Maybe most obvious example of unsustainable energy systems in Bosnia and Herzegovina are district heating systems, there are several reasons for that: most of them are old, built in seventies, and requires reconstructions and technical improvements, a lot of them running on expensive liquid of gaseous fossil fuels, and tariff system is more socially oriented than market oriented. There is also one important issue which makes whole concept unsustainable and requires urgent solutions, mayor shareholders of those systems are local communities, and functioning of DHS is directly affecting on their annual budgets. Due to that bioenergy can became solution for some of them, particularly with approach which consider use of clean development mechanisms of Kyoto as the one of the approaches which can make those projects sustainable.

The Clean Development Mechanism (CDM) is the one of the three flexible mechanisms (the other two are l Emission Trading — ET, and Joint Implementation — JI) which allows entities from Annex I (developed) parties to develop emission-reducing projects in non-Annex I (developing) countries, and generate trade able credits — CER credits (CER — Certified

Emission Reduction, one CER is equivalent to one tonne of CO2 emission reduction) corresponding to the volume of emission reductions achieved by that project.

Depending on the scale of the projects CDM projects can be classified into large-scale or small — scale projects.

There are three types of small-scale project activities; Type I: renewable energy project activities with a maximum output capacity of 15 megawatts (or an appropriate equivalent); Type II: project activities relating to improvements in energy efficiency which reduce energy consumption, on the supply and/or demand side, by up to 60 GWh hours per year (or an appropriate equivalent); Type III: other project activities that result in emission reductions of less than or equal to 60 kilotonnes of carbon dioxide equivalent annually.

Any CDM project activity not possessing the above mentioned characteristics is considered a large-scale CDM project activity.

Several options proposed under the CDM rules allow the development of CDM programmes, among them being bundles, PoAs, and several stand-alone CDM activities.

By definition, a CDM PoA is considered »a voluntary coordinated action by a private or public entity which coordinates and implements any policy/measure or stated goal (i. e. incentive schemes and voluntary programmes), which leads to GHG emission reductions or increases net GHG removals by sinks that are additional to any that would occur in the absence of the PoA, via an unlimited number of CDM programme activities (CPAs)« Bundling is a modality allowing the validation and registration of several project activities (small or large scale ones) within one CDM entry. Just like PoAs, bundles allow significant economy of scale while developing several CDM activities together.

In Bosnia and Herzegovina District Heating Systems are generally concentrated in larger cities. According to available data, currently in Bosnia and Herzegovina exists 25 District Heating Companies (12 in Republic of Srpska and 13 in Federation BiH).

District Heating Companies in Republic of Srpska mainly relies on its own boiler facilities, which mainly use fossil fuels (fuel oil, coal, gas). The exception is the District Heating Plant in Pale which as addition to coal use also biomass (waste wood) and Sokolac (only biomass). Estimated consumption of biomass in district heating sector in Republika Srpska in 2012 amounts about 1218,00 tonnes (0,1219 PJ) [16].

According to data listed in [17] the installed capacity of boilers in District Heating Companies in Republic of Srpska is 483.5 MW, the district heating sector is heated about 40 000 flats with a total area of about 2.3 million m2 and about 460 000 m2 of office space. According to available data, during the 2010 District heating companies in Republic of Srpska delivered to consumers about 1483 TJ of heat energy [1].

In Federation of BiH, the largest number of district heating systems also use fossil fuels (coal, fuel oil, gas). A certain number of district heating companies do not have their own thermal aggregates such as boiler units, but are connected to local heat production facilities — thermal power plant on coal (Tuzla, Lukavac, Kakanj) or Ironworks in which is also the primary fuel coal (eg, Zenica). The largest district heating system is in Sarajevo (installed capacity of boilers is 488.694 MW and the connected heat load is about 333.162 MW) that uses mainly gas as a fuel [18].

In Federation of BiH, also two district heating systems (in Gradacac and in Livno) use biomass as primary fuel. According to available data, consumption of biomass in these two companies during the heating season 2010/11 amounted to 14 980 m3 (Gracanica 12880 m3, Livno 2100 m3) and to consumers has delivered around 25.6 TJ (Gracanica 20,218 TJ, Livno 5,381 TJ) of heat energy.

