Deutsche Gesellschaft für Internationale Zusammenarbeit ... · Železnička Street and in Primary School ‘Desanka Maksimović’. Except for the Companies ‘Špik Iverica’ and

Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH

Development of a Sustainable Bioenergy Market in Serbia (DKTI)

WOODY BIOMASS POTENTIAL AND LOGISTICS STUDY FOR MUNICIPALITY OF

GORNJI MILANOVAC

PREPARED BY:

Milan Malidžan, B.Sc. Economics

Slaviša Vitorović, B.Sc. Mechanical Engineering

November, 2017

GIZ DKTI Programme ‘Development of sustainable bioenergy market in Serbia’:

Woody biomass potential and logistics study for the Municipality of Gornji Milanovac

2

Contents

1. Definition of Tasks ........................................................................................................................... 5

2. Methodology applied ....................................................................................................................... 6

3. Executive Summary ......................................................................................................................... 7

4. Moravica District ............................................................................................................................. 10

5. Public Utility Company ‘Gornji Milanovac’ .................................................................................. 12

6. Biomass potentials and realistic biomass supply in the area of Gornji Milanovac .............. 14

6.1 Estimation of roadside and riverbed biomass ......................................................................... 18

7. Biomass market situation in the area of Gornji Milanovac and input prices ......................... 19

7.1 Wood processing industry in area of Gornji Milanovac and potential for wood chips

supply ................................................................................................................................................... 22

8. Biomass supply and logistics ....................................................................................................... 26

8.1 Technical requirements and machinery in use ....................................................................... 26

8.2 Supply chain management ......................................................................................................... 30

8.3 Biomass storage .......................................................................................................................... 33

9. Legal aspects related to biomass utilization .............................................................................. 37

10. Financial analysis and economic indicators of biomass supply organization and financing

options .................................................................................................................................................. 39

10.1 Investments in hardware and operational costs ................................................................... 39

10.2 Economic indicators .................................................................................................................. 40

11. Conclusion and recommendations............................................................................................ 42

12. Literature ....................................................................................................................................... 43



3

List of Tables

Table 1: Road distance (km) between Gornji Milanovac and neighbouring cities ................... 11

Table 2: Example of unfavourable road connections of Gornji Milanovac to the west,

particularly to the Kolubara District .................................................................................................. 12

Table 3: Installed capacities operated by PUC ‘Gornji Milanovac’ ............................................. 13

Table 4: Data on forests on the territory of FEs in charge of respective area .......................... 15

Table 5: Forest area distribution by regions, municipalities and ownership ............................. 16

Table 6: Caloric value and ash content for selected wood fuels................................................. 18

Table 7: FE ‘Golija’, Ivanjica: wood sale in 2016 ........................................................................... 20

Table 8: Total wood sale in the area of 50 km road distance from Gornji Milanovac .............. 21

Table 10: Machinery necessary for biomass mobilization ........................................................... 29

Table 11: Requirements for wood chips according to SRPS EN ISO 17225-4:2015 .............. 32

Table 12: Machinery necessary for manipulation with wood chips ............................................ 39

Table 13: Annual operational costs related to manipulation with wood chips .......................... 39

Table 14: Analysis of sensitivity of fuel savings on fuels prices fluctuation- ............................. 40

Table 15: Analysis of sensitivity of fuel savings on fuels prices fluctuation- ............................. 41

List of Figures

Figure 1: Position of the Moravica District on the territory of Serbia, and its municipalities ... 10

Figure 2: Position of Gornji Milanovac in central Serbia .............................................................. 11

Figure 3: Location of the boiler rooms ............................................................................................ 13

Figure 4: Forested area in Serbia .................................................................................................... 14

Figure 5: Red circle marks area at 50 km of road distance from Gornji Milanovac ................. 20

Figure 7: Supplying wood directly from forest, option I ................................................................ 30

Figure 8: Supplying wood from forest to the storage or logistic centre ...................................... 31

Figure 9: Logistics and supply chain options for supply of wood chips ..................................... 31

List of Photos

Photo 1: Gornji Milanovac ................................................................................................................. 12

Photo 2: Roadside maintenance (Source: http://www.jp-gm.org)............................................... 19

Photos 3, 4: ‘Drvoprerada’, Klatićevo- wood drying kilns and covered storage ....................... 22

Photo 5: Oak round wood at ‘Drvoprerada’ .................................................................................... 22

Photos 6, 7, 8: Facilities of ‘Prezentparket’ .................................................................................... 23

Photos 9, 10, 11: Wood residuals in apple orchard by the road in a Village of Vinča (Topola),

30 km from Gornji Milanovac, November 2017 ............................................................................. 25

Photos 12, 13: Material for producing wood chips ........................................................................ 33

Photo 14: Parking lot in front of the boiler room in Železnička Street ........................................ 34

Photo 15: Boiler room besides the building of Primary School ‘Desanka Maksimović’. ......... 35

Photos16, 17: Stored wood chips .................................................................................................. 35

Photo 18; Trailer with hydraulic lifter ............................................................................................... 36

Photo 19: Tractor with telescopic handler with fork lifter .............................................................. 36



4

List of Abbreviations

A Annum

BMZ German Federal Ministry for Economic Cooperation and Development

CB Cost Benefit

CC Constitutional Court

DKTI German Climate Technology Initiative

€ EUR

EU European Union

FAO Food and Culture Organization

FE Forest Estate

FAU Forest Administration Unit

GIZ Deutsche Gesellschaft für Internationale Zusammenarbeit

H Hour

Ha Hectare

Kg Kilogram

Km Kilometre

kW Kilowatt

m³ cubic meter

MW Megawatt

No Number

PC Public Company

PUC Public Utility Company

RS Republic of Serbia

SE State Enterprise

SECO State Secretariat for Economic Affairs (Switzerland)

T Ton



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1. Definition of Tasks

Development of Woody biomass potential and logistics study for the Municipality of Gornji

Milanovac is supported by the Programme ‘Development of a Sustainable Bioenergy Market

in Serbia’, funded by the German Federal Ministry for Economic Cooperation and

Development (BMZ) under the German Climate Technology Initiative (DKTI), and

implemented by Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH.

The goal of the Study is determination of realistic woody biomass potential in the Gornji

Milanovac area within a radius of 50 km road distance, and provision of essential information

and data for decision makers in terms of implementation of a fuel switch project- from fossil

fuels, i.e. heavy oil (mazut) and coal to wood chips. It is planned the installation of 2.5 MW

wood chips boiler instead of a current mazut boiler in the boiler room of Public Utility

Company. Additional small boiler would replace coal boiler of 400 kW in Primary School

‘Desanka Maksimović’.

Tasks and activities

1. Biomass potentials and realistic biomass supply

Specification of available woody biomass potential from ‘Srbijašume’ and private

forests in the given area

Available woody biomass (wood processing residues by type and quantity)

Estimation of roadside, riverbed and park biomass

Determination of technical potentials and realistic biomass supply

2. Biomass supply and logistics

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

Technical requirements and machinery in use respectively necessary for sustainable

biomass supply

Supply chain management – recommended management procedures

Biomass storage and overview on technology and machinery used in biomass

harvest and logistic chains

3. Legal aspects related to biomass utilization

4. 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



6

2. Methodology applied

Woody biomass potential and logistics study for Gornji Milanovac should serve as a basis for

installation of 2.5 MW wood chips boiler and a smaller wood chips boiler in the boiler rooms

determined by the beneficiary, aimed to replacing the existing mazut, i.e. coal boilers. The

Study is based on both desk research and field investigation. Methodology applied in order

to meet the goal of the Study encompasses following activities:

1) Desk research of relevant data regarding: situation in the designated area

regarding forestry, biomass market, wood processing, roadside biomass,

infrastructure related to the installation of new boilers, biomass storage and

recommended options for organizing the supply chain, stakeholders in the

potential project at the supply side, and market research.

2) Review of selected literature on the topics of biomass fuels, referent legal

framework, and of available good/ bad practice examples.

3) Interviews with selected stakeholders representing local administration,

relevant local and national public companies, wood processors and

entrepreneurs. Structure of the interviews was following: a) standard

questions on biomass production and the sectors of forestry and wood

processing industry b) data on specific operations of a particular stakeholder

c) professional and personal experience and attitude towards the fuel switch

project and potential involvement. Interviews were conducted as a phone

interviews and face to face interviews during the field visits.

4) Field visits were conducted to specific stakeholders selected by the authors

as well as suggested by relevant local representatives.

5) Comparison and analysis of data gathered from different sources related to

respective sectors, calculation and estimation, followed by consultations with

experts in the fields of forestry, thermal and mechanical engineering.

6) Evaluation of the results of analysis according to development of different

scenarios of the project’s implementation.

7) Financial analysis

8) Conclusions and recommendations

9) Reporting to GIZ

Time frame of conducted assessment: November 2017.



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3. Executive Summary

Gornji Milanovac is located on hilly terrain in southwest Šumadija, at foothill of mountains

Rudnik, Maljen, and Suvobor. Metal and food processing are dominant industries in Gornji

Milanovac. There are also companies dealing in paper industry, chemistry, and mining.

