Wood biomass pellet

As recently as a few years ago, there was no pellet production at all in Serbia. According to the most current information on pellet plants in operation and those now under construction, by next year there will be six wood pellet producers in the country, with a projected production up to 250,000 tons. There is, however, plenty of room for further growth in the industry, as the estimated volume of wood waste from forests and sawmills could potentially be doubled. This study analyzed the location of the six existing plants, along with areas rich in forests, and recommended seven regions for new pellet plant installation.

Wood biomass residues have remarkable energy potential in Serbia, where forests cover about two million hectares, or more than one-fourth of the country’s total land area. In fact, twentyeight different municipalities have more than 40% of their entire area covered in forest.

Municipalities with the highest share of forest area are in two main regions. In the southwestern region, Prijepolje is over 80% forested, and Priboj and Kuršumlija range between 61-80%. The eastern region includes Majdanpek, with over 80% in forest, and Kucevo, Žagubica, Bor, Baljevac, all between 41-60%. Serbia has two forms of forest ownership: private and state-owned, with private forests covering 48.5% of the total forest area. A slight majority is state-owned. Wood processing companies in Serbia are mainly privatized or in the process of privatization.

Large privatized companies have had problems meeting former production rates. There is only one chipboard factory in the country, and there is no production of medium density fiberboard (MDF). A high volume of boards is imported in order to meet the demand for boards from other than the predominant domestic beech, oak, poplar, spruce and black pine.

Total wood volume in the forests is 204.6 million cubic meters. In short, there is a lot of wood in Serbia, but the rate of forest wood utilization – the ratio of cutting to regrowth – is a little less than 50%. The total annual wood cut in Serbia is 2.58 million cubic meters, while the estimated natural regrowth is 5.23 million cubic meters. Serbia’s utilization rate is low as compared to the 75% benchmark rate of sustainable forest utilization in developed countries with better forest management and infrastructure (a well-developed network of forest roads).

Much more wood could be harvested than is actually being cut. Even so, total wood residues in the forests after cutting are estimated at 1.1 million cubic meters. Forest wood residues consist of bark stripped off round logs, thin branches with bark and stumps with large roots. Some residues are already being used for other purposes, and most stumps are left in the ground, so the real available volume of forest wood residues is about 600,000 cubic meters.

The potential is under-utilized, with just a fraction of wood waste used in inadequate,

outdated boilers and furnaces. While the main wood pellet production raw materials are forest and sawmill residues, wood waste from other wood processing industries which produce pulp and paper could also be used for pellet production, but most of those companies tend to efficiently utilize the resource, so sawmills are the most appropriate source of the raw material used in pellet production.

In a well organized company, practically all wood waste is used in either board production or as fuel to produce heat and electricity. However, some wood processing companies in Serbia have available wood biomass, but aren’t making good use of it. Instead, they either spread the waste around their property, or simply push it into rivers, discarding a potentially valuable energy producing resource.

The main driving force actually is the European Union, where the price of pellets can exceed 150 € per ton, depending on the location. This makes pellet production very attractive to Serbian producers. Low salaries, the low cost of electricity and the availability of wood wastes provide financially attractive conditions for wood pellet production in Serbia. The high price of pellets in Europe would probably drive up the price of pellets in Serbia. That, combined with the previously described conditions, is probably obstructing the utilization of wood pellets in Serbia. Assuming construction of a pellet plant with a capacity of 20,000 tons per year, financial analysis shows that the break-even price for the sale of wood pellets in Serbia would be 51 € per ton, compared to 81 € per ton in the EU. The investment cost for pellet plants is relatively low, as are annual operating costs. The main operating costs are raw material and energy, while Serbian worker salaries have a smaller portion. Transport costs are also very important. To manage its energy input costs more efficiently, a pellet plant would probably need to operate at least two shifts per day.

Financial justification of wood pellets production is based on relatively high pellet prices in the EU and low investment costs compared to operating costs. The most important issues for potential investors are transport and raw material costs. It is important that prospective wood pellet producers investigate methods to keep these costs as low as possible. As ways to reduce these two costs are found, revenue and other financial parameters are increased.