About the Project

Name of the project

Reducing Barriers to accelerate the Development of Biomass Markets in Serbia

Key project information

Project duration : 2014 – 2018

Project funding : The Global Environment Facility (GEF) is providing US$ 2.850.000 and the UNDP US$ 310,000. Including co-financing, the project will have a total volume of US$. 30.000.000 Co-financing will be provided by Serbian institutions and private investors.

Project partners : The project is implemented in partnership with the Ministry of Mining and Energy and the Ministry of Agriculture and Environmental Protection, the Ministry of Mining and Energy being the lead partner.

Key data

On 18 October 2012, in Montenegro, the 10th Energy Community Ministerial Council agreed on the implementation of EU Directive 2009/28/EC on the promotion of renewable energy (RES Directive) by the Energy Community. With this decision, Serbia and other members of the Energy Community have committed to a binding share of renewable energy as part of their overall gross final energy consumption in 2020. The shares for the nine Contracting Parties were calculated on the basis of the EU methodology and extensive research work, thus reflecting an equal level of ambition as the targets fixed for EU Member States. The target for the share of renewable energy in gross final energy consumption in 2020 in Serbia is 27%.

Serbia’s renewable energy potential is estimated to 4.3 Mtoe annually. Biomass comprises largest share (63%), out of which 1.7 Mtoe annually is delivered by agricultural sector and 1 Mtoe annually by forestry sector. However, despite the large potential, renewable energy sector, expect for large scale hydro power plants, is in early stage of development. The Energy Law from 2011 and from 2014, as well as the National Renewable Energy Action Plan, were valuable first steps, but there are remaining barriers to promote investments in renewable energy sector in Serbia, which urgently need to be addressed.

Project purpose

The overall objective of the project is to reduce barriers and accelerate the biomass market in Serbia.

The aim of this project is to support investments in biomass fired facilities in Serbia by developing and successfully launching a Biomass Support Unit (BSU) and implementing a sustainable financial mechanism to support biomass projects which will continue beyond the lifetime of this project.

Project description/activities

The focus of the project is on the use of agricultural (including biogas) and woody biomass, which have already been identified as an attractive alternative to fossil fuels in many countries.

The target of the project is to develop, construct and operate at least 6 biomass/biogas fired combined heat and power (CHP) facilities over its duration of 4 years, and to encourage and leverage development of at least 12 similar projects in Serbia based on the experiences from these projects.

A number of activities aimed at improving capability of governmental/institutional bodies, municipalities and local entrepreneurs to identify, prioritize and develop bankable biomass energy projects in Serbia will also be conducted, together with supporting the development of regulatory framework related to biomass energy.

After the project lifecycle, investment support will continue through the established inter-institutional Biomass Support Unit within the Ministry of Mining and Energy , the development of stronger and more effective secondary legislation related to biomass energy and a set of foreseen project activities – training, information dissemination, development of National Biomass Program, and development of biomass E-trade platform.

Besides that, the realized flagship biomass projects will give confidence to investors that such projects are commercially viable with proven technology – and therefore encourage development of new biomass projects.

Along with promoting the biomass projects, the project will also promote the increased and more efficient use of biomass for energy generation through dedicated capacity building and training actions for a variety of stakeholders from the industry, governmental and financial sectors.

Project outcomes

Improved capacity of governmental/ institutional bodies, municipalities and local entrepreneurs to identify, prioritize and develop bankable biomass energy projects in Serbia.

Stronger and more effective secondary legislation related to biomass energy, developed, approved and adopted .

Successfully operating Biomass Support Unit which leads to increased capability of municipalities and entrepreneurs in Serbia to develop, finance, construct and operate bankable biomass energy projects.

At least 6 biomass projects are successfully financed, constructed and operating by the end of the project.

Technical viability of specific biomass technologies is demonstrated as the basis for replication .

At least 12 additional biomass projects are supported by the Biomass Support Unit by the end of the Project.

Project strategy

The project strategy is built around five outcomes, as follows:

Outcome 1: Improved capability of municipalities and entrepreneurs to identify, prioritize and develop biomass investment opportunities in Serbia

This outcome will focus on successfully launching activities that will improve the capability of both governmental/ institutional bodies, municipalities and local entrepreneurs to identify, prioritize and develop biomass investment opportunities. A significant barrier in Serbia is lack of awareness on the opportunities available for biomass energy. Local entrepreneurs and municipalities who might implement these projects need to have a greater understanding of the specific opportunities and the risks involved. This project component is designed to address this type of barrier.

