wood chips supply study for the city of...wood chips supply study for the city of zajeČar prepared...

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WOOD CHIPS SUPPLY STUDY

FOR THE CITY OF ZAJEČAR

Prepared for:

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

Bože Jankovića 39 11000 Beograd

Prepared by:

September 2018

Vojislav Milijić, Foragrobio cc doo

Sumska 9-III/1, Subotica

DKTI (GIZ) Program "Development of sustainable bioenergy market in Serbia": Zaječar Wood Chips Supply Study

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Table of Contents

List of tables

List of figures

List of charts

List of abbreviations

1. Executive summary .............................................................................................................................. 5

2. Definition of tasks ................................................................................................................................ 7

3. Methodology ......................................................................................................................................... 9

4. Background ......................................................................................................................................... 11

4.1. The City of Zaječar .......................................................................................................................... 11

4.2. Biomass Demand of Zaječar District Heating System ................................................................ 12

5. Biomass availability ........................................................................................................................... 16

5.1. Availability of firewood, forest residues, sawmill residues and wood chips ........................... 16

5.2. Availability of woody vegetation deriving from road side, river banks, and parks clearing .. 18

5.3. Availability of woody vegetation from orchard pruning and clearing residues ....................... 23

5.4. Availability of agricultural biomass............................................................................................... 24

6. Wood Chips Supply and Logistic Model ......................................................................................... 25

6.1. Model Concept ................................................................................................................................. 25

6.2. Wood and wood chips suppliers ................................................................................................... 31

6.2.1. State Forest Management Company - PE Srbijašume ............................................................. 31

6.2.2. Small-scale private forest owners .............................................................................................. 33

6.2.3. Medium-scale private forest or land owners or state forest users ......................................... 33

6.2.3.1. Timok Parish .............................................................................................................................. 33

6.2.3.2. Rakita Exploration ..................................................................................................................... 34

6.2.3.3. RTB Bor ...................................................................................................................................... 35

6.2.3.4. Salas doo .................................................................................................................................... 36

6.2.3.5. Delta Agrar ................................................................................................................................. 38

6.2.4. Sawmills ........................................................................................................................................ 38

6.2.5. PUC Timok Odrzavanje ................................................................................................................ 40

6.2.6. Water Management Company – PE Srbijavode ........................................................................ 41

6.2.7. Other potential suppliers ............................................................................................................. 43

6.2.8. Wood chips producers ................................................................................................................ 43

6.3. Biomass Supply and Wood Chips Delivery Contracting ............................................................ 43

6.4. Woody Biomass Central Storage Location - Biomass Logistic and Trade Center .................. 48

7. Financial analysis ............................................................................................................................... 51

7.1. Investment ........................................................................................................................................ 51

7.2. Operational costs ............................................................................................................................ 51

7.3. Incomes ............................................................................................................................................ 52

7.4. Economic indicators: iRR, NPV, BCR, sensitivity analysis ........................................................ 52

8. Conclusions ........................................................................................................................................ 56


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9. Literature and sources ....................................................................................................................... 57

10. Annexes ............................................................................................................................................. 59

10.1 Annex I: List of interviewed persons ........................................................................................... 59

List of Tables

T-1: Basic information about the City of Zaječar ...................................................................................... 11

T-2: Availability of road side woody biomass on local roads in Zaječar and neighboring municipalities 20

T-3: Availability of river banks woody biomass in Zaječar and neighboring municipalities ..................... 23

T-4: Participants in wood chips supply chain for Zaječar ......................................................................... 30

T-5: SWOT analysis of O1 and O2........................................................................................................... 30

T-6: Woody biomass units, conversion factors and prices in Zaječar region .......................................... 45

T-7: Wood chips units, conversion factors and recommended prices ..................................................... 47

T-8: Required space for fresh woody biomass and wood chips storage, machinery and equipment ..... 49

T-9: Investment costs ............................................................................................................................... 51

T-10: Unit costs ........................................................................................................................................ 51

T-11: Inputs for operational costs ............................................................................................................. 51

T-12: Annual operational costs ................................................................................................................. 52

T-13: Economic indicators: NPV, IRR, return of investment and BCR for O1 ......................................... 53

T-14: Economic indicators: NPV, IRR, return of investment and BCR for O2 ......................................... 54

List of Figures F-1: Position of The City of Zaječar .......................................................................................................... 11

F-2: Position of future Zaječar biomass DH system ................................................................................. 12

F-3: Future Zaječar wood chips boiler house location and high school center as major heat consumer 13

F-4: Zaječar Medical Centre – one clinic building, boiler house and the steam piping system ............... 14 F-5: Zaječar Medical Center ..................................................................................................................... 15

F-6: Ice breaks in Zaječar, Boljevac and Knjazevac area ........................................................................ 17

F-7: Road network in Zaječar and neighboring municipalities ................................................................. 19

F-8: Roadsides in Zaječar area ................................................................................................................ 20

F-9: River network and forest areas in Zaječar and neighboring municipalities ...................................... 21

F-10: Timok river bank in Zaječar area .................................................................................................... 22

F-11: Wood chips supply model concept ................................................................................................. 26 F-12: Applicable raw material for wood chips and wood chips in Zaječar project: green and fresh logging

and other residues, green wood chips stored at the open ....................................................................... 27

F-13: Capacities needed for wood and wood chips storage, production and transport – wood chippers,

self-unloading trailers and applicable vehicles, telehandlers/front loaders ............................................. 28

F-14: Municipalities within Timočke šume Forest Estate of PE Srbijašume ............................................ 32

F-15: Locations of most important forest properties of Timok Parrish of SOC ........................................ 34

F-16: Locations of land and forests owned by Rakita Exploration ........................................................... 35 F-17: Locations of land and forests owned by RTB Bor .......................................................................... 36

F-18: Location of land and forests owned by Salas doo .......................................................................... 37

F-19: Raw material for wood chips at Salas doo ..................................................................................... 37

F-20: Location of Delta Agrar apple plantations ....................................................................................... 38

F-21: Naka doo sawmill location .............................................................................................................. 39

F-22: Pictures from Naka doo sawmill ..................................................................................................... 39 F-23: Kraljevica forest ............................................................................................................................... 40

F-24: Location of Kraljevica forest ............................................................................................................ 41

F-25: Timok river system .......................................................................................................................... 42

F-26: Timok river banks close to Zaječar ................................................................................................. 43


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F-27: Location of future boiler house and biomass logistic and trade center site ................................... 48

F-28: Biomass logistic and trade center organization .............................................................................. 49

List of Charts

C-1: Costs, incomes, balance for O1 ....................................................................................................... 53

C-2: Costs, incomes, balance for O2 ....................................................................................................... 53

C-3: Sensitivity analysis for O1 ................................................................................................................ 54

C-4: Sensitivity analysis for O2 ................................................................................................................ 55

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

BLTC Biomass Logistic and Trade Centre

DH District Heating

DKTI Deutsche Klima Technologie Initiative

EUR, € Euro

FE Forest Estate

GIZ Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH)

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

ha hectare

kg kilogram

mm millimeter

m³ cubic meter

m2 square meter

MW Megawatt

PE Public Enterprise

PUC Public Utility Company

srm steer meter

Ton, t metric ton

VAT Value Added Tax


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1. Executive summary Project for Zaječar biomass-based DH system is currently in development. There are 2 biomass

boiler houses where project design is ongoing. First project of 0.75 MW capacity should be a small

district heating system for several schools, sport hall and city theater. Second project of Zaječar

Medical Center biomass boiler house should be 2.2 MW. Total annual wood chips quantity

requirement is projected at up to 3,600 tons/year or 10,000 bulk m³/year, at bulk density BD of

360kg/bulk m³. Considering raw material for wood chips production consisting of: road side

vegetation, river bank vegetation, scrubs from park management, thin branches from orchard

pruning, along with raw material from forest residues, quality demand for wood chips according to

SRPS EN ISO 17225-4 should be: Water content up to M55%max in order to reduce drying period;

Particle size: P31/31S-P45S; Ash content up to A5.0; Quality class A1, A2, B1, B2. Bulk density:

BD 300-450 kg/bulk m³; Lower calorific value min: 8 MJ/kg.

Total amount of firewood and forest residues produced in the area is around 200,000 tons /year.

Considering the volumes calculated total demand of future Zaječar biomass-based boiler houses of

3,600 tons/year represents 1.8 % of annual firewood and forest residues production in the forests

of timocka region. However, even though the wood production output in the area have been

increased, the demand for wood have increased even more, along with the prices. Total amount of

available woody biomass from clearing of roadsides of local roads only in the Zaječar City area is

assessed at 350 t/year, while in Zaječar and neighboring municipality total amount of available woody

biomass from road sides clearing is up to 2,300 tons/year. Total amount of available woody biomass

per year from clearing of second grade rivers’ banks outside forest areas in the territory of the City

of Zaječar is up to 630 tons / year. On the other hand, if banks of Timok within City of Zaječar are

included there can be additional 520 tons / year. In case banks of Timok are not included, total

potentially available annual amounts of woody biomass originating from banks of the rivers managed

by Zaječar and its neighboring cities and municipalities are 1,900 tons per year and if river banks

managed by PE Srbijavode are included, total woody biomass potential from river banks can be up

to 3,353 tons / year. In addition, 500 tons / year are available from city parks and park forest

management. Availability of agricultural biomass in the territory of the City of Zaječar is

3,000tons/year while in Zaječar county is 3,400 tons/year. In vicinity there is a strong potential of

agro-biomass in Negotin of 9,000 tons/year. Agro-biomass have specific requirement in terms of

logistics, storage and combustion. It requires significant amount of storage space for straw on one

side and machinery for logistics on the other side. It also requires specific boilers and grates

constructed to deal with high ash content and low ash melting point. Agro biomass boilers are in

average 40-60% more expensive than boilers for woody biomass, also usual scale of the boilers is

over 1 MW. Therefore, we cannot recommend agro-biomass boilers and utilization of agro-biomass

for Zaječar biomass boiler houses.

City of Zaječar recognized the opportunity of developing wood chips production and made first steps

in machinery procurement for road side clearing operations and wood chips production. Their idea

is to produce wood chips to satisfy their boiler houses demand and if possible to sell it to other users

in future. In regard to road side clearing operations their idea is to perform the activities on part of

the road network within City jurisdiction and in other municipalities in the area if applicable. Same

machinery can used for river banks clearing as well. If needed additional quantities of raw material

for wood chips production the City can procure from companies managing forests, private forest

owners or companies managing orchards. Also, there is a possibility to procure additional wood chips

quantities on the market. The City have following options: O1 - To contract, organize and perform

supply of wood material (firewood/logging residues/river banks, road sides vegetation) and organize


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storage and chipping; and O2 - To contract supply of needed quantities of adequate quality wood

chips.

Total investment in case of O1 is assumed at 2,340,000 € or 2,000,000 € in case of O2. Annual

operational costs based on above mentioned inputs are presented below. In case of O1 they are

148,820 € while in case of O2 they are 191,600 €. Income is perceived as sale of 8,100 MWh of heat

for 50 €/MWh hypothetical price. Total incomes in both options are calculated at 405,000 €/year. In

O1 investment can be returned in the tenth year of operation. Benefit cost ratio is 1.52, while internal

rate of return is 10.43%. In O2 investment can be returned in the tenth year of operation. Benefit

cost ratio is 1.39, while internal rate of return is 9.99%. Sensitivity analysis for O1 shows dependence

of iRR from change of most important inputs – investment costs, chipping costs, logistic costs and

raw material costs. iRR is mostly dependent on investment costs, while change of other inputs is not

so relevant. In O2 scenario chipping costs and logistics costs are not present since wood chips is

delivered to DH by There is an almost equal influence of investments and wood chips costs. The

change of investment costs for 30% up and down affects iRR change from 17% to 10% and 10% to

6%. The change of wood chips prices effect is similar, in case of 30% increase of wood chips price

iRR will drop from 10% to 6%, while in case of price reduction it will rise from 10% to 14%.

