biogas filling station

BIOGAS FILLING BIOGAS FILLING BIOGAS FILLING BIOGAS FILLING

STATIONSTATIONSTATIONSTATION

FEASIBILITY AND FEASIBILITY AND FEASIBILITY AND FEASIBILITY AND

PROFITABILITY PROFITABILITY PROFITABILITY PROFITABILITY

STUDY STUDY STUDY STUDY

ERKAS Valduse OÜ ERKAS Valduse OÜ ERKAS Valduse OÜ ERKAS Valduse OÜ

2010 TARTU2010 TARTU2010 TARTU2010 TARTU

Biogas Filling Station Feasibility and Profitability Study

ERKAS Valduse OÜ 2

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 façades 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;

1 http://www.balticbiogasbus.eu/web/about-the-project.aspx

2 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 OÜ; 20105;

• The study on Aardlapalu Landfill gases; Ecotech OÜ; 20106;

• The feasibility study of biogas buses used in public transport; Assets RPM OÜ; 20107.

5 Tartu City homepage: http://www.tartu.ee/data/Surugaasitanklate%20asukoha%20uuring0.ppt

6 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 (Jööri in Saare County,

Aravete in Järva 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 (Väätsa Landfill in Järva County, Pääsküla 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

8 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 waste9

Component

Municipal waste (landfill

gas)

Residual mud from water

treatment plants Agricultural waste % of volume % of volume % of volume

CH4 50–60 60–75 60–75

CO2 38–34 33–19 33–19

N2 5–0 1–0 1–0

O2 1–0 < 0.5 < 0.5

H2O 6 (à 40 °C) 6 (à 40 °C) 6 (à 40 °C)

Component

Municipal waste (landfill

gas)

Residual mud from water

treatment plants Agricultural waste mg/m3 mg/m3 mg/m3

H2S 100–900 1,000 – 4,000 3,000–10,000

NH3 – – 50–100

Aromatic

compounds 0–200 – –

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 gas10

Indicator Landfill gas Natural gas

PCS KWH/m3 6.6 11.3

PCI KWH/m3 6 10.3

Density 0.93 0.57

Mass kg/m3 1.21 0.73

The Wobbe

Index 6.9 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:

9 http://www.biogas-renewable-energy.info/biogas_composition.html

10 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 2011–2050 be ca 20 million normal cubic metres.

Right after covering the landfill, the volume of methane will be up to 800,000–900,000

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 OÜ 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 Veevärk. 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-Sõjamäe 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.

11 Environmental Investment Centre, AS Tartu Veevärk, OÜ Mõnus 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"; Ääsmäe-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)

Type of fuel In total

Passenger

cars

Goods

vehicles Buses Motorcycles

PETROL 457,245 417,287 21,009 325 18,624

DIESEL 192,272 128,385 60,094 3,792 1

GAS 23 17 6 0 0

ELECTRICITY 6 3 2 0 1

In total 649,546 545,692 81,111 4,117 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.


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.




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



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 cause-

and-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.



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 Bus Companies Bus Companies 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 transport”12, 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 (100–150 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.

12

Assets RMP OÜ; “Feasibility study of biogas buses used in public transport”; Tartu 2010 13

AS GoBus homepage: http://www.gobus.ee/?id=1525,s as of 15.08.2010



Bus companies as the target group of a filling station are what contribute significantly to determining

the range of a filling station’s 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 CompaniesWaste Management CompaniesWaste Management CompaniesWaste 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 – Tähe 108, Ragn-Sells – Sepa 26) or on the way to

their destination.

Companies Providing Taxi ServicesCompanies Providing Taxi ServicesCompanies Providing Taxi ServicesCompanies 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 cost-

effectiveness, are likely to install a gas application on their vehicle or buy a car fuelled by

compressed natural gas.

Other TransportationOther TransportationOther TransportationOther Transportation----Intensive CompaniesIntensive CompaniesIntensive CompaniesIntensive 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 VehiclesPrivate VehiclesPrivate VehiclesPrivate 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

14

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



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 Vehicles with CNG engines

Amount Percentage Calculated

1,000 1,000 1,000

Europe 285,000 812 0.28%

Estonia in total 646 0.28% 1.8

Private cars in

Estonia 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, Suur-

Sõjamäe 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-Sõjamäe 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: OÜ Anrebell, Kristen Grupp OÜ),

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 OÜ filling station (Ringtee 28).

