1. Seite 1 Thomas Mitschke, GIZ DKTI programme21.10.2015 Implemented by: Local subsidies / RDA Zlatibor / Center for Development Leskovac DKTI - Development of a Sustainable Bioenergy Market in Serbia Small Scale Slurry Biogas Plants for medium-sized farms in Serbia as an additional income source

2. Seite 2 Content Thomas Mitschke, GIZ DKTI programme 1.) About GIZ DKTI 2.) Agrobiomass potential in Serbia 3.) Economic Framework conditions 4.) Base-Case Biogas Manure Plants 5.) Financing programmes 6.) Legal framework 21.10.2015

3. Seite 3 Thomas Mitschke, GIZ DKTI programme Facts about the GIZ DKTI programme Implemented by : Objective: To strengthen capacities and create an enabling environment for sustainable use of bioenergy in Serbia Funded by: German Federal Ministry for Economic Cooperation and Development (BMZ) under the German Climate Technology Initiative (DKTI) Duration: March 2013 – December 2017 Political partners: Ministry of Agriculture and Environmental Protection & Ministry of Mining and Energy 21.10.2015

4. Seite 4 Thomas Mitschke, GIZ DKTI programme Eff. firewood use in HH Policy advice Project development Biomass supply KfW: Advise to investments in district heating companies. GIZ: Support to the creation of a sustainable supply with bio- resources Structure of the programme: GIZ: Support to harmonization of laws and regulations to EU standards Support to policy definition and strategy implementation GIZ: Support to a promotion of efficient stoves and ovens / firewood drying Advise to implement efficiency- and emission standards GIZ: Advise to the implementation of cost efficient and innovative bioenergy projects Technology and knowlege transfer Cross-cutting theme: Sustainability   BioRES GIZ: Support to the creation of regional Biomass Trade and Logistic centres. Support local supply chains for biomass. 21.10.2015

5. Seite 5 Thomas Mitschke, GIZ DKTI programme Objective: Innovative bioenergy projects are implemented Activities:  Identification of projects and potential investors for bioenergy heating systems in public buildings, biogas facilities, facilities for generation of industrial process heat  Consultancy for plant design and project concepts, elaboration of bankable (pre-) feasibility studies, project documentation, etc.  Support/Intermediation of financial opportunities and investment subsidies  Logistical concepts for biomass  Technical support for permit application and support to increase the efficiency of processes related to procurement procedure, permits and licensing agreements for bioenergy projects  Best-practice documentation and capacity building  Dialogue-platform for Serbian and international companies and institutional stakeholders to exchange project ideas, information and experiences Project development Implemented by : 21.10.2015

6. Seite 6 The concept of biogas production with agro biomass Thomas Mitschke, GIZ DKTI programme Feed-In- Tariffs? Heat prices? Biomass prices? 17.10.2015

7. Seite 7 Energetic use of Biogas Thomas Mitschke, GIZ DKTI programme12.05.2015 1 m³ with 60 % CH4/methane = 6 kWh Output: 2 kWh el 2 kWh heat CHP for electricity and heat generation Steam boilers or burners Transport Fuel Substitution of LFO/Diesel: 1 m³ Biogas ≈ 0.6 l Diesel Substitution of CNG: 1 m³ CH4 ≈ 1 m³ CNG (normal pressure) Equipment modification Fuel modification: Additional costs and losses

8. Seite 8 Thomas Mitschke, GIZ DKTI programme Biogas potential from manure in Serbia Velvet Farm plant, Curug, Serbia - Foto: GIZ 2014 Type of Biomass Theoretica l potential in PJ in Serbia Electrical efficiency in % Potential electrical energy in GWh/a Potential electrical capacity in MW Manure (cattle, pig and poultry)e 3.434322.2 45 Source: DBFZ Study 2015 Solid cattle manure, Serbia - Foto: GIZ 2014 Liquid cattle manure, Serbia - Foto: GIZ 2014 Liquid pig manure, Serbia - Foto: GIZ 2014 21.10.2015