Financial indicators for both scenarios are very similar however sensitivity of iRR from the price of

wood chips is apparent in case of O2, while investment costs are most influential in both scenarios.

There should be no significant financial differences if Zaječar organize supply of raw material for

chipping and facilitate storage and production of wood chips, or if wood chips would be procured on

the market. Considering medium quantities of required wood chips and relatively high investment

costs for the whole DH systems and needed machinery the level of investment costs has the highest

influence on project profitability, while influence of wood chips costs and other costs is not significant

in case of Zaječar organizes own supply and production, but it is relevant in case of wood chips

supply on the market. However, major difference between elaborated supply options is in

organization and possibility of local administration and local communal company to organize a

business activity, know how, efficiency, competitiveness and allocation of supply risks. Although

there are no successful examples of local administrations organizing raw material supply and

production, especially when it comes to wood chips, which is a new product in Serbian market,

Zaječar already decided to organize production of wood chips from road sides clearing and is

developing technical capacities in this direction. Therefore, future activities of the City should focus

on development of know-how and further capacities in production and also commercial activities

related to wood supply and processing. In case that City fails to supply and produce needed

quantities of wood chips, for additional quantities municipality would need to organize preparation of

tender, contracting, monitoring and developing control mechanisms which will ensure efficient and

timely supply of needed quantities of adequate quality wood chips.


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2. Definition of tasks Zaječar Wood Chips Supply Study is developed as an activity of the project: “Development of

Sustainable Bioenergy Market in Serbia” implemented jointly by KfW and GIZ and funded by German

Federal Ministry for Economic Cooperation and Development (BMZ).

Objective of Consultants’ assignments in completion of the Study consisted of:

- Assessment of required quantities of wood biomass for Zaječar DH plants;

- Analysis if available woody biomass potential (logging residues, sawmill residues, roadside,

river bank biomass, orchards’ pruning residues) in the given area meets the requested

amounts and quality of wood chips for Zaječar DH project;

- Biomass market situation in the given area, identification of potential suppliers (specialized

woody biomass mobilization companies, major wood processing companies, and producers

of wood chips and wood pellets, etc..) and their potentials and propensity for supply in

terms of quantity, quality and other properties;

- Price expectations for wood chips including each category of wood residuals and costs of

wood chips production;

- Biomass storage and overview on technology and machinery to be used in biomass harvest

or collection and logistic chains and wood chips production;

- Supply chain management and contracting including financial analysis and economic

indicators of biomass supply organization and financing options (Investments in machinery,

equipment, storage, quality control; Operational costs; Economic indicators including

sensitivity analysis)

Consultant’s tasks consisted of:

- Task 1: Field visit to the City of Zaječar:

o personal visit to the City and analysis of DH location and storage locations;

o interviewing most important potential wood biomass suppliers (the City, forest

managers, forest owners and wood processors) in order to obtain market information,

logistic challenges and to assess their propensity for supply;

- Task 2: Design and verification of wood chips supply and logistic models for district heating

plants in Zaječar:

o analysis and design of biomass supply chain models and verification of an optimal

model of biomass supply chain in order to find, collect, chip, and deliver wood biomass

to district heating plant in the most economically efficient way;

o provision of all costs of biomass supply chain (raw materials, collecting, storage,

transport, drying, chipping);

o provision of conclusions regarding optimal model of biomass supply chain as well as

recommendations and instructions how to achieve better, cheaper and more reliable

logistic concepts;

o provision of recommendations and instructions regarding models of contract between

potential suppliers and the municipality.

- Task 3: Results of the assessment including:

o summary of findings in an English and Serbian language written report as well as to

provide electronic version of the Study (WORD, PDF);

o provision of a PPT-presentation;

o Preparation and provision of all others requested outputs.


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Report was prepared by Foragrobio CC doo1 and submitted in September 2018.

1 http://www.foragrobio.rs/

http://www.foragrobio.rs/


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

- Analysis of related literature, regulations and other sources related to woody biomass,

machinery, equipment, logistics and city/area in question;

- Review of Zaječar DH system concept;

- Identification of relevant stakeholders’ representatives to be interviewed and scheduling

interviews;

- Meeting and/or face to face interviews with relevant stakeholders;

- On site analysis of potential locations for biomass storages;

- Availability analysis of woody biomass originating from riverbanks and road sides;

- Design of wood chips supply concept including investment and operational costs

assessment;

- Financial analysis including economic indicators;

- Reporting.

Literature and sources review was focused on obtaining information about municipality and area in

question, including their activities in the process of biomass-based district heating system

implementation. In addition, Serbian regulation related to forestry, wood industry, environment,

transportation, water management, construction and traffic and local administration were also

analyzed for definitions of potential impediments in supply of wood biomass. Logistic concept studies

and other relevant studies on wood biomass availability were analyzed as well. Potential

stakeholders were identified as representatives of the following groups:

- local administration (municipal authorities) – decision makers, potential suppliers and

consumers of biomass;

- public enterprise managing state owned forests (regional level) – supply and contracting

wood biomass and information about forest production in state and private forests, forest

infrastructure and other potential suppliers;

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

information;

- other land and forest owners and managers – forest companies and mining operation

companies as potential source of wood;

- water management company – supplying woody biomass originating from river banks;

- fruit producers – supplying woody biomass originating form orchard pruning.

Meetings and face to face interviews were carried out in the period of 20th of July and 21st to 24th of

August 2018, along with onsite analysis of possible biomass storages’ locations.

Special methodology was developed for availability assessment for biomass deriving from roadsides

and river banks. Methodology consisted of mapping the area using shape files and topographic maps

in order to define lengths and graphic image of rivers, roads, municipal boarders and forest areas.

For the mapping an open source software Quantum GIS2 was used. In the next step, when length of

rivers and roads were identified, and area of vegetation zone was calculated using different zone

widths from 2 to 5 meters. Also, the vegetation cover of areas was assessed and applied along with

expected yield of vegetation to harvest in every 5 years.

2 https://qgis.org/en/site/

https://qgis.org/en/site/


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Wood chips supply concept was designed based on the literature review, local condition,

stakeholders’ inputs, logistic studies and available best practice examples. Investment and

operational costs assessment were also based on review of relevant sources and information

provided by interviewed stakeholders, construction standards and equipment distributers.

Financial analysis, based on defined investment and operational costs, included application of

methods for calculation of net present value, internal rate of return, benefit-cost ratio, period for return

of investments and sensitivity analysis showing basic economic indicators development in case of

input increase and in case of output decrease. Report was prepared and submitted to GIZ DKTI

comments on 07th of September 2018.


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4. Background Chapter bellow provides basic background information about The City of Zaječar, their fuel switch

activities in district heating systems, technical aspects, and the assessment of biomass demand in

terms of form, quality and quantity.

4.1. The City of Zaječar

Map of the City of Zaječar, presenting its position in Serbia, along with city boarders and major roads

is presented in a figure bellow.

F-1: Position of The City of Zaječar

The City of Zaječar is situated in in the Region of Eastern and Southern Serbia. Administratively it is

a part of Zaječar County. Basic information on the City of Zaječar are presented in table below.

Info/City Zaječar

Area km2 1,069

No of settlements 1 urban+40 rural

Total population3 59,461 (43,860 in Zaječar urban area)

T-1: Basic information about the City of Zaječar

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

Map data © 2018 Google

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


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4.2. Biomass Demand of Zaječar District Heating System

Project for Zaječar biomass-based DH system is currently in development. There are 2 biomass

boiler houses where project design is ongoing. First project is a small district heating system for

several schools, sport hall and city theater. Map below presents the location of the public buildings

Zaječar biomass-based DH system.

F-2: Position of future Zaječar biomass DH system

Considering project design is not completed, for the purpose of this study the consultant roughly

calculated required heat power and biomass demand. Considering heat area of 12,400 m2, required




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heat of 120 W/m2 and 50% of the heat demand as base load to be covered by biomass boilers while

rest covered by light oil of compressed natural gas boiler as backup and peak load, total biomass

boiler capacity of 0.75 MW should be sufficient. Considering current biomass market situation and

Zaječar City plans to produce wood chips from biomass deriving from cleaning the road sides and

river banks, low quality, high ash content, wet wood chips is perceived as fuel for the biomass boiler.

Considering 2.52 kWh / kg as an energy value of M45 wood chips, 89% of boiler efficiency and 2,500

hours working on 100% regime and 1,500 hours working on 30% regime, total wood chips demand

should be up to 990 tons.

Boilers will be installed in the new boiler house close to city football stadium. Picture below shows

future boiler house location and heat consumers.

F-3: Future Zaječar wood chips boiler house location and high school center as major heat consumer

Second project is a boiler house in frame of Zaječar Medical Center. Below there are pictures and

the map of location of the Zaječar Medical Center.

Considering project design is not completed, same principle for capacity and demand calculation as

in the case of the previous boiler house were applied. Considering heat area of 37,000 m2, required

heat of 120 W/m2 and 50% of the heat demand as base load to be covered by biomass boilers while

rest covered by light oil of compressed natural gas boiler as backup and peak load, total biomass

boiler capacity of 2.2 MW should be sufficient. Although the City does not plan to supply Medical

center directly since it is not in the city jurisdiction, considering current biomass market situation we

believe that low quality, high ash content, wet wood chips should be perceived as fuel for the Medical

center biomass boiler as well.

Considering 2.52 kWh / kg as an energy value of M45 wood chips, 89% of boiler efficiency and 2,500

hours working on 100% regime and 1,500 hours working on 30% regime, total wood chips demand

should be up to 2,630 tons.

Photo by Foragrobio cc doo © 2018 GIZ DKTI


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F-4: Zaječar Medical Centre – one clinic building, boiler house and the steam piping system

Considering raw material for wood chips production consisting of: road side vegetation, river bank

vegetation, scrubs from park management, thin branches from orchard pruning, along with raw

material from forest residues, quality demand for wood chips according to SRPS EN ISO 17225-44

should be: Water content up to M55%max in order to reduce drying period; Particle size: P31/31S-

P45S; Ash content up to A5.0; Quality class A1, A2, B1, B2. Bulk density: BD300-450kg/bulk m³;

Lower calorific value min: 8MJ/kg.

Total annual wood chips quantity requirement is projected at up to 3,600 tons/year or 10,000 bulk

m³/year, at bulk density BD of 360 kg/bulk m³.

4 http://www.iss.rs/rs/standard/?natstandard_document_id=53689


http://www.iss.rs/rs/standard/?natstandard_document_id=53689


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F-5: Zaječar Medical Center




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5. Biomass availability Biomass availability for Zaječar DH plant have not been analyzed so far. However, biomass

availability in the region have been analyzed in frame of the fuel switch activities of Negotin, Kladovo

and Knjazevac, supported by KfW bank back in 20145. Those analysis focused on availability of

firewood, sawmill residues and forest residues within 50km radius of supply of mentioned towns.

Analysis of agricultural biomass availability6 was performed for all Serbia in frame of GIZ DKTI project

and also covered Zaječar and surrounding municipalities. So far there were no analysis covering

wood biomass availability from road sides and river banks. Also, availability of woody biomass

deriving from orchard pruning have not been analyzed so far.

5.1. Availability of firewood, forest residues, sawmill residues and wood chips Zaječar is situated in former timocko forest area, which is covering slightly reduced territories of

counties of Zaječar and Bor or complete municipal territories of Zaječar, Boljevac, Knjazevac, Bor,

Negotin and Kladovo and a part of Majdanpek municipality (Donji Milanovac area). There are

215,000ha of forests and forest land, from which 60% is private. State forests in the area are

managed by PE Srbijašume, forest estate Timocke sume Boljevac. Small scale private forests are

managed by their owners and professional tasks within are performed by PE Srbijašume FE Timocke

sume Boljevac. There are three medium scale private forests owners – Timok Parish of Serbian

Orthodox Church and church owned forests are managed by Foresting doo consulting company.