Table 4 Filling stations in Tartu City

Company Trade mark

Filling stations in Tartu

City

Alexela Oil AS Alexela 5

17

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

14.08.2010



Eesti Statoil AS Statoil, 1-2-3 7

Neste Eesti AS Neste 5

Lukoil Eesti AS Lukoil 2

Sevenoil Est OÜ 7 2

Alvistra AS Alvistra 1

Olerex AS Olerex 2

Go Oil AS GoOil 1

VostokOil OÜ Vostok 1

Jonny AS Favora 1

In total 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 Rannamõisa 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-Sõjamäe 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. (Kütuse hind (EEK) – Fuel price (EEK);Bensiin 95-95 Petrol; Diislikütus – 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



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

Average fuel

consumption Fuel consumption kr/km

Vehicle Fuel unit

consumptio

n kr/km

kr/ 100km

Compared to CNG

Private car*

Opel Zafira 1.6 CNG EcoFlex Cosmo

(69kW) gas kg/100km 5 0.53 53 0.00%

Opel Zafira 1.7 CDTI EcoFlex (81kW) diesel l/100km 5.7 0.98 98.32 85.52%

Opel Zafira 1.6 EcoFlex (85kW) petrol l/100km 7.1 1.22 122.47 131.08%

Bus**

MAN LionCity CNG 12m gas kg/100km 37.35 3.96 395.91 0.00%

Average Tallinn urban line bus diesel l/100km 39.23 6.77 676.72 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



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

18

Nordic Energy Group; “Report on the choices for the locations of compressed natural gas filling stations”;

Tallinn 2010.



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 Võru-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 Jõhvi-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.



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 OÜ5 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



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 Pärnu ERKAS Instituut OÜ.

• 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 bank’s

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 2010…2014 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 Year 15

2 EURIOBOR Euribor 6-month Euribor rate as of 11.08.2010 1.158%

3 Risk premium of bank RPd Estimated risk premium of bank at issuing loan 3%

19

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



2 Price of borrowed capital Kd Euribor+ROd 4.158%

3

Risk premium of equity

capital RPe Estimated 5.0%

4 Price of equity capital Ke kd+RP 9.158%

5

Percentage of borrowed

capital Wd 70.0%

6 Percentage of equity capital We 30.0%

7

Weighted average cost of

capital WACC kd*Wd+ke*We 5.658%

8 Inflation rate F 2.12%

9 Nominal discount rate k1 (1+WACC)*(1+f)-1 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 2010…2014, 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 2010…2014, 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.

Taxes

• Cost without VAT is used in the calculations of the current analysis.

• Excise duty has been added to fuel prices.

20

Spring prognosis 2010 of the Ministry of Finance: http://www.fin.ee/doc.php?105048 21

U.S Energy Information Administration. http://www.eia.doe.gov/neic/speeches/newell121409.ppt

Figure 2. EIA prediction on crude oil prices 2010. (Kõrge –High,

Madal – Low)



• 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%.



Financial Analysis

Operating Income and Costs

The current financial analysis assesses the profitability indicators of two types of filling stations: a 5-

slot 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 2012…2015 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



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 specialist’s 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



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 manager’s

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 station’s 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 station’s card payment and

other record-keeping systems as well as that of remote sensing systems. An

23

AS Elion communications services price calculator as of 18.08.2010 at:

http://lahendus.elion.ee/kalkulaator?ID=2010-08-

26%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



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 Räni 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 tax”26, 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

25

AS G4S video security price info as of 18.08.2010: http://www.g4s.ee/arikliendile/videovalve/videovalve 26

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



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 FastPublic Filling Station with a FastPublic Filling Station with a FastPublic Filling Station with a Fast----fill fill fill fill SystemSystemSystemSystem

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 client’s 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), WÄGA Wärme-Gastechnik

