How To Do Business With Woody Biomass - 5eures

EURES FIVE EUROPEAN RENEWABLE ENERGY HEAT PILOTS
EXAMPLE OF BIOENERGY BUSINESS PLAN
How to do Business
with Woody Biomass
Business plan examples for SMEs
5EURES - EIE/04/086/S07.38582
www.5eures.eu.com
5EURES WP4
The sole responsibility for the content of this publication lies with the authors. It does not necessarily
reflect the opinion of the European Communities. The European Commission is not responsible for any
use that may be made of the information contained therein.
Preface
This is a final report of Work Package 4 of 5EURES – Five European RES-Heat
Pilots – project (EIE/04/086/S07.38582) carried out during 2004 – 2007.
Objective of 5 EURES project was to introduce and foster implementation of best
practices in RES-heat markets in five European regions. Co-objective supporting
successful implementation of market structures was know-how transfer between the
participating regions. The example given by these five RES-heat pilots can be
benefited and adapted widely among other European regions.
All documents and associated Excel spreadsheets for calculations are available at the
project web site on the Internet www.5eures.eu.com.
Collaborators
CEBra Centrum für Energie- IrRADIARE - Investigação e
technologie Brandenburg Desenvolvimento em Engenharia e
GmbH Ambiente, Lda
Private company working mainly in energy
Promotion of applied research service and environment protection market
work in energy resources, with large companies and municipalities in
energy technology and auditing, monitoring and optimisation.
management.
IST - Institut Superior Técnico
DMAH - Direcció General de The IST, created in 1911, is the largest and
Medi Natural most reputed school of engineering, science
Planning and execution of the and technology in Portugal..
environmental policy of the
Government of Catalonia Metla - Finnish Forest Research Institute
Finland's central forest research organisation
established in 1917 and supervised by the
FHE - University of Applied Ministry of Agriculture and Forestry.
Science Eberswalde
One of the main German NCP - North Karelia University of Applied
institutions for teaching Sciences
applied sciences in Forestry, Higher education institution providing broad-
Landscape Management, based multidisciplinary education.
Nature Conser-vation, Wood
Science and Technology, and VTT
Economics. VTT is an expert organisation with objective to
develop new technologies, create new
FINPRO innovations and value added thus increasing
customer's competitiveness.
Finpro is an expert and
service organization with
mission to speed up the Forestry Technical Centre of Catalonia
internationalization of Finnish As an associate member, CTFC contributed
companies while. minimizing substantially to business plans. The Forest
the risks. Technology Centre of Catalonia (CTFC) is an
applied research, forestry training and
technology transfer centre located in the
. Catalonia.
Special thanks:
To all companies who provided technical material and information to this study.
5EURES was co-financed by the European Commission. The financiers are hereby
warmly thanked.
Authors
Vaatainen, K. Tahvanainen, T. 2007. Ash Recycling for Forest Fertilisation. 5 EURES
(EIE/04/086/S07.38582). Business Plan. 8 p.
Prinz, R. Poysti, J. 2007. Biomass supplier mixing from various sources. Finland. 5
EURES (EIE/04/086/S07.38582). Business Plan. 9 p.
Nunes, Elsa (IrRADIARE); Nogueira, Marcos (IrRADIARE); Henriques, Rui

(IrRADIARE); Costa Mário (Instituto Superior Técnico); Fernandes, Ulisses (Instituto
Superior Técnico). 2007. Biomass supply chain management. 5 EURES
Correal, E., Rodriguez, J.. (Forestry Management Service; Directorate – General for
the Natural Environment of Department of the Environment and Housing;
Government of Catalonia, and Forestry Technological Centre of Catalonia ) 2006.
District Heating Plant for Municipality of Lles de Cerdanya. 5 EURES Project Report
X/200X, Project EIE-04-086. Catalonia, april 2006, 6 pages. Keywords: Bioenergy,
wood fuel, benefit, balance, cost, price, Catalonia.
Väätäinen, K., Pöysti, J., Lamminen, S., Laitila, J. 2007. Energy wood harvesting with
farm tractor. Finnish Forest Research Institute, Joensuu, Finland. 5 EURES
Dipl.- Ing. (FH) Gundolf Schneider, UASE. Dipl.- Ing. (FH) Severine Laufer, UASE.
2007. Fire wood supplier for consumer sector (Biomassenhof). University of Applied
Science (Fachhochschule Eberswalde). Eberswalde, Germany. 5 EURES
Vaatainen, K. Karppinen, H. Poysti, J. (Ed) 2007. Forest Residue Information

Exchange for Biomass Trading. Joensuu, Finland. 5 EURES
Tukiainen, S. Raunio, O. Poysti, J. (Ed) 2007. Greenhouse pellet heating & CO2 plant
1 MW. 5 EURES (EIE/04/086/S07.38582). Business Plan. 5 p.
Sikanen, L. Poysti, J. (Ed). 2007. Heat entrepreneur operating wood heated spa 1MW.
Finnish Forest Research Institute, Joensuu, Finland. 5 EURES

Superior Técnico). 2007. Heating elementary school and kintergarden 300kW. 5
Superior Técnico); Poysti, Jyrki (Finpro). 2007. Heating hotel municipal swimming
pool 500kW. Portugal. 5 EURES (EIE/04/086/S07.38582). Business Plan. 8 p.

Superior Técnico); Poysti, Jyrki (Finpro). 2007. Heating hotel with wood pellets
50kW (alternative 1). IrRADIARE, Portugal. 5 EURES (EIE/04/086/S07.38582).
Business Plan. 6 p.
Correal, E., Rodriguez, J. (Forestry Management Service; Directorate – General for

the Natural Environment of Department of the Environment and Housing;
Government of Catalonia, and Forestry Technological Centre of Catalonia ) Heating
of municipal sports hall. 5 EURES Project Report X/200X, Project EIE-04-086.
Catalonia, April 2006, 6 pg. Keywords: wood fuel, balance, benefit, bioenergy,
Catalonia.

Superior Técnico); Poysti, Jyrki (Finpro). 2007. Heating hotel municipal swimming
pool 500kW. IrRADIARE, Portugal. 5 EURES (EIE/04/086/S07.38582). Business
Plan. 5 p.
López, I., Rodriguez, J (Forestry Management Service; Directorate – General for the
Natural Environment of Department of the Environment and Housing; Government of
Catalonia, and Forestry Technological Centre of Catalonia ), Poysti, J (Finpro)..
Heating pre-school and primary education centre – bidder viewpoint, 5 EURES
Project Report X/200X, Project EIE-04-086. Catalonia, December 2007, 8 pages
López, I., Rodriguez, J (Forestry Management Service; Directorate – General for the
Catalonia, and Forestry Technological Centre of Catalonia ), Poysti, J (Finpro)..
Castellfollit del Boix micro-district heating business plan – municipality viewpoint, 5
EURES Project Report X/200X, Project EIE-04-086. Catalonia, December 2007, 6
pages. Keywords: bioenergy, wood fuel, Bages, balance, benefit, Catalonia
López, I., Rodriguez, J. (Forestry Management Service; Directorate – General for the
Catalonia, and Forestry Technological Centre of Catalonia ), Poysti, J (Finpro);
Industrial user converting to bioenergy, 5 EURES Project Report X/200X, Project
EIE-04-086. Catalonia, December 2007, 7 pages. Keywords: bioenergy, wood fuel,
feeding system adaptation, balance, benefit, Catalonia.
Laufer, S. 2007. PELLET BURNING BIOMASS HEAT SUPPLY STATION 250

kW. FH Eberswalde, Eberswalde, Germany. 5 EURES (EIE/04/086/S07.38582).
Business Plan. 10 p.
Laufer, S. 2007. Short rotation coppice for bioenergy. University of Applied Science
(Fachhochschule Eberswalde). Eberswalde, Germany. 5 EURES

Superior Técnico); Poysti, Jyrki (Finpro). 2007. Small 3 MWe CHP with Biomass.
IrRADIARE, Portugal. 5 EURES (EIE/04/086/S07.38582). Business Plan. 7 p.
Pyhalahti, H. Poysti, J. (Ed) 2007. Wood burning biomass heat station 2.5kW. Finpro,
Munich, Germany. 5 EURES (EIE/04/086/S07.38582). Business Plan. 10 p.
Laufer, S. 2007. Wood Chip Supplier Company. University of Applied Science

(Fachhochschule Eberswalde). Eberswalde, Germany. 5 EURES
Value chain
Structure of a short business plan
In business plan entrepreneur describes intended business to potential investor. It is
also recommended that entrepreneurs starting a new business with their own funds
also make a proper plan because it is easy to forget some costs and issues without
careful consideration and formal process.
Business plans have several sizes but each should explain the business completely.
Every entrepreneur should make four descriptions oh their plans of following sizes::
Title (length one row) – This is the title of the business plan and it should be
unambiguous. The one row title should explain completely what the business
does, for example if the title is used as subject field of email or naming a
document.
Short explanation (length 15 seconds when told on telephone) – This is what
the entrepreneur tells when telephoning to banks and other relevant entities.
People usually listen 15 seconds before they say if they are interested or not
interested to hear more. If one can not explain the business idea in 15 seconds,
people usually think that it is not clear enough.
Half page summary – Financing bodies are usually very busy and will read
only half page before deciding if they want to read the whole document. This
applies especially to venture capital funders. The half page explanation can
also be used as introduction in email when full plan is attached. Everything
about the business must be clearly and effectively explained in this space.
Total costs, asked investment, turnover, profit, and payback period should be
stated.
5-10 page business plan – Usually enough for smaller investments, except in
cases where there are large numbers of details. Profit and loss calculation,
investment calculation and possibly cash flow calculation should be included.
Business plans have several different purposes. Most often plan is made for investors
or banks. Plan can be made also for internal use in company that intends to start new
business operation, or division. Municipalities also can do internal plans to assist their
decision making.
Business plan should be as short as possible, but explain everything in sufficient
details. Business plan explains everything in two different ways. Everything should be
written as text, and then, everything should be put in numbers and calculations. For
every part of text, there should be a numerical value, and vice versa.
Investors want to check calculations. Don’t just show the results of calculations, but
also how you ended up there. Start the calculations from basic publicly available
starting values that can be independently checked, such as €/kWh, €/hour, etc.
Business plan describes future of the business and therefore are not expected to be
exactly accurate. Obviously, future prices should always be used in all calculations.
Usually one can not estimate starting point numbers, such as fuel prices, more
accurately than +/- 15-20%.
Although business plan is not expected to be accurate, entrepreneurs should always
confidently write the main part as it would exactly happen like that. Any reservations
and deviations and corrective actions should be explained only in the Risk – chapter
which explains all possible eventualities, overestimates, underestimates and how the
business can survive them.
Sufficient care should be used to avoid errors cumulating in some calculations. If
calculations are made on spreadsheet, as they should, the planner can test how the
company’s profit changes when starting values are changed slightly. This is called
sensitivity analysis. In some cases company’s profit is very sensitive to small changes
in starting values. This is a risk factor.
If business is going to expand significantly, or starting values of prices may change
significantly during first years of operation, one should make profit and investment
calculations separately for each year.
Cash flow calculation should be made in those cases, and also when there are large
seasonal variations. Companies go often bankrupt because there is not enough cash to
pay interests, or other costs during slow season, even if the annual average operation
is profitable.
Special issues in business planning:
Business plan for entrepreneur’s own use Should be as detailed as business plan for
any other purposes, except there is
obviously no need to write about own
background.
For banks and investors People make business. Explaining own
background and expertise is very
important. Funding is actually given to a
person running the company, not to the
faceless company, or product.
For commercial lenders, only purpose of
business is to make profit. Business plan
must show good profit from operations,
not only to cover salary and operations,
but also cover wear and tear of
equipment and loan repayments.
Any other benefits for other companies
or to the local economy may be
explained if funding is applied form non
commercial sources such as
municipalities or community funds.
Municipalities Operations done by municipalities are
not always intended to make profit.
Business plan that has been made for
municipality’s own internal use, may
show no profit, or can even be loss
making.
Municipalities usually consider benefit to
local economy as important aspect of the
planned operation.
Biomass as replacement of fossil fuel Normally companies sell products or
services and income in the calculations is
the sales income. In cases where business
plan is made for an operation replacing
fossil fuel with biomass, the income is
difference between cost of biomass and
cost of fossil fuel used previously, i.e.
savings that are achieved by use of
biomass.
Usually business plan for biomass should
show some savings, but in some cases
municipalities are happy to show zero
savings in order to help biomass
suppliers with higher supply prices, or
generally to switch into sustainable and
environmentally friendly fuel source.
Biomass operation as supplementary Sometimes entrepreneurs plan to start
work new business in order to create some new
work for themselves for periods when
they don’t have enough work in their
main business.
Add-on entrepreneurship is treated
differently in business plan. Biomass
operations that are not profitable and thus
not possible as full time occupation, will
usually become possible as add-on work.
This happens because overhead costs and
equipment can be shared between
different businesses.
Sometimes only the additional cost of
operating the second business is used in
business plan, not the full cost or shared
cost. This is sometimes called as
Marginal Cost. Common sense should be
used in calculations.
Explanations for Business Plan content

1. Information about the company
a) This is a cover page and not used in the examples in this document. Each
company can fill its own information. It should contain name and address
details, ownership, managing director(s), profiles of key person(s), and
possibly targeted turnover, people to be employed.
b) Background and history of existing company - or for director(s) if new
company. Reason why this investment is considered.
2. Business idea
a) Products or services offered. (This could be biomass operation, or boiler
operation, etc. Products or services are the one client is paying money. No
other activities are explained here.)
b) Targeted customers. (Customers are only those who pay money to the
company for products or services. Biomass as replacement of fossil fuel does
not have targeted customers. Sometimes customer is clearly defined entity,
such as in case boiler ESCO offering heat to a school. If customers are general
such as any municipality residents, give convincing explanation that customers
will really exist and are ready to pay. )
c) Benefit for the customer. (All benefits, monetary and otherwise why customer
would buy product or service. Also, biomass as replacement of fossil fuel in
municipality’s or company’s internal use has some specific benefits why it is
considered. Explain here to decision makes what they are.)
d) Way to operate. (What the operation is buying and selling, how it is processing
the material and what specialist equipment and skills is needed.)
e) Recommended business structure (Incorporated SME company, partnership,
association, co-operative, independent contractor full time or part time,
division of medium-size company. Taxes may be different.)
f) Required resources
i. Equipment (Details of all necessary equipment.)
ii. Human resources (People and special skills needed.)
g) Earning model (Where exactly the money comes from. What the company is
selling, for example, is it selling biomass by weight or by kWh, or heat kWh,
at what price, pricing structure, base fees, energy fees, etc.)
h) Seasonal variations affecting operations. (Can the business survive low
season.)
i) Integration to other companies in the value chain (Other necessary partners
such as chippers, transport operators, maintenance companies, etc. One of the
important business operations is information flow up and down the value chain
- orders, invoices, stock level, forecasting. Each operator in the value chain
must know and be convinced that sufficient amount of biomass will be
available in the long term, and that deliveries will happen whenever needed).
3. Market situation
a) Market situation and forecast for bioheat. (Explain only those issues that are
important for the operation of the business, for example, to estimate
availability of biomass, or heat suppliers.)
b) National / regional policies currently and in long term. (Explain only those
issues that are important for the operation of the business, for example, to
estimate grants, taxes or other rules and legislation affecting the operation.)
c) Customers. (Customers’ current situation. Total number of customers that can
be expected.)
d) Sources of raw material (Especially if company is processing biomass.)
e) Competition. (Any other potential companies offering the same and thus,
competing on same customers. Sometimes competition comes from alternative
solutions, and not only from companies offering the same products or
services.)
4. Financial justifications
a) Sales (Monies received or cost savings achieved by using biomass as
replacement of fossil fuel.)
b) Costs (Total money used to purchase biomass, fuel, workers salaries, etc)
c) Operating Profit (Gross profit from operations before loan interests,
depreciations, taxes and other such costs.)
d) Depreciations (Treatment of depreciation for tax purposes depends on national
legislation. Sometimes depreciation can be deducted from taxable income,
sometimes not. Ultimate purpose of depreciation is to allow entrepreneur make
financial reservations to buy new equipment when the old one has worn out.
Some way of doing this should be included in the business plan.)
e) Financial costs (Interests are normally tax deductible, repayment not.)
f) Taxes
g) Return on investments – ROI, or Return on Capital Employed - ROCE. (This
is interest that money invested in the company earns expresses in percentage
value. It should ideally be higher than bank account interest. Typical values
are from 7-12%. If ROI or ROCE is very high it usually means there is an
error in calculation. Very high values are not usually found in companies, and
are not sustainable anyhow because competitors soon finds it and pushes
prices down. Proper definition for ROI is ‘Profit before interest, tax an
dividends, divided by the investment = net assets’. Note that if equipment is
bought with loan, there may not be any net assets since the company does not
actually own anything.)
5. Investments
a) Cost of each investment
b) Payback time for investments (How many months / years it takes to pay back
investments, or loans. Common sense should be used when calculating this.
Usually this is applied only to entrepreneur’s own investments since bank loan
has fixed payback period.)
6. Sources of funds
a) Own funds, loans, grants available
7. Entry barrier analysis
a) Why other entrepreneurs have already not started this business.
8. Risk analysis
Explain here all problems that can come up on next years. Is the profit sensitive
to variations in costs, fees, or prices? What can business do to correct problems?
Typically business should consider long term, fixed price fuel supply contract
with penalties for failure to supply contract quantity/quality but incentives for
suppliers for excellent performance, and focus on contracts with fewer/larger
supplies, and arrange availability of back-up fuel supply perhaps via spot market.
Fuel Supply Risks 1 that are usually considered in biomass operation:
• Enough biomass available in a viable catchments area?
• Is the crop / forest grown only for fuel or is there alternative competing
use for it? Or is biomass just a secondary product from crop / forest. In
some countries the typical fuel is forestry felling residue. But felling
residue is a side product (waste from another activity) and is not
reliably available, except in densely forested areas. It is not purposely
produced. There is no reliability in production and delivery to heat
plant - other than if there are large numbers of forest plots around the
plant, there is statistical likelihood that some felling is happening
somewhere in neighborhood at any given time. In less forested areas
the risk of not getting fuel becomes too big and plant investment risky.
• Do any external economic factors impact the suppliers’ motivation to
plant the crop / harvest the material?
• Market study available?
• Can the biomass be easily sourced and transported to the plant site
(road, ships, rail)?
• Are transport costs quantifiable for a long period?
• If “established” fuel source, independent market study is considered
obligatory.
• Lenders will have to run sensitivities to check on robustness of project
assumptions
• If no established fuel supply chain, case by case assessment
• Are suppliers reliable and sophisticated enough to understand benefits
of long term (supply) relationships?
• Are suppliers substantial enough to be worth pursuing for breach of
contract?
• Are alternative fuels technically feasible?
• Are alternative fuels readily available in the catchments area?
• Protection from moisture?
• Protection from arson?
• Accessibility of storage sites in adverse weather conditions?
Jyrki Poysti, Finpro, 2008
1
Adapted from: HVB Corporates & Markets; Klaus Frietsch; A presentation for the Biomass
Conference at Queen’s College, Cambridge – organised by RPA July 19, 2005
Content
Structure of a short business plan ..........................................................................6
ASH RECYCLING FOR FOREST FERTILISATION ......................................13
BIOMASS SUPPLIER MIXING BIOMASS FROM VARIOUS SOURCES....21
BIOMASS SUPPLY CHAIN MANAGEMENT ................................................29
DISTRICT HEATING NETWORK FOR MUNICIPALITY OF LLES DE
CERDANIYA ......................................................................................................33
ENERGY WOOD HARVESTING WITH FARM TRACTOR..........................39
FIRE WOOD SUPPLIER FOR CONSUMER SECTOR (BIOMASSENHOF).47
FOREST RESIDUE INFORMATION EXCHANGE FOR BIOMASS
TRADING............................................................................................................53
GREENHOUSE PELLET HEATING & CO2 PLANT 1MW............................57
HEAT ENTREPRENEUR OPERATING WOOD HEATED SPA 1MW ..........63
HEATING OF ELEMENTARY SCHOOL AND KINDERGARTEN...............73
HEATING HOTEL WITH WOOD PELLETS 40kW (ALTERNATIVE 2)......79
HEATING HOTEL WITH WOOD PELLETS 50kW (ALTERNATIVE 1)......87
HEATING MUNICIPAL SPORTS HALL .........................................................93
HEATING OF MUNICIPAL SWIMMING POOL 350kW................................99
HEATING PRE-SCHOOL AND PRIMARY EDUCATION CENTRE -
BIDDER VIEWPOINT .....................................................................................103
MUNICIPALITY VIEWPOINT .......................................................................111
INDUSTRIAL USER CONVERTING TO BIOENERGY...............................117
PELLET BURNING BIOMASS HEAT SUPPLY STATION 250 kW............123
SHORT ROTATION COPPICE FOR BIOENERGY.......................................133
SMALL 3 MWe CHP WITH BIOMASS..........................................................155
WOOD BURNING BIOMASS HEAT SUPPLY STATION 2.5MW ..............161
WOOD CHIP SUPPLIER COMPANY.............................................................171
ASH RECYCLING FOR FOREST FERTILISATION
Example business plan for wood ask recycling business in connection with timber
forwarding & forest machine contracting. The plan is prepared by Finnish Forest
Research Institute (METLA).
1. Business idea
A forest machine contractor will start new business which is spreading ash from
bioenergy plant into forests in order to fertilize the forest. Clients are forest
owners who want fertilization service. The main business of the contractor is off
road transporting of cut round wood from thinning of young and developed
stands.
Picture: Wood ash recycling with a disc spreader mounted to forwarder.
After forwarding the timber at the stand, the contractor fertilizes forest with
ash. Ash has good fertilizing properties and forest owner pays for it.
Bioenergy plant is happy to get rid of the ash and may pay a small fee. In the
future, the contractor may also use granulated residue from municipal waste
water treatment plants. Scientific tests for such material are under way.
a) Products or services to offer
Forest fertilizing service to forest owners. Forest machine contractor fertilizes
forest by spreading ash to the same plot where he does the off road timber
transporting. In this way, the contractor gets more income as the contract is
bigger since it includes fertilization. Separate fertilizing-only contracts are also
possible but cost of operation is lower if fertilizing can be done in connection
with timber thinning and transport contract.
b) Targeted customers
Forest owners, which have young stands ready for thinning and there is need
for forest fertilization in order to improve the forest growth and wood quality.
Often forest owners’ association acts on behalf of the owner and the
association is the client.
c) Benefit for the customer
In the long run, benefits come as better timber selling income when there will
be next cuttings at the stands. Ash increases forest growth especially in peat
lands from 1 to 4 cubic meters per hectare per year in Finland during next 40
years. This growth increase means 6 – 12 % more yield from the forest which
at current timber prices means 510€ - 530€ more income to the forest owner.
Ash spreading will cost 170-190 per hectare including spreading work (60-70
euros per hectare) and material costs (granulated ash, transport, management).
There are subsidies available which are explained in detail later.
After subsidies and tax incentives, the forest owner pays around €75-80 per
hectare and gets 510€ - 530€ more income per hectare due to increased
growth. Without subsidies and incentives, the ash spreading fee is in
calculated to be 170-190 € per hectare and the spreading is profitable for both
contractor and client (forest owner).
d) Way to operate
Ash comes from bioenergy boilers to granulating facility where it is
granulated. The granulating facility delivers ash to roadside pile by order of
forest owner who also contracts the contractor, usually for both thinning, off-
road timber transport, and ash spreading.
Contracts for thinning and ash spreading may come either from forest owner
or alternatively from forest owners’ association who usually coordinate forest
related activities. The target is to have ash spreading contract for the same
forest plot as the timber forwarding contract.
It is also possible to cooperate with the ash granulating company who would
sell fertilizing services and use contractor to spread the ash. Contractor would
get payment from the granulating company.
Operating area for the contractor is about 50 – 100 km radius from the ash
granulating company. Transport distance for the granulated ash can be long if
14
growth benefit to the forest owner is big, which depends on forest ground type.
In this case, contractor can charge larger fee to cover transport costs.
Contractor communicates with telephone and email and receives orders and
maps via email.
Forest machine contractor usually does medium scale and large scale
contracts. Minimum profitable plot size is 5 hectares.
e) Recommended business structure
Contractor can be an independed one or it can be co-operative with the
producer of wood ash.
i. Equipment
At minimum one forwarder and a changeable spreader or, more forest
machines but including at least one forwarder with a changeable spreader to
the load space of the forwarder.
The system should have a special grabber for ash (a timber grabber with
excavator type scoop for loading ash from roadside pile on forest into
spreader.
The ash spreader has capacity for 4-8 tons (metric) of ash, and it will last for
1-2 hectares.
ii. Financials
The company has to invest 20.000€ into a disc spreader system for
accomplishing the recycling of wood ash, and grabber scoop. Contractor (for
whom this business plan has been made) has already a forwarder to install a
spreader when needed.
iii. Human resources
The profit & loss calculations assume owner / operator entrepreneur and hired
help part time of the year.
There is minimum amount of special knowledge required. The contractor
needs to have one day training on ash properties and different types of forest
grounds. Especially if he is selling the benefits to forest owners. Local forestry
centre can give information.
g) Earning model
Wood ash recycling is increasingly interesting, and in the practice, there is
need for contractors who would do ash recycling, especially with the cheaper
ground-based systems (compare to more expensive aerial spreading). Because
the ash is cheap material (can have also a negative price) the product will
compete with artificial fertilizers, and especially when ash is recycled to forest
peatlands, where the growth increase is expected to be high.
There are three ways to organize this. Contractor may get separate contracting
deals with forest owner, or the local forest owners association may coordinate
the operation and pay to the contractor, or ash granulating company might sell
the services and pay the contractor. The fee for ash spreading is 60€ per
hectare.
15
h) Seasonal variations affecting operation
If ash recycling is done on soft peatlands, the spreading requires a frozen
ground in order to hold the tractor. Then the spreading season for example in
Finland would be from December to March. If the spreading special ash
mixtures is done to mineral soils, there is no limitations on seasons when
operating.
i) Integration to other companies in the value chain
The value chain is:
Bioenergy boiler => ash granulating company => spreading contractor =>
client (forest owner or forest owners’ association)
It is important to have contacts to companies or forestry organizations for
receiving the information of potential customers and the customers, which
would accept a semi-full contract including not only the timber forwarding but
also forest fertilizing i.e. improving the growth potential of stands.
The local forestry association may take coordinating responsibility on behalf
of owners and order ash spreading from the contractor if required beneficial.
Ash must be granulated. The granulating company can work in two ways; it
could sell granulated ash to contractor, or sell fertilizing services to forest
owner and use contractor whenever needed.
In the future, it might be also possible to use granulated residue from
municipal waste water treatment plants which has more nitrogen and has better
effect on mineral lands.
2. Market situation
a) Market situation and forecast (regional / national)
At present, market situation for ash recycling business is very good in Finland.
More and more forest owners are interested in managing their forest to well
producing phase with low investment and good internal rate of return. Future
for the ash spreader contractors should be good.
Currently, ash is currently used as landfill material. Ash does not have price
for that purpose. Most common alternative ‘use’ for ash is just to pile it, or
send to landfill site. Thus, it is possible for ash granulating company to get ash
at negative price from bioenergy plant.
Ash can be spread in all types of forestry land. In the future, ash spreading
may increase because minerals that are lost when most of felling residue and
tree stumps are removed for bioenergy use must be replaced. Spreading ash
back to forest is convenient way to do this.
b) National / regional policies currently and in long term
In Finland, forest owner can get KEMERA grant for forest fertilization if the
land suffers for growth deficiencies based on mineral analysis (Moilanen
2005). The grant is 40% of fertilizing costs.
Owner of fertilized forest can get tax deduction in forest sales. The amount is
28% of fertilizing costs. These two grants together make forest fertilization
very profitable (IRR 8 – 12%).
16
There are directives and regulations for the contents of recycled wood ash,
especially with the amounts of heavy metals. At present, wood ash granulator
companies takes care of the ash analyses and uses the best quality ash as raw
material of refined products. In addition, ash recycling contractor has to know
the limits of spreading conditions (also some regulations).
c) Customers
Private forest owners, Big forest industry companies (their own forests), State
forests.
d) Sources of raw material
Raw material comes from bio power plants and pulp mill power stations.
Mainly wood ash based ash material has to have right nutrient content and
heavy metal content under the max. limit of directives. The ash granulating
company should have the ash analyzed in order to be able to suggest right
quantities.
Plain wood ash is beneficial only to peatlands. If some additional nitrogen is
added to the ash it is beneficial also to mineral lands. Ash from tree bark has
most minerals and is best for spreading. Fly ash granulates best.
Ash can be spread to agricultural lands as well, providing the ash analysis
gives low levels of trace metals. Wood ash has some heavy metals originating
from the original forest residue used at the bioenergy plant.
Ash should be granulated because ungranulated ash is dusty, and thus dirty
and possibly health hazard. In addition, granulated ash spreads evenly and the
whole logistics costs is much less in recycling system of granulated ash than
loose ash.
e) Competition
At present in Finland, there are only few contractors operating in ash recycling
business.
Work time consumption: 750 hours for ash spreading and the rest for other
contracting. Two eight hour shifts assumed for part of the year.
INCOME €
Annual spreading: 5 000 tons (1250 ha) 2 75,000
COSTS
Salary costs 16,000
Variable costs (maintenance, fuel, relocation etc.) 3 16,000
Administration and management costs 2,000
TOTAL 34,000
OPERATING PROFIT / LOSS 41,000
2
Tariff rate: 60 €/ha
3
For machine hours of 750 hours
17
Financial costs (repayment of loans), interest 4.5% 2,400
Depreciation 4 9,670
Other 2,425
TOTAL 14,495
PROFIT BEFORE TAX 26,505
Taxes 10,000
NET PROFIT / LOSS / SAVINGS 16,505
INVESTMENT COSTS €
Disc spreader and a scoop 20,000
Return on Capital Employed 5 205%
SOURCES OF FUNDS €
Bank 15,000
Payback time on net investment
4. Sources of funds and financial assumptions

Funding has been calculated on the base of long term loan with 4.5 % interest
rate.
Depreciation includes both forwarder and spreader. The latter completely and the
forwarder in ‘pro rata’ to working hours.
5000 metric tons for 1250 hectares means in average 63 forest plots of 20
hectares each. Some areas are substantially larger. Metsähallitus (a government
owned company that manages government forests) and some companies owning
large forest areas typically tender 500 hectares for harvesting.
Salary costs include all work related costs such as spreading, maintenance,
transport time, etc. Typical average contractor income is 10.4 € per hour plus
overhead, extra for evening work, travel allowance and meal allowance (in total
21.3 € per hour). Transport time, maintenance time, and office time are included
in the 750 hours.
Operating hours are 85% of total working hours, transport time 6%, maintenance
and administration 9%.
The profit & loss calculations assume owner / operator entrepreneur and hired
help part time of the year working annually 2700 operating hours according the
E15 working hour standard..
4
5.6 years for forwarder and 12 years for spreader. Treatment of depreciation for tax purposes depends
on national legislation.
5
Profit before interest, tax an dividends, divided by the investment
18
The assumptions and cost factors for financial calculation is presented in below.
FINANCIAL ASSUMPTIONS
Forwarder’s annual use 2 700 h (E15)
Work time for recycling of wood ash 750 h (E15)
Annual costs, total 156 908 €
Annual costs, recycling total 48 750 €
MU % of the forwarder 86.5 %
Life time 5.6 years (15 000 h)
Tariff rate for recycling of ash 60 €/ha (15 €/tonne)
Disc spreader device and scoop

Annual use 750 h (E15)
Annual costs 3 700 €
Life time 12 years
5. Risk analysis
For buying the spreading device and a scoop (additional spreading system), the
contractors needs invest only 20 000 euros, which could be paid back in first
operating year, if everything goes as planned. Reselling the spreading system
would not be a problem. The same systems could be used also in agricultural
operations, with minor changes.
….. …..
Vaatainen, K. Tahvanainen, T. 2007. Ash Recycling for Forest Fertilisation. 5 EURES

19
Log production line in Abrantes, Portugal – Picture Elsa Nunes
Chipper at International Energywood Week, Eberswalde, Germany 23.01.-27.01. –

