national framework onditions to support the esta...

NATIONAL FRAMEWORK CONDITIONS TO SUPPORT THE

ESTABLISHMENT OF “BIOENERGY VILLAGES“ IN CROATIA,

MACEDONIA, ROMANIA, SERBIA AND SLOVENIA

Project Title: Bioenergy Villages (BioVill) - Increasing the Market Uptake of Sustainable Bioenergy Grant Agreement N° 691661

Deliverable N° 2.6 5 Reports on national framework conditions in the target countries Lead Partner: WIP Renewable Energies

Submission date: 23.11.2016

BioVill – National framework conditions to develop bioenergy villages

This project has received funding from the European Union’s Horizon 2020 research and innovation programme

under Grant Agreement N° 691661

Imprint

This document is issued by the consortium formed for the implementation of the BioVill project under Grant Agreement N° 691661 by the following partners: GIZ - Deutsche Gesellschaft für Internationale Zusammenarbeit GmbH (Germany) WIP – Wirtschaft und Infrastruktur GmbH & Co Planungs- KG (Germany) KEA - Klimaschutz- und Energieagentur Baden-Württemberg (Germany) AEA – Österreichische Energieagentur Austrian Energy Agency (Austria) REGEA – Regionalna Energetska Agencija Sjeverozapadne Hrvatske (Croatia) SDEWES-Skopje – International Centre for Sustainable Development of Energy, Water and Environment Systems - Macedonian Section (Macedonia) GEA – Asociatia Green Engergy (Romania) GIS – Gozdarski Institut Slovenije (Slovenia) SKGO – Stalna Konferencija Gradova i Opstina (Serbia) Lead Partner for the compilation of this document: WIP Renewable Energies

Contact: WIP Renewable Energies Sylvensteinstr. 2 D-81369 Muenchen Germany Tel: +49-89-720127 39 Fax: +49-89-720127 91 E-Mail: [email protected] [email protected] URL: www.wip-munich.de

Authors of this report: Juan-Manuel Ugalde, Dominik Rutz – WIP Renewable Energies Martina Krizmanić, Valerija Vrček, Velimir Šegon – REGEA Vladimir Gjorgievski, Natasa Markovska, Vasil Bozhikaliev – SDEWES Daniel-Alexandru Cosnita, Maria Gaspar, Boglarka Vajda, Lajos Vajda – GEA Miodrag Gluscevic , Tanja Cvetkov, Ivan Milivojevic – SKGO Todora Rogelja, Darja Kocjan, Dr. Nike Krajnc – GIS

Copyrights: © 2016 by authors. No part of this work may be reproduced by print, photocopy or any other means without the permission in written from the main authors. Disclaimer: Neither GIZ nor any other consortium member nor the authors will accept any liability at any time for any kind of damage or loss that might occur to anybody from referring to this document. In addition neither the European Commission nor the Agencies (or any person acting on their behalf) can be held responsible for the use made of the information provided in this document. Further information about the BioVill project on: www.biovill.eu

http://www.biovill.eu/


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Contents

List of Figures ............................................................................................................................................................ 4

List of Tables ............................................................................................................................................................. 4

Abbreviations and acronyms ..................................................................................................................................... 5

1. Introduction ................................................................................................................................................ 6

1.1 The BioVill Project ...................................................................................................................................... 6

1.2 Scope of the task/deliverable ................................................................................................................... 6

1. Croatia ........................................................................................................................................................ 7

1.1 General information .................................................................................................................................. 7

1.2 Current status of bioenergy and its potential .......................................................................................... 8

1.3 Development barriers.............................................................................................................................. 10

1.4 Incentives ................................................................................................................................................. 10

2. Macedonia ................................................................................................................................................ 13

2.1 General information ................................................................................................................................ 13

2.2 Current status of bioenergy and its potential ........................................................................................ 14


2.4 Incentives ................................................................................................................................................. 17

3. Romania .................................................................................................................................................... 19




3.4 Incentives ................................................................................................................................................. 21

4. Serbia ........................................................................................................................................................ 22




4.4 Incentives ................................................................................................................................................. 26

5. Slovenia .................................................................................................................................................... 28




5.4 Incentives ................................................................................................................................................. 32

References: ............................................................................................................................................................. 34


4

List of Figures

Figure 1: Energy production in the heating and cooling sector from the new facilities that use RES until 2020 ........................................................................................................................................... 24

Figure 2: Structure of RES (excluding hydro energy) in gross final energy use in Slovenia in 2015 .................... 30

Figure 3: Overall assessment of the potential of forest biomass by municipalities in 5 stages of suitability: rank 1 - the municipalities are less suitable for the use of biomass; rank 5 - the municipalities are highly suitable for the use of biomass ............................................................... 30

List of Tables

Table 1: Basic facts about the Republic of Croatia ................................................................................................. 7

Table 2: Contribution of RES in ktoe according to the NREAP scenario for 2020, 2025 and 2030 .................... 14

Table 3: Waste biomass potential in Macedonia .................................................................................................. 16

Table 4: Romanian Renewable Energy Potential .................................................................................................. 19

Table 5: Overview of technical usable potential of RES ...................................................................................... 24

Table 6: Planned bioenergy capacities for electricity production until 2020...................................................... 24

Table 7: Feed-in tariffs for bioenergy plants ......................................................................................................... 27

Table 8: The sectoral and overall shares of RES.................................................................................................... 30


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Abbreviations and acronyms

AN URE National Action Plan for Energy Efficiency Slovenia CHP Combined Heat and Power EBRD European Bank for Reconstruction and Development EE Energy Efficiency EESI European Energy Service Initiative EPC Energy Performance Contracting EPEEF Environmental Protection and Energy Efficiency Fund ERDF European Regional Development Fund ESC Energy Supply Contracting ESCO Energy Service Company EIB European Investment Bank ETS Emission Trading System EU European Union EU28 European Union of the 28 Member States FIT Feed-in Tariff GEF Global Environment Facility GFEC Gross Final Energy Consumption HBOR Croatian Bank for Reconstruction and Development HEP ODS Distribution System Operator HERA Croatian Energy Regulatory Agency HPP Hydro Power Plant HRK Croatian Kuna IFC International Finance Corporation IPA Instrument for Pre-Accession Assistance IPARD Instrument for Pre-Accession Assistance in Rural Development KfW Kreditanstalt für Wiederaufbau MBT Mechanical Biological Treatment tep ton equivalent of petrol ktoe kilo ton of oil equivalent LHPP Large Hydro Power Plant MEA Macedonian Energy Association NACE Nomenclature statistique des activités économiques dans la Communauté européenne NEEAP National Energy Efficiency Action Plan NGO Non-government organization NREAP National Renewable Energy Action Plan PJ Peta Joule PPP Public-private partnership PV Photovoltaic RE Renewable Energy RED Renewable Energy Directive RES Renewable Energy Sources SHPP Small Hydro Power Plant SME Small and Medium-sized Enterprise SRC Short Rotation Coppice SSO State Statistical Office UNDP United Nations Development Programme USAID United States Agency for International Development VAT Value Added Tax WPP Wind Power Plant


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1. Introduction

1.1 The BioVill Project

BioVill is a three years project supported by the European Union's Horizon 2020 research and innovation programme with a budget of around EUR 1.99 Mio. The project started in March 2016 and is implemented by the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH in collaboration with 8 partners from the BioVill target partner countries Croatia, Macedonia, Romania, Serbia and Slovenia, as well as from Germany and Austria.

Many South East European countries have high biomass potentials, but they are often not or only inefficiently used for local energy supply and regional economic development. Thus, the overall objective of the BioVill project is to support the development of regional bioenergy concepts and the establishment of bioenergy villages in Croatia, Macedonia, Romania, Serbia and Slovenia. This will be achieved by identifying suitable biomass value chains according to local and regional needs and transferring existing experiences in Austria, Germany and other European countries to the South-Eastern European partners. Thereby the market uptake of domestic bioenergy supply chains will be increased and the role of locally produced biomass as a main source of energy supply and added value for the local and regional economy will be strengthened.

Core activities of the BioVill project include national and local framework analyses, technological and economic assessments of local bioenergy value chains, development of the institutional set-up and energy management concepts for the potential bioenergy villages as well as capacity building on financing schemes and business models. As a key factor of success the BioVill project uses a multi stakeholder approach fostering the involvement and active participation of the citizens and all relevant stakeholders in the planning and implementation process.

Major results of the BioVill project will be the initiation of at least five bioenergy villages in the target partner countries up to the investment stage for physical infrastructure, the raise of public acceptance and awareness of a sustainable bioenergy production and its commercial opportunities as well as increased capacities of users and key actors in business and legislation to sustainably manage bioenergy villages and to enact national and EU legislation. Altogether the BioVill project will contribute to the expansion and sustainability of the bioenergy markets in the European Union.

1.2 Scope of the task/deliverable

The present report is a compilation of five national reports dedicated to understand the current national bioenergy framework conditions in Croatia, Macedonia, Romania, Serbia and Slovenia, the target countries of the BioVill project. In order to foster the development of the bioenergy sector in the target countries, this document aims to analyse the current national relevant legislations and regulations supporting the development of local markets for bioenergy as well as the bottlenecks.

The report includes dedicated chapters for each target country. Each country-chapter firstly provides a general description of the country, i.e. information on its geographical situation, the current government and national efforts on fostering sustainable energy. The second section is related to the current status of bioenergy and it’s potential. Here, the target countries consider the national efforts to include renewable sources for energy production. The third section analyses the bottlenecks and restrictions identified, affecting the promotion and development of bioenergy markets in the target countries. The fourth section describes the promotion of incentives within the bioenergy sector in the target countries.

The results of this report will be used to support the cooperation between different policy areas at national and regional level in order to optimise the regulatory framework in the BioVill target countries and to increase the capacities to enact relevant EU legislation.


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1. Croatia

1.1 General information

The Republic of Croatia is located in South Eastern Europe, at the meeting point of Central Europe, the Mediterranean, and the Balkans bordering Hungary to the northeast, Serbia to the east, Bosnia and Herzegovina to the southeast, Montenegro to the southeast, the Adriatic Sea to the southwest and Slovenia to the northwest. Croatia is a unitary democratic parliamentary republic and its capital and largest city is the City of Zagreb. The politics of Croatia are defined by the Parliament through a parliamentary representative democratic republic framework, where the Prime Minister of Croatia is the head of government in a multi-party system. Executive power is exercised by the Government and the President of Croatia. As the 8th Assembly of Parliament first constituted on 28 December 2015, the next elections for the Croatian Parliament are to be held no later than 26 February 2020. The country is divided into 20 counties and the City of Zagreb having a county status. Croatia covers 56,594 km

2, consisting of 56,414 km

2 of land and 128 km

2 of inland water and has diverse, mostly

continental and Mediterranean climates. Croatia's Adriatic Sea coast contains more than a thousand islands. The country's population is 4.28 million, most of whom are Croats, with the most common religious denomination being Roman Catholicism. Croatia became the 28th member state of the European Union on 1 July 2013.

Area 56,594 km

2

Territorial sea and inland sea area 31,067 km2

Length of sea coastline with islands 5,835.3 km

Land border length 2 028 km

The highest mountain Dinara, 1,831 m

Number of islands 1,185

Population density per km2 75.8

Population (2011 Census) 4,284,889

Capital city Zagreb

Language Croatian

Currency Kuna (HRK)

Political system Parliamentary democracy

President Kolinda Grabar - Kitarović

GDP (2015) $ 60 billion

GDP per capita – current prices (2015) $ 13,995

GDP per capita - PPP $ 20,873

Table 1: Basic facts about the Republic of Croatia

The Ministry of Economy, specifically its Directorate for Energy and Mining, has the overall responsibility for the energy policy in Croatia. The energy legislation package and corresponding rules and regulations adopted by the Croatian Parliament in July 2001, have opened the doors for increased use of renewable energy in Croatia. The legislative framework defines relationships within the energy sector that includes the following: Energy Law, Law on Electricity Market, Law on Oil and Oil Derivatives Market, Law on Gas Market and Law on Regulation of Energy Activities, Law on Production, Distribution and Supply of Thermal Energy and Law on Biofuels for Transport (Croatian Parliament 2002).