9. Seite 9 Thomas Mitschke, GIZ DKTI programme Type of Electrical GenerationFeed-inTariff Biomass power plant up to 1 MWel13,26 €Ct./kWh Biomass power plant 1 - 10 MWel13,82-0,56 x Pel €Ct./kWh Biomass power plant 10 MWel8,22 €Ct/kWh Biogas power plant up to 0.2 MWel15,66 €Ct./kWh Biogas power plant 0.2 – 1 MWel16,498-4,188 x Pel €Ct./kWh Biogas power plant over 1 MWel12,31 €Ct/kWh Plant fired by biogas from animal origin waste12,31 €Ct./kWh Feed-in Tariffs for Biomass and Biogas in Serbia (based on 2013) Source: DECREE ON INCENTIVE MEASURES FOR PRIVILEGED POWER PRODUCERS Pursuant to the Article 59, paragraph 6 of the Energy Law (“RS Official Gazette”, No. 57/11, 80/11 – corrigendum, 93/12 and 124/12) Anual increasing rate = inflation rate of EURO zone Duration of power purchase agreement (PPA)= 12 years 21.10.2015

10. Seite 10 Thomas Mitschke, GIZ DKTI programme Type of Electrical GenerationFeed-inTariff Biomass power plant up to 1 MWel13,26 €Ct./kWh Biomass power plant 1 - 10 MWel13,82-0,56 x Pel €Ct./kWh Biomass power plant 10 MWel8,22 €Ct/kWh Biogas power plant up to 2 MWel18,333 – 1,111 x Pel €Ct./kWh Biogas power plant 2 - 5 MWel16,852 – 0,370 x Pel €Ct./kWh Biogas power plant over 5 MWel15 €Ct/kWh Feed-in Tariffs for Biomass and Biogas in Serbia (based on proposal for 2016) Source: http://www.mre.gov.rs/doc/javne%20rasprave/28.09/Objedinjeno%20Uredba%20o%20podsticajnim%20merama%202015%20098%2014a.pdfhttp://www.mre.gov.rs/doc/javne%20rasprave/28.09/Objedinjeno%20Uredba%20o%20podsticajnim%20merama%202015%20098%2014a.pdf  Annual increasing rate = inflation rate of EURO zone  Corn Silage input = max. 40 % of overall dry matter content  Duration of power purchase agreement (PPA)= 12 years 21.10.2015

11. Seite 11 Fuel prices for heating in Serbia Thomas Mitschke, GIZ DKTI programme Current fuel prices for heating in Serbia without VAT Source: GIZ study and calculation Prices can differ depending on location, quality and quantity 21.10.2015

12. Seite 12 Thomas Mitschke, GIZ DKTI programme Project proposal medium-sized farm 50 kWel Biogas plant in Serbia Initial values: Following scenario are evaluated: 1.Digestion of available liquid pig manure for electricity generation of 50 kW el 2.Digestion of available liquid and solid cattle manure for electricity generation of 50 kW el 100 % of electricity generated will be sold to the grid under current feed-in-tariffs, 30 % of heat generated will be used for internal heating purposes (30 €/MWh -> comparable to current coal price) Institute for Animal Husbandry, Serbia - Foto: GIZ 2015 21.10.2015

13. Seite 13 Thomas Mitschke, GIZ DKTI programme Project Proposal 50 kWel Biogas plant in Serbia: Manure input– required quantity and quality  Pig farm of around 4.000 animal units (fatteners) or cattle farm around 500 animal units can provide needed amount for the proposed plant size  Analysis of organic dry matter content and real quantity values necessary for each individual farm and project Cattle Farm in Serbia, Foto: GIZ 2015 or Different farm structures: design, feeding, age and animal type 21.10.2015

14. Seite 14 Output 50 kWel Biogas plant Thomas Mitschke, GIZ DKTI programme 2 options for energetic use 30-40 % of generated heat shall be used for biogas process (own consumption) Source: Own Calculations GIZ, 2015 Foto: Fachverband Biogas 2015 21.10.2015

15. Seite 15 Thomas Mitschke, GIZ DKTI programme Average Investment Costs- Individual design Project size between 5.000 and 12.000 €/kW (average 8.000 €/kW) according to FvB 2015:  Reduction of investment costs possible through use of existing equipment like manure tanks  Standardized technology from already existing German market for small scale manure biogas plant available Source: FNR, 2014 21.10.2015

16. Seite 16 Thomas Mitschke, GIZ DKTI programme Estimated Investment Costs (CAPEX) Source: Own Calculations GIZ, 2015  Check real investment costs with turnkey-offer when detailed data (plans, substrates) is available  Contains 1 heated digester with gas storage roof and additional open storage tank  8.331 €/kW overall investment 21.10.2015