Second medium scale private owner is a company Rakita Explorations which is buying forests and

land for development of a copper mine. And the third is agricultural company Salas doo. There are

also state-owned forests managed by currently State owned, but in privatization process RTB Bor.

Also, there are forest managed by the cities and municipalities. All of the mentioned forest owners

and managers will be elaborated in detail in the chapter 6.2.

Total annual wood harvesting volume of forests inTimok region exceeds 280,000 m3/year, where

planning harvest in state forests is 160,000 m3/year and in private forests exceeds 120,000 m3/year.

In addition, the area especially forests in municipalities of Boljevac, Knjazevac and Zaječar were

significantly affected by ice breaks in 2014 and clearing of damaged trees took place from 2015 to

2018.

In state forests over 190,000 m3 is cleared and 30,000 m3 will be cleared this year. Every year from

2015 to 2018 around 60-80,000 m3/year where cleared in private forests affected by ice breaks.

Although ice breaks damaged trees were cleared in most of cases, there is a significant amount of

wood drying occurring in forests affected by ice breaks, where harvesting of damaged trees opened

tree crowns and barks to direct sun light. Therefore, increase of harvesting volumes in the next years

is also possible. Considering 20-40% share of technical wood and 5-10% share of usable forest

residues, total amount of firewood produced in the area is over 160,000 m3 or 180,000 tons

considering that hardwood is dominant.

5 2014. Pre-Feasibility Studies on 15 Biomass CHP-plants for District Heating Companies in Serbia for Serbian

cities/municipalities: Bajina Bašta, Čačak, Jagodina, Kikinda, Kladovo, Knjaževac, Kosjerić, Negotin,

Nova Varoš, Novi Pazar, Priboj, Šabac, Trstenik, Velika Plana, Zrenjanin. iC Consulenten for KfW.

6 2017. Study on Agro biomass availability in Serbia. Wieser, H. Milijic, V. for GIZ DKTI. http://www.bioenergy-

serbia.rs/images/documents/studies/20171028_Agrobiomass_Study.pdf

http://www.bioenergy-serbia.rs/images/documents/studies/20171028_Agrobiomass_Study.pdf



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In addition, around 23,000 tons of forest residues can be used for wood chips production plus

additional lying material in forests damaged by ice breaks. Additional amounts of unplanned wood

harvesting deriving from forest conversion to mining land can also be expected in near future.

Considering the volumes calculated total demand of future Zaječar biomass-based boiler houses of

3,600 tons/year represents 1.8% of annual firewood and forest residues production in the forests of

Timok region.

F-6: Ice breaks in Zaječar, Boljevac and Knjazevac area

However, even though the wood production output in the area have been increased, the demand for

wood have increased even more, along with the prices. Most significant wood consumers in Serbia

such as Kronospan7, the chipboard factory, Sparrow8 and Eko Step pellet9 as pellet factories are

supplying from the area. In addition, Bioenergy point10 the pellet producer, one of the largest wood

consumers is based in Boljevac and most of their 100,000 tons/year wood demand is covered from

the area. This company is constructing a 2.4 MWel wood chips combined heat and power plant11

which should be operational next summer consuming additional 30,000 tons/year of wood chips.

Also, there is another local pellet company KMD Pellet12 from Kladovo area. Four companies

mentioned are competing to supply from both state and private forests and they have developed

wood harvesting capacities to supply from wood on stump sale of forests damaged by ice breaks. In

addition, there is a traditional production of firewood to supply local population and cities in Vojvodina

7 https://rs.kronospan-express.com/sr

8 http://sparrow.rs/kontakt/

9 http://www.ekostep-pellet.rs/en/about-us

10 http://www.bioenergy-point.rs/

11 http://www.mre.gov.rs/doc/registar230818.html#Sec_Biomasa

12 http://www.kmdcompany.com/pelet-pellet.html

Photo by Foragrobio cc doo © 2015-2017 GIZ DKTI

https://rs.kronospan-express.com/sr

http://sparrow.rs/kontakt/

http://www.ekostep-pellet.rs/en/about-us

http://www.bioenergy-point.rs/

http://www.mre.gov.rs/doc/registar230818.html#Sec_Biomasa

http://www.kmdcompany.com/pelet-pellet.html


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province. Also, demand for logs increased significantly, due to demand rise for log export to China

and domestic wood industry demand. This have led to an increase of firewood (including wood for

pellet and chipboard) for over 20% in end of 2017 and a similar increase in log prices.

In Zaječar and Bor county there are only 2 sawmills, on in Zaječar and the other close to Donji

Milanovac. Nakka doo13 operates a sawmill in Zaječar and it is the only sawmill in 100 km circle from

Zaječar. There annual processing capacities are 8,000 m3/year, which can result in 3-4,000 tons of

sawmill residues per year, however all residues they use for pellet production of 6,000 tons/year and

they even have to buy additional wood for pellet production. Considering that there are no other

sawmills in the area, sawmill residues as a source of wood chips for future Zaječar biomass boiler

houses can hardly be considered.

There are no companies so far in the area specialized for wood chips production. Current demand

for wood chips is not high, but increase will occur due to ongoing fuel switch from fossils to biomass,

which is in progress in several municipalities14 of Timok region and ongoing CHP development

projects15. Apart from wood origination from forests other woody vegetation should also be

considered as a source for wood chips production. In order to enable production of wood chips from

raw materials which do not have high demand, and to reduce costs of wood chips production, wood

chips quality in boiler houses should enable high water content up to 55% and high ash content of

up to 5%.

5.2. Availability of woody vegetation deriving from road side, river banks, and parks clearing Basic assumption in regard to road side and river banks woody biomass availability assessment is

that the whole area needs to be cleared in 5 years period and subsequent cleaning needs to be done

in same intervals. So, the amount of available biomass may in the moment may be higher, due to

the fact that clearing was not performed on regular basis. In regard to road sides following

assumptions were made: 25 tons / ha as a 5-year increment/production of fresh woody biomass, 2

meters on 2 sides as a width of a buffer zone between the road and other land as an area which

needs to be cleared. In practice this zone area depends on the cadastral and ownership situation,

but the average of 2meter times 2 sides or 4 meter in total is used for calculations. Average coverage

of 70% of the road sides with woody vegetation. In regard to road sides biomass availability, only

local roads managed by the City of Zaječar and neighboring municipalities of Bor, Negotin, Boljevac

and Knjazevac are considered. National roads are not considered, due to the fact that they are

properly managed, and vegetation is regularly cleared.

13 http://www.naka-doo.com/pelet.html

14 Negotin is developing hospital boiler house on wood chips supported by Public Investment Management

Office. Kladovo is developing biomass DH project supported by KfW Banka and hospital biomass boiler

house supported by PIMO. Knjazevac is developing hospital boiler house supported by PIMO.

Majdanpek already installed wood chips boiler house in high school with support of PIMO and is

developing wood chips-based DH with support of KfW. Bor is developing wood chips boiler house in

hospital supported by PIMO and is in selection procedure for KfW support for biomass-based DH

system.

15 Apart from Green Energy point CHP, a 4MWel CHP development by Tersa Balkan doo company in Boljevac

is also in progress since the project have been awarded with and energy permit -

http://www.mre.gov.rs/doc/Zahtevi_ED220818.html#

http://www.naka-doo.com/pelet.html

http://www.mre.gov.rs/doc/Zahtevi_ED220818.html


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F-7: Road network in Zaječar and neighboring municipalities

Map by Foragrobio cc doo © 2018 GIZ DKTI


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F-8: Roadsides in Zaječar area

Total amount of available woody biomass from clearing of roadsides of local roads only in the Zaječar

City area is assessed at 350 t/year, while in Zaječar and neighboring municipality total amount of

available woody biomass from road sides clearing is up to 2,300 tons/year.

City/Municipality length (m) area (ha) fresh mass

(tons at 55%wc) yield per year (t/y at 55% wc)

Boljevac 249,736 100 1,748 350

Bor 366,642 147 2,566 513

Knjaževac 446,232 178 3,124 625

Negotin 317,132 127 2,220 444

Zaječar 249,104 100 1,744 349

Total 1,628,844 652 11,402 2,280

T-2: Availability of road side woody biomass on local roads in Zaječar and neighboring municipalities

In regard to river banks following assumptions were made: 35 tons per ha as a 5-year production of

fresh woody biomass, 3 meters on 2 sides or 6meters in total as a width of a bank and zone between

the river and other land as an area which needs to be cleared in case of local rivers managed by

cities and municipalities and 5 meters on 2 sides or 10 meters in total as a width of a bank and zone

between the river and other land as an area which needs to be cleared in case of Timok river

managed by PE Srbijavode. In practice this zone area depends on the cadastral and ownership

situation, but the average mentioned is used for calculations. Average coverage of 70% of the river

banks with woody vegetation. In regard to river banks biomass availability, only banks of the rivers

outside forests were considered.



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F-9: River network and forest areas in Zaječar and neighboring municipalities

Map by Foragrobio cc doo © 2018 GIZ DKTI


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F-10: Timok river bank in Zaječar area



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River banks in forests complex are not considered due to the fact that they are either the part of

forest management units of state forests or privately-owned forests, therefore jurisdiction of the city

and water management companies in regard to banks clearing does not exist.

Cit/Mun

Rivers and

streams length

(m)

Rivers and

streams in forest

areas (m)

Rivers and

streams outside forest areas (m)

Managed by

Srbijavode (m)

area (ha)

fresh mass

(tons at 55%wc)

yield per year (t/y at 55%

wc)

Managed by

cities/mun. (m)

area (ha)

fresh mass

(tons at 55%wc)

yield per year (t/y at 55%

wc)

Boljevac 228,292 104,356 123,937 45,014 45 1,103 221 78,922 47 1,160 232

Bor 295,123 157,533 137,590 16,417 16 402 80 121,173 73 1,781 356

Knjaževac 194,733 20,239 174,494 79,612 80 1,951 390 94,882 57 1,395 279

Negotin 354,016 136,787 217,230 48,754 49 1,194 239 136,453 82 2,006 401

Zaječar 438,588 116,864 321,724 106,343 106 2,605 521 215,382 129 3,166 633

Total 1,510,753 535,778 974,975 328,162 296 7,255 1,451 646,812 388 9,508 1,902

T-3: Availability of river banks woody biomass in Zaječar and neighboring municipalities

Total amount of available woody biomass per year from clearing of second grade rivers’ banks

outside forest areas in the territory of the City of Zaječar is up to 630 tons per year. On the other

hand, if banks of Timok within City of Zaječar are included there can be additional 520 tons per year.

In case banks of Timok are not included, total potentially available annual amounts of woody biomass

originating from banks of the rivers managed by Zaječar and its neighboring cities and municipalities

are 1,900 tons / year and if river banks managed by PE Srbijavode are included, total woody biomass

potential from river banks can be up to 3,353 tons per year.

In Zaječar’s communal company jurisdiction there are parks and park forest of Kraljevica, where

around 500 tons of woody biomass originating from sanitary harvests and shrubs clearing can be

produced.

Total availability of woody biomass which production can be organized and executed directly by the

city of Zaječar – local roads, rivers and parks can be assessed to up to 1,500 tons per year.

Total availability of woody biomass which production can be executed by the City of Zaječar

communal company in Zaječar and surrounding municipalities – on local roads and locally managed

river banks is assed to up to 4,200 tons per year.

Total availability of woody biomass which production can be organized in cooperation with PE

Srbijavode in the territory of Zaječar City is 520 tons per year, and if surrounding municipalities are

included around 1,450 tons per year of woody biomass could be produced annually.

5.3. Availability of woody vegetation from orchard pruning and clearing residues There is a tradition of fruit production in the area on a large-scale deriving from former state-owned

agricultural companies. In close proximity to Zaječar there are few private companies such as: Delta

Agrar doo, Agromarket doo and Salas doo operating 100 ha or more of apple, cherries, plums or

other type of orchards.


