Best Practice Case Study: Biomass Energy Plant from Vatra Dornei, Suceava County, North East Region, Romania

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1 Best Practice Case Study: Biomass Energy Plant from Vatra Dornei, Suceava County, North East Region, Romania January 2010 December 2012

2 Studiu de caz exemplu de buna practica: Centrala termica pe biomasa de la Floresti, Judetul Suceava, Regiunea Nord - Est, Romania Best Practice Case Study: Biomass Energy Plant from Vatra Dornei, Suceava County, North East Region, Romania Keywords: biomass, wood waste, thermal energy, local authority, multiple financing

3 1. EU Policy Valorization of renewable energy sources has represented for several decades an important component of the energy policy at the EU level. Nevertheless, the importance of this issue has greatly increased lately due to the problems caused by the dependence on imports and climate changes. The Green Paper: A European strategy for sustainable, competitive and secure energy states that renewable energy sources represent a political priority at the EU level and sets measures for their valorization. On January 10, 2007 the European Commission proposed a coherent package of measures for defining a new European energy policy able to mitigate the climate changes and increase energy security and competitiveness within the European Union. The proposed package was adopted by the European Council in April The Council established the following objectives for 2020: - Reduction by 20% in primary energy consumption; - Reduction by 20 % in GHG emissions; - Covering 20 % of the total energy consumption from renewable energy sources by2020; - Covering 10 % of the total transport fuel consumption from RES. On the occasion of the package launching on January 10, 2007, the President of the European Commission, José Manuel Barroso, said: Today marks a step change for the European Union. The energy policy was a core area at the start of the European project. We must now return it to the centre stage. Several directives approved immediately after aimed at creating the legislative framework with a view to attaining the established targets. One of the most important among them was the Directive 2009/28/EC on the valorization of the renewable energy sources. The Directive set mandatory targets for all the Member States by 2020, as well as orientations for the period The Directive also established that each country had to develop a national action plan for the valorization of RES to include measures for attaining the set target. The Directive 31/2010 stipulated that the primary energy generated from RES by location for each building should be greater than the consumption of final energy used by the building (fossil fuels, electricity, urban district heating, etc.) starting from (for all the new public buildings), and , respectively, for all the buildings regardless of their destination. Thus, all the new buildings should become energy producers. 2. National Policy At the beginning of this decade valorization of RES has become an important component of the energy policy at the national level in Romania for surpassing the period of transition and getting closer to the EU. Romania was the first country in UNFCCC Annex 1 to ratify the Kyoto Protocol in 2001 taking upon itself the obligation to reduce GHG emissions between 2008 and 2012 by 8% against the 1989 level. In these conditions Romania could use the Joint Implementation mechanism as a host country. At present in Romania there are 16 investment programmes of the Joint Implementation type under different development stages. One of these is the Sawdust 2000 Programme that envisages utilization of sawdust and other wood wastes as an energy source for the district heating systems in 5 towns from Romania among which Vatra Dornei. The Programme is being carried out in cooperation with Denmark.

4 An important role was played by the Strategy for the renewable energy sources valorization approved through GD 1535/2003. The strategy includes an evaluation of the renewable energy sources (RES) potential in Romania. According to this evaluation, the energy potential of biomass (7,6 mil. toe) represents more than half of the renewable energy sources potential at the national level. The general objectives of the strategy for the renewable energy sources valorization consist in: - Integrating the renewable energy sources into the national energy system structure; - Reducing the technical, functional and psycho-social barriers to the process of renewable energy sources valorization, at the same time identifying the cost and energy efficiency elements; - Promoting private investments and creating the conditions for facilitating the access of foreign capital to the renewable energy sources market; - Ensuring, where necessary, the supply with energy of the isolated communities by valorizing the potential of the local renewable energy sources. There are support schemes in the investment stage that envisage the allocation of nonrefundable financial support from the EU structural and cohesion funds or from the state budget in order to carry out RES valorization projects. Mention should be made that only the EU regions that are less developed can benefit from the EU structural and cohesion funds, but in Romania all its eight development regions fulfill these conditions. 3. Local Authority Context From the administrative point of view, Romania is divided into 42 counties and the Bucharest Municipality. Each county is led by a County Council, the councilors being directly elected by the electorate once every four years. The President of the County Council is elected distinctly also through direct vote every four years. Each county has several communes (in the rural area) or towns /municipalities (in the urban area). Each commune/town is led by a communal/town council. The members of the Communal/ Town Council are elected through direct vote once every four years. The mayor, who is also directly elected by the population, is the executive leader of the commune/town/municipality. In the context of Romania s acceding to the EU, 8 regional divisions called development regions were created on the territory of the country. A Regional Development Council (RDC) was established at the level of each region for coordinating the activity. The council has no legal status and acts as a deliberative body on the basis of partnership principles. In each development region there is also a Regional Development Agency (RDA), a public, non-governmental and non-profit body that has a legal status. Its organizational and functioning statute is approved by the RDC. In practice, the RDA is the executive body of the RDC. The main objectives of the RDC and of the RDA, respectively, refer to the management of the development funds allocated by the EU to the respective region, the strategic scheduling of the economic and social development of the region, in partnership with the local actors, promotion of cooperation and transfer of information and competences from the business environment towards the scientific and technological one and development of projects with major impact on the region development.