Picture Severine Laufe
20
BIOMASS SUPPLIER MIXING BIOMASS FROM VARIOUS

SOURCES
This is an example business plan for entrepreneur who is intending to start business
of sourcing biomass from various sources and missing them into standard qualities
and selling to boiler owners. Operation is based on biofuel depot and does not include
transport. The plan is prepared by Finnish Forest Research Institute (METLA) and
Finpro.
1. Business idea
Bioenergy boilers are manufactured to use one specific type of fuel, or at least
optimized for one fuel. Unfortunately, unless the fuel comes only from one type
of source, the variations cause technical problems in burning and heat production.
Biofuel is as variable as life itself.
Picture: Biofuel mixer-crusher-screener attached to wheel loader is the main

equipment for biofuel operator. Picture © Allu Finland ltd http://www.allu.net
Owners of boilers expect that biofuels they receive from trader will work in their
boiler faultlessly. If trader receives fuel material from different sources, the
material should be mixed in such fractions that the end fuel delivered to customer
is within specified limits.
a) Products or services offered
Operator buys biofuel material from various sources.
Such material may come as forest chips, forest residue, tree stumps
(shredded), tree bark from sawmills, tree surgery residue from park
management, short rotation coppice such as miscantus or willow, poplar, black
locust, reed canary grass, shredded grass, other woody material such as
recycled wood, and other agricultural residues such as straw, olive stone
residue, nut shells, poultry litter, etc.
Operator analyses incoming biomaterial in order to define correct mixing
quantities.
Operator mixes biomaterials from different sources into more uniform
qualities.
Operator stores biofuel in depot and sells to boiler operators.
Operator will most likely to have several different fuel qualities in store for
different types of customers (boiler technologies).
Harvesting of materials, transport to mixing operator, and transport to boiler is
done by a separate contractor.
Customers are medium size and large boiler operators in region. Transport
distance should be reasonably short (regional), not national unless there are
several depots. The mixed biomaterial is relatively dry because of recycled
wood and other dry materials are included in the mix. This allows longer
profitable transport distances than with some wet biomaterials.
i. Shorter average transport distances
Bioboilers operate best with the specific fuel they have been designed. In
many cases it would be better to be able to use various fuel sources. If one is
able to use many different biomaterials as fuel, then the average transport
distances are smaller because it is likely that some biomaterial is locally
available. It is more unlikely that one specific type of biofuel is locally
available at the same distance.
ii. More uniform fuel quality
Some reasons why boiler operator needs uniform fuel quality:
Moisture level: Variations is moisture affect heat and power generation.
Sometimes biofuel may be even too dry, as may be case with recycled wood.
Materials with low moisture should be mixed with materials having high
moisture.
Ash melting temperature: Some biomaterials have low ash melting
temperature which causes ash to melt on boiler grate. Boiler may need to be
22
stopped and ash tooled off. In order to prevent this, materials with low ash
melting temperature should be mixed with materials having high melting
temperature.
Particle size of biofuel: Boilers and fuel feeding systems work best with
specific particle size. Biomaterials should be screened, crushed or mixed so
that specific particle size and variation (such as amount of fines) in
maintained.
Wear and tear: Some biomaterials contain high levels of silica and other
grinding materials. Such material should be mixed with materials of low
content. Experiments showed that in mixtures with peat the share of grass or
straw should not be higher than 20 volume percent of the whole mixture to
avoid problems (corrosion) in the boiler.
Foreign materials: Some sources of biomaterials contain some foreign
objects that may cause problems in boilers or fuel feeding systems. Especially
crushed tree stumps contain stones, sand and other soil materials that need to
be screened out. Also recycled wood may contain such foreign objects or
metal objects.
Alkaline and acidic materials: Some biomaterials contain chemical
components that generate acids in boilers (chlorophyll) causing excessive
corrosion. Some materials may create too much NOx in certain type of boilers
if burned alone.
iii. Helps to create biofuel chain for boiler operator
Another benefit for the customer, which is not related to technical operation of
boiler but more to business environment, is that existence of biofuel operator
removes need for each bioboiler to arrange their fuel supply independently. A
central operator, and preferably several, gives guarantee to boiler operator that
fuel is available in most circumstances.
iv. Biofuel storage for boiler operator
Boiler operator needs to keep only minimum amount of biofuel in own storage
because the main amount of biofuel is stored at operator’s facilities, and at
operator’s cost, and is shared between local boiler owners. Boiler owner does
not need to buy so much biofuel to be kept in storage. Also, the storage silo at
boiler sites can be smaller and less expensive.
Recommended business structure
Incorporated company, but can also be single owner-operator.
d) Way to operate
The minimum size of operation must employ one owner-operator person and
one wheel loader tractor full time.
Biomaterial from various sources is transported to mixing operator’s site and
unloaded into pile. Ideally, materials that are to be mixed are unloaded next to
each other, or on top if each other. If necessary, wheel loader tractor with
bucked is used to move material at site. Various materials to be mixed are into
device (Allu Screener Crusher, as described below) which attached on wheel
23
loader’s attachment socket. Materials are mixed, crushed and screened, and
fall back on the pile.
Moist biomaterials can not be stored more than two weeks because they start
to self-compost. Moisture and biological activity increases temperature in the
pile’s interior. Water in the hotter interior vaporizes, rises to the surface parts
of the pile where temperature is lower causing the steam to condensate back
into water.6 7
The inside temperature may rise up to 80C which causes material to rot / self-
compost / self-ignite. Mixing moist material with dry material reduces
temperature.
Moisture distibution of biofuel storage piles

after 7 months
Source: VTT Processes
Picture: Moisture and temperature of the biofuel storage piles should be

monitored constantly. 8
However, purpose of this operation is not to store biofuels. The operation ahs
only temporary storage that is processed and transported to boilers. However,
piles that are unused for a period of time should be motored.
e) Required resources
6
Haikonen, T. Tutkimus biopolttoaineiden aumakuivauksesta (in Finnish) 2005, Motiva Oy
7
John Garstang (ADAS), Alan Weekes (FRL), Rowena Poulter (FRL), David Bartlett (ADAS).
Identification and characterization of factors affecting losses in the large-scale unventilated bulk
storage of wood chips and development of best practices. 2002. Department of Trade and Industry,
First Renevables ltd. UK.
8
Leena Fagernas. Puupolttoaineiden muutokset ja päästöt kuivauksessa ja varastoinnissa. Presentation
at Tekes seminar 17-18.3.2004. VTT Processes.
24
i. Equipment
Wheel loader tractor (14-16 tons) with quick attach bucket.
Allu Screener Crusher SC
Picture: Allu Screener Crusher is attached to wheel loader tractor bucket

attachment. Biomaterial is scooped in the bucket, crushed, screened and mixed
by horizontally rotating screening and crushing drums at the bottom, and
material falls back to pile. Picture © Allu Finland ltd http://www.allu.net
Allu Screener Crusher was selected for the operation because it can perform
most of the necessary functions needed in the operation (mixing, screening and
crushing) by using one single equipment.
In addition, Allu is accessory, not a separate self contained machine, to wheel
loader tractor which is anyway needed in this operation for loading mixed
biomaterial for delivery to the boiler installation. This lowers investment costs.
The device is also transportable which allows it to be taken to large boiler sites
and do some work as contractor for the fuel owned by the boiler operator.
The unit can process 80-100 m3 per hour.
ii. Human resources
One owner-operator in the beginning.
f) Earning model
The main earning comes from mixing low priced material into premium fuel.
Such low priced material is usually difficult or impossible to burn by itself (the
very reason why it is low priced) but can be easily burned when mixed with
other fuels. Volume purchase contracts may be secondary source of earnings.
Operator buys material from growers and chippers at lower wholesale price
with volume contracts, mixes low priced material into high prices material
achieving lower overall fuel cost but maintaining specified quality, and also
smoothing quality variations, and sells to boiler owners.
g) Seasonal variations affecting operations
Summer time is lower period unless some customers are electric power plants.
h) Integration to other companies in the value chain
Transport contractor is necessary. Commercial contacts to biomass suppliers
and boiler operators are needed.
25
2. Market situation
There is not much competition but boiler owners obviously have alternative
sources for fuel. Mixing of biofuels for combustion purposes in Finland is
currently relatively rare and done very roughly with existing machinery, for
example excavators and frontloaders, and usually at boiler sites by the boiler
operator. The use of biofuel-mixtures requires a number of appropriate size of
heating plants as well as the availability of different fuels in a given radius.
The European Commission is also paying particular attention to the adoption of
European standards for solid biomass fuels in order to facilitate trade, develop
markets and increase consumer confidence. The European Committee for
Standardisation is working to define these standards.
http://www.cen.eu/cenorm/homepage.htm
INCOME €
9
Biofuel sales, 80000 cubic metres * 15 € per m3 1,200,000
TOTAL 1,200,000
COSTS
Biofuel purchase, forest residue chips 22 € / m3 (25%) 440,000
Biofuel purchase, tree surgery chips 15 € / m3 (35%) 420,000
Biofuel purchase, straw/ reed canary grass 6 € / m3 (15%) 72,000
Biofuel purchase, recycled wood 6,8 € / m3 (20%) 136,000
Subtotal (for 80,000 cubic metres) 1,068,000
Wages 12 € per hour, 1600 hours 19,200
Indirect wage cost-25% 4,800
Repair and maintenance cost, 4 €/h-E15 * 1600 hours 6,400
Fuel cost 8.0 litr per hour * 0.55 € per litr * 1600 hours 7,040
Other 2,000
TOTAL 1,107,440
OPERATING INCOME 92,560
Financial costs (repayment of loans) 10 55,678

Depreciation 11
9
Mixing equipment capacity: 80 cubic metres * 5h * 200 days = 80000 cubic metres
10
5 years at 6%
11
Treatment of depreciation for tax purposes depends on national legislation.
26
Other n/a
TOTAL 55,678

Taxes 30% 11,065
INVESTMENTS €
Wheel loader, new 150,000
Allu Screener Crusher 30,000
Storage depot land, 5 ha 50,000
Additional costs and land preparation 10,000
TOTAL 240,000
Return on Capital Employed (loan capital only, no net assets) n/a
12
Bank loan 240,000
Payback time 2.6 yrs
4. Future expansion
Business can be expanded in regional biofuel supply and number of boilers allow.
In longer term, the operation can negotiate better long term material purchase
agreements.
It may become necessary to employ one or two persons to get the equipment in
use for two shifts per day.
If the business expands, it may become necessary to invest into fixed crushers,
chippers, conveyors, metal detectors and possibly a mixing silo.
However, having substantial fixed installations is completely different size of
business that having a multi purpose wheel loader and only inexpensive
attachment device dedicated only for mixing.
12
Profit before interest, tax an dividends, divided by the net assets.
27
Picture: Automated mixing silo with gribber. Photo Laka ltd
http://www.laka.fi/en/index_en.html
Automatic gripper can be programmed to take different quality of fuels from

different parts of the storage and mix them to more uniform quality. The system
also distributes fuel uniformly throughout the storage. This prevents fuel self
heating at unloading points and helps fuel to dry in silo before use. Gripper head
has radar for detecting depth of fuel layer at various parts of the silo. Different
parts of the silo can be used to store different types of fuels and gripper can be
programmed to mix them in suitable proportions. Unloading the silo happens at
bottom with walking floor. The silo can have several sections for different
qualities separated by a wall.

Major barrier is to make several good agreements with both suppliers and boiler
owners. Equipment investments in this owner-operator case low. The operation
needs operating capital and cost of it is not included in calculations.
6. Risk analysis
Major risk in this small operation is to handle holidays and sick days. Pricing and
mixing is very price sensitive and can affect to profit.
….. …..
-
in from various sources.

Prinz, R. Poysti, J. 2007. Biomass supplier mixing Finland. 5 EURES
28
BIOMASS SUPPLY CHAIN MANAGEMENT

This is an example business plan for a wood chip supplier company operating in
Portugal. This plan has been prepared by IrRADIARE and Instituto Superior Técnico,
Portugal.
1. Background
Bio-residues are a valuable energy source in regions where small forest areas and
agricultural farms coexist dispersed through vast territories. Biomass has a low
calorific value and is dispersed. Both factors result in a costly harvesting process
over large geographic areas. Complex coordination along the supply chain is
required. Internet is necessary as a meeting place for supply and demand.
2. Business idea
a) Service offered
The BioChain internet platform is a meeting place for supply and demand in
bio energy were local market agents may participate placing their offers and
accessing to tenders. BioChain covers both agricultural and forest biomass.
The system makes biofuel purchasing tenders available to the local markets
operators, who then may place service provision offers. Such offers are
geographically and timely referred allowing value chain service providers
optimised management of their operating conditions.
The BioChain operates as independent business.
b) Customers
Customers are forest and agricultural land owners, forestry and agricultural
associations, forest companies, energy producers, heath entrepreneurs,
contractors, foresters companies and contractors are targeted customers for the
BioChain platform.
Benefit for biomass service providers is that BioChain helps to optimize
management of their operations by helping them to get into contact with other
companies in value chain.
Benefit for biomass users is that BioChain helps supply and procurement
manager to find suppliers and place orders. The proposed approach is oriented
to establish an operational network were local market agents may participate
placing their offers and accessing to tenders.
The tenders available to the local markets agents, that may place service
provision offers, are geographically and timely referred allowing value chain
service providers optimised management of their operating conditions.
Cost formation models may allow to predict value chain long service costs
prediction facilitating the negotiation between service suppliers and the
biomass-to-energy procurement manager.
Cost formation models allow optimizing operation along the value chain by
supporting the decision of tendering a given service to a specified location and
time frame. Among those services harvesting, gathering, chipping, transport,
storage and drying are considering. Optimization capabilities allow saving
costs potentially reducing the bio-residues cost at biomass-to-energy plant
inlet.
The BioChain will offer following benefits:
• BioChain secures the supply of biomass and related services to power
plants and in such way it will make bioenergy more viable alternative;
• BioChain offers fair and transparent trade and procurement
environment for biomass to all participating actors. This will make
local biomass-to-energy markets more sustainable;
• BioChain promotes competition and reduces cost and makes biomass
procurement simpler;
• BioChain simplifies the planning of the biomass-to-energy operation
providing stable bioresidues and biomass blendings as needed to
optimize the biomass-to-energy plant operation.
d) Way to operate
The BioChain operator rents web space from internet service provider. Internet
application for biomaterial trading will be developed by a specialized team, in
IrRADIARE.
The web service will be promoted to forest owners, forestry associations,
forest companies, energy producers, heath entrepreneurs, contractors, foresters
companies and contractors who will register into the service. A registration fee
will be asked from the users of the BioChain platform.
Service providers operating along the supply chain can place their offers and
prices and find tenders. Biomass users will place their requirements and cost
targets as tenders.
These tenders are available to the local service suppliers who may place
provisional offers, and those are geographically and timely referred to each
other. The proposed supply management system provides harvesting,
gathering, chipping, transport, storage and drying services to the biomass plant
procurement manager. Transaction fee will be charged for each deal.
The proposed system will also handle geographic information, terrain, biomass
resources availability and costs along the supply chain modelling. Additionally
the system combines those models with technological and operational
parameters and market dynamic costs.
30
A supply cost formation model will be embedded in the system in order to
estimate the up-stream biomass cost from harvesting up to the plant feeding
and finding balanced price targets for the supply and demand management
along the chain. Geography – slops and poor accesses for instance – along
economic factors determine cost. The cost formation models will calculated on
basis of such factors as terrain shaping, availability of services, capillarity of
road network, transport distances, socio-economic context. This cost models
facilitate the optimal management of the bio-residues supply chains by
supporting decision on where and when harvesting, transporting, storing,
chipping and collecting bio-residues. Additionally, the decision on initial – at
farm – and final – at CHP – plant under current and predictable market
conditions.
Payments can be invoiced or through credit card, only by registered members,
and transactions should be made in the system, and authenticated (licensed).
i. Equipment
Laptop; Web Space contract; Office for the web administrator
ii. Human resources
Required personnel are web administrator and sales and marketing
representative. All other services such as office administration,
accounting, invoicing, bookkeeping at outsourcing)
f) Earning model
A registration fee will be asked (100 euros) to the users of the BioChain
platform. Estimated number of customers in the first year 2500. Also in every
transaction a percentage will be charged. The registration fee will be the same
to all types of customers the difference will come on the transactions.
g) Seasonal variations
As the platform will operate both with forest and agriculture residues no
significant seasonal variation is expected.
3. Market situation
a) Market situation
Biofuel market is growing in Portugal and with it´s predicable growth in the
next years some of the transactions can be expected to occur in web
marketplaces.
b) Competition
There aren’t any such platforms covering Portuguese territory.
4. Financial plans
INCOME €
Registration 13 250,000
Transaction fees To be decided
13
(2500 users with a 100 euros registration fee)
31
TOTAL 250,000
COSTS
Office and computer cost 12,000
Accounting & bookkeeping 2,400
Internet service fee 3,000
Marketing 25,000
Personnel costs 44,000
TOTAL 86,400
Operating profit / loss 163,600
Financial costs (repayment of loans)

Taxes
PROFIT / LOSS
Investments 25,000
ROI
Private capital
Payback time on net investment

There isn’t a strong tradition of using the internet among typical
forest/agricultural land owners. A strong marketing effort must be done to
encourage the visit to the platform. It is also very important to clearly state the
benefits of using this tool.
6. Risk analysis
The most important risk to be considered is the proliferation of several platforms,
identical to the one described. This risk can be mitigated by having the larger
possible number of registrations or pre-registrations even before the platform is
available on-line.
….. …..
Nunes, Elsa (IrRADIARE); Nogueira, Marcos (IrRADIARE); Henriques, Rui (IrRADIARE); Costa
Mário (Instituto Superior Técnico); Fernandes, Ulisses (Instituto Superior Técnico). 2007. Biomass
supply chain management. 5 EURES (EIE/04/086/S07.38582). Business Plan. 5 p.
32
DISTRICT HEATING NETWORK FOR MUNICIPALITY OF LLES DE

CERDANIYA
This business plan aims to show how the use of local forest wood chips, from public
forests, for heating, is one of the best solutions for small municipalities. The cost of
the wood chips is very low due to the short distance and the low price of the wood,
coming from pre-commercial thinnings and selection cuttings. The project in this
document was aborted in November 2006 due to public refusal. The plan is prepared
by Forestry Management Service; Directorate – General for the Natural Environment
of Department of the Environment and Housing; Government of Catalonia, and
Forestry Technological Centre of Catalonia.
1. Background
Catalonian forests, nowadays are suffering three main problems: forest fires, low
wood price and biomass accumulation. This combined with the increasing price
of petrol and the need of creating new jobs in rural economies, has increased the
interest in biomass, in order to save money, improve forest fire prevention, take
profit of local renewable resources and create social benefits
.
Lles de Cerdanya municipality has a surface of 10,238.8 ha, and nearly the 50% of
this area owns to public administrations, distributed as follows:
Public forest name Owner Surface (ha)
Muntanya de Lles Lles council 3,264.4
Avellanosa Lles council 350.2
Santa Lucaia Lles council 52.9
Caulas i costa de les gralles Lles council 53
Arànser decentralized municipal
Muntanya d’Aransa 1,271.1
organization
Claror Generalitat de Catalunya 119.9
Total 5,111.5
2. Business idea
a) General
Lles de Cerdanya council aims to create a district heating network to distribute
heat for household heating and hot sanitary water. The project is designed to
be developed in two stages. .
b) Fuel
Boilers are expected to be fed, mainly, with chips obtained from non
commercial wood and dead trees of the municipality forests, to improve forest
quality and reduce the fire potential.
Biomass type Operations included Cost (€/t)
Chipping at roadside landing Harvesting, chipping, transport 67.9
Harvesting, haulage, transport,
Chipping at power plant 39.1
chipping
c) Customers
The plant is developed for heat supply of the local market: public buildings
and some private housing. The town of Lles de Cerdanya has only 121
habitants and about fifty housings.
On a first stage public buildings such as the school, the rectory, a hotel, the
church and several housings, are the ones that are going to be connected to the
district heating. On a second stage, the heating network is going to be spread
to every building interested in.
d) Benefit
The expected price for each kWh obtained from biomass is only 0.018 €,
instead of 0.046 €/kWh when heating with natural gas, 0.060 €/kWh if using
gas-oil or 0.056 €/kWh with propane.
e) Way to operate
The owner of the boiler will be the town council and it is going to be the
responsible of heat distribution. About biomass supply, there are three possible
34
alternatives: creating a municipal brigade obtain the biomass from the loggers
and chip it in a timber yard; or hire an enterprise to chip the wood.
Municipal district heating system equipped with two automatic boilers of 150
kW each and 75.6 m3 of chip storage. In the near future it is foreseen to install
another furnace of 150 kW it demand rises enough. 125 t is the total amount of
forest biomass expected to be consumed in a year. The total length of pipes,
including return, installed in the heating network reaches 347.5 m.
g) Earning model
As seen above, the final cost of the energy produced by biomass is 0.018 €/kW
and from gas-oil 0.060 €/kW. More detailed information can be found on
sections 4, 5 and 6.
Hence the economic profits, in Lles de Cerdanya there are other indirect
benefits that must be considered: job creation and forest fire prevention.
h) Seasonal variations
Heating needs vary according outer temperatures. Taking into consideration
that there is a big difference between seasons in la Cerdanya, predicted
consumptions for a 150 kW furnace are:
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Des Year
h/day
Daily hours (h) 10,00 8,00 5,50 3,00 1,00 0,50 0,50 0,50 1,00 3,00 6,50 10,00 4,13
(average)
Monthly average kWh/year
51666,67 37333,33 28416,67 15000,00 5166,67 2500,00 2583,33 2583,33 5000,00 15500,00 32500,00 51666,67 249916,67
consumption (kWh) (total)
Monthly average kg/year
12916,67 9333,33 7104,17 3750,00 1291,67 625,00 645,83 645,83 1250,00 3875,00 8125,00 12916,67 62479,17
consumption (kg) (total)
Moreover the weather conditions the forest accessibility in many ways:

• Forest fires: On summer, when there is an extreme forest fire risk,
forest access can be exceptionally forbidden by decree. Hence, between
15th May and 15th October is forbidden to dump vegetal residuals on
the forest and also into a security buffer of 500 m from the border of
the wood. Unfortunately this measure includes biomass and harvesting
residuals and obliges having a timber yard far from the woods.
• Snow: From mid November to April, snow, combined with the
important slopes on forest tracks, blocks the forest paths.
• Mud: On spring and autumn rain can convert in muddy terrain the
tracks.
It is expected not to imply other enterprises on the district heating if possible.
On a first stage, the aim of the project is to guarantee chip supply only to the
municipality boilers. So no alternative clients are planned. .
3. Market situation
a) Market situation and forecast for bioheat
On medium and long term investments, bioheat seems to be cheaper than
fossil fuels. Taking into account predictions of Brent Barrel reaching 100 $ in
near future, the payback time of a biomass installation, it’s likely to be
strongly reduced compared with a traditional boiler.
35
b) Sources of raw materials
Own forests, and a near sawmill in Bellver de Cerdanya. The sawmill
consumes 37,000 t/year and is 18 km far from Lles de Cerdanya. The annual
production of by-products is 35,573 loose cubic meters of chips, 1,200 t of
bark and 6,800 loose cubic meters of sawdust.
c) Competition
Nowadays no competition in biomass heating exists or is expected to be built.
Only traditional firewood obtaining and minor logging are the activities done
in the municipality forests.
d) National / regional policies currently and in long term
According to the predictions of the “Pla de l’Energia de Catalunya” (Catalonia
Energy Plan) this it’s going to be the evolution in biomass consumption:
Forest and agricultural biomass
2003 2010 2015
consumption (ktoe/year)
BASE scenario 93.9 127.3 136.6
IER scenario 93.9 161.7 228.6
toe: Tones of oil equivalent
BASE scenario: According to the actual economic, energetic and technologic trends
IER scenario: Maximum enhancement of renewable energies use, energy saving and energy
efficiency
The average price for biomass energy in the UE15 is 72.5 €/MWh. In Spain
the price, including he incentives it’s about 61 €/MWh. The Spanish market
price was only 32 €/MWh in 2003. (Pla de l’Energia de Catalunya).
4. Financial plans
Financial calculation has been done considering theoretical gas-oil consumption
because, at least on a first stage, there is no heating sale.
PROFIT AND LOSS Unit Total (€)
INCOME
Sales: Gas-oil consumption1 0.7 €/l 46,667
COSTS
Fuel price (wood) 0.08 €/kg 10,666
Electric energy 60
Maintenance 700
Insurances and others 250
TOTAL 11,676
Operating profit /loss 34,990.9
Financial costs 3.5% 5,150.18

Depreciation 10 years 10,620.33
Taxes 0
36
Profit / Loss 19,220.49
1
If gas-oil boiler was going to be chosen
5. Investments
INVESTMENT COSTS Total (€)
Boiler and fuel feeder 82,864
Boiler accessories 9,610.81
District heating: Pipes and accessories 10,748.19
Transport, installation and works 39,800
Project design and construction supervision 2,860.46
1
Works 80,000
TOTAL 106,203.26
ROI 18.1%
1
The district heating pipes are going to be installed seizing the opportunity that the town facilities
are going to be renewed.
6. Sources of funds
SOURCES OF FUNDS Total (€)
Boiler and fuel feeding subsidies 25,699
Works: 80,000
Capital 120,184.46
SOURCES OF FUNDS Total (€)

Share capital 37,672.26
Capital loan 42,832
Government grant for boilers 25,699
TOTAL 106,203.26
ROI 18.1%

It is supposed that the biomass supply chain of Lles de Cerdanya will be new and
different from the one used in. This means many questions and problems to be
solved in the first stage of the start-up of the project.
oil price seems to ensure the future profitability of the biomass facility.
8. Risk analysis
The lack of experience on supplying biomass and the absence of appropriate
machinery is the main hazard for well-operation of the system. However, biomass
availability is fully guaranteed due to big amount of biomass available in Lles de
Cerdanya forests.
No emergency or low demand gas-oil boilers are foreseen in case biomass boilers
break down or low heat demand, for example in summer, occur.
37
Heating demand is difficult to predict because the buildings to be heated are used
intermittently. Moreover, the small dimension of the district heating can cause
important variations of heat demand in a short gap of time.
The boiler installation, the district heating and the main part of the buildings to be
heated, are owned by the city council. Hence the delivery and the consumption
are guaranteed.
The increasing trend of the oil price seems to ensure the future profitability of the
biomass facility.
9. References
DTI (Departament de Treball i Indústria). 2006. Pla de l’Energia de Catalunya
2006-2015. Ed. DTI, Generalitat de Catalunya. Barcelona. 460 pp
..... …..
FORESTRY MANAGEMENT SERVICE; DIRECTORATE – GENERAL FOR THE

NATURAL ENVIRONMENT OF DEPARTMENT OF THE ENVIRONMENT AND
HOUSING; GOVERNMENT OF CATALONIA.
FORESTRY TECHNOLOGICAL CENTRE OF CATALONIA
Correal, E., Rodriguez, J.. Lles de Cerdanya business plan. 5 EURES Project Report
X/200X, Project EIE-04-086. Catalonia, april 2006, 6 pages
Keywords Bioenergy, wood fuel, benefit, balance, cost, price, Catalonia
38
ENERGY WOOD HARVESTING WITH FARM TRACTOR
This is a business plan for a contractor starting to harvest small whole-trees for
bioenergy from early thinning sites and over growing trees and bushes from the sides
of forest roads and agriculture fields. The contractor invests into a second-hand
tractor with installed forestry-use equipments. This plan was prepared by the Finnish
Forest Research institute (Metla) and Finpro.
1. Background
Young thinnings are a potential source of biofuel. Currently, the highest
unutilized biofuel yields are found in stands, were forest management activities
have been neglected. These stands are over-dense, and the trees that have to be
removed are too thin or of undesirable tree species for industrial purposes. As
such, they are attractive for biofuel harvest (Hakkila 2004). Suggested
management guidelines for biofuel production in young forests could include
energy wood thinning which is carried out before first commercial thinning.
Energy wood harvesting includes only cutting of small whole trees. It can delay
the first commercial thinning compared to traditional forest management regime
(Hakkila 2004). In pine stands, an extra benefit is better quality of the remaining
stems, if young trees are originally growing too dense
A farm tractor with relatively high productivity and moderate purchase price can
be a competitive option in energy wood harvesting from thinnings, if terrain
conditions are favourable and the annual operational hours are adequate
(Ryynänen et al. 2000).
Use of forestry equipped second-hand farm-tractor in energy wood thinnings, can
be economically feasible option for the entrepreneurs and contractors in rural
areas, and for those who are entering to bioenergy markets and making their first
investments in forest machinery. Financially the situation is challenging because
harvesting costs in first commercial and pre-commercial thinnings are much
higher than in final fellings or in later thinnings.
Typically, the costs for one MWh of wood chips is about 50% higher if chips are
produced from first thinnings compared to wood chips from logging residues
from final cuttings.
In Finland, principal mean to compensate the high harvesting costs due to small
stem size and low harvesting removal per hectare is to have Government’s
(KEMERA) subsidies for full tree harvesting and chipping from young stands.
2. Business idea
a) Targeted customers
Contractor offers services to forest owners and co-operates or heating
entrepreneurs at the local bio power plant. They are contactor’s commercial
contracting partners and paying customers.
b) Products or services offered
Contractor does mainly early thinnings of forest stands, but also clearings of
over growing trees and bushes from the sides of forest roads and agriculture
fields. This is full time occupation.
Harvesting energy wood helps the stand to achieve the better growing state.
Thinnings of forests, for either production of industrial round wood or energy
wood, or both, must be done periodically. Early thinnings are most
competitively done by specialist contractors who have special felling heads in
tractors suitable for the thinning task, and have special skills to select the
stems to be removed.
d) Way to operate
The contractor is typical forest contractor. Several ways of operation are
possible. Forest owner may contract energy wood felling, or local bioenergy
boiler owner may buy standing energy wood from forest owner and contract
energy wood felling.
Contacts may come either from the forest owner or alternatively from forest
owners’ association who usually coordinate forest related activities, or from
boiler owner. Advertising can be done in local newspapers and web sites.
Operation is fairly local, perhaps within 25 km radius, since otherwise
traveling time and cost to work and back for the operator may become too
40
high, and acquiring new customers further is more difficult since operation
relies typically on local reputation.
Tractor can be driven to new locations in local operation without need to have
a separate truck transport.
Farm tractor will be used for cutting operations. Forest owner or heating
entrepreneur makes a deal with one local forwarder contractor, which
normally forwards the cut energy wood trees from the stand to the roadside.
This forwarding is best done by a specialist with appropriate equipment.
Cutting of energy wood
100
90
80
Hourly cost, €/h-E15
70
60
50
40
Agriculture use of 600 h
30
20 Agriculture use of 1000 h
10 Only energy wood harvesting
0
0 250 500 750 1000 1250 1500 1750
Energy wood harvesting hours
Picture: The hourly costs of forestry equipped farm-tractor as a

function of energy wood harvesting hour illustrates how costs decrease
rapidly until around 250 harvesting hours are achieved.
The business is targeting for around the year operation. Otherwise the cost of
operation would be too high according to studies14.
Felled small whole trees are forwarded and transported by other contractors to
roadside and terminal storages adjacent to the forest stand or road. Chipping of
small round wood is most often done at the road side storage, so the transport
of energy wood from road side storage to end use facility is done by chip
trucks. Bio power or heating plant company will receive the needed amount of
wood chips to produce the heat and distribute it to the buildings at the village.
The boiler owner contracts forwarding of energy wood from forest to roadside
storage (where it dries) and recycling ash away. By that way, the operating
hours of the forwarder could be raised and, therefore the hourly costs remains
at reasonable level and the work load could be spread better thorough the year.
Feasibly operable energy wood stands are: the average stem size being at
minimum of 4–5 cm at breast height, dense forest and small amount of driving
in the forest. Especially birch stands, where the amount of removable stems is
usually high and the resulting tree density remains quite low (easy to drive),
are feasible targets. Other potential energy wood harvesting sites for farm
tractor based harvesting are the abandoned fields growing energy wood, where
all the trees and bushes have to be cut. Additionally, cutting of bushes and
14
Väätäinen, K., Tahvanainen, T., Sirparanta, E. & Lamminen, S. 2007. Energy wood from early
thinnings.
Joensuu. Finnish Forest Research Institute, 5 EURES (EIE/04/086/S07.38582) Project Report 21. 30 p.
41
small stems right next to the smaller (private and forest) uncared roads are
proper working sites, even though the share of these sites’ energy wood
removal from total remains quite small.
Alternatives are private entrepreneur or limited company. Private
entrepreneurship is selected and recommended mainly because of tax reasons
in Finland.
f) Integration to other companies in the value chain
Contractor forms part of the business network with local heating power plant,
which produces district heat to the village. Heating co-operatives and forest
owners’ associations are also important partners in marketing services.
Forwarding of energy wood is done by the another contractor.
Thus, the amount of privately operated contractors could be even four at
maximum in the supply system of energy wood to local bio power plant – The
contractors for cutting, forwarding, chipping and chip transporting.
Alternatively, contractors can be merged and then the bio energy co-operative
will offer the whole wood energy supply system for producing power and heat
to local village.
g) Required resources
Farm tractors used for forestry works needs to be equipped for forest work
purposes. Tractor manufacturers typically install a special forest cabin,
revising techniques (the driving during cutting is done reversed) and cut-
resistant tires in farm-tractors intended also for forest use. Shielded
underframe and hydraulic pump are also vital to install to the tractor.
Depending of the prospective forestry use of the tractor, there are several
additional accessories possible to attach to the tractor, such as crane, forestry
trailer, accumulating felling head for energy wood, mobile chipper and snow
blower.
i. Equipment
The equipments used by the company are a farm tractor (Valtra 6400, year
model - 1996), a timber crane (Kronos3000), an accumulating felling head
(NaarvaGrip1000-23E) and optional timber trailer (Kronos).
The tractor is relatively light and cheap second-hand forestry equipped tractor
which purchase price was 28,200 euros (VAT 0%).
Separate tires with rims for agriculture use have to be included into basic
investment cost, if the tractor is used for agriculture purposes. In this case
those were not taken into account
42
Picture. Energy wood harvesting head with accumulating grips
ii. Human resources