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Apple orchards can be considered as interesting in terms of woody biomass supply since they can

produce over 4-8 t/ha after 10 years of age. Salas doo annually collects and stores around 100 tons

from pruning of 30 ha and clearing 10 ha of cherry orchards per year. On the other hand, Delta Agrar

collects 1-2 t/ha from 150 ha of their young apple orchards, which they mulch on site. Considering

their ongoing expansion to over 500 ha of apple plantations in next years, they can be considered

as potential wood chips raw material suppliers once the orchards do mature. Agromarket also does

mulching considering they have cherry orchards which do not have high volume of pruning residues.

Analysis of orchard pruning residues have not been done so far. Having in mind the existence of old

orchards owned by small scale farmers and expansion of new plantations, the collectable quantities

can be considered as relevant for future wood chips supply.

5.4. Availability of agricultural biomass Availability of agricultural biomass have been analyzed in detailed in 2017 in 2017. Study on Agro

biomass availability in Serbia. Wieser, H. Milijic, V. for GIZ DKTI16. If we consider potentials described

in the Study as Potentials collectable in big bale format meaning 60% utilization rate of straw on

properties larger than 50 ha, straw used in animal farms larger than 50 ha deducted as described in

Methodology part of the Study in details, total potential of agricultural biomass supply consisting of

Barley straw, Oats straw, Rye straw, Wheat and Spelt straw, Other grain cereals straw, Maize straw,

Soya straw, Sunflower straw and having in mind straw used in animal production, in the territory of

the City of Zaječar is 3,000 tons/year while in Zaječar county is 3,400 tons/year. In vicinity there is a

strong potential in Negotin of 9,000 tons/year. Agro-biomass have specific requirement in terms of

logistics, storage and combustion. It requires significant amount of storage space for straw on one

side and machinery for logistics on the other side. It also requires specific boilers and grates

constructed to deal with high ash content and low ash melting point. Agro biomass boilers are in

average 40-60% more expensive than boilers for woody biomass, also usual scale of the boilers is

over 1 MW. Therefore, we cannot recommend agro-biomass boilers and utilization of agro-biomass

for Zaječar biomass boiler houses.

16 http://www.bioenergy-serbia.rs/images/documents/studies/20171028_Agrobiomass_Study.pdf



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6. Wood Chips Supply and Logistic Model Wood chips quality requirement determines the applicable logistics concept more than wood chips

quantities requirement – quantities determine the scale of the implemented concept but not the

concept model. Requirement of the project is water content of maximally 55%, which implicates that

wood chips from freshly harvested wood can be used directly– raw material for wood chips does not

need to be dried or wood chips does not need to be dried prior to consumption. Also, ash content of

up to 5% implicates that thin branches, shrubs and branches with leaves and needles can be used.

Wood chips needed for the project can be produced from firewood, logging residues, sawmill

residues, orchard cleaning, parks and clearage of roadside or river banks vegetation. This material

can be chipped and used directly in fresh state or stored and used and chipped later on. Also, wood

chips can be stored in sheds or outside.

Considering other wood chips DH systems in development in Eastern Serbia (Kladovo, Majdanpek,

Negotin, Bor, Knjazevac) and demand from wood chips boiler houses planned in Zaječar there is a

clear business opportunity to develop wood chips production. In case of Zaječar the business can

be expanded to road sides and river banks clearing and wood chips production. City of Zaječar

recognized the opportunity and made first steps in machinery procurement for road side clearing

operations and wood chips production. Their idea is to produce wood chips to satisfy their boiler

houses demand and if possible to sell it to other users in future. In regard to road side clearing

operations their idea is to perform the activities on part of the road network within City jurisdiction

and in other municipalities in the area if applicable. Same machinery can used for river banks clearing

as well. If needed additional quantities of raw material for wood chips production the City can procure

from companies managing forests, private forest owners or companies managing orchards. Also,

there is a possibility to procure additional wood chips quantities on the market.

Primary suppliers of wood for chipping in the chain are: the state forest managers – PE Srbijašume,

small scale private forest owners, medium scale private forest owners – Timok Parish and company

managing their forests Foresting doo, companies active in mining operations – RTB Bor and Rakita

Explorations, water management company – PE Srbijavode and companies performing activities in

water management operations - and managers/owners of agricultural land and orchards such as

Salas doo and Delta Agrar, City communal company PUC Timok održavanje which performs

roadsides or park maintenance and others. Therefore, municipality have following options:

- O1 - To contract, organize and perform supply of wood material (firewood/logging

residues/river banks, road sides vegetation) and organize storage and chipping;

- O2 - To contract supply of needed quantities of adequate quality wood chips;

This chapter will elaborate supply and logistic concept models in detail including analysis of potential

suppliers and organizational options.

6.1. Model Concept Applicable woody biomass supply chain model is presented in the figure below. Following operations

are present in this supply model concept:

1. Woody biomass production and collection, encompassing:

a. Wood and biomass harvesting – in case of utilizing woody biomass from the forests

or road sides and river banks;

b. Wood and biomass extraction to the forest road, or central log storage – in case of

utilizing wood biomass from the forests, road sides and river banks;


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c. Wood processing and production of sawmill residues – in case of utilizing sawmill

residues;

d. Woody biomass transport to the central biomass storage;

2. Operations in central biomass storage, including:

a. Storing of woody biomass;

b. wood chipping

c. storing of wood chips;

d. woody biomass and wood chips manipulation;

3. Wood chips transport;

4. Wood chips consumption in DH plants including:

a. Wood chips storing in DH storage;

b. Wood chips manipulation;

c. Wood chips consumption.

F-11: Wood chips supply model concept

Wood and woody biomass production and collection is organized by forest owners and managers.

In mountain and hilly areas such as Eastern Serbia, harvesting is performed with chainsaws, while

wood extraction is performed by skidders or agricultural tractors adapted for skidding operations.

This is the practice in both state and private forests and the most significant differences between

operations in state and private forests is in density of forest roads and skid line network; and scale

of harvesting operations. Individual private forest owners perform harvesting operations in smaller

areas, usually at one or several forest owners’ plots, while state forest managers organize operations

in one or several sections in forest management units. Wood production can also be performed by

clearing vegetation from road sides and river banks. In this case special machinery with automatic

harvesting or manual harvesting can be performed. Woody biomass transport to the central biomass

storage - BLTC encompass loading unprocessed woody biomass to a transport vehicle at forest or

road side or river bank and its transport to biomass central storage. Chips can also be produced


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directly at forest or paved road. Biomass central storage is a storage facility with enough space to

store unprocessed woody biomass and wood chips and provide space for manipulation with engaged

machinery. At central storage woody biomass is processed by wood chippers into wood chips. Wood

chips can be stored at central storage, preferably in sheds, in order to provide drying and protection

from further decay. Manipulation and loading of wood biomass are usually performed by telescoping

handlers or front loaders. However, application of tractors with front loader can also be possible. In

case of vicinity of woody biomass to DH plants, an option of moving wood chipper to processing site

and direct delivery to DH plants can also be applied. For flexibility it is necessary to include mobile

wood chippers in the operations.

Transport of wood chips from central storage to DH plants should be performed with vehicles which

can be automatically unloaded. Such vehicles need to be in line with traffic regulations, especially if

DH plant is located in the city where truck transport is not allowed. For longer transport distances in

location accessible by large vehicles, tow trucks and walking floor trailers with capacity of 90-100 m³

are usually utilized, however in smaller distances kipper trucks or trucks with unloadable container

can also be utilized. Tractors with unloadable trailers can also be used for wood chips delivery at

smaller distances.

F-12: Applicable raw material for wood chips and wood chips in Zaječar project: green and fresh

logging and other residues, green wood chips stored at the open



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F-13: Capacities needed for wood and wood chips storage, production and transport – wood

chippers, self-unloading trailers and applicable vehicles, telehandlers/front loaders

Wood chips storage in DH plant, usually requires space for few days or one week of operation, with

perceived reserves in winter time to cover inaccessibility of transport vehicles, due to the unperceived

events such as winter storms causing road blockade. In Zaječar project it should be a walking floor

underground storage connected to a boiler via hydraulic conveyers, therefore no additional

manipulation would be needed. Table below presents organizational model in two supply options for

the City of Zaječar. Woody biomass production can be organized by the City communal company

and state forest managers and private forest owners. Communal company can perform road side

and river banks clearing if possible and transport woody biomass, produce and store wood chips. In

State forests, harvesting, wood extraction is organized by their contractors – private harvesting

companies. In case of wood on stump sale by state forest managers, private companies can buy the

wood on stump and subcontract private companies for harvesting, extraction and possible delivery

to the central biomass storage. In private forests, private forest owners or managers or their

harvesting contractors or wood on stump buyers perform harvesting, extraction and they can

possibly deliver the woody biomass to a central biomass storage.

Due to the usual practice of state forest managers, woody biomass transport from state forest

managers’ forest road or central storage to woody biomass central storage can be organized by

wood chips supplier. From private forests transport can be organized in a same manner or woody

biomass from private forests can be delivered to the central biomass storage by the seller (private

forest owner, harvesting company or wood trader). All operations on woody biomass central storage

including storing unprocessed biomass, chipping, storing wood chips and manipulation with woody

biomass and wood chips need to be organized by wood chips supplier or the city depending on the

implemented option. Wood chipping on the central biomass storage can be outsourced or performed

by actor running the supply and storage, depending on the capacity.



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Considering capacities – in case of option 1 the city should develop capacities adequate to cover

their own wood chips demand as much as possible, while in option 2 a private company running the

supply can dimension capacities to supply other consumers as well. Wood chips transport to DH

plants needs to be organized by wood chips supplier or outsourced. Finally, wood chips storing at

DH plants, should be organized by the consumer.

Info/Model – roles O1 – Municipality organize, contract and supply

wood material (firewood/logging

residues/roadsides and river banks vegeration)

and organize storage/drying and chipping

O2 – The City contracts supply of needed quantities

of adequate quality wood chips

Woody

biomass

production

and collection

Wood and

biomass

harvesting

State forests – wood and biomass on the road or

central storage, harvesting site, wood on stump -

contractors for PE Srbijašume, FE Timočke šume

for wood harvesting and extraction; private

companies buying wood on stump or collecting

woody biomass, contractors for harvesting and

extraction;

Small scale private forests – private forests

owners, contractors or wood on stump buyers

Medium scale private forests Timok Parish of

SOC – forest managers Foresting doo

Forests in mining areas – RTB Bor and Rakita

Explorations doo

Orchards – Salas doo, Delta Agrar other fruit

producers or subcontractors do the clearing and

provide wood material

Riverbanks – PE Srbijavode and PUC

Održavanje Timok, depending who is in charge

do the clearing and provide wood material

Roadsides, parks –PUC Održavanje Timok







extraction;

Small scale private forests – private forests owners,

contractors or wood on stump buyers

Medium scale private forests Timok Parish of SOC

– forest managers Foresting doo


Explorations doo

Orchards – farmers or subcontractors do the

clearing and provide wood material

Riverbanks and roadsides – companies performing


Wood and

biomass

extraction







extraction;

Small scale private forests – private forests

owners, contractors or wood on stump buyers

Medium scale private forests Timok Parish of

SOC – forest managers Foresting doo


Explorations doo

Orchards – Salas doo, Delta Agrar other fruit

producers or subcontractors do the clearing and

provide wood material

Riverbanks – PE Srbijavode and PUC

Održavanje Timok, depending who is in charge


Roadsides, parks –PUC Održavanje Timok



contractors for PE Srbijašume, FE Timocka sume




extraction;

Small scale private forests – private forests owners,

contractors or wood on stump buyers

Medium scale private forests Timok Parish of SOC

– forest managers Foresting doo


Explorations doo

Orchards – farmers or subcontractors do the


Riverbanks and roadsides – companies in charge


Woody biomass transport to the

central biomass storage

CIty or subcontractors Private company supplying wood chips or

subcontractors

Operations in

woody

biomass

central

storage

Storing of

woody biomass

City Private company supplying wood chips

Wood chipping City

Subcontractor providing wood chipping services

Private company

Subcontractor providing wood chipping services

Storing of wood

chips

City Private company supplying wood chips


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Wood chips transport to DH

plants

City

Subcontractor

Private company supplying wood chips

Wood chips

consumption

in DH plants

including

Wood chips

storing in DH

storage

City City

Wood chips

consumption

City City

T-4: Participants in wood chips supply chain for Zaječar

To summarize, roles and responsibilities of wood chips supplier – the City in O1 or private company

in O2 start with planning of biomass delivery to DH plants and contracting and buying unprocessed

woody biomass quantities. Responsibilities continue with production of woody biomass on roadsides

and river banks, or takeover (including quantity and quality control) of woody biomass at forest road

or central log storage or central biomass storage and transport of unprocessed woody biomass to a

central biomass storage depending on procurement agreement with forest owners and managers.

