) .............................................................................................................. 44
Figure 5-4 Boiler station in Novi Pazar ......................................................................................................................... 48
Figure 5-5 Woody biomass potential vs. demand ........................................................................................................ 52
Figure 5-6 Wood biomass producer in Serbia .............................................................................................................. 53
Figure 6-1 Crude oil, price forecast .............................................................................................................................. 58
Figure 6-2 Coal, Australian, price forecast ................................................................................................................... 59
Figure 6-3 Wood chips, price forecast .......................................................................................................................... 59
Figure 6-4 Price indices for different fuels (forecast), 2015 base year ......................................................................... 60
Figure 6-5 Fuel prices in Serbia (in Euros), forecast ...................................................................................................... 60
Figure 6-6 Fuel cost per energy output for different fuels(Note: all these costs are based on current fuel prices in
Serbia, see Table 7-2) ................................................................................................................................................... 65
Figure 6-7 Fuel costs estimation for ten years, DHS Bajina Bašta ................................................................................ 67
Figure 6-8 Fuel costs estimation for ten years, DHS Nova Varoš ................................................................................. 68
Figure 6-9 Fuel costs estimation for ten years, DHS Priboj ........................................................................................... 69
Figure 6-10 Fuel costs estimation for ten years, DHS Prijepolje ................................................................................... 70
Figure 6-11 Fuel costs estimation for ten years, DHS Mali Zvornik .............................................................................. 71
Figure 6-12 Fuel costs estimation for ten years, DHS Novi Pazar ................................................................................. 72
Figure 6-13 The NPV of cost savings across municipalities .......................................................................................... 74
Figure 6-14 IRR of projected cost savings across municipalities .................................................................................. 74
Figure 7-1 Biomass fuel supply chains for solid bio-fuel ............................................................................................... 76
Figure 7-2Employment impact of wood biomass production in Finland ...................................................................... 80
Figure 7-3 Estimated number of new jobs that would be created in case of fuel switch ............................................. 92
Figure 7-4Estimated induced local income effect of fuel switch in selected municipalities ......................................... 94
Figure 8-1 Carbon neutrality of biomass ...................................................................................................................... 96
Figure 8-2 Price per metric ton of CO2 (2005-2015) .................................................................................................. 101
Figure 8-3 Serbian district heating plants energy inputs by fuel type ........................................................................ 102
Figure 8-4 Annual carbon emission in selected DHS (comparison of fossil fuels and wood biomass) ........................ 104
Figure 8-5 Values of carbon emission reduction in case of fuel switch (in Euros) ...................................................... 105
114
List of abbreviations
12.
LIST OF ABBREVIATIONS
BE - Boiler Efficiency, 37
BIOSEM - Biomass Socio-Economic Multiplier model, 13
BQ - Biomass Quantity, 37
CHP - Combined heat and power plants, 8
CO2 - Carbon dioxide, 5
DHP - District heating plants, 8
DHS - District heating systems, 4
DKTI GIZ Program - The program “Development of a Sustainable Bioenergy Market in
Serbia", 49
EEA European Economic Area, 93
EFTA - European Free Trade Association, 93
EU - European Union, 5
EU ETS - EU emissions trading system, 92
EUA - Emission allowances, 100
EUR - Euro, Euros, 6
FQ - Fuel Quantity, 37
GDP - Gross domestic product, 13
GHG - Greenhouse gases, 92
GJ - Gigajoules, 7
HEO - Heat energy output, 37
HFO - Heavy fuel oil, 38
IRR - Internal rate of return, 70
KJ - Kilojoules, 37
KWh - Kilowatt per hour, 37
l.m. = loose meter, 38
MW - Megawatt, 38
N2O - Nitrous oxide, 94
NCV - Net Calorific Value, 37
NPV - Net present value, 70
PC - Public company, 39
PFCs - Per fluorocarbons, 94
RES - Renewable energy sources, 7
RSD - Serbian dinar (currency), 18
TJ - Terajoules, 6
115
References
13.
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concept of district heating supply with woody biomass (wood chips) in the
municipalities of Prijepolje and Mali Zvornik”, DKTI GIZ study
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price algorithm model and price index of wood chips and (II) data collection and
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used for heat production in Serbia”, DKTI GIZ study
5. Domac J. 2001. The contribution of bioenergy systems on a national level—case
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6. Domac J. Socio-economic consequences of biomass utilization. Social Ecology
Scientific Journal 3, Zagreb, 2002. p. 171–83.
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Institute, Metla
8. EUBIA – the European Biomass Industry Association
9. Glavolljić B., Petrović Slavica, Savić R., Radović Stana, Jović D., Sretenović P.,
Pajović Ljiljana. M 2009. Potencijali i mogućnosti komercijalnog korišćenja drvne
biomase za proizvodnju energije i ekonomski razvoj opština Nova Varoš, Priboj i
Prijepolje, Šumarski fakultet, Beograd
10. IEA Bioenergy, 2002. Socio-economic aspects of bioenergy systems: Issues ahead,
Task 29, Socio-Economic Aspects of Bioenergy Systems, Cavtat-Dubrovnik, Croatia
11. Kairiûkðtis, L., Jaskelevièius, B., Saladis, J. 2004. Socio-Economic and
Environmental Effects of Wood Fuel Use in Lithuania. Baltic Forestry, 11 (1): 2.12
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13. Lasse Okkonen, 2005. WOODFUELS AND THE LOCAL ECONOMY, Northern
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117
Appendices
14.
APPENDICES
Appendix 1: Adopted BIOSEM model equations
The following formulas are used for the calculation of direct, indirect and induced jobs:
Jdir =
VJdir r+
Pg
Pg = average wage in forestry
Pr+= Sp- Ss
Pr+ = The average annual income from biomass manufacturing
Spr+ = Total annual revenue from the manufacture of wood biomass
Ssr+ = The total cost of the production of biomass
m1 =
1
VJ
1-( S dir )
pr+
m1 = multiplier
Wr = The weighted value of labor cost - according to the proportion, that comes from the
region
Jind1 =
VPSindr+
Wr
Jind1- Indirect jobs as a result of the use of the means of production and services
VPSindr+ = Indirect value of the means of production and services related to the production
of WB
Jind2 =
LEindr
Wr
Jind2 = Indirect jobs as a result of work associated with the preparation of LB in the region
LEindr = Indirect value of work (labor expenditures) associated with the preparation of WB
118
Appendices
Jind1 =
NPr+ *k3
Pavgr
Jind1 = Induced jobs as a result of additional net income at the stage of production of
biomass, consumed in the region
NPr+ = Average net annual income from the production of biomass (subject to tax)
k3 = The share of annual income that is consumed in the region
Pavgr = The average salary in the region
NVJind1+2 = (1 + DMp2)*Pavgr
NVJind1+2 = The value of the newly created indirect jobs
Jinduced2 =
NVJsumr+ *k4
Pavgr
Jinduced2 = Induced jobs resulting from the newly created direct and indirect jobs
119