GmbH (Germany), EPM Gas Technology (USA, Spain), Safe CNG Technology (Singapore), the Estonian

representative Kristen Grupp OÜ (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 – 4…5 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 SlowDepot Filling Station with a SlowDepot Filling Station with a SlowDepot Filling Station with a Slow----fill fill fill fill System System System 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 LotsRoads and LotsRoads and LotsRoads 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)



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 Constructing Gas Constructing Gas Constructing Gas PipingPipingPipingPiping Systems Systems Systems 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

Connection charge (EEK)

without VAT

Sepa 26 114m ~170,000

Turu 47 250m ~215,000

Ringtee 8 8m ~46,000

Ringtee 25 40m ~45,000



Ringtee 77 2…8m ~31,000

Connection to Power LinesConnection to Power LinesConnection to Power LinesConnection 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 PlansDetailed PlansDetailed PlansDetailed 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 OÜ ERKAS Pärnu 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 ImmovablePurchasing a Registered ImmovablePurchasing a Registered ImmovablePurchasing 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 Räni 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 cost-

sharing and 70% by a loan. The calculations made on the costs of servicing a loan are based on the

following:

• Loan period 5 years = 60 months

29

https://www.energia.ee/et/business/network/connecting#



• Loan interest 4,158%/per year

• Equal repayments



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 fast-

fill 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 project’s 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; “Väljaminekud” –

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.



Figure 4 Comparison of the predicted consumption and the average consumption required (“Müügiprognoos” – Sales

estimate; “Min müük tegevuskulude katteks” – Minimum sales to cover operating expenses; “Min müük 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 Limit as of which project becomes negative

Sales prognosis -29.3%

Selling price of fuel -17.25%

Investment costs +50.65%

Operating costs in total +17.37%

Purchasing price of fuel +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.



Figure 5 The incomes and costs of a slow-fill station investment project (“sissetulekud” – income; “väljaminekud” –

Expenditures)

Changes in the critical parameters of the financial analysis of the slow-fill station affect the

profitability of the project as follows:

Variable Limit as of which project becomes negative

Sales prognosis -18.27%

Selling price of fuel -7.9%

Investment costs +55.9%

Operating costs in total +203%

Purchasing price of fuel +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



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.



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 230 000…250 000 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 Veevärk 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



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.



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.



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 20…30% 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: Units ECE R 49 R 49 -20% EURO 1 EURO 2 EURO III EURO IV EURO V EURO VI

Chemical

compound

before

1990 *

1.10.1990

* 1.7.1992 *

1.10.1995

*

1.10.2000

*

1.10.2005

*

1.10.2008

*

31.12.2012

*

1.10.1991

**

1.10.1993

**

1.10.1996

**

1.10.2001

**

1.10.2006

**

1.10.2009

**

31.12.2013

**

CO g/kWh 14.00 11.20 4.50 4.00 2.10 1.5 1.5 1.5

HC g/kWh 3.50 2.4? 1.10 1.10 0.66 0.46 0.46 0.25

NOx g/kWh 18.00 14.40 8.00 7.00 5.00 3.50 2.00 2.00

PM g/kWh - - 0.36 0.15 0.10 0.02 0.02 0.02

Smoke M*-1 0.86 0.86/0.78 0.80 0.5 0.5 0.15

Sulphur ppm B150/D35

0 B50/D50 10?

CEMT name "EURO 0" GREEN

LORRY

GREENER

AND SAFE

LORRY

EURO III EURO IV

CEMT

marking L U S 3 4 5



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)

Amounts of exhaust gases g/per day CO HC NO x PM Diesel bus Euro III 4941.18 1552.94 11764.71 235.29 Gas bus 1639.13 0.46 337.58 5.70 Reduction of exhaust gases 3302.05 1552.49 11427.13 229.60

Reduction of exhaust gases per 5 gas buses 16510.26 7762.426 57135.63 1147.978

Reduction of exhaust gases per 5 gas buses (a year**) 6,026,244 2,833,286 20,854,503 419,011.9 *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.



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 vehicle’s 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 7.5…10.3 kr per 1 kg of fuel

sold. The corresponding indicators of a slow-fill station are somewhat smaller (7.5…9.6).

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.



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

biogas filling station

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