Major responsibility of joint company lies in management and all operations (storing, chipping,

manipulation) on central biomass storage and delivery of wood chips to consumer.

As mentioned, difference between O1 and O2 model lies in delegation of roles between partners,

reflecting in procurement of finances for investing, basic goals and management. In option O1 the

City needs to develop a structure founded and owned by City of Zaječar. This structure already exists

in a form of Public Utility Company Odrzavanje Timok. Goal of this company is not to make profit,

but to provide most efficient and financially viable solutions for wood chips supply to DH system

resulting in reduction of heating costs for municipality or citizens. On the other hand, all investments,

biomass procurement, operational costs, know how, training and organizational efforts will be bared

by the City, while it will establish control and independency of wood chips supply process. Option

O2 is a private company with a goal to create profit. Woody biomass procurement, investments,

operational costs, know-how and organizational efforts and risk of competition and supply will be

bared by the private company – wood chips production, while the City will develop public

procurement mechanisms in order to get most competitive conditions of supply with needed

quantities of adequate quality wood chips. Major positive and negative sides of both models are

presented in SWOT analysis below.

O1 – City contracts supply of wood material

(firewood/logging residues/sawmill residues/other

residues) and organize storage/drying and chipping

O2 - City contracts supply of needed quantities of adequate

quality wood chips

Strengths

1. Independent wood chips

supply

2. Control over supply

mechanisms

3. Security in supply

Weaknesses

1. City will have to invest and

organize the supply

2. No experience in local

administration

3. No good practice examples

in Serbia

Strengths

1. Private supplier will invest

2. City has procurement

mechanisms

3. Know-how and capacities

Weaknesses

1. High wood chips price

2. Inability to provide quantities

in required time

3. Issues in supplying with

adequate quality

Opportunities

1. Direct and indirect

employments

2. Developing efficient

woody biomass contracting

options

3. Set up a model and

example

Threats

1. Limited funds for

investments

2. Inefficient management in

state/city owned companies

3. Supply risks

Opportunities

1. Developing efficient wood

chips contracting options

2. Economy of scale effect

3. Set up of cooperation model

Threats

1. Different goals of supplier and

city

2. Poor cooperation between

supplier and city

3. Issues in contract

implementation and

enforcement

T-5: SWOT analysis of O1 and O2


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Major strengths of O1 model encompass independent wood chips supply, control over supply

mechanisms resulting in security of supply. Opportunities of O1 model are direct and indirect

employments and developing of efficient biomass contracting solutions, which can reflect in setting

up a model and example. Major weakness lies in the fact that the City without experience and know

how will have to bear the risk of investments and supply organization, while major threats lie in limited

funds for investments, inefficient management practices and supply risks. Major strengths of O2

model is that private supplier will have to invest and bear the supply risks and that the City have

available public procurement mechanisms to provide competitive supply. Private supplier should

have know-how and capacities for wood chipping business development. Major opportunities are in

developing an efficient wood chips contracting options and setting up a cooperation model while

additional opportunity for private supplier can be to create economy of scale effect by enlarging

supply network to other consumers and create additional competitiveness in terms of costs and

prices reduction. Major weaknesses of O2 is a possible price escalation, inability to provide

contracted quantities on required timing and issues in supplying with adequate quality. Major threats

of O2 are different goals of supplier and the city resulting in poor cooperation and issues in contract

implementation and enforcement. Considering that the City of Zaječar is already developing

capacities for road sides and river banks clearing and wood chips production based on O1, model

O2 can be partially implemented only in cases when needed quantities of wood chips cannot be

procured by PUC Održavanje Timok. Model O2 can be implemented in case of supply of Zaječar

medical center boiler house if PUC Odrzavanje Timok cannot perform the supply for some reason.

6.2. Wood and wood chips suppliers Most important wood suppliers in proximity of Zaječar have been identified and interviewed and their

possibility and propensity to participate in supply of future Zaječar biomass boiler houses have been

analyzed. Not a single specialized wood chips producer was identified in the area.

6.2.1. State Forest Management Company - PE Srbijašume

State forests in the area of Zaječar City are managed by PE Srbijašume, Forest Estate Timočke

šume - Boljevac. Total area of state forests and forest land managed by FE Timočke šume is over

80,000 ha. As a state forest management company PE Srbiašume are in charge of all forest

management activities according to the Law on forests, from forest management planning and plans

implementation, through forest guarding, nursing and protection, through tree marking, wood

stumping, harvesting organization and sale of wood products. Forest Estate Timočke sume have an

annual harvesting plan17 of an around 160,000m³ of wood from which up to 100,000 m³ of firewood,

which can generate up to 20,000 tons of forest residues derives after harvesting is performed.

Harvesting is organized by PE Srbijašume but done by private harvesting contractors upon public

procurement procedures. Wood is sold on the forest road, central storage, stump or next to stump,

and wood sale is in jurisdiction of General Direction of PE not forest estates.

17 http://www.Srbijašume.rs/boljevac.html


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F-14: Municipalities within Timočke šume Forest Estate of PE Srbijašume

There is a procedure in application for wood sale contracts, but due to very high demand, grading

system favorize old buyers with high degree of wood product finalization. In terms of firewood or

cellulosic wood most important buyers are pellet and chipboard factories.


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Representatives of FE Timočke šume do not see the potential of developing wood chips supply.

Also, there is very high demand for firewood from chipboard and wood pellet producers resulting in

high level of competition on wood on stump sales in forests damaged by ice breaks. According to

representatives of FE, there is a possibility of utilization of forest residues, but profitability is

questionable especially in selective harvests. Also, there is a challenge in work force provision. In

case there is an interest from the City of Zaječar to partially supply with wood chips raw material

direct contact between FE Timočke šume or General Direction of PE Srbijašume, should be

established.

6.2.2. Small-scale private forest owners

Private forests are dominant category in terms of ownership – over 130,000 ha in Timok forest area

are private forests. Private forest owners manage their forests, but provision of professional and

technical services is organized by PE Srbijašume. FE Timočke šume provides: tree marking, wood

stumping and control of wood trade. Private forest owners organize afforestation, harvesting and

wood sale. Annually around 120,000 m³ of wood from which over 80,000 m³ of firewood is produced.

Such production is generating over and 14,000 tons of forest residues. Private forests in the region

are fragmented, but larger than in other parts of Serbia. There are several local private forests

owners’ associations, who’s activities are mostly related to forest roads construction.

Although private forest owners manage their forests and have organized harvesting in the past, due

to high demand for wood, harvesting of private forests became private business of local and

regionally active companies. Usual practice in private forests is that wood is sold on stump to buyers

who do the harvesting and wood sale. Also, sale of complete forest plots by owners who live in the

cities or abroad is occurring. Buyers buy wood on stump, organize harvesting and sell logs and

firewood. Final consumer of wood from private forests are sawmills, firewood users, pellet and

chipboard companies. Competition for buying firewood and logs from private forests in the area is

on the constant rise fueled by increase of demand of chipboard factories, pellet factories and

firewood or logwood traders.

If the City is interested to attract forest residues or wood deriving from private forests, a possibility to

negotiate supply and delivery of wood material to storage site with small scale local companies

should be elaborated.

6.2.3. Medium-scale private forest or land owners or state forest users

There are 5 identified medium scale private forest and land owners and one state forest user in the

privatization process which can be considered as potential suppliers of raw material for wood chips

production for Zaječar boiler houses.

6.2.3.1. Timok Parish

The only typical forest owner with the aim of managing the forests is Timok Parish of the Serbian

Orthodox Church. They own around 1,000 ha of forests of churches and monasteries. Their largest

estate is Suvodol Monastery with 300 ha. Other monasteries are Bukovo, Vratna, Manastirica and

also plenty of smaller plots of church forests.


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Forest management of those forests is contracted with Foresting doo18, a private forest consulting

company from Belgrade. Foresting doo is in charge of organization of forest management activities

in Timok Parish, while the Parish gets annual contracted compensation and firewood supply. Apart

from Timok Parish, Foresting doo manages forests of Zica Parish as well. In Timok parish annual

harvest is around 2,500 m³ per year from which 800 m³ per year in Suvodol monastery property.

Quality structure of harvested wood is 70% or 1,800 m³ of firewood and up to 10% of forest residues,

from which 50% can be extracted or up to 150 tons. Main tree species are hardwood broadleaves –

beech and oaks, while there is a small portion of conifer plantations.

F-15: Locations of most important forest properties of Timok Parrish of SOC

Harvesting is subcontracted by Foresting doo to forestry harvesting companies. Firewood is used to

supply monasteries and sold to firewood traders or chipboard producers, while forest residues are

utilized where eligible. In general, they can be interested in supply of forest residues, but their

capacities and quantities are limited, and forest properties largely scattered.

6.2.3.2. Rakita Exploration

The Company Rakita Exploration19 is developing copper mines in the area of Bor. In mine

development process in last few years they have managed to acquire over 300 ha of agricultural

land, forests and forest land in the area of villages: Slatina, Brestovac and Metovnica within Bor City

limits, but 20 km from Zaječar.

18 https://sites.google.com/view/forestingdoo/%D0%BF%D0%BE%D1%87%D0%B5%D1%82%D0%BD%D0%B0

19 http://www.rakita.net/en/home/


https://sites.google.com/view/forestingdoo/%D0%BF%D0%BE%D1%87%D0%B5%D1%82%D0%BD%D0%B0

http://www.rakita.net/en/home/


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F-16: Locations of land and forests owned by Rakita Exploration

Around 150 ha of forests are within the land acquired by Rakita for coper mine development and

company continues to buy land. Currently those forests remained unutilized. The owner does not

have the forest management plan, nor is entitled to perform wood marking or tree stumping. Also,

Srbijašume cannot perform such activities to companies as forest owners. Also, in case of forest

clearing for mine development, tenfold value of the forests needs to be paid to the state budget as

compensation for forest land conversion. Nevertheless, mining expansion should generate

significant amounts of firewood and forest residues. If 100 m³ per ha is calculated as an average

wood volume – around 15,000 m³ of mostly firewood and forest residues could be available for the

market. Deriving forest residues can be potential source of supply for future Zaječar biomass boiler

houses or other wood chips users.

6.2.3.3. RTB Bor

RTB Bor20 is state owned mining and smelting company, which is in the privatization process21. Apart

from land used for mining and industrial land, the company is managing around 800ha of forests.

Forests are scattered between the mining areas and still there is no forest management plan.

Annually RTB harvests 200-500 m³ of black locust wood but they are also performing expansions of

the mining area and clearing the forests. Recently, they have announced the public call for sale of

6,000 m³ of wood on stump for clearing 29 ha of forests. As in the previous case the company need

to pay tenfold value of the forests to the state budget as a compensation for forest land conversion.