Most of the consumers (90%) in Gornji Milanovac are connected to the gas pipeline, but less

than 50% are actually using gas for the heating. Single family houses, which prevail in the

architecture of Gornji Milanovac, mainly use fire wood for heating, and some consumers use

coal as a fuel. PUC ‘Gornji Milanovac’ is in charge of production and distribution of heating

energy to1,105 residential units and 31 business entities at 56,000 m².

Local authorities consider fuel switch to biomass and installation of 2.5 MW wood chips

heated boiler in the boiler room located in Železnička Street, and replacement of two ~40

years old hot water mazut heated boilers type EMO Celje SVN3000, Slovenia, with capacity

of 3.45 MW each. In addition, it is also planned replacement of coal heated boiler of 400 kW

in Primary School ‘Desanka Maksimović’, and installation of wood chips heated boiler in the

boiler room in the School. There would be also installed additional gas boilers in both boiler

rooms. It is estimated that 2,900 t annually of wood chips are necessary for fuel switch in

these two boiler rooms (2,500 t for larger boiler room, and 400 t for the boiler room in the

School).

Conservatively estimated, there is total of 87,473 m³ of wood per year sold on the market in

the area of Gornji Milanovac (50 km road distance), out of which 9,984 m³ (2,995 t) of wood

residuals. With additional 1,500 t/a collected at small-scale wood processing companies,

total quantity of wood residuals in the respective area is estimated at app. 4,495 t/a, which is

sufficient raw material (from wood residuals only) for production of 2,900 t of wood chips

necessary for a fuel switch from mazut and coal to wood chips in the boiler rooms in

Železnička Street and in Primary School ‘Desanka Maksimović’.

Except for the Companies ‘Špik Iverica’ and ‘Jela Star’, there are no major producers of

wood pellets in wider area (80- 150 km) of Gornji Milanovac. Quantity and variety of wood

sources are among critical elements in planning of a new wood pellet production facility.

With respect to 51,948 m³ of fuel wood, and 11,484 m³ of wood residuals currently available

in the area of 50 km of road distance from Gornji Milanovac, there is realistic potential for

establishment of wood pellet production facility in the area.

There are 900 m² parking lots in front of the boiler room in Železnička Street, owned by the

Municipality. With respect to potential future reconstruction of the boiler room (depending on

technical solution), safety measures, and space for manipulation of trucks and

mechanization, it is recommended construction of a covered storage with volume of 2,000

m³, sufficient to storing 500 t of wood chips, which is for 17 t more than monthly

consumption.

The boiler room of Primary School ‘Desanka Maksimović’ is located besides the School

building, with the yard of app. 200 m² and coal storage next to the boiler room. There is

sufficient space for construction of covered storage with volume of 500 m³.



8

It is not financially justified for PUC ‘Gornji Milanovac ‘to start own production of wood chips

for this project type due to considerable potential investment (315,000 €) and small

quantities (2,900 t/a) of wood chips needed for 1 x 2,5 MW and 1 x 400 kW boilers. It is

recommended to the decision makers in Gornji Milanovac to outsource supplying of wood

chips and conclude a purchase contract of wood chips with best bidder (s). Being a public

company, PUC ‘Gornji Milanovac’ is liable to conduct public procurement procedure

stipulated by law. Risk management refers to several suppliers; in that way risk of potential

shortage of wood chips at one supplier (or inadequate quality, e.g. moisture content) can be

compensated by more orders from another supplier. One of critical requirements in tender

documentation should be for the supplier(s) to own/lease adequate storage of wood chips.

Based on analysis of capacities, number, and types of wood processing companies in the

area of Gornji Milanovac, conclusion imposes that currently there are no local capacities for

supply of 2,900 t of wood chips annually, necessary for operations of wood chips heated

boilers in Železnička Street and in Primary School ‘Desanka Maksimović’. It is therefore

recommended to PUC ‘Gornji Milanovac’ to announce the Public Invitation for submission of

Letters of interest to supplying annual quantity of 2,900 t of wood chips. Result of the Public

Invitation will contribute to further actions of both sides: municipal authorities, and potential

local suppliers of wood chips.

This project will be financed by the Municipality of Gornji Milanovac through bank loan. Both

boiler rooms are analysed as points of cost, and not as a points of profit. Consequently,

savings are in the centre of financial analysis instead of profit. Complete profit analysis

should be based on the data for revenues – heat selling prices and income, costs of a new

equipment, and costs of financing.

Price of mazut varies; average price of mazut for PUC ‘Gornji Milanovac’ in 2016 was 46,390

RSD/t included VAT, which is 387 €/t1. Price of coal is 7,728 RSD/t included VAT, which is

64 €/T2. Price of wood chips is different for softwood (40 €/t) and for hardwood (50 €/t) on

the nearest market (Kolubara region). Analysis considered variation of the price of wood

chips for hardwood which prevails in the area of Gornji Milanovac.

Price sensitivity analysis for the boiler room in Železnička Street shows savings of 168,346 €

with current prices of fuels. Price sensitivity analysis also shows price variation of +/- 30%.

At the worst assumed scenario, where at the same time price of wood chips rises by 30%

and price of mazut drops by 30% the savings are 42,842 €/t. In the opposite case, if price of

mazut rises 30% and price of wood chips conservatively estimated drops by 10%, the

savings are 268,850 €/t.

Price sensitivity analysis for the boiler room in Primary School 'Desanka Maksimović' shows

different results due to relatively approximate prices of fuels, similar caloric value (17.5

MJ/kg for coal, and 14.4 MJ/kg for wood chips), and small annual quantities necessary for

heating of the School. Presently, savings of 2,960 € would be achieved with current prices of

fuels. Price sensitivity analysis also shows price variation of +/- 30%. It shows that savings

would still be achieved if the price of wood chips raises up for 10%, and the price of coal

1 Source: PUC ‘Gornji Milanovac’. Exchange rate in calculation: 1 € = 120 RSD 2 Ibid



9

remains at current level. According to this analysis, the biggest savings (11,848 €/t) would be

achieved in case when price of wood chips drops for 10%, and price of coal rises for 30%.

According to the price sensitivity analysis, it is safe to assume that the investment in 2,900 t

wood chips supply, which is at focus of this study would be repaid in the first year from the

fuel switch savings in the School boiler room, and in less than two years in the boiler room in

Železnička Street.

As future user of renewable energy fuel, PUC ‘Gornji Milanovac’ will be eligible to apply for

GHG emission reduction, government subsidies for using renewable energy, international

financial institutions and local commercial banks special and favourable credit lines for

renewable energy and energy efficiency.

In general, our findings are that;

1) There is enough wood biomass available to meet requirements of a fuel switch

project in the area of 50 km distance from Gornji Milanovac.

2) We recommend purchase of wood chips by PUC ‘Gornji Milanovac’ from more than

one supplier. Purchase conditions should include transport of wood chips to the

buyer; and owing/ leasing storage of wood chips by the suppliers.

3) It is recommended announcing the Public Invitation by local authorities for

submission of Letters of interest to supplying annual quantity of 2,900 t of wood

chips. Result of the Public Invitation will contribute to further actions of both sides:

municipal authorities, and potential local suppliers of wood chips.

4) There should be constructed covered storages of wood chips with capacity of 2,000

m³, and 500 m³ beside the boiler rooms.

5) Investment in supply chain and logistics can be paid from fuel switch savings in the

first year from the fuel switch savings in the School boiler room, and in less than two

years in the boiler room in Železnička Street.

6) There is realistic potential of wood biomass for establishment of wood pellet

production facility in the area



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4. Moravica District

The Moravica District is located in the central and south-western parts of Serbia, surrounded

by the Districts of: Kolubara, Zlatibor, Raška, and Šumadija. The name of the District

derivatives from the River Moravica which forms the West Morava River, both passing

through the district. There are 212,603 inhabitants of the Moravica District3, half of which

(53.8%) live in the urban areas. Area of the Moravica District is 3,016 km², with the City of

Čačak as an administrative centre of the District; municipalities of Gornji Milanovac, Ivanjica,

and Lučani; and 201 villages.

Figure 1: Position of the Moravica District on the territory of Serbia, and its municipalities4

Gornji Milanovac is located at 332 m AMSL, on hilly terrain in southwest Šumadija, at foothill

of mountains Rudnik, Maljen, and Suvobor. It covers 836 km², with over 65% (54.755 ha) of

agricultural land, and 32% (27.498 ha) of forests. On the banks of the Despotovica River,

there is the urban area of Gornji Milanovac with population of 24,216, while total population

of the Municipality is 44,4065. Metal and food processing are dominant industries in Gornji

3 2011 Census of Population, Households and Dwellings in the Republic of Serbia 4 https://commons.wikimedia.org/wiki/File:Serbia,_administrative_divisions_(provinces%2Bdistricts)_-_de_-_colored.svg 5 2011 Census of Population, Households and Dwellings in the Republic of Serbia

https://commons.wikimedia.org/wiki/File:Serbia,_administrative_divisions_(provinces%2Bdistricts)_-_de_-_colored.svg

https://commons.wikimedia.org/wiki/File:Serbia,_administrative_divisions_(provinces%2Bdistricts)_-_de_-_colored.svg



11

Milanovac. There are also companies dealing in paper industry, chemistry, and mining. The

largest export share of the Moravica District belongs to the companies in Gornji Milanovac.

