STRAWPOWER -Increased rural economic development in cross border region by empowering agriculture through using waste straw for energy production

Terms of Reference

For development of Market Analysis, Business Plan and Decision Support Software (Web based Expert System) and Web Portal

Part A. ABOUT STROWPOWER PROJECT

Summary

The STRAWPOWER aims to contribute tor rural economic development in Cross Border Region by promotion of the use of agricultural waste for production of biomass fuel. To date, there have been several attempts for promotion of such waste in biomass production, but without any significant and wide-reaching effect. The results from those projects have either remained exclusive, available only to a small circle of project participants, or were effective only for a limited number of highly motivated agricultural entrepreneurs. Unfortunately, those results have remained out of reach for the wider community of farmers, mainly due to the following reasons:

- the prepared studies are either overly technical or academic, not easily understandable for an average farmer,

- the results from those studies are too general, and do not provide tangible response to the specific questions about the advantages that each individual farm can benefit from,

- suitable campaigns, promoting the use of agricultural waste in the process of biomass fuel production and targeting the farmers have not been realized,

- there is a lack of any feedback on the effects from the installed facilities,

Due to all the above-stated, the STRAWPOWER project aims to introduce an innovative approach for promotion of use of the agricultural waste in the process of biomass fuel production.

The core of the innovative measures consists of the following:

- A pilot installation will be set up, which would practically demonstrate the benefits from use of the waste, and there will also be a series of study visits to the site(s) where this installation will be located, so that the other farmers, the supporting institutions in the agriculture sector, as well as the banks and the credit lenders organization could become familiar with the benefits from use of the agricultural waste.

- Work of pilot installation will be daily monitored and its performance recorded in a database, what will enable anyone interested to read remotely, via web, about the financial and environmental effects from the use of agricultural waste for biomass fuel production (how much energy is being produced, what are the savings/earnings from it).

- On the basis of the prepared studies, a web-based software will be developed, which would enable each interested farmer to get an estimate about the amount of savings that their farm could achieve due to use of its waste biomass for fuel (agripellets) production, or about the amount they could earn by selling the produced biomass fuel. It would also help them determine the level and type of investment needed for use of the waste biomass for pellet production, the length of the period of return on investment, etc.

Background of the STRAWPOWER project

Biomass power is power obtained from the energy in plants and plant-derived materials, such as food crops, grassy and woody plants, residues from agriculture or forestry, and the organic component of municipal and industrial wastes. Biomass is the single largest source of renewable energy in the United States. In 2009 it accounted for half of all renewable energy consumption and contributed ~ 4.1% of the total U.S. energy consumption (Source: Biomass Energy Data Book 2010, Oak Ridge National Laboratory). In EU situation is even better: Biomass contribute by 2/3 of the total EU consumption of renewable energy (Source:Biomass Green Energy for Europe, European Commission 2010). Numbers of installations for producing heat from agricultural biomass waste are installed worldwide, starting from small installations to district heating plants. Agenda 202020 of European Union (20% energy produced from renewable energy sources by 2020) just strengthens importance of production of biomass fuel.

Bride future for biomass as energy source, gives chance to agriculture for generating significant extra incomes from producing biomass fuel (pellets, briquettes) from agricultural waste. Instead using its energy potential, Cross Border Region of the Republic of Macedonia with the Greece (in further text CBC-Region) is facing the problem of agricultural wastes, among them cereal straw which is dominant in CBC-Region. Straw is sometimes baled and used mainly for internal consumption of the agricultural farms (as bedding for livestock and in rare cases for feeding animals). There are not examples for using agricultural waste as power alternative, except in rare cases for domestic stoves.

On the basis of conducted researches during preparation of this proposal, we rough estimate that by using straw as row material for pellets/briquettes production, agricultural businesses in CBC-Region could have extra incomes of 60.000.000 EUR per year (SIXTYMILION EUROS).

In the CBC region there exists a common perception that straw cannot be effectively utilized to produce biomass fuel (extra incomes to agriculture). This energy source is therefore not considered as a serious option. This project intend to demonstrate that straw can be transfigured from an agricultural waste into a market based product for heating that could generate additional income stream for farmers and agro-enterprises and significantly contribute to economic development of rural areas in CBC-region.

The main barrier to the use of straw is that there is not current possibility for an independent and rational decision maker to investigate agricultural waste biomass as a market product. The straw market is presently undeveloped in CBC-Region, having mainly a virtual meaning. The straw is baled and used mainly for internal consumption of the agricultural farms (as bedding for livestock and in rare cases for feeding animals).

For example in the Republic of Macedonia 50% of the straw from the field is taken and used for livestock bedding (this will be forbidden soon according an EU regulation of welfare of animals). The remaining quantities are usually burned on the field.