20 https://rtb.rs/en/

21 http://rs.n1info.com/a416275/Biznis/Kinezi-preuzimaju-RTB-Bor.html


https://rtb.rs/en/

http://rs.n1info.com/a416275/Biznis/Kinezi-preuzimaju-RTB-Bor.html


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Considering announced development of RTB with new owner, more forests can be expected to be

cleared for mines development generating logs, firewood and forest residues.

F-17: Locations of land and forests owned by RTB Bor

6.2.3.4. Salas doo

Salas doo22 is an agricultural company based in Salas village in Zaječar municipality. The company

owns or manage over 5,000 ha of predominantly agricultural land. They also own 360 ha of forests.

They used to manage 340 ha of state-owned forests, but management of those properties is

transferred to PE Srbijašume. They have valid forest management plan according to which annual

harvest should be 1,800 m3peryear, however they do not have harvesting activities in the forests.

On the other hand, they are performing orchard clearing and pruning. Annually they clear around 10

ha of cherry orchards and perform pruning of 35 ha of apple, plum and quince orchards. In addition,

they have around 300 tons of wood chips stored in jumbo bags in storage building, they’ve produced

few years ago and over 200 tons of wood chips raw material stored on site, originating from orchards

and other vegetation clearing. It is in Salas interest to sell both wood chips and wood chipping

material. Option of supplying Zaječar wood chips boiler houses from Salas doo should be elaborated

and exercised in direct contacts between the City and the Company, especially considering that

Salas is less than 20 km from Zaječar.

22 http://www.salasdoo.rs/Index_ser.html


http://www.salasdoo.rs/Index_ser.html


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F-18: Location of land and forests owned by Salas doo

F-19: Raw material for wood chips at Salas doo




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6.2.3.5. Delta Agrar Delta Agrar23 is an agricultural company, a part of Delta Group and one of the largest land owners

and agricultural producers in Serbia. In Zaječar area the company is engaged in development of

apple plantations. Currently they are producing apples on 150 ha orchard, situated 5 km from Zaječar

and have plans to expand their production to 500 ha. Currently they mulch apple pruning residues,

but as their orchards expand and mature, considering 4-8 tons/ha as an annual pruning residues

production, they should be generating over 2,000 tons/year in next 10 years. They are potentially

interested to sell their pruning residues at the road of orchard edge parity. Cooperation options

should be elaborated in direct contacts between the City and the Company.

F-20: Location of Delta Agrar apple plantations

6.2.4. Sawmills

Nakka doo24 operates a sawmill in Zaječar and it is the only sawmill in 100 km circle from Zaječar.

There annual processing capacities are 8,000 m3/year, which can result in 3-4,000 tons of sawmill

residues per year, however all residues they use for pellet production of 6,000 tons/year and they

even have to buy additional wood for pellet production. Option of supplying Zaječar with wood chips

or sawmill residues from this sawmill is very limited and possible only in case it would be more

profitable for the company to produce wood chips instead of pellet, which is not realistic in near

future.

23 https://www.deltaagrar.rs/home.html

24 http://www.naka-doo.com/pelet.html


https://www.deltaagrar.rs/home.html



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F-21: Naka doo sawmill location

F-22: Pictures from Naka doo sawmill




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6.2.5. PUC Timok Odrzavanje PUC Timok Odrzavanje is a communal company25 established by the City of Zaječar in 2018.

Company is in charge of management of parks, management of public lightning and sport and

recreational facilities. The company is developing capacities for road side management and wood

chips production and supply of future biomass boiler houses.

On the other hand, the company manages park forest of Kraljevica, which is state owned but

managed by the city of Zaječar. The area of the forest land is 330 ha, from which 150 ha is forest.

The forest had valid forest management plan until 2015, according to which 500 m3/year should have

been harvested and around 50 ha of shrub vegetation should have been cleared. However, those

activities were never executed. Forest management plan needs to be prepared and adopted again,

but at least 500 tons/year of wood chipping raw material should be expected from harvesting and

shrub clearing activities. Also, wood chipping raw material deriving from other city parks should also

be used.

F-23: Kraljevica forest

25 http://timokodrzavanje.rs/


http://timokodrzavanje.rs/


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F-24: Location of Kraljevica forest

Second grade waters, including small rivers are in jurisdiction of the cities and municipalities,

therefore the City can plan and organize clearing of river banks vegetation with the approval of

inspections in charge.

6.2.6. Water Management Company – PE Srbijavode

Management of rivers in Serbia is entrusted to PE Srbijavode26. Riverbank management of Zaječar

and Bor county is in jurisdiction of Negotin Water Management Working Unit. They are managing

parts of Danube, Jasenicka river Porecka river and Timok. Timok river banks are most relevant for

potential supply of wood chipping raw material from river banks to Zaječar. Timok river system is

202km long and it consists of: Svrljiski Timok and Trgoviski Timok, which form White timok in

Knjazevac. Black Timok and White Timok form Timok in Zaječar, which flows into Danube close to

Negotin. PE Srbijavode organize water management including clearing of vegetation from the river

banks and rivers. After initial clearing of vegetation from the banks and water and stump excavation,

every five years the vegetation should be cleared, considering vegetation growth rate. These

activities are planned by Srbijavode and executed by Water Company Požarevac27 according to the

contract. All activities have to be approved by water management and forestry inspection of the

Ministry of agriculture, forestry and water management. Water management company is in charge

for state owned land on the river banks, but challenge is that it is often borders with private land and

rivers change their courses so in case of clearing cadaster should be checked and ownership should

be marked in order to avoid disputes. There is a possibility to supply Zaječar with wood chipping raw

26 http://www.srbijavode.rs/

27 http://www.vodoprivreda.co.rs/sajt/index.html


http://www.srbijavode.rs/

http://www.vodoprivreda.co.rs/sajt/index.html


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material from Timok river banks, but this possibility needs to be elaborated in direct contacts between

the City in PE Srbijavode.

F-25: Timok river system


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F-26: Timok river banks close to Zaječar

6.2.7. Other potential suppliers

Other potential suppliers of wood chipping material are farmers which are clearing the orchards.

Existing trend in the region is development of apple or blueberry plantations; therefore, plums or

other fruits are being cleared. Whole wood from fruit trees is applicable for wood chips production

including thin branches from pruning, which may elevate ash content due to high bark share. The

policy of the City should be to open possibility for delivery of wood material from orchards to wood

biomass logistic center.

6.2.8. Wood chips producers There are no companies so far in the area specialized for wood chips production. Current demand

for wood chips is not high, but increase will occur due to ongoing fuel switch from fossils to biomass,

which is in progress in several municipalities of Timok region and ongoing CHP development

projects. Therefore, development of specialized wood chips producers should be expected.

6.3. Biomass Supply and Wood Chips Delivery Contracting In O1 scenario the City should organize unprocessed woody biomass supply from road sides

managed by the City or other Cities and municipalities in the area; or contract unprocessed biomass

supply from river banks with PE Srbijavode or forest with state forest manager - PE Srbijašume, or



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private forest owners or wood traders procuring wood in private forests. Also, the City should

organize transport and delivery of wood chips raw material to a central storage location – biomass

logistic and trade center, where wood should be stored prior to chipping. Wood can also be chipped

on site of takeover – road side, etc, depending on production organization.

Wood products that can be considered as unprocessed biomass are long firewood, cuttings and

forest residues, deriving from forests, river banks, road sites, parks, etc. Also, long and short, thick

or thin wood from branches and fruit trunks is acceptable.

Price of wood products in Serbia is usually expressed per volume unit – cubic meter (m³) or steer

meter (srm). However, woody biomass can also be sold per weight unit (tons). By buying the wood

per weight unit, important issue of bulk woody biomass low density compared to logs or firewood

can be resolved. In addition, water content of fresh wood and woody biomass is constant 45-55 %,

while density of woody biomass bulk is not, therefore energy value of both woody biomass can be

calculated circumstantially based on the weight. Table below presents basic properties of woody

biomass products, units in which they are usually sold along with conversion factors and prices.

Products/Units m³ srm Tons

Definition A volume that is made

by a solid cube of wood

that is 1 meter on each

side.

A volume of space that is made by a

cube of wood with space between

wood pieces included that is 1 meter

on each side.

Weight unit

Firewood Measure used by forest

management

companies

Measure used in private forest

owners and usual trade

Measure used by energy wood buyers or

wood pellet and chipboard factories

Long firewood Measure used by forest

management

companies

Not used Measure used by energy wood buyers or


Cuttings Measure used by forest

management

companies





Forest residues Measure used by forest

management

companies





Sawmill residues Not used Measure used by sawmills and wood

biomass processors



Products/Properties

Water content (%)

Density (t/m³)

Conversion

factor srm to m³

Heat value

(kWh/kg)

Conifer Broadleaves

Definition

Share of water in total

weight of humid wood

Weight of 1m³ of wood

How many m³ of

wood are needed

for stacking 1srm

of wood products

Heat value of 1kg

of wood

Firewood 45-55 760 1120 0.69 2.50

Long firewood 45-55 760 1120 / 2.50

Cuttings 45-55 760 1120 0.55 2.50

Forest residues 45-55 760 1120 0.40 2.50

Sawmill residues 30-45 540 800 0.60 3.20

Products/Prices

State forests Small and Medium scale private

forests

Sawmills

On stump On forest

road/log

storage

On stump On forest

road/log storage

At sawmill site


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Definition Price of wood on stump

– in the forest before

harvest – buyer bares

costs of harvest, wood

extraction, loading and

transport. In case of

forest residues buyer

bares the costs of

extraction, loading and

transport.

Price of wood on

forest road or

log storage –

buyer bares

costs of loading

and transport

Price of wood on

stump – in the

forest before

harvest – buyer

bares costs of

harvest, wood

extraction,

loading and

transport

Price of wood on

forest road or log

storage – buyer

bares costs of

loading and

transport

Price of forest

residues at

sawmill site –

buyer bares costs

of loading and

transport

Firewood Con: 4.20 – 15.50 €/m³

Broad: 6.20–23.50

€/m³

Con:18-23 €/m³

Broad: 26-

34€/m³

10-15 €/srm or

15-20 €/m³

1/3 to 1/2 of

selling price

value

Broad: 30 €/srm or

40 €/m³

/

Long firewood Con: 4.20 – 15.50 €/m³

Broad: 6.20–23.50

€/m³

Con:18-23 €/m³

Broad: 26-

34€/m³

10-15 €/srm or

15-20 €/m³

1/3 to 1/2 of

selling price

value

Broad: 33€/ton or

40 €/m³

/

Cuttings Con: 2.6-7.2 €/m³

Broad: 5.7– 15.7€/m³

Con:11 €/m³

Broad: 23 €/m³

Sold as firewood Sold as firewood

/

Forest residues Con: 3.00 – 6.2 €/m³

Broad: 3.3 – 11.5 €/m³

/ 7 €/srm Sold as firewood

/

Sawmill residues / / / / 9-13 €/srm

T-6: Woody biomass units, conversion factors and prices in Zaječar region

Supply of wood from road sides is linked to road maintenance, which is in jurisdiction of the City,

thus local communal company such as PUC Timok Održavanje should do it on secondary network

of local roads. Price of wood should not be calculated, only the costs of its harvesting, transport and

chipping. Same is with supply of wood chips raw material from parks or river banks of secondary

river network, which management is also in City jurisdiction. In case of PUC Timok Održavanje

performs road site or river bank clearing to other municipalities in the region, services should be

charged and a value of woody material to be taken over can be determined based on the cost

assessment and experiences from operations in Zaječar.

Supply of wood chipping raw material from river banks of Timok river is in jurisdiction of PE

Srbijavode. It can be however assumed that woody biomass can be either taken over at harvesting

site or harvested by PUCTimok Održavanje in case of contracting with PE Srbijavode.

