www.metla.fi Energy sector in Belarus: Focus on wood and peat fuels Yuri Gerasimov Working Papers of the Finnish Forest Research Institute 171 http://www.metla.fi/julkaisut/workingpapers/2010/mwp171.htm ISBN 978-951-40-2251-7 (PDF) ISSN 1795-150X Working Papers of the Finnish Forest Research Institute 171 http://www.metla.fi/julkaisut/workingpapers/2010/mwp171.htm 2 Working Papers of the Finnish Forest Research Institute publishes preliminary research results and conference proceedings. The papers published in the series are not peer-reviewed. The papers are published in pdf format on the Internet only. http://www.metla.fi/julkaisut/workingpapers/ ISSN 1795-150X Office Post Box 18 FI-01301 Vantaa, Finland tel. +358 10 2111 fax +358 10 211 2101 e-mail julkaisutoimitus@metla.fi Publisher Finnish Forest Research Institute Post Box 18 FI-01301 Vantaa, Finland tel. +358 10 2111 fax +358 10 211 2101 e-mail info@metla.fi http://www.metla.fi/ Working Papers of the Finnish Forest Research Institute 171 http://www.metla.fi/julkaisut/workingpapers/2010/mwp171.htm 3 Authors Gerasimov, Yuri Title Energy sector in Belarus: Focus on wood and peat fuels Year 2010 Pages 62 ISBN 978-951-40-2251-7 (PDF) ISSN 1795-150X Unit / Research programme / Projects Joensuu Unit / 7395 Central and Eastern European Forest Information Service Accepted by Timo Karjalainen, Professor, 8.9.2010 Abstract The energy sector in Belarus makes up approximately 30% of the industrial structure of the country. The role of the sector is large both in exports (36% of the total export value) and imports (39% of the total import value). Previously access to cheap gas from Russia and a lack of energy diversification pol- icies have prevented Belarus from developing its potential local energy resources for energy generation. Nowadays energy security, which is determined primarily by the share of local energy resources in the overall energy balance, is the top priority. Currently, the share of local fuels is about 16% of the gross consumption of primary energy and 17% in the use of boiler and furnace fuel. According to the concept of energy security of Belarus the latter figure must be increased to 25% by 2012. Belarus is poorly endowed with fossil resources, which have met only about 7% of the country’s pri- mary energy consumption in recent years. The most valuable Belarusian fossil energy resource is high quality oil, but its residual reserves are estimated at only 55 million tons. The total reserves of peat in the country are identified as 4 billion tons, but most of these are in agricultural land, or assigned to envi- ronmental areas. The natural conditions of Belarus do not allow a large-scale use of such renewable en- ergy sources as wind, solar and hydro. The greatest potential sources of renewable energy in Belarus are the forests. The annual increment of forests is about 28.6 million m3; which can provide approximately 4.6 million toe per year. Therefore, it is wood and peat which will be the main sources of growth in the share of local energy resources in the energy balance of Belarus until 2020. The current annual harvest of woody biomass for energy is about 9 million m3 whereas the share of peat is over 3 million tons. In 2009, Belarus produced 5.6 million m3 of wood in rough, 0.6 million solid m3 of wood chips, 57,000 ton of wood pellets and briquettes, 1.2 million tons peat fuel briquettes. The government has developed a series of regulatory documents to create a legislative, economic, finan- cial, organizational and technical framework in the use of wood and peat fuels (Local Fuels Programme 2004, Woodfuels Programme 2009, Peat Programme 2008, Forestry Programme 2006). The target is 7 million m3 of wood in rough, 1.5 million solid m3 of wood chips, 0.8 million tons of wood pellets and briquettes, and 1.5 million tons of peat fuel briquettes. However, there is a risk that the targeted increase in the production of woodfuels may cause an extensive use of high-quality logs as woodfuel, which will have negative environmental implications and cause a suboptimal exploitation of the forest resources. Many of these issues are not unique to Belarus and are being faced by several countries who plan to promote renewable energy. Keywords renewable energy, woody biomass, woodfuels, wood harvesting, wood chips, wood pellets, wood bri- quettes Available at http://www.metla.fi/julkaisut/workingpapers/200x/mwp171.htm Replaces Is replaced by Contact information Yuri Gerasimov, Finnish Forest Research Institute, Joensuu Research Unit, P.O.Box 68, FI-80101 Joensuu, Finland, yuri.gerasimov@metla.fi Other information Working Papers of the Finnish Forest Research Institute 171 http://www.metla.fi/julkaisut/workingpapers/2010/mwp171.htm 4 Contents Preface.............................................................................................................................5 Introduction.....................................................................................................................6 1 Energy Sector ............................................................................................................8 1.1 Macroeconomic role.......................................................................................................... 8 1.2 Energy source and supply................................................................................................ 11 1.3 Energy sub-sectors .......................................................................................................... 13 1.3.1 Oil ......................................................................................................................... 13 1.3.2 Natural gas ........................................................................................................... 13 1.3.3 Electricity generation ........................................................................................... 14 1.3.4 Heat generation .................................................................................................... 16 1.4 Energy policies................................................................................................................ 18 1.4.1 National Programme on Energy Saving 2001–2005............................................. 19 1.4.3 Measures to improve the efficiency of energy resources up to 2012 ................... 21 1.4.4 Electricity and heat tariff policy............................................................................ 