The Ministry of Agriculture is the administrative body responsible for the implementation of national forestry

policy, while the state‐owned company Hrvatske šume Ltd has a mandate to manage the state‐owned forests

according to the principles declared in the official documents that have to be approved by the Ministry and

Government. Legal persons, other than Hrvatske šume Ltd, manage a minor area of state‐owned forests.

The Energy Law, as the fundamental document, regulates the organisation and the institutions active in the field of energy efficiency and renewable energy sources. The Energy Law, for the first time, precisely articulated the positive attitude of the Republic of Croatia towards renewable energy sources, thus representing a small, but significant shift in view of a positive message to the investors interested. The key step, as regards to the legislative treatment of renewable energy sources (RES), was also included in the Law on Electricity Market that established the legislative obligation of electric energy purchase generated from renewable energy sources.


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By becoming a full member of the EU, the Republic of Croatia has, together with other Member States, adopted the obligation to increase energy efficiency in the EU in order to achieve the objective of saving 20% of primary energy consumption at EU level by 2020 (pursuant to Directive 2012/27/EU of the European Parliament and of the Council of 25 October 2012 on energy efficiency, amending Directives 2009/125/EC and 2010/30/EU and repealing Directives 2004/8/EC and 2006/32/EC). With the Energy Strategy, the National Energy Efficiency Programme, and the First National Energy Efficiency Action Plan (NEEAP), the Republic of Croatia set the target of reducing final energy consumption in 2016 by 19.77 PJ, in accordance with the requirements of Directive 2006/32/EC on energy end-use efficiency and energy services

1. The sectoral distribution of the target was

revised in the 3rd NEEAP in accordance with the amended projections for final energy consumption and the savings potentials per sector. The government has established a co-financing programme for the procurement of the most efficient appliances available on the market as replacements for old appliances, which are being removed from use. The programme of Energy Renovation of Family Homes 2014–2020 is aimed at the renovation of existing family homes. It focuses primarily on family homes of up to 400 m

2 constructed before

1987 and on their renovation in compliance with low-energy standards by encouraging the renovation of the building envelope, the replacement of the heating system and the use of RES. The most important expected effects of the implementation of this measure are investments encouraging annual energy savings in final consumption. Furthermore, the citizens’ payments for energy as well as CO2 emissions shall be reduced. The share of renewable energy sources shall be increased as well as the employment, the security of power supply, and the market value of real estate. The production industry shall be further developed, the ‘grey economy’ and the energy poverty reduced, and the overall living conditions shall be improved. It is assumed that 100 family homes per county, or approximately 2,000 houses throughout the territory of Croatia, will participate in the programme at an annual level.

The Energy Law of 2012, which defines the energy policy and energy development, and the Electricity Market Law, last amended in 2013 and regulating activities in the electricity market (e.g. generation, transmission and distribution), are the main legal documents regulating the electricity market (Ministry of Economy 2016). The Tariff System for Electricity Production from Renewable Energy Sources and Combined Heat and Power, last amended in 2013, determines the feed-in tariffs for eligible renewable energy producers. There are other incentives, too. Solar photovoltaic power plants with additional ability to produce hot water or heat receive a higher feed-in tariff and all power plant operators may receive a bonus of up to 20% of the tariff based on social and environmental factors, such as employment or the plant’s contribution to the local community. Interest-free loans are available for renewable energy developers by the Fund for Environmental Protection and Energy Efficiency. Grid connection for renewable energy power plants is non-discriminatory and the distribution operator HEP ODS bears the grid connection costs. Energy production is subject to licensing, which is obtained, together with ‘qualified producer’ status to receive the feed-in tariff, by the Croatian Energy Regulatory Agency (HERA). In accordance with the Heat Energy Market Law, with the aim of achieving greater utilisation of the national thermal potential for heating and cooling, the Government of the Republic of Croatia will adopt until 2018 a programme on the utilisation of potential for heating and cooling efficiency. This programme will lay down the public support measures for the production of thermal energy for heating and cooling.

The main conclusion is that continuous efforts are needed to further formulate energy efficiency policy and design tools (e.g. forecasts, least-cost plans and indicators) for effective and efficient project implementation and monitoring. In order to strengthen the implementation of adequate regulatory measures, the government should evaluate the implementation effectiveness, including cost-effectiveness, as well as the socio-economic effects of policy measures employed. In particular, to reduce the administrative burden for the project developers, one single responsible authority, which can set clear and integrated guidelines for authorization procedures for projects, should be established. A crucial point for the success of the projects is an active project support by national and local authorities. Therefore, public acknowledgement of energy efficiency efforts as well as related press coverage is one of the most important tools to raise interest of the stakeholders.

1.2 Current status of bioenergy and its potential

The Republic of Croatia is one of the top of European countries by forests and forest area in total. The forests in Croatia cover an area of 47% and the country also has a well-established wood and wood processing industry. In

total forest area, 75% of forests are owned by the state and managed by the company Hrvatske šume Ltd., while

the remaining 25% are privately owned (Ministry of environmental and nature protection, 2014). The forestry

1 Legal sources on renewable energy (Croatia). Accessed May 17, 2016, from http://www.res-legal.eu/en/search-by-country/

http://www.res-legal.eu/en/search-by-country/


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industry has supported the development of a woody biomass industry as a complementary business activity, with the added value of being an environmentally friendly and locally available source of renewable energy.

Croatia also ranks as a country with significant wood energy potential, but despite this, the exploitation and maintenance of forest and wood biomass for heat/power production in district heating systems and small boilers is at a low level. Most of the biomass energy, as a fuel for heating, is primarily used in households in rural parts of Croatia, especially in old and inefficient stoves. The exploitation of bioenergy should be one of the most important parameters in the sustainable development of rural areas.

According to the publication Energy in Croatia 2014 (Ministry of Economy, 2014), (Annual energy report, published by the Ministry of Economy) biomass covered approximately 11.6% of the Croatian total primary energy supply (46.82 PJ were supplied from biomass out of the total 402.22 PJ) in 2014. The total production of fuelwood amounted to 6.3 mil m

3 and production of wood chips, briquettes and pellets amounted to app

600,000 t. Approximately 72% of the total pellet production and 62% of the briquettes production is exported to foreign markets, while there are no official data for wood chips (but it can be assumed that most of it is also exported).

On the other side, the potential of waste for energy production is available on the entire territory of Croatia. Most of the municipal waste is landfilled. Out of a total of 1,788,311 tonnes of municipal waste in 2012, 77% was mixed municipal waste. The amount of separately collected types of municipal waste is continually growing and in 2012 it accounted for 23% (227 651 tones). However, only part of this quantity ends up being recovered while the rest is landfilled (EEA, 2013). The separately collected municipal waste consisted mainly of bulky waste, paper, organic waste and glass added up to 382 078 tonnes in 2012. The national waste management strategy sets a target of 18% for separate collected and recycled municipal waste in 2020 and 25 % in 2025 (EEA, 2013). In addition, it is planned to treat municipal waste by Mechanical Biological Treatment (MBT) plants and one incineration plant with the aim of reducing landfilling to only residual waste.

In Croatia, there are numerous potential users/consumers of thermal energy produced from biomass in heating plants and district heating systems, primarily in small villages in rural areas, but also public buildings in small settlements. Currently, the majority of public buildings in villages (schools, kindergartens, health centres, etc.) are heated by fossil fuels (natural gas in the villages where the gas infrastructure was built, and fuel oil in the villages where no gas infrastructure exists).

Croatia has all the necessary state policy instruments for renewable electricity production, a financial support mechanism and a statement of the obligations and responsibilities of players in the energy sector. Existing feed-in tariffs for bioelectricity are among the highest in Europe and very stimulating under Croatian market conditions.

Croatia is now facing the triple challenge of energy shortages, socio-economic development and environmental protection. Bioenergy and biomass utilisation could play an important role in the promotion of a number of Croatian goals. The development of a successful bioenergy sector could, in the long run, contribute to diversification of energy production and security of supply; increased domestic production and decreased import of energy; significant reduction in environmental influences from the energy sector, and creation of new jobs and investment in rural areas (e.g. in areas of special interest to the state, in coastal regions and islands) (Domac 2008).

2

A very important instrument supporting bioenergy development in Croatia has been the establishment of an Environment Protection and Energy Efficiency Fund in 2003. The main objective of the fund is to participate with its resources in financing national energy programmes having in mind the achievement of energy efficiency, i.e. use of renewable energy sources. Today, the fund has become central to raising extra-budgetary funds and distributing them to programmes and projects on environmental protection, energy efficiency and renewable energy sourcing. This instrument has been especially important to the development of district heating and pellet production plants.


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1.3 Development barriers

The main obstacles for the development of the biomass sector in Croatia can be found in the areas of legislation, finance and general competence.

Regarding electricity production from biomass, complicated administrative procedures at all relevant levels (specific energy permits, environmental impact, access to the network, obtaining construction permits, resolving property issues, procedures to obtain feed-in tariffs), lack of coordination of the administration, sluggishness and inflexibility inhibits the development of this sector in Croatia. Specifically the following are the main barriers:

Long and unclear procedures to obtain the status of ‘Privilege producer of electricity’ (needed to ensure feed-in tariffs), with too frequent legislation changes

Long process of obtaining positive solutions for environmental impact studies

Long and in some elements vague procedures for obtaining the approvals for connection to the electricity network

Lack of clearly defined requirements for obtaining construction permits, unsteadiness of requirements depending on the place of permit issuance (local offices, county / city offices, the competent Ministry)

Lack of harmonization of legislation and regulations, especially those in authority of different institutions

3

The quality, the tradition in wood processing, and the increased demand are responsible for the expansion of the national pellet industry and market. Although dependent on market demand and economic feasibility in relation to non-renewable energy sources, renewable energy sources can and must be exploited in a better and more effective way. Important items that hinder further development of Croatian bioenergy markets in this area are:

Lack of national policies

Lack of incentive schemes and subsidies

Socio‐economic situation of forest owners

Lack of knowledge and technologies (BiomassTradeCentre II, 2011)

Currently, there are only three biomass district heating systems operating in Croatia (in the Cities of Ogulin and Gospić and in the Municipality of Pokupsko, all of them with 1 MWth capacity). The biggest obstacle to the construction of a large number of district heating systems and biomass heating plants in small villages is the lack of appropriate financial incentive mechanisms. Some of the projects were co-financed through the Environment Protection and Energy Efficiency Fund, but for a large number of potential projects, the level of funding was not sufficient to financially justify the project. In many cases, the level of co-financing of 40% does not provide sufficient financial profitability, and in some cases when it was possible to finance a higher percentage (80%) there was a limit of 1,400,000 HRK (set as a proportion of the Fund), so real share was even less than 40%. Furthermore, co-financing construction of the biomass heating plants in Croatia was possible only through the IPARD pre-accession programme with the contribution of 100% of the total eligible costs. However, considering the complexity of the application procedure and implementation of projects (including the implementation of the public procurement by the PRAG forms, with the overall project documentation in English) only one heating plant (Municipality of Pokupsko) of the planned 12 was constructed. Currently, there are very limited options to finance biomass district heating projects from EU Structural funds in Croatia.

The Croatian government shall adopt several sub laws regarding heat from renewables, which should define the national target, financial incentive mechanisms and all other aspects necessary for the stimulation and realisation of the target.