There are app. 2000 business entities on the territory of the Municipality with predominant

small and medium enterprises, although percentage of medium and large companies is

higher than average in the Republic of Serbia6.

Figure 2: Position of Gornji Milanovac in central Serbia7

Table 1: Road distance (km) between Gornji Milanovac and neighbouring cities

There is no efficient road transportation system in the area from Gornji Milanovac to the west

due to unfavourable terrain and underdeveloped road infrastructure. Example shown in the

following table illustrates disproportionate relations between air and road distances of Gornji

Milanovac and Kragujevac to the east; and Kosjerić to the west:

6 http://www.gornjimilanovac.rs/lat/privreda.html 7 www.motorna-vozila.com/auto-karta-srbije/

From To Km

Gornji Milanovac Belgrade 115

Kragujevac 44

Čačak 22

Valjevo 79

Kosjerić 79

http://www.gornjimilanovac.rs/lat/privreda.html

http://www.motorna-vozila.com/auto-karta-srbije/



12

Table 2: Example of unfavourable road connections of Gornji Milanovac to the west, particularly to the Kolubara District

Most of the consumers (90%) in Gornji Milanovac are connected to the gas pipeline, but less

than 50% are actually using gas for the heating. Single family houses, which prevail in the

architecture of Gornji Milanovac (see the photo below), mainly use fire wood for heating, and

some consumers use coal as a fuel. There are a few multi-storey (up to 7 floors) buildings on

the right bank of the Despotovica River, and they are connected to district heating network

operated by Public Utility Company ‘Gornji Milanovac’.

Photo 1: Gornji Milanovac8

5. Public Utility Company ‘Gornji Milanovac’

PUC ‘Gornji Milanovac’ is in charge of production and distribution of heating energy, as well

as of water and sewerage system; waste management; and maintenance of public hygiene.

The Company provides heating to 1105 residential units and 31 business entities at 56.000

m². Recently, 10 of business clients cancelled the heating due to reduction of operational

costs caused by slow business operations9.

There are two boiler rooms with total of 10 MW heating capacity, 21 substations, and 4 km of

Primary pipeline. First boiler room is located at Loma's Street, in the basement of residential

building. There are two hot water boilers type EMO Celje, (1x1.86 MW and 1x1.28 MW),

made in Slovenia in 1983 and in 1986. In front of the boiler room there is 50m³ underground

mazut tank. Second, larger boiler room is located at municipal parcel in Železnička Street.

8 www.gornjimilanovac.rs 9 Source: PUC ‘Gornji Milanovac’

Air Distance (km)

Road Distance (km)

Gornji Milanovac- Kragujevac 36 44

Gornji Milanovac- Kosjerić 44 79

http://www.gornjimilanovac.rs/



13

There are two hot water boilers type EMO Celje SVN3000 with capacity of 3.45 MW each,

produced in Slovenia in 1979 and 1980.

Boiler room No

Address Nominal boiler capacity (MW)

Boiler type Heating

volume (m³) No of users

1

Lomina 1 x 1.86 1 x 1.28

EMO Celje 13,000 250 units

(10 multi-storey buildings)

2

Železnička 16 2 x 3.45 EMO Celje SVN3000 43,000 850

Table 3: Installed capacities operated by PUC ‘Gornji Milanovac’

Local authorities consider fuel switch to biomass and installation of 2.5 MW wood chips

heated boiler in the boiler room in Železnička Street (No 2). In addition, it is also planned

replacement of coal heated boiler of 400 kW in Primary School ‘Desanka Maksimović’, and

installation of wood chips heated boiler in the boiler room in the School. There would be also

installed additional gas boilers.

For the purpose of this Study, it is estimated that 2,900 t annually of wood chips are

necessary for fuel switch in these two boiler rooms (2,500 t for larger boiler room, and 400 t

for the boiler room in the School). School winter holidays are neglected due to the reason

that the heating of the School starts earlier if October is cold; on the other hand, series of

mild winters can decrease wood chips consumption. Currently, 100- 150 t of coal is used

annually for heating app. 3,000 m². The School works in two shifts, and faces the problem of

lack of space. There is no space for extracurricular activities. School authorities applied for

funds with Public Investment Management Office to improving energy efficiency of the

School building. It is also planned construction of the Annex to the School building in

following period10. Therefore, it is estimated that full capacity of 400 kW will be necessary for

the heating of the School building.

Figure 3: Location of the boiler rooms

10 Source: Primary School ‘Desanka Maksimović’

Primary School ‘Desanka Maksimović’

Boiler room in Železnička Street



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6. Biomass potentials and realistic biomass supply in the area of Gornji

Milanovac

National forest inventory from 2008 finally defined basic data on forest resources in Serbia at

the level of 29.1%, with very unfavourable state of afforested area in Vojvodina region of

7.1%. Total area of forests is 2,252,400 ha, with high nature forests on the area of 621,000

ha (27.6%), coppice nature forests on 1,465,400 ha (64.6%), 174,800 ha (7.8%) of forest

plantations and other forest land on 382,400 ha. Total area of forests and other forest land is

2,634,800 ha.

Figure 4: Forested area in Serbia11

Total (standing) volume is 362,487,418 m3 and annual volume increment of 9,079,773 m3.

Average value of wood volume is modest 160,9m3/ha and volume increment of 4.0 m3/ha.

Concerning the ownership structure, state forests represent 53.0% (1,194,000 ha) and

private forests 47.0% (1,058,400 ha).

Forest territory managed by Forest Enterprises does not match with administrative division

of the Districts in the Republic of Serbia. Forests in the area of 50 km of road distance from

Gornji Milanovac are located at territory of following administrative districts: Moravica,

Zlatibor, Kolubara, Šumadija, and Raška. In accordance with organizational structure of SE

‘Srbijašume’, these forests are managed by following Forest Enterprises: Kragujevac; Užice;

11 National Forest Inventory (2008)

Forest area: 2,252,400 ha

Wood volume: 362.5 million m3

Annual increment: 9,079 million m³



15

‘Golija’, Ivanjica; and ‘Stolovi’, Kraljevo. Average wood volume on the territory of these

enterprises is 172 m³/ha, with average increment of 4.74 m³/ha.

Forest Enterprise

Area

Forest

Total wood

volume

Average wood

volume Increment

per ha TOTAL per ha

ha ha m3 m3 m3

Kragujevac 27,553 25,280 3,767,456 149 115,475 4.6

'Golija', Ivanjica 73,902 56,906 10,731,378 189 316,545 5.6

Užice 36,536 32,021 4,794,988 150 111,927 3.5

‘Boranja', Loznica 35,962 33,695 7,258,792 215 186,385 5.5

‘Stolovi', Kraljevo 47,794 39,765 6,261,903 157 177,689 4.5

Total: 221,747 187,667 32,814,517 172 90,8021 4.74

Table 4: Data on forests on the territory of Forests Enterprises in charge of respective area12

Share of forest area in the area of 50 km of road distance from Gornji Milanovac is 19%,

which is far below Serbia average. Majority of forests in this area are privately owned (65%).

According to data provided by Forest Enterprises Kragujevac, ‘Golija’- Ivanjica, Užice,

‘Boranja’- Valjevo, and ‘Stolovi’- Kraljevo, overall forest area in the respective area is

178,582 ha, out of which state owned forests cover 63,250 ha, and privately owned forests

cover 115,332 ha. Table 4 shows distribution of forests in regional municipalities by area and

ownership:

12 Source: SE ‘Srbijašume’



16

District Municipality Total area Ownership Forest area

ha ha % M

ora

vic

a Gornji Milanovac 83,660

State 12,085 14

Private 15,037 18

Total 27,122 32

Čačak 63,600

State 5,379 8

Private 9,230 15

Total 14,609 23

TOTAL 147,260

State 17,464 12

Private 24,267 16

Total 41,731 28

Zlatibor Požega 88,600

State 2,190 2

Private 10,264 12

Total 12,454 14

Kolubara Ljig 27,900

State 965 3

Private 6,922 25

Total 7,887 28

Šu

ma

dija

Kragujevac 83,500

State 5,756 7

Private 24,375 29

Total 30,131 36

Knić 41,300

State 5,262 13

Private 8,612 21

Total 13,874 34

Topola 35,600

State 1,719 5

Private 4,631 13

Total 6,350 18

Arandjelovac 37,600

State 2,329 6

Private 10,400 28

Total 12,729 34

TOTAL 198,000

State 15,066 8

Private 28,905 15

Total 43,971 22

Raška Kraljevo 153,000

State 27,565 18

Private 44,974 29

Total 72,539 47

OVERALL 960,020

STATE 63,250 7

PRIVATE 115,332 12

TOTAL 178,582 19

Table 5: Forest area distribution by regions, municipalities and ownership13

13 Source: Forest Enterprises Kragujevac, ‘Golija’, Užice, and ‘Boranja’



17

Forests in the municipality of Gornji Milanovac are managed by Forest Administration Unit

‘Gornji Milanovac’, an organizational part of Forest Enterprise ‘Kragujevac’. There are five

administration units of FAU ‘Gornji Milanovac’: ‘Rudnik II’, ‘Ješevac II’, ‘Vujan-Rožanj’,

‘Rajac-Ostrvica’, and ‘Suvobor’. In 2017, total quantity of felled wood on territory of FAU

‘Gornji Milanovac’ is estimated at 21,948 m³. The most represented deciduous wood is

beech (50%), oak (14%), acacia, and maple trees. Conifers are represented by 11%.