According to available data, during the 2010 District heating companies in Federation of BiH delivered to consumers about 3913 TJ of heat energy [2].

One way to improve the current situation in the district heating systems which using fossil fuels is the partial or complete replacement with biomass fuels where it is possible. Those projects can be attractive as CDM project.

The analysis conducted in the District Heating Companies in Gradiskaand Prijedor] which use heavy fuel oil as fuel has shown that realisation of proposed CDM Programme of Activities (PoA) would led to lower heat prices, openning of the new jobs, reduction of fossil fuels dependency of Bosnia and Herzegovina and reduction of CO2 emission. In addition, by selling CERs District Heating Companies would provide additional revenues that could invest partially in the modernization of existing systems.

The District Heating Company in Gradiska provides heating for about 1740 buildings (residential buildings, public buildings such as kindergarten, schools etc. and other facilities). The vast majority of these, about 50%, are residential apartment buildings. Heated floor area in residential buildings is about 75 000 m2. It produces heat in a central boiler house, consisting of two 11.8 MW boilers with a combined capacity of 23.6 MW. The boilers are fired by heavy fuel oil, and the total connected heat load in the town is about 16.8 MW.

Average annual fuel consumption during the heating seasons (2008-2010) is about 1516 tonnes of heavy fuel oil, and heat supplied to the district heating network is about 13,35 GWh/yr. Consumption of heavy fuel oil has been increasing each year because of connection of new customers to the existing district heating network.

The District Heating Company in Gradiska intends to install a new 6 MW wood biomass boiler for production of thermal energy for heating residential and commercial facilities in Gradiska. The new biomass boiler will be installed within the existing boiler house of the company. During the heating season, the biomass boiler will provide the base heat load. In that way, the Public Communal Company "Toplana" A. D. Gradiska has estimated less consumption of heavy fuel oil (which is currently the only fuel for production of thermal energy) by approximately 1080 tonnes annually.

As part of the project, the wood biomass boiler will be connected with the existing boilers in a parallel function enabling the use of both heavy fuel oil boilers for covering peak heat load during the coldest winter days. As a result of implementation of this project, the new installed heat capacity in production will be 29,6 MW.

Biomass fuel should be transported by a truck from the local Forestry Company or local biomass factory, about 30 km to a storage area, which will be built close to the existing boiler house. The amount of transported biomass will be supported by invoices. Calculation shows that payback period with estimated investment of 2.87 million EURO and CDM is about 6 years and 5 months.

Toplana A. D. Prijedor, the district heating company (DHC) is a main producer of heat for the town of Prijedor and it covers nearly 320 000 m2 of building surface for heating. Installed heat power is 2×30 MW via two boilers. Total connected heat load in the town is about 30 MW (the second boiler is technical reserve). Annual heat energy production is approximately 50 GWh.

Today DHC uses heavy fuel oil for combustion. One of the existing boilers of 30 MW will be reconstructed in order to use wood pellets. This boiler will be the base load boiler, while the other existing boiler will be reserve and peak load boiler. The needed wood pellets will be produced by the DHC and it is a part of the project.

Production of wooden pellets includes a complete introduction of the new technological line for production of wood pellets (Figure 1). The wood pellets will have the following parameters: 6 mm diameter, 10% of moisture, 1 % of ash, and 5 kWh/kg calorific value.

The capacity of the technological line for production of wood pellets will enable production of 4 t of pellets per hour. This capacity will be sufficient for the continuous production of heat during the heating season. In addition, pellets will be produced outside the heating season and all production surpluses will be sold on the market. Raw materials used for the production are wooden sawdust, waste wood and wooden logs that are categorized as firewood. Warehouses for the reception of raw materials are located near of the boiler house and have the capacity of 20 000 m3. Energy from wood pellets will replace energy from 4901 t of heavy fuel oil. The total amount of pellets needed per heating season is about 11272 t. To produce this amount of pellets, DHC in Prijedor should provide at least 25362 m3 spatial raw wood with 50 % humidity.

Calculation shows that payback period with estimated investment of 4.4 million EURO and CDM is about 5 years and 8 months, which is one year shorter than project without CDM. Reduction of CO2 emission from the project will be 14 381 t/yr.