1.4 Incentives

During the pre-accession process and as a full member of the European Union, the Republic of Croatia has adopted a number of strategic and operational documents that define the development of the energy sector. According to the Energy Act of the Republic of Croatia (NN 120/12, 14/14, 95/15, 102/15), energy efficiency and

3 Biomass in Croatia – Report on the situation of biomass (production, supply, use) as fuel in Croatia, and RES in education as an answer to renewable market demands (2012). Accessed May 15, 2016, from: http://www.adam-europe.eu/prj/9352/prd/2/2/P-REPORT_CROATIA_E.pdf

http://www.adam-europe.eu/prj/9352/prd/2/2/P-REPORT_CROATIA_E.pdf

http://www.adam-europe.eu/prj/9352/prd/2/2/P-REPORT_CROATIA_E.pdf


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the use of renewable energy sources are of special interest. The utilization of biomass is recognized as one of the key measures to achieve the goals set both in national and in European strategic documents. Therefore, following strategic goals by 2020 have been set up in the Energy strategy of the Republic of Croatia (NN 130/09) (The Republic of Croatia – Ministry of Economy, Labour and Entrepreneurship 2009):

the share of renewable energy sources in transport will be 10% of the total consumption for the respective year;

the share of electricity generation from large hydro power plants and renewable energy sources in total electricity consumption is maintained at the present level of 35%; and

the share out of renewable energy sources will amount 20% in gross final energy consumption for heating and cooling.

The main instrument for financial support of energy efficiency and renewable energy projects in Croatia is the Environment Protection and Energy Efficiency Fund (EPEEF) (EPEEF 2016), founded as an extra-budgetary fund by a special Law in 2003 (O.G. 107/03, 144/12) and financed based on the polluter pays principle. The Fund provides grants to municipalities, cities and counties in the range of 40% to 80% of investment (in most cases limited to a maximum of 200,000 EUR), and also provides interest-free loans and subsidy of bank interest rates for private companies and entrepreneurs. The EPEEF represents an exceptionally important financial support to the implementation of energy efficiency policy in Croatia while its primary function would be to secure co-financing of the implementation of the National Energy Efficiency Action Plan. Therefore, the EPEEF needs to fully align its programme of work and financial plans with the NEEAP and to direct its financial resources into target projects and programmes defined in the NEEAP. EPEEF’s available funds are allocated in accordance to the Law on the Environmental Protection and Energy Efficiency Fund.

EPEEF is implementing energy retrofit programmes that were adopted by the Government of the Republic of Croatia, and it is co-financing energy efficiency measures in buildings, with the goal to reduce the consumption of energy at national level and reduce CO2 emissions. Measures aimed to achieve energy savings in households (including encouraging the use of RES: installation of small, biomass powered boilers) are one of the important guidelines of both European and Croatian energy policy, in accordance with the Energy Development Strategy of the Republic of Croatia, and the current Third National Energy Efficiency Action Plan (The Environmental Protection and Energy Efficieny Fund 2016).

Grant funding provided by the Environmental Protection and Energy Efficiency Fund was the most valuable mean of financing EE projects primarily aimed at public sector users. By entering the EU, things are about to change for Croatia, as now the funds from the Cohesion Fund, Structural Funds and the Investment Fund are on disposal to support the implementation of programs promoting energy efficiency. Furthermore, the EC has set a minimum allocation of funds from the ERDF to be 12% (for the less developed members such as Croatia) in order to support the transition to a low carbon economy based on low level of CO2 emissions in all sectors. These funds must be used to encourage investment in the use of renewable energy, advanced energy networks and urban mobility. New EU resources will represent a significant step forward as well as an opportunity to support a comprehensive national energy efficiency framework.

It is also important to mention the national development bank, Croatian Bank for Reconstruction and Development (HBOR), which participated in the co-financing of measures of the NEEAP. HBOR directed its efforts towards financing sustainable projects, which protect the environment and improve energy efficiency, as well as projects involving renewable energy sources.

In order to successfully implement as many energy efficiency projects as possible, EPEEF and HBOR continuously announce competitions to award financial funds in the form of credits, subventions and donations for the projects in the following fields:

sustainable construction

utilization of renewable energy sources

sustainable development of rural areas

stopping the migrations from rural into urban areas

environment protection

At the moment there is no special action plan exclusively focused on the promotion of bioenergy in Croatia, in the sense that biomass has not received any special treatment in comparison to other renewable energy sources, except for the slightly different feed‐in tariffs for each RES. However, an important impetus to biomass


12

utilisation for heat production is expected from the adoption of the legislative package regarding heat production from RES, which is expected in the near future.

Specifically, the Renewable Energy and High Efficient Cogeneration Act (OG 100/15) provides a new model of incentives and instead of the current feed-in tariff system, a new concept of market premium model is going to be implemented.

4 Unfortunately, biomass heating plants (even with this new act) are still unrecognized, the

contribution of renewable energy to national energy savings and other regulations or laws focused on the development of the biomass market are still not adopted.

Furthermore, Croatia has applied EU funded programmes for possible support measures related to regional development and increased use of bioenergy.

Financial subsidies for biomass heating projects were available through the IPARD pre-accession programme until 2013 (which was used by the Municipality of Pokupsko to establish the first and currently only communal biomass district heating system in Croatia). However, neither the Croatian Operational Programme for Competitiveness and Cohesion 2014-2020 nor the Operational Programme for Rural Development 2014-2020 foresee providing subsidies to biomass heating plants.

Also through European development banks and funds (EIB, EBRD), direct preferential loans are offered to investors in the public and private sectors for major projects. Through the World Bank’s Global Environmental Facility (GEF), many energy efficiency (EE) projects are realized. The activities of EE projects focused on the development of human, organizational and procedural resources needed for energy management, their education and supply of necessary tools for a systematic approach to energy management. The total investment in Croatia was 40 million EUR over a period of six years. The majority of the national programmes are focused on improving energy efficiency of existing buildings since they account for the highest final energy consumption (39.5%), which is much higher than transport and industry and can contribute to high level of greenhouse gas emissions reduction.

4Renewable Energy and High Efficient Cogeneration Act (OG 100/15). Accessed May 17, 2016, from:

http://www.zakon.hr/z/827/Zakon-o-obnovljivim-izvorima-energije-i-visokou%C4%8Dinkovitoj-kogeneraciji

http://www.zakon.hr/z/827/Zakon-o-obnovljivim-izvorima-energije-i-visokou%C4%8Dinkovitoj-kogeneraciji


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2. Macedonia


The Republic of Macedonia is a landlocked country in the centre of the Balkan Peninsula, characterized by a large range of mountains, which give way to extensive flat valleys and plains. It has a total area of 25,713 km

2

and a total population of 2,069,172. The Municipalities of the Republic of Macedonia are units of local self-government. In February 2013, the country was reorganized into 80 municipalities, 10 of them constitute the City of Skopje, a distinct unit of self-government and the country’s capital.

The Republic of Macedonia has been a candidate for accession to the European Union since 2005, although has not yet entered into accession negotiations.

The strategic priorities of Macedonia in the energy sector and provisions that transpose the European Union Energy Community acquis-communautaire are incorporated in the Energy Law (Assembly of the Republic of Macedonia, 2011). It provides a legal framework for the Macedonian energy market including a chapter on RES. The Law determines measures and activities that provide conditions for transposing and implementing the Renewable Energy Directive 2009/28/EC of the European Parliament. Furthermore, the Energy Law prescribes the adoption of a RES strategy and an action plan, which set targets and annual dynamics for increased share from RES. The law also defines the supporting schemes as guarantees of origin of electricity produced from RES and obtaining the status of preferential producer. The electricity transmission and distribution system operators shall provide priority access to the power system for electricity generated from RES.

The Ministry of Economy5 over the past period within the IPA project “Strengthening the administrative capacity

of the Energy Department at the Ministry of Economy and the Energy Agency" (Project lasted between 2013-2015) has drafted the new Energy Law which fully transposes the Directive. After the adoption of the Law, preparing and adopting of the sub legislation will follow.

The RES Strategy sets the targets on the use of RES and the manners for attaining these targets (Government of the Republic of Macedonia, 2010), in particular:

Potential of RES

Feasibility of the use of RES

Target volume and dynamics for increasing the share of electricity from RES and share of biofuels in the gross final energy consumption (GFEC); as well as the share of biofuels in the total consumption of fuels for transport

Incentives for the use of RES

In accordance with the existing Energy Law, the Government of the Republic of Macedonia adopted the National Renewable Energy Action Plan (NREAP) until 2025 with vision until 2030 (Government of the Republic of Macedonia, 2015). This Action Plan presented scenarios for the RES share in the final energy consumption in 2020, 2025, and 2030. These scenarios are based on the series of assumptions concerning the future development of the hydropower generation, which is rather predictable. Furthermore, the technical and economical hydro potential is well known. Its further development is dependent on significant investment, which inevitably requires strategic partnerships with foreign investors or financing from international financing institutions. The RES share of the GFEC that could be achieved based on this scenario is: 21% in 2020, 25 % in 2025 and 28 % in 2030, see table 2.

5 http://www.economy.gov.mk/

http://www.economy.gov.mk/


14

CONTRIBUTION OF RES 2020-2025-2030 (ktoe)

2020 2025 2030

Electricity from RES 177 270 370

Hydro Power Plants 158 228 288

Large Hydro Power Plants 117 174 228

Small Hydro Power Plants 41 54 60

Wind Power Plants 9 26 53

PV Systems 3 4 11

Biomass 2 3 4

Biogas 5 7 7

Geothermal energy 6

Heat from RES 219 252 269

Biomass 204 233 245

Solar energy 5 5 7

Geothermal energy 11 14 17

Biofuels 57 67 78

TOTAL RES 454 588 717

GFEC 2,156 2,350 2,563

RES share (%) 21.0% 25.0% 28.0%

Table 2: Contribution of RES in ktoe according to the NREAP scenario for 2020, 2025 and 2030

The responsible body for energy policy and planning is the Ministry of Economy. The other relevant ministries are: The Ministry of Environment and Physical Planning

6, The Ministry of Transport and Communications

7, The

Ministry of Agriculture, Forestry and Water Economy8. Besides ministries, the key energy stakeholders include:

Energy Regulatory Commission9, The Energy Agency

10, energy utilities, NGOs, equipment suppliers and

municipalities.

The City of Skopje and the Energy Agency established two information centres for information dissemination on benefits from improved EE and utilization of RES in the country.

Moreover, there is a Macedonian Energy Association (MEA) operating within the Economic Chamber of Macedonia

11. It is engaged for upgrading of the work and development of the companies – members of the

Economic Chamber of Macedonia - in the field of power supply. The Association with its activity contributes in creation of conditions for stable power supply, establishing of transparent market relations, initiation and realization of projects which are aimed at increasing of the EE and RES utilization. In the frames of MEA are established two Groups: Group for heating, cooling, ventilation and air conditioning and Group of investors in SHPPs.


The share of RES in Macedonia in 2012 amounted to 16.8% in the GFEC, while in 2013 dropped to 15.1% because of the reduction of biomass consumption due to the relatively warm heating season (Kanevce et al., 2016).

The share of biomass in the energy balance of Macedonia is very important. In the total primary production of energy from RES, the biomass participated with 64% in 2012, which is at a similar level as EU average. The biomass accounted for 6.6% of the primary energy consumption in 2012, and 10.4% in the final energy consumption.

According to the budget survey of the State Statistical Office (SSO), 70-75% of the households or 390,000 to 420,000 households use biomass for heating and/or cooking. The biomass accounts for 34% of the final energy consumption of households.

6 http://www.moepp.gov.mk 7 http://mtc.gov.mk/ 8 http://www.mzsv.gov.mk/ 9 http://www.erc.org.mk/ 10 http://www.ea.gov.mk/ 11 http://www.mchamber.org.mk

http://www.moepp.gov.mk/

http://mtc.gov.mk/

http://www.mzsv.gov.mk/

http://www.erc.org.mk/

http://www.ea.gov.mk/

http://www.mchamber.org.mk/


15

According to the latest data from the SSO, in 2014 the total forest area in Macedonia is 983,388 ha (38.6% of the state territory), of which 90% (874,245 ha) are state owned forests, and 10% (109,143 ha) are privately owned forests. According to EUROSTAT, Macedonia has 0.55 ha forests per capita, which is higher than for EU-27 countries (0.35 ha/capita).