17. Seite 17 Thomas Mitschke, GIZ DKTI programme Additional economic presumptions  Feed-in Tariff: 0,1566 €/kWhel for 400.000 kWh per year (50 kW, 8.000 full load hours per year)  Sales heat price: 0,03 €/kWh Heat, 30 % of generated heat is used/sold externally  Financing: 30 % equity, 5 % per year interest rate on commercial loan for 10 years  Grant: 15 % of investment (e.g. websefff, UNDP/GEF)  Manure costs: 0 €/t,  1st year after commissioning: 80% of production  80% sales and 80% of variable costs  Maintenance costs: 1.5 % per year of investment for biogas plant plus 0,015 Euro/kWhel for CHP  Electricity consumption: 6 % of overall generation for 0,05 Euro/kWhel  Operation staff: 365 days x 1 h/d x 10 EUR/h = 3.650 EUR/year  Admin and Overhead: 1 % of income, telecommunication: 25 €/month  Insurance: 0,25 % of overall Investment  Fees: 1,000 Euro/year  Miscellaneous: 2 % of income  Production cost increasing rate: 2 %  Increasing of feed-in tariff referred to inflation rate Eurozone: 2 % per year  NPV and IRR-Evaluation basing on employed equity with Return-On Equity (RoE)-expectation of 5% Solid manure from cattle farm in Serbia, Foto: GIZ 2014 21.10.2015

18. Seite 18 Thomas Mitschke, GIZ DKTI programme Cash Flow Biogas Manure Plant I (0 – 10 years) Source: Own Calculations GIZ, 2015 21.10.2015

19. Seite 19 Thomas Mitschke, GIZ DKTI programme Cash Flow Biogas Manure Plant II (11-15 years) Source: Own Calculations GIZ, 2015  Calculated on equity, 5 % equity interest rate  IRR on overall project cash flow 10-11 % for 15 years Financial improvement possible through:  Increasing of manure input  Decreasing of investment costs  Increasing of feed-in-tariffs 21.10.2015

20. Seite 20 Thomas Mitschke, GIZ DKTI programme Cash Flow Biogas Manure Plant III (11-15 years) FiT = 18Ct/kWh Source: Own Calculations GIZ, 2015  Calculated on equity, 5 % equity interest rate  IRR on overall project cash flow 18-19 % for 15 years ≈ +15 % increasing FiT  ≈ +45 % increasing profitability!! 21.10.2015

21. Seite 21 Sensitivity analysis of project Thomas Mitschke, GIZ DKTI programme Source: Own Calculations GIZ, 2015 21.10.2015

22. Seite 22 Thomas Mitschke, GIZ DKTI programme Technical and financial aspects to consider  Modification of existing manure tanks for conversion into a biogas digester possible by installing heat insulation, agitation system, gas storage, heating pipes and concrete protection?  Permission and concession procurement  Low dry matter content may require especific biogas technology or additional solid organic substrates  Availability of slurry and manure all over the year?  Additional external heat demand for further income growth  Grant requirement/availability? Future FiT? Good Manure…. 21.10.2015

23. Seite 23 Thomas Mitschke, GIZ DKTI programme Reasons for implementation  Additional cash-flow of over 326.000 € per project without taxation in 15 years possible (around 21.700 € per year)  18 Ct/kWh FiT: 482.000 € in 15 years, 32.000 € per year  Emission reduction of methane from manure storage  Environmental treatment of manure waste  Renewable energy sources, energy independency  Conditioning of fertilizer, nutrients stay in effluents  additional market?  Upscale and multiplication possible  positive visibility  Economic improvement potential with new feed-in-tariffs  Investment cost reduction through adopted technology? Mirotin Energo Biogas plant, Vrbas, Serbia - Foto: GIZ 2014 21.10.2015

24. Seite 24 Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH Development of a Sustainable Bioenergy Market in Serbia Bože Jankovića 39 11000 Belgrade Serbia T +381 11 3912 507 E bioenergy-serbia@giz.de Thank you for your attention! Thomas Mitschke, GIZ-DKTI Component Leader Project Development Thomas Mitschke, GIZ DKTI programme Please visit us on: www.bioenergy-serbia.rs 21.10.2015

25. Seite 25 Financial structure: EBRD -WeBSEFF Thomas Mitschke, GIZ DKTI programme Loans and grants for businesses WeBSEFF is available to provide financing of up to EUR 2 m (2.5 m for public stakeholders) to private businesses looking to invest in: (amongst others)  Modern technologies that cut energy consumption or CO2 emissions by at  Reduce costs and make enterprises more competitive  Provide opportunities to replace old equipment and modernize production  www.webseff.com www.webseff.com Conditions:  Loan through third bank  Equity: 20 - 40 % of investment  Grant 5 -10 % of investment (10-15 % for public stakeholders)  Interest rate 6-8 % per year 21.10.2015