5 The beneficiaries of the regional programmes and projects are public and private institutions (the local and county councils), trade companies, NGOs, education institutions and professional associations, etc. RDAs play an important role in the management of the structural and cohesion funds that Romania has received from the EU, acting as an Intermediate Body at the level of the Regional Operational Programmes (ROP) for the respective regions. Valorization of RES represents an important component of the regional strategies and the respective projects are significant, both in number and value. These projects have a significant non-reimbursable financing component from the EU structural and cohesion funds or the state budget. They have also got a co-financing component to be provided by the beneficiary/applicant. The share of this last component is low if the beneficiaries are local authorities, but it can be significant in absolute value if the total project value is great. According to the legislation in force in Romania the local budget is made up partly of the local taxes paid by the population of the respective commune/municipality and partly of the amounts transferred from the state budget. Thus, the investment capacity of a local authority essentially depends on the amounts it receives from the state budget. In Vatra Dornei live inhabitants. The town is situated in the northern part of the country in the Suceava County, in a depression between mountain ranges with altitudes of about 800 m. The annual average temperature is 5.2 o C. The winters are long and last for 5-6 months. The Suceava County is situated in a preponderantly mountain region with great areas covered by woods. The woods cover 58 % of the total county area as compared to an average of 28% at the national level. In the area there are numerous companies whose object of activity is wood exploitation and processing. In these conditions, the biomass resources are abundant. Vatra Dornei is an important tourist center and its industry is based on the valorization of the natural resources existing in the area (wood, milk and meat processing, mineral water springs exploitation). 4. Renewable Energy Systems Initiative During the period of centralized economy entire districts of blocks of flats were built in the towns all over Romania. They were supplied with heat and hot water through district heating systems. Prior to the project development, the thermal energy necessary for the heating and hot water preparation of the Vatra Dornei apartments was supplied by six small thermal plants that ran on light liquid fuel. The district heating system (the thermal plants and the heat distribution networks) were worn and obsolete. The energy losses were high. Thus, the town was selected to be included in the Sawdust 2000 project. The project was carried out on the basis of the Memorandum

6 of Understanding concluded between the Romanian Government and the Danish Government ratified in 2004 which represented the legal framework for the application of the Joint Implementation mechanism between the two countries. At first, only the replacement of the worn boilers running on liquid fuel by modern biomass boilers was considered. This would have directly contributed to the reduction in carbon dioxide emissions and justified the project development in agreement with Joint Implementation. The developed studies proved that the simultaneous modernization of the heat distribution networks, also characterized by high wear, would have been very efficient. This required supplementary funds, inclusive of the state budget and from the Vatra Dornei municipality. The new 18 MW thermal plant is equipped with 2x6 MW sawdust-fuelled boilers and 1x 6 MW petroleum derivatives-fuelled boiler. The thermal plant is provided with a flue gas cleaning system at the national and EU standards. The area necessary for the building of the thermal plant (486 mp) was provided by the Vatra Dornei municipality. A sawdust store directly linked to the boiler hall, as well as a buffer store, was built. The sawdust storage was designed so that to store enough sawdust for 3-4 days for burning at maximum capacity. Thus, it was possible to supply heat and hot water for domestic use during the periods when the traffic was interrupted due to heavy snowfalls. In the immediate proximity of the thermal plant a buffer store for ensuring the taking over of the sawdust from the sawmill/lumber factories in the area was built. The annual sawdust consumption amounts to about 17,300 tonnes, the resulting ash amount representing 1 % of the burnt sawdust. The area necessary for the sawdust stores was also provided by the Vatra Dornei municipality. Within the project the district heating network was also rehabilitated starting from the boiler hall up to all the consumers totaling 11,000 m. The thermal plant supplies 1,500 apartments, several public institutions (a school, a kindergarten, a crèche, a children s home, four medical offices) three hotels accommodating 900 people, 2 treatment bases. The reconstruction of the district heating network included: - Reconstruction of the primary and secondary circuits and of the heat exchangers in the thermal points; - Installation of new elements for connecting consumers from each building; - Replacement of the old pipes from the blocks of flats basements with new ones.