The forest growing stock in the Republic of Macedonia is estimated at 75 million m3, which in terms of total

forest area means that there are 83 m3/ha, which makes Macedonia a country with poor quality forests (71% of

the forests is scrublands and disturbed natural forests).

The high percentage of scrublands and disturbed natural forests allows them to be used as fuel because they lack the technical mass. According to this, fuel wood and scraps accounts for 82% to 86% of the total forest exploitation, but this information cannot be considered as reliable since much of the population is supplied with wood from illegal logging which cannot be registered. This problem is detected by several institutions in Macedonia and as a result, with the help of funds from the Energy Community, the SSO has conducted a survey on household consumption and currently they are processing the obtained results.

Except for heating, depending on the year, 120-150 thousand m3 timber is used as commercial timber and the

scraps have been reduced in the last two years to a level of about 40,000 m3, while in the previous period there

were 70,000 to 100,000 m3 scraps.

The fires have great impact on forest destruction. In the period from 2005 to 2014 about 94,000 ha of forest area was damaged by fires. The largest area was affected in 2007 - 34,443 ha, followed by 15,046 ha in 2008 and 19,312 ha in 2012.

In order to achieve forest sustainability and thus preserve forests, a continuous and planned afforestation is required. As a result, thanks to the fund for afforestation which functioned until 1990, 140,000 hectares were afforested. As forest exploitation has decreased in the last 30 years, the artificial afforestation has also a continuous decline. 7,000 hectares were afforested in 1984, and in 2014 it was reduced to only 1,000 hectares. In the period from 1998 to 2008 it is in the range from 2,000 to 3,000 hectares. It is important to note that with the action of the Government and the NGOs, in 2009 trees were planted on a total area of 4,000 hectares, which represents the largest afforestation in the last 25 years.

On the other side, the waste biomass is comprised of: residue from forest-cutting, residue from wood processing, residue from agriculture, residue from livestock breeding, industrial residue and solid municipal waste.

There is not enough reliable data to assess the economic feasible potential, nor sufficient experience in the performance of specific power plants (Kanevce et al., 2016).

Macedonia is experienced in terms of using waste biomass from forest cutting, wood processing and agriculture, where its primary use is related to heat generation. However, this type of waste biomass is suitable also for cogeneration plants for heat and electricity generation.

The 65 thousand tons of waste biomass from forest-cutting, wood processing and from agriculture can generate around 50-70GWh electricity and 120-180GWh heat at cogeneration plants depending on the demand and accessibility to heating energy consumers.

Solid municipal waste in Macedonia is usually disposed on landfills. However, only landfill Drisla, servicing the region of Skopje, is properly managed. For the forthcoming period plans have been made to establish integrated regional management of solid municipal waste. Seven regional landfills have been planned throughout Macedonia. The total quantity of solid municipal waste in Macedonia accounts for nearly 700 thousand tons per year. From this amount, the regional landfill Drisla accounts for around 200 thousand tons, while the other regional landfills account for 50 or 100 thousand tons, each. The lower heating value of municipal waste in Macedonia is estimated at 7,860 kJ/kg.

If all phases of managing waste are implemented, which includes recycling, and also composting of waste, which includes food and garden waste, (which account for around 42%), then the amount of waste from which electricity can be produced is much lower, and so its feasibility is questioned.

It is estimated that paper and plastic waste contribute with 24% and 6% in the total waste quantity, respectively. If the average degree of 50% paper and plastic waste recycling is achieved, the waste quantity would be reduced to approximately 600 thousand tons. The calorific value of waste would be 6,200 kJ/kg, while under a high degree of paper and plastic recycling the waste quantity would be reduced to around 500 thousand tons and the calorific value of waste would be less than 4,000 kJ/kg. Depending on the option pursued the potential of solid


16

municipal waste in Macedonia ranges from 500 to 1,500 GWh annually. If it is used only for electricity generation, it would imply a generation in the range of 200 – 500 GWh annually, and the total potential in Macedonia is put into use. If we assume that only Drisla, as the biggest landfill in Macedonia will have economic justification to produce electricity, then up to 2035, 50-90 GWh of electricity will be produced annually from municipality solid waste. The upper limit implies that Macedonia will not implement plastic and paper recycling, which – of course – is unrealistic, while the lower limit under high degree of waste and paper recycling implies technologies with high investment costs due to the low calorific value of waste (Kanevce et al., 2016).

In Macedonia, the residue from breeding of livestock and poultry are estimated at around 5.5 million tons per year. This refers to the theoretical potential, about 3.5 million tons is the technical potential. It can be used to obtain a total of around 90 thousand m

3 biogas per year, with a total energy of around 600GWh. However,

experiences in terms of cost-effective use of biogas in the region are modest and the useable potential might not exceed 25% from the total potential. It is estimated that such potential cannot provide more than 50GWh electricity (Kanevce et al., 2016). The overall biomass potential is given in table 3.

TYPE OF WASTE BIOMASS QUANTITY PER YEAR POTENTIAL PER YEAR

Forest-cutting, wood-processing, agriculture

65,000 t 50-70 GWh electricity and 120-180 GWh heat

Solid municipal waste 700,000 t 500-1,500 GWh energy, 200-500 GWh electricity

Livestock breeding 3.5 Mt 90,000 m3 biogas, 600 GWh energy, 50 GWh

electricity

Table 3: Waste biomass potential in Macedonia

For the purpose of stimulating the construction of new power plants using RES or high-efficiency cogeneration plants, Article 149 of the Energy Law prescribes that these facilities can obtain the status of preferential producer, and thereby the right to sell electricity under the feed-in tariff (FIT). The FITs can be applied in a manner and under procedure stipulated in the Energy Law and the by-laws adopted pursuant to the law. The FIT for sale of electricity produced and delivered from biomass and biogas are 150 €/MWh and 180 €/MWh, respectively with a duration of 15 years.

Five plants for electricity generation from biogas have been licensed by the Energy Regulatory Commission in the period 2013-2014 with a total installed capacity of 6.99 MW. As a result, the FIT quota for electricity generation from biogas of 7MW has de facto been fully utilised. Two of these plants (2.99 MW) have been commissioned in 2015. The other ones are expected to be operational by the end of 2016.

On the other hand, there has been very little interest in the development of biomass-powered power plants. So far, the Energy Regulatory Commission has awarded two licences for electricity generation from biomass with installed capacity of 1.4 MW, which means that the FIT quota for electricity generation from biomass (10 MW) is still available.


The procedures for small-scale decentralized installations are simplified since they are not tied with certain permits, such as land rights. If small-scale installations are used for other purposes rather than applying for FITs, there is no need for procedure applications. The rules are publicly available to citizens through the informational brochures prepared by the Energy Agency. The net metering is possible for the small-scale installations (Government of the Republic of Macedonia, 2015).

In general, continuous improvements of the legislative and regulatory framework in the past few years have substantially simplified and shortened the administrative procedures. Further simplification is possible and is expected to come with the new Energy Law. Compliance is so far satisfactory and is expected to be improved more soon (Energy Community, 2015).

Macedonia has significant possibilities for energy production from biomass, especially forest residues, but there are also certain difficulties and barriers for the increase of this share (South-East Europe Transnational Cooperation Programme, 2014). There are two critical barriers to the use of bioenergy in a wider scale, especially in community-based projects:

Social barriers (lack of knowledge, understanding and change of behaviour)


17

Lack of financial resources

An encouraging trend is that policy makers are beginning to perceive the potential economic benefits of the commercial use of biomass e.g. employment/earnings, regional economic gain, contribution to security of energy supply and others. This represents a significant policy shift concerning the old perspective in which biomass was considered as a non-commercial rural source, or “poor man’s fuel”.

The principal barriers to obtain financial resources for bioenergy projects in Macedonia as in all Western Balkan countries (Centre for Renewable Energy Sources and Savings, 2015) include:

The use of technology which does not have a proven track record with reference plants. Because the technologies are new they take a long time in planning and environmental permitting;

Weak project sponsors lacking the human, technical and financial resources;

Absence of credible fuel supplies with sound financial standing.

There are still certain barriers, which block the development of the biomass market (Centre for Renewable Energy Sources and Saving, 2015), including:

Low availability of certified boilers with high efficiency and low pollution levels in the local market;

Unorganised biomass supply and trade centres;

Limited green procurement in the public administrative procedures;

Space requirements for biomass storage in public buildings.

2.4 Incentives

According to the RES Strategy, the incentives applied for promoting RES shall aim at:

Reducing costs for electricity generation from RES and production of biofuels;

Increasing prices of electricity generated from RES or prices for biofuels; or

Creating obligations for purchasing the electricity generated from RES or obligation for blending fossils fuels and biofuels in the fuels for transport.

The funds required to implement the incentives can be provided, inter alia, from the Budget of the Republic of Macedonia, by grants, donations, sponsorships, loans, state aid pursuant to the law (Government of the Republic of Macedonia, 2010).

The main incentives in the country are the FITs. They are offered to RE producers who qualify as preferential producers in the following technologies: SHPPs, WPPs, PV power plants, biomass, and biogas. FITs might be offered in the future also to other technologies if they become technically and economically viable and if identified in future issues of the government’s RES Strategy.

In Macedonia, electricity producers are responsible for all costs for connection to the transmission or distribution grid and therefore technical adaptation, but the regulator is entitled to oblige the competent operator to cover the grid connection costs when needed to provide incentives to promote RES or to reach the relevant targets.

The Energy Agency has recently developed brochures for RE process development for different types of RE installations. Each of them describes the process and the involved institutions.

The United States Agency for International Development (USAID) has supported the preparation of a Benchmarking Study for Renewable Energy Project Development Process. The objective was to provide the Government of Macedonia with an accurate accounting of specific issues with respect to Macedonia’s RE development process as set forth by laws, regulations, precedent and established procedure; identify critical barriers that are hindering or slowing down the RE project development process, and provide targeted conclusions and recommendations for overcoming identified barriers. The study includes a detailed step-by-step description of the administrative and regulatory process that a project developer would need to follow to get their project from concept to commissioning.

Furthermore, the Ministry of Economy under an IPA project prepared Guidelines and procedures for the development and construction of a plant for production of electricity from RES including SHPPs, WPPs, PV power plants, biomass power plants and biogas. The guidelines have been prepared in Macedonian, Albanian and


18

English language, and have been published and posted on the website of the Ministry of Economy. These guidelines will enable timely introduction of potential investors with procedures for construction and will simplify the whole process and aim to provide guidance to investors in the development and implementation of RES.

The Energy Regulatory Commission on their web site has already published information for obtaining the license and the status of a preferential producer.

Also, Macedonia has access to the IPARD funds. The main responsible institution for these funds in the country is the Agency for Financial Support of Agriculture and Rural Development

12, as well as the National Extension

Agency13

and the Ministry of Agriculture, Forestry and Water Economy that provide information and services to the interested farmers who can apply through public calls. The IPARD I Programme 2007-2013 has already finished. It has had maximum EU contribution of 85 million Euros. Unfortunately, only 15% of the funds have been utilized until the end of July 2016. The results have detected the following problems among the farmers: the lack of knowledge, the unsolved land rights issues, the difficulties in obtaining construction permits, etc. Because a capacity building is inevitably needed, the Ministry announced that will train a team of 80 experts in order to help the farmers in preparation of quality applications. The IPARD II Programme is expected to start during the autumn 2016. The maximum EU contribution in the IPARD II Programme 2014-2020 for Macedonia is decreased to 60 million Euros (5, 5, 5, 6, 10, 14, 15 million Euros per year, respectively), though additional funds of 36 million Euros have been approved for structural investments in agriculture.

1415 The IPARD Programme itself

includes financial support for production of RE energy, especially from biomass and energy crops.16

Since 2007, the Government of Macedonia introduced subsidies of 30% from the total investment up to 300 Euros per household that installs solar water heaters. This measure is implemented through a lottery based system and it was repeated in 2009, 2011, 2012, 2013, 2014 and 2015, comprising 500-600 households per year (total subsidized households: 3,611; total budget in Euros: 800,000). In addition, the VAT rate for solar collector systems is lowered from 18% to 5% (Government of the Republic of Macedonia, 2015).