Quantities of straw in CBC-Region are roughly estimated on 0,3Million Tons (based on annualstatistical data for production of straw in Republic of Macedonia which are then interpolated on CBC - Region). To produce 1 ton of pellets is required ton of straw. So it could be produced 0,2Million tons of pellets. Price of straw pellets on international market is ~ 200 EUR/ton + taxes, so agriculture in the CBC-Region can have extra incomes of max. 60.000.000 EUR. Not just economic benefits, but also environmental benefits are high: 2000 tons of pellets can replace 1,000 tons of fuel oil per year. This can reduce 250 tons CO2 emissions into the atmosphere per 1000 tons of oil fuel. So we are promoting in this project green economic development of the CBC-Region.

Objectivesof the STRAWPOWER project

Overall objective of the project is to contribute toward economic development of rural areas in CBC-region through overcoming barriers for economically viable usage of agricultural waste biomass (straw) by providing examples of best practice (including demonstration plants) in the use of agriculture waste biomass fuelled energy systems.

The proposed project has the following specific objectives:

• To develop the commercial infrastructure to produce, promote, market and sell biomass fuels (pellets/ briquettes) from straw;

• To develop demonstration plants for producing and using biomass fuels (pellets/ briquettes) from straw on a phased basis focusing first on basic amenity in public buildings – heating systems;

• To create a transaction based market for waste biomass fuel (straw) on the basis of supply contracts for heating systems in demonstration plants;

• To develop training, information and technology transfer capacities for producing and using biomass fuels (pellets/ briquettes) from straw.

Target groups of the STRAWPOWER project

Target groups in the project are agro-enterprises and individual farmers. By installation and operation of pilot heating installation powered on straw pellets, we intend to show that using agricultural waste (straw) for production of (carbon neutral) fuel is economically (and environmentally) justified and can generate significant extra incomes for farms. Also, this project intends to show that investment in biomass powered boilers is also viable and economically justified investment. By linking these segments - production of the straw pellets and consumption of the straw pellets, we intend to develop straw market in the CBC-Region.

Expected outcomes of the STRAWPOWER project

a) A pilot installationin Mogila for demonstration of economic and social benefits of using agricultural waste for heating, including decreased operating costs.

b) Three technical studies for identification of the least expensive „local solutions“ for utilization of agricultural waste biomass (straw) as fuel for heating.

c) Market analysis and generic business plan for producing briquettes/pellets from straw in CBC-Region

d) Software (expert systems) for estimation of extra incomes for farmers and agro-enterprises by using straw for production of briquettes/pellets.

e) Public Awareness Campaign for direct, out of project replication of biomass heating systems: Web portal, leaflets, brochures, trainings, study trips etc.

Expected results of the STRAWPOWER project

This project is conventionally designated as the very first step in a waste biomass (straw) market development in CBC-Region. Of course the implemented demonstration site won’t be able to influence the energy balance of the region or its rural economic development, but it will foster investments in straw briquettes/ pellets production as well as in installation of biomass fuelled heating systems in the CBC-Region.

Prepared studies, business plan and market analysis, developed software (expert system) for prediction of incomes/savings and especially installed demonstration plants will result in higher investments in using agricultural waste biomass (especially straw) in CBC-Region.

Learning by seeing principle (by visiting operating demonstration sites) will enable successful dissemination and replication of the (on-site) learned lessons for profitability of investing in production of straw briquettes/pellets not only in CBC-Region but countries wide.

As result of incresed investmetns in production of straw briquettes/pellets other new economic activities will be created dealing with design, specification, procurement, supply and maintenance of the agricultural equipment and biomass fuel and heating systems. The likelihood of a manufacturing and assembly operation for renewable energy systems is also possible.

Location of activities of the STRAWPOWER project

Location of activities will be in the whole CBC region of the Republic of Macedonia. Studies what will be prepared should target the whole CBC region. Data analysed and conclusions made in the studies should be relevant for the CBC Region (not for Republic of Macedonia at whole), i.e. regions Southwest, Pelagonia, Vardar and Southeast:



Part B. DESCRIPTION OF ASSIGNMENTS FOR DEVELOPMENT OF MARKET ANALYSIS BUSINESS PLAN, AND DECISION SUPPORT SOFTWARE (WEB BASED EXPERT SYSTEM) FOR PRODUCTION OF STRAW PELLETS

In the framework of this contract following assignments should be realized:

Lot 1. Preparation of Market Analysis for Straw Pellets.

In cooperation with the experts of the Macedonian Science Society to develop Market Analysis for selling straw pellets. This analysis aims to describe the market potential for the straw pellets, and to assess the opportunities and barriers for development of such biomass markets locally (in cross border region) and nationally, as well as opportunities and barriers to export straw pellets internationally.

Specifically this analysis will consist following components:

  • Biomass market in Europe today (traded quantities and prices for the period of last 10 years)
  • Biomass market in the Republic of Macedonia today (traded quantities and prices for the period of last 10 years)
  • Trading (national and international) of straw and straw pellets (traded quantities and prices of straw and straw pellets)
  • Regulations for trading of straw and straw pellets (quality standards)
  • Comparison of market for straw pellets with market for wood pellets (quantities, prices)
  • Forecast of market of straw pellets in next 10 years, locally and internationally (quantities, prices).