26. Seite 26 Thomas Mitschke, GIZ DKTI programme Financial structure: KfW-MEGLIP Program  Only for Serbian Municipalities and municipal public utilities  Max. loan amount: EUR 1.25 m  Loan through third bank  No equity requirement  Interest rate 5-8 % per year  Grant 15-20 % of overall loan amount after implementation  www.meglip.org www.meglip.org 21.10.2015

27. Seite 27 Thomas Mitschke, GIZ DKTI programme Financial structure: KfW-IPEX Program  Target group and classifying: projects with German Technology  Financing: supplier and buyer credits (with ECA cover), corporate finance (including in connection with matching KfW funding), project finance, acquisition finance, guarantees and credits  Amount of Credit: Depending on the level of funding concrete business, no fundamental restrictions, Large volumes of up to EUR 100 million export contract value on the "European Recovery Program" (ERP), Small volumes from 0.5 - 5 million EUR, max. EUR 10 million, via the "Small Ticket exports“  Interest rates: ERP rates: Interest education upon minimum interest rules of the OECD Consensus, at the conclusion valid CIRR (Commercial Interest Reference Rate) of the relevant currency; Small Ticket exports: fixed or variable, the amount is based on specific export risk  Duration: depending on the specific business, 2 - 5 years; for project financing and more complex financing also significantly longer  https://www.kfw-ipex-bank.de https://www.kfw-ipex-bank.de 21.10.2015

28. Seite 28 Climate partnerships with the private sector KfW DEG I Who can participate? German and European companies, also in cooperation with local companies, which  have an annual turnover of at least 1 million euros,  have a staff of at least ten people  and have been in operation for at least three financial years What is supported?  promote the introduction of climate-friendly technology,  adapt proven technology for greenhouse gas reduction to the specific conditions in the target countries or  demonstrate the application of innovative technology  and have a structure-building effect in connection with the use of climate-friendly energy. 21.10.2015

29. Seite 29 Climate partnerships with the private sector KfW DEG II What is supported? Interested companies are invited to submit project proposals to DEG at any time. In the event of a positive decision, the company and DEG jointly develop a comprehensive project concept. An amount of up to 200,000 euros per project can be provided through the programme. The company has to contribute at least 50 per cent of the overall project cost. You can find further information in the overview under: https://www.deginvest.de/International-financing/DEG/Unser- Angebot/Förderprogramme/Klimapartnerschaften/ 21.10.2015

30. Seite 30 Other: Thomas Mitschke, GIZ DKTI programme  UNDP/GEF Fund: Public call for Biomass CHO up to 2.5 m EUR, 15 % Grant  Guarantee Fund of Vojvodina http://www.garfondapv.org.rs/http://www.garfondapv.org.rs/  Provincial Secretariat for Energy and Mineral Resources Vojvodina: Public Calls for different grants, mosty for public calls (http://www.fkuapv.org )http://www.fkuapv.org  Deutsche Bundesstiftung Umwelt (www.dbu.de)www.dbu.de  International Climate Initiative (www.iki.de )www.iki.de  Private-Equity-Funds  GIZ- developpp-Programm  www.developpp.dewww.developpp.de  ESCO, BOT, etc.  …more 21.10.2015

31. Seite 31 Thomas Mitschke, GIZ DKTI programme Implemented by: Potentials and first Experiences of Energy-Supply-Contracting by implementing a fuel-switch to biomass for the heating of public buildings in Serbia Local subsidies / RDA Zlatibor / Center for Development Leskovac 21.10.2015

32. Seite 32 Fuel prices for heating in Serbia Thomas Mitschke, GIZ DKTI programme Current fuel prices for heating in Serbia without VAT Source: GIZ study and calculation Prices can differ depending on location, quality and quantity 21.10.2015

33. Seite 33 Fuels used for heating in public buildings in Serbia (without district heating) Thomas Mitschke, GIZ DKTI programme21.10.2015

34. Seite 34 Project example with simple numbers: public school building in Serbia Thomas Mitschke, GIZ DKTI programme Current heating system and its costs:  2 overdesigned, 20-years-old light fuel boilers á 400 kW  Current consumption: 75 t/a light fuel á 1.000 €/t = 75.000 €/a Solution with a woodchip boiler concept:  1x 500 kW wood chip system for around 150.000 – 200.000 € Investment cost, current system as a back-up  Future fuel costs: 275 t/a á 65 €/t = 17.875 €/a Source: GIZ, 2014 21.10.2015