One owner-operator, one shift, full time occupation.
h) Seasonal variations affecting operations
Unfavourable weather conditions may prevent operation on some days. In
winter times especially, when the snow depth is high.
3. Market situation
Contractor is a local operator and market situation and competition varies
accordingly. There should be a local 1-3 MW bioenergy plant that would buy
harvested small whole trees, or chips, from the forest owner.
In Finland, repeated thinnings are a standard and essential silvicultural practice
for the efficient production of good quality and well priced industrial wood.
Nearly all stands are thinned one to three times during a rotation time.
Currently only around 10% of wood material from early thinnigs is collected in
Finland. There is a market opportunity for contractors. Energy wood harvesting in
young stands can be done with relatively light and cheap machines.
INCOME €
Sales, contracting fee 11,8€ per cubic m (*3 m³/h *1742h) 61,668
15
TOTAL 61,668
COSTS
15
Estimated productivity is 3 cubic metres per hour and the annual operating hours of the tractor is
1742 h
43
Wages 11 € per hour, 1936 hours 21,296
Indirect wage cost-25% 5,324
Repair and maintenance cost, 3 €/h-E15 * 1742 hours 5,227
Fuel cost 8.0 litr per hour * 0.55 € per litr * 1742 hours 7,667
Motor oil cost 0.1 litr per hour * 1.7 € per litr * 1742 hours 296
Gear oil cost 0.1 litr per hour * 2.1 € per litr * 1742 hours 366
Hydraulic oil cost 0.25 litr / h * 1.83 € / litr * 1742 hours 806
Insurance 500
Relocation of tractor (1210 km/year, 0,6 €/km) 726
Management, marketing & overheads 1,500
TOTAL 43,708

Depreciation 17 n/a
Other n/a
TOTAL 8,616

Taxes 30% 2,803
NET PROFIT / LOSS / SAVINGS 18 6,541

INVESTMENTS €
Forestry equipped tractor (Valtra 6400, year model 1996) 19 28,200
Naarva-Grip 1000-23E Wood energy felling head 6,970
(accumulating felling head)
Kronos 4000 Crane 9,410
TOTAL 44,580
Return on Capital Employed (if own investment) 20 40%
16
To borrow 44,580€ over a term of 72 months at an interest rate of 5%.
17
Salvage value 25%. Treatment of depreciation for tax purposes depends on national legislation.
18
This is business profit. Salary of the operator is accounted in costs.
19
Total cost of the investment is allocated to forest use although the tractor is also used in agricultural
work.
20
Profit before interest, tax an dividends, divided by investments.
44
Bank loan 44,580
Payback time 2,5 yrs
5. Risk analysis
Conditions on some forest sites are difficult making profitable operation
impossible. Average size of the energy wood stem should be big enough (at least
30-40 liters).
If the subsidies received from government will end, energy wood harvesting from
young stands (early thinnings) will become unprofitable. Then the operation
should be refocused on industrial wood cuttings from final fellings or stand
treatments, where bigger stems are cut. The problem would be the suitability of
the equipments in processing bigger stems.
A farm-tractor contractor is basically concentrated on cutting of small whole trees
for wood energy. In addition to that, and specially in case if level of business
activities is low or other supporting contractors are not available locally, the
contractor can invest to a mobile chipper powered by the farm-tractor.
Still broadening the services, the contractor can offer the snow ploughing of
forest roads at winter times. By that way, operator can increase the utilization of
the base machine, especially at winter time; the farm-tractor and, furthermore,
contractor can add one contracting phase to the whole wood energy supply
system.
Risk of not having enough energy wood sites available at local region does not
exist in Finland. Average yield of energy wood from forested areas is about 20-30
m³/km². This means that in 25 km radius, there is at least 35 000-40 000 m³
energy wood available. For example in this business plan case the contractor
collects a little bit over 5 000 m³ annually.
Particularly, it must be remembered that forestry equipped farm tractor is still not
able to go to similar logging environments than conventional harvesters. Some
terrains are too demanding to operate at all, or the operation may be unprofitable.
Contractor must check the situation before accepting contract. Information
exchange with other forestry contractors and harvester operators is needed.
….. …..
Väätäinen, K., Pöysti, J., Lamminen, S., Laitila, J. 2007. Energy wood harvesting with farm tractor.
Finnish Forest Research Institute, Joensuu, Finland. 5 EURES (EIE/04/086/S07.38582). Business Plan.
8 p.
45
Crushing demonstration in Vilnius, Lithuania 2006 – Picture Markku Paananen
Transport demonstration in Vilnius, Lithuania 2005 – Picture Jelena Aneicik
46
FIRE WOOD SUPPLIER FOR CONSUMER SECTOR

(BIOMASSENHOF)
This is an example business plan for a company processing (manufacturing) and

distributing various kinds of firewood, pellets and briquettes mainly for consumer
sector. This plan is prepared by University of Applied Science, Eberswalde,
Ggermany (Fachhochschule Eberswalde).
Picture: Pinosa "EPC 3300" firewood processor at www.pinosa.net
1. Background
There is good opportunity to start this business because Eberswalde area has no
large firewood suppliers. The other firewood suppliers are in Berlin area and
concentrate offering premium priced firewood for city people. Eberswalde has
also large local wood resources which will keep procurement and transport costs
reasonable and products of this company will be affordable to local small home
owners in Brandenburg
2. Business idea
The „Biomassehof Eberswalde GmbH“ will sell various kinds of firewood,
pellets and briquettes. Customers get the opportunity of cash and carry or
home delivery. Furthermore DIY-Stores and boiler & chimney suppliers keep
the goods for sale.
The products which are standardized to comply with European common
standards are as follows:
Dryed and wet chopped wood in batches with: 0,25 m, 0,33 m and 0,50 m
length,
Wood chips: humidity under 20 % and a particle size distribution: G 30, G 50,
G 65
Wood pellets / Wood briquettes: Industry pellets for large scale plants, high
quality pellets for boilers and briquettes mainly for chimneys
Home owners, small & medium sized enterprises and combined heat and
power plants, supplying municipal or commercial property managements as
well as public and social utility. DIY-Stores, and boiler & chimney suppliers
will also distribute various kinds of firewood, pellets and briquettes
manufactured by the company.
c) Benefit for the customers
Consumers get a better survey of the local energy wood market plus expert
advice at one central location. They get standardised sales terms and delivery
conditions as well as all needed product information, e. g. guaranteed quality
and certified standards. This results in a tailored product offer and service for
each customer at best prices.
The products are standardized to comply with European common standards.
d) Way to operate
Products are either produced in own production lines or bought from local
enterprises for reselling.
The wood yard runs an own production line for chopped firewood. The
firewood will be dried naturally or in a drying chamber. Wood chips are
produced by subcontractors. The drying of wood chips will be done by natural
drying or by using industrial waste heat. Furthermore the company will retail
wood pellets and wood briquettes. Haulage contractors will supply the
products from stock to the consumers.
i. Purchase and reselling of finished products (chips, chopped wood,
pellets, briquettes)
ii. Wood chips:
- Chipping by subcontractor, further handling by “Biomassehof
Eberswalde GmbH”
48
- Drying realised by open air drying under canvas cover and by
using industrial waste heat
iii. Chopped firewood:
- Chopping of purchased raw material by employees and an in-house
chopping machine
- Drying realised by open air drying in iron-bared boxes and by
drying chamber using industrial waste heat
iv. The transportation of raw wood from the forest to the yard and the
distribution of finished products will be done by haulage contractors
v. Customer consultation on fireplaces & firewood as a free service
Customers get the opportunity of cash and carry or home delivery.
Furthermore DIY-Stores and boiler & chimney suppliers keep the goods for
sale.
Long term supply contracts with bulk consumers make quantity discounts
possible as well as payment after consumption.
Location of the business will be chosen based on GIS maps with wood
potentials, transportation routes and market studies as well as a location
benchmarking.
The optimal location could be connected, for instance, to a already existing
biogas plant where the mostly unused heat could be utilised for wood drying.
Limited company (GmbH).
i. Equipment
a. Chopping machine Pinosa "EPC 3300" (88.000 €, E-Motor, ø 470
mm, max prod. 15 t/h, max splitting power 35 ton, automatic feed
for raw wood and chopped wood)
b. Digger with removable clamshell and lift fork for handle the raw
wood,
c. Wheel loader for handling wood chips
d. Packing machine for packing the chopped wood
ii. Human resources
Throughout the first year one commercially educated part time working
employee is working at the administration department (afterwards 1 and then
1,5). One part time plus one fulltime technical employees (afterwards 2,5 and
later 3) are responsible for production, store and sales. These employees have
a mechanical apprenticeship in the fields of wood-processing or forestry and
have skills in handling agricultural or forestal implements.
Among the management the managing director is concerned with the
acquisition of suppliers and key accounts, marketing, purchasing and sales.
Necessary skills are a final degree in forestry or agriculture with business
49
orientation. He should be aware of the wood and energy wood market
especially in Brandenburg and in Barnim County.
iii. Financial resources required
The total investment of the company amounts to 217.660 € for chopping
machine (88.000 €), digger (60.000 €), drying chamber (10.000 €), wheel
loader (35.000 €) etc.
3. Long term business objective
Within two years the company will be well established on the energy wood
market and develop a stabile clientele. It will work cost-covering with growing
sales. There will be a positive operating income already in the first year.
Until the end of the fifth year the economic utilisation should be reached. There
should be a continuous growing in sales volume and goods turnover.
Until the 5th business year there will be a goods turnover in the amount of 12.000
scm (chips and chopped wood) and a volume of sales amounting to 1.664.000 €
(chips, chopped wood and pellets). This is based on the regional annual
requirements of chopped wood and chips for boilers and plants under 1.000 kW
in the region.
4. Market situation
a) Suppliers
On the energy wood market there are numerous small, regional chopped
wood producers. Larger chip or chopped wood producers and retailers are
existing mostly outside the county and don’t have a big influence on the
regional market as they are concentrated mostly on the Berlin clientele.
Poor logistic sales and marketing structure are resulting in high prices for
chopped firewood from 42 up to 143 €/stacked cu m in DIY stores. Wood
chip prices are ranging from 12 to 28 €/cu m. In Brandenburg there are just 5
pellet producers. Here the price ranges from 190 to 220 € / t.
b) Customers in Brandenburg
From the comparison of required wood (Industry 5,7 mio solid cu m and heat
and power 2 mio solid cu m) and potential supply (currently 5,5 mio solid cu
m) follows a deficit of round about 2 mio solid cu m. This supply shortage
demands a comprehensive market structuring as well as profitable and rising
forestry operations. The Biomassehof Eberswalde GmbH is one actor in the
optimisation of the regional value chain for timber and energy wood.
Because of the low capacity utilisation especially of smaller wood-fired
boilers with only about 4 – 30 % and due to the fact that the most heat
utilities are wood-fired boilers with 15 to 100 kW the current firewood
consumption has a big development potential and will rise in the future,
especially when conventional fuel and electricity prices continue to grow.
Furthermore an uptrend in reinstallation of small pellet boilers was noticed
recently.
50
c) Customers in Eberswalde
There are only two CHP´s with nominal output exceeding 1 MW namely:
HOKAWE - Holzkraftwerk Eberswalde GmbH (raw wood) and BPK
Biopower (matured wood).
Regional wood consumption of small scale boilers (under 100kW):
Current chopped wood consumption: 25.000 m³(solid)
Chopped wood consumption if boilers used at maximum capacity: 250.000
m³(solid)
Based on the low efficiency as well as the development hinted under point 7
and 8.2.1 within the next 4 years a rise of chopped wood consumption from
25.000 m³(solid) to 50.000 m³(solid) might be expected.
d) Competition
In the Berlin area are some firewood suppliers which have tailored their offer
to the needs of the Berlin clientele. This means nice and clean firewood which
is easy to store and looks good at the fireplace. Therefore the Berlin dealers
charge a multiple of the price normal on the countryside. These suppliers are
focused on their city clients and don’t target at the small home owner in
Brandenburg. Plus longer transport distances cause additional rises in the price
of firewood.
In the Eberswalde area there are no large firewood providers, only a few small
companies which run the firewood business beside their main work.
5. Financial plans
The needed fund for investments and initial purchase and liquidity is 217.660 €
financed by 30.000 € shareholder loan and 225.000 € investment loan.
Investment loan has been calculated on a period of 10 years, starting the
repayments as from 3rd business year with 5,85% interest rate.
1. year 2. year 3. year

€ € €
Income
Sales 673.800 1.059.400 1.362.900
Total 673.800 1.059.400 1.362.900
Costs
raw materials, goods in process and
finished goods 158.400 251.800 338.250
transportation costs 202.590 317.820 408.870
personnel - wages & indirect costs 141.560 175.560 199.320
Maintenance 48.984 48.984 48.984
Insurances, legal advice and others 3.684 3.688 3.688
Total 555.218 797.852 999.112
Operating Profit / Loss
51
Financial costs 0 0 12.340
Depreciation 21 99.953 22.494 22.486
Total 99.953 22.494 34.826
Profit before tax 118.582 261.548 363.788

Taxes
Net profit / Loss / Income 118.582 261.548 363.788
Investment costs € € €
chopping machine, digger, wheel loader
etc. 217.660 0 0
ROI 3 23 24
Sources of funds €
Privat capital 30.000
Payback time on investment 8 years
6. Risk analysis
Close to the Biomassehof Eberswalde there are some small chopped wood
producers which partly could be integrated into the actions with positive
synergetic effects. Larger competitive enterprises are far enough from our
location in the Barnim region. From the energy market development follows the
evidence that the market prices conform to the calculated product prices as well
as the planned goods turnover.
….. …..
Dipl.- Ing. (FH) Gundolf Schneider, UASE. Dipl.- Ing. (FH) Severine Laufer, UASE. 2007. Fire wood
supplier for consumer sector (Biomassenhof). University of Applied Science (Fachhochschule
Eberswalde). Eberswalde, Germany. 5 EURES (EIE/04/086/S07.38582). Business Plan. 6 p.
21
52
FOREST RESIDUE INFORMATION EXCHANGE FOR BIOMASS

TRADING
1. Background
This is an example business plan for a forest residue business that was developed
and is operated in Finland by governmental forestry agency Forestry Centre
(Metsakeskukset) as self sufficient operation. Budgetary calculations presented
here are done assuming that operation is independent commercial business.
Calculations do not reflect operational environment at agency Forestry Centre.
2. Business idea
Business operates a nation wide internet pages for forest owners and forest
operators such as contractors that machinery to harvest or offer similar
services to forest owners. Forest owners will list available energy wood plots
and contractors can find and offer to harvest them.
Users of the internet platform are forest owners that have young energy forests
available and want to sell, or find contractor to harvest them. Other users are
companies or contractors who operate in the forest harvesting and collecting
energy wood. Forest operators might be forestry associations, forest
companies, energy producers, heath entrepreneurs, contractors, foresters, etc.
The internet platform is meeting place for forest owners to offer energy wood
and harvester & users to find suitable forest plot to collect energy wood. This
is effective alternative to the old method where supply and demand was
matched via network of old acquaintances.
The web page is information exchange. All prices are negotiated individually
between forest owner and contractor. The web page will not list prices or act
like trading platform because public listing would drive prices up or down.
d) Way to operate
Forest owner becomes listed on the web pages by informing the administrator
his details and details of the forest plot by email or telephone. Administrator
will enter the details into the web database and will send a hard copy to forest
owner. Registration is free for forest owners.
Wood energy contractors (forest operators) fill up the registration form
available at the web page and pay registration fee. Form is sent to the
administrator who will enter details on web database. Administrator will send
user ID and password to the registered forest operator.
The web database works in two ways. Forest owners can browse available
harvesting services and select suitable company. Forest operators and
harvesters can place offers on database and browse forest owner database to
look for suitable forest plots.
Forest owners can post details about size of the area offered, volume, wood
type and quality, and ground type. Administrator will add maps of the plots.
Information is edited and added to web site by site administrator.
Forest operators can add details of their machinery and requirements.
Information can be edited by the forest operator themselves.
Forest operators will see forest owner information only on their operating area.
Forest owners can not see each others information. Forest operator information
is available publicly.
Forest owners and forest operators are each responsible of the information
given. We page business does not take liability of posted information.
The business is currently run as (within) an association.
Required services are internet pages and database services ordered from
internet company. The business needs one full time operator who will add new
54
forest owner information and sell the service to forest operators. Completing
the database will take five man years.
If business in run as part of forest owner’s association or similar, the business
may need 14 part time people. One is main administrator at national level who
is responsible of the general operation. At regional level there are 13 people
who act as regional administrators checking and entering information into the
database. No significant financial investments are required.
g) Earning model
Operation gets income from registration fees from forest operators.
Information on available forest plots for harvesting is limited to subscribers.
Browsing of harvesting services is free and can be used by both forest owners
and public.
Only forest operators are interested in paying for the service because their
need for new contacts is immediate. Forest owners can wait a long time
without significant loss of money. Forest operators need constant business
otherwise equipment stays unused causing significant loss of money. Thus, the
service is more valuable for forest operators, and it is assumed only they are
willing to become paying subscribers.
3. Market situation
Pages are competing with the old method where supply and demand was matched
via ineffective network of old acquaintances.
Other sources where forest owner can find contractors are Yellow Pages and web
pages of forestry contractor’s association. Information on those pages is not
updated frequently and details about machinery capacity are sparse.
4. Budget
INCOME €
Subscription fees, €55 per contractor, 900 users 22 49,500
Advertisements 10,000
TOTAL 59,500
COSTS
Internet service fee 2,000
Admin salary, per year 35,000
Fixed costs (computers, office) 2,000
Marketing, etc 5,000
TOTAL 44,000
OPERATING ICOME 15,500
Financial costs (repayment of loans) 0

Depreciation 23 0
Other 0
22
Subscription fees for similar type of service at www.ihb.de are between 250 – 2500 euros per year.
IHB has 10.000 users.
23
55
TOTAL 0

Taxes 30% 4,650
INVESTMENTS €
Computers 2,000
Office equipment & furniture 1,000
TOTAL 3,000
Own funds 3,000
Payback time 4 months

There are no significant barriers to enter internet business. Service contracts and
web hosting are readily available from different sources. There is no licensing for
the trade and no major competitors doing similar things.
In Finland the agency Metsakeskukset can get forest data from their own
database. Commercial operation must get the data from forest owners.
6. Risk analysis
It is essential that the web site reaches critical size very soon, otherwise paying
subscribers (forest contractors) can not benefit enough and are not interested to
pay next years fee. Regional implementation is suggested where concentrated
effort is made to get all potential forest owners and forest operators into the
database, and then expand to another geographical area.
The full nationwide implementation may take several years and the operation will
probably make loss in the first two years. Break even level is around 600-700
paying users at indicated fee level. Increased fees may be got but only if service
is exceptionally good.
Information quality on forest plots is critical. Forest operators can get most
benefit from the system when they know accurately sizes and types of the plot.
This means directly decreasing costs of acquiring new contracts and reduced
costs of operation because planning can be done before hand.
….. …..
Vaatainen, K. Karppinen, H. Poysti, J. (Ed) 2007. Forest Residue Information Exchange for Biomass
Trading. Joensuu, Finland. 5 EURES (EIE/04/086/S07.38582). Business Plan. 5 p.
24
Profit before interest, tax an dividends, divided by the investment.
56
GREENHOUSE PELLET HEATING & CO2 PLANT 1MW
This is an example business plan for using wood pellets to heat greenhouse and
generate CO2 to fertilise plants by gasifying wood pellets. Prepared by Finpro and
Puhdas Energia ltd.
1. Business idea
Company supplies heat and carbon dioxide generated from biomass to local
large commercial glasshouses in Finland. Company uses wood pellets which
are gasified into wood gas and piped into combined condensing heat
exchanger & gas cleaner unit that takes heat of from the flue gas and cleans
the flue gas to a very high degree. The carbon dioxide must be extremely clean
because it is breathed by employees. Heat is used to heat the glasshouses and
carbon dioxide is vented into the glasshouses to act as gaseous fertilizer.
Previously, the greenhouse grower used to buy carbon dioxide in bottles from
industrial gas company.
Picture: Vaanela greenhouses, Finland. The green container in the foreground

contains heat and CO2 generator. Wood pellets are stored in silo background.
The right concentration of carbon dioxide can enrich the growth of plants,
boosting production by up tens of per cents.
When compared to the standard bio fuel boiler solution offered by PE, the
recovery of carbon dioxide in this system enhances profitability even further
and the investment benefits the glasshouse operation both economically and
ecologically.
Company will get income from:
• Selling heat 7200 MWh per year
• Selling CO2 production 3.6 million kg per year
• Selling carboneus ash to power plant
Fuel is wood pellets that are bought from commercial providers at 25 €/MWh.
Company is considering to shift into less expensive wood chips in the future
Customers are two local large glasshouses which use the heat and carbon
dioxide. PE has five year agreement for heat and CO2 delivery with the
customers
c) Benefit for the customers
The glasshouse industry has been hard hit by an unprecedented increase in the
price of energy. Heating costs have risen by more than 50 per cent, putting
huge pressure on the viability of some growers. The glasshouses were
previously heated from local district heating network. Heat from the PE
bioenergy is purchased at lower price. The heating system will substitute the
use of 300 tons of heavy fuel oil annually, cutting most of the CO2, NOx and
SOx emissions of the glasshouse.
In addition to producing clean heating energy, the innovative system also
produces 300 tons of beneficial carbon dioxide which significantly accelerates
plant growth and increases final yield. The glasshouse used to buy CO2 from
industrial gas supplier at €160-170 per ton. The glasshouses can now buy CO2
from bioenergy plant at 50 €/ton.
d) Way to operate
The equipment supplier will operate the plant remotely through internet
connection. Possible service visits are arranged with local operators.
The plant can operate with full capacity throughout the year because
glasshouse needs substantial amount of heat also in the summer for heating
irrigation water. Glasshouse needs some heating also in the summer. Capacity
of the bioenergy plant is much smaller than what the glasshouses could
consume at any time.
A 1 MW wood pellet or wood chip gasifier produces synthetic gas which is
combusted in a standard fire tube – smoke tube boiler with a low NOx wood
gas burner, specially designed by PE. The boiler flue gas is cleaned from all
58
particles in a wet scrubber. The system is built in a standard container.
Foundations are simply leveled earth with gravel on top.
The individual components are listed below the following illustrative picture
that presents the plant:
• 1 MW wood pellet gasifier, gas cleaner and gas burner.

• Boiler and condensing heat recovery unit
• fuel silo and supply system// outside the picture
250 kg of pellet generates gas for 900 kWh and an additional 500 kg of CO2.
f) Earning model
Operation gets income from selling heat 7200 MWh per year, by selling CO2
production 3.6 million kg per year, and by selling carboneus ash to power
plant.
Carboneus ash is created when small amount of carbonized wood pellets fall
through the system into the ash. The amount of fall through is very small but
since ash itself is very condens, the percentage amount of unburned carbon is
relatively high. Since this carboneus ash is made from renewable green
sources it is very useful and valuable for cofiring purposes in coal power
plants.
The plant produces up to 15 kg/hour of char at full operation. The carbon
content of the ash is 80% and thus it can be sold to any solid fuel (coal or bio-
fuel) power plant for co-firing. The carbon in the ash is activated which is
typically used in various filtering purposes. Considerably higher value of ash
could be obtained by selling the highly reactive ash to a filter manufacturer.
2. Market situation
The company has secure market position since the glasshouses have made five
year contract for the heat supply. However, the glasshouses have possibility to
use town’s district heating system as alternative.
59
3. Budget
INCOME €
Sales of heat 25 172,800
Sales of CO2 26 200,000
Sales of carboneus ash 20,000
TOTAL 27 392, 800
COSTS
Fuel price (wood pellets) 28 250,000
Maintenance 5,000
Own energy use (electric) 5,000
Administration & operation 3,000
TOTAL 263,000
Financial costs (repayment of loans at 6%) 13,164

Depreciation 29
Other
TOTAL 13,164

Taxes 30% 34,991
INVESTMENTS €
System in container 250,000
Fuel storage and screws 30,000
Installation and commissioning 20,000
TOTAL 300,000
Government grant 31 70,000
Long term loan 32 130,000
25
7 200 MWh of heat * 24 €/MWh = 172 800 €
26
4 000 000 kg of CO2 * 5 c/kg = 200 000 €
27
The monthly production of the plant is 900 MWh of heat (@24€/MWh) and 250000 kg of CO2
(€0.05 /kg).
28
The fuel consumption is around 8500 MWh, which equals to 2000 tons of wood pellets per year. At
the price of 25 €/MWh = 125 EUR/ton the annual fuel cost is 250 000 €.
29
30
Profit before interest, tax an dividends, divided by the investment (net assets).
31
Ministry of Trade and Industry has approved 70000€ grant for the plant.
32
Finnvera has approved long term loan for 130000€ of the costs.
60
Equity 100,000
TOTAL 300,000
Net investment 230 000
Payback time on net investment 14 months
Investment 300 000 €
Interest rate on long term loan 6%
Plant life time, loan pay-back time 15 yrs
Fuel price 25 €/MWh
Operating time 8000 h / a

Efficiency, with char coal sales 87%
Efficiency, without char coal sales 82%
Fuel input 1 100 kW
CO2 production 500 kg/h

CO2 production 4 000 000 kg/a
Heat out put 900 kW

Heat production 7 200 MWh/a
4. Risk analysis
Company has only two customers but on the other hand company has five year
agreement. System is built in transportable container and can be taken away. The
system is in competitive situation with town’s district heating supply. Price of
wood pellets may depend on supply and demand in the market and price of
alternative source of energy.
….. …..
Tukiainen, S. Raunio, O. Poysti, J. (Ed) 2007. Greenhouse pellet heating & CO2 plant 1 MW. 5
61
Thinning in Finland – Picture Antti Ala-Fossi
Workshop Biomass to Energy Local Markets Aveiro, Portugal 2005 – Picture Elsa
Nunes
62
HEAT ENTREPRENEUR OPERATING WOOD HEATED SPA 1MW
This is an example business plan for heat entrepreneur who is intending to sell heat to
a hotel / Spa. This plan form base for the quote from the heat entrepreneur to the
hotel. This plan has been prepared by Finnish Forest Research Institute (METLA) and
Finpro.
Picture: Laka Y 1 MW boiler selected for this heating plant. Preconditions in the
calculations were that boiler house, fuel storage and pipelines are ready
1. Background
Modern tourism aims also to be environmental friendly and sustainable. Spa in
Nordic conditions needs remarkable amount of heat energy. Forest fuel heated
spa is fascinating idea in Finnish conditions, especially if the planned location is
entirely surrounded by forests. Modern spa heated by forest chips is definitely
alternative worth of considering. Higher investment costs are paid back relatively
soon and positive impact to local forestry and rural business also supports the
idea.
The preliminary plan of Koli spa has been done according to local zoning
directives and by benchmarking corresponding spas in Finland.
Details of the premises used in calculation were as follows.
• Building area of spa: 1 000 m2
• Volume of spa pools 660 m3
• Building area of hotel and
• other premises 7 000 m3
Wood chip heating is considered in this case. Lower fuel price with of wood
chips and pellets is the key advantage compared to oil heating:
Annual costs by using wood chips are: 13.8 € per MWh * 5751 MWh = 79364€
Annual costs if oil is used would be: 52.56 € per MWh * 5751 MWH = 302273€
Calculated investment costs for wood chip based system for this case are 610
300 €. Oil based system would cost only 230 800 €.
As the investments in wood heating systems are relatively high, the usage profile
plays an important role in the cost structure. The heat load of a spa is
exceptionally favorable for wood boilers, because the heat load is much more
stable and flat than in space and household water heating, or in ordinary hotels
on average. The large amount of warm water in the pools gives some more
flexibility for dealing with the daily peak heat consumption during warm
morning showers.
2. Business idea
a) General
Business plan calculation is based on assumption that the hotel / Spa invests
into boiler, boiler house, fuel storage and pipelines. A heating company or
cooperative, to whom this plan has been made, is running the plant and takes
care of the fuel purchases.
Because investment costs are high, it is not feasible to consider situation where
heating entrepreneur would invest into the plant itself. In smaller cases it
would be an alternative, especially if the heating plant would be installed into
transportable container that can be taken away after the contract. The hotel /
Spa already has boiler room and fuel storage facilities that should be used in
order to reduce investment costs.
b) Customer
This business in heat entrepreneur who is selling heat to a hotel & Spa
complex.
c) Earning model
The business is a cooperative that sells heat to the hotel & spa complex at
price 44 € per MWh. The price is indexed partly to biofuels price index and
partly to the oil price index. This gives security for the cooperative that their
costs (wood fuel prices) are taken into account and also for the hotel & Spa
complex that bioheat prices are competitive compared to other energy prices
that closely follow oil prices.
.
64
d) Fuel and seasonal variations
The total annual amount of wood chip needed in this plant equals to 7 700
loose-m3 of chips with 40% average moisture content. The peak month,
January, would require 1 100 loose-m3 of chips. This means 10-11 full chip
trucks. When the size of the plant is about 1 MW, fuel delivery usually
happens with smaller trucks or farm tractors with trailer. The net payload in
this case is about 35-45 loose-m3 with equals 25-30 deliveries per month
during winter. During summer only load per week or less is needed.
Wood chips are delivered to the plant by the cooperative either by tractor
trailer or by lorry.
Picture: Fuel chip delivery with typical truck serving small heating plants in
Finland.
The heat consumption of Koli spa was calculated according to two reference
spas and their exact statistics of heat and energy consumption. In Finnish
conditions, spas consume remarkable amount of heating energy during winter
season. Especially on the Koli area, winter is high season due to exquisite ski
resort located next to the spa.
.
65
The plant will use wood chips. Annual heat demand of the hotel and spa
combination is 5 751 MWh. Monthly peak demand is achieved in January and
it is 820 MWh. When this monthly consumption is changed to the fuel demand
considering also losses in production and in pipelines, the fuel demand is 975
MWh/month.
Correspondingly, minimum demand is in July-August, when monthly fuel

amount needed is equivalent to 275 MWh. In order to estimate capacity of
heat production, one hour peak value has to be calculated. According to
average monthly consumption in January, it would be 1.35 MW. Short term
peak value can, of course, be remarkably higher than this.
.
66
e) Benefit for the spa as customer
The hotel / Spa will buy heat at competitive price but don’t have to take care
of the boiler operation and fuel supply. Second benefit for the hotel is that
when the cooperative is in charge of the fuel quality, all interruptions due to
stones, frozen fuel, etc will reduce cooperative’s income and gives then
incentive to buy only fuels with adequate quality.
f) Way to operate and integration to other companies
Harvesting and forwarding of wood fuels for Koli Spa can be done by local
farmers and it can be based on farm tractor based harvesters and forwarders.
Picture: Valtra farm tractor with Naarva-Grip 1000-23E energy wood

harvester head and Kronos crane.
i. Equipment
Laka Y 1 MW boiler was selected for this application. The boiler is a
gasifying boiler that can burn very wet and very poor fuels. It does not need
clean, medium dry wood chips. The poor fuel reduces the fuel costs but the
investment costs are higher.
The efficiency of chip boiler is on it’s best when running with almost full
capacity. The range of efficient use is narrower than with oil boilers. Due to
this, Koli Spa is recommended to equip with two boilers. The bigger one
would be 1 – 1.3 MW. For peak consumption and back up, oil boiler or pellet
boiler is recommended. The size of the boiler could 0.4 – 0.8 MW. The annual
heat demand curve is rather constant if compared to, for example, normal
.
67
households or block of flats. If main boiler would be 1.3 MW, the mean
consumption even with summer period would be 25% of the capacity. This fits
well to the control area of boilers according to most of the boiler
manufacturers. This means that even during summer, the main boiler can be
successfully used for heating of water and premises.
Finnish heating plant supplier LAKA ltd. calculated preliminary investment
costs of heating plants. Preconditions were that boiler house, fuel storage and
pipelines are ready. Plant equipment is attached to the pipeline joints already
inside the boiler house. According to the calculation, the total cost of 1 MW
chip boiler and 1 MW oil boiler as a back up is 610 300 €. The alternative is
1.5 MW oil boiler, which would have 230 800 € total costs. Value added tax is
excluded in calculations.
ii. Personnel
The heat entrepreneur will take care of the maintenance. Annual service and
maintenance costs are about 2% of the investment costs. Daily need of
supervision and heating work can be estimated as 2 hours.
3. Market situation
The price of the forest chips at the plant can be estimated to be about 13€/MWh
without VAT. The corresponding price of heavy heating oil was in March 2006
32.6 €/MWh and light heating oil 52.5 €/MWh (Energy statistics 2006). The price
of pellets is 28 €/MWh (Vapo 2006).
4. Financial plans
This is financial plan for the cooperative that runs the boiler. Calculations for the
total cost including investments that this plans assumes the hotel & Spa will do
are included in the two following pages. Detailed Excel sheets are available
separately.
INCOME €
Sales of heat 33 253 044
TOTAL 253 044
COSTS
Wood fuel price (wood chips from local suppliers) 34 78,288
Supplementary light fuel oil price 46,137
Annual service and supervision 35 14,800
Own energy use (electric) 60 €/MWh 5,000
Annual repairs 14,800
Administration & operation overheads 5% 11,298
Bought services 36 6,750
TOTAL 177,073
33
5 751 MWh of heat * 44 €/MWh = 253 044 €
34
The plant uses special boiler that can burn wet and poor fuels. The estimated price of such fuel is
13.8 € per MWh. The total costs of fuel is 5 751 MWh of heat * 13.8 € per MWh (rounded figure)
(wood chips) = 78,288 €
35
730 hours, 20 € per hour
36
.
68
Financial costs (repayment of loans) 37 0