The Macedonian Government has announced subsidies for pellet stoves. With this measure, 70% of the cost for the pellet stove will be covered, but not more than 30,000 Denars (around 500 Euros) per household.

Information campaigns and awareness raising activities are also practiced in Macedonia usually by the Ministry of Economy, energy utilities or NGOs, often related to EE improvements. For example, the Ministry of Economy in April 2013 organized an Open Day under the motto "Purchase solar collector - Apply for subsidies". The aim of this event was a) to promote the use of solar panels in households and thus better use the solar potential of the country as RES and b) provide information and promotion of the benefits of using solar thermal collectors.

There are also educational programs on RES lectured in Macedonian Universities, with some training programs on the benefits and practicalities of developing and using energy from RES.

Finally, the positive effects from the incentive measures are as follow:

Annually, with the introduction of solar thermal collector, a household saves about 2,400 kWh if the household uses the solar system about 8 months during the year. According to the final price of electricity in the country, the financial savings for a household per year is approximately 13,000 Denars (210 Euros);

Raising public awareness of the positive effects of the use of solar energy in households;

Promotion of RES to increase its share in the final energy consumption;

Protection of the environment.

12 http://www.ipardpa.gov.mk/Root/default_eng.asp 13 http://agencija.gov.mk/ 14 http://www.sep.gov.mk/data/file/IPA-2014-2020/IPARD%20ProgrammeMK_13022015_final.pdf 15 http://www.mia.mk/en/Inside/RenderSingleNews/289/133278213 16 http://www.ipardpa.gov.mk/Root/mak/default_mak.asp

http://www.ipardpa.gov.mk/Root/default_eng.asp

http://agencija.gov.mk/

http://www.sep.gov.mk/data/file/IPA-2014-2020/IPARD%20ProgrammeMK_13022015_final.pdf

http://www.mia.mk/en/Inside/RenderSingleNews/289/133278213

http://www.ipardpa.gov.mk/Root/mak/default_mak.asp


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3. Romania


Romania is one of the largest countries in South-Eastern Europe. With an area of 237,500 km² and a population of 20 million inhabitants it is the 7th largest country in the European Union in terms of population, while its capital Bucharest (2 Mio. inhabitants) is the 6th largest city in the EU. Geographically it is determined by the Carpathians Mountains, the Danube and the Black Sea. It is divided in 8 development regions (NUTS 3), however only the National State (NUTS 1) and the 41 counties (NUTS 4) do have administrative power. In terms of GDP per capita, it ranks on the 27

th place within the EU with around 150 Bill EUR, estimated from 2015 with a steady

3% growth over the last 5 years.

Romania is a semi-presidential republic with a president elected by direct vote on a term of 5 years and a bicameral Parliament elected on a term of 4 years. The main political parties are the Social-Democratic Party (PSD) (socialist) and the National Liberal Party (PNL) (popular) with the Hungarian Party representing the interests of the Hungarian minority playing an important role in ensuring majority of coalition governments. The incumbent president is Klaus Johannis (German Party supported by PNL).


The yearly energy potential of renewables - according to the National Energy Strategy 2012 (Ministerul Economiei, Comerţului Şi Relaţiilor Cu Mediul De Afaceri 2012) - is given in the table below:

Romania is very close to achieve the target of 24% of the gross final energy consumption out of renewable sources by 2020. According to the Romanian National Institute of Statistics, the unused technical energy production potential from renewables is of around 8,000 ktoe, which includes 47% biomass and biogas, 19% solar, 19% wind, 14% hydro and 2% geothermal energy.

The European Renewable Energy Directive is reflected in the National Strategy for Climate Change (2013) which foresees several objectives and measures:

Development of systems for the production, transport , distribution and consumption of electric energy

Development of high efficient cogeneration systems by the National Programme for Energy Efficiency

Support to investments in industrial equipment leading to energy savings by means of Structural Funds Interventions

Renewable Energy Type Yearly energy potential

Economic equivalent energy (tsd toe)

Use

Solar

- thermal 60x106GJ 1433.0 Thermal

- photovoltaic 1200 GWh 103.2 Electrical

Wind energy 23000 GWh 1978.0 electrical

Hydro energy out of which: - under 10 MW

40000 GWh

- 6000 GWh

3440.0

- 516.0 Electrical

Biomass and biogas 318x106 GJ 7597.0 Electrical

Geothermal 7x106 GJ 167.0 thermal

Table 4: Romanian Renewable Energy Potential


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Increase of energy efficiency in agriculture

Eco-design, taking into consideration industrial environmental aspects all along the product life cycle

Carbon capture and storage in Romania (pilot project Turceni coal power plant)

Information and raising awareness campaigns on energy efficiency targeting industrial partners and the wider public

Energy, environment and climate change are amongst the priorities of the national smart specialization strategy for 2014-2020, as they were identified in the 2014-2020 National Strategy for Research Development and Innovation.

The final energy consumption in 2013 was estimated at 21.885 million toe, with the following structure: population 35.4%, industry and construction 28.8%, transport 24.5%, other activities 9.1%, agriculture, forestry and fisheries 2.2%. (Source: 2015 Economic Situation, INS). As for the electricity production, the year 2013 was dominated by the thermoelectric production with 65% (-13.3% compared to 2012), followed by hydropower with 28.8% (+24.1% compared to 2012) and wind power with 8.4% (+ 86.6% compared to 2012).

However, residential and non-residential buildings are considered now a weakness in terms of energy efficiency. In 2010, there were 5,982 buildings used for educational purposes, 4,342 buildings used for cultural purposes, and 51,269 buildings used for health services, but over 75% of residential buildings were built after World War II, with about 2.4 million apartments built before 1985 with low energy efficiency, requiring renovation.

In terms of competitiveness, in 2013, the energy sector contribution to the GDP was 3%, while in 2012 reached the peak of the period 2007-2012 with 4.29%. The expenditures for research, development and innovation in the energy sector have declined dramatically in recent years to 220,000 EUR in 2013, after they had reached 250 million EUR in 2010. This sudden decrease can be partially because most private companies serving the energy market operates under NACE (Nomenclature statistique des activités économiques dans la Communauté européenne) codes belonging to other sectors.

The energy market evolution is mainly marked by international regulations, given the requirements imposed by the reducing greenhouse gas emissions policy at the European level. In Romania, the largest share of emissions belongs still to the energy sector, by 71%, 2010 (74.5% in 1990). The regulations will lead to an increase in energy prices given the internalisation of the transaction costs on EU ETS market (Emission Trading System) under the circumstances of sub-allocation in the energy system. In compensation, investments are needed to reduce the emissions at least to up to the allocated level, which will lead to additional costs related to investment (debt burden). At European level, in terms of an average price of 20 EUR per green certificate, the price of energy will increase by up to 40%. Although Romania is part of the 8 EU Member States (Bulgaria, Latvia, Estonia, Hungary, Netherlands, Portugal, Romania and the UK) that will achieve the objectives of the EU ETS by 2020, this will imply a decrease in the economic competitiveness.


Renewable energy must be seen in the wider perspective of the energy market in Romania, having certain particularities of which the most important are:

Regulation: Maintaining a system of regulated prices for an extended period of time led to losses and discouraged investments in energy system. A program to eliminate regulated prices for electricity and natural gas was adopted in 2012, but liberalization will lead to a rise in prices.

Oligopoly market type: the restructuring of the integrated monopolies (RENEL ROMGAZ) started since 1998 at the insistence of the International Monetary Fund and World Bank. After the establishment of the National Energy Regulation Authority (ANRE) as market regulator, the competition in energy production was opened, confidential long-term arrangements have been made with large producers of cheap energy that turned out extremely wasteful on the national economy level in the end and which contributed to market distortions.

The underfunding in the energy sector: European Energy Funds were used only slightly, and the private investments were modest given that the legislative framework was unstable.

Low energy efficiency: Energy losses are very high, especially in buildings and heating systems and the energy intensity of industry is 2.5 times higher than the EU average. Furthermore, some of the planned energy efficiency measures were not implemented, but occurred due to a shrink in industrial activity.


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Large energy-intensive consumers asked mainly for preferential gas prices and cheaper electricity, despite the fact that Romania has the lowest price of natural gas in the EU (65% of EU average concerning industrial consumers and 38% of EU average concerning households).

Social issues: the energy “poverty”, in terms of lack of access to modern energy services, affects 40% of the population. Consequently, the social protection concerned all governments after 1990 resulting in very low regulated prices together with a complex system of subsidies and social benefits.

3.4 Incentives

Main financial support sources are to be found in the Structural Funds Interventions, i.e. within the European Regional Development Fund (ERDF) and Cohesion Fund (CF) Large Infrastructure Operational Programme, Priority Axis 6 as described subsequently.

Specific Objective 6.1 “Increased Energy Production from biomass, biogas and geothermal sources”

● Interventions dedicated to the increase of renewable energy with a particular focus on biomass, biogas, geothermal. Eligible applicants are local and regional administrative bodies, regional development associations and enterprises specialised in energy production and selling. Eligible activities include the set up or modernisation of energy production capacities based on biomass, biogas o geothermal sources. All regions except Bucharest-Ilfov are eligible. Financing is limited to a maximum of 15 Mio EUR, while beneficiary’s contribution ranges from 2% in the case of public bodies up to 20% for private entities.

● Interventions dedicated to the enlargement of energy distribution grids. Eligible applicants are energy distributors transporting renewable energy. Eligible activities include the modernisation and enlargement of energy grids with a nominal voltage of up to 110 kV. Financing is limited to a maximum of 3 Mio EUR.

Specific Objective 6.2 “Reducing energy consumption in industry” is dedicated to setting in place energy consumption monitoring systems. Eligible applicants are industrial enterprises with an energy consumption higher that 1,000 toe/year. Eligible activities include the acquisition of energy monitoring systems. Financing is limited to 200,000 EUR, while beneficiary’s contribution is set at 20%.

Specific Objective 6.3 “Reducing energy consumption in households” is dedicated to intelligent energy measuring systems in households. Eligible applicants are public energy distribution companies. Eligible activities include the set-up of intelligent electric energy measuring systems and the modernisation of low/medium voltage distribution grid. Financing is limited at 5 Mio EUR, while beneficiary’s contribution ranges from 20% In the case of micro and small enterprises and 30% for medium sized enterprises.

Specific Objective 6.4 “High efficiency co-generation systems” is dedicated to a more efficient use of primary energy in highly efficient co-generation systems. Eligible applicants are industrial enterprises with a consumption of over 200 toe/year or industrial parks. Eligible activities include the set up or modernisation of high efficiency co-generation electric plants of max 8MWe. Financing is limited at 6 Mio EUR while beneficiary’s contribution ranges from 20% for micro and small enterprises to 30% for medium enterprises and 40% for large enterprises. All regions are eligible with the exception of Bucharest-Ilfov.


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4. Serbia


Serbia is located in the central part of the Balkan Peninsula, on the important route linking Europe and Asia, occupying an area of 88,499 km². According to the 2011 census the population of Serbia (excluding Kosovo-Metohija) comprises 7,186,862 inhabitants (Statistical Office of the Republic of Serbia, 2012).

Northern Serbia is mainly flat, while its central and southern areas consist of highlands and mountains. The flatlands are mainly in Vojvodina (the Pannonian Plain and its rim: Macva, the Sava Valley, the Morava Valley, Stig and the Negotin Marches in Eastern Serbia). Arable land covers 55% of the territory, while 27% of the territory is forested. Climate is temperate continental, with a gradual transition between the four seasons of the year (Government of the Republic of Serbia, 2016a).

In terms of administrative and territorial division, the Republic of Serbia is divided into provinces (Vojvodina and Kosovo - Metohija

17), regions, administrative areas, the City of Belgrade, cities and municipalities.

The Republic of Serbia has the full candidate status in the process of accession to the European Union. Membership negotiations started in 2014, and the first accession chapters were opened in 2015.