Percentage of wood residuals depends on type of wood: 10% of felled deciduous trees, and

up to 20% of felled conifers. Annual quantity of wood residuals in state owned forests is

2,285 m³, and in privately owned forests 1,000 m³.14

Gornji Milanovac borders with the Municipality of Požega to the west. FAU Kosjerić, a part of

FE Užice, is in charge of state owned forest and in providing technical assistance to the

private forests owners. Annual quantity of wood residuals on territory of the Municipality of

Požega in state and in private forests is approximately 1,400 m³.15

Municipalities of Kragujevac, Knić, Topola, and Arandjelovac surround Gornji Mianovac from

north-east. FAU Kragujevac is in charge of this territory. Total quantity of felled deciduous

trees at territory of these municipalities is 25,975 m³, and 1,321 m³ of conifers. Total quantity

of wood residuals in state and private forests is app. 2,163 m³ per year.16

To the south-west, Gornji Milanovac borders the City of Čačak. FAU Čačak organizationally

belongs to FE 'Golija', Ivanjica. Estimated annual quantity of wood residuals in Čačak is

1,309 m³.17

Area of the Municipality of Kraljevo starts at south-east, less than 50 km from Gornji

Milanovac. FAU Kraljevo, a part of FE ‘Stolovi’ is in charge of 17,542 ha of forests.

Estimated annual quantity of wood residuals is 2,827 m³.18

Accordingly, we can conclude that there are 9,984 m³ of wood residuals in state and private

forests in the area of Gornji Milanovac (as shown in Table 8 bellow).

Following Table shows caloric value and ash content for coniferous and broad-leaf wood

fuels:

14 Source: FAU Gornji Milanovac 15 Source: FAU Kosjerić 16 Source: FAU Kragujevac 17 Source: FAU Čačak 18 Source: Srbijašume



18

Parameter Unit Coniferous wood Broad-leaf wood

Typical value

Typical variation Typical value

Typical variation

Ash % 0.3 0.2 - 0.5 0.3 0.2 - 0.5

Gross calorific value MJ/kg 20.5 20.2 - 20.8 20.2 19.5 - 20.4

Net calorific value MJ/kg 19.2 18.8 - 19.8 19 18.5 - 19.2

Parameter Unit Coniferous bark Broad-leaf bark

Typical value

Typical variation Typical value

Typical variation

Ash % 4 2 - 6 5 10

Gross calorific value MJ/kg 21 20 - 23 21 20 - 23

Net calorific value MJ/ kg 20 19 - 21 20 19 - 21

Parameter Unit Coniferous forest residues Broad-leaf forest residues

Typical value Typical variation

Typical value Typical variation

Ash % 2 1 - 4 1.5 0.8 - 3

Gross calorific value MJ/kg 21 20.8 - 20.4 20 19.7 - 20.4

Net calorific value MJ/kg 20 19.5 - 20.0 19 18.4 - 19.1

Table 6: Caloric value and ash content for selected wood fuels19

6.1 Estimation of roadside and riverbed biomass

Total length of roads on territory of the Municipality of Gornji Milanovac is 496 km. There are

38 km of state roads, 178 km of regional roads, and 282 km of municipal roads.

Department of Greenery is a part of Public Company for urban planning and maintenance of

public infrastructure in Gornji Milanovac. It is in charge of maintaining green areas of the city,

by the local roads, and riverbed (regular inspection, planting, pruning, and cutting). 50 m³ of

woody biomass collected annually consists of tree benches and a dozen of tree trunks.

Collected biomass is partly distributed to local residents belonging to the category of a social

19 Wood Fuels Handbook, Nike Kranjc, FAO, 2015



19

need for firing, and partly transported to the municipal landfill20. Machinery of PC for urban

planning and maintenance of public infrastructure is used for maintenance of the city

greenery

Photo 2: Roadside maintenance (Source: http://www.jp-gm.org)

7. Biomass market situation in the area of Gornji Milanovac and input prices

Figure 6 shows regional roads which connect Gornji Milanovac to towns and villages at the

distance of 50 km.

There is no efficient local road transportation system in this area due to unfavourable terrain

and underdeveloped road infrastructure. Forest roads are in very poor condition. There is

hardly accessible terrain, and only a few points are pervious to the trucks. Wood residuals

are mostly transported from the forest by tractors with baskets with capacity of 2-3 m³. Most

of wood residuals stay in the forests due to labour intensive collecting process, difficulties in

transportation, and cost-ineffectiveness.

Forests in the area of villages Družetići, Srednja Dobrinja (marked on Figure 6), and Gojna

Gora are examples of such difficult operations21, though this situation is very much the same

in hilly and mountainous terrain.

20 Source: Department of Greenery Gornji Milanovac 21 Source: FAU Čačak

http://www.jp-gm.org/



20

Figure 5: Red circle marks area at 50 km of road distance from Gornji Milanovac

There is no accurate General Forest Management Plan (Forest Area Development Plan) and

new inventory data of forests per ownership is still missing. Due to this fact, as well as to the

still ongoing restitution process, there is usual inconsistency regarding the ownerships data,

and also regarding wood volume and increment. However, these issues do not affect

recommendations for PUC ‘Gornji Milanovac’, as proved in following chapters.

Total sale of wood in FE ‘Golija’, Ivanjica, in 2016, was 198,716 m³. Following table shows

data on sales of technical and fuel wood in five Forest enterprises within FE ‘Golija’.

Forest Enterprise Ivanjica: sales in 2016 (m³)

FAU Technical wood Fuel wood Wood residuals

Golijska Reka 16,632 14,405 4,809

Devići 9,526 8,472 3,284

Ivanjica- Kušići 7,779 15,553 3,430

Sjenica 3,979 11,710 1,927

Čačak 1,165 10,137 1,309

Total: 39,081 60,277 14,759

Table 7: FE ‘Golija’, Ivanjica: wood sale in 201622

22 FE ‘Golija’, Ivanjica

Aranđelovac

Kragujevac

Gornji

Milanovac

Kraljevo

Družetići

Srednja Dobrinja



21

Municipalities Technical wood Fuel wood Wood residues

Gornji Milanovac, Kragujevac, Topola, Arandjelovac, Knić

10,558 15,920 4,448

Požega 3,330 10,104 1,400

Čačak 1,165 10,137 1,309

Kraljevo 10,488 15,787 2,827

Total: 25,541 51,948 9,984

Table 8: Total wood sale in the area of 50 km road distance from Gornji Milanovac23

Table 8 shows that 77,489 m³ of technical wood and fuel wood from state and private forests

is sold in the area of 50 km road distance from Gornji Milanovac, with 9,984 m³ of wood

residuals.

Estimation is based on data provided by SE ‘Srbijašume’, and on the interviews of

professionals on the field, whose unanimous opinion is that there are more wood residuals in

private forests than official data show, due to illegal cut which is very often in Serbia.

According to consultations with forest engineers and wood processors, it is hard to

determine average weight of raw wood residuals per m³, since it depends on type of wood,

and on type of residuals (e.g. branches, trunks, stumps). Considering the fact that majority of

wood residuals in the subject area are deciduous trees, we conservatively estimated that

9,984 m³ of wood residuals on the territory of 50 km around Gornji Milanovac weights app.

2,995 t (i.e. 30% of total quantity of wood residuals expressed in m³). Furthermore, at least

1,500 t of residuals of wood processing companies are sold on the market in the area, which

makes total of 4,495 t/a.

It is important to point out the fact that huge quantity of wood residuals stays scattered in

forests, uncollected due to inaccessible terrain and difficulties related to the workforce and

transport. Drying of forests and windbreaks additionally increase quantities of wood available

in the forests for collecting. Taking into account these facts, as well as the fact that wood

residuals are used for other purposes (such as firing), and sold at the market to various

buyers, there is still sufficient raw material only from wood residuals for production of 2,900 t

of wood chips necessary for a fuel switch from mazut and coal to wood chips in the boiler

rooms in Železnička Street and in Primary School ‘Desanka Maksimović’.

23 Srbijašume and field inquiry



22

7.1 Wood processing industry in area of Gornji Milanovac and potential for

wood chips supply

Metal processing and chemical industry are predominant in Gornji Milanovac. There are 10

small wood processing companies (small scale: furniture production, production of sawn

timber); half of those companies are mostly dealing in wood trade. There are also 50

entrepreneurial workshops registered in wood processing and wood trade. Most of these

workshops have one or two employees. Some of them provide carpenter services, other

produce souvenirs24.

An example of successful (at local level) entrepreneurial workshop is family business

‘Drvoprerada’ in a village of Klatićevo, 8 km from Gornji Milanovac. 'Drvoprerada' saws over

1,200 m³ of oak round wood annually, and produce timber which is exported to Kosovo and

Bosnia and Herzegovina. There are two wood drying kilns and covered storage in the yard.

Wood residuals are sawdust and bark in quantities of app. 10% of annual production, and

they are fired in wood drying kilns.