Depreciation 38 0
Other 0
TOTAL
PROFIT BEFORE TAX

Taxes 30% 22,778
INVESTMENTS €
0
TOTAL 0
ROI
0

Since this is internal investment for the hotel, there are no entry barriers.
6. Risk analysis
When using fuel subcontractors with farm tractor technology, long distance
transportation is the weakest link. Low driving speed of farm tractor makes
logistics sensitive for distance of delivery. If distance is over 10-15 km, lorries
are usually more cost effective vehicles than farm tractors with trailers.
….. …..
Sikanen, L. Poysti, J. (Ed). 2007. Heat entrepreneur operating wood heated spa 1MW. Finnish Forest
Research Institute, Joensuu, Finland. 5 EURES (EIE/04/086/S07.38582). Business Plan. 10 p.
37
Hotel & Spa invests, not the cooperative
38
.
69
Appendix FINACIAL ASSUMPTIONS
Total annual
consumption 3,651 solid-m3
of woodchips 7,607 loose-m3
Prices
Chips 13 €/MWh 89,712 € / year
Heavy h-oil 32.6 €/MWh 224,970 € / year
Light h-oil 52.5 €/MWh 362,299 € / year
Difference Hhoil 135,258 € / year Pellets, 4,75 MWh per tonne
Lhoil 272,587 € / year
Pellets 28 €/MWh 193226 € / year 133
Monthly
Heat Production costs, €
Heavy heating
used needed Wood chips oil Wood pellets Chip&pellets Chip& H-oil Chip& L-oil
January 810 972 12,639 31,695 27,222 12,639 12,639 12,639
February 690 828 10,766 26,998 23,188 10,766 10,766 10,766
March 595 714 9,276 23,262 19,979 9,276 9,276 9,276
April 490 588 7,645 19,170 16,465 7,645 7,645 7,645
May 333 400 5,199 13,037 11,197 5,199 5,199 5,199
June 268 321 4,178 10,477 8,998 8,998 10,477 16,872
July 238 286 3,717 9,322 8,007 8,007 9,322 15,013
August 226 271 3,529 8,850 7,601 7,601 8,850 14,253
September 316 379 4,931 12,365 10,620 4,931 4,931 4,931
October 470 564 7,327 18,373 15,781 7,327 7,327 7,327
November 577 693 9,007 22,587 19,400 9,007 9,007 9,007
December 737 884 11,498 28,835 24,766 11,498 11,498 11,498
TOTAL 5,751 6,901
Annual costs 89,712 224,970 193,226 102,894 106,937 124,425
Savings when compared to oil only 135,258 0 31,744 122,076 118,034 100,545
.
70
Appendix FINACIAL ASSUMTIONS
READ THIS FIRST

Investment cost (see report) 610,300 €
Annual service and hours Business plan calculation based on
supervison 730 á 20 14,600 € assumes that heating
Annual repairement 14,600 € company/cooperative makes
investment to the heating system
excluding pipelines.
Capital costs
Interest rate 5 % Subsidies for investment are not
Reselling value (10%) 61,030 considered.
Keeping time 20 years
Interest cost 33,567 € All prices are tax free
Depreciation by straight line 30,515 €
Insurances 1,500 €
Annual fixed costs 94,782 €
Annual fuel costs Woodchips 78,288 124,425 €

Light fuel oil 46,137
Risk 5 % 11,298 €
Bought services 150 hours á 45 6,750 €
Overheads 5 % 11,298 €
TOTAL ANNUAL COSTS 248,552 €
TOTAL ANNUAL HEAT

NEED 5,751 MWh
PRICE OF HEAT 44 €/MWh
TOTAL ANNUAL SELLINGS 253,034 €
EXTRA PROFIT / LOSSES 4,482 €
.
71
Forest work on the mountains of Catalonia, Spain – Picture Markus Huhtinen
Chipping in Finland – Picture Erkki Oksane
.
72
HEATING OF ELEMENTARY SCHOOL AND KINDERGARTEN
This is an example business plan for a heating plant for Portugal. This plan has been
prepared IrRADIARE and Instituto Superior Técnico, Portugal.
1. Background
This business plan is developed for the municipality of Arbantes as one proposal
on how heating of elementary school and kindergarten could be arranged. This
business plan will be presented at the municipal meeting. The purpose of this
business plan is to show municipal decision makers how investment costs and
operating costs in this alternative are compared to forecasted savings in heating
costs.
2. Business idea
a) General
This new company is a municipal participated company. It owns and operates
bioenergy boiler next to elementary school and kindergarten in Arbantes, and
sells heat to these users. The heating plant is an internal part of municipality’s
operation because it is very small operation. However, the operation has
separate accounts which enable municipal authorities to follow income and
cost.
The business will measure the heat that is consumed by the school and
kindergarten, and invoices them separately. The heating plant is operated by
employees of the municipality as part-time work. There is possibility to
expand by installing more boilers to other locations, and to offer heat to other
municipal heat users and possibly private users that are very close.
b) Fuel
Fuel is tree bark, wood shavings and sawdust. The potential of biomass
residues in the region of Abrantes is about 88 000 tonnes. There is an
excellent opportunity to use cheap materials. The estimated annual need for
biomass is 10 tons per year. Municipality will deliver biomass directly to the
boiler system’s silo. The municipality has already the necessary equipment
and resources to collect, chip and deliver the biomass to the schools. The heat
business pays municipality for the delivered biomass according to it’s calorific
value.
It is necessary to invoice for the biomass because it is expected that some
private users will also join the system and it would not be correct if
municipality subsidizes heat by giving free fuel. Also the elementary school
and kindergarten are operated by separate budgets, although both are
municipal facilities. To enable both of them to follow heating costs separately,
it is necessary to invoice both of them with separate invoices. Invoices also
encourage facilities to save energy whenever possible.
Third reason for invoicing is that the municipality may consider selling the
operation in the future, and thus it must have independent income and
accounts.
The person operating the heat plant is responsible of inspecting each fuel
delivery has he has rights to refuse it, if it does not meet agreed quality
standards, or contain stones, gravel, sand, green material, or long sticks that
can block fuel feeding system.
c) Customers
Customers in the first phase are the elementary school and kindergarten. It is
expected that the other elementary schools and kindergartens in Abrantes
region will follow the model. This heat division is planning to expand by
installing new boilers and making new heat delivery contracts with other
schools. The other schools are so far away that it is not possible to lay pipes
from this plant to them.
d) Benefit for the customer
Customers are the elementary school and kindergarten, and ultimately the
municipality who finances the operation. They currently use €2814 for heating
in both premises together.
The heating cost when heat is bought from this new heating plan is €1500.
This new plant saves €2814 - €1500 = €1314 annually. In addition, the
important benefit for the elementary school and kindergarten is the hot water
and better stability of temperature (which will make the school more
comfortable and help pupils to learn better).
74
The elementary school uses currently biomass boiler which is fuelled by
firewood. This old boiler supplies heat to the classrooms but no hot water. The
boiler is fuelled manually by periodically opening the hatch and feeding
firewood in. This fuel feeding system is affecting seriously the performance of
the boiler, does not keep the temperature stable, and uses firewood that is more
expensive that what wood chip would be. The biomass consumption of the
school heating system is about 8 ton per year. The boiler operates from
October to March. The new boiler will supply both heat and hot water to both
elementary school and kindergarten.
The kindergarten has currently 6 Electric Heaters (2ND6803 of 2.4 kW each)
and 3 Electric Heaters (2ND6804 of 3.6 kW each), total power 24kW.
CURRENT HEATING COSTS

Primary school Kindergarten
Monthly Annual cost Monthly Annual cost
cost (€) (€) cost (€) (€)
Electricity 63 630 62 620
Fuel 86 864 0 0
TOTAL 171 1714 90 900
Note that electricity consumption of the kindergarten includes both electricity

for heating and electricity for other purposes such as lights, as they are not
measured separately.
Assumptions.
• Elementary school – old system: Calorific value of the used firewood
is 3 MWh per ton and 8 tons used annually = 24 MWh. Cost of
firewood is €71 per MWh.
• Elementary school – new system: Heat is bough at €30 per MWh.
Annual consumption is 30 MWh because of hot water. Total costs are
€30 / MWh * 30 MWh = €900.
• Kindergarten – old system: 24 kW heaters used 458 hours means 24
kW * 458 = 11 MWh annually. At electricity cost €80 per MWh the
total heating costs are €80 / MWh * 11 MWh = 880 .
• Kindergarten – new system: Heat is bough at €30 per MWh. Annual
consumption is 20 MWh because of hot water. Total costs are €30 /
MWh * 20 MWh = €600.
• The elementary school and kindergarten (i.e. municipality’s
educational division) are expected to install central heating radiators at
their own cost and do other associated pipework to the wall of the
heating plant.
• Heating plant: Delivers annually 50 MWh heat at price €30 per MWh.
The income is 50 MWh * €30 / MWh = €1500. The plant buys 16 tons
of wood chip at 40% moisture level at price €10 per ton. The
purchasing costs are 16 t * €10 / t = €160. The plant makes trading
profit of €1500 - €160 = €1340.
75
e) Way to operate
The heat division operates independently from municipality with own
accounts. The municipality’s park and forestry management division delivers
wood chip and other biomass to the silo. There is internal accounting price for
the biomass.
The heat division invoices clients who in the first phase are the elementary
school and kindergarten. The municipality’s heat division is planning to own
and operate other bioenergy plants in the future which will deliver heat to
other regional schools and public facilities.
Long term plans are to sell this heat division to a local investor who will then
independently own and operate plant(s) by selling heat to the users.
Alternatively the municipality may choose to contract local company or
cooperative to operate the plant while the ownership of the equipment will
remain at the municipality but the cooperative or company can keep the profit,
i.e. difference between heat sales income and biomass purchase cost, minus
operating expenses such as maintenance and work time costs.
i. Container type wood chip boiler, wood chip silo with size of 5 m3,
screw conveyor from chip silo to boiler hopper, heat measuring devices
for calculating delivered and consumed heat at customer premises.
ii. Operational and maintenance person who spends annually 30 hours at
the plant. Municipality currently employs this person as municipal
facility manager.
g) Earning model
The plant will be a non-profit municipal company. For accounting purposes,
the plant will buy wood chip from municipality and sell heat to municipality at
own cost price. In the future, when energy costs increase, municipality may
consider rising the energy prices slightly which allows the plant make small
profit and makes it interesting investment opportunity for a local small
company or cooperative.
Although this is non-profit operation, the budget shows profit from heat sales.
This profit is used to pay back the equipment investments.
The schools are open 10 months a year. The heat system should operate the
period between October and March.
The municipality has already the necessary equipment and resources to collect,
chip and deliver the biomass to the schools. No other companies are required
by this plant to operate.
3. Market situation
In Abrantes municipality there are no biomass heating plants at the present
time. However, due to the high prices of fossil fuels and the increasing
76
demand for the usage of renewable energy there is the will to integrate
alternative energies systems, namely biomass.
The municipality hopes to make this an example of good implementation of
biofuels business. It is expected that other boilers will be installed by other
private users based in this example. The municipality would be able to deliver
them fuel. This increased biofuels activity would create some work and tax
income to the municipality.
The Portuguese energy market is based on a large share of imported fossil
fuels (oil, coal and natural gas). The inland production is small but mainly
from renewable sources. Portugal as strong ambitions and as set important
targets in reducing the fossil fuel consumption, and increasing the usage of
resources such as biomass.
c) Competition
No competition in biomass heating exists. There are no businesses offering to
sell heat in Arbantes. The municipality actively encourages commercial
activity in biofuels and will, in future consider selling its share on the
company to a commercial operator, with or without ownership of equipment.
In such circumstances, the municipality will also periodically ask competitive
offers for heat for municipality’s own use.
4. Financial plans
INCOME €
COSTS
Purchase of fuel 40 160
Operating costs 41 240
TOTAL 400
OPERATING PROFIT / LOSS 1,100

Taxes
PROFIT / LOSS
Investments 28.000
39
The plant delivers annually 50 MWh heat at price €30 per MWh. The income is 50 MWh * €30 /
MWh = €1500.
40
The plant buys 16 tons of wood chip at 40% moisture level at price €10 per ton. The purchasing costs
are 16 t * €10 / t = €160. The plant makes trading profit of €1500 - €160 = €1340.
41
Work, maintenance and spare parts. The plan needs 30 hours annually manual work at price €8 per
hour.
77
ROI
Municipality’s own budget 28.000
Payback time on net investment 25
The actual payback time is expected to be much shorter than calculated here
because energy prices are increasing and this operation can invoice slightly more
for the energy. In addition, fuel costs and needed manual labour may decrease
slightly if the operation has more boilers.
The municipality is willing to change the old boiler and substitute the electric
heaters and use biomass. However there are still difficulties to be solved, namely
the finding of financing sources. There are also some issues to be solved
regarding that teachers are not sufficiently motivated to substitute an equipment
that is effectively working (electric heaters) by another that some of them think
that is not so effective.
6. Risk analysis
The lack of experience in biomass supply chain with subsequent possible problem
is the supply is the main risk for well-operating the system. However the small
dimension of the unit and the biomass availability in the area can minimize the
risk. Also a risk to be considered is the possibility of the prices rising as a large
number of biomass heat and power plants are planned to be installed in the next
few years, in Portugal.
..... …..
Mário (Instituto Superior Técnico); Fernandes, Ulisses (Instituto Superior Técnico). 2007. Heating
elementary school and kintergarden 300kW. 5 EURES (EIE/04/086/S07.38582). Business Plan. 6 p.
78
HEATING HOTEL WITH WOOD PELLETS 40kW (ALTERNATIVE 2)
This is an example business plan for heating hotel with wood pellet burner & boiler
combination in Portugal. This plan has been prepared by IrRADIARE, Instituto
Superior Técnico, Portugal, and Finpro.
1. Background
The hotel Albergaria El-Rei Dom Manuel has two old oil boilers. The plan is to
replace oil burner in one of the boilers with pellet burner. The purpose of this
business plan is to show hotel owner how investment costs and operating costs in
this alternative are compared to forecasted savings in heating costs.
2. Business idea
a) General
The hotel is planning to replace oil burner with new pellet burner. The new solution is
aimed at supplying to all hot water and heating of the hotel during the winter.
Bioenergy is expected replace fossil fuel, decrease the dependence on fossil
fuel suppliers, decrease slightly costs, and decrease carbon footprint. These
benefits may have marketing value by giving hotel residents positive picture
about hotel’s environmental awareness.
b) Fuel
The proposed system is a pellet burner with power capacity of 40 kW. The
pellets are expected to come from newly established pellet mill (with the
participation of the hotel´s owner, Mr. Mauel Gaio). This company will sell
the pellets to the hotel and others at affordable prices.
Wood pellet can be imported in initial phase of implementation of the project
but since there is interest from local private enterprise to invest in pellet
production the fuel cost should decrease in the future.
Pellets in this system must be Grade 1 high quality pellets made from virgin
wood with no bark or knots.
c) Customers
The boilers will supply heat only to hotel. This business plan just helps hotel
to evaluate investment feasibility, and enables them to discuss about loans or
other funding.
d) Benefit for the hotel
The existing Albergaria’s heating system consists of two oil boilers with
nominal thermal capacity of 152 kW. They generate 135 MWh annually.
(37 litres per day * 365 days = 13505 litres = 13.5 m3 => 13.5 m3 * 10 MWh /
m3 = 135 MWh).
Normally when one of those boilers is in operation the other one is held in
reserve as backup system. The average e fuel consumption of the boilers
varied from 31 litres per day in 2002 to 37 litres per day in 2005.
The total fuel costs have risen from € 4,647 in 2002 to € 9,106 in 2006. At
current prices cost of wood pellets for equivalent heat energy are € 6,600.
Pellet boiler would save the hotel € 2,400 annually if no oil is used. However,
with pellet burner some oil must be used during peak periods because this
pellet burner is slightly smaller than optimum size which is 50 kW.
(Pellet costs: 120 MWh * 5 MWH / ton = 24 ton => 24 ton * €200 / ton = €
4,800)
In addition, the additional benefit is that the hotel can market itself as eco-
friendly.
e) Way to operate
The boilers would be operated in the same way and personnel as the two
existing diesel oil boilers. No special arrangements are necessary. Hotel would
buy pellets from wholesaler or from the new local pellet mill once it is
established.
80
i. Equipment
Pellet burner replaces separate oil burner that is attached to the boiler hatch.
The old oil burner can be kept in reserve. The second oil boiler stays in
original condition for peak time use. Space for pellet silo must be found. Pellet
silo for the same capacity is much bigger than oil tank. The hotel has an empty
room in the cellar that can be used as pellet storage. Screw feeder moves
pellets from the storage to the feed tube at the top of the pellet burner.
Picture: Pellet burner – a separate box attached to the hatch of biomass

boiler. Pellets are fed from the top via plastic tube (not shown). The burned is
on hinges and can be turned away and/or replaced with oil or bas burner in
case of backup is needed. Supplier www.laka.fi
The efficiency of pellet burner to be installed is assumed to be about 80%.
Picture: Typical pellet silo types.

Pellet silo for the same capacity must be two times bigger than oil tank.
Calorific value of pellet is 5 MWh per m3, and calorific value of oil is 10
MWh per m3.
81
Picture: Pellet silo in a separate garden shed with underground
feeding tube (max length 10m).
ii. Personnel
Operation is made by the hotel personnel. Maintenance such as ash removal,
sooting, annual maintenance and repairs are contracted as needed from local
engineering company.
Picture: Current fuel consumption at case site

Heating needs vary according outer temperatures. Very hot summer days and
very cold winter days can be expected. One of the existing oil boilers is to be
used as backup system and for peak load. Peak loads happen every morning in
hotel and residential applications but the worst case is January-February when
the total heat consumption is highest.
82
In yearly average, about 55% of the boiler capacity is used for heating and the
remaining 45% for hot water production.
Pellet & gasifier response
Worst case peak load
Conventional wood (chip) boiler

reponse
kW Top load from boiler size

calculation
kW
7am
Average annual load
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Picture: Average, top and peak load considerations.
Second issue that must be considered is what the lowest load is. Many
bioenergy boilers stop working at very low loads because the flame just goes
off. Some manufacturers have electric ignition system heating pellets or chips
but this causes smoke when the fuel is not actually burning in the beginning.
In addition, ignition takes 15-20 minutes until the wood fuel burns
satisfactorily.
Occasionally occurring low loads can be handled with sufficiently large hot
water accumulator tank or by using gas or oil boiler at low months.
However, in this case we selected a pellet burner that has zero low point
(Supplier www.laka.fi). The burner keeps very small amount of pellets
glowing all the time. When more heat is needed, the burner blows air to the
pellets and feeds in more fuel. The response time from idle to full power is less
than minute. Hot water tank is not needed and hot water delivery is also
guaranteed also during the whole summer period without using gas or oil.
83
kW
Cut-off point
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
WHAT IS THE LOWEST LOAD?

Many bioenergy boilers have cut-off point (the flame just goes off)
Picture: Cut-off point considerations.
New small pellet mill is considered with active participation of the hotel´s
owner, Mr. Mauel Gaio. The mill would supply pellets to the hotel.
i) Background information about the hotel
The hotel Albergaria El-Rei Dom Manuel is located in Marvão village and
provides lodging (breakfast included) and serves meals in the restaurant. The
Hotel has 15 bedrooms (220 m2), one restaurant (80 m2), one bar (20 m2) and
a common space (30 m2). The hotel total area is 360 m2.
Energy costs in hotel industry are very high: Albergaria El-Rei Dom Manuel
has taken several measures to reduce costs and they are willing to start using
biomass to substitute some of the fossil fuel based solutions they have been
using in the past.
3. Market situation
There are very few other alternatives for the hotel to start using biofuels.
In Marvão municipality there is no biomass heating plant at the present time.
However, due to the increasing price of the oil some enterprises plan to
convert the existing diesel system to alternative energies system by integrating
renewable energy (e.g. biomass system) since it does not increase the
operating cost.
84
4. Financial plans
These calculations are used by the hotel internally to decide whether investment
into pellet system is feasible.
INCOME €
42
Oil consumption in the old system 9,106
COSTS
Purchase of wood pellets 43 5,800
Supplementary oil use 44 800
TOTAL 6,700
Operating profit / loss - Annual savings from moving into 2,406

bioenergy
PROFIT / LOSS
Pellet burner + screw feeder (€9000) and pellet silo 12,000
ROI 20%
Private capital 12,000
Payback time on net investment 5 yrs
The actual payback time is expected to be shorter than calculated here because
energy prices are increasing. .
The owner of the hotel is willing to change the boiler and use biomass. However
there are still difficulties to be solved, where the most important are the supply
and storage of the biomass and the reaction of local public opinion to a (still)
unknown fuel.
8. Risk analysis
The lack of experience in biomass supply chain is a risk to be considered, in this
business. Assuming that the installation of the new boiler will take place even
before a pellet production unit is installed in the area, the supply is the main risk
42
In average 37 litres per day, € 9,106 in 2006 annually
43
144 MWh annually = 29 tons of pellets at 80% efficiency. Cost of pellets at current market prices
€200 per tonne * 29 = €5,800.
44
Additional oil use €800
45
Ash removal, annual sooting.
85
for well-operation of the system. However the small dimension of the unit and the
biomass availability in the area can will minimize that risk. Also a risk to be
considered is the possibility of the prices raising as a large number of biomass
heat and power plants are planned to be installed in the next few years, in
Portugal.
..... …..
Mário (Instituto Superior Técnico); Fernandes, Ulisses (Instituto Superior Técnico); Poysti, Jyrki
(Finpro). 2007. Heating hotel municipal swimming pool 500kW. Portugal. 5 EURES
Logging residue haulage in Vilnius, Lithuania 2006 – Picture Markku Paananen
86
HEATING HOTEL WITH WOOD PELLETS 50kW (ALTERNATIVE 1)
This is an example business plan for heating hotel with wood pellet burner & boiler
combination in Portugal. This plan has been prepared by IrRADIARE, Instituto
Superior Técnico, Portugal, and Finpro.
1. Background
This planned bioenergy boiler will be owned and operated by the hotel Albergaria
El-Rei Dom Manuel who will use it for heating and hot water. The purpose of
this business plan is to show hotel owner how investment costs and operating
costs in this alternative are compared to forecasted savings in heating costs.
2. Business idea
a) General
The hotel is planning to replace two old boilers with new bioenergy boiler.
The new solution is aimed at responding to all the hot water and heating needs
of the hotel during the winter.
Bioenergy is expected replace fossil fuel, decrease the dependence on fossil
fuel suppliers, decrease slightly costs, and decrease carbon footprint. These
benefits may have marketing value by giving hotel residents positive picture
about hotel’s environmental awareness.
b) Fuel
The proposed system is a pellet boiler with power capacity of 50 kW. The
pellets are expected to come from newly established pellet mill (with the
participation of the hotel´s owner, Mr. Mauel Gaio). This company will sell
the pellets to the hotel and others at affordable prices.
Wood pellet can be imported in initial phase of implementation of the project
but since there is interest from local private enterprise to invest in pellet
production the fuel cost should decrease in the future.
c) Customers
The bioenergy plant will not have outside customers. This business plan just
helps hotel to evaluate investment feasibility, and enables them to discuss
about loans or other funding.
d) Benefit for the hotel
The existing Albergaria’s heating system consists of two oil boilers with
nominal thermal capacity of 152 kW. They generate 135 MWh annually.
(37 litres per day * 365 days = 13505 litres = 13.5 m3 => 13.5 m3 * 10 MWh /
m3 = 135 MWh).
Normally when one of those boilers is in operation the other one is held in
reserve as backup system. The average e fuel consumption of the boilers
varied from 31 litres per day in 2002 to 37 litres per day in 2005.
The total fuel costs have risen from € 4,647 in 2002 to € 9,106 in 2006. At
current prices cost of wood pellets for equivalent heat energy are € 6,600.
Pellet boiler would save the hotel € 2,400 annually.
(Pellet costs: 135 MWh * 5 MWH / ton = 33 ton => 33 ton * €200 / ton = €
6,600)
In addition, the hotel can market itself as eco-friendly.
e) Way to operate
The boiler would be operated in the same way and personnel as the two
existing diesel oil boilers. No special arrangements are necessary.
Hotel would buy pellets from wholesaler or from the new local pellet mill
once it is established.
i. Equipment
Pellet boiler installed into existing boiler house, pellet silo with size of 5 m3,
screw conveyor from the silo to boiler hopper.
One of the old oil boilers are removed. The other one remains as backup. Once
one of the oil boiler is removed, the pellet system can be installed in the
vacated space. Although bioenergy boilers of the same capacity as oil boilers
88
are much bigger, the space in the boiler house is large enough because the
current oil boiler is 80 kW (and old big model) and the replacement pellet
boiler is 50 kW (new efficient small model). Additional space for pellet silo
must be found. Pellet silo for the same capacity is much bigger than oil tank.
The hotel has an empty room in the cellar that can be used as pellet storage. A
screw feeder is moving pellets from the storage to the boiler.
The efficiency of biomass boiler to be installed is assumed to be about 80%.
Pellet silo for the same capacity must be two times bigger than oil tank.
Calorific value of pellet is 5 MWh per m3, and calorific value of oil is 10
MWh per m3.
Picture: Typical pellet silo types.

ii. Personnel
Operation is made by the hotel personnel. Maintenance such as ash removal,
sooting, annual maintenance and repairs are contracted as needed from local
engineering company.
Heating needs vary according outer temperatures. Very hot summer days and
very cold winter days can be expected. One of the existing oil boilers to be
used as backup system and for peak load.
Picture: Fuel consumption at case site
89
In yearly average, about 55% of the boiler capacity is used for heating and the
remaining 45% for hot water production.
Peak loads in hotel applications can be very substantial because we must
assume that all residents go to shower at 7am in the morning. One of the
existing oil boilers is to be used as backup system and for peak load and for
summer time. Hot water accumulator helps to balance the load. Second issue
that must be considered is what the lowest load is. The boiler type considered
in this case stops working at very low loads because the flame just goes off
and can not be ignited easily and fast.

New small pellet mill is considered with active participation of the hotel´s
owner, Mr. Mauel Gaio. The mill would supply pellets to the hotel.
i) Background information about the hotel
The hotel Albergaria El-Rei Dom Manuel is located in Marvão village and
provides lodging (breakfast included) and serves meals in the restaurant . The
Hotel has 15 bedrooms (220 m2), one restaurant (80 m2), one bar (20 m2) and
a common space (30 m2). The hotel total area is 360 m2.
Energy costs in hotel industry are very high: Albergaria El-Rei Dom Manuel
has taken several measures to reduce costs and they are willing to start using
biomass to substitute some of the fossil fuel based solutions they have been
using in the past.
3. Market situation
There are very few other alternatives for the hotel to start using biofuels.
90
operating cost.
4. Financial plans
These calculations are used by the hotel internally to decide whether investment
into pellet system is feasible.
INCOME €
46
Cost of oil in the old system 9,106
COSTS
Purchase of wood pellets 47 5,800
Supplementary oil use 48 800
TOTAL 6,700

bioenergy
PROFIT / LOSS
€
INVESTMENT COSTS
Pellet burner + screw feeder (€9000) and pellet silo 28,000
ROI 8.5%
Private capital 28,000
energy prices are increasing. .
46
In average 37 litres per day, € 9,106 in 2006 annually
47
165 MWh annually = 33 tons of pellets at 80% efficiency. Cost of pellets at current market prices
€200 per tonne * 33 = €6,600
48
Additional oil use €800
49
Ash removal, annual sooting.
91
The owner of the hotel is willing to change the boiler and use biomass. However
there are still difficulties to be solved, where the most important are the supply
and storage of the biomass and the attitude of local public opinion to (still)
unknown fuel.
6. Risk analysis
The lack of experience in biomass supply chain is a risk to be considered, in this
business. Assuming that the installation of the new boiler will take place even
before a pellet production unit is installed in the area, the supply is the main risk
for well-operation of the system. However the small dimension of the unit and the
biomass availability in the area can will minimize that risk. Also a risk to be
considered is the possibility of the prices raising as a large number of biomass
heat and power plants are planned to be installed in the next few years, in
Portugal.
..... …..
(Finpro). 2007. Heating hotel with wood pellets 50kW (alternative 1). IrRADIARE, Portugal. 5
Forestry Owners Association Lithuania at demonstration 2005 – Picture Jelena

Aneicik
92
HEATING MUNICIPAL SPORTS HALL

This business plan shows calculations made in 2006 for the development of the supply
chain and heating installations in Alp. This plan shows better economical balance
when using biofuel.
Further studies have been developed in Alp which demonstrated the goodness of the
use of this wood fuel, from the economical point of view.
The plan is prepared by Forestry Management Service; Directorate – General for the
Catalonia, and Forestry Technological Centre of Catalonia.
1. Background
Catalonian forests, nowadays are suffering three main problems: forest fires, low
wood price and biomass accumulation. This combined with the high cost of petrol
and the need of creating new jobs in rural economies, has increased the interest in
biomass, in order to save money, improve forest fire prevention, take profit of
local renewable resources and create social benefits.
Alp municipality has a surface of 4,405.5 ha, and nearly the 26% of it owns to the
town council. The Muntanya d’Alp occupies 1,137.5 ha.
2. Business idea
a) General
The town council wants to heat with biomass a municipal sports hall that has
been recently built in the place. Although it’s not already definitely in use, the
motivation for using alternative energies comes from the high heat demand
that the edification, due to its size and its not efficient isolation, has.
b) Fuel
Boilers are expected to be fed, mainly, with chips obtained from non
commercial wood and dead trees of the municipality forests, to improve forest
quality and reduce the fire potential.
Biomass obtaining type Operations included Cost (€/t)
Chipping at roadside landing Harvesting, chipping, transport 67.9
Harvesting, haulage, transport,
Chipping at power plant 39.1
chipping
c) Customers
The municipality sports hall is the only building that is going to be heated at
the moment. The volumes of the building are following ones.
Sports hall facilities Volume (m3)
Court and stands 15,789
Congress hall 2,550
Seminar room 301
Hall 400
Changing room 2,073
Snack bar 716
Total 19,534
d) Benefit for the municipality

Municipality does not get financial benefit from bioheat because biomass it is
supposed to replace gas-oil consumption. Due to the sports hall it has not been
already on use now, the exact heat demand it is not still known, but despite
this fact, it is supposed to reach 200 gas-oil l/day between October and April,
both included, if working partially 5 days a week and fully 2.
e) Way to operate
Alp’s council has the will to own the whole biomass chain: from the forest to
the boiler.
On one hand, nowadays there is a municipal brigade that is in charge of
pruning trees meanwhile there is snow on the municipality mounts and to
harvest municipality forests from spring to autumn. The brigade is composed
by for men, but two of them work in “La Masella” ski resort during the skiing
season.
On the other hand it has been just build in Alp a sports hall that has a high heat
demand.
The main reasons for choosing biomass to substitute gas-oil are:
• The raise of the gas-oil cost
• Branches and small trees left in the forest cause severe fire risk and it’s
forbidden by law
• Bringing biomass to a rubbish dump is very expensive
94
• Consolidate and create new brigade jobs.
The chosen equipment is in a container equipped with a boiler that must be, at
least, 365 kW. This means that the approximate dimensions of the container
are 7,200 mm (with) x 7,200 mm (length) x 4,070 mm (height). Storage
capacity is about 30 to 40 m3.
g) Earning model
As seen above, the final cost of the energy produced by biomass is 0.018 €/kW
and from gas-oil 0.060 €/kW. More detailed information can be found on
sections 4, 5 and 6.
Hence the economic profits, in Alp there are other indirect benefits that must
be considered: job creation and forest fire prevention
Heating needs vary according outer temperatures. Taking into consideration
that there is a big difference between seasons in la Cerdanya, monthly fuel
consumption is very different from winter to summertime. Unfortunately, the
sports hall has not been opened yet and the provided data are theoretical
estimates.
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Des Year
h/day
Daily hours (h) 10,00 8,00 5,50 3,00 1,00 0,50 0,50 0,50 1,00 3,00 6,50 10,00 4,13
(average)
Monthly average kWh/year
86683,12 69346,49 47675,71 26004,94 8668,31 4334,16 4334,16 4334,16 8668,31 26004,94 56344,03 86683,12 429081,43
consumption (kWh) (total)
Monthly average kg/year
24059,32 19247,45 13232,63 7217,80 2405,93 1202,97 1202,97 1202,97 2405,93 7217,80 15638,56 24059,32 119093,63
consumption (kg) (total)
Moreover the weather conditions the forest accessibility in many ways:

• Forest fires: On summer, when there is an extreme forest fire risk,
forest access can be exceptionally forbidden by decree. Hence, between
15th May and 15th October is forbidden to dump vegetal residuals on
the forest and also into a security buffer of 500 m from the border of
the wood. Unfortunately this measure includes biomass and harvesting
residuals and obliges having a timber yard far from the woods.
• Snow: From mid November to April, snow, combined with the
important slopes on forest tracks, blocks the forest paths.
• Mud: On spring and autumn rain can convert in muddy terrain the
tracks.
It is expected not to imply other enterprises on the biomass supply if possible.
On a first stage, the aim of the project is to guarantee chip supply only to the
sports hall boilers. No alternative clients are planned.
3. Market situation
On medium and long term investments, bioheat seems to be cheaper than
fossil fuels. Taking into account predictions of Brent Barrel reaching 100 $ in
near future, the payback time of a biomass installation, it’s likely to be
strongly reduced compared with a traditional boiler.
95
According to the predictions of the “Pla de l’Energia de Catalunya” (Catalonia
Energy Plan) this it’s going to be the evolution in biomass consumption:
2003 2010 2015
BASE scenario 93.9 127.3 136.6
IER scenario 93.9 161.7 228.6
BASE scenario: According to the actual economic, energetic and technologic tendencies
IER scenario: Maximum enhancement of renewable energies use, energy saving and energy
efficiency
The average price for biomass energy in the UE15 is 72.5 €/MWh. In Spain
the price, including he incentives it’s about 61 €/MWh. The Spanish market
price was only 32 €/MWh in 2003.
c) Sources of raw materials
Own forests, and a near sawmill in Bellver de Cerdanya. The sawmill
consumes 37,000 t/year and is 18 km far from Alp. The industry produces
every year, 35,573 loose cubic meters of chips, 1,200 t of bark and 6,800 loose
cubic meters of sawdust
d) Competition
Nowadays no competition in biomass heating exists or is expected to be built.
Only traditional firewood obtaining and minor logging are the activities done
in the municipality forests.
4. Financial plans
Financial calculation has been done considering theoretical gas-oil consumption
because there will be no heating sale.
INCOME
Sales: Gas-oil consumption1 0.7 €/l 46,667
COSTS
Fuel price (wood) 0.08 €/kg 10,666
Electric energy 60
Maintenance 700
Insurances and others 250
TOTAL 11,676
Financial costs 3.5% 5,150.18

Taxes 0
96
Profit / Loss 19,220.49
1
If gas-oil boiler was going to be chosen
5. Investments
INVESTMENT COSTS Total (€)
150 kW: boiler, fuel feeder and accessories, transport,
installation works and design and construction 89,000
supervision
TOTAL 89,000
ROI
1
May vary when the container model is definitely defined
6. Sources of funds
The funds for the sports hall installation come from ICAEN (50%) and from own
municipality funds.
It is supposed that the biomass supply chain of Alp together with Lles de
Cerdanya will be new and different. This means many questions and problems to
be solved in the first stage of the start-up of the project.
8. Risk analysis
The lack of experience on supplying biomass and the absence of appropriate
machinery is the main hazard for well-operation of the system. However, biomass
availability is fully guaranteed due to big amount of biomass available in Alp
forests.
Sports hall is equipped with conventional gas-oil boilers that can supply heat in
case of biomass lack, boiler breakdown or working in low heat demand periods.
The sports hall, the municipal brigade and the forests all are under Alp’s Council
command. This fact ensures the availability, delivery and consumption of
biomass
The increasing trend of the oil price seems to ensure the future profitability of the
biomass facility
9. References
..... …..
Forestry Management Service Directorate –
General for the Natural Environment of Department
of the Environment and Housing, Government of
Catalonia. Forestry Technical Centre of Catalonia.
Correal, E., Rodriguez, J. Heating of municipal sports hall, 5 EURES Project Report
X/200X, Project EIE-04-086. Catalonia, April 2006, 6
Keywords wood fuel, balance, benefit, bioenergy, Catalonia
97
Biomass CHP Klosterfelde – Picture Severine Laufer
Chipping in Finland – Picture Erkki Oksanen
98
HEATING OF MUNICIPAL SWIMMING POOL 350kW

This is an example business plan for heating swimming pool with wood pellets. This
plan has been prepared by IrRADIARE and Instituto Superior Técnico, Portugal.
1. Background
The Municipal swimming pool is located in Sto. António das Areias, in Marvão.
This swimming pool is open all year, except in August when it is closed for
holiday and maintenance operation. The municipality is intending to create a
municipal company to respond to all the heating needs of the municipal
swimming pool. The purpose of this business plan is to show municipality how
investment costs and operating costs in this alternative are compared to forecasted
savings in heating costs.
2. Business idea
a) General
The planned business is bioenergy heating business that operates bioheat
plant which will heat municipality swimming pool. The heating plant will be
a separate company directly owned by the municipality. The daily operation
of the plan is subcontracted to local entrepreneur who buys pellets, or may
even produce them by himself, and sells heat to the municipality
Initially, wood pellets will be imported but since there is interest from local
private enterprise to invest in pellet production the fuel cost should decrease
in the future.
In the future, pellets are expected to come from newly established local pellet
mill. There are two initial locations where this mill can sell pellets. The
municipality has already a social company that is creating jobs for
unemployed people, for collecting biomass residues.
The municipality has also bought some harvesting and chipping material so it
is expected to have biomass at very low prices within a short period of time.
b) Customers
The municipality owns the heating plant. There are no commercial customers.
c) Benefit for the municipality
The cost of gas is about € 38351 annually. On the other hand, if wood pellets
boiler is used the annual fuel cost will be about € 14185 saving the
municipality € 24166. Some of the savings must go to the heat entrepreneur.
The current swimming pool water heating system is a gas boiler with nominal
thermal capacity of 327 kW and 92% of efficiency.
The average gas consumption is approximately 1806 cubic meters per month
from September to July. That means that the annual gas consumption is about
19865 cubic meters per year, considering that the swimming pool closes in
August for holiday and maintenance operation. This quantity is used
considering that the boiler works during the whole week. There is a tank for
gas storage with storage capacity of 7.48 cubic meters.
The correspondent biomass consumption is estimated based on the average gas
consumption and the amount is around 114 ton of pellets per year considering
biomass boiler with 80 % efficiency.
d) Way to operate
The heating plant operates as a separate company owned by the municipality.
The plant will buy pellets initially from commercial supplier and generates hot
water and sells heat to municipality who owns the swimming pool.
Picture: Pellet silo.

The daily operation of the plan is subcontracted to local entrepreneur who
buys pellets, or produces them by himself, and sells heat to the municipality.
The subcontracted local entrepreneur will have a dedicated operator person
whose duties will be to oversee operation, order new pellets as required,
remove ash, repair faults, do annual maintenance, and stay on alert on
weekends and nights in case of faults. The plant will have kWh meter for
100
measuring delivered heat. The entrepreneur uses reading to invoice
municipality.
Municipality is responsible of plants own energy use (electricity) and
equipment repairs if there is more to do than normal operational maintenance
and fault fixing.
The existing boiler which uses propane or natural gas will be backup boiler.
Wood pellet boiler with power capacity of 300 kW and pellet silo of 8-12 m3.
In addition, the operation requires a local entrepreneur who is subcontracted to
run the operation.
f) Seasonal variations
The swimming pool is open all year except in August.
g) Integration to other companies in the value chain
The operation requires a local entrepreneur who is subcontracted to run the
operation.
In the future, pellets are expected to come from newly established local pellet
mill. There are two initial locations where this mill can sell pellets.
The municipality has already a social company that is creating jobs for
unemployed people, for collecting biomass residues. The municipality has also
bought some harvesting and chipping material so it is expected to have
biomass at very low prices within a short period of time.
3. Market situation
operating cost.
4. Financial plans
INCOME €
50
Energy consumption in the old oil / gas system 38,351
COSTS
Purchase of energy from entrepreneur 51 25,000
50
19865 cubic metres of propane annually
101
TOTAL 25,000

bioenergy
Financial costs (repayment of loans) 0

Taxes 0
PROFIT / LOSS / SAVINGS 13,351
Pellet burner + screw feeder and pellet silo 105,000
ROI
Municipality 105,000
energy prices are increasing.
The municipality is willing to change the boiler and start to use biomass.
However there are still difficulties to be solved, namely the finding of financing
sources. There are also some issues to be solved regarding the establishing of
supply chain and storage of the biomass and the reaction of local public opinion
to a (still) unknown fuel.
6. Risk analysis
Problems with the operation financing is a very serious risk in this operation.
Also, the lack of experience in biomass supply chain is a very important main risk
to be considered for well-operation of the system. However the small dimension
of the unit and the biomass availability in the area can minimize the risk. Also a
risk to be considered is the possibility of the prices rising as a large number of
biomass heat and power plants are planned to be installed in the next few years,
in Portugal.
..... …..
(Finpro). 2007. Heating hotel municipal swimming pool 500kW. IrRADIARE, Portugal. 5 EURES
51
The operating entrepreneur will buy 114 tons of pellets annually at € 14,185. This gives him annual
income of € 10,815
102

BIDDER VIEWPOINT
This document is a business plan designed for a company answering a tender calling.
The aim of the tender is to find a company providing the heat services to a public
school in Prats de Lluçanès. This company will have a concession period which will
be fixed by the municipality depending on economic feasibility. The plan is prepared
by Forestry Management Service; Directorate – General for the Natural Environment
of Department of the Environment and Housing; Government of Catalonia, and
Forestry Technological Centre of Catalonia.
Map 1: Location
1. Background
The CEIP Prats de Lluçanès was built in 1975, and in 2001 it was renovated and
new education facilities were added. The school uses currently propane gas and
electricity for heating. The tank gas needs replacing and the Consorci del
Lluçanès decided to ask alternative offers to convert the heating into renewable
energy.
On date May 19th 2007 the municipally published tender calling for offers for the
biomass heating system project. The tender was delayed due to political changes
in the municipality.
2. Business idea
a) General
The school wants to change the heating system and install a biomass one.
Part of the investment for the new heating system has to be covered by the
successful bidder (from now the company) of a tender. Maintenance,
operation and heat supply is sole responsibility of the company. Thus, the
company has to cover these expenses. The company receives as payment a
concession installment equivalent to the former cost of heating with fossil
fuel.
b) Fuel
The company will arrange supply of fuel with contracts with local forest
owners, chipper owners, and farmers or transport companies. Currently, price
of air dried tone of wood chip from forest material is approximately 120 €/t.
c) Customers
The customer is the pre-school and primary education center CEIP Prats de
Lluçanès with 130 students from 4 to 11 years old, 9 teachers and
administrative staff.
The school will have the same comfort at a price which is more independent
on fossil fuel instabilities.
The school’s current heating costs are 28,500 €. The school is expected to
pay the same amount annually to the successful bidder, with annual revisions
(CPI and propane fuel). No savings from energy costs are expected but there
will be other more intangible benefits to the municipality.
It is expected that the school will not notice changes, expect from economics
and environmental issues. The heat entrepreneur needs to access credit and
subsidies for covering installation costs.
The bioenergy operation will create some jobs and tax income for the
municipality. Employees who operate the boiler and arrange the supply chain
are important social aspects, taking into account that this area is considered
as run-down.
e) Way to operate
The company needs to get a credit to cover part of the installation expenses.
The municipality will then contract the company to operate and maintain the
boiler. The municipality will pay a concession installment equivalent to the
former fossil fuel consumption. This amount will be checked annually.
The company will arrange supply of fuel with contracts with local forest
owners, chipper owners, and farmers or transport companies. Currently, price
of air dried tone of wood chip from forest material is approximately 120 €/t.
104
Transport will be made by the wood chip producer. Distance of transport
shouldn’t exceed 20 km.
i. Equipment
The heating system will be a biomass boiler of 220 kW which will be
assisted by the former propane boiler of 300 kW for peak consumption, back-
up and breakdowns. Feeding system also needs to be installed.
Isolated pipes will connect boiler room, which is located 50 m away (for
spacing reasons), to the school.
Silo is dimensioned to last at least one month in the coldest winter. The
currently chosen size is 60 m3.
No radiators are needed; the ones already installed will be used.
Chips will be bought directly to owner, who will transport the chips. No extra
equipment is needed.
At a first stage, material for operation and cleaning will be provided by the
sub contracted company for operation (heating systems’ installation company
providing one worker at part time). Further, material can be purchased.
ii. Human resources
Basic operation will be performed by a school worker which will be in
constant contact with the company.
The company will need few hours-man per year, since operation is expected
to be easy (especially for public entities) added to maintenance. 4 hours per
week is considered enough to operate, remove ash, buy fuel and check the
system.
Ideally, this person should be part time worker related to plumbing and
heating systems installations. As the company gets more businesses, one
person for operation several heating systems could form the company’s staff.
g) Earning model
The company receives as payment a concession installment equivalent to the
former cost of heating with fossil fuel This amount will be checked annually.
The income per year is 28,500 €, which will be adjusted every year according
to consumption, CPI (consumer price index) and propane price.
Costs of operation and fuel supply need to be lower over the year, added to
the financial costs.
The company will receive the concession installment once per year; thus, this
income is not affected by seasonal variations.
The personnel hours will be concentrated over the winter months for ash
removing, fuel purchasing and supervising. Weekends are free of activities and
in summer just minimum requirements are needed.
The yearly consumption is expected as following:
105
Consumption (tones of chips at 35% MC wet basis)
J F M A M J
21 16.8 11.6 6.3 2.1 1.1
J A S O N D
0.8 0.8 1.6 4.8 10.5 16.1
This distribution is assessed assuming a maximum consumption in winter
and 20 times less in each summer month.
This distribution summarizes a total of 104 tones per year, covering the heat
demand of approximately 260,000 kWh per year.
Forest material needs to be arranged one year in advance, through pre-
contracts and verbal agreements. In this way, raw material is guaranteed over
the year long.
For operation and maintenance of heating system, a local heating systems
installation company will be subcontracted to provide a person to supervise
the heating system.
Private forest company or forest owner will be contracted to supply boiler
with fuel. The forest owner can create his own company for providing fuel,
since he has experience enough. The guarantee of consumption 100 tones per
year, added to other projects, will make feasible the purchase of a chipping
machine and the performance of forest works. Known prices of forest fuels in
the area are 120 €/t air dried. This price may be negotiated.
Transport will be made and negotiated by the wood chip producer..
3. Market situation
Market of biofuel as chips is not yet established. Several initiatives have been
producing forest chips and estimating a price to be sold. At the present
moment there are few producers of chips for fuel in the whole Catalonia and
the customers contact directly to them. The product “wood chip” or “forest
chip” is not well known.
Within Lluçanès County there have been initiatives which have produced
several tones of forest chips. There is, as well, a grain logistics company
which is producing pellet with the sawdust of nearby sawmill companies.
This company aims to produce pellet with silviculture forest residues too.
There are two more projects working with wood chips within the county,
which means that in the following years there will be a demand of this kind
of biofuel. Although the demand of such kind of small boilers will be small
regarding the size of the county, it is expected that more boilers will be
projected soon. Special subsidies for heating of farms are also expected.
The will of one forest owner in this area to develop his own supply business
by means of his own storing places, silviculture, and chip machine purchase,
talks about the perspective within the county.
106
The ICAEN (Catalan Energy Entity), within the frame of the Catalonian
Energy Plan, gives yearly, from 2006, subsidies up to 50% of payable budget
for biomass installations.
Every two years, the DMAH (Housing and Environment Department of the
Government of Catalonia) gives subsidies for Sustainable Forestry. Subsides
for forest cleaning and precommercial thinnings exist within this frame.
The recently published national law for electric energy production with
renewable sources gives also special tariffs for electricity production with
wood coming from silviculture. There are also tariffs for wood from short
rotation forestry and wood waste from wood industries.
c) Competition
At this first stage of the development of forest material use as energy,
competence is not expected. There is one pellet producer with sawmill
products and one forest owner aiming to produce by himself forest biofuels.
With respect to the supply chain, transport can be done by many companies
and machinery owners; the issue for the wood chip seller is to find the best
price. Regarding chipping, the forest owner aims also to purchase a chipping
machine. Only another chipping machine, not already bought, at the neighbor
county Bages, can compete with machines within Lluçanès.
At bidding level is not yet known the degree of competition, since the due
date for bidding has been delayed.
Map 2. Land use at Lluçanès county
107
Lluçanès county’s forests are expected to cover not only the demand of this
installation but also others, since forest lands account up to almost 50% of
the whole territory.
Land use % surface Area (ha)
Agricultural crops 34.5 12,689.1

Water 0.0 4.8
Forests 47.3 17,421.9
Shrublands 16.9 6,203.5
Improductive 0,4 134.3
Urban, Roads 1.0 352,8
Total 100 36,806.4
Table 1. Land use distribution
4. Financial plans
The total needed investment accounting material and installation costs is 136 k€
(see table 3). It is remarkable how in many cases civil engineering accounts an
important part of the budget.
Here is shown a bidding length of time of 10 years (and credit length). The
economic balance regarding this period, for a EURIBOR value of 4.599 % (31 –
October - 07) is shown in table 2.
PROFIT AND LOSS Unit Quant Total (€)
INCOME
Propan consumption
Electric energy
Maintenance
TOTAL 28,500.00
COSTS
Biomass consumption 120 €/t35%hbh 104.14 12,496.61
Electric energy 239.59
Operation, maintenance,
fuel parchase, etc. 4 h per week 3,200.00
TOTAL 15,936.20

Financial costs of loan EURIBOR + 1.1% 7,201.99
Taxes 0.00
TOTAL FINANCIAL
COSTS 11,492.10
Profit / Loss
1,071.70
However, depreciation and financial costs will be 0 € the 11th year because the
machine will be already paid to the bank.
5. Investments
Concept Quantity
Civil engineering 43,921.1
108
Boiler 220 kWt 60,153.3
Hydraulic installation and canalization 29,481.3
Electric installation 2,350.1
TOTAL 135,905.9
Sales margin 6% 8,154.4
General costs 13% 17,667.8
SUBTOTAL 161,728.0
VAT 16% 25,876.5
TOTAL included VAT 187,604.5
6. Sources of funds
Diverse sources of funds have been considered for this project. The subsidy from
ICAEN can be up to 50% of the total amount, included taxes, industrial benefit
and indirect costs, and excluding the installation of radiators.
Little grants have also been achieved from the Diputación de Barcelona (County
Council of Barcelona Province), which have supported the draft of the project and
the future installation.
Source Quantity
Institut Català de l’Energia (ICAEN) Subsidy 93,802.24
Diputació de Barcelona – Xarxa de Municipis
Subsidy 6,000.00
Diputació de Barcelona – Servei de Medi
Ambient Project Subsidy 2,000.00
Successful bidder capital loan 85,802.24
TOTAL 187,604.46
The lack of knowledge of the supply system arrangement is one of the most
important barriers. Although there is a forest owner willing to trade with wood
chips, the lack of ongoing projects and installations in the area may lead to
mistakes and costs running over in the supply chain. This point need to be
especially planned.
Growth of the activity of the company may take place if more heating systems
can be managed, but bureaucracy slows project steps. From the idea to the
heating system may last 3 or more years.
8. Risk analysis
The solid biofuel circuit is not already working. Quality of chips is not
guaranteed and therefore the net heating value and reasonable maintenance of the
heating system. A well developed supply chain will guarantee supply and its
quality, and this is not yet established.
Higher consumption than expected may lead to unbalanced economy. Special
control of consumption and energy provided needs to be performed in order to
avoid losses.
Forest fires may put in the market a high quantity of material but, in the same
way, the following years this offer may disappear. Preventive silviculture is
needed in order to provide raw material as well as guarantee sustainability of
supply.
109
9. References
..... …..
Forestry Management Service Directorate – General for the Natural Environment of

Department of the Environment and Housing, Government of Catalonia. Forestry
Technical Centre of Catalonia.
López, I., Rodriguez, J., Poysti, J. (Finpro). .. Heating pre-school and primary
education centre – bidder viewpoint, 5 EURES Project Report X/200X, Project EIE-
04-086. Catalonia, december 2007, 8 pages
Keywords bioenergy, wood fuel, Bages, balance, benefit, Catalonia
Roll baled residue at power plant in Finland – Picture Benet
110

MUNICIPALITY VIEWPOINT
This document has some of the characteristics that a public institution offering a
tender calling for heating services, needs to take into account. In this case, the
installation to be heated is a public school in Prats de Lluçanès. The municipality
needs a company to provide some funds and to operate the heating system. This
company will obtain a concession installment. The plan is prepared by Forestry
Management Service; Directorate – General for the Natural Environment of
Department of the Environment and Housing; Government of Catalonia, and Forestry
Technological Centre of Catalonia.
Map 1: Location
1. Background
The CEIP Prats de Lluçanès was built in 1975, and in 2001 it was renovated and
new education levels were added. The school uses currently propane gas and
electricity for heating. The tank gas needs replacing and the Consorci del
Lluçanès decided to ask alternative offers to convert the heating into renewable
energy.
On date May 19th 2007 the municipally published tender calling for offers for the
biomass heating system project. The tender was delayed due to political changes
in the municipality.
2. Business idea
a) General
The school would like to find heat entrepreneur to sell heat to the school for
heating the classes by using biomass system. The agreement would be for
seven years and with partially fixed price. The municipality will own the
equipment, which will be paid through the bidder with the concession
instalments, and the bidder will get the credit. The school will pay same
amount for energy as it currently pays, with annual revision of CPI
(consumer price index) and propane gas price variations. The heat
entrepreneur can keep the profit if he can deliver heat with lower costs.
b) Fuel
The bidder should arrange fuel supply any way that they consider suitable.
c) Savings for the school
No savings are expected for the school. The economic situation for the
school will be same, but using a nature friendly biofuel.
d) Benefit for the school and municipality
The school’s current heating costs are 28,500 €. The school is expected to
pay the same amount annually to the successful bidder. No savings from
energy costs are expected but there will be other more intangible benefits to
the municipality.
It is expected that the school will not notice changes, expect from economics
and environmental issues. The heat entrepreneur can expect subsidies for
boiler installation and price of solid biofuel (wood chip piles) is expected to
be lower than what the school currently pays for energy.
The bioenergy operation will create some jobs and tax income for the
municipality. Employees who operate the boiler and arrange the supply chain
are important social aspects because this area is considered as run-down.
Furthermore, the use of renewable source for energy has to be considered as
social benefit. This boiler modification will actually mean that 20.4 TOE less
emission to the atmosphere every year.
e) Way to operate
Successful bidder will have a concession, at first for seven years. This bidder
will sell heat to the school at a fixed rate of 28,500 €/year(1). The bidder
needs to cover its installation expenses (subsidy for installation costs may be
available), plus fuel and operation expenses.
f) Recommended business structure for municipality
Longer than 7 years concession (8 years would be attractive enough – in this
case) period could be more attractive for bidders and municipality, since it
guarantees:
i. By one side a longer working period of the boiler
112
ii. By other, stability of forest harvesting and payout of machinery
investments
The bidder delivers everything. It’s matter of the bidder taking care of system
operation. The school must provide or design a place to install the boiler, and
to store the chips.
Old heating radiators can be still used, and gas-oil boiler will remain for
back-up and possible breakdowns. No extra people need to be contracted by
the school in order to supervise boiler’s operation.
These variations will not affect the municipality. Bidder must to take care
about seasonal variations, which can be adjusted later when reviewing the
concession installment.
3. Feasibility evaluation for bidder operation
For a correct operation of the heating system, successful bidder should take into
account the following.
a) Market situation
Market of biofuel as chips is not yet established. Several initiatives have been
producing forest chips and estimating a price to be sold. At the present
moment there are few producers of chips for fuel in the whole Catalonia and
the customers contact directly to them. The product “wood chip” or “forest
chip” is not well known.
As forecasted in the “Pla de l’Energia de Catalunya” (Catalonia’s Energy
Plan) this is going to be the evolution in biomass consumption:
2003 2010 2015
BASE scenario 93,9 127,3 136,6
IER scenario 93,9 161,7 228,6
BASE scenario: According to the actual economic, energetic and technologic trends
IER scenario: Maximum enhancement of renewable energies use, energy saving and energy efficiency
Within this frame, ICAEN subsidies up to 50% of material and installation

costs for renewable energy projects for individual and public entities. This
percentage falls to 30% for private companies.
Lluçanès county’s forests are expected to cover not only the demand of this
installation but also others, since forest lands account up to almost 50% of
the whole territory.
Within Lluçanès County there have been initiatives which have produced
several tones of forest chips. There is, as well, a grain logistics company
which is producing pellet with sawdust of nearby sawmill companies. This
company aims to produce pellet with silviculture forest residues too.
There are two more projects in municipal buildings as well as several private
initiatives which will work with wood chips within the county. This means
that in the following years there will be a demand of this kind of biofuel.
113
Although the demand of such kind of small boilers will be small regarding
the size of the county, it is expected that more boilers will be projected soon.
Special subsidies for heating of farms are also expected.
Map 2. Land use at Lluçanès county

Land use % surface Area (ha)
Agricultural crops 34.5 12,689,1

Water 0.0 4.8
Forests 47.3 17,421.9
Shrublands 16.9 6,203.5
Improductive 0.4 134.3
Urban, Roads 1.0 352.8
Total 100 36,806.4
Table 2: Land use distribution
One of the divisions of the consortium for the development of the
municipalities of the county of Lluçanès, is Environment and Territory. This
division supports and promotes initiatives dealing, among others, with the use
of local available forest material as energy. The division will help establishing
biofuel supply chain.
At this first stage of the development of forest material use as energy,
competence is not expected. There is one pellet producer with sawmill
products and one forest owner aiming to produce by himself forest biofuels.
Many companies can offer transport services. Local chipper owners in the
vicinity may provide chipping. .
114
4. Financial plans
There are no savings in the energy costs, and the school will not invest anything.
One of the barriers that may prevent the municipality to get many good bids is
perceived lack of biofuel supply. The difficulties are mostly related to the absence
of a forest biomass market, rather than excess of competence.
In fact, the contact person of this initiative remarks the absence of a supply chain
of this fuel. It is expected that as initiatives consuming this fuel get more
common, more fuel offer will be found. Thus, a private forest owner is planning
to produce forest chips for energy for its own use and to commercialize.
Biofuel heating has not developed fast because public entities, due to a lack of
running initiatives of RES heating in the surrounding area (and then with similar
conditions), do not completely trust on forest biofuels. As good initiatives take
place and go ahead on a long-term base, other public entities will be opened to
change its heating systems to RES ones.
There is a perception that support from the Spanish and Catalonian public
administrations should be higher. Boilers are very expensive and many entities
cannot afford or justify this huge expense. It would be better subsidizing in a
case-by-case basis, allowing better distribution of subsidies and a study of
installation regular or irregular budgets.
Recent experience in Catalonia shows that heating projects will be able to pay a
higher price for unit biomass than generation projects. Consequently little heating
initiatives, which will take place in rural areas of Catalonia where forest biomass
is easily available, are the ones which need support from public administrations.
6. Risk analysis
The only risk from school`s and municipality’s point of view is if the accepted
bidder later on goes bankrupt or otherwise ceases to trade. This may happen if
heat consumption of the school increases, or price of the wood chip increases, and
negotiations about heat price with the school will not lead into satisfactory price
from the heating system operator’s point of view.
7. References
..... …..
Forestry Management Service Directorate – General

for the Natural Environment of Department of the
Environment and Housing, Government of Catalonia. Forestry Technical Centre of
Catalonia.
López, I., Rodriguez, J., Poysti, J.; Heating pre-school and primary education centre –
municipality viewpoint, 5 EURES Project Report X/200X, Project EIE-04-086.
Catalonia, December 2007, 5 pages
115
Firewood production in Finland – Picture Erkki Oksanen
Chipper in Finland – Picture Jouko Parviainen
116
INDUSTRIAL USER CONVERTING TO BIOENERGY

This business plan is intended to show company’s directors that use of wood fuels has
better advantages than use of hazelnut shells and what savings can be achieved by
using a new type of biomass.
The solution proposed consisted at first on an adaptation of the feeding system. The
current feeding system works perfectly for hazelnut shells but it has problems with
some big and slender wood particles.
Another solution might be a complete adaptation for wood fuels, including the change
of the boilers and keeping in mind the possibility of co-generation.
The plan is prepared by Forestry Management Service; Directorate – General for the
Catalonia, and Forestry Technological Centre of Catalonia.
1. Background
Company Joaquim Albertí S.A. produces packed sausages, ham, and other meat
products with the brand name “La Selva”. The company has three industrial
boilers providing hot water used to cook ham and other cooked pork products.
Boilers are currently fed with nut shells (hazelnut and almond). Company’s board
of directors is considering using other fuels because uncertainties in availability
of nut shells due to variations in climate ad nut production.
2. Business idea
a) General
The company is using mix of particle board chip from the nearby factory and
wood chip from forest.
In the current fuel feeding system, unsieved particle board and forest wood
chips block the pneumatic feeding system. This is due to unusual big
particles present in the chips. Chips can be sieved, but it increases chip price
25%, from 40 € per ton to 50 € per ton. Therefore the management has asked
a plan to modify the feeding system and technical details and costs for each
are explained below. Another alternative is to change the whole heating
system with the implementation of a cogeneration unit.
b) Fuel
The total need of heat per year of this company is 11,600 MWh, which are
approximately 3,000 tones of biomass (hazelnut shells) per year.
The company is currently using biofuel which is a mixture of particle board
chips with forest wood chips. The biofuel is delivered to plant by a small
independent and haulage company. The best result for the chipping company
is the mixture of particle board and forest wood chips.
c) Benefit for the company
New fuel sources will make fuel supply more secure.
Prices of nut shells have been variable. New fuels are expected to make fuel
price and supply more stable. New fuels will have lower prices than nut
shells. Forest chips from burned, dead and non commercial trees are
becoming competitive.
These will help the company to stay competitive by reducing energy costs. A
greener image of the company is also an important issue. As a private
company, they want to keep productivity at lower cost without sacrificing
quality and environmental issues.
Cost of energy for company’s current production with hazelnut shells (10%
moisture content) is approximately 0.013 – 0.014 €/kWh. The cost of energy
with forest chips would be 0.010 €/kWh at a price of 40 € per ton and 20% of
moisture content.
This means that in terms of fuel consumption, the total investment along a
year would vary from 165,000 – 180,000 € (consuming hazel nut shells) to
145,000 €, with wood chips. This is a saving of 20,000 – 35,000 € per year.
d) Required modifications
Currently, unsieved chips block the pneumatic feeding system because chips
contain unusually big particles. This feeding system is similar to those used
to store grain in high silos. The feeding system must be modified in order to
be able to use lower price biofuels and thus to ensure supply of fuel. Another
alternative is to change the whole heating system.
The current feeding system, from the big agrarian silos to the boilers, is
pneumatic. The alternatives to this are.
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i. Modification of feeding system
Modify track and pipe diameter to the current pneumatic system, in order to
adapt it for larger biofuel particles. About 60 m of broader pipes and more
powerful turbines is estimated to be necessary. In this case another
possibility is to modify the feeding system into a conveyor belt. About 60 m
of a conveyor belt plus mid point adaptations are estimated to be necessary.
ii. New boilers and feeding system
New efficient boilers only for cooking purposes could also reduce fuel costs.
iii. Cogeneration
New efficient boilers could be installed for cooking, heating of the plant and
some buildings of the vicinity and electric energy generation. In this case, it
would be necessary to have more space for the cogeneration unit and for
storage of biomass.
e) Integration to other companies in the value chain
Two kinds of entrepreneurs are expected to be within the value chain of
forest chips for this study.
• a forest work, haulage and transport to plant company
• a chipping company
There are several forest work companies. La Selva buys chips from the
chipping company which selects forestry suppliers and haulage contractors.
Another two companies are expected to compete offering chipping services.
At the present moment, just one is providing the chip to this industry,
because it is closer (4 km). The other is 22 km away through a narrow road.
f) Seasonal variations
Heating needs are constant along the year. Weekends and holidays are the
sole periods of time where less work and have less demand of heat is
expected. The boiler system is already automatic, so that, the adaptation
needed is not affected. There are peaks of consumption every morning and
evening, when the company cooks the meat.
3. Market situation
Bioheat seems to be cheaper than fossil fuels on the medium and long term.
Taking into account predictions of Brent Barrel reaching 100 $ in the near
future, the payback time of a biomass installation, it’s likely to be
significantly reduced compared to a traditional boiler.
Regarding hazelnut shell, the rise of prices until 55-60 €/t and the unsecured
availability due to weather conditions leads to conclusion that price may
increase in the short–middle term. Furthermore, the promotion of bioenergy
all around Catalonia will also create more demand of hazelnut shell as a fuel
also in its production area. Thus, the more the demand, the higher the price.
Within this scenario, forest chips seem to be a more stable and cheaper fuel,
in this case.
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Figure 2: Location of the company, wood chip plant and sources of raw material
Subsidies for installations are distributed as following:
For municipality’s installations, individuals and non-profit organizations: up
to 50% of material and installation costs (except radiators). For companies,
this percentage is set up to 30%.
The national energy agency has also agreements in order to give soft credits
up to 100% of project expenses (excluding VAT and up to 1.5 M€). Electric
energy delivered to the network produced in cogeneration with biomass, has
the following regulated tariffs:
Regulated Reference
Biofuel Power Time tariff tariff
(c€/kWh) (c€/kWh)
First 15 years 12.7998 8.4643
≤ 2 MW th
Gardening, After year 15 8.6294 0
pruning, etc First 15 years 10.7540 6.1914
>2 MW th
After year 15 8.0660 0
First 15 years 12.7998 8.4643
≤ 2 MW th
Silviculture
First 15 years 11.8294 7.2674
>2 MW th
First 15 years 9.4804 5.1591
≤ 2 MW th
Forest industry After year 15 6.6506 0
byproducts First 15 years 7.1347 2.9959
>2 MW th
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The company can either sell the energy at a fixed tariff (regulated tariff) or at
market price. If the market price is too low, it will added the reference tariff,
to keep the final price of energy between a top and bottom price.
4. Sources of biomass
There is a large forested area close by, Les Gavarres, where conventional forest
works are expected to be able to supply biofuel material. This raw material can be
processed by the company which supplies currently the meat industry. Also, there
are small forested lands close by, in Empordà and Gironès. Their forest activity
can provide with raw material.
5. Competition
There are two separate issues when market situation in competition is considered:
• Competition at biomass level: low prices of nut shell can lead to a
competition with forest wood chips
• Competition at supplier company level: several companies within the
area are expected to be able to perform works at forest site, and two
companies (instead of just one) can process the raw material.
6. Financial assessment
Financial calculation has been done considering hazelnut shell consumption.
SALES INCOME
Hazelnut shell consumption 55-60 €/t 165,000 – 180,000
COSTS
Fuel price (wood) 40 €/t 145,000
TOTAL 145,000
Benefits 20,000 – 35,000