The Republic of Serbia is a contracting party of the Energy Community Treaty since 2006. This and the accession process to the European Union have determined the development of the legal framework for renewable energy. The basic EU document that defines the RES policy in Serbia is the Directive 2009/28/EC on the promotion of the use of energy from renewable sources. In accordance with this document, the Government of the Republic of Serbia adopted the National Renewable Energy Action Plan (NREAP) in 2013 (Ministry of Energy, Development and Environmental Protection, 2013a). With this document, Serbia adopted a binding 27% share of renewable energy in gross final energy consumption by 2020 (including 8% of biofuels in transport sector). The Progress Report on Implementation of NREAP for 2012 - 2013 has been conducted in 2014 (Ministry of Mining and Energy, 2014). In accordance with the Directive and the NREAP, the Government of Serbia has adopted in 2013 and 2014 two regulations. The Regulation on the Incentives for the Eligible Producers of Electricity (Government of the Republic of Serbia, 2013) introduced feed-in tariffs within the period of guaranteed supply of electricity of 12 years. The second one is the Regulation on the Conditions and the Procedure for Acquiring the Status of the Eligible Producer of Electricity (Government of the Republic of Serbia, 2014c). These regulations are followed by the Regulation on Incentive Fee for Privileged Power Producers (Government of the Republic of Serbia, 2016d), and Regulation on Special Incentive Fee Level for each Year of Implementation (Government of the Republic of Serbia, 2016b).

The Republic of Serbia adopted a new Energy Law in 2014 (Government of the Republic of Serbia, 2014a) that transposes the EU’s Third Energy Package. This Law has regulated strategic directions in the development of renewable energy sources in the Republic of Serbia. A whole chapter in the Energy Law is devoted to RES. Creation of economic, commercial and financial conditions for electricity generation from RES is set as the strategic objective of the Serbian energy policy. The Law on Energy prescribes that the Government, upon the proposal of the ministry in charge for energy, shall adopt the National Action Plan for the Use of RES for the period of 10 years. The law also regulates conditions for issuing of the “guarantee of origin” of the generated electricity from RES and the status of the eligible producer of electricity from RES, as well as incentives for electricity and heat produced from RES. Privileged producers of heat energy are the producers using renewable energy sources in the process of thermal energy production and fulfilling the conditions in terms of energy efficiency. The Law envisaged that local self-governments have rights to prescribe incentive measures and conditions for acquiring the status of a privileged heat energy producer (the producers using RES in the process of heat energy production and fulfilling the conditions in terms of energy efficiency).

The National Assembly of the Republic of Serbia adopted the Energy Sector Development Strategy of the Republic of Serbia for the period until 2025 with projections until 2030 (Government of the Republic of Serbia, 2015a). Providing energy security, energy market development and overall transition towards sustainability of

17

Kosovo-Metohija is an autonomous province within the Republic of Serbia and, in line with United Nations Security Council Resolution 1244, adopted on 10 June 1999, it is under the interim civilian and military administration of the UN.

http://www.srbija.gov.rs/kosovo-metohija/?id=8919

http://www.srbija.gov.rs/kosovo-metohija/?id=8919


23

the energy sector are imposed as key priorities of energy sector development in the Republic of Serbia. Increase of energy production from renewable energy sources, proposed by this document, is aimed to reduce import dependency and improve energy security, while the implementation of NREAP by 2020 was recognized as priority activity.

The construction of a bioenergy plant requires acquirement of the right to construct the plant. According to the Law on Planning and Construction (Government of the Republic of Serbia, 2014b) this is necessary for all facilities with a capacity over 50 kW. The right to construct includes Location Permit, Construction Permit and Operating Permit (Ministry of Energy, Development and Environmental Protection, 2013b). In addition, the construction of such facilities requires the right to be engaged in electricity/heat generation. In accordance to the Energy Law this is necessary for all facilities with installed electric and/or heat power capacity equal to or exceeding 1 MW. The Law on Public Procurement (Government of the Republic of Serbia, 2015b) regulates the area of procurement for state, autonomous provinces and local self-government institutions.

Environmental, forestry and agricultural regulations are also important for the development of bioenergy projects. The main documents are the Forest Law (Government of the Republic of Serbia, 2015d), the Law on Environmental Protection (Government of the Republic of Serbia, 2016c), the Rulebook on Forest Order (Ministry of Agriculture, Forestry and Water, 2011), the Agricultural Land Law (Government of the Republic of Serbia, 2009a), and the Livestock Production Law (Government of the Republic of Serbia, 2009b).

There is no experience of organizing stakeholders engaged in bioenergy business in Serbia. However, important requirement for proper operation of biomass plants is ensuring a long-term biomass supply by appropriate contracts. Therefore, in the selection of legal forms of bioenergy villages or organizational forms of stakeholders, it is necessary to have in mind that 53% of forest area (61% in volume) in Serbia are state owned (Milijic, 2016), managed by State Enterprises for Forest Management "Srbijašume" (Srbijasume, 2016) and "Vojvodinašume" (Vojvodinasume, 2016). Biomass supply is feasible from private forests too, but owners have to be organized (joint contracts with owners, cooperatives or associations), or local operational logistic centres should be established as a link between large number of small-scale producers or forest owners and energy producers (Milijic, 2016). Contrary to forests, agricultural business in Serbia is mostly private and some agro companies have already used agro biomass for energy production, mostly for meeting own energy demand.

The two largest associations of stakeholders in the bioenergy sector are the National Association for Biomass and the Biogas Association Serbia. The National Association for Biomass Serbia - SERBIO exist since 2012, with the mission to contribute to the sustainable development of bioenergy sector (Serbio, 2016). Today the Association has 30 members (13 companies, 9 non-governmental organizations and 8 individual members). The Biogas Association Serbia is a non-profit organization established with the aim to promote and to develop biogas projects in Serbia. In addition, there are few private forest owners' associations (GIZ, 2015).


Biomass is the most significant renewable energy source (RES) of the Republic of Serbia. The potential of biomass is estimated at 3.448 Mtoe/year

and it makes 60.3% of total potential of RES (Government of the

Republic of Serbia, 2015a). The structure of this potential is presented in Table 1. The largest part of this potential is wood with a biomass potential of 1.53 Mtoe/year and agricultural biomass with a potential of 1.67 Mtoe/year (parts in crop farming, cattle breeding, food growing, wine growing and primary fruit processing), while the potential of biodegradable municipal waste is estimated at 0.205 Mtoe/year. Biodegradable waste (except municipal waste) includes also waste cooking oils and animal waste (slaughterhouse waste) in total amount of 0.043 Mtoe/year.

RES Available technical

potential in use (Mtoe/year)

Unused available technical potential (Mtoe/year)

Total available technical potential (Mtoe/year)

BIOMASS 1.054 2.394 3.448

Agricultural biomass 0.033 1.637 1.67

Parts of agricultural species 0.033 0.99 1.023

Parts in fruit growing, wine growing and fruit processing

- 0.605 0.605

Liquid Manure - 0.042 0.042


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Woody biomass 1.021 0.509 1.53

Energy crops - - Not available

Biodegradable waste 0 0.248 0.248

Biodegradable municipal waste 0 0.205 0.205

Biodegradable waste (except municipal) 0 0.043 0.043

Table 5: Overview of technical usable potential of RES (Government of the Republic of Serbia, 2015a)

The potential of biomass is available on the entire territory of Serbia. Woody biomass is available mostly in central Serbia, while the agricultural biomass dominates in Vojvodina. However, compared to its potential, only the woody biomass is used significantly (1,021 Mtoe/year), but mostly inefficiently in a traditional way (in stoves and furnaces). Currently there are no power plants or CHPs fuelled by biomass in operation. Six CHPs fuelled by agro biomass (in Aleksinac, Bač, Alibunar and Zrenjanin) are under construction. There is only one district heating system in operation, using agro biomass (Sremska Mitrovica). Besides, there are several industrial users of wood and agro biomass for meeting own energy demand, and over 50 factories – producers of wood pellet, and over 10 factories – produce agro pellets (Milijic, 2016).

In accordance to the NREAP, out of 1,092 MW RES total planned capacities, 143 MW are bioenergy capacities for production of electricity that is 13.1% of foreseen RES capacities for electricity generation. However, the share of electricity produced from bioenergy in the total production from new-installed RES should be over one quarter (25.6%) until 2020 (see Table 6). The same document foresees an even more important role of biomass in the heating/cooling sector. 90% of 0.149 Mtoe of additionally planned production of heat from RES until 2020 is planned from biomass (figure 1). The same trend of increased utilization of bioenergy potentials is included in projections of energy development up to 2030 (Government of the Republic of Serbia, 2015a).

Type Power (MW)

Asumed production (GWh)

Share in planned RES capacities (%)

Biomass – CHP plants 100 640 17.5

Biogas (manure) – CHP plants 30 225 6.2

Waste 3 18 0.5

Landfill gas 10 50 1.4

Table 6: Planned bioenergy capacities for electricity production until 2020 (Ministry of Energy, Development and Environmental Protection, 2013a)

Figure 1: Energy production in the heating and cooling sector from the new facilities that use RES until 2020 (Ministry of Energy, Development and Environmental Protection, 2013a)

In the achievement of settled targets, different activities and measures have been undertaken. The most important is the introduction of incentive measures for producers of electricity from biomass. This includes an obligation of the guaranteed supplier to purchase the produced electricity, feed-in tariffs and timeframe within the produced electricity must be purchased - maximal 12 years. During the specified period the privileged electricity producer is obligated to sell 100 % of the produced energy to the guaranteed supplier.

33%

17% 7%

7% 3%

33%

Biomass – CHP plants Biomass (DHS)

Biogas (manure ) – CHP plants Geothermal energy

Solar energy Biomass in individual households


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The Energy Law also states that each unit of local government should define the measures, terms, conditions and procedure for acquisition of incentive measures for privileged heat producers. However, there is no evidence that any of the units of the local governments adopted these measures (GIZ, 2015).

Two significant programs are implemented in Serbia as a support of bioenergy utilization. The Global Environment Facility (GEF) and the UNDP are funding the project “Reducing Barriers to Accelerate the Development of Biomass Markets in Serbia”, and it is implemented with the Ministry of Mining and Energy (lead partner) and the Ministry of Agriculture and Environmental Protection as partners, within the period from 2014 to 2018

18. The six previously mentioned biomass fuelled CHPs under construction are co-financed from this

project. Also, the aim of the project is to encourage and leverage the development of at least 12 similar projects in Serbia based on the experiences from these initial projects. Project activities are directed to capacity building (governmental/institutional bodies, municipalities and local entrepreneurs) with the aim to improve capability of these institutions to identify, prioritize and develop bioenergy projects and to support the development of an adequate regulatory framework. The project also includes training programs, information and dissemination activities, development of a National Biomass Program, and development of a biomass E-trade platform. During the project lifecycle, the establishment of a Biomass Support Unit within the Ministry of Mining and Energy is expected.

The second program is the GIZ DKTI programme - “Development of a Sustainable Bioenergy Market in Serbia“, funded by German Federal Ministry for Economic Cooperation and Development, with support of the Serbian Ministry of Agriculture and Environmental Protection and the Ministry of Mining and Energy

19. The program is

realized in the period 2013 – 2017, with an objective to strengthen capacities and create an enabling environment for sustainable use of bioenergy in Serbia through the five main directions:

Policy advice in harmonization of laws and regulations with the EU standards and improvement of the institutional and regulatory capacities;

Facilitating investments in district heating companies for the fuel switch and biomass use, as well as creating the sustainable biomass supply chain infrastructure for fuel-switch;

Promotion of the efficient utilization of wood fuels and wood-based technologies in households and development of the sustainable market for wood fuels and wood-based heating and cooking technologies;

Project development (advisory services and technology/knowledge transfer for the implementation of cost efficient and innovative bioenergy projects, business match-making);

Establishing regional supply chains for woody bioenergy.