Photo 3, Photo 4: ‘Drvoprerada’, Klatićevo- wood drying kilns and covered storage

Photo 5: Oak round wood at ‘Drvoprerada’

24 Source: 1. Municipality of Gornji Milanovac, Local Economic Development Department 2. Field inquiry



23

Based on analysis of capacities, number, and types of wood processing companies in the

area of Gornji Milanovac, conclusion imposes that currently there are no local capacities for

supply of 2,900 t of wood chips annually, necessary for operations of wood chips heated

boilers in Železnička Street and the boiler in Primary School ‘Desanka Maksimović’.

Owner and manager of wood processing company ‘Prezentparket’, Mr. Pavlović, is very

much interested in production of wood chips. This company had been established in 1993,

and produced parquet until 2003. Nowadays, main products are wood pallets and wooden

elements, produced of beech with less than 30% of moisture. ‘Prezentparket’ holds FSC

certificate. There is drying kiln and covered storage in the yard of the Company.

Quantity of wood residuals produced in ‘Prezentparket’ is 5 t per a day of production.

Average daily consumption of wood residuals (burning) is 2 t, and surplus is sold to various

buyers. Mr. Pavlović is considering a purchase of wood chipper. Based on his calculation,

annual production of wood chips would be 1000 t annually at the current level of production

of ‘Prezentparket’. With respect to his plan for increasing the production, future production of

wood chips could reach 2,900 t annually.

Photos 6, 7, 8: Facilities of ‘Prezentparket’



24

Company BASNA Ltd. was founded in 2010 for the production of charcoal from biomass, to

be sold to the domestic and export market. The owner of the company is an environmental

engineer with extensive working experience in Serbia. He has successfully developed and

tested charcoal from biomass for grilling, as fertilizer and feed supplement, which are

available at the market. The loan of the SECO Start-up Fund was used for construction of

the plant and for buying modern production equipment. BASNA Ltd. is also producing wood

chips, and the Company representatives are interested in potential supply of PUC ‘Gornji

Milanovac’. The production facility is located in a village of Viča, at 48 km from Gornji

Milanovac and 30 km from Lučani.

Unlike the situation on the local market, the competition at the market of wood biomass is

strong in the south-west area at distance of app. 80-150 km from Gornji Milanovac (Ivanjica,

Prijepolje). The company ‘Špik Iverica’ Ltd. is specialized in producing raw chipboard and

melamine faced panels, as well as wood pellets (165- 170 €/t, EXW Ivanjica)25. Since 2006,

the Company operates within Italian Fantoni Group. Špik Iverica Ltd. is the biggest buyer of

‘Srbijašume' in the area26. They produce 6t/ hour wood pellets. According to Mr. Duško

Minjović, Director of the Company, Špik Iverica Ltd. purchases half of necessary raw

material from ‘Srbijašume', and another half is purchased from private sellers. ‘Špik Iverica’

purchases wood residuals in wider area around Ivanjica. The Company faces the problem of

lack of raw material.

‘Jela Star’ Ltd., Prijepolje (150 km from Gornji Milanovac) is also one of the major producers

of sawn wood, wood pellets, wood chips, and briquettes in Serbia. It is also an official area

representative of HEZOMAT Gerätebau-Energiesysteme GmbH, Germany for Serbia,

Montenegro, and Bosnia and Herzegovina. Price of wood chips EXW ‘Jela Star’ per 1

stacked metre of wood chips ranges from 18- 25 €. Raw material is purchased in Serbia,

Montenegro, and Bosnia and Herzegovina27.

Except for the Companies ‘Špik Iverica’ and ‘Jela Star’, there are no major producers of

wood pellets in wider area of Gornji Milanovac. Quantity and variety of wood sources are

among critical elements in planning of a new wood pellet production facility. With respect to

51,948 m³ of fuel wood, and 9,984 m³ of wood residuals currently available in state and

private forests in the area of 50 km of road distance from Gornji Milanovac, there is realistic

potential for establishment of carefully scaled wood pellets production facility in the area.

Although competition in the field of wood biomass will not necessarily lead to lower prices of

final products (prices of raw material are rising) as usually expected, strong competition

benefits both: consumers and businesses, and actually contributes to economic growth.

There should also be considered the facts that, well organized collection of wood residuals in

the area, in cooperation with private forest owners and managers of the forests owned by

the church, could significantly increase quantity of wood biomass available for potential new

wood processing company. Growing demand of wood biomass based fuels could also

influence consideration of establishment of energy wood plantations, which is already

situation in AP Vojvodina.

25 Source: ‘ Špik Iverica', Ivanjica; Sales Department 26 Source: FE ‘Golija’, Ivanjica 27 Source: ‘Jela Star’ Ltd., Mr. Mićo Živković



25

Potential suppliers of wood biomass for wood chips and wood pellets production in Gornji

Milanovac are companies managing forests owned by the church. Upon restitution, 260 ha

of forests have been returned to Monastery ‘Vraćevšnica’, at 20 km from Gornji Milanovac.

At the territory of FAU ‘Golija’, 1,100 ha of forest have been returned to the church28. To the

Monastery ‘Studenica’ at territory of FAU ‘Stolovi’, 1,400 ha have been returned by the Law

on Property Restitution and Compensation29. Forests owned by the church in this area

mostly belong to the Eparchy of Žiča, Kraljevo. Church authorities establish companies to

manage their forests fund increased by the restitution process, or outsource business

companies specialized in this field.

There are 11,384 ha of orchards at 30 km road distance from Gornji Milanovac at territories

of the municipalities of Čačak, Topola, Arandjelovac, including Gornji Milanovac30. There is

no estimation of wood residuals collected during regular maintenance of the orchards. They

are used for heating in local households. In spite of law calorific value of such residuals

(apples are mostly cultivated in this area), it seems that well organized collection of such

biomass would quite contribute to the quantity of collected wood residuals in this area.

Photos 9, 10, 11: Wood residuals in apple orchard by the road in a Village of Vinča (Topola), 30 km from Gornji Milanovac, November 2017

28 FAU ‘Golija’ 29 Official Gazzette of the RS No72/2011, 108/2013, 142/2014, and 88/2016- Decision of the Constitutional Court 30 Source: Statistical Office of the Republic of Serbia



26

Regarding woody biomass production, several aspects are important. Firstly it is the

identification of appropriate needs for raw material (fuel wood, wood chips, or other wood

based fuel), then the raw material identification, and finally possibilities for production (fuel

wood, forest residues, wood industry residues, wood biomass from parks and nearby

roadside, etc.); and additional requirements like machinery and its capacity for production.

For fuel wood, the price depends on the season and general demand. The most of the year

it varies between 20- 30 €/m³. A long-term buyer should be able to negotiate the price at the

lower end or even below.

The published price list of ‘Srbijašume’ is ~30 €/m³ for hardwood and ~20 €/m³ for softwood

on a truck roadside, without transportation costs. Based on the field inquiry, prices of wood

residuals are as follows: for sawdust app. 2- 3 €/m³, price for slabs of approximately 10 €/m³,

solid dry waste 5-10 €/m³. In the process of gathering price data, luck of wood chips

producers in the area of Gornji Milanovac refers to usual prices on the market in West

Serbia.

Accordingly, prices of wood chips shown in tons, are following:

‒ Average price of wood chips delivered to the final consumer (DAP) for softwood is 40

€/t, while for hardwood is 50 €/t

‒ Transport costs up to 150 km are around 5-10 €/t.

8. Biomass supply and logistics

8.1 Technical requirements and machinery in use

With reference to forest harvesting operations, it is possible to differentiate between the

following working phases:

felling: cutting a tree from its stump so that the tree falls to the ground;

processing: limbing (removing branches from the trunk and topping it) and cross-

cutting (cutting the trunk to predetermined lengths);

skidding: transporting wood from felling site to extraction routes and transporting

wood along extraction routes to the landing site;

debarking: partially or completely removing the bark from a log

transporting: moving wood using forest roads and public roads;

transforming: reducing wood for fuel destination (cutting, splitting, chipping).

The importance of chipping operation has been growing in the last few years, due to the fact

that chipping enables maximum exploitation of woody biomass otherwise unused.

There are two main working systems in forest harvesting operations:

Short Wood System - SWS: processing is completed on the falling site in the forest,

commercial logs are transported;

Tree System - FTS: after felling the whole tree is hauled and processing is performed

either on the forest road or on the landing site.



27

Although in South-eastern Europe SWS is the most predominantly used system, the FTS

system is becoming more and more common, especially when cable cranes are used: with

this method, forest residues (branches and tops) are collected either at the roadside or at the

landing site, ready to be chipped.

A review of the most important machines and equipment involved in chipping operations,

with reference to the Slovenian and Italian market, is presented in next table. The range of

the most frequent values is indicated for each machine. Hourly cost, when specified,

includes the staff costs. All prices are in € and exclusive of VAT.