Market analysis should be developed on Macedonian and English

Lot 2. Preparation of generic Business Plan for Production of Straw Pellets

In cooperation with the experts of the Macedonian Science Society to develop a generic Business Plan for Production of Straw Pellets.In this business plan the order of the implementation of the project devoted to straw pellet production should be presented. The costs to build premises, to purchase the needed equipment and also transport should be estimated. The other fixed, variable, operational (production) and administrative costs as well as the expenses for marketing should be named. The analysis of the sales market of straw pellets should be conducted, on the basis of this analysis the annual sales should be forecasted. The approximate sale prices should be formed. Besides this, the expected profit and the payback period should be calculated. More specifically business plan should consists:

  • Stages of the project implementation
  • List of the assets
  • Production plan
  • Description of the production
  • Technology of pellet production
  • Equipment specification of the line forseveral different production capacities
  • Brief equipment specifications
  • Direct costs
  • Staff list
  • Marketing plan
  • Pricing policy
  • Financial plan
  • Taxation
  • Profit and loss account
  • Structure of profits and costs
  • Investment plan
  • The balance of investment costs and the volumes of financing
  • Cash-flow statement
  • Cash-flow analysis
  • Balance
  • The structure of assets
  • Estimation of the investments economic effectiveness
  • Financial rates
  • Analysis of the project vulnerability
  • Conclusions
  • Effectiveness of investments

Business Plan should be developed on Macedonian and English.

Lot 3. Development of Expert System Software

Expert system software will be tool what will enable interested farmers and other investors to assess feasibility of investing in straw pellets production.

Based on the Market Analysis and Business Plan, by applying advanced mathematical apparatus (mathematical modelling) advanced software – web based decision support (expert) system should be developed. The software can predict (with reasonable accuracy) the following:

-an assessment of the quantities and energy potential of the agricultural waste, as a function of the arable area and the type of crops;

-an assessment of the necessary equipment: what equipment should be purchased for the production of biomass (baling, briquetting, pelleting, etc.) and at what cost;

-an assessment of the costs for the production (transportation costs of raw materials, energy consumed, depreciation of equipment, etc.) of biomass from agricultural waste;

-expected revenue from the sale of biomass or anticipated savings from the use of biomass for own needs.

So, every farmer and other investor will be able to receive answers on these questions through the web, by entering data on his/hers arable areas (location and area) and sown crops.

The user interface of this web software will be in the following (indicative) form:

-Enter the arable area: X m2;

-Enter the location of the parcel: Х km distance from site for processing/ using biomass;

-Enter the type of sown crops: menu with choice of different crops.

The software will give the following results (answers):

-You have agricultural waste: X kg;

-Its energy value is: X kJ, equivalent to X m3 wood, kWh electricity, tons oil, m3 gas…;

-You can produce X kg briquettes with specific energy value of X kJ/kg;

-You can produce X kg pellets with specific energy value of X kJ/kg;

-Your agricultural waste could contribute to reduction of greenhouse gases emission byX kg.

Furthermore, the software will predict several indicative parameters depending on whether the biomass will be sold on open market or used for own needs. The predictions will be based on calculations related to a dynamic database in which current local market prices of biomass and other fuels, transportation costs, local labor costs etc. will be stored.

Input menu will be:

-What are you existing heating needs [kW];

-What kind of fuel you are using [choice from menu];

-How much are current expenses for heating [MKD/USD/EUR per year];

-What kind of heating equipment you have [a selection of options], etc.

On the basis of these parameters, the software will analyze several scenarios:

-Non-processed or baled only biomass:

  • for own usage you need the following heating equipment -> type of boiler, prices, photos, links to manufacturers, etc.;
  • costs of adaptation of the existing heating systems will be X MKD (EUR);
  • by own usage you can save X MKD (EUR) per year;
  • with sale you can earn X MKD (EUR) per year.

-Briquetting:

  • for own usage you need the following heating equipment -> type of boiler, prices, photos, links to manufacturers, etc.;
  • costs of adaptation of the existing heating systems will be X MKD (EUR);
  • by own usage you can save X MKD (EUR) per year;
  • with sale you can earn X MKD (EUR) per year.

-Pelleting:

  • for own usage you need the following heating equipment -> type of boiler, prices, photos, links to manufacturers, etc.
  • costs of adaptation of the existing heating systems will be X MKD (EUR);
  • by own usage you can save X MKD (EUR) per year;
  • with sale you can earn X MKD (EUR) per year.

At the end, the software, by using advanced artificial intelligence algorithms, will give recommendation in the following form: on the basis of your arable land area and its location, cultivated crops and current markets conditions we are suggesting that you XXXXXXXXXXXXXXXXXXXX (several suggestions would be possible: sell agricultural biomass unprocessed or balled, use unprocessed/balled biomass for own needs, produce briquettes, produce pellets, etc.) by which you can earn/save X MKD (EUR) and reduce green house gasses emission for X kg.