35. Seite 35 Thomas Mitschke, GIZ DKTI programme Specific Investment costs for Biomass boilers Source: Leitfaden Feste Biobrennstoffe 2014, FNR €/kW Upper value:  Lower capacity  Agro biomass fuel  Steam boiler Lower value:  Higher capacity  Pellets  Hot Water Boiler Heat Capacity in kW Specific Investment Costs for fully automated biomass boilers 21.10.2015

36. Seite 36 Thomas Mitschke, GIZ DKTI programme BIOMASS-ESCO (Supply-Contracting) Interface of supply/responsibility ESCO-Company:  Designs, finances, builds, operates biomass plants until delivery border of heat/warm water  Responsibility for boiler efficiency  Biomass purchasing, logistic and quality supervision  Maintenance  Heat measuring (defined delivery point)  Provides back up system Client:  Pays heat energy consumption plus fixed monthly/yearly price for finance and operation  Responsible for internal heating system/consumption Calorific meter (kWh/MWh) Heat exchanger: Separated heating circles  important!! Buffertank to cover low demands Storage, feeding system, boiler house and boiler Source: Fug-Verlag, © Hargassner 21.10.2015

37. Seite 37 Thomas Mitschke, GIZ DKTI programme Advantages and disadvantages of the ESCO-Modell Advantages:  Budget for investment can be used for other public needs  Public debts can be reduced or won`t increase  Outsourcing of responsibility and risk for boiler efficiency, possible damages  Implementation and operation of heating plant by experienced partner  New technology requires additional capacities and knowledge – no need in case of ESCO  No additional internal capacities for fuel logistics and quality control needed  After PPP-procurement no additional administration for tendering (fuel, equipment, spare parts) needed  Concentration on core tasks  Local income regarding biomass supply and operation will increase, since also a foreign investor would purchase on local market Disadvantages:  Sharing savings with a private partner  10 years fixed contract with partner – less flexibility 21.10.2015

38. Seite 38 Crucial Documents for PPP-Procurement  Project proposal to be approved by assembly (prefeasibility level)  Feasibility Study with Business Plan and Value-for-Money-Analysis  Contract model and specifications  Bidding and selection criteria  Duration revision by PPP-Comission 3 - 6 weeks Thomas Mitschke, GIZ DKTI programme21.10.2015

39. Seite 39 Contract criteria  Heat capacity (min./max.) and back up system  Heat delivery guarantee and penalty  Payment aspects  Duration, extraordinary cancellation  Delivery border (P&ID) and responsability interface  Property issues and access, ownership of special purpose vehicle  Var. price per consumption in € or RSD/MWh (price index?)  Fix price in € per month/year for capital costs (fix) and operation costs (index for salary/spare parts)  Guarantees (both sides)  Final agreements Thomas Mitschke, GIZ DKTI programme21.10.2015

40. Seite 40 Price Setting  Variable Working Price: WP = ____ € /MWh * F/F 0 F = Fuel index (market price or costs) in accounting period F 0 =Fuel index (market price or costs) in start of contract  Fix Price: FP = ___ € * (x + y * O/O 0 ) x = share of capital costs in % y = share for operation costs in % O= Operation costs index (salaries, mech. parts etc.) in accounting period O 0 =Operation costs index (salaries, mech. parts etc.) in start of contract Thomas Mitschke, GIZ DKTI programme21.10.2015

41. Seite 41 Financial structure for ESCO: Example EBRD -weBSEFF Thomas Mitschke, GIZ DKTI programme Loans and grants for businesses WeBSEFF is available to provide financing of up to EUR 2 m to private businesses looking to invest in: (amongst others)  Modern technologies that cut energy consumption or CO2 emissions by at  Reduce costs and make enterprises more competitive  Provide opportunities to replace old equipment and modernize production Conditions:  Loan through third bank  Equity: 20 - 40 % of investment  Grant 5 -10 of investment  Interest rate 6-8 % per year 21.10.2015

42. Seite 42 Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH Development of a Sustainable Bioenergy Market in Serbia Bože Jankovića 39 11000 Belgrade Serbia T +381 11 3912 507 E bioenergy-serbia@giz.de Thank you for your attention! Thomas Mitschke, GIZ-DKTI Component Leader Project Development Thomas Mitschke, GIZ DKTI programme Please visit us on: www.bioenergy-serbia.rs 21.10.2015