Although the potential for bioenergy is significant, the Serbian bioenergy sector has developed very slowly in the last decades. Barriers can be divided as legal, regulatory, financial and technical, but also educational and related to awareness and knowledge of stakeholders, etc.

In Serbia, concrete and systemic government support for intensifying energy use of biomass does not exist (Nakomcic-Smaragdakis at all, 2016). The legal framework is sufficient, but some barriers still exist. The legal definition of the term wood in the context of short rotation coppice (SRC) production and forest management in the Forestry Law is not adequate (GIZ, 2015). Since SRC is defined as wood, in order to grow SRC on agricultural land, a special agreement on changing the land use from the Directorate for Agricultural Land, Ministry of Agriculture and Environmental Protection must be obtained. There are problems with legal framework for long-term lease of state owned agricultural areas (GIZ, 2015). Time limits for long-term lease of state owned agricultural areas are specified by The Agricultural Land Law - 20 years for orchards and 40 years for wine yards and fishponds. For agricultural land used for crop production, a time limit was not proposed by this Law. However in practice, due to restitution process, defined by The Law on Property Restitution and Indemnification (Government of the Republic of Serbia, 2015c), the land lease is limited to three years. The municipalities, which are in charge of land distribution, often prefer to enable more entities to use the land rather than have a few entities with big land shares, so the size of lease land is limited to 30 ha in practice (GIZ, 2015).

18

Program web site: http://biomasa.undp.org.rs/?lang=en 19

Program web site: http://www.bioenergy-serbia.rs/index.php/en/

http://biomasa.undp.org.rs/?lang=en

http://www.bioenergy-serbia.rs/index.php/en/


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Complicated and demanding procedures are stated as the main regulatory obstacle for bioenergy projects (Ministry of Energy, Development and Environmental Protection, 2013), (Cvetković et all, 2014). The procedure consists of several stages: information on the location, location permit, preparation of the technical documentation (prefeasibility and feasibility studies, main project, etc.) and technical supervision. Procedures for the obtaining of building permits require finished and approved project documentation, with an adequate technical audit. Depending on the specific bioenergy project, permits for water management, permits for waste management, integrated permit, and finished and approved Environment Impact Assessment Study can be further requested. The procedure can be very long due to problems with the ownership, problems related to Environmental Impact Assessment Study, the slowness of the administration, etc. (Cvetković et all, 2014). In addition, missing official calculation tools for the assessment of the biomass potential can be considered as a serious regulation barrier (Government of the Republic of Serbia, 2010).

Generally, biomass combustion technologies have low operation and maintenance costs, but investment costs for these technologies are relatively high per unit of capacity installed (Nakomcic-Smaragdakis at all, 2016). High investment cost is one of the major barriers to wider utilization of biomass. Additionally, one of the main characteristics of the Serbian energy sector is the low price of electricity (Energy Agency of the Republic of Serbia, 2015). The share of electricity for heating the residential buildings in Serbia is 15.5% (Lukic et all, 2015), and even in rural communities, where biomass is abundant, electricity is used for heating (Nakomcic-Smaragdakis at all, 2016). Hence, high initial costs of investments and low price of electricity make very unfavourable conditions for investments in biomass projects. This barrier is only partly tackled by the introduction of the feed-in tariff, because there are no incentives for heating/cooling sector and promotion of fuel switch. Besides, local banks have a lack of capacity to analyse bioenergy projects and often, they are unwilling to finance such projects, while credit lines for bioenergy projects from others financial institutions (EBRD, IFC, EIB, KfW, etc.) are not sufficient in this moment (Cvetković et all, 2014). Furthermore, lack of organized biomass markets and problems in providing reliable supply of fuels discourage potential investors from investing in this sector (Nakomcic-Smaragdakis at all, 2016). A specific financial barrier is 20% VAT to biomass pellet, while the VAT for natural gas is 10% (Milijic, 2016).

Some technical barriers to wider the use of biomass are generally not country specific (high and variable moisture content, low energy density per unit volume – consequently higher costs of transport and storage, difficulty in collecting large quantities of crop residues due to their disperse nature, seasonal availability and yearly fluctuation of agro biomass, etc.). There is a lack of adequate mechanization for agro residues collecting and forest cutting, while significant problems are identified due to poor quality or even absence of forest roads (Standing Conference of Towns and Municipalities, 2015). These barriers are particularly significant for small farms or forests. As Serbia is a new market for bioenergy projects, existing experience and knowledge of companies and planners are limited. In addition, variety of designs and standards in equipment design can be expected. Potentially, this could create problems with the equipment maintenance, specially bearing in mind that manufacturers generally do not provide service centres located in Serbia (Cvetković et all, 2014).

The number of established consulting companies and associations for education of the public about bioenergy technologies in Serbia is limited. Although some successful examples exist, Serbian farmers, as well as the agricultural and industrial sector are generally not familiar with bioenergy plants and do not understand their advantages (Cvetković et all, 2014). Particularly there is a concern that the use of agro biomass for energy purposes will influence the land quality, due to reduction in residues ploughing (Standing Conference of Towns and Municipalities, 2015). Generally, low public awareness of bioenergy among farmers, households, and forestry professionals, including the absence of a professional association for biomass producers have been identified as the important factors affecting the bioenergy sector in Serbia (Halder et all, 2014).

4.4 Incentives

Currently, there are no specific policy or legislation incentives directed only to bioenergy utilization. The only similar document was the Biomass Action Plan for the Republic of Serbia 2010 – 2012 (Government of the Republic of Serbia, 2010). This document proposed a set of actions to address the challenges in the bioenergy sector in Serbia. Some of the problems mentioned in that document have been overcome in the meanwhile.

The main financial support for biomass utilization for energy purposes is an incentive measure for privileged electricity producers - feed-in tariffs (Government of the Republic of Serbia, 2013). The current feed-in tariffs are presented in Table 7. The contracted time period in which the total amount of electricity must be purchased is


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maximal 12 years, during which the privileged electricity producer is obligated to sell 100 % of the produced energy to the guaranteed supplier.

Power plant type Installed capacity (MW) Feed-in tariff (c€/kWh)

Biomass power plants < 1 13.26

1 - 10 13.82 – 0.56*P

> 1 8.22

Biogas power plants < 0.2 15.66

0.2 - 1 16.498 – 4.188*P

> 1 12.31

Biogas power plants from animal waste 12.31

Landfill gas power plants and power plants fueled by gas from facilities for municipality waste water treatment

6.91

Table 7: Feed-in tariffs for bioenergy plants

A good example of the used feed-in tariff is the realized project of a biogas CHP plant in Vrbas by the Mirotin-Energy Company

20. This project was realized during 2011 and 2012 with a nominal capacity of 1.0 MW

(electrical) and 1.0 MW (heat). The total annual electricity production is about 8 million kWh. Heat energy is used for own needs, but there are plans for using heat externally (hospital and other consumers). In this way, by using all available input materials, 27,000 tons of manure and about 10,000 tons of corn silage and other green mass, technological chain are completely connected within agricultural production of the company. Apart from heat and electricity, the digestate (total amount of 36,000 t/a) is used as a good fertilizer for plants growth.

IPARD II Programme is the EU instrument for pre-accession assistance in the field of rural development for the programming period 2014 to 2020 with the goal to reach European standards and increase competitiveness in the agriculture sector. The program was approved by the EU and by the Republic of Serbia. It should have been started in the fall of 2015, but it was somewhat delayed in order to prepare the public sector for program management - process management and control of the distribution of donations. Donation program is being implemented through the Ministry of Agriculture and the Environment, the Directorate for agricultural payments.

21 Calls for support are launched annually. The total budget of IPARD II is 229,970,558 Eur. The

programmee allows financing of projects related to energy crops and utilization of renewable energy sources.

Another source for financing bioenergy projects are public calls issued by the Autonomous Province of Vojvodina - Provincial Secretariat for Energy and Mineral Resources. These calls are generally directed to different RES projects, but include the use of biomass for heating/cooling/ventilation on farms and in public buildings. Although some of these calls are repeated in couple of consecutive years, they still have a relatively contemporary manner (GIZ, 2015).

The Provincial Secretariat for Energy and Mineral Resources, but also the Standing Conference of Towns and Municipalities, are very active in training activities, guidelines issuing, and others supporting activities for different stakeholder groups related to bioenergy projects. Very significant roles, in these activities, have two previously mentioned programs “Reducing Barriers to Accelerate the Development of Biomass Markets in Serbia” and „Development of a Sustainable Bioenergy Market in Serbia”. Their activities are mostly realized in cooperation with local self-governments and related ministries.

20

http://www.mirotinen.rs/index.php?lang=en 21 www.uap.gov.rs

http://www.uap.gov.rs/


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5. Slovenia


The Republic of Slovenia is located in southern Central Europe at the meeting point of the Alps, the Mediterranean Sea, and the Pannonian plains and karsts. It has 20,273 km² in size and on 1st of January 2016 there were 2,064,188 inhabitants (Statistical office of Republic of Slovenia, 2016).

Slovenia is divided into 12 statistical regions which are combined in 2 cohesion regions: East Slovenia includes 8 statistical regions (Mura, Drava, Carinthia, Savinja, Central Sava, Lower Sava, Southeast Slovenia, and Inner Carniola–Karst), while cohesion region West Slovenia includes 4 statistical regions (Central Slovenia, Upper Carniola, Gorizia, and Coastal–Karst).

Slovenia consists of 5 natural macro-regions: the Alps, the subalpine landscapes, the Sub-Mediterranean Slovenia, the Dinaric plateaus and Subpanonian Slovenia. There are three different types of climate: continental in the central part, Alpine in the north-west and sub-Mediterranean along the coast and its hinterland (Government of the Republic of Slovenia, 2016).

Slovenia is one of the most forested countries in Europe as 58.5% of the land is covered by forests (Ministry of Agriculture, Forestry and Food, 2016). Therefore, wood represents national and energy wealth.

The Republic of Slovenia is a parliamentary representative democratic republic since 25 June 1991 and became an EU member on 1 May 2004. Borut Pahor is the current president, elected in December 2012 for 5 years. The state’s authority is based on the principle of the separation of legislative, executive and judicial powers, with a parliamentary system of government. The highest legislative authority is the National Assembly (90 deputies) which is represented by Political Parties (Government of the Republic of Slovenia, 2016).

In order to fulfil obligations under the Renewable Energy Directive, Slovenia adopted a National Renewable Energy Action Plan 2010-2020 in 2010. The NREAP presents the national renewable energy policy, followed by expected final energy consumption for the period 2010-2020. The second part of the document presents national and sectorial targets and trajectories. The main part of the document prescribes specific measures needed to fulfil the requirements of the Directive 2009/28/EC, and describes support schemes for the promotion of energy from RES. There are specific measures prescribed for buildings, specific measures for the promotion of the use of energy from biomass, as well as support schemes to promote the use of energy from RES in heating and cooling (Rogelja & Krajnc, 2014).

The National Energy Programme (NEP) identifies the long-term development objectives and guidelines of the national energy policy, energy systems and energy supplies, taking into account the environmental and technological criteria, the development of public infrastructure and infrastructure of national importance, and the incentives and mechanisms to encourage the use of renewable energy sources and implementation of measures for the efficient use of energy (Rogelja & Krajnc, 2014).

The Second National Action Plan for Energy Efficiency (AN URE 2) contains an overview of the objectives and implementation of The First National Action Plan for Energy Efficiency for the Period 2008 to 2010 (AN URE 1), assessment of the achieved effects and planned activities during the period 2011-2016, and financial resources for the implementation of programs and measures for achieving the objectives of energy efficiency. The objective of AN URE 2 is to achieve a 9% saving in final energy consumption (Rogelja & Krajnc, 2014).

The Action Plan for Energy Efficiency for the Period 2014 -2020 (AN URE 2020) was adopted in May 2015. AN URE 2020 builds upon already existing instruments, but more precisely defines responsibilities of the relevant ministries. This document provides an overview of the national energy targets, achieved savings, and policy measures for the implementation of the EU Renewable Energy Directive. AN URE 2020 sets an objective of limiting primary energy usage in 2020 up to 7.125 Mtoe (compared to 4.67 Mtoe in 2015), and recognizes the existing building stock as a sector with the highest potentials for energy savings.