Output 1.1: Biomass Support Unit established and operational with a team in place to support biomass projects in Serbia

Output 1.2: The Training Module on Biomass Energy for municipalities and entrepreneurs designed and implemented

Output 1.3: At least 16 regional seminars on biomass energy that employed the designed training module completed

Output 1.4: A new course on biomass energy incorporated at the Universities of Belgrade and Novi Sad

Output 1.5: National public awareness raising campaign on biomass energy run by the Biomass Support Unit successfully completed

Output 1.6: Annual International Workshop on Biomass Energy in Serbia prepared by the Biomass Support Unit regularly organized

Output 1.7: E-trade platform established and operational

Output 1.8: Project website providing the information about the project-related activities established and operational

Outcome 2: Stronger and more effective secondary legislation related to biomass energy is developed, approved and implemented

This outcome refers to establishing the regulatory framework necessary for the long-term development of the biomass market in Serbia: technical standards and regulations related to biomass energy, policies and regulations to promote biomass supply and licensing procedures to support the biomass market long-term development.

Output 2.1: Technical standards and regulations for biomass energy projects in line with international best practices adopted and implemented

Output 2.2: Policies and regulations to promote biomass supply and its sustainability adopted and implemented

Output 2.3: Appropriate licensing procedures to support the long-term development of the biomass market in Serbia developed and in place

Outcome 3: Successfully operating Biomass Support Unit which leads to the increased capability of municipalities and entrepreneurs in Serbia to develop, finance, construct, and operate bankable biomass energy projects

A Biomass Support Unit (BSU) will be established within the Ministry of Mining and Energy (MoME) with the objective to facilitate the investments on agricultural and woody biomass energy projects, which due to various financial barriers cannot attract enough financial resources from other sources. The BSU will use the Investment Support Mechanism (ISM) to complement existing financial resources, with the ability to absorb significantly higher risks and lower rates of return than financial resources available in the commercial market.

The BSU will also include permanent members from i) the other relevant ministries (the Ministry of Agriculture and Environmental Protection) and ii) external project partners from different institutions relevant for the project (Serbian Chamber of Commerce, Standing Conference of Towns and Municipalities, Institute for Standardization and Regional Development Agency of Srem).

Output 3.1: The National Programme for Supporting Biomass Projects developed and adopted

Output 3.2: At least 20 training seminars conducted by the Biomass Support Unit for Serbian banks and Serbian project developers regarding biomass energy projects and the ways the BSU can provide assistance through the Investment Support Mechanism completed

Outcome 4: A minimum of six biomass projects ( biomass/biogas fired CHP facilities) are successfully financed, constructed and operating by the end of the project

The component 4 of the project will involve providing investment grants to a minimum of six biomass projects (3 woody biomass and 3 agricultural biomass). Two main types of biomass projects which have potential for large scale deployment in Serbia include agricultural waste (including livestock) biomass projects and wood-waste biomass projects. The GEF investment grants, which will not exceed 20% of the total project investment cost, will be provided for these projects. The total value of the grants is US$ 1.6 million.

Encouraging additional investment in biomass projects requires flagship projects with high replication potential which give confidence to investors that such projects are commercially viable and are proven to work. The selected projects will help to create a market demand for biomass in Serbia. However, in order for the projects to be successful it is critical to ensure a long term reliable supply of biomass.

The project will facilitate the establishment and implementation of the Investment Support Mechanism for biomass projects in partnership with banks, whereby GEF resources will be used to provide performance-based subsidies to the first batch of commercial biomass projects in Serbia. The ISM will be designed and implemented in stages aiming at gradual phase-out of subsidy provision and maximizing its leveraging potential.

Output 4.1: Investment Support Mechanism established

Output 4.2: Agricultural biomass projects selected under the Investment Support Mechanism developed, constructed and operational by the end of the project

Output 4.3: Woody biomass projects selected under the Investment Support Mechanism developed, constructed, and operational by the end of the project.

Outcome 5: At least 12 additional biomass projects are supported by the Biomass Support Unit / Investment Support Mechanism by the end of the project

It is important that the project has sustainable results throughout Serbia so that a more widespread promotion of biomass energy can be undertaken and that there is an ongoing support. For this to happen the Biomass Support Unit needs to provide a continuous assistance to additional biomass projects in Serbia beyond only those projects which are selected and partially supported within the Outcome 4.

The goal of the project will be that at least 12 additional projects are successfully supported by the BSU through technical assistance.

A documentary film on the implemented biomass energy pilot projects produced by the BSU will also be produced within this component.

Output 5.1 : Twelve 12 additional biomass projects in Serbia beyond those which are partially assisted with GEF funds successfully supported

Output 5.2 : A documentary film on the implemented biomass energy pilot projects implemented by the Biomass Support Unit produced