With PE Srbijašume, contract for wood supply should be closed with Direction of PE Srbijašume in

Belgrade, for all quantities excessing 50 m³. Usual practice of PE is to close annual contracts, where

regular buyers have the advantage. PE Srbijašume is some occasions, such as the case of some

chipboard and large wood pellet production, practice long term – 10-year supply contracts, but after

probation period of few years of annual contracts. Also, there are cases of combined heat and power

plants, closing 12-year supply contract with PE without trial period. Supply can be contracted with

takeover on:

- Stump;

- Next to stump;

- Forest road or central log storage.


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Sale of wood on stump is an option offered by PE Srbijašume, especially in case of low-quality

coppice forests for firewood production. This practice was exercised in the region last few years due

to the need to regenerate forests damaged by ice breaks. Usual practice is that Forest Estates make

a public call28 for wood on stump sale in certain sections of the forests within forest management

units. Companies interested in wood on stump buying are bidding for the contract, therefore starting

price depending on the demand can be increased up to 10 %. In case of wood on stump sale,

contract is based on the planned quantities for harvest, however, final payment is made according

to the measured quantities of extracted wood. There is a pricelist of PE Srbijašume for sale of wood

on stump29, where price depends on forest position and forest roads conditions with special

categories of wood on stump from forest affected with fires or ice, snow and wind brakes. Prices of

wood on stump in different categories of forests, vary significantly. In case of wood on stump sale,

all harvesting, and wood extraction operations are performed by the buyer, whereas the seller

controls and monitors harvesting and extraction.

Sale of wood next to stump is a practice which is in most cases applied for smaller quantities of

wood. In such manner forest residues are sold to local population. Forest residues are collected and

extracted to the forest road and then measured by forest technicians. This is a retail of wood and

small quantities are sold directly by Forest Units and Forest Estates. Another possibility is to make

annual or even long-term contract for collection and extraction of forest residues. However, costs of

woody biomass procurement in such manner can be substantial, especially in case of selective

harvest, steep terrains and without optimal forest roads and skidding roads network. Such operations

also require significant work force, since collection of biomass needs to be manual in cases that

harvesting sites are not easily accessible, on the other hand if residues are scattered, it is necessary

to pile them manually in order to be collected mechanically.

Sale of wood on the forest road or central log storage is a most usual practice of PE Srbijašume,

especially for logs, long firewood or cut firewood. Sawmills, chipboard and pellet factories usually

buy wood in such way. Forest residues, on the other hand are not extracted in case of wood product

method application, which is dominant in PE Srbijašume system. Buying forest residues in central

storage is a most cost-effective option, nevertheless it can be applied in case of the re-introduction

of whole tree or part tree method, where wood products are tailored and produced at the storage.

Contracting options need to be explored in case of application of scenario O1 in direct contact

between Zaječar City and PE Srbijašume.

With private forest owners, or harvesting companies trading with wood from private forests in O1

case Zaječar City can make contracts for woody biomass delivery to the central storage or contracts

for buying long firewood or woody biomass at forest or paved road. It is important to stress that

contracting with individual private forest owners can be complicated since most of private forest

owners are small scale with small quantities of wood for sale. Nevertheless, significant quantities of

wood can be procured if a possibility for small scale forest owners of woody biomass delivery and

sale at the central biomass storage is opened.

On the other hand, there are companies which trade with wood from private forests and annual

supply contracts can be concluded with them as well for delivery of woody biomass to the central

storage or takeover at forest road or sellers’ storage.

28 http://www.Srbijašume.rs/licitacija.html

29 http://www.Srbijašume.rs/pdf/cenovnikogr.pdf

http://www.srbijasume.rs/licitacija.html

http://www.srbijasume.rs/pdf/cenovnikogr.pdf


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In case of O2 scenario in case of lack of missing quantities the City can produce itself, it should

organize public procurements for Wood chips delivery to a storage at DH plant – consumption

point. Buying conditions should encompass binding obligations in terms of requested quality,

quantities to be delivered and timing including delivery schedule. Contract should reflect the price,

quality, quantity, delivery schedule and mutual responsibilities. Price of wood chips can be

determined per unit of defined wood chips quality and referent water content. Quality of wood chips

should be determined based on Serbian wood chips standards30 and requirements of firing

technology used. Quantity should be determined by calculated and determined consumption, while

delivery schedule should be determined according to heat production monthly demand and capacity

of the storage in each of DH plants. Finally, all mutual responsibilities including payments, penalties,

dispute settlements and possibility of contract termination, should be defined.

Wood chips on Serbian and Western Balkan market is usually sold per weight unit or bulk volume

unit. Transactions based on energy content are still not present. Table below presents wood chips,

units, conversion factors and prices. For contracting between envisaged parties, we can recommend

sale based on volume unit with sample control including quality control, granulation control and water

content control defined by Serbian standard31.

Products/Units Bulk m³ tons

Definition A volume of space that is made by a cube of bulk wood chips with

space between wood chips pieces included that is 1 meter on each

side.

Weight unit

Wood Chips Measure used by chipboard and pellet factories Measure used by pellet factories and

wood chips traders

Wood Chips

Properties

Water content (%)

Density (t/bulk m³)

Heat value

(kWh/kg)

Conifer Broadleaves

Definition Share of water in total

weight of humid wood

chips

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

Wood chips 45-55 300-350 400-450 2.50

Wood Chips Prices

Delivered to buyers’ site

Definition Wood chips delivered and unloaded to buyers point

Conifer &

Broadleaves green

wood chips mix

12-15 €/bulk m³

T-7: Wood chips units, conversion factors and recommended prices

Wood chips can be delivered to DH plants directly from raw material production and chipping site or

from central storage, 45%-55% will be water content range on which wood chips should be delivered

to DH plant. Thus, the price can be indicated in RSD per bulk m³ of wood chips with water content

ranging from up to 55%. This 55% water content should be the restriction limit for acceptance of

wood chips. This water content is applicable only in wood chips boilers which can operate on such

regimes.

30 SRPS EN ISO 177225-1 and SRPS EN ISO 177225-4

31 SRPS EN ISO 18134-2, SRPS EN ISO 17827-1, SRPS EN ISO 18315, SRPS EN ISO 14780


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6.4. Woody Biomass Central Storage Location - Biomass Logistic and Trade Center

In case scenario O1 is applied, wood chips can be produced on wood harvesting site or unprocessed

biomass can be delivered to central biomass storage managed by PUC Timok Održavanje.

F-27: Location of future boiler house and biomass logistic and trade center site




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Wood biomass central storage location can be organized next to the future biomass boiler house,

where there is a 7,000 m2 land plot owned by the city. It is a greenfield location, with enough space

to organize the boiler house, storage for unprocessed biomass and wood chips sheds. Location is

accessible for transport means via paved road linked to bypass around Zaječar. Map showing the

location is presented in F-2.

Considering that wood chips raw material will be produced in clearing of road sides or river banks or

forests in spring, summer and autumn months, and wood chips will be used in autumn and winter

some space would be needed to store wood or wood chips. Up to 2,000 m2 would be needed for

woody biomass open storage, wood chips shed, and machinery and equipment shed. Wood chips

can also be stored without shed, if adequate boilers enabled to cope with high water content are

installed.

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

Fresh Woody biomass 3000 0.36 5 - 7 1,400

Wood Chips 500 0.36 4 - 6 300

Machinery and equipment 200

T-8: Required space for fresh woody biomass and wood chips storage, machinery and equipment

Example of the organization of wood biomass logistic and trade center is presented below.

F-28: Biomass logistic and trade center organization

Central biomass storage needs to have close access to major road, without weight restrictions.

Storage should be equipped with necessary infrastructure including: electricity, water, and sewage

and telephone connection. Storage surface should be paved or asphalted in order to prevent mixing

gravel with woody biomass which can cause damages to wood chipping machines. Open part should

be used for storing fresh woody biomass.


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Open part should have enough space for manipulation with trucks and other machines. All of these

conditions are met at the site proposed by the City of Zaječar. Wood chips shed should also be built

for storing wood chips. Shed should be covered with roof and opened from the front and sides, to

enable ventilation and natural drying of wood chips. Central biomass storage also needs a machinery

garage and an office container.

The City of Zaječar is already procuring32 multifunctional vehicle for clearing road side vegetation

with appendixes for loading, cutting and pruning of branches, etc; manually fed, pulled mobile wood

chipper with own engine and kipper trucks for transport of biomass and wood chips. Machines in the

procurement process have adequate capacities for cutting wood of up to 15 cm diameter and

chipping wood with up to 20 cm diameter. Larger trees can be harvested with chain saws and split

before chipping. Demanded capacity of the wood chipper is enough to produce 40 bulk m3 per hour,

in case of 50% of capacity utilization, with 4-hour work in 220 days, total production can be 18,000

bulk m3, which is two times more than needed quantities of wood chips for Zaječar boiler houses.

Such chipper can be used for outsourcing wood chipping services or production of wood chips for

sale. Price of wood chipping services in Serbian market ranges from 12-14 €/ton. Truck or tractor

should be used for pulling the wood chipper. Manipulation with woody biomass and wood chips,

including wood chips loading, should be operated with multifunctional vehicle which is in

procurement. Also, telescopic handler can be equipped with fork lifter and loading bucket.

Biomass logistic and trade center is a point where wood chipping material storing and production

and manipulation of wood chips and it is needed in case of O2 as well. Also, wood chips can be

directly produced at harvesting site and delivered to boiler house if installed boiler can cope with high

water content. Supplier of wood chips should have the location which satisfy requirement in terms of

necessary space and size. Supplier in O2 scenario also need to be equipped with wood chippers

and transport vehicles. Adequate trailers for transport of woody biomass and wood chips are also

required. Walking floor trailers with capacity of 90-100 m³ are the most common for wood chips

tractors but also there are kipper trailer or container trailer of 50-60 m³ for wood chips delivery to

locations with restricted accessibility for large trailers. Zaječar medical center boiler house will be

located in the area where weight restrictions in transport exists. In case of 50% supply outsourced,

transporting and production capacities of the supplier needs to be higher than 200 bulk m³ of wood

chips per week – since this is a half of the weekly demand of future DH plant.

32 http://www.Zaječar.info/files/tender/2018/8/kd404-3251.pdf

http://www.zajecar.info/files/tender/2018/8/kd404-3251.pdf


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7. Financial analysis Financial analysis will present an overview of envisaged investment and operational costs and

incomes along with calculation of basic financial indicators for cluster supply. Analysis will also

compare financial indicators of O1 and O2.

7.1. Investment Investment costs are presented in table below. Investment costs are related to required construction

and machinery procurement presented in chapter 6 including investments in DH system – boilers

and pipeline. Total investment in case of O1 is assumed at 2,340,000 € or 2,000,000 € in case of

O2.

Investment O1 - € O2 - €

DH system including pipeline 2,000,000.00 2,00,000.00

BLTC, Location preparation, paving, sheds 100,000.00 0.00

Multifunctional vehicle, transport vehicle, chipper 240,000.00 0.00

Total Investment costs 2,340,000.00 2,000,000.00

T-9: Investment costs

7.2. Operational costs

Operational costs are related to woody biomass and wood chips prices presented in chapter 6.

Unit costs are presented below.

Unit costs specification Costs

Average price of raw material for wood chipping at stump (€/t) 0.00

Harvesting of woody biomass (€/t) 5.00

Woody biomass transport to BLTC 5.00

Manipulation and storage costs (€/t) 1.00

Wood chipping costs (€/t) 5.00

Transport to DH (€/t) 3.00

Wood chips price delivered to DH (€/bulk m³) 15.00

Gross salary DH and BLTC operators (€/month) 600.00

T-10: Unit costs

Quantities of various inputs for operational costs are presented below.

Info Quantity

Wood chipping raw material demand (t/year) 3,600.00

Wood chips demand (t/year) 3,600.00

Wood chips demand (bulk m³/year) 10,000.00

Number of DH operators 3.00

Number of biomass preparation operators 4.00

Maintenance costs O1/O2 (€/year) 30,000.00/20,000.00

T-11: Inputs for operational costs

Annual operational costs based on above mentioned inputs are presented below. In case of O1 they

are 148,820 € while in case of O2 they are 191,600 €.