7 The project enabled the acquisition of the necessary logistics equipment (tractors, dumping trucks, truck loaders) for collecting and transporting the sawdust and other types of wood waste. The total cost of the project amounted to EURO 4.5 million of which: - 36 % from the EU through the PHARE Programme - 29 % from the Danish Government within the Joint Implementation System - 25 % from the state budget - 10 % from the local budget 5. Impact indicators The project has had a strong energy, social and ecological impact. From the energy point of view, the project has enabled the rehabilitation of a district heating system (heat production source and distribution networks) whose heat losses had been estimated at about 50% replacing it with a modern one with low losses. The initially burnt fuel (prtroleum derivative) was also replaced by biomass, a renewable fuel. From the social point of view, the project has ensured the supply with hot water and heat 24 h/day of 40% of the town population at low prices and without requiring any subsidies from the budget. From the ecological point of view the project has reduced annual GHG emissions by 9,400 tonnes CO2 equivalent. 80% of this reduction resulted from reduction in the wood waste amount left in the forests whose anaerobic digestion produces methane. The number of workshops organized The project has been presented and carried out with the help of the legal and decisionmaking factors at the national level. Thus, the Memorandum of Understanding between the Romanian Government and the Danish Government based on which the project Sawdust 2000 was carried out, was signed in Copenhagen in 2003 by the representatives of the Romanian Government and ratified by the Romanian Parliament through the Law 532/2004. The funds allocated from the state budget were approved through the Government Decisions in The overall Sawdust 2000 Project was coordinated by the Romanian Agency for Energy Conservation. In these conditions the project was highly popularized on the occasion of internal manifestations and through mass media. Benefits for the community By putting into operation this objective, 40 % of the Vatra Dornei inhabitants benefit from hot water and heating 24 hours a day at low prices without subsidies from the budget. Thus, the project has had a direct social impact. 6. Lessons learned: Useful information for other authorities Development of RES valorization projects heavily depends on the specific local conditions (legal and institutional framework, etc). Thus, some of the lessons learned may be used not only in Romania, but in other countries in a similar situation. At the same time, they may prove inapplicable to other countries. The communal authorities have a low financial power and greatly dependent on the amounts they receive from other financing sources. For example, the project presented above was developed through the financial contribution of the Danish Government, European Union (through the PHARE Programme), as well as with funds from state budget.

8 The support provided by the decision-making factors at the national level is also a condition for the success of such projects in our country. The Vatra Dornei project development was enabled by the signing of an intergovernmental agreement, approval of a law and of a Government Decision, all of them underlining the importance of this support. It should be also added that the Romanian Energy Conservation Agency has played an important role in the management of the entire Sawdust Programme, the Vatra Dornei project included. The European Union has directly contributed to the project financing through the PHARE Programme. Such projects can be also financed through other EU regional development programmes. In the investment phase they can benefit from the European Commission financial support through the structural and cohesion funds within the Sectoral Operational Programme Economic Competitiveness Increase Priority Axis 4 Increasing energy efficiency and security of supply in the context of climate change mitigation Major intervention field 2 Valorization of renewable energy sources for green energy production. This programme finances the co-financing scheme without applying the state support rules that apply in the investment phase and envisages the non-reimbursable financial support of the public administration authorities and of the Intercommunity Development associations during the project implementation. Other sectoral operational programmes provide financial support for the RES valorization installations. Nevertheless, the local authorities need to be familiar with all these opportunities, as well as with the way to access the respective funds. This lesson is relatively less known by the communal authorities from our country. The Joint Implementation Mechanism within the Kyoto Protocol represents another possibility for financing local projects. The general economic situation at the national and local level has also got an important role. The project has been developed by means of funds allocated from the state and local budget in a period when Romania had a favorable evolution. If the project had been carried out in the period in the economic crisis conditions its development would have been much more difficult. The communal authorities are understaffed and the existing staff has to solve numerous specific local technical problems. Therefore, it is very important that they benefit from specialized technical consultancy. The technical cooperation relationship established between the Vatra Dornei Municipality and the Romanian Energy Conservation Agency was decisive for the project success. 7. Overall project evaluation The project is included in the National Programme Sawdust 2000 that aimed at developing district heating stations running on sawdust for supplying heat to the district heating systems from five towns in Romania. Vatra Dornei was one of them. The project envisaged the rehabilitation of the entire local district heating system. A new 18 MW biomass plant provided with the corresponding sawdust stores was built, and the district heating networks were also rehabilitated. The project was carried out in the period with funds from the European Union, Danish Government, state and local budgets. The total value of the investment was of Euro 4.5 million. As a result of the project development 40 % of Vatra Dornei inhabitants are supplied with heat, the entire area was cleaned and the GHG emissions were reduced.

9 8. Sources of information Contact information of the compiler of this report: Maria Rugina Energy Research and Modernization Institute - ICEMENERG Bd. Energeticienilor nr.8, , Bucharest, sect. 3, Romania Tel: maria.rugina@icemenerg.ro Website: