Biogas Filling Station Study Assesses Feasibility, Profitability

BIOGAS FILLING STATION FEASIBILITY AND PROFITABILITY STUDY
ERKAS Valduse O
2010 TARTU
Biogas Filling Station Feasibility and Profitability Study
Contents
Introduction ............................................................................................................................................4 Current Situation.....................................................................................................................................6 Natural Gas and Biogas .......................................................................................................................6 Natural gas ......................................................................................................................................6 Biogas..............................................................................................................................................6 Gas Production................................................................................................................................7 Compressed Natural Gas Filling Stations ............................................................................................8 Vehicles Consuming Compressed Natural Gas ...................................................................................8 Technical, Constructional, Environmental and Safety Requirements of Compressed Natural Gas Filling Stations ......................................................................................................................................... 9 Analysis of Target Groups and Description of Client Base....................................................................11 Target Groups ...............................................................................................................................11 Competition Analysis ............................................................................................................................14 Compressed Natural Gas Filling Stations ......................................................................................14 Other Filling Stations.....................................................................................................................14 Fuel Prices .....................................................................................................................................15 Potential for Compressed Natural Gas Filling Stations.................................................................16 Initial Analysis of Compressed Natural Gas Filling Stations Locations..................................................17 Financial Analysis ..................................................................................................................................19 Methodology.........................................................................................................................................19 Basic Data..........................................................................................................................................19 Cost of Investment........................................................................................................................19 Accounting Period and Residual Value .........................................................................................20 Discount Rate................................................................................................................................20 Macroeconomic Input Data ..........................................................................................................21 Taxes .............................................................................................................................................21 Financial Analysis ..............................................................................................................................23 Operating Income and Costs.............................................................................................................23 Operating Income .........................................................................................................................23 Operating Costs.............................................................................................................................24 Investment Costs ..............................................................................................................................27 Filling Station Equipment and Installation....................................................................................27 Costs of Building Compressed Natural Gas Filling Station............................................................27 Costs of Financing Investments ....................................................................................................29 Financial Analysis ..............................................................................................................................31
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Profitability of Filling Stations with a Fast-fill System...................................................................31 Profitability of Filling Stations with a Slow-fill System aka Depot Filling Stations........................32 Comparison of the Two Types of Filling Stations..........................................................................33 Risk Assessment ....................................................................................................................................35 Analysis of Environmental Impacts.......................................................................................................37 Environmental Impacts of a Filling Station .......................................................................................37 Environmental Impacts of Building a Filling Station .....................................................................37 Environmental Impacts of Using a Filling Station .........................................................................37 Indirect Environmental Impacts of Building a Filling Station............................................................38 Reducing Pollution ........................................................................................................................38 Summary ...............................................................................................................................................40 ANNEXES ...............................................................................................................................................41
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Introduction
This feasibility and profitability study has been carried out within the framework of the Baltic Biogas Bus project. The strategic aim of the project is to achieve a more extensive use of biogas as a renewable energy source in the Baltic Sea region public transport. It is funded within the Baltic Sea Region Programme in the amount of 4.2 million EUR. The greatest pollutants of city air are public transport, industrial activities and the heating of buildings. Hence, means of transport can be viewed as the main pollutants of city air. In Europe, for example, an estimated 70% of carbon dioxide, one of the causes of global warming, originates from the transportation sector1. In addition to carbon monoxide (CO), the exhaust gases of internal combustion engines contain nitric oxide (NOX), sulphur dioxide (SO2), and very fine particular matter (PM) or simply soot, which all pose a health hazard. Besides global problems climate changes brought about by the so-called greenhouse effect and the destruction of the ozone layer , the pollutants catapulted into the air in the exhaust gases of means of transport are also the source of local problems for the life and health of living organisms, not to mention materials. Various studies have proven that air pollution has a direct impact on our health. Based on the air pollution monitoring data of Tartu City, the air pollution of Tartu shortens the life span of a human being by approximately 8 months2. The deaths and illnesses in Europe caused by air pollution are estimated to be equal to 1.3% of GDP3. Apart from having a negative effect on the life and wellbeing of humans, air pollution in cities is one of the main reasons for the damages suffered by building structures: the so-called acid rains rooted in acidic nitrogen and sulphur compounds corrode metal and degrade mineral construction materials4. The soot emitted in exhaust gases stains the faades of buildings. For the purpose of reducing different global effects, several international agreements have been entered into, for example the Kyoto Protocol in 1997 and the Copenhagen Protocol in 2009. Many areas have made cooperative efforts to diminish local impacts. The Baltic Biogas Bus, too, is a joint project between several states located in the Baltic Sea region, striving to decrease the level of air pollution in cities. Tartu City sees the commissioning of biogas buses in the Tartu public transport system as one of the direct aims of the project. In order to achieve this end, it is planned to carry out diverse studies and analyses to help clarify the possibility and feasibility of using biogas buses. One of the more important preliminary studies is the current biogas filling station feasibility and profitability study, the goals of which are: To collect information on the requirements of building a compressed natural gas filling station; To determine the costs of establishing a compressed natural gas filling station; To determine the profitability conditions of a compressed natural gas filling station;
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http://www.balticbiogasbus.eu/web/about-the-project.aspx Hans Orru, Eda Merisalu; Eesti Arst 2007; 86 (6): 401-405 http://www.eestiarst.ee/static/files/001/ohusaaste_linnades_ja_selle_moju_inimeste_tervisele.pdf 3 Hans Orru, Eda Merisalu; Eesti Arst 2007; 86 (6): 401-405, in which WHO. The World Health Report 2002: Reducing risks, promoting healthy life. Geneva, Switzerland: WHO; 2002. 4 Antonina Zguro; https://www.vk.edu.ee/uliopilastele/Materials/RDIR/Keskkonnakaitse/ATM_Eesti.ppt
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To determine the alternative technological solutions for building a compressed natural gas filling station, as well as their costs; To give an evaluation to the environmental impacts caused by using compressed natural gas (CNG, biogas). (The initial task of the study is given in Annex 1) Previously, several related studies have been carried out: The study on locations chosen for a compressed natural gas filling station; Nordic Energy Group O; 20105; The study on Aardlapalu Landfill gases; Ecotech O; 20106; The feasibility study of biogas buses used in public transport; Assets RPM O; 20107.
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Tartu City homepage: http://www.tartu.ee/data/Surugaasitanklate%20asukoha%20uuring0.ppt Tartu City homepage: http://www.tartu.ee/data/Aardlapalu_prygilagaaside_tekke_uuring0.ppt 7 Tartu City homepage: http://www.tartu.ee/data/Surugaasibusside_tasuvusuuring0.ppt
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Current Situation
Natural Gas and Biogas
In a compressed natural gas filling station, vehicles are fuelled by methane gas (natural gas or biogas) in its gaseous form. In Estonia, natural gas is supplied by AS Eesti Gaas, virtually in a monopoly position. First steps are being taken to produce biogas several biogas production plants are being established to produce gas from agricultural waste and manure (Jri in Saare County, Aravete in Jrva County, Ilmatsalu in Tartu County and many more). In addition, production of the so-called landfill gas has begun: gas released as a result of the degradation of biodegradable waste within a covered landfill is being collected (Vtsa Landfill in Jrva County, Pskla Landfill in Harju County, planned gas collection at Aardlapalu Landfill in Tartu County). Natural gas is a mixture of gases (CH4 + C2H6 + ... + CmHn + N2 + CO2) primarily methane, but with smaller amounts of ethane, propane, butane, high-molecular-weight hydrocarbons and inert gases emitting from natural sources (boreholes) by itself or as a by-product of oil production. Natural gas is brought to Estonia in its gaseous form and it contains: methane (CH4) 96...99%, ethane (C2H6) 0.5...1.5%, content of high-molecular-weight hydrocarbons less than 0.5%, content of inert gases less than 1.5%. The lower combustion threshold of natural gas is 5% (in the air, at the temperature of 0 C); upper combustion threshold 14% (in the air, at the temperature of 0 C). The combustion area extends as the temperature rises; for example, at the temperature of +400 C, the combustion area is 3...17%. In oxygen, the combustion area is 5...60%. The combustion thresholds of the mixtures of gas and air can be modified by adding inert gases to the mix (carbon dioxide or nitrogen). If there is less than 12% of oxygen in the air, the mixture of air and gases is no longer combustible. Self-combustible temperature 600 C. Combustible energy < 1 mJ.
Biogas is the gas produced by the anaerobic fermentation of different biodegradable materials. Many biomass resources available in Estonia are suitable for the production of biogas, such as biodegradable municipal waste, biodegradable waste from the food industry, agricultural waste, waste water sediment and mud, as well as grassy biomass8. In addition to that, it is possible to produce biogas from the gases generated by the fermentation of biodegradable matter taking place in existing landfills. Just like natural gas, biogas mainly consists of methane (see
Villu Vares, Tallinn Technical University, Department of Thermal Engineering; Technology studies of biomass, implementing biomass technologies in Estonia"; 28.09.2007: http://www.bioenergybaltic.ee/bw_client_files/bioenergybaltic/public/img/File/Tellitud%20uuringud/Biomass i_tehnoloogiauuringud_ja_tehnoloogiate_rakendamine_Eestis_2.pdf
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Table 1).
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Table 1 The content of biogas produced by different biodegradable waste
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Component CH4 CO2 N2 O2 H2O Component H2S NH3 Aromatic compounds
Municipal waste (landfill gas)

% of volume
Residual mud from water treatment plants

% of volume
Agricultural waste
% of volume
5060 3834 50 10 6 ( 40 C) Municipal waste (landfill gas)

mg/m3
6075 3319 10 < 0.5 6 ( 40 C) Residual mud from water treatment plants
mg/m3
6075 3319 10 < 0.5 6 ( 40 C) Agricultural waste

mg/m3
100900 0200
1,000 4,000
3,00010,000 50100
Biogas is heavier than natural gas, since it contains more water. Still biogas, too, is lighter than air under normal conditions, and is volatile in the case of leakages. In comparison to natural gas, the energy value of biogas is smaller (see Table 2).
Table 2 The comparison of landfill gas and natural gas
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Indicator PCS KWH/m3 PCI KWH/m3 Density Mass kg/m3 The Wobbe Index
Landfill gas 6.6 6 0.93 1.21 6.9
Natural gas 11.3 10.3 0.57 0.73 14.9
Taking into account that urban living, waste water treatment and agriculture constantly produce biomass, which can in turn be used to produce biogas, then biogas is considered to be a renewable energy resource. Gas Production The existing supply of gas in a gas filling station relies upon the contracts entered into between Gazprom, the Russian national gas monopoly, and Eesti Gaas AS. The volumes of biogas feasibly sold depend on the biogas stations to be established. As constructing pipelines for gas is relatively expensive and transporting gas on trucks is ineffective, then the Tartu gas filling stations can only consider bio gas producers active close by as their suppliers for bio gas. At the moment, the plans to construct three biogas production plants in Tartu County are known:
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http://www.biogas-renewable-energy.info/biogas_composition.html http://www.biogas-renewable-energy.info/biogas_composition.html
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Aardlapalu Landfill. According to studies, the potential gas production volume of the Aardlapalu Landfill will during the years 20112050 be ca 20 million normal cubic metres. Right after covering the landfill, the volume of methane will be up to 800,000900,000 normal cubic metres a year, but it is estimated that it will decline to 350,000 normal cubic metres a year in no longer than 10 years which means under 1,000 normal cubic metres a day. Ilmatsalu biogas station, a project developed by O Tartu Biogaas to produce biogas on the basis of bovine manure. As the biogas produced is at the same time used to run the combined power and heat plant, this enterprise cannot be viewed as a possible supplier for the gas station. The anaerobic sediment treatment complex of waste water treatment, developed by AS Tartu Veevrk. By using the sediments from grease interceptors as well as by fermenting waste water, the annual methane production has been estimated to be 440,620m3 CH4/per year11.
Therefore, the volume used in the gas filling stations of known biogas plants can be a total of 800,000 to 1,000,000m3 of methane a year.
Compressed Natural Gas Filling Stations

At the moment, there is only one compressed natural gas filling station active in Estonia the one belonging to Eesti Gaas AS, located in Tallinn, Suur-Sjame 56a. A few slow-fill systems for private users that are able fill about one or two vehicles at a time are also in use. We have no specific data about their location and consumption.
Vehicles Consuming Compressed Natural Gas

There are no precise data about the existence of vehicles running on compressed natural gas in Estonia. According to the Vehicle Registration Department of the Estonian Road Administration, there are 23 vehicles in Estonia that have entered gas as their fuel source in the registry (see Table 3). No differentiations have been made as to what kind of gas (liquid or compressed) the vehicles use. It is known that the national postal service AS Eesti Post have put 5 vans consuming compressed natural gas to use for delivering post in Tallinn. Tallinn Bus Company has carried out tests on using CNG buses in public transport. It is not known whether the Company has purchased any biogas buses as a result. Tartu City Government has completed a procurement for urban lines regular services, as a result of which, 5 functional CNG buses are to carry passengers on Tartu City urban lines in the year 2012.
Environmental Investment Centre, AS Tartu Veevrk, O Mnus Minek; the final report of the process-oriented research and development "The possibilities of using biogas obtained by fermenting waste water sediments in Tartu City public transport"; sme-Tallinn-Tartu 2009.
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Table 3 The number of vehicles according to fuel sources in Estonia as of 01.01.2010 (source: Vehicle Registration Department of the Estonian Road Administration)
Passenger Type of fuel In total cars PETROL 457,245 417,287 DIESEL 192,272 128,385 GAS 23 17 ELECTRICITY 6 3 In total 649,546 545,692
Goods vehicles 21,009 60,094 6 2 81,111
Buses 325 3,792 0 0 4,117
Motorcycles 18,624 1 0 1 18,626
Technical, Constructional, Environmental and Safety Requirements of Compressed Natural Gas Filling Stations
As compressed natural gas filling stations are a new idea, then the details of constructing and using them are not regulated by law. Different existing legislations provide requirements for using gaseous fuel, pressure equipment and equipment in general. The following Estonian legislation is related to compressed natural gas filling stations and constructing them. Gaseous Fuel Safety Act, which provides requirements for o Gaseous fuels, appliances burning gaseous fuels, fittings of appliances burning gaseous fuels, and gaseous fuel installations. o The placing on the market, putting into service and the use of appliances burning gaseous fuels and of fittings of appliances burning gaseous fuels, and for the procedure for the conformity assessment and attestation thereof. Specified by the Ministry of Economic Affairs and Communications with the regulation No. 25 of 28 June 2002 on The requirements for gas appliances and fittings and for the provision of information and attachment of conformity marks thereto. Gas appliances subject to registration have been provided by the Ministry of Economic Affairs and Communications with the regulation No. 42 of 1 July 2002 on The list of lifting equipment and gas installations subject to registration, the list of requirements for electrical installations, lifting equipment, gas installations and pressure equipments subject to registration as well as the owner, supervisor of the use, person in control of an electrical installation and technical inspection thereof, and the formal requirements for such information and the procedure for the submission and registration thereof". The registration of gas appliances has been provided by the Ministry of Economic Affairs and Communications with the regulation No. 144 of 25 November 2005 on Procedures for registering pressure and lifting equipment and gas installations. o The construction, putting into service and use of gaseous fuel installations. Specified by the Ministry of Economic Affairs and Communications with the regulation No. 99 of 5 October 2009 on Requirements on gas installations, installation of gas appliances and construction of gas installations. The protection zones for gas installations have been specified by the Government of the Republic with the regulation No. 212 of 2 July 2002 on The extent of a gas installation protection zone and the maintenance zone of a category D gas installation. o The supervisors of the use of gas installations, for persons in charge of gas work, persons manufacturing permanent joints for gas installations and for the procedure for the conformity assessment and attestations of such persons.
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Specified by the Ministry of Economic Affairs and Communications with the regulation No. 54 of 19 June 2008 on The procedure for assessing and attesting the conformity of the supervisor of the use of pressure equipment, lifting equipment, gas installation and machine and the person in charge of pressure equipment work, lifting equipment work, gas works and machine works and the person manufacturing the permanent joints which contribute to the pressure resistance of the metal piping of the gas installation and by the Ministry of Economic Affairs and Communications with the regulation No. 42 of 1 July 2002 on The list of lifting equipment and gas installations subject to registration, the list of requirements for electrical installations, lifting equipment, gas installations and pressure equipments subject to registration as well as the owner, supervisor of the use, person in control of an electrical installation and technical inspection thereof, and the formal requirements for such information and the procedure for the submission and registration thereof. o Gas work, gas contractors, notified bodies, assessment and attestation of persons, the technical inspection and the organisation of state supervision. The area of technical inspection has been specified by the Ministry of Economic Affairs and Communications with the regulation No. 32 of 17 March 2005 on The cases, procedure, frequency and terms for the technical inspection of gas installation and appliances. Pressure Equipment Safety Act. As a filling station contains equipment to create pressure and containers for preserving gas under pressure, it is necessary to follow the Pressure Equipment Safety Act, which, with the aim of ensuring the safety of persons, property and the environment, provides requirements: o Pressure equipment and pressure assemblies, and for the placing on the market, putting into service, use, installation, reconstruction and repair thereof; The requirements for pressure equipment are specified by the Ministry of Economic Affairs and Communications with the regulation No. 129 of 7 May 2004 on Requirements on pressure equipment and the procedure for the assessment and attestation of the conformity of pressure equipment. The requirements for pressure equipment work are specified by the Ministry of Economic Affairs and Communications with the regulation No. 30 of 28 June 2002 on Requirements for pressure equipment work. The protection zone of pressure equipment is established by the Government of the Republic with the regulation No. 213 of 2 July 2002 on The extent of the protection zone of pressure equipment; o The procedure for the conformity assessment and attestation of pressure equipment and pressure assemblies; The conditions of registering pressure equipment and attesting the conformity of pressure equipment to requirements have been established by the Ministry of Economic Affairs and Communications with the regulation No. 54 of 19 June 2008 on The procedure for assessing and attesting the conformity of the supervisor of the use of pressure equipment, lifting equipment, gas installation and machine and the person in charge of pressure equipment work, lifting equipment work, gas works and machine works and the person manufacturing the permanent joints which contribute to the pressure resistance of the metal piping of the gas installation and by the Ministry of Economic Affairs and Communications with the regulation No. 42 of 1 July 2002 on The list of lifting equipment and gas installations subject to registration, the list of requirements for electrical installations, lifting equipment, gas installations and pressure equipments subject to registration as well as the owner, supervisor of the use, person in control of an
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electrical installation and technical inspection thereof, and the formal requirements for such information and the procedure for the submission and registration thereof. o Supervisors of the use of pressure equipment and pressure assemblies, for persons in charge of pressure equipment work, and for the procedure for the conformity assessment and attestation of such persons; The requirements for the competency of the operator of pressure equipment are established by the Ministry of Economic Affairs and Communications with the regulation No. 138 of 25 May 2004 on The list of pressure equipment for the operation of which a certificate of competency is required from the person operating it and the procedure for the assessment and attestation of operators. o Designated bodies, persons performing pressure equipment work, technical inspection bodies, authorities assessing and attesting the conformity of persons, and impartial designated bodies; Specified by the Ministry of Economic Affairs and Communications with the regulation No. 54 of 19 June 2008 on The procedure for assessing and attesting the conformity of the supervisor of the use of pressure equipment, lifting equipment, gas installation and machine and the person in charge of pressure equipment work, lifting equipment work, gas works and machine works and the person manufacturing the permanent joints which contribute to the pressure resistance of the metal piping of the gas installation. o Technical inspection and the organisation of state supervision. The procedure for technical inspection has been established by the Ministry of Economic Affairs and Communications with the regulation No. 35 of 24 March 2005 on The procedure and frequency of technical inspection of pressure equipment. The general management and completion of the construction of the filling station is regulated by the Building Act. The planning of the filling station within Tartu city is regulated by the Planning Act and the comprehensive plan of Tartu City. Restrictions to the station being located on the sites presented in the study of preliminary location choices can be made by the Roads Act and the Electrical Safety Act.
Analysis of Target Groups and Description of Client Base

Target Groups The use of gas as motor fuel is not very common in Estonia. Considering the issue from the causeand-effect point of view, this has been due to the lack of both suitable filling stations as well as vehicles running on that kind of fuel. Economic, but also environmental conditions could be important catalysts for the use of gas. As the price of gas (both liquid and compressed) has continuously remained lower than the price of both petrol and diesel during the last years, a more price-sensitive client could decide in favour of a gas-fuelled vehicle. Yet, let us not rule out enterprises, a large part of whose expenses can be attributed to fuel consumption. Another key factor in bringing about a more extensive use of gas appliances could be regulations related to the pollution of city environment, making concessions to less polluting means of transportation or banning vehicles whose indicators exceed the established pollution norms. Studies show that burning gas emits considerably less pollutants to the environment than burning petrol or diesel fuel.
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Since the use of gas as motor fuel is not very widespread in Estonia, no existing target groups can be assessed. This study shall evaluate the target groups who have shown an interest in using gas-fuelled vehicles or could potentially use more gas-fuelled vehicles once a gas filling station was built. According to the assumptions made, the companies with large vehicle fleets who are mainly active in cities have the most potential to make up the target group of compressed natural gas filling stations. These large-scale customers ensure that the station's selling volumes remain stable. At the same time, the number of customers demanding large amounts of gas is relatively limited. When it comes to increasing consumption volumes, private car owners have the most potential. Supposedly, companies need fuel most urgently during weekday mornings. Even though filling the gas containers of vehicles as big as lorries and buses only takes up to 5 minutes, the ability to serve all the customers during the morning rush hour is of utmost importance to a filling station. Bus Companies One of the relatively extensive transportation sectors, active mainly within city limits, is public transport. In Estonia, buses with diesel engines predominantly serve city and county bus lines. Since there are only a few gas filling stations in Estonia and the size of the gas container on a vehicle is restrictive to driving distance, it is not likely that gas buses will be used for intercity transport in the near future. Hence, the company serving the Tartu urban lines has real potential of becoming a customer to a gas filling station. As a result of the public procurement carried out by the Tartu City Government and titled Public regular services within Tartu City between 01.01.2011 and 30.06.2017, by the year 2012, five compressed natural gas buses should be serving urban lines. According to the information obtained form Tartu City Government, long-term plans foresee the use of 25 (bio)gas buses in public transport. Based on the data presented in the Feasibility study of biogas buses used in public transport12, the annual amount of kilometres travelled by a single urban line bus in is 79,289km/per year; the average fuel consumption is 37.35kg/100km. Therefore, the annual fuel consumption for one bus would be around 30,000 kg (90kg/per day); for five buses, ca 150,000 kg (450kg/per day) and for 25 buses 750,000 kg per year (2 250kg/per day). Considering the distances, gas-fuelled buses can feasibly be used on most of the inner-county bus lines of Tartu. A compressed natural gas bus can drive an estimated of 300 kilometres on a single tank filling (100150 kg). At the moment, the Tartu county lines are served by AS GoBus, whose web page declares that they use 130 buses in the region13. As the same company serves the urban lines as well, the number of buses used on county lines should be around 80. It is not possible to predict the replacement of diesel buses with gas buses. According to the percentage of gas buses planned to be used on Tartu urban lines (10% in the year 2012 and 50% in the long run), the potential demand for gas may reach up to 800 kilograms a day. If the network of gas filling stations was expanded, it would also be possible to use gas buses on long-distance lines. Due to the timetables of urban line buses, the filling demand is estimated to be the greatest in the mornings before starting work or in the evenings after finishing work.
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Assets RMP O; Feasibility study of biogas buses used in public transport; Tartu 2010 AS GoBus homepage: http://www.gobus.ee/?id=1525,s as of 15.08.2010
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Bus companies as the target group of a filling station are what contribute significantly to determining the range of a filling stations territory. Given the size of buses, a filling station has to offer access and manoeuvring room for no less than 18-meter-long articulated buses. Waste Management Companies Large vehicle fleets are also owned by companies active in the transport of waste. The areas of waste transport organised by Tartu City are covered by Veolia Keskkonnateenused AS and Ragn-Sells AS. These two are the biggest waste management companies in Estonia and use more than 200 special waste transport vehicles. Around 13 waste loads are transported each day between Tartu and the transhipment station located on the territory of Aardlapalu Landfill14, which means that one waste transport vehicle travels over 400 km per day (the distance from downtown Tartu to Aardlapalu Landfill is 15.5 km). This is why waste transporters can be seen as attractive clients by gas filling stations. On the one hand, contracts of carriage are relatively long-term: the contracts for organised waste transport of Tartu City are entered into for three years. That means waste transporters are more prone to invest further funds in gas vehicles. On the other hand, these vehicles travel fairly short distances, and saving on fuel costs is an important factor. Waste management companies use special vehicles that are quite bulky, meaning that a filling station has to be easily accessible. The most suitable location for a filling station could be near the site where the vehicles are parked at night (Veolia The 108, Ragn-Sells Sepa 26) or on the way to their destination. Companies Providing Taxi Services According to the taxi services survey of 2003, there were 398 active taxi drivers in Tartu15. The large number of taxis in urban traffic in Tartu makes them a desirable target group, who, aiming for costeffectiveness, are likely to install a gas application on their vehicle or buy a car fuelled by compressed natural gas. Other TransportationTransportation-Intensive Companies In addition to the aforementioned enterprises, a gas filling station could gain clients from among the companies who are connected to transport inside the city and have a large vehicle fleet such as different transport companies that deliver goods to consumers from wholesale warehouses or logistics centres, and why not even companies delivering food or those active in road and street maintenance. One such who has experience using gas vehicles is AS Eesti Post, who, when asked, predicted they would start using 5 gas-fuelled vans in Tartu. Private Vehicles Data from EUROSTAT16 state that in the year 2009, there were around 285 million registered vehicles (motor vehicles, except for motorcycles and trailers) in Europe. In Estonia, that number was (according to Eurostat) 646,000. Considering the estimates about CNG vehicles made on the web site
According to the data of Tartu City waste management plan, the annual amount of municipal waste is 40,000 tonnes, an average load on a waste transportation lorry weighs 12 tonnes, the amount of work days is 260: 40,000/12/260=12.8 15 Anu Laas, Kairi Talves; Tartu Taxi Service Survey; Tartu 2003; http://www.tartu.ee/data/taksoteenindud.pdf 16 Eurostat web page: http://epp.eurostat.ec.europa.eu data as of 15.08.2010
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www.cngnow.com17, then the percentage of gas vehicles out of all vehicles in Europe is 0.28%. Given the same percentage, the amount of CNG vehicles in Estonia would be around 1,600. However, it is known that CNG engines are more commonly used on lorries and buses. Private car manufacturers have a limited amount of vehicles with compressed natural gas engines in their product list; often, compressed natural gas is simply an additional alternative in cars running on petrol the so-called petrol + gas cars. Vehicles in total
Europe Estonia in total Private cars in Estonia
Vehicles with CNG engines Amount Percentage Calculated 1,000 1,000 1,000 285,000 812 0.28% 646 0.28% 1.8 546 0.28% 1.6
Competition Analysis
Compressed Natural Gas Filling Stations As there are not many CNG vehicles in Estonia, competition for clients is not fierce either. At the moment, there is only one compressed natural gas filling station in Estonia, located in Tallinn, SuurSjame 56a, and belonging to Eesti Gaas AS. The station has a fast-fill system. Customers can pay for the filling with a special Eesti Gaas filling station card. The price of gas at the Suur-Sjame filling station as of 12 August 2010 was 10.6kr/kg. Eesti Gaas has thought about building a compressed gas filling station in Tartu, but the people preparing this analysis do not know of a specific stand of the Eesti Gaas as to when and where the station is to be constructed. Accordingly, there is no information about any other companies planning to establish a CNG filling station in Tartu. There are several companies in Estonia who are able to install small gas pumps with a slow-fill system suitable for household use and for one vehicle (for example: O Anrebell, Kristen Grupp O), but there is no information as to how many filling stations like these have been established in Estonia. Other Filling Stations According to the information found on the homepages of the main fuel sellers in Estonia, there are 27 filling stations in Tartu (see Table 4). Of these, it is possible to buy liquid gas in AS Olerex on Aardla St and in Vostok Oil O filling station (Ringtee 28).
Table 4 Filling stations in Tartu City
Company Alexela Oil AS

17
Trade mark Alexela
Filling stations in Tartu City 5
Web page: http://www.cngnow.com/EN-US/Vehicles/AroundTheWorld/Pages/default.aspx data as of 14.08.2010
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Eesti Statoil AS Neste Eesti AS Lukoil Eesti AS Sevenoil Est O Alvistra AS Olerex AS Go Oil AS VostokOil O Jonny AS In total Statoil, 1-2-3 Neste Lukoil 7 Alvistra Olerex GoOil Vostok Favora 7 5 2 2 1 2 1 1 1 27
Fuel Prices Fuel sellers claim that the prices of fuel are largely dependant on the price of fuel on the global market. If the prices of petrol and diesel fuels react to the changes in global prices quite fast, then the price of gas sold by Eesti Gaas is connected to the average price of heavy and light heating oil over six months. Hence, the price of gas reacts more slowly. Figure 1 demonstrates the changes in fuel prices. The prices presented in the figure mirror the prices of the more common fuels (95 petrol and diesel fuels) in comparison to natural gas (CNG). The prices of petrol and diesel are based on the prices of the automated filling station 1-2-3 located at Rannamisa tee 1, Tallinn, presented in the price observation portal www.superhind.ee. The price of gas is based on the information obtained from Eesti Gaas AS about the CNG filling station (Suur-Sjame 56a, Tallinn) prices on the retail selling price of gas. The prices on the figure include VAT.
Figure 1 The price of fuels in Estonian filling stations between 01.11.2009...13.08.2010. The price of 95 petrol and diesel fuel (kr/l) in the automated filling station 1-2-3 is based on the data of the web page www.superhind.ee, CNG price (kr/kg) on the data of AS Eesti Gaas. (Ktuse hind (EEK) Fuel price (EEK);Bensiin 95-95 Petrol; Diisliktus Diesel fuel; Maagaas
(CNG) Natural Gas (CNG)).
The figure perfectly demonstrates the stability of the price of gas compared to the prices of petrol and diesel. Price stability could be one of the key marketing strategies of Eesti Gaas AS. Looking at the price changes of natural gas offered by the company to residential customers (gas usage more
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than 750m3/per year), it can be seen that the price of gas has, during the period presented on Fig 1, changed once. Since 1 October 2009, the price of gas for residential customers, along with network service charges and excise duty, was 5.89kr/m3; since 1 May 2010, it was 6.70kr/m3 (the price went up ~14%); as of 1 September 2010, according to the price list, the residential customer will have to pay 7.59kr/m3 for gas (compared to the previous increase in price, the price goes up 13% and compared to 01.11.2009, the price increases 29%). By making future estimates on the price of gas sold in filling stations, based on the changes in the price list of Eesti Gaas AS (an increase in the current price of gas in Eesti Gaas filing stations of 10,6kr/kg, compared to the increase in the price of natural gas sold to residential customers consuming more than 750m3/per year by 29% = 13,67kr/kg), it can be concluded that even in the case of a hypothetical increase in the price of CNG, it would still cost less than petrol and diesel fuel. Potential for Compressed Natural Gas Filling Stations As the only Estonian CNG filling station at the moment is located in Tallinn, there is great potential in building a filling station in Tartu. Modern gas containers on private cars can hold an average of 15 kg of natural gas, enabling them to drive 200 to 250 km. Therefore, it is not possible to drive further than a 100 km radius from Tallinn. A single filling is not enough to travel to Tartu or any other part of South-Estonia. This could be the reason there are so few CNG cars in Estonia. Building a compressed natural gas filling station in Tartu could lead to an increase in the number of CNG vehicles, as it is estimated that the costs of running a gas engine are up to 120% smaller than those of running a petrol or diesel fuelled engine (see Table 5).
Table 5 Estimated fuel costs across different fuel types
Vehicle Private car* Opel Zafira 1.6 CNG EcoFlex Cosmo (69kW) Opel Zafira 1.7 CDTI EcoFlex (81kW) Opel Zafira 1.6 EcoFlex (85kW) Bus** MAN LionCity CNG 12m Average Tallinn urban line bus
Fuel
Average fuel consumption Fuel consumption kr/km consu mptio kr/ Compare n unit kr/km 100km d to CNG
gas diesel petrol gas diesel
kg/100km l/100km l/100km kg/100km l/100km
5 5.7 7.1 37.35 39.23
0.53 0.98 1.22 3.96 6.77
53 98.32 122.47 395.91 676.72
0.00% 85.52% 131.08% 0.00% 70.93%
* http://media.opel.com/media/intl/en/vehicles/opel/zafira/2009.brand_opel.html ** A pilot study by MAN and Tallinn City Government
Estimating that the average amount a private car travels per year is 30,000 km, the financial savings of using gas are ca 13,000kr/per year when compared to a car with a diesel-fuelled engine, and ca 20,000 kr/per year when compared to a car with a petrol-fuelled engine. When buses are compared, the annual travelled distance of 80,000 km means that a gas-fuelled engine saves ca 225,000kr/per
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year on fuel costs. Given the significantly lower price of gas, it can be predicted that the number of gas-fuelled vehicles is on the rise.
Initial Analysis of Compressed Natural Gas Filling Stations Locations

The report on the choices for CNG filling station locations prepared by Nordic Energy Group18 presents the analysis for the possible locations for a filling station. By comparing the pros and cons of different locations, the following were selected as primary choices: Sepa St 26 Turu St 47 Ringtee St 8 Ringtee St 25 Ringtee St 77
In addition to the criteria of the aforementioned location analysis, this feasibility study takes into account the possible costs of building a filling station in different locations. All of the aforementioned registered immovables are, by the Tartu City comprehensive plan, located on areas designated for small and business enterprises or directing functions of service enterprises. Hence, it is possible to establish a filling station on the chosen registered immovables. What follows is an analysis of the conditions of building a CNG filling station in the locations mentioned. Sepa St 26 By order No. 858 of 3 July 2007 by Tartu City Government, a detailed plan for the registered immovable was initiated. The plan aimed at obtaining building rights for a warehouse and two office buildings. The detailed plan is not adopted. A new detailed plan has to be prepared to obtain building rights for a gas filling station. Considering the goals and access points of the initiated detailed plan, the most suitable spot for a filling station would be on the asphalt lot located next to Sepa St. Restrictions are made by a 110 kV overhead transmissions line, located at the northern edge of the Sepa St road area. The location is easily accessible. Making a left turn to Turu St over two lanes during rush hour can prove to be a problem. It would be necessary to rebuild the intersection of Sepa and Turu St to be regulated by traffic lights. According to the information gathered from AS Eesti Gaas, the closest existing category B piping system to the registered immovable is located 114 metres away, with a connection charge of 170,000 EEK + VAT. Turu St 47 By order No. 28 of 21 November 2002 by Tartu City Government, a detailed plan for the registered immovable was adopted. The existing detailed plan has established access to the registered immovable only from Turu St, eliminating the possibility of making left turns. A new detailed plan is necessary to build a filling station. An exit to Sepa St has to be created, enabling making left turns to Turu St. It is complicated to make a left turn to Turu St from Sepa St on rush hour due to heavy
Nordic Energy Group; Report on the choices for the locations of compressed natural gas filling stations; Tallinn 2010.
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traffic; an intersection regulated by traffic lights is required. The closest existing category B piping system to the registered immovable is located 250 metres away, with a connection charge of 215,000 EEK + VAT. Ringtee St 8 Establishing a filling station requires drawing up a detailed plan if station causes restrictions of using neighbour property. Considering the so-called Eastern Roundabout plan, the registered immovable can be accessed through the Ringtee St collector road, which is why both the right and left turn off the immovable should be trouble-free: the main road of Ringtee St should cover most of the traffic. What could be a problem is the fact that one can access the collector road only from the crossings of Turu-Ringtee and Vru-Ringtee streets. There is no way to drive straight to the filling station while passing it. In the future, this may mean the loss of randomly passing customers. The closest existing category B piping system to the registered immovable is located 8 metres away, with a connection charge of 46,000 EEK + VAT. This registered immovable also has an existing gas utility line and a connection to Anne Soojus AS, the so-called Ropka boiler plant. Ringtee St 25 Building a filling station requires drawing up a detailed plan. At the moment, the registered immovable holds an administrative building and a bus parking lot belonging to the transportation company GoBus. Access pros and cons are similar to Ringtee St 8. The closest existing category B piping system to the registered immovable is located 40 metres away, with a connection charge of 45,000 EEK + VAT. Ringtee St 77 Drawing up a detailed plan for the registered immovable has been initiated for constructing a business building (by order No. 221 of 19 February 2008 by Tartu City Government). The decision eliminated the possibility of constructing a filling station. It is necessary to initiate a new detailed plan to consider building a filling station. Considering the intersection of the Tallinn-Tartu-Luhamaa highway and the Jhvi-Tartu-Valga highway or the so-called Riia Roundabout, access to the registered immovable can only be granted by making a right turn from the Valga-Elva direction. From other directions, the filling station would only be accessible through Aardla St, making the drive to the station about 1.5 km longer (exiting from the roundabout through Aardla St and on to Ringtee St 77). The closest existing category B piping system to the registered immovable is located 2 to 8 metres away, with a connection charge of 31,000 EEK + VAT.
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Financial Analysis Methodology

The aim of preparing a financial analysis for a gas filling station was to determine the payback period of a compressed natural gas filling station and give an evaluation to the economic profitability of the project. The financial analysis of a gas filling station has been prepared as a typical investment project analysis, where the projects deemed successful are the ones where the net current asset value NVA of the discounted values of the investment cash-flows and the cash-flow resulting from the operating income and operating costs ratio has to be bigger than 0, and the internal rate of return IRR on the project has to be equal to or bigger than the discount rate used in the calculations. The financial calculations were made in the table calculation programme Microsoft Excel 2007, where the cash-flows (cost/income ratio) have been calculated by simple mathematical operations; the financial indicators are calculated by using the following functions: The discounted net current asset value has been calculated, using the function NVA (discount rate; period cash-flows). The internal rate of return on the project has been calculated, using the function IRR (period cash-flows).
The incremental cumulative cash-flows method was used to calculate the payback period. On the basis of the discount rate, it is checked, on which year after the project has ended, does the net current asset value of the incremental cumulative cash-flows become positive and stay positive during the period of assessment. The payback period is a specific period in years, beginning with making the investment and ending with the year that profitability is achieved.
Basic Data
Cost of Investment The potential total costs of building a compressed natural gas filling station in the locations suggested as a result of the report on the choices for CNG filling station locations prepared by Nordic Energy Group O5 have been considered while preparing the biogas filling station profitability study. Both direct costs on the CNG station equipment and the construction of the station itself as well as the essential accompanying investment costs of connecting to the gas utility line and power network, building access ways, preparing plans and purchasing the land necessary have been taken into account. Direct costs result from price offers made; accompanying costs are estimated. The estimations are made on the basis of the following data: The costs of building a filling station the price indication obtained from the representative of AS AGA Eesti on building a filling station in Sweden. Establishing gas utility lines etc cost based on the price calculations presented by AS Eesti Gaas. Connecting to the power network an ampere charge according to the price list of AS Eesti Energia (EE) at connecting to the power network. According to the requirements of EE, there
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will be an additional charge for building lines, if the closest substation is located more than 400 m from the connection point. Cost of the plan the cost of a detailed plan for establishing building rights for a compressed natural gas filling station in Tartu City, as estimated by Prnu ERKAS Instituut O. Cost of a registered immovable the average selling price kr/m2 of immovables designated for specific purposes on business and production area lands in the stated area, as given on the real estate website www.kv.ee, as of 13.08.2010. Adding these costs up to determine the cost of a filling station in each location has proved to be a basis for the locations list. The profitability assessments have been made on the basis of the costs of the most advantageous filling station location. Accounting Period and Residual Value The accounting period of the project is 15 years. The equipment and civil engineering works of the filling station shall be amortised in the accounts of the accounting period of 15 years, which is why at the end of the accounting period, their residual value shall be 0. The useful life of the registered immovable of the filling station is 50 years in the accounts. At the end of the 15-year-long accounting period, the residual value of the registered immovable shall be considered. Discount Rate The discounted values of cash-flows have been used to assess the profitability of the project. The nominal discount rate k1=9.37 has been used as the discount rate. The nominal discount rate has been calculated on the basis of the weighted average cost of capital (WACC) and inflation (f) (see Table 6). The weighted average cost of capital (WACC) has been calculated on the basis of the formula WACC= kd x Wd + ke x We, where - kd is the price of loan capital, which is dependent on base rate EURIBOR and the banks risk premium. EURIBOR values in the calculations are the 6-month EURIBOR rates as of 11.08.2010 1.158%. The bank's risk premium is an estimated 3%. Kd=1.158+3=4.158%. - Ke is the price of equity capital, calculated on the basis of the formula ke=kd+RP=4.158%+5%=9.158%. RP is the risk premium of equity capital, the value of which has found to be an estimated 5% in the calculations. - Wd is the percentage of borrowed capital. In calculations, it is an estimated 70%, as banks generally require a minimum of 30% cost-sharing; - We is the percentage of equity capital in the investment. An estimated 30% in the calculations. Inflation f=2.12%. Inflation is based on the arithmetic mean of the period 20102014 of the harmonised index of consumer prices presented in the spring prognosis of the Ministry of Finance19.
Table 6 Prices and discount rates of capitals
1 Accounting period 2 EURIOBOR 3 Risk premium of bank

19
Year Euribor 6-month Euribor rate as of 11.08.2010 RPd Estimated risk premium of bank at issuing loan
15 1.158% 3%
Homepage of the Ministry of Finance: http://www.fin.ee/doc.php?105048
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2 Price of borrowed capital Risk premium of equity 3 capital 4 Price of equity capital Percentage of borrowed 5 capital 6 Percentage of equity capital Weighted average cost of 7 capital 8 Inflation rate 9 Nominal discount rate Kd RPe Ke Wd We WACC F k1 kd*Wd+ke*We (1+WACC)*(1+f)-1 Euribor+ROd Estimated kd+RP 4.158% 5.0% 9.158% 70.0% 30.0% 5.658% 2.12% 7.898%
Macroeconomic Input Data In making predictions about the income and costs of the current analysis, the changes in consumer prices according to the spring prognosis 2010 by the Ministry of Finance20 were generally used. The prognosis of the Ministry of Finance was drawn up for the period of 20102014, where it is foreseen that the harmonised index of consumer prices shall change from 0.8% in 2010 to 2.7% in 2014. The changes in the consumer price index occurring later than 2014 are taken to be equal to the indicators of the year 2014. The labour costs predictions use the data presented in the spring prognosis 2010 by the Ministry of Finance on the changes in labour costs (nominal increase in average wages). The prognosis of the Ministry of Finance was drawn up for the period of 20102014, where it is foreseen that the average wages shall increase from -2.8% in 2010 to 4.2% in 2014. The changes in the consumer price index of the accounting period of the analysis occurring later than 2014 are taken to be equal to the indicators of the year 2014. Seeing how AS Eesti Gaas (hereinafter EG) as a wholesale seller of natural gas, who is practically in a monopoly position, uses the price of light and heavy heating oil on the global market as a component in the price formula, then the prognoses of crude oil prices made by the U.S Energy Information Administration (EIA)21 are taken into account while making future estimates as to the purchase price of the gas to be sold in filling stations.
Figure 2. EIA prediction on crude oil prices 2010. (Krge High, Madal Low)
Taxes Cost without VAT is used in the calculations of the current analysis. Excise duty has been added to fuel prices.
20 21
Spring prognosis 2010 of the Ministry of Finance: http://www.fin.ee/doc.php?105048 U.S Energy Information Administration. http://www.eia.doe.gov/neic/speeches/newell121409.ppt
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In calculating labour costs, the national taxes on labour costs paid by the employer have been noted separately, including social tax 33% and unemployment insurance tax 1.4%.
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Financial Analysis Operating Income and Costs

The current financial analysis assesses the profitability indicators of two types of filling stations: a 5slot filling station with a slow-fill system to be used in a bus depot and a filling station with a fast-fill system for public use. Operating Income As a slow-fill station is to be used primarily within enterprises, then only the consumption of gas buses has been taken into account in the income section of the profitability calculations for that kind of a station. The consumption of other CNG vehicles is added in the calculations for a fast-fill station. The income section for both filling station types is made up of fuel selling only, the calculations of which are based on the following data: The selling price of fuel. The calculations make use of the selling price of 8.83 kr/kg without VAT (10.6 kr with VAT) displayed in the AS Eesti Gaas filling station in Tallinn. That price has been modified for different periods according to the average changes in fuel prices during the previous six months on the global market. Excise duty changes are not taken into account, as there is no way of adequately foreseeing them. The consumption of fuel. The volumes of two consumer groups have been taken account in predicting the consumption volumes: o The buses serving Tartu City urban lines. Number of buses. As the predicted number of the gas-fuelled buses serving Tartu City is known, the main component of the estimated consumption volume is the fuel demand of buses. The predictions made about the number of buses are based on the condition that there will be 5 compressed natural gas buses serving urban lines in the year 2012, and the number of CNG buses will rise to 25. The period between 20122015 has been considered to be a test period and no more buses shall be added during these years. As of 2016, it is predicted that two gas buses shall be added each year. The buses shall be added until the 14th operating year, by which the number of gas-fuelled buses should have reached 25. Fuel costs. The fuel costs calculations are based on the results of a study carried out by Keil MA, reseller of MAN buses, and Tallinn Bus Company. The study showed that the average fuel cost of a CNG bus within Tallinn City was 37.35kg/per 100 km. Annual distance travelled. It is estimated that the annual distance travelled by an urban line bus is 72,000 km (Tartu urban lines in total 3.5 million kilometres; 50 buses). The consumption volume of a single bus is 72,000/100*37.35=26,892 kg/per year. o Other CNG vehicles. Predictions about the use of gas-fuelled vehicles are difficult to make. In the course of the financial analysis, various enterprises located in Tartu were questioned about
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the perspectives of them using vehicles with a gas engine. The only one, who predicted they would be using gas-fuelled vehicles if a CNG filling station was built, was AS Eesti Post, estimating that the company could purchase up to 5 gas vehicles. The list of possible consumers also includes waste management enterprises, taxi services providers and street maintenance companies. The profitability calculations associate the predicted consumption volumes of filling stations with the consumption of gas-fuelled buses. The prepared prognosis is conservative. There are no predictions about adding gas-fuelled vehicles to Tartu during the first operating year. The following year, the estimated consumption volume should make up to 10% of the consumption of buses, which will increase by 10% each year, until it will stabilise on the 6th year at 50% of the consumption of the buses of the corresponding year. Converting the annual consumption volume of other vehicles to the annual consumption volume of a single urban line bus in Tartu, a bus equivalent, means that the gas demand will grow from an estimated 0.5 bus equivalent on the 2nd operating year to 12.5 bus equivalents on the 14th operating year. The consumption in total will increase by 134,460kg/per year until it reaches 1,008,450kg/per year by 2025. Operating Costs The following costs are considered to be the operating costs of filling stations: Purchasing fuel. The wholesale purchase price of the natural gas used in the filling station is taken to be the price of gas in the AS Eesti Gaas price list22 for clients consuming more than 750m3/per year 5.130kr/m3, plus the price of network services 0.82947kr/m3 and excise duty for natural gas 0.367kr/m3, in total 6.96kr/m3 (7.59176kr/m3 with VAT). Since supplying gas to a filling station is bound by a special contract, then in the profitability calculations, the increased selling price for residential customers has been increased by a further 10%. Personnel costs. The personnel costs of a filling station are seen to be the wages of two employees: o The wages of a fuelling specialist. A fuelling specialist is the person, who, in a slow-fill station, connects the buses to the gas pumps and monitors the work of the filling station. In a fast-fill station, he instructs first-time station users, issues filling station customer cards and monitors the work of the filling station. The following assumptions have been made in calculating the fuelling specialists wages: - Average wages 13,329 kr/per month, net value. Based on the data issued by Statistics Estonia about the 1st quarter of the year 2010 in the Classification of Economic Activities area wholesale and retail trade and repair of motor vehicles and motorcycles; - Taxes on labour costs, paid by the employer: social tax 33% and unemployment insurance premium 1.4%; - Work load 0.2 positions in the case of a fast-fill system and 0.5 positions in the case of a slow-fill system.
22
AS Eesti Gaas home page: http://www.gaas.ee/index.php?page=186&, as of 14.08.2010
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o The wages of a station manager 14,832kr/per month, net value. Additional labour costs are attributable to the station manager the leader of the enterprise, whose job description includes dealing with clients and suppliers, entering into contracts etc. The following assumptions have been made in calculating the station managers wages: - Average wages 13,329 kr/per month, net value. Based on the data issued by Statistics Estonia about the 1st quarter of the year 2010 in the Classification of Economic Activities area activities of head offices, managing services; - Taxes on labour costs, paid by the employer: social tax 33% and unemployment insurance premium 1.4%; - Work load 0.5 positions. Management costs. o Electricity 60,000kr/per year. The price of energy is based on the price list presented on the AS Eesti Energia homepage https://www.energia.ee/et/business /electricity/rates for business clients as of 15 August 2010. The following assumptions have been made in calculating the cost of electricity: the main circuit breaker 3x32A, one meter, electricity demand ca 110kW per day. Energy costs are made up of the costs on the filling stations equipment and the costs on street lights. o Maintenance and repair costs. About 2%/per year of the initial investment in equipment and construction has been considered for maintenance and repair costs. Administration costs. o Costs on communication costs on the office's Internet connection and fixed telephone service. The price is based on the price calculator on the home page of AS Elion23, according to which, the calculated cost of the service (the package includes Internet speed 3Mbit/760Kbit, Wi-Fi, 1 phone number, homepage domain) is 564kr/per month. o The mobile phone costs of 839.2 kroons are based on the AS EMT service package MINU 120024, whose price with VAT is 1,007 kr. o Transportation costs (1,500kr/per month) are considered to be the compensation for the station's employees' private cars: 3kr/km with a limit of 500 km per month. o Office supplies. Supplies needed around the office, such as paper, printing ink, pens and so on. In the case of a slow-fill station, these costs have been considered to be 1,200kr/per year. In the case of a fast-fill station, additional costs on station cards have to be taken into account, so the cost of office supplies rises up to 2,400kr/per year. Purchased services. o Accounting services 1,500kr per month. o IT services the maintenance and monitoring of the stations card payment and other record-keeping systems as well as that of remote sensing systems. An
AS Elion communications services price calculator as of 18.08.2010 at: http://lahendus.elion.ee/kalkulaator?ID=2010-0826%2011%3A45%3A01%2090.191.104.149%2090.191.104.149 24 AS EMT service package prices as of 18.08.2010: http://www.emt.ee/teenused/teenuspaketid/minuemt/minuemt_hinnad
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estimated 2,000kr/per month. Since monitoring and sensing are designated to both filling stations, the prices are equal. o Security services. The profitability calculations are based on the assumption that the stations are equipped with security cameras. The minimum price for AS G4S video security according to the price list of the enterprise is 3,999kr/per month25. o Renting office space. The calculations are made on the assumption that the enterprise owning and managing the filling station shall rent an office space. Determining the price of renting an office space was based on the offers of office spaces in the Ropka and Rni city districts among the offers of www.kv.ee as of 15 August 2010. The aforementioned city districts were chosen, since the preferred locations noted in the Report on the choices for CNG filling station locations are situated within the limits of these districts. As there were no special requirements to the office space of the enterprise, no restrictions were made to the size or cost of the spaces on offer. The average rental price of the offers presented on the real estate web site www.kv.ee was 1,412kr/per month. o The maintenance of roads and lots service costs on snow removal during winters and street cleaning during summers. In the case of a public filling station, the estimated contractual sum is 50,000kr/per year and in the case of a depot filling station, 40,000kr/per year. Other costs o Insurance 30,000kr/per year. As this is a high-risk facility and the initial investments are costly, then the insurance premiums are quite high. The assessment of the insurance premium is made on the basis of an offer by AS IF P&C Insurance, which was prepared in the light of the estimated basic data. o Marketing costs. In order to get the business running, the planned marketing costs of the first three years are 10,000kr/per year in current prices. The costs of the following years are predicted to be 5,000kr/per year in current prices. Marketing costs are only added to fast-fill stations, since slow-fill stations are only meant to meet the demands of a depot. Marketing costs include advertisements in print and electronic media. o Calculating the advertisement tax of 14,600kr/per year is based on the regulation No. 48 of 7 December 2006 by Tartu City Council on Advertising tax26, which sets the price of advertising tax at 4kr/per ad for one square metre a day. The planned size for the advertisement of the station is 10m2 (10 x 4 x 365=14,600kr/per year) in the form of an outside advertising stand next to the filling station. o Land tax. Determining the land tax is based on the results of the land assessment, according to which, the registered immovables of the preliminary study on locations in the Ropka city district are situated within the value zone H079502327, in which the taxable value of land for commercial purposes is 100kr/m2. By regulation No. 3 of 3
AS G4S video security price info as of 18.08.2010: http://www.g4s.ee/arikliendile/videovalve/videovalve Regulation No. 48 by Tartu City Council on advertisement tax on the Tartu City homepage: http://info.raad.tartu.ee/webaktid.nsf/web/viited/VOLM2006120700048 27 The results of land assessment, provided by regulation No. 50 of 30 November 2001 by the Ministry of the Environment. Available as of 18.08.2010 on the Land Board homepage: http://www.maaamet.ee/hv/795.pdf
26
25
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December 2009 by Tartu City Council28, the general land tax rate in Tartu City is 1% of the taxable value per year. The size of land needed to build filling stations in taken into account in making the calculations: a fast-fill station needs 1,000m2; a slow-fill station needs 365m2.
Investment Costs
Filling Station Equipment and Installation Public Filling Station with a FastFast-fill System Building a compressed natural gas filling station means high pressure work. As the availability of specialists in the field is limited in Estonia, then the delivery and installation of filling station equipment is done by the manufacturers. Hence, the price of filling station equipment and the cost of their installation is not noted separately. Due to their specificity, CNG filling station equipment can be designed and manufactured in a way that meets the clients needs precisely. Because of the specificity and high cost of explicit equipment, the manufacturers find it complicated to give an adequate price estimate. During the profitability study, a price request was sent by e-mail to 7 enterprises active in the field: Processkontroll AB (Sweden), Bauer Kompressoren GmbH (Germany), WGA Wrme-Gastechnik GmbH (Germany), EPM Gas Technology (USA, Spain), Safe CNG Technology (Singapore), the Estonian representative Kristen Grupp O (Estonia) of Dresser Wayne (USA), Eesti Gaas AS (Estonia). By phone, a request was made to the representative of AS AGA Eesti. AS of 1 September 2010, there were no written replies to the price request, which was first sent by e-mail and then reminded to the addressees on 19 August 2010. By phone, the representative of AS Eesti Gaas gave information about the cost of a CNG filling station built by a Swedish parent company 300 000EUR. The representative of AS Eesti Gaas gave information about the cost of a CNG filling station 45 million kroons. As these estimates are equal, then the price of a filling station in the profitability study was taken to be 300 000EUR. Depot Filling Station with a SlowSlow-fill System The price of equipment for a slow-fill station is estimated to be 2/3 of the price of equipment for a fast-fill station. Although a slow-fill station can be built with relatively low costs by installing nothing more than a compressor and fuelling equipment, the price of the depot filling station is increased due to the measurement systems. Fuel metres are necessary to keep count of the fuel costs of bus companies. Costs of Building Compressed Natural Gas Filling Station Roads and Lots Considering regulation No. 212 of 2 July 2002 by the Government of the Republic on The extent of a gas installation protection zone and the maintenance zone of a category D gas installation, a
28
Regulation by Tartu City Council on the taxable value of land in 2010, available on the Tartu City homepage: http://info.raad.tartu.ee/webaktid.nsf/web/viited/VOLM2009120300003 (as of 18.08.2010)
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protection zone of 10 m has to be left around the gas filling station. In addition, regulation No. 50 of 18 May 2001 by the Ministry of Transport and Communications on The requirements made to the equipment and technical condition of a motor vehicle and its trailer, which states that the outer radius of the turning circle of any vehicle has to remain under 12.5 m, has to be taken into account. On the basis of the facts mentioned, the lot of the filling station has been calculated to be 25 x 25 m, constructed as an asphalt cover over a gravel base. Along with access ways, the calculations state that the territory of the filling station shall be 1,000m2. A slow-fill station is meant to service 5 vehicles. Estimations on the size of the station's territory are based on the assumption that all vehicles served are 18m long and 2.5m wide, which is why the area of the station should be an estimated of 360m2 (a parking lot 4m wide for each bus). The calculations of a depot filling station have not taken the cost of access ways into account on the assumption that the station will be located on the territory of a depot, which already complies with the requirements for a protection zone, access ways and manoeuvring areas. The costs of building the solutions that result from possible changes in traffic management also have to be considered in constructing a public filling station. Additional costs like these could include, depending on the location, acceleration or deceleration lanes, auxiliary lanes to the street, traffic lights systems and so on. The locations noted in the locations study are largely situated by the existing Turu St and by a section of Ringtee St (the so-called Eastern Roundabout) to be reconstructed as a main street. Turu St is a street of heavy traffic with a 2+2 scheme, which means that making left turns into and out of the station from unregulated intersections and during rush hour is dangerous and time-consuming. Therefore, from the point of view of ensuring the station's safety and ease of use, it could be required to construct an intersection regulated by traffic lights. These additional costs have not been considered in the profitability calculations. Constructing Gas Piping Systems A price request about the amount of connection charges was made to AS Eesti Gaas. The estimates given on the amount of connection charges in the Report on the choices for CNG filling station locations on five different locations have been presented in Table 7. As the exact location of the filling station is not known, the calculations make use of the arithmetic mean of the connection charges of the five locations: 101,000 kroons.
Table 7 The charges of connecting to gas piping systems in the preliminary choices for locations according to the data by AS Eesti Gaas
Address
Distance of existing category B piping system on registered immovable 114m 250m 8m 40m
Connection charge (EEK) without VAT
Sepa 26 Turu 47 Ringtee 8 Ringtee 25
~170,000 ~215,000 ~46,000 ~45,000
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Ringtee 77 28m ~31,000
Connection to Power Lines The assessment on the charges of connecting to power lines is based on the assumption that the suitable substation is located up to 400m away. According to that, the connection charges in the price list of AS Eesti Energia presented on their home page29 are 1,750kr/A. It is calculated that the electric power of the filling station is 3x32A, and hence, the estimated connection charges are 32 x 1,750=56,000kr. If there is no substation within 400m of the location where the station is going to be built, the costs of establishing a network shall be added to the connection charges. Detailed Plans On most of the preliminary location choices, a detailed plan has been adopted or initiated, mainly to obtain building rights to construct business and/or production buildings. When the station is to be built, it will be required to draw up a new detailed plan. The comprehensive plan of Tartu City does not prohibit establishing a filling station in the Ropka industrial area. The price of preparing a detailed plan is largely dependant on the location, which is why it is complicated to give a general assessment to the cost of the plan. According to the expert opinion of O ERKAS Prnu Instituut, the cost of the detailed plan could reach up to 100,000 kroons. This is also the price that has been taken into account in the profitability calculations. Depending on the actual situation of the area covered by the detailed plan and the market situation in the field of preparing detailed plans, the actual price may differ from the estimated price quite greatly. The cost of a detailed plan in the calculations made for a slow-fill station is an estimated 50,000 kr. It is assumed that the detailed plan does not have to include access ways and the possibility of establishing a filling station has also been considered in preparing the detailed plan for a depot. Purchasing a Registered Immovable The calculations are based on the estimated territory of a filling station (a fast-fill station 1,000m2, a slow-fill station 365m2). The price of one square metre is based on the average price of business and production land in the Rni and Teguri city districts within Tartu City as presented in the database of the real estate web site www.kv.ee as of 15 August 2010. Ten of the 14 registered immovables designated for the purpose of commercial and production land were presented with a viewable selling price. The arithmetic mean price per m2 of these immovables was 1015.4kr. Therefore, the price of a registered immovable is 1,015,400kr for a fast-fill station and 370,621kr for a slow-fill station. Costs of Financing Investments The financial analysis is based on the assumption that 30% of the investment is covered by costsharing and 70% by a loan. The calculations made on the costs of servicing a loan are based on the following:
29
Loan period 5 years = 60 months
https://www.energia.ee/et/business/network/connecting#
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Loan interest 4,158%/per year Equal repayments
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Financial Analysis
Profitability of Filling Stations with a Fast-fill System The financial calculations of a fast-fill station are presented in Annex 1. In the case of the income and costs presented, the construction of a public filling station with a fastfill system is a profitable investment during the 15-year-long accounting period. The net current asset value NPV at a discount rate of 7.9% is 5,183,923 kr. The internal rate of return IRR on the project is 15.9%. Both indicators of the project meet the profitability criteria set forth (NPV>0; IRR>discount rate 7.9%). The payback period calculated on the basis of the projects discounted cumulative cash-flows is 5 years. Therefore, the cash-flows will be positive as soon as by the 6th operating year.
Figure 3 The incomes and costs of a fast-fill filling station investment project (Sissetulekud Income; Vljaminekud Expenditures)
An additional analysis has been performed together with the profitability calculations. The aim of the analysis is to determine the optimum consumption volume, which would: a) Balance operating incomes and operating costs, b) Balance operating incomes and operating costs with investment costs. According to calculations, selling gas will not cover operating costs during the first three operating years. To cover operating losses, it would be necessary to increase the sales volume of the filling station by 12,000 kg, equivalent to the annual consumption volume of 0.44 urban line buses. On the third operating year, the predicted sales volume will be around 1300 kg less than necessary to cover operating losses. The predicted sales volume will, until the 6th operating year, remain smaller than the sales volume necessary to cover the costs of the whole project (operating costs + investment costs). During the first 6 operating years, the predicted sales volume will be smaller than the average minimum required, by about 106,000 kg or the extent of the consumption demand of 4 urban line buses.
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Figure 4 Comparison of the predicted consumption and the average consumption required (Mgiprognoos Sales estimate; Min mk tegevuskulude katteks Minimum sales to cover operating expenses; Min mk kogukulude katteks Min sales to cover total expenses)
The additional calculations show that the investment project will remain positive if other data change, even if the following strategic variables are changed: Variable Sales prognosis Selling price of fuel Investment costs Operating costs in total Purchasing price of fuel Limit as of which project becomes negative -29.3% -17.25% +50.65% +17.37% +22.42%
Therefore, the changes in the selling price of fuel and operating costs have the most effect. The increase in investment costs has a relatively insignificant impact. Profitability of Filling Stations with a Slow-fill System aka Depot Filling Stations The financial calculations of a slow-fill filling station are presented in Annex 2. On the conditions set, constructing a deport filling station is a profitable investment project, whose net current asset value NPV of the cash-flows of the 15-year-long accounting period is 3,663,592 kr, internal rate of return IRR=15.23%. Both indicators meet the requirements set: NPV>0 and IRR>discount rate 7.9%. The cash-flows of the project will turn to positive on the 6th operating year. The payback period calculated on the basis of the cumulative discounted cash-flows is 10 years.
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Figure 5 The incomes and costs of a slow-fill station investment project (sissetulekud income; vljaminekud Expenditures)
Changes in the critical parameters of the financial analysis of the slow-fill station affect the profitability of the project as follows: Variable Sales prognosis Selling price of fuel Investment costs Operating costs in total Purchasing price of fuel Limit as of which project becomes negative -18.27% -7.9% +55.9% +203% +13.94%
Changes in the selling price of fuel have the strongest impact on the profitability of a filling station. An increase in operating costs does not have an effect of the same extent as in the case of a fast-fill station. Comparison of the Two Types of Filling Stations In addition to calculating profitability, the two types of filling stations were compared against each other. The goal of the calculations was to determine, which type of station is more profitable. Calculations were performed as an incremental analysis of incomes and costs. The slow-fill station was chosen as the basic scenario and the fast-fill station was chosen as the comparative scenario. The incomes and costs of the two scenarios were then compared to each other. The resulting incremental cash-flows are the basis of assessing the profitability of the project of building a fast-fill public filling station instead of a slow-fill depot filling station. Decreases in incomes were considered to be costs and decreased in costs were considered to be incomes. The profitability calculations are presented in Annex 3. The profitability calculations demonstrate that both operating incomes and operating costs and well as investment costs increase due to preferring a fast-fill station. However, the increase in incomes is so much bigger that the project is in fact profitable: NPV = 1,520,352 kr
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IRR = 18.25% Payback period 12 years The incremental cash-flows of the first five years in total are negative, i.e. not in favour of the fast-fill station. As of the 6th operating year, the incomes of preferring a fast-fill station exceed its costs.
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Risk Assessment
Business risk Demand risk. As using compressed natural gas is not widespread in Estonia, and at the moment, there is only one CNG filling station active, the consumption of gas may be a lot less than predicted, and this even despite the current low price of gas compared to the prices of petrol and diesel. A decrease in the numbers of clients may also be brought about by a competitor establishing their gas filling station in Tartu. In order to assess that risk, calculations have been made, according to which, the predicted sales volumes may decrease by up to 29% in the case of a fast-fill station and by up to 18% in the case of a slow-fill station, without making the project unprofitable. At the same time, marketing costs to help promote the use gas-fuelled vehicles have been taken into account. Demand risk is also decreased by maintaining the price of gas at a relatively low level. Finance risks. Building a compressed natural gas filling station is a relatively large investment, and financing it probably requires raising foreign capital (loans). However, increases in the price of loan capital do not change the profitability conditions of the project in any significant way: an increase of 100% of the loan capital i.e. to the level of 8%/per year does not mean the project will become negative, but the payback period of a slow-fill station will be 13 years instead of 11. Mostly, the banks require a minimum of 30% cost-sharing in financing a project. As this means that the amount needed for a fast-fill station will be around 2 million kroons and the amount needed for a slow-fill station around 1.1 million kroons, an adequate sum of equity capital is required. An incorrect evaluation of the investment volume. As the investment volumes used in the profitability calculations are partly estimated, then the actual volumes, formed in the course of price offers and sales negotiations, could differ considerably from the volumes predicted. However, the calculations show that there is approximately a 50% investment costs increase space for both types of stations. An incorrect evaluation of operating costs. Since there is only one CNG filling station in Estonia and it has been active for a relatively short amount of time, there are no comparative data to adequately evaluate operating costs. There is only a 17% increase in the predicted operating costs for a fast-fill station, if other conditions remain the same, which in financial terms means around 230 000250 000 kroons during the first year. Supply risks. The only supplier of natural gas in Estonia is AS Eesti Gaas, who is practically in a monopoly position. Should the supply break off through the Eesti Gaas network, the operation of the station would be hindered. Using biogas can be a solution to the problem. Several projects are being carried out in the Tartu area with the aim of producing biogas from different basic products: as landfill gas at the covered Aardlapalu Landfill, as biogas at AS Tartu Veevrk by treating waste water sediments. If the biogas thus produced was purified enough to be suitable as engine fuel, it could be marketed at a gas filling station. In that case, additional investments in station equipment would be required, allowing the station to be used as a so-called daughter station, or, alternatively, a special lorry equipped
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with a gas pump has to be purchased. These investments are not taken into account in the profitability calculations. Construction risks The operating reliability and guarantee risks of equipment. There are many producers of compressed natural gas equipment. As the supplier of a filling station, a market research of the possible producers and suppliers has to be carried out to prevent possible future problems with the construction and maintenance of equipment. An important factor in choosing a successful price offer is the ability to perform maintenance and guarantee services. Since high pressure piping system works are specific and finding the specialists required in Estonia is problematic at best, then one of the significant risks is the lack of a quick reaction in the case of malfunctions in the filling station. In order to reduce that risk, it is possible to establish two filling stations, enabling to direct the clients into another filling station, should there be a malfunction. Delivery risks. As there are specific requirements to the location and consumption of a CNG filling station, and as it is usually constructed on the basis of a special order, there may be trouble in both meeting the delivery terms and the suitability of the object delivered. The risks may be reduced by presenting the producer with an initial task as meticulous as possible, and choosing the producer very carefully. Construction risks. Due to the specificity of high pressure pipelines and gas installations, there may be risks resulting from the incompetence of construction workers. While implementing the investment, one has to consider the possibility that certain works have to be performed abroad. However, there is adequate competence of low pressure piping systems works, the construction of roads and lots and performing electrical works in Estonia.
Usage risks As the substance handled in a filling station is highly flammable and the equipment under high pressure, the risks of using a filling station are also very high. To reduce the risks, CNG can only be purchased with a special card (public filling station), which is issued only after detailed instructions. In addition, clear usage and safety requirements will be displayed in the filling station. A specialist, who has had special training, will fuel the vehicles in a depot filling station.
Legal risks Risks resulting from plans. As no detailed plans have been prepared for the construction of a compressed natural gas filling station, unexpected oppositions or problems may arise in the planning process, postponing the implementation of the investment or resulting in the need to find a new location for the filling station. In order to reduce the risk, it is necessary to describe the advantages and disadvantages connected to the station via the local media before establishing it. The construction and usage of a CNG filling station is not regulated by a specific law. At the same time, installing and using gas equipment as well as pressure equipment is prescribed comparatively strictly. It is of utmost importance to follow compliance with all regulations while establishing and running a filling station.
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Analysis of Environmental Impacts

Environmental Impacts of a Filling Station
Environmental Impacts of Building a Filling Station The negative environmental effects of building a filling station are mainly to do with the impacts of the machines and equipment used in construction work and the impacts accompanying construction processes: Pollution of soil and water bodies in the course of construction works, fuel, oil and other liquids may leak from the construction machines and equipment. The amounts and extents of the leaks are predictably small and easily eliminated. Pollution of air air pollution caused by construction machines with an internal combustion engine is relatively low-level, local and short-term, and does not contribute significantly to the usual concentration of pollutants in the area. The gas accidentally spilled during gas piping systems works is lighter than air, so if there were small amounts of gas, they would diffuse in the air and would not have a negative impact. Damage to flora and fauna most of the locations found in the preliminary location choices study are situated on industrial areas that are in use and where the landscape has mainly been created by humans. Excavation works may cause a short-term, local and low-impact disturbance of flora (destroying grass where the ground is dug up) and fauna (possible habitats in the ground destroyed by digging). Impact to cultural environment there are no cultural monuments in the areas of initial choices, therefore, there is no impact on cultural goods. Construction works may temporarily pose a significant threat to the aesthetic appearance of the city (open pits etc). Impact on the life and health of citizens construction impact is connected to the safety of construction workers. If occupational safety requirements are followed, there is no threat to the life and health or people. Working with gas and pressure equipment is strictly regulated by legislation; the workers must have activity licenses, reducing the risks on their life and health resulting from handling gas and pressure equipment. Environmental Impacts of Using a Filling Station While using the station, the negative environmental impacts are mainly to do with accidents. If the station is used per instructions and the safety requirements are followed, the environmental impacts of a filling station are brought to a minimum. There is no impact on soil or water. There is a possibility of the vehicles using the station leaking oil or other liquids (windshield washer fluid, cooling liquid etc). The leaks are temporary and predictably of small amounts. As the territory of the filling station will be covered in asphalt, no leaks will reach the soil.
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Impact on air a filling station will be equipped with special appliances to avoid gas leaks, so that when the station is working normally, the gas will not leak into the outdoor environment. In the case of a small leak, the gas will diffuse into the air. As the gas is something that can be found in nature, it is of no negative effect to the environment. An accidental spillage of gas is possible during more extensive disturbances in the work of the station it is supposed that the gas will not pollute the air, but since it is highly flammable, it does nevertheless pose a threat to life and property. Flora and fauna is in no way harmed by the filling station. The station has no negative effect on cultural environment. Impact on life and health the negative impact is related to such accidents, when a large amount of gas is released into the environment. As natural gas is lighter than air and the station is an open construction, there should be no more than 2030% of gas in the air, which could lead to oxygen deprivation and asphyxia. Since gas is highly flammable, then in the case of an extensive gas leak (the concentration of gas in the air more than 5%), the gas could explode. The compressed natural gas filling station and compressed natural gas vehicles are connected to containers and equipment under high pressure, which may pose a threat to life and health in the case of breaking under pressure due to damage or malfunction.
Indirect Environmental Impacts of Building a Filling Station

Reducing Pollution In connection to ratifying climate protocols, Estonia has taken responsibilities to fulfil the international agreements on reducing the amount of pollutants emitting from means of transport. Regulation No. 122 of 22 September 2004 by the Ministry of the Environment provides the limit values for the emission, smokiness and noise level of the pollutants found in the exhaust gases of motor vehicles.
Table 5 The limit values of exhaust emissions (engines for the vehicles M2, M3; N2, N3) Pollutants: Chemical compound Units ECE R 49 before 1990 * R 49 -20% 1.10.1990 * 1.10.1991 ** 11.20 2.4? 14.40 EURO 2 1.10.1995 1.7.1992 * * 1.10.1993 1.10.1996 ** ** 4.50 1.10 8.00 0.36 0.86 4.00 1.10 7.00 0.15 0.86/0.78 EURO 1 EURO III 1.10.2000 * 1.10.2001 ** 2.10 0.66 5.00 0.10 0.80 B150/D35 0 EURO IV 1.10.2005 * 1.10.2006 ** 1.5 0.46 3.50 0.02 0.5 B50/D50 EURO V 1.10.2008 * 1.10.2009 ** 1.5 0.46 2.00 0.02 0.5 10? EURO VI 31.12.2012 * 31.12.2013 ** 1.5 0.25 2.00 0.02 0.15
CO HC NOx PM Smoke Sulphur
g/kWh g/kWh g/kWh g/kWh M*-1 ppm
14.00 3.50 18.00 -
CEMT name CEMT marking
"EURO 0" L
GREEN LORRY U
GREENER AND SAFE EURO III LORRY S 3
EURO IV 4 5
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Noise level dB(A) 84 80 80 80 80 80 80
* On the type-approval of new types of vehicles ** On the first-time registration of a vehicle (first-time commissioning)
According to the aforementioned legislation, as of 1 October 2009, it is prohibited to register a vehicle with lower pollutant indicators than the EURO V norm. The requirement is only valid for the first-time registration of a vehicle, which is why the general legislation has not restricted the traffic of existing vehicles with lower indicators. However, it is allowed to restrict the usage of certain vehicles with lower norm emissions in public transport by procurements or local legislation. The new gas vehicles sold in Europe, too, have to comply at least with the Euro V norm emissions. At the same time, the levels of pollution of gas vehicles are significantly lower than the Euro V limits. For example, the gas bus MAN LionCity CNG (type of engine marking E2876LUH03; 310hp) complies with the norm EEV (Enhanced environmentally friendly vehicle, a term used in the European emission standards for the definition of a clean vehicle over 3.5 tonnes in the category M2 and M3. The EEV standard lies between the levels of Euro V and Euro VI) and its pollutant indicators (g/kWh) are: PM 0.0025; CO 0.7191; NOx 0.1481; CH4 0.0264; NMHC 0.0002. Comparing, for example, a diesel bus (the closest engine capacity is mostly 320hp) and a gas bus (310hp) of the same capacity on the assumption that both travel for 10 hours a day, the reduction of different pollutants in using gas buses is remarkable (see Table 8). Replacing five diesel buses the age of 10 years with gas buses reduces the amounts of CO for over 6 tonnes, the amounts of HC almost 3 tonnes, the amounts of NOx even over 20 tonnes and the amounts of particle matter for over 400 kilos.
Table 8 The comparison of emissions of a diesel bus (10 years) and a gas bus (new)
Diesel bus Euro III Gas bus Reduction of exhaust gases Reduction of exhaust gases per 5 gas buses Reduction of exhaust gases per 5 gas buses (a year**)
Amounts of exhaust gases g/per day CO HC NO x PM 4941.18 1552.94 11764.71 235.29 1639.13 0.46 337.58 5.70 3302.05 1552.49 11427.13 229.60 16510.26 6,026,244 7762.426 57135.63 1147.978 419,011.9
2,833,286 20,854,503
*The Euro III standard limit is considered as the pollution volume of the diesel bus. For the gas bus, pollution volume is the one noted by the manufacturer used. Pollution volumes g/kWh have been multiplied by the capacity and working hours of a bus engine. ** On the assumption that buses will be driven 365 days per year.
If the buses to be replaced are newer, the reduction in pollution will also be lower. Replacing new diesel buses with new gas buses has a minimum effect on reducing pollution, since although new buses have to comply with the Euro V norm, many European bus manufacturers offer buses that are compliant with the EEV norm.
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Summary
The aim of preparing the current study was to assess the profitability of building a compressed natural gas filling station in Tartu City. Two different types of filling stations were analysed: a) A filling station with a fast-fill system, where gas is loaded in a vehicles gas container under pressure during a short period of time (2 to 5 minutes). The filling station is planned to be a public filling station, but would also meet the needs of the gas buses that are to serve Tartu City urban lines. b) A filling station with a slow-fill system, where gas is loaded between the times that a vehicle is in use for longer periods of time, for example at night. The station will only meet the demands of gas buses serving Tartu City urban lines. According to the study, there is practically no competition in the field of gas filling stations. However, limited experiences of using CNG in Estonia also result in a limited client base. As the price of gas has remained at a low level for a long time, and is predicted to continue to stay at a low level, it has a promising future as an engine fuel. In addition to smaller fuel costs, using gas will result in the sustainability of the environment, since fewer pollutants are emitted into the air during gas burning. The investment volume of a fast-fill CNG filling station is ~6.6 million kroons and the investment volume of a slow-fill CNG filling station is ~3.9 million kroons. A larger part of the investment goes to purchasing and installing the filling station equipment. The profitability calculations of the filling stations demonstrate that the operating costs of a filling station during the 15-year-long accounting period will remain between 7.510.3 kr per 1 kg of fuel sold. The corresponding indicators of a slow-fill station are somewhat smaller (7.59.6). Considering the sales predictions, according to which, an important part of the sales will be made up of selling fuel to gas buses serving Tartu City urban lines, then operating incomes will cover operating costs on the 4th operating year in the case of a fast-fill station and on the 5th operation year in the case of a slow-fill station. The investment projects for both types of filling station are positive: the NVA value of either project is greater than 0 and the internal rate of return on the projects exceeds the discount rate used in the calculations. The payback period is 5 years for a fast-fill station and 10 years for a slow-fill station. When the two filling stations are compared, then investing in a fast-fill station is more profitable, since its sales predictions are higher. Higher sales revenue will cover higher investments and slightly higher operating costs. Using gas does not result only in saving on fuel costs, it also reduces air pollution. According to the estimates and assuming that the new gas buses that comply with the EEV norm will replace five diesel buses complying with the Euro III norm, the annual amount of exhaust gases in Tartu City will be reduced thusly: by 6 tonnes of CO, by 3 tonnes of HC, by 21 tonnes of NOx and by 0.4 tonnes of particle matter.
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ANNEXES
Annex 1. The profitability calculations of a fast-fill compressed natural gas filling station Annex 2. The profitability calculations of a slow-fill compressed natural gas filling station Annex 3. The comparison of a fast-fill station and a slow-fill station
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Biogas Filling Station Study Assesses Feasibility, Profitability

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BIOGAS FILLING STATION FEASIBILITY AND PROFITABILITY STUDY

Biogas Filling Station Feasibility and Profitability Study

Biogas Filling Station Feasibility and Profitability Study

Biogas Filling Station Feasibility and Profitability Study

Biogas Filling Station Feasibility and Profitability Study

Biogas Filling Station Feasibility and Profitability Study

Biogas Filling Station Feasibility and Profitability Study

Biogas Filling Station Feasibility and Profitability Study

Component CH4 CO2 N2 O2 H2O Component H2S NH3 Aromatic compounds

Municipal waste (landfill gas)

Residual mud from water treatment plants

5060 3834 50 10 6 ( 40 C) Municipal waste (landfill gas)

6075 3319 10 < 0.5 6 ( 40 C) Agricultural waste

Landfill gas 6.6 6 0.93 1.21 6.9

Natural gas 11.3 10.3 0.57 0.73 14.9

Biogas Filling Station Feasibility and Profitability Study

Compressed Natural Gas Filling Stations

Vehicles Consuming Compressed Natural Gas

Biogas Filling Station Feasibility and Profitability Study

Goods vehicles 21,009 60,094 6 2 81,111

Buses 325 3,792 0 0 4,117

Motorcycles 18,624 1 0 1 18,626

Biogas Filling Station Feasibility and Profitability Study

Biogas Filling Station Feasibility and Profitability Study

Analysis of Target Groups and Description of Client Base

Biogas Filling Station Feasibility and Profitability Study

Biogas Filling Station Feasibility and Profitability Study

Biogas Filling Station Feasibility and Profitability Study

Europe Estonia in total Private cars in Estonia

Company Alexela Oil AS

Trade mark Alexela

Filling stations in Tartu City 5

Web page: http://www.cngnow.com/EN-US/Vehicles/AroundTheWorld/Pages/default.aspx data as of 14.08.2010

Biogas Filling Station Feasibility and Profitability Study

Biogas Filling Station Feasibility and Profitability Study

gas diesel petrol gas diesel

kg/100km l/100km l/100km kg/100km l/100km

5 5.7 7.1 37.35 39.23

0.53 0.98 1.22 3.96 6.77

53 98.32 122.47 395.91 676.72

0.00% 85.52% 131.08% 0.00% 70.93%

* http://media.opel.com/media/intl/en/vehicles/opel/zafira/2009.brand_opel.html ** A pilot study by MAN and Tallinn City Government

Biogas Filling Station Feasibility and Profitability Study

Initial Analysis of Compressed Natural Gas Filling Stations Locations

Biogas Filling Station Feasibility and Profitability Study

Biogas Filling Station Feasibility and Profitability Study

Financial Analysis Methodology

Biogas Filling Station Feasibility and Profitability Study

Table 6 Prices and discount rates of capitals

1 Accounting period 2 EURIOBOR 3 Risk premium of bank

Homepage of the Ministry of Finance: http://www.fin.ee/doc.php?105048

Biogas Filling Station Feasibility and Profitability Study

Biogas Filling Station Feasibility and Profitability Study

Biogas Filling Station Feasibility and Profitability Study

Financial Analysis Operating Income and Costs

Biogas Filling Station Feasibility and Profitability Study

AS Eesti Gaas home page: http://www.gaas.ee/index.php?page=186&, as of 14.08.2010

Biogas Filling Station Feasibility and Profitability Study

Biogas Filling Station Feasibility and Profitability Study

Biogas Filling Station Feasibility and Profitability Study

Biogas Filling Station Feasibility and Profitability Study

Connection charge (EEK) without VAT

Sepa 26 Turu 47 Ringtee 8 Ringtee 25