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Costs O1 - € O2 - €

Salaries 50,400.00 21,600.00

Wood chipping raw material production 18,018.00 0.00

Woody biomass transport 18,000.00 0.00

Manipulation and storage costs 3,600.00 0.00

Wood chips transport 10,800.00 0.00

Wood chipping 18,000.00 0.00

Wood chips procurement costs 0.00 150,000.00

Indirect costs including utilities and maintenance 30,000.00 20,000.00

Total Operational costs 148,820.00 236,600.00

T-12: Annual operational costs

7.3. Incomes

Income is perceived as sale of 8,100 MWh of heat for 50 €/MWh hypothetical price, which is similar

as perceived LUC costs in Mionica DH study33. Total incomes in both options are calculated at

405,000 €/year.

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

Cash flow for 20 years of operation, along with incomes and costs is presented in chart below for O1

and O2. Cash flow assumes that production capacities will not grow, and that infrastructure and

object will retain their value at the end of 20-year cycle.

33 Milosevic, M. Elaboration of Technical Project Concept of the fuel switch to biomass in Mionica including

economic evaluation and recommendations for implementation structure of district heating grid. 2016.

GIZ DKTI;

-3,000,000

-2,000,000

-1,000,000

0

1,000,000

2,000,000

3,000,000

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

O1

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


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C-1: Costs, incomes, balance for O1

C-2: Costs, incomes, balance for O2

Tables below presents Net present value (NPV), internal rate of return (IRR), payback period and

Benefit-cost ratio (BCR) for O1 and O2.

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

0 405,000 -2,488,818 -2,083,818 -2,083,818

1 405,000 -148,818 256,182 231,994

2 405,000 -148,818 256,182 210,090

3 405,000 -148,818 256,182 190,254

4 405,000 -148,818 256,182 172,291

5 405,000 -148,818 256,182 156,024

6 405,000 -148,818 256,182 141,292

7 405,000 -148,818 256,182 127,952

8 405,000 -148,818 256,182 115,871

9 405,000 -148,818 256,182 104,931

10 405,000 -148,818 256,182 95,024

11 405,000 -148,818 256,182 86,052

12 405,000 -148,818 256,182 77,927

13 405,000 -148,818 256,182 70,569

14 405,000 -148,818 256,182 63,906

15 405,000 -148,818 256,182 57,873

16 405,000 -148,818 256,182 52,408

17 405,000 -148,818 256,182 47,460

18 405,000 -148,818 256,182 42,979

19 405,000 -148,818 256,182 38,921

∑

8,100,000 -5,316,360 2,783,640 0

BCR 1.52 IRR 10.43%

T-13: Economic indicators: NPV, IRR, return of investment and BCR for O1

-2,000,000

-1,500,000

-1,000,000

-500,000

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

O2

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


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In O1 investment can be returned in the tenth year of operation. Benefit cost ratio is 1.52, while

internal rate of return is 10.43%.

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

0 405,000 -2,191,600 -1,786,600 -1,456,000

1 405,000 -191,600 213,400 279,275

2 405,000 -191,600 213,400 226,728

3 405,000 -191,600 213,400 184,068

4 405,000 -191,600 213,400 149,435

5 405,000 -191,600 213,400 121,318

6 405,000 -191,600 213,400 98,491

7 405,000 -191,600 213,400 79,960

8 405,000 -191,600 213,400 64,915

9 405,000 -191,600 213,400 52,701

10 405,000 -191,600 213,400 42,785

11 405,000 -191,600 213,400 34,735

12 405,000 -191,600 213,400 28,199

13 405,000 -191,600 213,400 22,893

14 405,000 -191,600 213,400 18,586

15 405,000 -191,600 213,400 15,089

16 405,000 -191,600 213,400 12,250

17 405,000 -191,600 213,400 9,945

18 405,000 -191,600 213,400 8,074

19 405,000 -191,600 213,400 6,555

∑

8,100,000 -5,832,000 2,268,000 0

BCR 1.39 IRR 9.99%

T-14: Economic indicators: NPV, IRR, return of investment and BCR for O2

In O2 investment can be returned in the tenth year of operation. Benefit cost ratio is 1.39, while

internal rate of return is 9.99%.

C-3: Sensitivity analysis for O1

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

70% 80% 90% 100% 110% 120% 130%Chipping Raw material Logistic, transport, manipulation Investment


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Sensitivity analysis for O1 shows dependence of iRR from change of most important inputs –

investment costs, chipping costs, logistic costs and raw material costs. iRR is mostly dependent on

investment costs, while change of other inputs is not so relevant.

C-4: Sensitivity analysis for O2

In O2 scenario chipping costs and logistics costs are not present since wood chips is delivered to

DH by suppliers. There is an almost equal influence of investments and wood chips costs. The

change of investment costs for 30% up and down affects iRR change from 17% to 10% and 10% to

6%. The change of wood chips prices effect is similar, in case of 30% increase of wood chips price

iRR will drop from 10% to 6%, while in case of price reduction it will rise from 10% to 14%.

Financial indicators for both scenarios are very similar however sensitivity of iRR from the price of

wood chips is apparent in case of O2, while investment costs are most influential in both scenarios.

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

70% 80% 90% 100% 110% 120% 130%Chipping Wood chips Logistics Investment


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8. Conclusions

Regarding amounts and quality of wood chips needed for future Zaječar wood chips boiler houses,

we can conclude that provision of those quantities and quality should not represent the challenge

due to the fact that production of sufficient quantities of raw material can be organized by Zaječar

communal company from parks, road sides and second grade river banks clearing in Zaječar and

neighboring municipalities. Alternatives include supply from Timok river banks vegetation in

cooperation with PE Srbijavode, orchards pruning residues or forest residues. We can also expect

that wood chips suppliers in the area will develop considering other projects which will consume

wood chips in near future. Also, the mixed supply organized by Zaječar communal company and

private suppliers is a possibility.

There should be no significant financial differences if Zaječar organize supply of raw material for

chipping and facilitate storage and production of wood chips, or if wood chips would be procured on

the market. Considering medium quantities of required wood chips and relatively high investment

costs for the whole DH systems and needed machinery the level of investment costs has the highest

influence on project profitability, while influence of wood chips costs and other costs is not significant

in case of Zaječar organizes own supply and production, but it is relevant in case of wood chips

supply on the market.

However, major difference between elaborated supply options is in organization and possibility of

local administration and local communal company to organize a business activity, know how,

efficiency, competitiveness and allocation of supply risks. Although there are no successful examples

of local administrations organizing raw material supply and production, especially when it comes to

wood chips, which is a new product in Serbian market, Zaječar already decided to organize

production of wood chips from road sides clearing and is developing technical capacities in this

direction. Therefore, future activities of the City should focus on development of know-how and

further capacities in production and also commercial activities related to wood supply and

processing. In case that City fails to supply and produce needed quantities of wood chips, for

additional quantities the City would need to organize preparation of tender, contracting, monitoring

and developing control mechanisms which will ensure efficient and timely supply of needed

quantities of adequate quality wood chips.


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9. Literature and sources Helbig, F. Market Assessment: Wood Chips in Serbia Production, Consumption & Transportability. 2014.

GIZ DKTI.

Milijic, V. Report on Design of woody biomass supply chain cluster for district heating plants in

municipalities of Prijepolje, Priboj and Nova Varoš. 2015. GIZ DKTI http://www.bioenergy-

serbia.rs/images/documents/studies/Cluster_Supply_Study_20150906_final.pdf

Milijic, V. Mionica Wood Chips Supply Study. GIZ DKTI.2018

Milijic, V. Despotovac Wood Chips Supply Study. GIZ DKTI 2018

Milosevic, M. Elaboration of Technical Project Concept of the fuel switch to biomass in Mionica including

economic evaluation and recommendations for implementation structure of district heating grid.

2016. GIZ DKTI

Djuric, A. Study on Biomass Potentials and Ways of Utilization of Roadside Biomass (“Rastinje”) on the

Teritory of Bajina Basta Municipality. GIZ DKTI 2016

Pre-Feasibility Studies on 15 Biomass CHP-plants for District Heating Companies in Serbia for Serbian

cities/municipalities: Bajina Bašta, Čačak, Jagodina, Kikinda, Kladovo, Knjaževac, Kosjerić,

Negotin, Nova Varoš, Novi Pazar, Priboj, Šabac, Trstenik, Velika Plana, Zrenjanin. iC Consulenten

for KfW.

Wieser, H. Milijic, V. Study on Agro biomass Availability in Serbia. GIZ DKTI 2017

http://www.bioenergy-point.rs/

http://www.mre.gov.rs/doc/registar230818.html#Sec_Biomasa

[https://sites.google.com/view/forestingdoo/%D0%BF%D0%BE%D1%87%D0%B5%D1%82%D0%BD%

D0%B0

http://bioresproject.eu/

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

http://rs.n1info.com/a416275/Biznis/Kinezi-preuzimaju-RTB-Bor.html

http://sparrow.rs/

http://timokodrzavanje.rs/

http://www.ekostep-pellet.rs/

http://www.fcc-group.eu/sr/Srbija/Pocetna.html

http://www.foragrobio.rs/

http://www.iss.rs/rs/standard/?national_standard_id=58965

http://www.iss.rs/rs/standard/?national_standard_id=59631




http://www.kmdcompany.com/pelet-pellet.html

http://www.lamborghini-tractors.com/en-eu/

http://www.metla.fi/julkaisut/workingpapers/2010/mwp186.pdf



http://www.rakita.net/en/home/

http://www.bioenergy-serbia.rs/images/documents/studies/Cluster_Supply_Study_20150906_final.pdf

http://www.bioenergy-serbia.rs/images/documents/studies/Cluster_Supply_Study_20150906_final.pdf


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http://www.salasdoo.rs/Index_ser.html

http://www.Srbijašume.rs/boljevac.html

http://www.Srbijašume.rs/licitacija.html

http://www.Srbijašume.rs/pdf/cenovnikogr.pdf

http://www.srbijavode.rs/

http://www.vodoprivreda.co.rs/sajt/index.html

http://www.Zaječar.info/files/tender/2018/8/kd404-3251.pdf

https://rs.kronospan-express.com/sr/products

https://rtb.rs/en/

https://www.deltaagrar.rs/home.html

www.biomasstradecentre2.eu/scripts/download.php?file=/data/pdf_vsebine/Technical_backgrounds/XI.

Technical_backgrounds.pdf


http://www.biomasstradecentre2.eu/scripts/download.php?file=/data/pdf_vsebine/Technical_backgrounds/XI.Technical_backgrounds.pdf

http://www.biomasstradecentre2.eu/scripts/download.php?file=/data/pdf_vsebine/Technical_backgrounds/XI.Technical_backgrounds.pdf



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10. Annexes

10.1 Annex I: List of interviewed persons

Person Position, organization

Bosko Nicic Mayor of the City of Zaječar

Sasa Matijevic Head of Public Procurement Unit of the City of Zaječar

Vice Lalic Director of JKP Timok Odrzavanje Zaječar

Jasmina Basalic JKP Timok odrzavanje Zaječar

Zoran Velickovic Director of Forest Estate Timocke Sume Boljevac, PE Srbijašume

Nenad Stevanovic Director of Foresting doo

Bozidar Mircic Nakka doo, Zaječar

Vesna Filipovic Forestry engineer, RTB Bor

Tibor Strak Land acquisition manager, Rakita Explorations doo

Dragomir Milovanovic PE Srbijavode, Unit Negotin

Ivan Rkulovic Forestry Inspector, Ministry of Agriculture

Aleksandra Trifunovic Deputy director Salas doo, Zaječar

Dusan Kalajcic Agricultural engineer, Agromarket doo

Ivan Djenic Agricultural engineer, Delta Agrar doo

wood chips supply study for the city of...wood chips supply study for the city of zajeČar prepared...

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