The main legislative document is the Energy Act (EZ1), adopted in March 2014. It arranges the field of energy market, promotes energy efficiency, and renewable energy. The law gives the legal basis for the adoption of the national strategic documents that will define the long-term policy in the area of land use and energy supply in the future. The basic document shall be the Energy Concept of Slovenia (EKS), which should set out the objectives of a competitive, sustainable and reliable energy supply for the next 20 years and a framework for the


29

next 40 years. The National Energy Plan will be based on the EKS, and it should set the framework plan for major investment in energy infrastructure. EZ1, § 322 prescribes that the use of renewable energy, cogeneration and excess heat in district heating systems is compulsory. The end users of fossil fuels have to pay a contribution to the production of heat from renewable sources. There is no contribution if the heat is gained from RES (Rogelja & Krajnc, 2014).

Building and operating a bioenergy plant requires a set of official documents and permits. Not all permits listed below are required since it depends on several factors of the specific bioenergy plants. If the energy from a bioenergy plant will be used for personal needs, only building and operating permits are required. In case that the produced energy will be for selling, an energy license for a plant above 1 MW and an energy permit is required. Steps for building and operating combined heat and power bioenergy plant are as follows (Borzen, 2016):

1. Decision on construction:

Obtaining location information

Obtaining opinions on the possibility of connection to the grid

Analysis of the suitability of the location

Conceptual design, preliminary design and feasibility study

Decision on the construction

2. Required authorizations:

Energy permit

Application and approval of project conditions in the procedure for obtaining a building permit

Application and approval to build

Building permit

For simple devices, a building permit is not required. Among these are devices that produce electricity through combined heat and power with a nominal electrical power not exceeding 50 kW, but only if certain requirements are met.

3. Procedure of construction and connection of the plants to the grid:

Preparation of tender documentation and selection of a contractor

Professional training for the management of energy installations

Submission of the application and obtaining approval for the connection of devices to the electricity grid

Contract on the connection to the network

Preparation of a project for implementation

Construction of production facilities and the construction of a connection to the electrical system

Create a project executed works and operating instructions

Contract for the purchase and sale of electricity (commercial contract) or contract the Centre to support the entry into the Eco Group (Eko contract)

Filling of the application and review of the fulfilment of the conditions for connection

Conclusion of contracts on access to the electricity grid

Technical inspection

Operating permits (only for those production systems, which require obtaining a building permit)

Connecting to the electricity grid


In Slovenia the production of energy from non-renewable sources dominates. Renewable energy sources (RES) represent 21.9 % of the final energy consumption according to the latest data for the year 2014 (Statistical Office of RS, 2016) as shown in Table 8, but there is a national target to achieve at least 25% share of RES in gross final energy use by 2020 (Ministry of Infrastructure, 2016).


30

Year 2013 Year 2014

RES – heating and cooling (in %) 33.69 33.27

RES – electricity (in %) 33.09 33.94

RES – transport (in %) 3.46 2.58

Total share of RES (in %) 22.54 21.90

Table 8: The sectoral and overall shares of RES (Ministry of Infrastructure, 2015)

The gross domestic consumption of renewable energy sources (excluding hydro energy) amounted to 31801 TJ in 2015 (Slovenia Country Market Statement 2015). The structure of RES is shown in figure 2. The largest amount of energy from RES is acquired from wood and wood biomass, with a domestic production of 22832 TJ in 2015, which is 1.7 % less compared to 2014.

Figure 2: Structure of RES (excluding hydro energy) in gross final energy use in Slovenia in 2015

The largest consumers of wood fuels are households with a total consumption of 1.24 million tons recorded for 2015 (Energy balance of the Republic of Slovenia 2015). In the last ten years, there is an increasing interest in the production and use of various wood fuels. Consequently, by increasing the consumption of wood fuels also the supply increases. The Country Market Statement 2014 reports that in 2013 and 2014, the domestic demand of pellets increased, which led to increased import. The monitoring of manufacturing and foreign trade shows that the production of pellets in Slovenia failed to follow market opportunities (Slovenia Country Market Statement 2014).

Figure 3: Overall assessment of the potential of forest biomass by municipalities in 5 stages of suitability:

rank 1 - the municipalities are less suitable for the use of biomass; rank 5 - the municipalities are highly suitable for the use of biomass

biomass

67.4 %

geothermal energy 11.7 %

non-renewable industrial

waste 6.2 %

biodiesel 5.8 %

solar energy 4.6 %

other biogases

2.5 %

other RES

1.8 %


31

The key roles in the development of bioenergy and energy efficiency have the Ministry of Infrastructure (MI), the Ministry of the Environment and Spatial Planning (MESP), Eco Fund – Slovenian Environmental Public Fund, and Borzen

22.

In Slovenia, support measures for the use of RES for energy production are non-refundable financial subventions and credits with low interest rates that are acquired through public tenders. Ministries and the Eco Fund are publishing tenders. Incentives provided by the Ministries and large tax payers are intended for legal persons, while the Eco Fund and Borzen are also focused on providing incentives to natural persons.

In addition, the state encourages the use of wood biomass in an indirect way, using tax exemptions. Wood biomass is exempt from the tax system. This tax is paid from taxes on fossil fuels used for transportation and heating. The tax for fuel used for heating, is prescribed for the extra light fuel oil, natural gas, black coal or lignite. In addition, fossil fuels are subject to the tax on emissions of carbon dioxide (Rogelja & Krajnc, 2014).

The Government of the Republic of Slovenia adopted a Decree on Environmental Tax on Carbon Dioxide Emissions in May 2013. The regulation prescribes the obligation to pay a specific tax for the environmental charges for air pollution by carbon dioxide emissions from burning fuel and by emission of fluorinated greenhouse gases. In addition, the regulation prescribes the duties of the tax payers, the basis for levying duty, its height, the way of charging and billing. The tax is calculated according to the unit load on the environment by the emission of CO2. Fuels, for which the duty is payable are: liquid fuels (petrol, kerosene, gas oil, fuel oil and liquefied petroleum gas), gaseous fuels (natural gas), and solid fuels (coke, black and brown coal). According to this regulation, wood biomass is exempt from this tax system. However, woody biomass is not exempted from the value added tax system, where all the fuel is taxed at 22% rate. (The National Assembly of the Republic of Slovenia, 2013)

Financial incentives are described in more details in the subchapter 5.4.


In Slovenia, main constrains are as follows (Rogelja & Krajnc, 2014):

1) Administrative and institutional constraints

Getting construction documentation for wood biomass heating system exceeding 50 kW is complex and time consuming.

Environmental requirements are vaguely addressed; the absence of regulations, standards and technical regulations with the aim of utilization of wood biomass.

Complex system of concessions for small systems and district heating.

Cross-sectoral coordination in promoting the use of wood biomass is poor. There is a lack of cooperation between different sectors (energy, environment, agriculture, and forestry). In addition, cross-sectoral strategy does not exist.

2) Economic constraints

Investment costs per unit of produced energy compared to fossil fuels are higher.

Uncertain long-term market price of wood biomass and the relationship to other energy products.

The high cost of project preparation due to the underdeveloped market of services for planning of biomass projects (low number of experts with knowledge and experiences in wood biomass project planning). In addition, due to the typical smaller sizes of projects transaction costs are higher.

Uncertainty about the final number of clients who opt for a connection to the district heating.

Low level of availability of own funds: bad financial status of municipalities and local businesses.

Undeveloped alternative funding models (contract models to provide energy supply and energy services based on woody biomass), ignorance of the areas by financial institutions.

Grants are uncertain; investors are counting on the grants as a reliable hard financial source. Long-term financial mechanisms are not stable to support projects for the utilisation of woody biomass.

22 Borzen’s principal activity is the implementation of public service obligation relating to the organisation of the electricity market that

includes organisation of the electricity market in the strict sense and the activities of the Centre for RES/CHP Support


32

3) Technical and market constraints

The small size of farms: the average size is 6.3 ha and in most cases agriculture is not the main source of income.

Average size of private forest property is about 2.5 ha. (Zavod za gozdove Slovenije, n.d.) Small and spatially fragmented units increase the costs of the management of the forest. Many owners show little interest in their forest parcels, or they simply do not know where their parcels are located.

Poor equipment and technological skills of private owners of forests.

Low realization of maximum allowable cut in private forests.

There is no appropriate instrument for promoting the management of private forests.

Uncertain long-term market price of wood biomass and uncertain relationship to other energy products

Exports of wood biomass are large. There is an inequality in conditions on the market in neighbouring countries and Slovenia.

4) Sociological constraints

Smaller municipalities do not have professional and qualified personnel to cope with tasks in the area of supply and use of energy that are transferred to them by the legislation.

Lack of training and information of local communities to promote the development of local bioenergy markets.

Lack of skilled and experienced professionals with relevant knowledge in the field of technologies for wood biomass preparation, production and use.

Low level of public awareness of positive local and global environmental impacts of the energy use of wood biomass in comparison with other fuels, of renewable energy and of modern technologies for the exploitation of biomass.

Lack of quality pilot projects, especially in public buildings (schools, kindergartens, administrative buildings) and private (farmhouses, hotels, etc.) in the countryside, including district heating systems on wood biomass.

Poor information of consumers on price advantages on wood biomass systems, taking into account the total cost for heating.

Poor awareness of consumers with regard to technical possibilities of environmentally friendly heating system on wood biomass; Poor awareness of users about the modern devices for heating on automated wood biomass heating.

5.4 Incentives

Eco Fund grant credits for environmental investments and provides other forms of assistance. It encourages investments, which are in accordance with the National Programme of Environmental Protection and the environmental policy of the European Union. Activities of the Fund are in particular: investments in environmental protection using credits with favourable interest rate, issuing guarantees for investments in environmental protection, financial, economic and technical advice and other tasks relating to the implementation of the policy of protection of the environment. The primary purpose of the fund is to finance environmental investments of natural and legal persons, as well as of local municipalities. The fund publishes public calls for all three groups separately. Public calls contain the measures falling within the environmental investment. These include the installation of equipment and systems for space heating (public call for natural persons and municipalities) or investment to reduce emissions of greenhouse gases (public call for legal persons), including wood biomass boilers. Interest rates are lower than in the commercial banks. Repayment period varies between groups; for natural persons the longest repayment period is 10 years, for legal persons is 15 years. From this also arises the highest possible amount of credit; for natural person is 20,000 EUR, and for legal persons 2 million EUR. Eco Fund also prepares and conducts a program for achieving energy savings.

Large tax payers are suppliers of heat that provide a minimum of 75 GWh of heat per year, and those suppliers of electricity, gas and liquid fuels, which provide at least 300 GWh of energy per year. Based on the Decree on energy savings at end-users, system operators and suppliers with electricity, heat, gas and liquid fuel have to ensure the energy savings of at least 1% per year according to the delivered energy or fuel to final customers in the previous year (The National Assembly of the Republic of Slovenia, 2011). Large tax payers collect


33

contributions according to the quantity of delivered energy, heat, gas or fuels in separate accounts and pay the amount to Eco Fund. They prepare a program for achieving savings at end-users in the form of grant award through public tender for specific environmental investments. When Eco Fund approves the program, large tax payers carry out tenders, and report to the Eco Fund. Those tenders are intended to end-users in industry, the service sector and in the public sector, because it is possible to achieve large savings with a little organization and lower costs.

The individual measures from the Rural Development Programme of the Republic of Slovenia 2014-2020 will affect in future also the use of wood biomass. In the view of promoting the use of wood biomass, sub-measure M6.4 provides support for investment as follows: M6.4 - Support for investment in the creation and development of non-agricultural activities among others acquisition of electricity and heat from renewable energy sources such as wood biomass, biomass, manure and slurry, water, wind, sun (Rural Development Programme 2014-2020).


34

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