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German development bank to fund Serbia biomass programme

Serbia is set to receive €31.925 million investment for development of its biomass market, in a project that aims to ensure consumers are connected to district heating networks.

This is the second phase of the programme, the first of which is expected to end this year.

German development bank KfW is providing a €20 million loan and a grant of up to €2 million on behalf of the German government.

An additional grant of €0.925 million by the EU Instrument for Pre-accession Assistance (IPA)[IB(1] and a €9 million grant of the EU Regional Energy Efficiency Programme (REEP) under the Western Balkan Investment Framework (WBIF) will also be provided via KfW.

The programme would provide financing of biomass district heating systems in 4-6 municipalities to construct new boiler houses with biomass boilers and with new or existing and relocated gas boilers.

If the existing boilers are coal-fired, which is mainly the case, they will be completely shut down and replaced with biomass-fired boilers.

All heating plants would have backup gas boilers for maintenance purposes, or in the case of failure of biomass boilers.

In general, 90% of energy should be produced from sustainable sources, i.e., from biomass wood chips.

Technical assistance for policy dialogue will be provided as part of the project, focused on the transposition of the EU Directives to achieve sustainable forest resources management.

The project is open for participation, with minimum requirements including readiness, commitment to the project, clear legal status of the land, etc.

Technical assistance will be available to develop necessary studies and economic analysis, which will bring the maturity of individual projects to the level necessary for tendering and implementation.

Municipalities will be identified soon, out of which Prijepolje and Novi Pazar (adding additional capacities following successful phase one) are already known.

The following measures will be included in the programme: main investments concerning boilers on wood chips biomass andor similar biomass fuel, as well as secondary equipment, civil works; measures associated with network, substations, and other accompanying equipment; consulting services, including supervision and institutional measures.

Expected results include significant reduction of CO2 emissions, and an SO2 reduction of 100%.

Additionally, a considerable increase in the share of renewable energy is expected.

Serbia is characterised by a large district heating sector. There are over 60 municipal district heating companies supplying heat to about 19% of the 3 million households in Serbia, as well as to commercial and public clients.

The DHCs mainly operate heat-only plants using natural gas (67%), heavy fuel oil (19%) and lignite (14%) with a capacity totalling 7,000 MW (almost as much as total electrical capacity – 7,700 MW).

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