7. Investments
At the current moment, the company has a budget for replacing the feeding
system of about 300,000 €. The approximate investment for the establishment of
a cogeneration unit is, according to estimations of Mr. Asko Puhakka, 850,000 €.
8. Sources of funds
SOURCES OF FUNDS Note Total (€)
≤30 % of the investment on works,
Institut Català de l’Energia installation and material *
Capital loan 60 % and rest *
Owner capital 10 % and rest *
TOTAL
ROI
The company management board is willing to change the fuel from hazelnut shell
to wood chips. Hazelnut shell quality as fuel is higher than wood chips, since it is
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always dryer and it comes from an existing industry. However, that price is rising
and supply depends on production and therefore, on weather.
If there is an increment of the demand of hazelnut shell into its production area,
the price will increase. This fact can lead to a better competitiveness of wood
chips in the study area.
10. Risk analysis
An inefficient adaptation of the feeding system could be the sole risk. It would
mean that it’d be necessary to continue usind sieved wood chips. These chips are
more expensive than unsieved wood chips. The aim of changing the feeding
system is to use cheaper biofuel.
This is an industrial and private project which will consume wood chips. Quality
regulation and control of forest and wood chips supply will be necessary and is
nowadays not guaranteed. Forest works are expensive. In order to keep the price
of 40 € per ton, one has to ensure quality and origin of biofuel.
However, increasing price of hazelnut shells and the dependence on weather
conditions is a positive factor in the risk analysis because market of forest chips is
expected to be more stable. This can be especially true if forest works are planned
in the mid-long term and principles of silviculture and sustainability are followed.
Forest fires are common in the Mediterranean area, and therefore in Catalonia.
Forest fires can create an over-offer of wood that can be use as biofuel. At the
same time, it creates, later on along a short time, a lack of offer. These variations
may affect the stability of the offer and prices of the wood fuels.
Gas companies offer cheap and even free gas installation (to private domestic
users) once gas pipe reaches potential customers. A gas network in the vicinity
could compete seriously with wood chips. Furthermore, a drop of the fossil fuel
prices could make competition difficult for wood chips, especially if the situation
of the previous paragraph takes place.
11. References
..... …..
Forestry Management Service Directorate – General for the Natural Environment of

Department of the Environment and Housing, Government of Catalonia. Forestry
Technical Centre of Catalonia. López, I., Rodriguez, J., Poysti, J.. Industrial user
converting to bioenergy, 5 EURES Project Report X/200X, Project EIE-04-086.
Catalonia, December 2007, 7 pages
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PELLET BURNING BIOMASS HEAT SUPPLY STATION 250 kW
This is an example business plan for a company running initially a 250 kW heating
plant for heating a complex of municipal facilities. If the plant works well, the
company plans to expand the business and to supply other public and private
buildings. This plan is prepared by University of Applied Science, Eberswalde,
Germany (Fachhochschule Eberswalde), CEBra GmbH and Finpro Germany.
Picture: 250 kW Pellet boiler. Picture courtesy Mawera.com

1. Background
The calculations are based on an example in Eberswalde, where the community
has decided to change gas heating to a pellet-burning biomass heating station.
2. Business idea
The company is running and owning a 250 kW pellet heat plant, where the
heat is sold to one client (public body). Contracts are made for several years
(15 years are planned) with the client. Company will take care of running the
plant, and does the maintenance and services.
Services includes: selling heat, running the heat plant, taking care of
maintenance and reparations if needed.
It’s also possible to contract the company only for the plant service if the
plant belongs to the client.
The first customer of the company is an administrative building complex
owned by the community. It was decided to change the old gas heating
system to a pellet-burning biomass heating station. The complex includes six
building which are connected via an existing heating grid. The total surface
area of the buildings is 3.879 m2, whereas the total volume amounts to
47.566 m2. Taking into account the required, building specific heat demand
shares, the annual heat demand in the comes to 1166 MWh. Where the
annual heating period starts on September 1st, and ends Mai 31st.
For covering the base load one 250 kW pellet boiler with 90% efficiency was
installed. This size of boiler is ensuring the most possible full use hours of
wood boiler work. A sophisticated control system adjusts the work of the
wood pellets heating plant automatically in accordance with the heat
consumption and starts one of the old existing two 500 kW gas boilers if the
basic load is exceeded.
The pellet boiler is producing the annual base load of 90% (1049,4 MWh),
whereas the gas boiler is covering 116,6 MWh and emergency cases.
The main benefit is that the client does not have to invest into a new heating
system.
The company takes care of all operations. Customer can buy heat at a better
price without any worries about fuel supply, maintenance, or operations.
Advantages of the heat plant services
• Outsourced service: heat production, controlling, maintenance and
fuel procurement.
• One partner for all services
• Experienced service provider in this business no trouble or
worries for the customer
• The customer does not need to employ or to train special
maintenance personnel
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• Best prices for equipment since the company has special contracts
with boiler manufacturers
The plant contributes to the BARUM energy initiative of the two counties
Barnim and Uckermark. The initiative aims at a sustainable, future oriented
production and use of energy in the region. Heating public buildings with
wood energy has not only positive effects on the climate and local value
chains but can also serve as a role model for other regions.
d) Fuel
A fuel mix of industry wood pellets and gas will be used in the heating
station. The annual base load of heat is 1166 MWh which is covered by
wood fuel and peak loads are covered via gas.
The wood pellets are industry quality pellets with 5 kWh/kg and which are
produced at a pellet facility in nearby Schwedt. Average fuel consumption of
the plant will amount to approx. 233 tons per year if the plant covers 90% of
the total demand. With a plant efficiency of 90% the calculation basis is
1166MWh in order to produce 1049,4 MWh. The pellet price is 150 € with
an expected price growth rate of 20% within the next 10 years. Total pellet
costs are: 34,950 €.
Additionally used gas will be delivered by the local gas supplier
“Stadtwerke” at a price of 50,90 € / MWh plus basic fees. This price is also
expected to grow. Experiences from the last ten years show a growth rate in
gas prices of about 150%. Annual fuel price for 116,6 MWh gas is expected
to be approx. 5935 €.
The operator tries to cover as much as possible with pellets to get a better
income.
e) Way to operate
The company offers a free calculation of customers heat demand and offers
possible wood fuelled heating solutions, where the heating system belongs
either to the company or to the client and the company does only service and
maintenance work. If the customer agrees to a change of the heating system,
the company organizes the whole construction work.
The service company makes heat contracts for several years with the
customer. Similar contracts will be made with pellet and boiler suppliers as
well as with installation companies, ensuring best possible prices for fuel and
equipment
This “worry – free” package is the most convenient way for the customer to
change to a climate friendly heating system and to save money in the long
run.
f) Recommended business structure
Company can be at first a small one man company, which requires only part
time activities. If the business grows and several people have to be
employed, another business structure might be favorable.
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In this case the heating system will use industry wood pellets. The already
existing gas boiler remains in the system. The main reason for this is that
pellets are environmentally friendly and inexpensive, so that the biomass
boiler will provide an as high as possible share of the base load while the gas
fuel boilers will satisfy peak load needs.
An additional task for the gas boiler is to act as back-up and emergency
boiler in case pellet boiler does not work. This is important aspect in regions
such as in Brandenburg where pipes can freeze if heat is not supplied all the
time. Backup boilers using gas can start automatically even during the night.
i. Equipment – wood pellet boiler supplied and owned by the client

The chosen equipment is a MAWERA pellet boiler, type FU 220 RIA, with a
nominal firing capacity of 250 kW and a boiler efficiency rate of 90%. The
firebox is equipped with a double grate, each of them having a separate
primary air. The stoker feeds the fully refractory lined combustion chamber
from underneath. A hermetically insulated Three-pass flame tube boiler sits
on top of the firebox. The boiler is provided with fully-automatic self-
cleaning function run on compressed air. Fire tubes are therefore kept free of
dust and soot thus increasing boiler efficiency and durability. The conveyor
system consists of a sweep-arm discharging the pellets from the bunker and
screw conveyors. The storage capacity is 40 cubic metres. The annual fuel
consumption is between 220 and 240 tons of pellets. The boiler and pellets
are stored in a renovated part of the basement in one of the heated buildings.
Picture: Mawera.com
126
ii. Equipment – gas boiler supplied and owned by the client
The utilized backup gas boiler is one of two already existing 500 kW gas
boilers which were installed in the early 90’s.
iii. Equipment – required to purchase by the company
Only basic office and repairing tools are needed for service and
maintaining the heat production plant, and to administer the fuel supply.
Fuel supply will be completely outsourced to external subcontractors.
iv. Human resources
The company will employ one part time person. The person should have
some experience in wood fuel markets and service of heating plant. Ideally
the employee is a trained plumber.
If the company grows one person could work full time, or another part
time worker can be employed to have a change in shifts.
In the beginning the work load is rather small with about 10h per week and
plant for maintenance, cleaning etc. Generally the plant is designed to
work without supervision, but in the case of an emergency the company
gets a message on the mobile phone. The aim of the company is to run
several plants in order to have one full time employee.
g) Earning model
Company sells heat to the client at around 70 € per MWh (depending on
negotiations) which is a common heat price in Germany these days.
The customer is paying monthly for the heat incl. services and maintaining,
based on yearly rate and used/produced heat kWh. Yearly rate is agreed
according to savings compared to costs of old and new unit and work load.
The average price development of fuels is taken in to account in the contract –
f.e. with index correction.
Profit comes from savings which are reached with new heat unit compared to
old system.
Specialized heat Service Company such as this company is able to negotiate
better fuel supply contracts than not specialized company such as the client in
this case. Savings might come also from cost effective maintenance.
i) Seasonal variations affecting operations
The main work occurs naturally during heating season between September and
Mai. In summertime the main work is to look after the gas burner and to make
maintenance work like cleaning.
j) Integration to other companies in the value chain
Long term contracts with pellet and boiler producers are possible. This will
ensure best prices. The pellet producer is taking also care for a continuous
supply and the transportation. Also contracts with installation companies for
the erection of the whole heating system are recommended.
127
3. Market situation
The price for heating with oil or gas has increased constantly over the past
years. Therefore the interest in wood fuels has risen significantly. Right now
heating with wood is considered to be a real alternative, unlike a few yeas
ago. More and more companies and municipalities are changing their oil
ands gas heating systems into renewables, because life expectancy of their
old systems expires and reasons to change the type of fuel are obvious.
During the last two years a steep rise in the utilization of pellet burning units
was recognized in Germany.
Currently biomass heat and power systems have a great development
potential in Germany, due to the fact that from biomass generated electricity
is rewarded with an over 20 years guaranteed feed in tariff. In 2006 the feed
in tariff for biomass based electricity was for plants up to 20 MW: 8, 15
ct/kWh and 11, 16 ct/kWh for plants under 150 kW.
Grants for the erection pellet boilers are available for private persons, SME,
communes and associations.
The market stimulation programme of the KfW offers for automatically fed
facilities between 100 and 1.000 kW a beneficial loan model with a partly
debt relief. To get the loan and relief the following parameters have to be
met:
• Efficiency rate over 90%
• Automatic ignition
• Heat capacity control
• 250 mg/m3 CO at rated heat load
• 250 mg/m3 CO at partial load
c) Other potential customers
Owners and operators of larger heating grids are considered as potential new
customers. There are still lots of old gas or oil boilers firing large local heat
grids in residential areas throughout Brandenburg.
It might also be considered to sell the maintenance service to already existing
bioheat plants. For this purpose the employees are constantly trained on new
bioenergy methods, e.g. grain or straw firing.
The company buys the fuel from local pellet producers. In the north
Brandenburg area HPS in Schwedt is the closest pellet producer. (www.hps-
pellets.de) Another pellet producer is located in Calau, in southern
Brandenburg.
Which one will be chosen depends on price and transportation negotiations.
128
e) Competition
Not too many heat contracting companies are active on the Brandenburg
market since heat contracting is not very common yet.
The case company should convince the heat supply plant owners to outsource
the service instead of running the plant by them selves. Since this service is
quite new in Brandenburg, no real competition exists for this service.
INCOME €/a
TOTAL 81,620
COSTS
Wood fuel price (wood pellets from local suppliers) 1 34,950
Supplementary gas price 53 5,935
Own energy use (electric) 55 3,732
Inspection 300
Chimney sweeper 400
Measurement instrumentation 100
Service contract 300
TOTAL 55,717
Financial costs (repayment of loans) 7,380

Depreciation (might be considered if new plant is planned 2,487
often 15 years)
TOTAL 9,867

Taxes (30%) 5,352
INVESTMENTS €
TOTAL 38,800
ROI 32 %
52
1166MWh of heat * 70 €/MWh = 81,620 €
1
The estimated price of wood pellets is 150 € per tonne (rounded figure). The total costs of fuel is
34950 €/a. It is expected that the price of pellets rises by 20% over 10years. This is considered in price
negotiations.
53
50,90 €/MWh
54
10h/week, part time worker (40,000€ per year as full time, basis for calculation)
55
6,5 kW, 18 ct/kWh
129
KfW Bank loan 44,500
The service company doesn’t have to do special investments beside the plant.
• Basic office investments for communication like telephone and PC.
• Basic tools and equipments to make small service work.
• Car is needed if the person takes care of several heat supply plants. (a car
can be leased as well)
INVESTMENTS
Biomass – pellet boiler package 37,300 €
MAWERA FU 220 RIA
Office equipment & basic tools 1,500 €
TOTAL INVESTMENTS 38,800 €
OPERATING COSTS
Annual heat generation 1166 MWh/a
Fuel need / consumption 233 t/a
(pellets)
Fuel costs (pellets) 34,950€
Fuel costs (gas) 5,935€
Electricity (6,5 kW, 18ct kWh) 3,732€
TOTAL OPERATING 44,617€
COSTS
PLANT OPERATION
Personnel (part time worker) 10h / week 10,0 00€
Inspection 300€
Chimney sweeper 400€
Measurement instrumentation 100€
Service contract 300€
TOTAL OPERATION 11,100€
COSTS
CAPITAL COSTS
130
Investment costs 38,800€
Financing conditions loan 44.500€ (96% payed out)
duration 10 years
interest rate 5%
interest 2.225 €/a
redemption 4.450 €/a
reliability expert 44,5 €/a
insurance 660 €/a
TOTAL CAPITAL COSTS 7,380 €/a
DEPRECIATION 15 years 2,487 €/a
OVERALL COSTS
Depreciation 2,487 €/a
Costs of capital 7,380 €/a
Operating costs 44,617 €/a
Plant operation 11,100 €/a
TOTAL COSTS 65,584 €/a
Specific heat costs 250kW, 56,25 €/MWh

1166MWh/a
5. Entry barriers
Since this business is quite new in Brandenburg, difficulties might arise in
convincing the potential clients to outsource the heat business and not to run the
plants themselves.
The current fine dust emission discussion could prevent people from changing to
environment friendly wood fuelled heating systems.
6. Risk analysis
Risks for the case company are mostly in maintenance and in fuel supply.
Risk in maintenance
• Unexpected technical problems show up before expected and take into
consideration while making yearly contracts
• Risks in fuel supply and fuel quality
• Fuel supply is depending on subcontractors
• Supplier don’t keep the schedule
• The fuel prices are getting very high fast, so that the agreed indicator does
not help to correct the price of sold heat
131
Risks for the break of heat production are minimized with the gas boiler unit,
which is a spare unit for emergency and peak time use.
….. …..
Laufer, S. 2007. PELLET BURNING BIOMASS HEAT SUPPLY STATION 250 kW. FH
Eberswalde, Eberswalde, Germany. 5 EURES (EIE/04/086/S07.38582). Business Plan. 10 p.
Short rotation coppice in Lithuania – Picture Jelena Aneicik
132
SHORT ROTATION COPPICE FOR BIOENERGY
This is an example business plan for AgriWood ltd, a privately owned company
producing wood chips from short rotation coppice. The company is a division of the
AgriProducts ltd. Both companies are owned and managed by one farmer. This plan
is prepared by University of Applied Science, Eberswalde, Ggermany
(Fachhochschule Eberswalde).
Picture: Planting aggregate “Quickwood” [1]
1. Business idea
The company plants and grows fast growing tree species for the production of
wood chips. The wood chips are sold either to a nearby located CHP for heat
and energy production or to a biomass trading company.
The types of fuel produced are mainly poplar and black locust wood chips.
The farmer grows poplar on the wet parts of the fields, whereas black locust is
grown on dry and sandy soils.
Usually the soil conditions in Brandenburg are quite poor and sandy with little
precipitation during the year (500 – 700mm / a). Therefore willow planting is
not recommended in areas with insufficient water supply
The local CHP has given a supply contract for the first two harvests and an
option on the following.
Energy wood retailer or planned BtL production facilities could be additional
customers if the business proofs to be profitable and expands.
Since the wood market in Brandenburg faces currently a gap of almost
2mio.m³ wood between the usable annual increment and demand, an
additional source for energy wood production is urgently required. Different
CHP and other bioenergy production facilities already stated their interest in
purchasing wood chips form short rotation coppice fields.
The ongoing competition between the wood industry and the energy industry
led also to a high price level for small diameter timber, so that the
establishment of such fields would help to stabilize the market price for wood
chips as well.
d) Way to operate
The farmer rents 40 hectares of arable land for a price of 115,- € per hectare
for the establishment of the plantations. 20 ha are planted with poplar; the
remaining 20 ha are planted with black locust. The total utilization time of the
plantation will be 20 years with harvesting performed every 4th year.
For the success of fast growing tree plantations weed control is an essential
factor. Especially the first year decides about success or failure. Therefore the
establishment of plantations starts with extensive weed control by applying 70
liters herbicides per hectare. This is followed by ploughing.
Both operations are performed some weeks before plantation establishment.
For seedbed preparation just before planting, a disc harrower with seedbed
combination is used.
These tasks are carried out with employees of the AgriProducts ltd.
The application of fertilizers is not necessary, as this was former farm land and
the nutrient requirement of poplar and black locust are relatively low. It might
be recommended to control the nutrient content in the soil between the
harvests and to apply a fertilizer if needed.
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The purchase and planting of poplar and black locust shoots will be
subcontracted to an external gardening company. The amount of planted
shoots is 10.000 plants per hectare at a price of 9 cent per shoot in black locust
and 20 cent per poplar shoot.
With regard to the harvesting technology, a two-row planting system should
be selected where the distance between rows is 75cm and 175 cm between
double-rows. With this system a total plant number of 10.000 plants per
hectare are placed.
Right after the planting a fence of 2m height will be built up to protect the
young plants form game bite caused by hares and deer.
In the establishment year the upcoming weeds should be removed between the
rows mechanically (chopping, mulching). From the second year on the plants
grow tall enough to dominate weeds. To maintain a good accessibility of the
plantation additional mulching (2 x) is performed.
As the first year is essential for success or failure, the possibility of irrigation
should be considered in very dry years.
After 4 years first harvesting can be performed. The most suitable time for this
is late autumn or winter, where the work load at the farm is low and the
moisture content in the trees is at its minimum.
The most efficient harvesting method for trees of this size is the full
mechanized system which cuts, chips and blows out the chips in one work
step. A driving by tractor with a container is collecting the chips.
The subcontracted company who carries out the harvesting work uses this full
mechanized harvesting system. One additional tractor with a container must be
constantly available to replace the one being filled up. The containers are then
transported to the nearby CHP plant.
After the maximum utilization time of 20 years the plantation will be
recultivated back into farmland. This is required as the soil needs to recover,
and to avoid that this area will be turned into forest land by forest law. For
recultivation a farm tractor towed milling cutter will be used. This will be
repeated twice to eliminate potential shooting from remaining roots.
Other businesses of the same owner and role of the businesses in the company
operations are:
• AgriProducts ltd., an agricultural company, farming at owners
land. The companies farming equipment and personnel will be
used for the establishment and maintenance of the plantation at
own costs. Also storing premises are available if needed.
This company supports AgriWoods operations because there are manpower
and the required agricultural machines available at minimum costs and this
will minimize the need of investments in the first years.
If the business is successful and pays off, an enlargement of the plantation area
could be considered and then some specialized machinery could be bought.
135
A division of AgriProducts ltd. (AgriWood ltd.)
i. Equipment – wood boiler supplied and owned by the client
For Soil preparation a farming tractor is needed. Furthermore the following
agricultural equipment should be available: extention nozzle for herbicide
application, a plough, a disc harrow with seedbed combination. This
equipment with the according manpower will be done by AgriProducts at own
costs.
The purchase and planting of the willow and black locust shoots will be
completely subcontracted to a gardening company which has experience with
short rotation coppices.
For fencing the whole area, a wild game protection fence for forestry will be
bought and erected by staff of AgriProducts.
Weed control will be performed by employees of AgriProducts with a small
farming tractor and attached chopping and mulching aggregates. Mulching
will be performed three times (or more if necessary) during the whole
plantation period to prevent extreme weed growth in driving lanes.
The harvesting operation will be subcontracted to a local agricultural service
provider who owns a Claas Jaguar forager and a SRC cutting head. The
produced wood chips are blown directly into containers which are town by a
tractor and then brought to the CHP plant.
After the maximum utilization time of 20 years the plantation will be
recultivated by using a farm tractor and milling cutter. The machinery and
personnel comes from AgriProducts ltd.
ii. Financials
Total investment costs are approx.155, 000 €. The loans are coming from the
owner as a shareholder loan of 20,000 € at an interest rate of 5% for the first
four years. This loan will be paid back after the first harvest.
The second loan comes from the KfW Förderbank as a 100% loan for
investments on renewable energies. The KfW Förderbank supports projects
and investments in environmental protection, energy saving and renewable
energies with different grants and beneficial loans.
The interest rate for this kind of investment amounts to 6,05%, but lower rates
are possible. The payback time for the loan is 8 years (see interest repayment
plan). The owner guarantees the loan personally plus the loan is secured to
AgriProducts equipment.
iii. Human resources
The manager of the AgriProducts ltd. is also responsible for the operations at
the plantation. At this stage it’s not recommended to employ somebody solely
for the plantation because this is mostly part time work.
136
When the plantation grows successfully, it could be considered to establish
new fields every year so that there will be a yearly income. Then it’s
reasonable to employ somebody for care and maintenance.
The other human resources are mainly subcontracted and coming from the
AgriProducts ltd. or from gardening and forestry companies.
g) Earning model
The first income from this business is going to be earned not until the first
harvesting, which is in the 4th year. This assumes that until the first harvest an
investment sum of 123,512 € + 28,253 € for loan interest must be considered
before the first income. With the first income this sum is not balanced. So that
not until the third harvesting real income will be achieved. (see financial
planning!) Meanwhile yearly costs are arising only from overheads and loan
interest. Every 4 years the harvesting costs have to be considered as well.
The average income from selling the wood chips to the CHP plant is 71.160 €
every 4 years, amounting to 355.800 in total. This is based on a price of 59, 30
€ per tone of dry mass and estimating an average yield of 8 dry tons per
hectare and year for poplar and 7 dry tons per hectare for black locust. The
CHP picks up the fuel right after harvesting without preliminary drying.
Additional income comes from the EU with the direct payment grant for
agricultural companies according to their farming land. In Brandenburg this
amounts to an annual payments of 273 € per hectare.
Additional income could be obtained trough the energy-plant grant of the EU
which amounts to 45 € per hectare on non-fallow land. But due to some
uncertainties in paying this grant for SRC now and in the future the business
calculation was done without considering this resource.
These operations do not compete with owners other farming operations
because there is very little maintenance required after the establishment year.
Additionally the most laborious work like planting or harvesting is
subcontracted to other companies.
The main workload is during the first year during establishing and maintaining
the plantation. After that year there is almost no care needed beside the
harvesting operation in winter every 4 years and the recultivation in the last
year. The harvesting operation is done while other work on the farm is at the
lowest.
In the future it’s possible to establish a new plantation every year, so that up to
4 or 5 plantations are existent in a sort of rotation. Then there would be a
steady work load and additional staff could be hired.
The SRC operation integrates well into owner’s other agricultural business and
optimizes the efficiency of his machinery.
The CHP plant is the key client but there is possibility to get other clients from
biomass trading companies or possible BtL plants in the future.
137
The SRC specialized gardening company is located in the neighboring county
and will be subcontracted if new plantations are planned.
The harvesting will be subcontracted to an agricultural service company who
owns the required machinery.
2. Market situation
years. Therefore the interest in wood fuels has risen significantly.
In 2006 wood fuel prices started to move upwards in Brandenburg as a result
of the rising demand. The price for collecting firewood in state owned forests
increased dramatically from 9 € per m³ in summer 2005 to 16-18 € per m³ in
summer 2006.
Wood pellets prices exploded in the second half 2007 from 120-130 €/ton up
to 158 €/ton ex works. This led to prices of 250-260 €/ton for individual
customers. This extreme increase has been forced by booming sales of pellet
boilers, scarcity of pellet raw material and an enormous demand of the Italian
market. In the light of a 70% rise in prices, a dramatic decline of wood boiler
sales was recognized. In October/November 2006 purchase orders for wood
boilers and pellets practically broke down.
As a negative result potential customers felt insecure and looked for other
alternative energy resources like heat pumps. In spring 2007 wood pellet
prices moved back very fast to the level of previous years.
This development of wood fuel prices shows a further increase due to the
rising demand. Bulk purchasers of wood biomass will face growing problems
to cover the demand from regional resources and for originally calculated
prices.
There is a widening gap between the annually usable increment in
Brandenburg's forests and the rising timber demand. The current gap between
timber yield potential and timber consumption amounted to 1 million m³ in
2006. This gap will grow to 2 million m³ during 2007.
The establishment of fields with fast growing trees could contribute to a more
stabilized wood fuel market.
The Brandenburg government has set the target to cover the whole demand of
biomass for energetic utilization from forestry and agricultural production
within the state. In future investment decisions clear preference will be given
to decentral district heating systems and mid-sized CHP plants instead of big
biomass power plants.
It is expected that the use of biomass for heating will realize the biggest
growth rate of all bioenergy sources until 2010. Wood biomass based energy
production will remain a booming branch in Brandenburg.
c) Customers
The CHP plant will be the main customer for the first years. If the energy
wood production expands over the next years additional contracts with wood
138
fuel retailers or BtL production facilities could be considered. If the company
should ever face the problem of not having wood chip customers, the particle
board and paper industry would purchase the wood as well.
d) Competition
There can be some sort of competition seen between the traditional energy
wood from the forest and energy wood from fields. But due to the very high
demand of woody biomass for bioenergy production and the widening gap of
wood supply and demand, it is not expected to be problematic to find a buyer
for the produced material at reasonable prices.
The only realistic competition could occur between conventional agriculture
and SRC fields about the utilized acreage because agricultural energy crops are
currently very much requested and seen as a big opportunity for farmers.
a) Detailed financial planning (see annexed financial tables!) [2]
Framework conditions:
Acreage: Black locust: 20ha
Poplar: 20 ha
Total utilization time of plantation: 20 years
Harvesting cycle: every 4th year
Staff costs:
Average hourly staff costs in agriculture in eastern Germany are 7, -
€/h.
Preparatory work:
Weed control: 70 liters per hectare at a price of 0, 56 € per liter.
Planting:
The purchase and planting of the shoots will be completely
subcontracted.
The cost of a single black locust shoot is 0, 09 € and for poplar 0, 20 € with
an average amount of 10.000 plants per hectare. If the business expands, self
growing of shoots should be considered.
Machine costs:
Cost structure for machinery use is obtained from the KTBL handbook
“Faustzahlen für die Landwirtschaft” which is the official manual for cost
calculation of agricultural operations in Germany (e.g. ploughing, seeding,
harvesting etc). These numbers have been proven through practical
applications.
The whole cost structure calculation was obtained in strong cooperation with
the CEBra GmbH, the Agrartechnik Bornim, BTU and
Landschaftspflegeverband Spree – Neiße e.V..
139
INCOME €
Sales black locust: 2800 dry tons (59,30 € / t DM) 166,040
Sales black locust: 3200 dry tons (59,30 € / t DM) 189,760
Area related grants (273,- € / ha / a) 218,400
TOTAL 574,200
COSTS
Soil preparation 5,684
Planting 75,876
Maintenance 11,592
Harvesting 14,202
Recultivation 8,742
TOTAL 5,684
Soil preparation 75,876
Planting 11,592
TOTAL 116,096
OTHER COSTS
Rentals (115,- € / ha) 92,000
Payments / Memberships 18,400
Operational management 20,800
Financial costs 36,420
TOTAL 167,620
PROFIT BEFORE TAX

Taxes 6,400
INVESTMENTS €
(see the financial flow below)
Capital loan from owner 20,000
KfW loan 135,000
TOTAL 155,000
Payback time (see interest and repayment plan) 4 and 8 years
140
b) Financial flow:
Fin. flow until the 1. harvest in the 4th year:
Black locust: Poplar:

Preparation: 2,842 2,842
Planting 26,938 48,938
Maintanance 5,796 5,796
Harvesting 1,420 (1/5 of 7,101,-) 1,420 (1/5 of 7,101,-)
Overheads 13,760 (4/20 of 68,800) 13,760 (4/20 of 68,800)
Total costs: 50,756 € 72,756 € -123,512 €

Loan interest: - 28,253 €
Total income: 114,840 €
- 36,925 €
Total costs for the first four years are amounting to 123,512 € plus 28,253€
accumulated interest on loans. The total income from the first harvest is
114,840 €, so there is a minus of 36,925 € left after the first harvesting period.
Harvesting 1,420 (1/5 of 7,101,-) 1,420 (1/5 of 7,101,-)

Overheads 13,760 (4/20 of 68,800) 13,760 (4/20 of 68,800)
Total costs: 15,180 € 15,180 € - 30,360 €

Loan interest: - 8,167 €
Remaining costs: - 36,925 €
39,388 €
Until the next harvesting, costs are amounting to 30,360 € + 8,167 € for
interest on loans. With a harvesting income of 114,840 € in year 8, the balance
after the second harvesting is positive with: 39,388 €.
Harvesting 1,420 (1/5 of 7,101,-) 1,420 (1/5 of 7,101,-)

Overheads 13,760 (4/20 of 68,800) 13,760 (4/20 of 68,800)
Total costs: 15,180 € 15,180 € - 30,360 €

Remaining budget: 39,388 €
123,868 €
Harvesting 1,420 (1/5 of 7,101,-) 1,420 (1/5 of 7,101,-)

Overheads 13,760 (4/20 of 68,800) 13,760 (4/20 of 68,800)
141
Total costs: 15,180 € 15,180 € - 30,360 €
Remaining budget: 123,868 €
208,348 €
Harvesting 1,420 (1/5 of 7,101,-) 1,420 (1/5 of 7,101,-)

Recultivation 4,371 4,371
Overheads 13,760 (4/20 of 68,800) 13,760 (4/20 of 68,800)
Total costs: 19,551 € 19,551 € - 39,104 €

Remaining budget: 208,348 € Total
income: 14,840 €
Profit: 284,084 €
The financial flow indicates that for maintaining liquidity a loan of approx.
155,000 € is required until the second harvest.
4. Investments
No big investments in machines are necessary since the machinery from
AgriProducts will be used for the upcoming tasks. Additionally it’s not
reasonable to buy machinery for occasional work at the plantations; the efficiency
would be extreme low. If there is the decision to extend the business it might be
recommended to buy a small farming tractor with the needed equipment.
The short rotation coppice business is still at the initial stage in Brandenburg and
Germany as well. Some practical experience exists from smaller experimental
fields. So this could be some kind of pioneer business with an area of 40ha.
The owner knows the SRC topic from extended training provided by regional
energy wood working groups.
Additional support comes from the University of Applied Sciences as there is
experience from experimental plots with fast growing tree species.
Since the owner runs a farm as his main business, the SRC can be considered as a
secondary job. Especially during harvesting in winter time this complements
seasonal variations in farming.
Working costs are included in profit and loss calculations, so the business could
operate with employed people but due to the minimal maintenance requirements
during the growing period it’s not feasible at this stage.
Should the business proof to be profitable and extend so that every year one field
could be harvested one or two persons could be employed.
The owner also has some agricultural equipment and facilities that are used for
establishment, maintenance and fuel handling. This reduces investment costs.
142
6. Risk analysis
Wood chip supply to the CHP plant is secured by a contract for the first two
harvests and an option on the remaining. The CHP takes the fresh chips and
mixes it with dry material for burning. Other options for selling wood chips are
local retailers and smaller wood chip users in the region.
The main risk of the operation can be seen in the sensitivity of the plantation in
the establishment year. In dry years the plant shoots have to be irrigated until the
roots are well developed. Great care must also been taken of weed control during
the first year. From the second year on generally very little maintenance is
required.
Right now the area related grants of the EU are a big proportion of the total
income. The discontinuation of these payments could bare a potential risk. Some
states have already established some financial benefits for establishment costs
since those are the highest burden of the new business.
7. References
[1] Sächsische Landesanstalt für Landwirtschaft, 2004: Anbauempfehlungen für
schnellwachsende Baumarten, Leipzig
[2] Autorenkollektiv (ATB, BTU, CEBra, Landschaftspflegeverband Spree –
Neiße e.V.) Kostenalkulation für Kurzumtriebsplantagen, 2007 unveröffentlicht
143
All tables available in Excel format as separate file.
Black
0 Basic data Species: Locust
Acreage 20 ha
Utilisation time of plantation D= 20 a
Harvesting cycle 4 a
All prices are

net.
Amount Material Costs Revenue Costs
Position in D Amount Price Salary Time fix variable other
MP
1/ha Unit €/Unit €/h h/ha €/ha €/ha €/ha €/t DM € €/ha €/ha a
1 Fertilisation / Soil preparation Sum 2,842 142 7
Weed control 0 0 0.00
Extention nozzle (1000l, 15m) 1 70 l 0.56 7.00 0.12 2.66 2.33 901 45 2.25
Fertilisation (broad fertiliser) 0 0 0.00
Loading 0 0 0.00
Spreading 0 0 0.00
Ploughing 0 0 0.00
Plough 1 7.00 0.93 21.38 31.47 1,187 59 2.97
Disc harrow 0 0 0.00
Harrowing with seed bed comb. 1 7.00 0.38 18.46 16.59 754 38 1.89
2 Planting Sum 26,938 1,347 67