Chainsaw

Purchase cost: 500–1.000 €

Productivity in high forests:

0,8–1,2 m3/h (thinning operations)

2–2,5 m3/h (final cutting)

Productivity in coppice forests:

0,4–0,7 stacked m3/h (average conditions)

0,8–1,8 stacked m3/h (good conditions)

Fuel consumption per hour: 0,6–1 l/h (petrol and oil

mixture)

Hourly cost15–18 €

Tractor (farm tractor adopted for forest

operations) and winch

Purchase cost: tractor 45.000–80.000 €

Purchase cost: winch 3.000–8.000 €

Productivity in high forest: 3–8 m3/h

Productivity in coppice:

3–7 stacked m3/h

Fuel consumption per hour: 4–8 l/h

Hourly cost 35–45 € (2 del.)

Tractor (farm tractor adopted for forest

operations) and trailer

Purchase cost: tractor 45.000–80.000 €

Purchase cost: trailer 8.000 – 25.000 €

Loading capacity: 5 – 15 t

Productivity: 5–12 m3/h (depending on skidding

distance)


Hourly cost 40–50 €

Skidder

Purchase cost: 120.000–150.000 €

Skidding capacity: up to 3 t

Max negotiable slope: 20%

Productivity: 8 - 12 solid m3/h (depending on

hauling distance)





28

Harvester

Purchase cost (with processor head):

300.000–370.000 €

Max cutting diameter: 65–70 cm

Max delimb diameter: 45–60 cm

Max negotiable slope: 35% (wheels)

and 60% (tracks) (with optimal soil bearing

capacity)

Productivity in high forest:: 8–20 m3/h



Hybrid harvester

Purchase cost: harvester with processor: 240.000 €

Max cutting diameter: 55 cm

Max delimb diameter: 50 cm

Max negotiable slope: 45–60 %

Productivity: 10–15 m3/h


Hourly cost 70-80 €

Excavator-based processor

Excavator purchase cost: 170,000 €

Processor purchase cost: 60,000 €

Max cutting diameter: 65 cm

Max delimb diameter: 60 cm

Productivity: 15-40 solid m3/h

Fuel consumption per hour: 15 - 17 l

Hourly cost 85 €

Truck and trailer (wood chips transport)

Truck purchase cost: 100,000-115,000 €

Trailer purchase cost: 45,000 €

Loading capacity: 20-22 t (85-90 bulk m³)

Fuel consumption: 2.5-3.5 km/l

Hourly cost: ≈ 65-70 €

with clamshell bucket loader purchase

cost: 205,000 € loading capacity: 81 bulk m³

hourly cost: ≈ 70-75 €

Forwarder

Purchase cost: 180.000 – 270.000 €

Loading capacity: 10 - 14 t

Max negotiable slope: 30 - 35%

Logs length: up to 6 m

Productivity: 12-20 solid m3/h (depending on

hauling distance)

Fuel consumption per hour: 7 - 11 l

Hourly cost 65 - 80 €

Source: Wood Fuels Handbook (production, quality requirements, trading), AEBIOM (2008)



29

Types of wood chippers

Small (driven by tractor)

Purchase cost:: 4.500–35.000 €

Working diameter. 20 cm

Productivity: 2–3 t/h

Fuel consumption per hour: 5– 8 l/h

Hourly cost 15 – 22 €

Medium (driven by tractor)

Purchase cost: 20.000–85.000 €

Working diameter: max 30 cm


Fuel consumption/ hour: 10-14 l/h


Large

Purchase cost: 85.000–400.000 €

Working diameter: > 30 cm



Source: Wood Fuels Handbook (production, quality requirements, trading), AEBIOM (2008)

Among all costs categories for middle size wood chipper (shown at the picture) fuel

represents nearly 30%, followed by depreciations and maintenance costs. Labour and

biomass costs are not taken in to consideration in this calculation costs.

With regard to machinery needed for supply of 2,900t/a of wood chips for future boilers in

Gornji Milanovac, there is the fact that machinery listed below could provide much more

quantities of wood chips. Regardless to that fact, these machines are necessary in order to

provide even smaller quantities. Data shown in Table 7 prove that investment in necessary

machinery would be 315,000 €.

Machinery and equipment necessary for biomass mobilization

Pc. Unit Price (€) Total

Tractor (80kW) 2 25,000 50,000

Winch 1 5,000 5,000

Telescopic front loader 1 5,000 5,000

Truck 2 100,000 200,000

Tractor trailer 1 10,000 10,000

Truck trailer (capacity 85m³ of wood chips) 2 15,000 30,000

Small chipper 1 15,000 15,000

TOTAL 315,000

Table 9: Machinery necessary for biomass mobilization31

31 Data gathered by on-line and phone inquiry



30

PUC ‘Gornji Milanovac’ currently employs 2 workers in the boiler rooms, and 1 electrician.

There would be needed at least 1 additional worker (loading and unloading). Currently,

additional employment in Public Companies in Serbia is the subject of the approval of the

Ministry in charge (in this case, the Ministry of Mining and Energy). Primary School ‘Desanka

Maksimović’ is 1.5 km far from the boiler room, so there will not be necessary additional

equipment and additional employment in the School.

In respect to the described above, the best solution for PUC ‘Gornji Milanovac’ is to

purchase wood chips from one or more suppliers which meet quantity, quality, and other

requirements regarding wood chips supply, and are selected through the public procurement

procedure.

8.2 Supply chain management

The situation on the field described in previous chapters refers to the solution of one or

several suppliers as the most apparent solution for supplying the future boiler room.

There are two basic options that can be considered regarding supply chain management.

Figure 6: Supplying wood directly from forest, option I32

The first option is to store raw wood material at the truck road, to chip it there and to bring

wood chips as a final product to the heating plant. The second option is to bring raw wood

material to central storage, to store it there, chip it there when it is dried and then to store

wood chips also for further drying.

32Source: Wood Fuels Handbook (production, quality requirements, trading), AEBIOM (2008)



31

Figure 7: Supplying wood from forest to the storage or logistic centre and continuing flow from there to end user, option II33

Areas of the land parcels on which the boiler rooms in Gornji Milanovac are located are

insufficient for storing more than monthly supply of wood chips. Therefore it is necessary for

the supplier to have an open storage for wood chips with at least 2,000m³ of volume covered

storage in order to store sufficient quantity of wood chips and to enable drying.

Figure 8: Logistics and supply chain options for supply of wood chips34

33Source: Wood Fuels Handbook (production, quality requirements, trading), AEBIOM (2008)



32

In the majority of cases, entrepreneurs make business arrangements to deliver wood chips

directly to storages/ end users. Wood chips have the highest price in such arrangements

(VAT included). Regardless that fact, it is recommended to the decision makers in Gornji

Milanovac to outsource supplying of wood chips and conclude a purchase contract of wood

chips with best bidder (s). Being a public company, PUC ‘Gornji Milanovac’ is liable to

conduct public procurement procedure stipulated by law35. It is not financially justified for

PUC ‘Gornji Milanovac ‘to start own production of wood chips due to huge potential

investment (machinery, storage) and small scale (2,900 t) of potential production. Risk

management refers to several suppliers; in that way risk of potential shortage of wood chips

at one supplier (or inadequate quality, e.g. moisture content) can be compensated by more

orders from another supplier. Law on Public Procurement stipulates special forms of public

procurement procedure such as Framework Agreement36, which allows concluding contracts

with more than one bidder, and could be applied in a case of PUC ‘Gornji Milanovac’.

Public procurement contracts on goods and/or services are stipulated by the Law on Public

Procurement as well as by the Law on Obligations37, which stipulates usual provisions on

such contracts (the subject of the contract; price and terms of payment; terms of delivery;

quality requirements, quantity and quality control and consequences of failing to perform;

risk of loss; amendments; cancellation). However, wood chips quality control measures and

consequences of failures in meeting required quality – e.g. required moisture content in case

of contracting wood chips are among essential provisions of the future contract. The quality

of wood chips depends on type of wood, on granulation, and moisture content. It is

determined by the standard for solid fuels SRPS EN ISO 17225-1:2015.

SRPS EN ISO 17225-4:2015 determines the fuel quality classes and specifications of

graded wood chips. The following table shows the requirements determined by the

standards in Serbia:

Table 10: Requirements for wood chips according to SRPS EN ISO 17225-4:2015

34Source: Wood Fuels Handbook (production, quality requirements, trading), AEBIOM (2008) 35 Law on Public Procurement, Official Gazette of the RS No 124/2012, 14/2015, 68/2015 36 Article 40 of the Law on Public Procurement 37 Law n Obligations, Official Gazette of SFRY No 29/78, 39/85, 45/89, 57/89; Official Gazette of SRY, No 31/93

Wood chips

Standard SRPS EN ISO 17225-1:2015

SRPS EN ISO 17225-4:2015

Particles size

Amax = 6 cm2

L = 10 cm (max 10% - 35cm)

Moisture content W10 – W60

suitable: 40% max

Bulk density < 350 kg/m3

Calorific value 2,80-3,40 kWh/kg



33

8.3 Biomass storage

The main recommendations for producing and storing wood chips are:

- Wood should be stored for at least three months (during summer) in a dry, windy and

sunny position (natural drying).

- Wood that is properly stored during summer should have water content of less than 30 %.

- After the dry season (at the beginning of autumn) wood piles should be covered.

- Only dry wood chips (water content below 30 percent) can be stored in closed storage.

- Wood chips should be removed from storage following the simple FIFO “first in – first out”

rule.