Plants - shoots (incl. VAT) 1 10,000 Pieces 0.09 18,000 900 45.00
Transport of shoots 1 0 0 0.00
Plantation (Personal+Technology as billed) 1 7.00 27.50 254.38 8,938 447 22.34
3 Care / Maintenance Sum 5,796 290 14

Protection from wild game (fencing) 3 7.00 1.00 50.00 3,420 171 8.55
144
Weed contol / mechan. 0 0 0.00
Choping 1 7.00 1.13 12.69 412 21 1.03
Mulching 3 7.00 1.10 14.91 10.12 1,964 98 4.91
Milling 0 0 0.00
Weed control / chem. 0 0 0.00
Water 0 0 0.00
4 Harvesting Sum 7,101 355 18

Felling - manually 0 0 0.00
Felling, bundling 0 0 0.00
Felling, chipping 5 7.00 2.31 21.31 3,748 187 9.37
Other 0 0 0.00
Transport 5 7.00 0.24 31.85 3,353 168 8.38
5 Recultivation Sum 4,371 219 11

Milling cutter; 1,5m; 40kW (x 8) 1 7.00 1.60 66.64 140.72 4,371 219 10.93
0 0 0.00
6 Interim storage Sum 0 0 0

into stock 0 0 0.00
from stock 0 0 0.00
Transport 0 0 0.00
7 Expenses Sum 47,048 2,352 118
8 Overheads from agric. Comp. Sum 87,010.0 4,351 218

Rentals 20 115.00 46,000 2,300 115.00
Depreciaion of company equipment 20 0 0 0.00
Payments (Associations etc.) 20 23.00 9,200 460 23.00
Operational management 20 26.00 10,400 520 26.00
other Overheads 20 0 0 0.00
145
Insurance (buildings, Equipment) 20 0 0 0.00
Financial costs 18,210 911 45.53

Taxes and payments 20 8.00 3,200 160 8.00
Einnahmen
9 Revenue Sum ###### 13,762 688
Allocation 1 (area related grants) 20 273.00 109,200 5,460 273.00
Allocation 2 (Energycrops grant) 20 0 0 0.00
Revenue from yield (t DM / ha a)
from 20 7.0 t 59.30 166,040 8,302 415.10
Ergebnis
€ €/ha €/ha a
(Revenue minus
10 Contribution margin I expenses) 228,193 11,410 570
11 Contribution margin II (Contribution margin I minus overheads) 141,183 7,059 353
12 Cost per unit (without revenue) 47.88 €/t DM Operating result (Contribution margin II minus grant benefits) 80
146
0 Basic data Species: Poplar
Acreage 20 ha
Utilisation time of plantation D= 20 a
Harvesting cycle 4 a
All prices are

net.
Amount Material Costs Revenue Costs
Position in D Amount Price Salary Time fix variable other
MP
1/ha Unit €/Unit €/h h/ha €/ha €/ha €/ha €/t DM € €/ha €/ha a
1 Fertilisation / Soil preparation Sum 2,842 142 7
Extention nozzle (1000l, 15m) 1 70 l 0.56 7.00 0.12 2.66 2.33 901 45 2.25
Fertilisation (broad fertiliser) 0 0 0.00
Loading 0 0 0.00
Spreading 0 0 0.00
Ploughing 0 0 0.00
Plough 1 7.00 0.93 21.38 31.47 1,187 59 2.97
Disc harrow 0 0 0.00
Harrowing with seed bed comb. 1 7.00 0.38 18.46 16.59 754 38 1.89
2 Planting (Subcontracting) Sum 48,938 2,447 122

Plants - shoots (incl. VAT) 1 10,000 Pieces 0.2 40,000 2,000 100.00
Transport of shoots 1 0 0 0.00
Plantation (Personal+Technology as billed) 1 7.00 27.50 254.38 8,938 447 22.34
3 Care / Maintenance Sum 5,796 290 14

Protection from wild game 3 7.00 1.00 50.00 3,420 171 8.55
147
Weed contol / mechan. 0 0 0.00
Choping 1 7.00 1.13 12.69 412 21 1.03
Mulching 3 7.00 1.10 14.91 10.12 1,964 98 4.91
Milling 0 0 0.00
Weed control / chem. 0 0 0.00
Water 0 0 0.00
4 Harvesting Sum 7,101 355 18

Felling - manually 0 0 0.00
Felling, bundling 0 0 0.00
Felling, chipping (as billed) 5 7.00 2.31 21.31 3,748 187 9.37
Other 0 0 0.00
Transport 5 7.00 0.24 31.85 3,353 168 8.38
5 Recultivation Sum 4,371 219 11

Milling cutter; 1,5m; 40kW (x 8) 1 7.00 1.60 66.64 140.72 4,371 219 10.93
0 0 0.00
6 Interim storage Sum 0 0 0

into stock 0 0 0.00
from stock 0 0 0.00
Transport 0 0 0.00
7 Expenses Sum 69,048 3,452 173
8 Overheads Sum 87,010 4,351 218

Rentals 20 115.00 46,000 2,300 115.00
Depreciaion of company equipment 20 0 0 0.00
Payments (Associations etc.) 20 23.00 9,200 460 23.00
Operational management 20 26.00 10,400 520 26.00
other Overheads 20 0 0 0.00
148
Financial costs 18,210 911 45.53
Taxes and payments 20 8.00 3,200 160 8.00
Einnahmen
9 Revenue Sum 298,960 14,948 747
Allocation 1 (area related grants) 20 273.00 109,200 5,460 273.00
Allocation 2 0 0 0.00
Revenue from yield (t DM / ha a) from 20 8.0 t 59.30 189,760 9,488 474.40
Ergebnis
€ €/ha €/ha a
(Revenue minus
10 Contribution margin I expenses) 229,913 11,496 575
11 Contribution margin II (Contribution margin I minus overheads) 142,903 7,145 357
12 Cost per unit (without revenue) 48.77 €/t DM Operating result (Contribution margin II minus grant benefits) 84
149
Interest and repayment plan
1st
Plan period year
1 2 3 4 5 6 7 8 9 10 11 12
1st open credit
Opening balance plan period 0 0 0 0 0 0 0 0 0 0 0
Rise
Repayment-
Closing balance plan period 0 0 0 0 0 0 0 0 0 0 0 0
Average value 0 0 0 0 0 0 0 0 0 0 0 0
Interest rate
Interest (per period!) 0 0 0 0 0 0 0 0 0 0 0 0
2nd shareholder loan
Opening balance plan period 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000
Rise
Repayment-
Closing balance plan period 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000
Average value 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000
Interest rate 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00%
3rd still participation
Opening balance plan period 0 0 0 0 0 0 0 0 0 0 0
Rise
Repayment-
Average value 0 0 0 0 0 0 0 0 0 0 0 0
Interest rate
4th investment credit
Rise
Repayment- -1,406 -1,406 -1,406 -1,406 -1,406 -1,406 -1,406 -1,406 -1,406 -1,406 -1,406 -1,406
150
Average value 134,297 132,891 131,484 130,078 128,672 127,266 125,859 124,453 123,047 121,641 120,234 118,828
Interest rate 6.05% 6.05% 6.05% 6.05% 6.05% 6.05% 6.05% 6.05% 6.05% 6.05% 6.05% 6.05%
Interest altogether 760 753 746 739 732 725 718 711 704 697 690 682
Repayments altogether -1,406 -1,406 -1,406 -1,406 -1,406 -1,406 -1,406 -1,406 -1,406 -1,406 -1,406 -1,406
151
2nd 3rd 4th 5th

Plan period year year year year
I II III IV I II III IV I II I II
1st open credit
Opening balance plan period 0 0 0 0 0 0 0 0 0 0 0 0
Rise
Repayment-
Average value 0 0 0 0 0 0 0 0 0 0 0 0
Interest rate
Opening balance plan period 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 0 0
Rise
Repayment- -20,000
Closing balance plan period 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 0 0 0
Average value 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 10,000 0 0
Interest rate 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00%
Opening balance plan period 0 0 0 0 0 0 0 0 0 0 0 0
Rise
Repayment-
Average value 0 0 0 0 0 0 0 0 0 0 0 0
Interest rate
Rise
Repayment- -4,219 -4,219 -4,219 -4,219 -4,219 -4,219 -4,219 -4,219 -8,438 -8,438 -8,438 -8,438
152
Average value 116,016 111,797 107,578 103,359 99,141 94,922 90,703 86,484 80,156 71,719 63,281 54,844
Interest rate 6.05% 6.05% 6.05% 6.05% 6.05% 6.05% 6.05% 6.05% 6.05% 6.05% 6.05% 6.05%
Interest (per period!) 1,755 1,691 1,627 1,563 1,500 1,436 1,372 1,308 2,425 2,169 1,914 1,659
Interest altogether 2,005 1,941 1,877 1,813 1,750 1,686 1,622 1,558 2,925 2,419 1,914 1,659
Repayments altogether -4,219 -4,219 -4,219 -4,219 -4,219 -4,219 -4,219 -4,219 -8,438 -28,438 -8,438 -8,438
Total Interest 4. year: 28,252.5
153
6th
Plan period year 7th year 8th year
I II I II I II
1st open credit
Opening balance plan period 0 0 0 0 0 0
Rise
Repayment-
Closing balance plan period 0 0 0 0 0 0
Average value 0 0 0 0 0 0
Interest rate
Interest (per period!) 0 0 0 0 0 0
Rise
Repayment-
Interest rate
Rise
Repayment-
Interest rate
Opening balance plan period 50,625 42,188 33,750 25,313 16,875 8,438
Rise
Repayment- -8,438 -8,438 -8,438 -8,438 -8,438 -8,438
Closing balance plan period 42,188 33,750 25,313 16,875 8,438 0
Average value 46,406 37,969 29,531 21,094 12,656 4,219
Interest rate 6.05% 6.05% 6.05% 6.05% 6.05% 6.05%
Interest (per period!) 1,404 1,149 893 638 383 128
Interest altogether 1,404 1,149 893 638 383 128
Repayments altogether -8,438 -8,438 -8,438 -8,438 -8,438 -8,438
Total Interest 8. year: 8,167.5
….. …..
Laufer, S. 2007. Short rotation coppice for bioenergy. University of Applied Science (Fachhochschule
154
SMALL 3 MWe CHP WITH BIOMASS

This is an example business plan for small scale gasifying heat and power plant
(CHP) using wood and agricultural residue as fuel. The plan is prepared by
IrRADIARE, Portugal.
1. Background
The Marvão heat and power plant concept was first formulated in 2006 as
response to a call from the Portuguese General Directorate for Energy to design
and construct a Biomass Power Plant running exclusively on Forest Management
Wastes and Residues.
The call specified novel and innovative approach. Small scale combined heat and
power plant using wood gasification was selected for the proposal because of
number of innovative benefits such modular approach offers.
Picture: Design of one 350 kWe module in transport container.

The key specifications of the Portuguese Government requests were:
• Generation of 10MWe to the power distribution grid at 30kV with flexible
active/reactive power ratio;
• Firing forest wastes originated by forest management actions;
• Using only 2-3% of fossil fuels over the total energy input;
• Maximizing the plant availability;
• Being innovative, in the sense of demonstrating under actual operating
conditions clean and efficient technology able to be spread for other
similar cases;
• Delivering as co-generated heat 15% of the total energy input (for district
heating, typically);
• Emitting clean flue gases;
• Attracting foreign investment under a join-venture approach;
• Presenting a clear and effective local proposal for biomass supply
contracts for small and medium companies involved in forest
exploitation/management and to their associations, which would cause the
power-plant to have a beneficial impact on local employment and
economic development;
• Being able to pay biomass at level of around 70% of the log price
(currently around 35Euro/ton of forest residue);
• Being operable with reduced personnel, particularly not requiring highly
complex training either for maintenance and operational tasks.
Considering those constrains and requests and considering the social-economic
context in Marvão it was decided to design a smaller CHP plant (less than half of
the required size) using not only biomass but also agriculture residues.
This is summary from the more comprehensive business plan.
2. Business idea
a) General
Advanced technology new generation 3 MWe combined heat and power plant
using both agriculture and forest residues as fuel and selling both electricity
and heat. Advanced features requested at the Government call, and design
limitations at the selected site, are described above at Background. The plant
design incorporates technological advantages explained in “d. Advanced
features of the plant”.
b) Fuel
From medium to low quality forest and agricultural residue dried at plant by
using generated heat.
c) Customers
Electricity will be bought by EDP. Heat consumers are not yet completely
defined yet but an industrial park is planned to be build next to the power
plant. The companies in the park would be users of the low calorific value heat
from the plant, for example for drying various biomaterials. The plant is
expected to have a pellet producer, food industries, and cork industries. Also
the local municipal swimming pool, located about 1.5 km, is expected to use
the waste heat.
d) Advanced features of the plant
The proposed design will have following benefits and features:
156
• Power plan modules are made in factory and assembled into transportable
40 foot containers into fully functional units. Required number of
containers are then transported to the site close to biofuel source and
connected to run parallel to give out desired MW amount of electricity.
Conventional power plants must be built on site. It is more economical to
build power plant in dedicated factory and transport it to the site than build
the plant on site.
• Power plant can extend or contract in size, as required, by adding or
removing modules, for example if biofuel supply changes or local
requirement for electricity changes.
• The whole power plant can be transported to another site if required.
Conventional power plants can only be demolished.
• This modular power plant can operate 100% over the whole life time since
one module can be kept in reserve, or under maintenance, while the others
produce electricity. Closing the plant for maintenance is not needed.
• Estimated operating efficiency is higher than 30%. Ordinary steam turbine
power plants of this size are typically 10-25% efficient. The remaining
heat is also used beneficially to dry biofuel. Nothing is wasted.
• Cost per MWe generated is estimated to be similar to ordinary steam
turbine power plants.
The plant can be assembled close to biofuel source. This will minimize need to
transport biofuel.
e) Benefits for the local economy
The main benefits for the local economy will be:
• The possibility to use electricity generated from local renewable sources.
• Market for forest residue which is collected from several places including
places under the responsibility of the municipality such as abandoned
lands, roads is very important because during summer the risk of forest
fires is very high due to the very hot climate.
• Agriculture residues, available in considerable quantities seasonably, are
also significant renewable energy source in this particular area where
agriculture has still an important role.
• There will be an important opportunity of installing new heat consuming
businesses. A new industrial park will be created in the location where the
heat and power plant is to be installed. New industries will have attractive
conditions and the heat prices will be appealing.
f) Way to operate
The power plant operates around the year 8760 hours. One module at any time
is expected to be in maintenance and the others are generating electricity and
heat. Modular structure of the plant allows modules to be shut down for
maintenance without affecting the rest of the plant.
Biomass that will feed the system will be contracted in a pluri-annual basis,
with forest and agricultural associations.
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i. Plant design and equipment
Picture: Layout of the heat and power plant. The 350 kWe modules are
black rectangles on the upper right part of the plant layout. They are
grouped into groups of three – each providing 1MWe.
Internal combustion engines will be fed by wood gas produced by a row of
gasifiers. Gasifier and gas cleaning technology from Puhdas Energia oy/ltd is
http://www.puhdasenergia.com/ considered because it produces very clean
syngas.
A modular approach was followed in order to maximize the plant annual
availability average and safety. Modular 1MW gasifiers were selected keeping
it within the optimal operation power level for reverse flow gasification. This
process is considered to require very few operational personnel.
Preliminary calculations indicated a set of 3 to 4 lean gas engines, delivering
around 3 MWe. A steam cycle would be installed to use the engine flue gases
heat. A steam turbine would be delivering around 1.7 MWe. A ranking organic
cycle is under consideration to reuse downstream heat for an additional 0.4
MWe.
Electrical over capacity is assumed to balance internal consumption and as
reserve to achieve quasi-100% availability.
Different maintenance operations are considered to be phased-up in order to
reduce the out-of operation times. Maintenance operations on different
equipment are considered to be un-phased to exploit the back-up capacities of
the modular concept.
158
ii. Operating personnel
The plant will employ ten people.
Electricity selling won’t have seasonal variation but heat users at the industrial
park may have variable heat demands.
As biomass market is still growing in Portugal no many supply companies are
identified. The creation of small companies, operating in cooperation with
forest and agricultural association is expected.
A separate small wood pellet mill is expected to be set up to produce wood
pellets from selected biofuel fractions that come to the plant. This company
will be using heat from the heat and power plant and will buy residues when
they are not being used in the heat and power plant. As the availability of these
products will vary seasonally and over-storing is not desirable due to the fire
risks, self-combustion, and rotting of the material, the existence of this
company will allow buying bigger and cheaper quantities of biomass.
3. Market situation
a) Market situation
Portuguese government is having a particular attention to electricity coming
from renewable sources. It is expected that within the period 2007/2013
incentives on investment in this area is to be made and that electricity coming
from renewable sources will continue to have interesting tariffs.
b) Competition
A forest biomass power plant is planned to be constructed in the area. This
power plant will use forest biomass, coming exclusively from forest that
already have forest management plan. In this region, only a small portion of
the forest is under this condition.
4. Financial plans
INCOME €
Sales, electricity (abt 100 € per MWh) 56 2,621,811.06
TOTAL 2,621,811.06
COSTS
Biomass 57 308,169.69
Personnel - Salaries & indirect costs 280,000.00
Maintenance 312,840.00
Insurances and others 172,629.60
TOTAL 1,073,639.29
56
3 MW * 8760h = 26280 MWh
57
5 MWh / ton – dried with waste heat; annual requirement = (26280 MWh / 35% engine efficiency *
1.2 gasifier efficiency) / 5 MWh per ton = 18021 tons @ €17 per ton
159
OPERATING PROFIT / LOSS 1,548,171.77
Financial costs (repayment of loans) to be negotiated

Depreciation 58 600,000.00
PROFIT BEFORE TAX 948,171.77

Taxes
NET PROFIT / LOSS / INCOME 948,171.77
21 gasifier islands plus gas engines 59 8,415,000.00
ROI 11%
Private capital 8,415,000.00

Municipal authority in Marvão is very interested in this project. However, private
investors are hesitating because there isn’t a clear statement from central
government about grants and/or special conditions (such as lower taxes),
specially considering that this heat and power plant is the first to be installed in
Portugal using this technology and fuel sources (both agriculture and forest
residues).
6. Risk analysis
The fuel supply is the main risk for plant’s operation because there is lack of
experience in biomass supply chain. However, the small capacity of the unit and
the biomass availability in the area can minimize the risk. Also a risk to be
considered is the possibility of the prices rising as a large number of biomass heat
and power plants are planned to be installed in the next few years, in Portugal.
….. …..
(Finpro). 2007. Small 3 MWe CHP with Biomass. IrRADIARE, Portugal. 5 EURES
58
Lifetime of gas engine is 10 years; other plant components 20 years. Treatment of depreciation for
tax purposes depends on national legislation.
59
2800€ per kWh electricity generated.
160
WOOD BURNING BIOMASS HEAT SUPPLY STATION 2.5MW
This is an example business plan for a company running initially a 2.5 MW heating
plant and planning to expand to run several such plants. This plan forms base for the
company board to decide on what terms to offer services to the community. This plan
is prepared by Finpro, and University of Applied Science, Eberswalde, Ggermany
1. Background
The calculations are based on an
example in Holzdorf/
Schönewalde in Brandenburg
from campus like community
has decided to change oil heating
to wood-burning biomass
heating station. This case
company is new, but with
experience from biomass heating
stations business.
2. Business idea
a) Products or services
offered
The idea is that the company
is selling energy to the
community from one heat
plant owned by the client.
Contracts are made for
several years with the client,
who owns the heat supply
station. Company will take
care of running the plant,
and does the maintenance
and services on behalf of the Picture: Typical 2.5MW wood heat plant delivered
owner. as factory made container (Photo: Laka Oy ltd)
Services includes: selling heat, running the heat plant, taking care of
maintenance and reparations if needed.
The first customer of the company is a campus like community has decided
to change oil heating to wood-burning biomass heating station, which
situated in Holzdorf/ Schönewalde in Brandenburg. The community has
about 1500 persons who live and work in this area. This amount is expected
to rise to 2.500 in 2013. Holzdorf is supposed to become the site of a wood-
burning biomass power station. It is suggested to be a grate boiler plant. The
building area site will be defined later, but the building site conditions are
considered typical to the region.
Company has separate plans to expand to run several wood-burning biomass
heat supply stations in near by.
Other similar customers like a campus like area can be searched; these could
be hotels, compact housing areas. Next customers can be those, who have
already a wood-biomass heat plant or the ones who are planning to invest in
biomass heat plant.
The company takes care of all operations. Customer can buy heat at regulated
price without any worries about fuel supply, maintenance, or operations.
Advantages of the heat plant services
• Outsourced service: controlling, maintenance and fuel procurement.
• One partner for all services
• Experienced service provider in this business.
• The form of contract can be made flexible to minimizing risk for both
sides (follow fuel prices etc.)
The new boiler plant will stand for a modern and innovative way of energy
generation with high levels of efficiency and automation. The energy
production is based on renewable energies. Depending on its water content 1
ton of wood can replace between 200 and 400 litres of fuel oil.
d) Fuel
A fuel mix of wood chips and fuel oil will be used in the power station. Total
amount of energy needed is 7740 MWh (7660 MWh bioenergy and 774
MWh oil). Typically this means 9600 loose-m3 of chips with 40% average
moisture content. At wood chip price of 15 € per MWh, the annual cost of
fuels is 114,900 €. (The amount of wood chips is actually slightly bigger than
the 6966 MWh noted on the boiler data table later in the text due to
efficiency loss in boiler.) In addition, the plan will use oil at 65 € per MWh,
which is annually will cost 50,310 €.
Obviously, the operator of the plan has incentive to produce as much as
possible with wood chips because use of oil will reduce his profit.
162
e) Way to operate
The service company makes contracts for several years with heat supply
station owner and/ or the heat users. Similar contracts will be made with
wood chip suppliers.
Company can be at first a small one man company, which requires only part
time activities.
The required equipment is a matter for the client to invest but since they affect
to the operation of the heating unit, the company must agree with the client
what equipment will be available.
The plant will use both wood chips and oil. There are three technical reasons
to use both fuels.
Environmentally friendly and inexpensive wood chip burning in the biomass
boiler will provide an as high as possible share of the base load while the fuel
oil boiler will satisfy peak load needs.
Use of some oil is necessary for several reasons and these are mainly caused
by peak loads. Heat consumption will change significantly depending on
seasons of the year and also time of the day. Relatively small amount of heat is
needed during the summer.
Reason one – low load periods: Grate bioenergy boilers have the unfortunate
feature of not working on very low loads because the flame just goes off.
Estimated heat load during the summer is so low that grate boiler does not
work. Thus, use of a separate small oil boiler is necessary.
Reason two – response time to peak loads: Grate boilers also respond very
slowly to peak loads. Typical peak load in this residential application happens
every morning when everyone goes to the shower. The peak can be almost
immediate. Grate boiler can not respond fast enough. In order to get more
power from grate boiler, one has to throw more wood in and wait until it burns
well. This can take half-an-hour in worst case (depending on manufacturer’s
specifications). The answer to the problem is partly to use big hot water
accumulator tank, and if the peak is still too big, to start the oil boiler
automatically.
Reason three – backup: Additional task for the oil boiler is to act as back-up
and emergency boiler in case the biofuel boiler does not work. This is
important aspect in regions such as in Brandenburg where pipes can freeze if
heat is not supplied all the time. Backup boilers using oil can start
automatically even during the night.
Reason four – optimization of investment costs: Biofuel boilers cost
typically three times more per kWh than oil boilers. Investment costs are
optimized if biofuel boiler is smaller than the total energy consumption, and
the rest is generated with oil. In this case 89% of the energy is generated with
wood chips. Peak loads happen only 14% of the total working time. In this
way, investment costs are much lower but obviously fuels costs are higher
because some oil has to be burned.
163
SITE DATA
Electric supply capacity 4,300 kW
Peak load service hours (heat): 1,800 h/a
Total annual energy requirement: 7,740 MWh/a
BOILER DATA For base load For peak load

Type of boiler grate boiler Large water boiler
Power: 2.5 MW 2.0 MW
Fuel biomass wood fuel oil
Annual degree of utilization 89 % 90 %
Operating hours 2,787 h/a 387 h/a
Heat supply 6,966 MWh/a 774 MWh/a
i. Equipment – wood boiler supplied and owned by the client

Company is suggesting client to use to use a grate boiler plant. The new boiler
plant will stand for a modern and innovative way of energy generation with
high levels of efficiency and automation and will demonstrate the project's
competitive strength. Wood is usually very heterogeneously structured. So, the
combustion procedure must take into account differing fuel compositions.
Compared to fossil sources of energy (gas, oil, coal) the structure of wood is
far more complex. Grate boiler can handle difficult wood fuels very well.
Depending on the respective fuels special attention must be paid to the
combustion furnace. This makes necessary a special combustion as well as
boiler technology. Variations of the fuel composition must thus be taken into
consideration during the combustion process. Therefore, the company suggests
using an advancing grate furnace plant.
However important, the advancing grate is only one component of a solid fuel
Of equal importance for an optimal combustion process with relatively long
traveling times and low emissions are the design of the combustion chamber
and the circulation and temperature of the fuel gases.
The pre-prepared wood is transported from a storage depot or a small shelter
to a specially designed conveyor. It takes the wood to a cup located before the
grate. If needed, this cup can be blocked with a damper on its entry and exit
sides. Wood gets onto the grate via a screw conveyor under the cup.
Compared to other combustion systems the advancing grate has many
advantages and presents good procedure for the combustion of broadly
diversified and inhomogeneous fuels. The advancing grate is the result of
many years of technological research, development and improvement, based
on operational experiences with the most different fuels and powers.
Wood is burnt on a sloping grate. Forward and backward movements of
individual grate elements make the wood move downward on the sloping
164
grate. The grate fulfils various functions. It moves the wood, stirs up the fire
and turns over the wood, thus homogenizing the fuel bed and improving the
air passage. At the end of the grate there is an automatic ash removal.
Towards the end of the grate there is an approximately 15° bent. This bent
angle has proven to establish the most favourable relation between good
stirring and safe, controllable fuel transportation. The grate elements are made
of fixed as well as mobile parts, which overlap like roof tiles.
Part of the air needed for the combustion is blown as so-called primary air
through air supply ducts which are attached to the front part of the grate. This
air also cools down the grate. Thus, especially when dealing with risky
combustion material, the danger of slag sticking and overheating of the
material is reduced.
The so-called secondary air is either blown in from above the grate or before
entering the combustion chamber.
On the first segment of the grate, the wood is dried. On the middle segment of
the grate, the so-called main burning zone, the pyrolytical decomposition and
the degasification procedure take place. They are followed by the burnout on
the last grate segment.
Finally, the ashes fall into a collecting device which, for instance, can be a
water bath. Subsequently, a chain and/or screw conveyor transports them into
a container.
ii. Equipment – oil boiler supplied and owned by the client
The oil burner unit uses extremely light fuel oil according to DIN 4755, part 2.
The nominal content of the tank storage is 1 x 10 m³. Storage tanks, unloading
units for road tankers, the fuel oil pump unit as well as the complete pipe
system form part of the fuel supply unit.
The peak load boiler of the examined heating station influences a reliable
power supply and its controllability favourably.
The fuel oil boilers have a 2.0 MW power with a flow temperature of 90 - 110
°C.
Using a special furnace guarantees amounts of emissions which lie below
approved limits.
The entire boiler plant is designed in such a way that it can be operated
without supervision according to TRD 604 (24 hours).
iii. Equipment – required to purchase by the company
Only basic office and other equipment are needed for service and maintaining
the heat production plant, and to administer the fuel supply. Logistic needed
for fuel supply will be owned by subcontracting partners.
iv. Human resources
The company will employ one part time person. The person should have
experience in wood fuel markets and service of heating plant. Other part time
person is needed to take turns in controlling and maintenance work. Otherwise
also free days were difficult to organize.
165
Later the company might grow in activities by taking care of more heat plants.
The work load ranges from 2 to 3 hours/day for maintenance and controlling
tasks which can be handled by one worker. The entire boiler plant is designed
in such a way that it can be operated without supervision according to TRD
604 (24 hours).
h) Earning model
Company sells heat to the client at around 75 € per MWh (depending on
negotiations).
The customer is paying monthly for services and maintaining based on yearly
rate and used/produced heat kWh. Yearly rate is agreed according to savings
compared to costs of old and new unit and work load. The average price
development of fuels is taken in to account in the contract – f.e. with index
correction.
Profit comes from savings which are reached with new heat unit compared to
old system.
Specialized heat service company such as this company is able to negotiate
better fuel supply contracts (wood and oil) than not specialized company such
as the client in this case. Savings might come also from cost effective
maintenance.
There is more work in winter time because higher heating need for example
fuel deliveries more often. In summer, when heating need is low, there is need
and possibilities to make maintenance break.
Possible longer contracts with wood chip suppliers, who take care of
continuous supply and transport of wood chips to the storage of the plant.
3. Market situation
a) Regulations to be met
The Federal Emissions Protection Legislation Biomass dictates that the HEL
and the boiler plant is to be classified under 'TA-Air'. It defines the following
emission limits when using solid and liquid combustibles in new power
stations with a thermal capacity of up to 5 MW as follows:
EMISSION LIMITS
Wood HEL
Vol. - % O2 11 3
Dust mg/Nm³ 150 80
CO mg/Nm³ 250 170
NOx mg/Nm³ 500 250
Total C mg/Nm³ 50 -
166
b) Market situation and forecast for bioheat
There are nowadays many bio heat plants in Brandenburg. In last years they
have built many new plants, which produce heat and power.
c) Other potential customers
In Brandenburg there are several power and heating units, which use biomass
like wood chips as fuel. It’s seems to be possible to find new clients, if the
case company wants to widen its’ clientele and offer outsourced maintaining
and service to other bio heat plants.
The case company buys bio fuels from suppliers. There are several active
suppliers within the reasonable distance.
e) Competition
The case company should convince the heat supply plant owners to outsource
the service instead of running the plant by them selves.
INCOME €
TOTAL 580,500
COSTS
Wood fuel cost (wood chips from local suppliers) 61 114,900
Supplementary light fuel oil cost 62 50,310
Own energy use (electric) 64 25,200
Annual repairs 14,000
Ash removal cost 65 3,200
Administration & operation overheads 5% 11,298
Bought services 66 6,750
TOTAL 256,658

Depreciation 68
Other 0
60
7740MWh of heat * 75 €/MWh = 580,500 €
61
The estimated price of wood chip is 15 € per MWh (rounded figure). The total costs of fuel is 7660
MWh of heat * 15 € per MWh (rounded figure) (wood chips) = 114,900 €. Boiler efficiency is 90%. In
order to generate 6966 MWh, the company must buy 7660 MWh wood chip.
62
65 €/MWh
63
64
20 – 30 kW Elt-need in the plant at 7.0 ct/kWh
65
40 €/t
66
67
15 years at 6.5%
68
Treatment of depreciation for tax purposes depends on national legislation
167
TOTAL 257,151

Taxes 30% 20,007
INVESTMENTS €
TOTAL 2,460,000
Return on Capital Employed 69
Developer’s own funds 2,460,000
Payback time 13 yrs
The service company doesn’t have to do special investments.