- Safety measures at work should be applied for protection of human health (wearing masks

to protect from fine dust particles and various microorganisms when handling wood chips in

closed storage houses).

- Avoid storing wet wood chips with many needles and leaves. The temperature in the pile of

this kind of wood chips (green wood chips) will increase (activity of microorganisms).

- Wood chips should be stored in piles with a maximum height of 7m and for only 2-3 weeks.

Photo 12, 13: Material for producing wood chips38

Round wood which will be used for producing wood chips can be stored at forest road sides

but this should be in a sunny position and it should be considered temporary storage. It is

recommended to produce wood chips from dry wood material. The most recommended

material for producing wood chips is wood residues (residues from wood processing

industry). This material should be stored in a dry position and should be chipped when it is

dry.

38 Wood Fuels Handbook (production, quality requirements, trading), AEBIOM (2008)



34

Photo 14: Parking lot in front of the boiler room in Železnička Street

Anticipated quantity of biomass necessary for one year consumption in both boiler rooms is

2,900t: 2,500 t in the boiler room in Železnička Street, and 400 t in the boiler room in Primary

School ‘Desanka Maksimović’. Heating season lasts from half of October until half of April.

Average monthly consumption in the boiler room in Železnička Street is 483 t, and in Primary

School ‘Desanka Maksimović’, it is 66.7 t.

There is available space at locations of both boiler rooms to constructing covered storages

necessary for storing wood chips (shown on Figure 6 above). (There is 900 m² parking lot in

front of the boiler room in Železnička Street (Photo 21), which is municipal property. This

area is suitable for construction of covered storage, also sufficient for potential

reconstruction of the boiler room (if necessary for new boilers and equipment). With respect

to potential future reconstruction of the boiler room (depending on technical solution), safety

measures, and a space for manipulation of trucks and mechanization, it is recommended

construction of a covered storage with an area of 400 m² (e.g. 20 m x 20 m x 5 m), and

volume of 2,000 m³, sufficient to storing 500t of wood chips, which is for 17 t more than

monthly consumption (bulk density of wood chips = 250kg/m³).

The boiler room of Primary School ‘Desanka Maksimović’ is located besides the School

building, with the yard of app. 200 m² and coal storage next to the boiler room (Photo 22).

There is sufficient space for construction of covered storage with area of 100 m² and volume

of 500 m³, i.e. capacity for 125 t of wood chips, which is almost two-month consumption in

the School (monthly consumption is 66.7 t).



35

Photo 15: Boiler room besides the building of Primary School ‘Desanka Maksimović’. Red arrow shows the entrance to the boiler room. There is coal storage on the left.

.

Considering our recommendation considering purchasing wood chips instead of producing it,

additional recommendation to PUC ‘Gornji Milanovac’ is to include the requirement to

potential suppliers to own/lease adequate storage of wood chips in tender documentation.

Photos 16, 17: Stored wood chips 39

Manipulation with wood chips should be operated with telescopic handler. Telescopic

handler should be equipped with fork lifter and loading bucket. Telescopic handler should

have elevation possibility for loading or stacking of 4 - 5 meters.

39 Source: https://greengain.eu/platform/exploitation/serra-biomass-energy-employment/ ; Storing of energy wood and wood fuel quality management; Timo Tahvanainen & Antti Asikainen, Finnish Forest Research Institute, 2006

https://greengain.eu/platform/exploitation/serra-biomass-energy-employment/



36

Photo 18; Trailer with hydraulic lifter40

Photo 19: Tractor with telescopic handler with fork lifter41

40Source:https://turkish.alibaba.com/product-detail/tandem-farm-trailer-8-ton-farm-wagon-trailer-with-

big-wide-tire-trailer-1823687871.html 41 Source: http://www.ryetec.net/product.php?id_product=77

https://turkish.alibaba.com/product-detail/tandem-farm-trailer-8-ton-farm-wagon-trailer-with-big-wide-tire-trailer-1823687871.html

https://turkish.alibaba.com/product-detail/tandem-farm-trailer-8-ton-farm-wagon-trailer-with-big-wide-tire-trailer-1823687871.html

http://www.ryetec.net/product.php?id_product=77



37

9. Legal aspects related to biomass utilization

Legal framework in Serbia related to biomass utilization consists of laws, by-laws, and rule

books, which stipulate referent sectors.

‒ Law on Energy (Official Gazette of the Republic of Serbia No 145/20014) regulates

the production and distribution of energy.

‒ Law on Efficient Use of Energy (Official Gazette of the Republic of Serbia No

25/2013) among other stipulates metering and billing based on the consumption;

introduces ESCO, and defines energy service.

‒ Law on Public Procurement (Official Gazette of the Republic of Serbia No 124/2012,

14/2015 and 68/2015) prescribes detailed procedures for procurement of goods,

procurement of works, and procurement of services for public companies,

institutions, and organizations financed by public budget funds.

‒ Law on Business Companies (Official Gazette of the Republic of Serbia No 36/2011,

99/2011, 83/2014, and 5/2015) defines types of business companies, legal

procedures for their establishment and operations.

‒ Law on Public Companies (Official Gazette of the Republic of Serbia No 15/2016)

regulates establishment and functioning of companies founded by state and local

governments in order to performing operations of public interest.

‒ Law on Obligations (Official Gazette of the Republic of Serbia No 29/78, 39/85,

45/89, 57/89, Official Gazette of SUSM No 31/93, and Official Gazette of State Union

of Serbia and Montenegro No 1/2003) regulates contracts and torts.

‒ Law on Public-Private Partnerships and Concessions (Official Gazette of the

Republic of Serbia No 88/2011 and 15/2016) regulates institutional and contractual

PPP, and concessions between public bodies and private partners.

‒ Law on Environmental Protection (Official Gazette of the Republic of Serbia No

135/2004, 36/2009, 36/2009; 72/2009; 43/2011 – Decision of CC, and 14/2016)

regulates sustainable management of integral system of natural values and

environmental protection.

‒ Law on Environmental Impact Assessment (Official Gazette of the Republic of Serbia

No 135/2004 and 36/2009) regulates the impact assessment procedure for projects

that may have significant effects on the environment.

‒ Law on Strategic Assessment of Environmental Impact (Official Gazette of the

Republic of Serbia No 135/2004 and 88/2010) stipulates requirements and

procedures for impact assessment of specific plans and programmes on the

environment.

‒ Law on Integrated Prevention and Control of Environmental Pollution (Official

Gazette of the Republic of Serbia No 135/2004 and 25/2015)



38

‒ Waste Management Law (Official Gazette of the Republic of Serbia No 36/2009,

88/2010 and 14/2016)

‒ Law on Forests (Official Gazette of the Republic of Serbia No 30/2010, 93/2012 and

89/2015) regulates the conservation, protection, planning, cultivation, use and

management of forests and forest land on the territory of the Republic of Serbia,

including all necessary rules and requirements defining the control over the

implementation of provided rules, monitoring, inspection, as well as other issues

relevant to forests and forest land and areas. The provisions of this Law are related

to forests and forest land in all forms of property.

‒ Law on Forest Reproductive Material (Official Gazette of the Republic of Serbia No

35/2004, 8/2005 – amendment, and 41/2009)

‒ Law on Planning and Construction (Official Gazette of the Republic of Serbia No

72/2009, 81/2009 - correction, 64/2010 – Decision of Constitutional Court, 24/2011,

121/2012, 42/2013 – Decision of CC, 50/2013 - Decision of CC, 98/2013 - Decision

of CC, 132/2014 and 145/2014). This Law regulates: the conditions and modalities of

spatial planning and development, the maintenance and use of building land and the

construction of facilities; carrying out supervision over the application of this Law and

supervisory inspections; other issues of significance in the development of space,

landscaping and use of building land, and the construction of facilities.

‒ Law on Fire Protection (Official Gazette of the Republic of Serbia No 111/2009 and

20/2015)

‒ Law on Safety and Health on Work (Official Gazette of the Republic of Serbia No

101/2005 and 91/2015)

‒ Law on Local Self-Government (Official Gazette of the Republic of Serbia No

129/2007 and 83/2014)

Other important regulations and rule books are:

‒ Regulation on methodology of determining the price of thermal energy for final users

(Official Gazette of the RS No 63/2015)

‒ Regulation on activities which affect environment (Official Gazette of the RS No

109/2009 and 8/2010)

‒ Regulation on the types of projects for which environmental impact assessment is

obligatory or can be required (Official Gazette of the RS No 114/2008)

‒ Regulation on requirements for the location (Official Gazette of the RS No 114/2008)

‒ Rule Book on technical requirements for designing, construction, and control of

equipment under pressure (Official Gazette of the RS No 87/2011)



39

10. Financial analysis and economic indicators of biomass supply organization

and financing options

10.1 Investments in hardware and operational costs

The results of research show that there are enough wood residuals available at the market

to meet requirements of PUC ‘Gornji Milanovac’.

Investment costs in storage and machinery are estimated at 155,000 €, while annual

operation costs are estimated at 161,595 € – see Tables 10 and 11. For the reason of cost

effectiveness, it is recommended to engage one tractor with telescopic front loader which in

cases of malfunctioning can be temporarily replaced by another vehicle owned by local

public companies.