• Basic office investments for communication like telephone and PC.
• Basic tools and equipments to make small service work.
• Car is needed if the person takes care of several heat supply plants. (a car
can be leased as well)
For the case service company a small bank loan is sufficient to start the activities
if the worker doesn’t have own capital.
Below are the financial assumptions covering the whole plant:
INVESTMENTS €
Biomass – boiler including 900,000 €
supply stock, furnace, boiler (hot
water generation), fuel gas filter,
container for ashes,
Chimney, height ca. 12 m 40,000 €
Circulation pumps, pipes, district 700,000 €
heating grid in the heating plant
HEL – boiler unit with tank unit 120,000 €
Electrical engineering, 120,000 €
instrumentation and control,
establishing connections to the
existing grid
Structural and civil engineering 500,000 €
(foundations, boiler building)
69
Profit before interest, tax an dividends, divided by the investment
168
Planning costs 200,000 €
TOTAL INVESTMENTS 2,460,000 €
Nominal heat capacity 4,300 kW
Peak load hours 1,800 h/a
Annual heat generation 7,740 MWh/a
Fuel need / consumption (wood) 370 kg/h 1,030 t/a
Investment costs for heat supply 1,760,000 €
station (without district heating
grid)
District heating grid 700,000 €
Total investment costs 2,460,000 €
Writing-down period 15 a
Interest rate 6.5 %
OVERALL COSTS
Costs of capital 324,000 €
2.0 % IH-costs 49,000 €
0.5 % insurance costs/taxes 12,000 €
Additional material 10,000 €
Labout costs (1 worker) 31,000 €/per 31,000 €
person
20 – 30 kW Elt-need in the plant 7.0 ct/kWh 25,200 €
0.03 m³/h water/sewage water 4.0 €/m³ 220 €
Ash removal 40 €/t 3,200 €
Fuel costs (wood) 12 €/m3Schütt 61,800 €
Fuel costs (HEL) 40 €/MWh 30,960 €
TOTAL COSTS 547,380 €
Specific heat costs €/MWh 70.70
5. Entry barriers
The combustion procedure must take into account differing fuel compositions.
Compared to fossil sources of energy (gas, oil, coal) the structure of wood is far
more complex. Therefore, the spectrum of expected emissions is much wider and
the assessment of combustion behaviour including ash-slag-softening can only be
determined by applying appropriate expert knowledge.
6. Risk analysis
Risks for the case company are mostly in maintenance and in fuel supply.
Risk in maintenance
169
• Unexpected technical problems show up before expected and take into
consideration while making yearly contracts
• Risks in fuel supply
• Fuel supply is depending on the partners
• Bad quality or changing quality
• Supplier don’t keep the schedule
• The fuel prices are getting very high fast, so that the agreed indicator does
not help to correct the price of sold heat
Risks for the break of heat production are minimized with the oil boiler unit,
which is a spare unit for emergency and peak time use.
….. …..
Pyhalahti, H. Poysti, J. (Ed) 2007. Wood burning biomass heat station 2.5kW. Finpro, Munich,
Germany. 5 EURES (EIE/04/086/S07.38582). Business Plan. 10 p.
Short rotation coppice in Lithuania – Picture Jelena Aneicik
170
WOOD CHIP SUPPLIER COMPANY
This is an example business plan for a wood chip supplier company. The company
used as example is privately owned by one entrepreneur and operated with two
additional forest workers. Home base is the region of Eberswalde, Barnim. This plan
was prepared by University of Applied Science, Eberswalde, Germany
1. Business idea
The company produces wood chips for energy purposes and sells them to
various regional customers. Furthermore the company offers a chipping
service as an additional source of income. This part of business is considered
to become more important during the next years because of the growing
interest in short rotation coppice (SRC) on farmland. Most small and medium
sized farms won’t buy chipping equipment so that the chipping business most
likely will be handed over to other companies.
Additionally a recycling service is offered for waste wood which
accumulates during landscape conservation activities, on construction sites or
simply from private gardening.
b) Fuel
The fuel procurement is done within a 50km maximum radius around the
targeted customers to keep transport costs low. The company will use mainly
felling residues and cuttings from private, commune and state owned forests,
landscaping industry, private home owners, municipalities (branches from tree
cuttings, trees from building sites etc.) and associated forest enterprises.
Especially the potential of unused resources in small private forests can be
considered as high. To get hands on these resources a strong cooperation with
private forest owners is targeted.
The company buys waste wood from the owner for a price of 0,50 € / m³ for
fresh cuttings and up to 4,00 € / m³ for higher quality wood. Additionally the
company rents a yard with storage capacities where private people, communes
and other companies can deliver tree residues for recycling and get paid for
them at the same price. This can be an alternative to the trash yard where
people have to pay to get rid of the material. On the company yard the residues
will be piled, stored and dried for approximately one year. Then the moisture
content will drop to an appropriate level which ensures high quality wood
chips. The chipping will be done at the company yard with the companies own
chipper in times where work load in forests and on the field is low.
Fuel sources and prices:
Fuel type Amount Price

Recycled wood (fresh branches, trunks etc. from 10 % 0,5 €/m³
tree cuttings)
delivered to wood chipping yard
Higher quality wood (diameter over 4cm) 10 % 2 €/m³
delivered to wood chipping yard
Wood from thinnings 40 % 0,5 €/m³
paid to forest owner
Residues from final fellings 20 % 0,5 €/m³
paid to forest owner
Landscaping wood 20% 0,5 €/m³
at constructing site, felling site etc.
TOTAL average 0,8 €/m³
c) Targeted customers
Municipalities (schools, official buildings, appartment blocks), public bodies,
heat (and power) plants. Long term contracts with the state & private forests
for wood supply and big consumers like CHP’s are considered as the most
effective way to assure a stabile work flow. A 10 year contract with a local
20MW CHP plant will assure the sale of fresh wood chips. The higher quality
chips will be sold to smaller customers.
172
Forest owners get an additional income from fellings and thinnings.
Municipalities and private persons can save (and earn) money with the
delivery of their woody residues.
Farmers with SRC fields don’t have to purchase equipment which they cannot
use effectively. Especially for farmers with small SRC fields it’s more
valuable to pay a contractor then to invest high amounts into special
equipment.
Municipalities will benefit from local value chains and reduced costs for
heating.
e) Way to operate
EWS Barnim ltd. owns mobile chipping equipment and operates with 3
people, where the owner is in charge of the company overall management, fuel
acquisition and marketing and the others are working in the energy wood
procurement.
In the forest the felling residues are arising within the regular final cuttings
and thinnings which are performed by other forest service companies. In the
case of full mechanised fellings, the felling residues are piled by the harvester
on one or both sides of the driving lane. So that the company’s mobile chipper
can drive, collect and chip the residues along these lanes in one working step.
The chips are blown into the bunker of the chipper.
In the case of thinnings, the small trees and residues will be placed on the
lanes (or along the lanes) by the harvester so that the front fed chipper can chip
those trees directly by driving on the lanes. If the thinned area is small or
unsuitable for full mechanised work, the thinning is done manually with
companies own workers.
The chips are emptied from the chipper’s bunker into truck containers along
the road side, which are provided by a logistics company. The whole logistical
distribution will be contracted to a separate company. In the further company
development it is planned to organise the logistics as a part of the company.
On short rotation coppice fields the approximately 4 year old trees will be
felled either manually by forest workers or with a subcontracted harvester on
bigger fields. If possible the trees will be piled for drying and chipped when
moisture content has dropped to ~ 30%. The chipping is performed directly at
the stand. Here the company only sells the chipping service to the farmer.
In case of wood removal from construction sites and landscaping, the wood
will be delivered to the companies’ wood yard or chipped on site if amounts
are bigger. Communes and private persons can deliver their woody material
directly to the wood yard. Restrictions are that the material has to be natural
and untreated, not too old and therefore decomposed and not contaminated
with other materials. The material will be stored and chipped when dry
enough.
173
Limited company because of:
• Investments in the equipment are fairly high
• Intentions to expand to transportation and perhaps to heat
entrepreneurship
i. Equipment
The mobile chipper is the highest investment of the company. It was decided
to buy a Silvatec 878 CH mobile chipper because driving through forest lanes
is mostly required under Brandenburg conditions, assuming that the highest
potential in Brandenburg comes from thinnings in scotts pine stands. The
chosen mobile chipper has the advantages of a small size, front feeding,
adjustable chip sizes and a mounted 16m³ container.
Mobile chipper SILVATEC 878 CH
Manufacturer SILVATEC A/S

Fabriksvej 50
DK-9640 Farso
Dänemark
Tel.: 0045/9863/2411
E-mail: silvatec@silvatec.com
Internet: www.silvatec.com
Type of equipment Mobile disc chipper for energy wood
chipping
Engine 205 kW
Chipping rotor Disc chipper
Feeder opening 350 x 350 mm
Max. diameter 350 mm
Chip lengths 15 - 35 mm
Range 6m
Length 9850 mm
Width 2170 mm
Hight 3000 mm
Other tiltable 16 m³ Chip container
Weight 19500 kg
Price € 470,000
Chainsaws are required for the manual felling of trees. It was decided to buy
two STIHL 260 chainsaws as they are suitable for felling as well as for
delimbing.
For storage and chipping yard an old, unused agricultural silo facility will be
rented. The advantage is that it’s cheap to rent such premises as lots of them
are still existing relicts from former agricultural collectives. Other advantages
are large storage capacities, concrete floors and the possibility to cover them
if required.
The office premises will be rented on or nearby the silo yard. Additional
office supply like paper, telephone, internet etc. will be listed and calculated
174
as monthly fixed costs. For bookkeeping, overall management and internet
connection one Laptop will be bought.
To reach the clients and for general business purposes, the owners own car
will be used and booked with 0,30 cent per driven km.
ii. Human resources
The company’s owner is responsible for the overall operation of the business.
He acquires the contracts, the raw material and is in charge of the sale. One
of the two forest workers is operating the mobile chipper. The other one is
doing the manual fellings and thinnings. In times of high work load the
owner is operating the chipper and both workers are felling.
The wood chipping yard will be open mostly on weekends and in the
afternoon. But via telephone flexible opening can be arranged. At these times
one person is at the site to receive the wood and residues.
h) Earning model
The produced wood chips are sold in the first year at a average price of 15,- €
per m³. Per year a rise of the wood chip prise of 0,50 € is included since the
wood chip market in Germany is still growing. This results in a rise in annual
turnover from 630.000€ in the first year to 714.000€ in the fifth year. The
operating result amounts to 132.099€ in the first year and to 396.367€ in the
fifth year. The net profit with deductions of loan repayments etc. is in the 1st
year: 335.108€ and in the fifth year: 1.856.026€ with no negative liquidity in
the whole time period.
Because forecasts in market development are not reliable in long terms,
financial calculations are performed only for a period of five years.
The prices for wood fuels in Brandenburg are expert knowledge and market
driven. There is no official wood fuel price index existing in Germany. Only
for some regions there are evaluations of regional pricing. The difference in
wood chip price can be very high between rural areas and big cities or
between East and West Germany.
The assumed rise of the price index can be considered as low. In the past
three years the price of wood chips has risen about 1,50€ on average per year.
This can compensate a possible price increase of the raw material.
If business develops according to the financial forecast, it is planned to
invest into a truck and containers to take over the transportation service in the
6th year. But this depends on the business performance in the first years. If
the business profit is lower than planned, this investment has to be
postponed.
Highest work load for forest operations are autumn and winter time because
naturally fellings and thinnings are highest at these times. Plus heat demand
is at peak in these times as well, so that the request for wood chips will rise.
Unlike the forest work, landscaping and gardening work are highest in
spring, summer and autumn. So that in this time most operations are taking
175
place in these fields. It is expected that the wood recycling yard will have the
most clients in spring and summer time.
For harvesting short rotation coppice only autumn comes into question. The
chipping could be done right away or in the next summer when the wood has
reached lower moisture contents.
The municipality with its premises and the local CHP are the main clients for
selling the produced wood chips. Other clients are private users or small
companies heating with wood chips.
Chipping clients are mainly farmers with short rotation coppice on their
fields. Here either only the chipping service is sold or the company buys the
whole stand and sells the chips itself. The chipping service will also be sold
on demand to other customers.
Main partners are local forestry entrepreneurs, landscaping companies,
logistic companies, forestry offices, forest and land owners.
2. Market situation
years. Therefore the interest in wood fuels has risen significantly. Right
now heating with wood is considered to be a real alternative, unlike a few
yeas ago. More and more companies and municipalities are changing their
oil ands gas heating systems into renewables, because life expectancy of
their old systems expires and reasons to change the type of fuel are obvious.
A rise in the demand of chopped firewood in the private sector is also
recognised, therefore it is planned to expand the companies work field to
the production and sale of chopped firewood. The possibility to work as a
heat contractor for municipalities could be considered when some
experience in the field of heating systems exists.
Currently combined heat and power systems have a great development
potential in Germany, due to the fact that from biomass generated electricity
is rewarded with an over 20 years guaranteed feed in tariff. In 2006 the feed
in tariff for biomass based electricity was for plants up to 20 MW: 8, 15
ct/kWh and 11, 16 ct/kWh for plants under 150 kW.
Grants for wood chip boilers are available for private persons, SME,
communes and associations. Automatically filled wood chip boilers from 8
kW to 100 kW can get 60 € per kW, but at least 1700 € if the boiler
efficiency is 90% minimum.
Beneficial loan models for CO2 saving investments are available from the
KFW Bank as well.
c) Customers
The municipality, the local CHP plant as well as private customers are main
wood chip customers. Another possibility would be to sell the wood chips
to a trading company, but a direct sale to the customer is preferred.
176
Customers for chipping service are farmers, forest- and land owners,
communes, landscaping businesses and other private persons.
From state and private owned forests, short rotation fields, municipal waste
wood, landscaping, recycled wood etc.
e) Competition
There are no direct competitors existing in the Eberswalde region which are
offering wood chips or a particular chipping service for energy wood.
The trash yard in Eberswalde receives woody residues and shreds them for
composing. People have to pay a fee for that service.
In the wider periphery of Eberswalde are the following companies offering
wood chips:
- Energieholz Dr. Falk Brune
Birkenallee 3, 16837 Zempow, Tel.: 033923-76911, Fax 76921
- BHB Biomassehof Brandenburg GmbH
Gewerbering 9, 14641 Zeestow, Tel.: 033234-89167, Fax 89168
- Fa. Fehring, Herr Busch
Tel.: 030 7051000, 0451-393060, Fax 3968220
- Akademie für Abfallwirtschaft
Andre-Pican-Straße 3-5, 16515 Oranienburg, Tel.: 03301-535404,
Fax 535406
- GEBECON
Tessenowstr. 13B, 13437 Berlin, Tel.: 030 81461240, Fax -1461241
- Forstunternehmen Ulf Mösenthin
Dorfstraße 6, 16798 Fürstenberg OT Neuthymen, Tel.: 033093 3 20
69, Fax 3 20 69
- biolistic, Frau Jänicke
Gutachstraße 21, 13469 Berlin, Tel.: 030 43745288, Fax 43746049
- BIOMASSE, Andreas Anisch
Küllstedter Straße 20A, 13055 Berlin, Tel.: 030 322 74 34
3. Financials
a) Summary
Total investment costs are 500.000 €. This comes from the KfW Förderbank
as a 100% loan for investments on renewable energies. The KfW
Förderbankbank supports projects and investments in environmental
protection, energy saving and renewable energies with different grants and
beneficial loans.
The interest rate for this kind of investment amounts to 6,05%, but lower
rates are possible. The payback time for the loan is eight years where the first
two years are payback free. After that monthly payback amounts are due. The
owner guarantees the loan personally plus the loan is secured to companies’
equipment.
Additionally to the bank loan, the owner gives 15.000 € equity capital to the
company. This avoids problems in liquidity in the first months because of
time lags in payments. After one year the loan will be paid back in one sum.
The interest rate for this loan is 6%.
177
b) Equipment
SILVATEC 878 CH chipper
Purchase Costs (A) € 470.000

Interest rate (p) % 6
Life expectancy (n) years 8
Machine hours / year h 1.400
Insurance € / Year 7.000
Repair factor % of depreciation 75
Fuel consumption Liter per machine hour 20
Fuel price € / liter 1,00
Lubricants % of fuel costs 10
1. Fixed operating costs
Interest A/2*p/100 14.100
Insurance € 7.000
2. Depreciation A/n 58.750
3. Variable operating costs
Fuel l/Mh*€/l*Mh/a 28.000
Lubricants S% * Fuel 2.660
Repair R% * depreciation 44.063
TOTAL €/a 154.573
€ / M. hour 110,41
Chainsaw STIHL 260 (2,6kW / 3,5 PS )

Purchase Costs (A) € 629
Interest rate (p) % 6
Life expectancy (n) years 3
Machine hours / year h 900
Insurance € / Year
Repair factor % of depreciation 75
Fuel consumption Liter per machine hour 2
Fuel price € / liter 1,30
Lubricants % of fuel costs 10
1. Fixed operating costs
Interest A/2*p/100 18,87
Insurance
2. Depreciation A/n 209,67
3. Variable operating costs
Fuel l/Mh*€/l*Mh/a 2.800
Lubricants S% * Fuel 280
Repair R% * depreciation 157,25
TOTAL €/a 3.465,80
€ / Mh 3,85
178
c) Operation
Sale and production of Wood chips:

8h * 30m³ = 240m³ / d
1400 Machine hours * 30m³ = 42000 m³ / a
Average price for wood chips at plant: 15 € / m³ (10€ for W 50%; 20€ for
W 30%)
Price increases: 0,50 € per year on average, although the range of prices in
one year can amount up to 10,- €. This development in prices can be
considered as stabile due to the increased number of wood fuelled CHP’s
in the region and the growing interest in wood fuels in general.
1st year: 42000m³ * 15€ / m³ = 630.000€ income

2nd year: 42000m³* 15, 50€ / m³ = 651.000€ income
3rd year: 42000m³* 16,00€ / m³ = 672.000€ income
4th year: 42000m³* 16,50€ / m³ = 693.000€ income
5th year: 42000m³* 17,00€ / m³ = 714.000€ income
The chipping service should be seen as an extra operation in the first years.
Therefore the profit from chipping is not integrated into financial
calculations yet. It is expected that this service will extend over the next
years. Right now only a few short rotation coppice fields existing in
Brandenburg. At the beginning the chipping service will be sold for 5€ per
m³. The price may rise according to fuel costs and demand.
Average raw material purchase price 0,8 €/m³

Transport costs Logistics company 4, 50 € / m³
assesses average for transportation
Staff costs (monthly)
Employer’s salary: 3000€
Forest worker 1 salary 1600€ + 22% non wage labour
costs (352€)
Forest worker 2 salary 1600€ + 22% non wage labour
costs (352€)
TOTAL 6904 € per month
Office set up
Desk, chairs, table 3000€
Laptop 1200€
Tel./printer/fax/scanner 500€
Overheads (monthly)
Office rent 200 € / month
Silo yard rent 200 € / month
179
Office supplies etc 120 € / month
Telephone/Internet 120 € / month
Insurance chipper 7000 € / year 583€ / month
Chipper (gas, oil, repair etc.)
Chainsaw (2x)
Legal advice service 2500€/ a 208,33€ / month
Travel costs 10.000 km * 0,30 €/km =
3000€/a 250€ / month
d) Investment- and depreciation plan
Investment 1: Chipper 470.000€ / 8 years depreciation

Depreciation 1: 58750€ / a 4895,83 € / month
Investment 2: 2 x chainsaws 1258€ / 3 years depreciation

Depreciation 2: 419,33€ / a 34,94€ / month
Investment 3: Laptop, Printer, Telephone 1700€ / 3 years depr.

Investment 4: Office furniture 3000,- / 13 years depreciation

Depreciation times are derived from official AfA – Tables (Derivation

tables for investment goods) for forestry and agriculture from the federal
ministry of consumerism, nutrition and agriculture.
e) Financing costs
The first two business years are free of repayments for loans. From the
third year the loan will be paid off linear every half year. The loan
repayment is calculated that the loan is cleared with the end of the
depreciation time.
From 3rd to 8th business year:

500.000 €/6 years (remained depreciation time) = 83333,33€ 6944,44€ /
month.
The interest rate for the bank loan amounts to 6,05%.
180
f) Profit and loss calculation
4th 5th
1st year 2nd year 3rd year year year
Teuro % Teuro % Teuro % Teuro % Teuro %
Turnover 630,000 651,000 672,000 693,000 714,000
inventory changes+/- 0 0 0 0 0
Activated own contribution 0 0 0 0 0
Operating performance 630,000 651,000 672,000 693,000 714,000
Other incomes 0 0 0 0 0
Operating income 630,000 100 651,000 100 672,000 100 693,000 100 714,000 100
- cost of materials -33,600 0.0 -33,600 0.0 -33,600 0.0 -33,600 0.0 -33,600 0.0
- staff effort -82,848 0.0 -82,848 0.0 -82,848 0.0 82,848 0.0 82,848 0.0
- normal deduction -59,967 0.0 -59,967 0.0 -59,967 0.0 -58,865 0.0 -58,865 0.0
- interest effort -31,113 0.0 -30,250 0.0 -27,729 0.0 -22,688 0.0 -17,646 0.0
- -
-- other efforts -290,373 0.0 -290,369 0.0 -290,369 0.0 290,370 0.0 290,370 0.0
- -
Operating expense -497,901 0.0 -497,034 0.0 -494,513 0.0 322,674 0.0 317,633 0.0
Operating results 132,099 100.0 153,966 100.0 177,487 100.0 370,326 100.0 396,367 100.0
public subsidies/raises 0 0 0 0 0
Other neutral income 0 0 0 0 0
- neutral charges 0 0 0 0 0
Stated result 132,099 153,966 177,487 370,326 396,367
Employees (average) 3 3 3 3 3
Indicators
Sales earnings/month (teuro) 52,500 54,250 56,000 57,750 59,500
Operating performance/month
(teuro) 52,500 54,250 56,000 57,750 59,500
Oper. perf. /Employee (teuro) Betriebsleist . /Besch . (teuro) 217,000 224,000 231,000 238,000
Processing perf. /Employee
(teuro) Veredel.leist . /Besch . (teuro) 205,800 212,800 219,800 226,800
Personnel costs /Employee (teuro) Personalaufw . /Besch . (teuro) -27,616 -27,616 27,616 27,616
Operational cash-flow (teuro) 192,066 213,933 237,453 429,191 455,233
Stated cash-flow (teuro) 192,066 213,933 237,453 429,191 455,233
Net profit ratio (%) 21 24 26 53 56
181
Good knowledge about the regional wood market is required to enter the biofuel
business in Brandenburg, since a run on the small diameter assortments has
started. The owner comes from the region and has studied forestry in the region.
Therefore he knows the market. Good contact to private forest owners
association and local forestry helps to get hands on those resources. Private
contacts to the municipal administration secure the fuel supply from this side.
Meetings with potential customers where held in advance of the business
establishment. That secures the sale of the produced chips. Additional
advertisement on bio energy events, in newspapers and in the internet should
attract more customers.
Some of the owners farming and forestry equipment can also be used for fuel
handling at the wood yard. This reduces investment costs.
5. Risk analysis
The fuel availability is considered as the limiting factor. A constant work load of
the chipper is crucial for the whole company performance. Therefore great care
should be taken when organising the chipping sites and amounts of residues
available. In times with no work in the forest or on the field, the chipper will be
used to chip the wood accumulated at the wood yard.
The biggest end user is one 20MW CHP in the region. Long term contracts (10
years) secure a stabile sale. Additionally municipalities with small heating
facilities and private customers can receive the better quality chips. If the
demand is higher then the productivity, one additional employee will be
engaged for peak times in autumn and winter.
The increase in fossil fuel prices could cause higher operating expenses. This
will be compensated with a fairly low price rise of the sold wood chips contrary
to the faster rise of the market prices.
6. Financial details
For financial details see the annexed tables!
….. …..
Laufer, S. 2007. Wood Chip Supplier Company. University of Applied Science (Fachhochschule
182
Directory
1 MW, boiler, residue 63
1 MW, pellet gasifier 57
150 kW, chips 133
220 kW, residue 106
250 kW, pellet 124
2500 kW heating plant 162
3 MWe CHP with biomass 155
300 kW, pellet 100
350 kWe gasifier 155
365 kW, resiude 96
40 kW, pellet 80
50 kW, pellet 94
abandoned fields growing energy wood 42
accumulator tank 164
advertising 41
alkaline and acidic materials in biofuel 24
Allu Screener Crusher SC 24, 26
analysing incoming biomaterial 23
ash 16
ash from tree bark 18
ash heavy metal content 18
ash material nutrient content 18
ash melting temperature 23
ash recycling 14
ash spreading 15
ash to agricultural lands 18
automated mixing silo with gribber 28
automatic start of boiler 164
average yield of energy wood from forested areas 46
back up,oil boiler 68, 127, 164
base load 125
bioenergy boilers and fuel 22
biofuel mixer-crusher-screener attached to wheel loader 22
biofuels price index 65
biomass accumulation 34
biomass CHP 98
birch stands 42
black locust 133
boiler response to peak load 84
boiler investment costs, optimization of 164
boiler at low loads 84
calorific value of pellet 80
calorific value, biomass 29
campus community 163
183
carbon dioxide generated from biomas 57
carboneus ash 58
chipper at work 22, 72
chipping service 172
chipping yard, wood 176
chopped firewood: 50
chopped wood 53
CHP 98, 133, 155, 182
CO2 to fertilise plants by gasifying wood pellets 57
combustion chamber 127
company answering a tender 104
company owned by the municipality. 100
concession period 104
concession 105, 113
condensing heat exchanger & gas cleaner unit 57
consumer biofuels 48
container heating plant 162
contractor 40, 54, 66, 68, 77
converting farm tractor to forest use 43
crushing demonstration 47
degasification procedure 166
depot 23
depreciation for tax purposes 45
directives for the contents of recycled wood ash 18
disc spreader mounted to forwarder 14
distributing firewood, pellets and briquettes 48
district heating network 35
diversified and inhomogeneous fuels 165
DIY-Stores, boiler & chimney suppliers 49
drying chamber 49, 174
electricity production with wood coming from silviculture 108
emissions 166
energy wood harvesting head with accumulating grips 44
energy wood harvesting hours / Hourly cost 42
energy wood thinnings 41
European Committee for Standardisation 27
excavators and frontloaders 27
exit plan., heat division to a local investor 77
farm tractor to forest use, conversion 43
farm tractor 41, 70
farmer 133
fast growing tree species 133
feeding system adaptation 118
fertilizer. 57
fertilizes forest with ash 15
fertilizing contracts 15
184
fire prevention. 36
firebox 127
Firewood production in Finland 118
firewood suppliers 48
flue gas 57
fly ash granulates 18
foreign materials in biofuel 24
forest cabin for tractor 43
forest chips 23
forest company 107
forest fertilization 15
forest fires 34, 96, 110
forest machine contractor 14
forest operators 55
forest owner 14, 15, 55
forest owners’ association 15
forest residue 23, 55
forest work on the mountains 72
forwarder and a changeable spreader 16
fuel silo and supply system/ 58
fuel supply 24
gas cleaner unit 57, 159
gasification 155
gasifying boiler 57, 68
glasshouses 57
grain silo 119
granulated residue from municipal waste water plants 15
granulating facility 15
grate boilers 164, 166
guaranteed quality and certified standards 49
harvesting method for SRC trees 133, 177
heat company, 250 kW pellet heat plant 125
heat contracts 126
heat division of municipality 77
heat entrepreneur to sell heat 41, 63, 112, 113
heat exchanger 57
heat load of a spa 65
heat peak demand 67
heat supply company 105, 128
heating silo at unloading points 28
high harvesting costs due to small stem size 41
hot water accumulator tank 164
hotel / Spa 63, 79, 94
hourly costs of forestry equipped farm-tractor 42
improve the forest growth and wood quality 15
industrial cooking. 118
185
industrial use of heat 118
information exchange 55
information quality on forest plots 56
internet forest residue business 54
internet pages for forest owners and forest operator 54
KEMERA grant 17, 41
Lles de Cerdanya 35
location of the business 50
log production line in Abrantes 22
logging residue haulage 86
long term supply contracts 50
low emissions 165
low harvesting removal per hectare 41
low loads, boiler 84, 164
low wood price 34
mineral lands 18
mixer-crusher-screener attached to wheel loader 22
mixing biofuel 22
mixing biomaterials into uniform qualities 23
mixing silo 28
modular design of power plant 158
moisture level 23
monthly peak demand 67
Mud 36, 96
municipal brigade obtain the biomass 36
municipal company 99
municipal district heating system 36
municipal facilities 124
municipal sports hall 94
municipal swimming pool 99
municipal waste water treatment plants 15
municipalities 34
municipality client 125
municipality forests 95
municipality heating 74
municipality 112
municipally tendering 105
municipally tendering 113
negative price 17
nitrogen 18
non-profit hat operation 77
NOx 58
nut shells 119
oil price index 65
operational biofuel network 29
optimal location of a business 50
186
optimization of boiler investment costs 164
optimize management of their operations 29
organising the chipping sites 182
park and forestry management division 77
particle board chip 119
particle size of biofuel 24
peat lands 15, 67, 84, 164, 166
peatlands 18
pellet burner 40 kW 80
pellet silo types 80, 100
pellets 126
plant, boosting production 58
planting system 133
pneumatic feeding system 119
poor fuels 68
poplar 133
power plant operating hours 158
power plant, modular design 158
price indexes 65
price variations 113
price, heating projects can pay a higher price for biomass 116
profitable transport distances 23
propane to biofuel 105, 112, 113
pruning trees 95
public buildings 35
pulp mill power stations 18
pyrolytical decomposition 166
ranking organic cycle 159
recovery of carbon dioxide 58
recultivation 133
recycling yard, wood 177
registration fees from forest operators 56
removing fuel price instabilities 105
replace oil burner 79
replace propane with biomass 104, 105
response time to peak loads 164
revising techniques for tractor 43
risk of not having enough energy wood sites available 46
rot / selfcompost / self-ignite 25
sawmill 37
school 74, 104, 105, 112
secondary air 166
second-hand farm-tractor 41
selfcleaning function 127
self-compost 25, 63, 74
selling carboneus ash to power plant 58
187
selling CO2 production 58
selling energy to the community 58, 162
shielded underframe for tractor 43
short rotation coppice (SRC) on farmland 172
short rotation coppice 133
silo 57
small municipalities 34
Small scale CHP plant using wood gasification 155
Snow 36, 96
social company 100
sourcing biomass 22
Spa 63
sports hall 94
SRC - short rotation coppice 133
standardised sales terms and delivery conditions 49
steam cycle 159
stoker burner 127
subscribers.of web information system. 56
supply chain 29
Sustainable Forestry. Subsides 108
swimming pool 99
tank, hot water 164
thinnings 40
tractor operating, repair and maintenance cost 45
tractor 42
trader of biofuel 23
traditional firewood 37
transport demonstration 47
transport distance 23
traveling time 41
tree bark from sawmills 23
tree stumps 23
tree surgery residue from park management 23
tube boiler 127
unburned carbon 58
variations of the fuel composition 165
various fuel sources 23
waste water treatment plants 15
waste wood 173
wear and tear of boiler 24
web database 55
wet and very poor fuels 68
wheel loader and biofuel mixer-crusher-screener 22, 26
willow planting 133
wood chip heating 65
wood chip supplier company 29, 172
188
wood chipping yard 176
wood energy contractors (forest operators) 55
wood gas cleaner unit 57
wood gasification 155
wood pellet burner & boiler 79
wood pellets prices 133
wood pellets to heat greenhouse 57
wood recycling yard 177
wood yard 49
work load of the chipper 182
young thinnings 40
189

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EURES FIVE EUROPEAN RENEWABLE ENERGY HEAT PILOTS

EXAMPLE OF BIOENERGY BUSINESS PLAN

Nunes, Elsa (IrRADIARE); Nogueira, Marcos (IrRADIARE); Henriques, Rui

Vaatainen, K. Karppinen, H. Poysti, J. (Ed) 2007. Forest Residue Information

Nunes, Elsa (IrRADIARE); Nogueira, Marcos (IrRADIARE); Henriques, Rui

Nunes, Elsa (IrRADIARE); Nogueira, Marcos (IrRADIARE); Henriques, Rui

Correal, E., Rodriguez, J. (Forestry Management Service; Directorate – General for

Nunes, Elsa (IrRADIARE); Nogueira, Marcos (IrRADIARE); Henriques, Rui

Laufer, S. 2007. PELLET BURNING BIOMASS HEAT SUPPLY STATION 250

Nunes, Elsa (IrRADIARE); Nogueira, Marcos (IrRADIARE); Henriques, Rui

Laufer, S. 2007. Wood Chip Supplier Company. University of Applied Science

Explanations for Business Plan content

Jyrki Poysti, Finpro, 2008

ASH RECYCLING FOR FOREST FERTILISATION

Picture: Wood ash recycling with a disc spreader mounted to forwarder.

OPERATING PROFIT / LOSS 41,000

PROFIT BEFORE TAX 26,505

NET PROFIT / LOSS / SAVINGS 16,505

4. Sources of funds and financial assumptions

Tariff rate for recycling of ash 60 €/ha (15 €/tonne)

Disc spreader device and scoop

Vaatainen, K. Tahvanainen, T. 2007. Ash Recycling for Forest Fertilisation. 5 EURES

Chipper at International Energywood Week, Eberswalde, Germany 23.01.-27.01. –

BIOMASS SUPPLIER MIXING BIOMASS FROM VARIOUS

Picture: Biofuel mixer-crusher-screener attached to wheel loader is the main

Moisture distibution of biofuel storage piles

Source: VTT Processes

Picture: Moisture and temperature of the biofuel storage piles should be

Picture: Allu Screener Crusher is attached to wheel loader tractor bucket

OPERATING INCOME 92,560

Financial costs (repayment of loans) 10 55,678

PROFIT BEFORE TAX 36,882

NET PROFIT / LOSS / SAVINGS 25,817

Automatic gripper can be programmed to take different quality of fuels from

5. Entry barrier analysis

in from various sources.

BIOMASS SUPPLY CHAIN MANAGEMENT

Operating profit / loss 163,600

Financial costs (repayment of loans)

5. Entry barrier analysis

DISTRICT HEATING NETWORK FOR MUNICIPALITY OF LLES DE

Moreover the weather conditions the forest accessibility in many ways:

Operating profit /loss 34,990.9

Financial costs 3.5% 5,150.18

SOURCES OF FUNDS Total (€)

7. Entry barrier analysis

FORESTRY MANAGEMENT SERVICE; DIRECTORATE – GENERAL FOR THE

Keywords Bioenergy, wood fuel, benefit, balance, cost, price, Catalonia

ENERGY WOOD HARVESTING WITH FARM TRACTOR

Picture: The hourly costs of forestry equipped farm-tractor as a

ii. Human resources

OPERATING INCOME 17,960

Financial costs (repayment of loans) 16 8,616

PROFIT BEFORE TAX 9,344

NET PROFIT / LOSS / SAVINGS 18 6,541

Transport demonstration in Vilnius, Lithuania 2005 – Picture Jelena Aneicik

FIRE WOOD SUPPLIER FOR CONSUMER SECTOR

This is an example business plan for a company processing (manufacturing) and

Picture: Pinosa "EPC 3300" firewood processor at www.pinosa.net

1. year 2. year 3. year

Operating Profit / Loss

Profit before tax 118.582 261.548 363.788

Net profit / Loss / Income 118.582 261.548 363.788