Machinery and equipment

Unit Price (€) No of Units Total Cost (€)

Tractor of 80 kW 25,000 1 25,000

Telescopic front loader 5,000 1 5,000

Storage canopy at Železnička Str. 250/m² 400m² 100,000

Storage canopy at the School yard 250/m² 100m² 25,000

Total: 155,000

Table 11: Machinery necessary for manipulation with wood chips42

Operational costs include salary of 1 new worker, wood chips, manipulation, maintenance,

and indirect costs. Price of wood chips is conservatively calculated at 50 €/t delivered at the

site of the boiler room.

Annual operational costs

1 employee 1 Ann. gross salary

500 €*12 6,000

Wood chips 2,900 50 145,000

Manipulation, loading, unloading 2,900t 1 2,900

Maintenance and indirect costs 5% 7,695

Total: 161,595

Table 12: Annual operational costs related to manipulation with wood chips

42 Data gathered by on-line and phone inquiry



40

10.2 Economic indicators

This project will be financed by the Municipality of Gornji Milanovac through bank loan. Boiler

rooms in Železnička Street and in Primary School ‘Desanka Maksimović’ are analysed as

points of cost, and not as a points of profit. Consequently, savings are in the centre of

financial analysis instead of profit. Complete profit analysis should be based on the data for

revenues – heat selling prices and income, costs of a new equipment, and costs of

financing.

Price of mazut varies; average price of mazut for PUC ‘Gornji Milanovac’ in 2016 was 46,390

RSD/t included VAT, which is 387 €/t43. Price of coal is 7,728 RSD/t included VAT, which is

64 €/T44. Price of wood chips is different for softwood (40 €/t) and for hardwood (50 €/t) on

the nearest market (Kolubara region). In following analysis, it is calculated variation of the

price of wood chips for hardwood which prevails in the area of Gornji Milanovac.

Wo

od

ch

ips:

Pri

ce in

€

Heavy fuel oil – mazut: Price in €

Price

-30% -20% -10% 0% 10% 20% 30%

271 310 348 387 426 464 503

30% 65 42,842 72,177 101,511 130,846 160,181 189,515 218,850

20% 60 55,342 84,677 114,011 143,346 172,681 202,015 231,350

10% 55 67,842 97,177 126,511 155,846 185,181 214,515 243,850

5% 52.5 74,092 103,427 132,761 162,096 191,431 220,765 250,100

0 50 71,944 100,079 139,011 168,346 197,681 227,015 256,350

-5% 38 110,342 139,677 169,011 198,346 227,681 257,015 286,350

-10% 45 92,842 122,177 151,511 180,846 210,181 239,515 268,850

Table 13: Analysis of sensitivity of fuel savings on fuels prices fluctuation- boiler room in Železnička Street

Price sensitivity analysis for the boiler room in Železnička Street shows savings of 168,346 €

with current prices of fuels. Price sensitivity analysis also shows price variation of +/- 30%.

At the worst assumed scenario, where at the same time price of wood chips rises by 30%

and price of mazut drops by 30% the savings are 42,842 €/t. In the opposite case, if price of

mazut rises 30% and price of wood chips conservatively estimated drops by 10%, the

savings are 268,850 €/t. Therefore, it is safe to assume that the investment in wood chips

supply, which is at focus of this study would be repaid in less than two years from the fuel

switch savings.

43 Source: PUC ‘Gornji Milanovac’. Exchange rate in calculation: 1 € = 120 RSD 44 Ibid



41

Wo

od

Ch

ips:

Pri

ce in

€

Coal : Price in €

Price

-30% -20% -10% 0% 10% 20% 30%

49 56 63 70 77 84 91

30% 65 -9,928 -7,632 -5,336 -3,040 -744 1,552 3,848

20% 60 -7,928 -5,632 -3,336 -1,040 1,256 3,552 5,848

10% 55 -5,928 -3,632 -1,336 960 3,256 5,552 7,848

5% 52.5 -4,928 -2,632 -336 1,960 4,256 6,552 8,848

0 50 -3,928 -1,632 664 2,960 5,256 7,552 9,848

-5% 47.5 -2,928 -632 1,664 3,960 6,256 8,552 10,848

-10% 45 -1,928 368 2,664 4,960 7,256 9,552 11,848

Table 14: Analysis of sensitivity of fuel savings on fuels prices fluctuation- boiler room in Primary School ‘Desanka Maksimović’

Price sensitivity analysis for the boiler room in Primary School 'Desanka Maksimović' shows

different results due to relatively approximate prices of fuels, similar caloric value (17.5

MJ/kg for coal, and 14.4 MJ/kg for wood chips), and small annual quantities necessary for

heating of the School. Presently, savings of 2,960 € would be achieved with current prices of

fuels. Price sensitivity analysis also shows price variation of +/- 30%. It shows that savings

would still be achieved if the price of wood chips raises up for 10%, and the price of coal

remains at current level. According to this analysis, the biggest savings (11,848 €/t) would be

achieved in case when price of wood chips drops for 10%, and price of coal rises for 30%.

Therefore, it is safe to assume that the investment in wood chips supply, which is at focus of

this study would be repaid in the first year from the fuel switch savings.



42

11. Conclusion and recommendations

Local authorities in the Municipality of Gornji Milanovac are planning to implement a

fuel switch project to the benefit of the citizens. The project is in accordance with

National Renewable Energy Action Plan of the Republic of Serbia.

There is more than sufficient quantity of woody biomass in the area of 50 km of road

distance from Gornji Milanovac to supply the needed 2,900 t of wood chips for

installation of 1 x 2.5 MW and 1 x 400 kW boilers.

Currently, there are no local capacities for supply of 2,900 t of wood chips annually,

necessary for operations of wood chips heated boilers in Železnička Street and in

Primary School ‘Desanka Maksimović’. However, some of the existing wood

processors aim to increasing their capacities, which would enable them to compete in

future process of Public procurement.

Total investment in supply of wood chips can be paid from fuel switch savings in less

than 2 years

With respect to the listed above, as well as to the subject of this Study, we can

conclude that a fuel switch project from mazut/ coal to wood chips in two boiler rooms

in Gornji Milanovac is feasible.

There is no major wood pellet production in the respective area (50 km road distance

from Gornji Milanovac), and there is available raw material for wood pellets

production.

Recommendations:

It is recommended to the decision makers in Gornji Milanovac to outsource

supplying of wood chips for this project type (1 x 2.5 MW and 1 x 400 kW boilers)

instead of producing it, due to huge potential investment (machinery, storages) and

small quantities needed (2,900 t/a of wood chips).

Considering a lack of potential major suppliers of wood chips on local market, Public

Invitation for submission of Letters of interest to supplying wood chips should be

announced in order to promote the project and more precisely determine future

criteria of Public procurement, as well as to facilitate preparations of potential

suppliers operating on local market.

The best option for PUC ‘Gornji Milanovac’ is to conclude a Framework Agreement

for purchase of wood chips with more than one supplier. The suppliers should

own/lease adequate storage of wood chips Term of delivery should include transport

of wood chips to the storages at the sites of the boiler rooms.



43

12. Literature

Bankovic S. at all, (2008): National Forest Inventory of the Republic of Serbia, Faculty of Forestry, Belgrade Statistical Yearbook of Serbia, 2010-2016

Vasiljevic, A. (2015): Wood Market Impact on Socio-economic Components of Sustainable Development of Wood Sector in Serbia, Doctoral Dissertation, Faculty of Forestry, Belgrade Nike Kranjc: Wood Fuels Handbook, FAO, 2015 Zagorka Tomić, Ljubinko Rakonjac, Vasilije Isajev (2011): The Selection of Species for Reforestation and Amelioration in Central Serbia, Institute of Forestry, Belgrade Study ‘Potentials and possibilities of commercial use of wood biomass for the production of energy and economic development of municipalities Nova Varoš, Priboj and Prijepolje’, Faculty of Forestry, 2009 Mantau U.: Concept of the national wood resource balance - methodological introduction, UNECE, Geneva, Switzerland, 2008 Feasibility Study on Waste Wood Utilisation In Serbia, Energy Saving Group (Serbia), funded by USAID, 2007 Renewables and wastes in Serbia, http://www.iea.org/stats/renewdata.asp?COUNTRY_CODE=RS Stampfer K., Kanzian C., (2006): Current state and development possibilities of wood chip supply chains in Austria. Croatian Journal of Forest Engineering 27 (2): pp 135 – 144. Krajnc, Nike, Piškur, Mitja. (2009): Proizvodnja in raba lesnebiomase v Sloveniji = Biomass production and use in Slovenia. Gozd. vestn., 2009, letn. 67, št. 9, str. 399-403, iustr Statistical Office of the Republic of Serbia: Municipalities and Regions of the Republic of Serbia, 2014, 2015, and 2016; http://webrzs.stat.gov.rs/ Francescato, V., at all, (2008): Wood Fuels Handbook (production, quality requirements, trading), AEBIOM (http://www.biomasstradecentreii.eu/available-literature )

http://webrzs.stat.gov.rs/

http://www.biomasstradecentreii.eu/available-literature



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Documents

Deutsche Gesellschaft für Internationale Zusammenarbeit ... · Železnička Street and in Primary School ‘Desanka Maksimović’. Except for the Companies ‘Špik Iverica’ and