21 2 Renewable Energy...................................................................................................23 2.1 Potential, actual and projected use.................................................................................. 23 2.1.1 Woody biomass..................................................................................................... 23 2.1.2 Peat ....................................................................................................................... 24 2.1.3 Biogas from animal waste..................................................................................... 24 2.1.4 Crop residues......................................................................................................... 25 2.1.5 Hydropower........................................................................................................... 25 2.1.6 Wind power........................................................................................................... 25 2.1.7 Solar energy........................................................................................................... 25 2.1.8 Fuel ethanol and biodiesel..................................................................................... 26 2.2 Renewable energy policy................................................................................................. 26 3 Woody Biomass and Woodfuels.............................................................................28 3.1 Woody biomass ............................................................................................................... 28 3.1.1 Energy logs............................................................................................................ 28 3.1.2 Logging by-products............................................................................................. 28 3.1.3 Energy plantations ................................................................................................ 29 3.1.4 Short rotation energy wood................................................................................... 29 3.1.5 Dead felled and dead standing trees ..................................................................... 29 3.1.6 Wood processing industry by-products................................................................. 30 3.1.7 Potential for energy use......................................................................................... 30 3.2 Supply for woody biomass.............................................................................................. 31 3.2.1 The Ministry of Forestry ...................................................................................... 34 3.2.3 The Ministry of Communal Services.................................................................... 37 3.3 Woodfuels ....................................................................................................................... 37 3.3.1 Production of energy wood in the rough .............................................................. 37 3.3.2 Production of wood chips ..................................................................................... 38 3.3.3 Production of wood pellets and briquettes ........................................................... 39 3.4 Domestic use of woodfuels............................................................................................. 45 3.4.1 Export.................................................................................................................... 47 4 Peat and peat-based fuel.........................................................................................48 4.1 Potential and projected use ............................................................................................. 48 4.2 Peat industry.................................................................................................................... 49 4.3 Peat fuels......................................................................................................................... 53 4.3.1 Production of fuel briquettes................................................................................. 53 4.3.2 Production of fuel pellets ..................................................................................... 55 4.3.3 Production of sod peat .......................................................................................... 55 4.4 Re-equipment of the peat industry.................................................................................. 56 5 Conclusion...............................................................................................................57 References....................................................................................................................58 Working Papers of the Finnish Forest Research Institute 171 http://www.metla.fi/julkaisut/workingpapers/2010/mwp171.htm 5 Preface This report was written under the umbrella of the project “Central and Eastern European Forest Information Service”. The aim of the project is to create an information service for the Estonian, Latvian, Lithuanian, Polish, Czech, Belarusian, Ukrainian and Romanian forest sectors and to strengthen knowledge relating to it. The goal is to find business opportunities and new markets in the Central and Eastern European (CEE) countries. The project’s target groups are Finnish forest sector enterprises and technology manufacturers planning to enter the business or expand it to the CEE countries. The project is funded by the European Social Fund (ESF). This report is the second publication within the project. The report describes briefly the current situation of the energy sector in Belarus with a focus on wood and peat fuels. The thematic and cartographic material is grouped to woody biomass and peat resources and potential, production and the most important producers of woodfuels (energy wood in rough, wood chips, wood pellets and briquettes), as well as peat fuels (briquettes and pellets). This review serves the information needs of different stakeholders and those interested in the bioenergy sector in Belarus. All maps can be downloaded from the Metla information service on Central and Eastern European coun- tries in the Internet (www.metla.fi/metinfo/kie). The report is a part of a publication series which will be prepared about CEE countries during 2010–2012. Finally, a word of appreciation to Timo Karjalainen, Elina Välkky, and Juhani Marttila who have reviewed the first full draft. Their comments greatly helped to improve the quality of this report. Working Papers of the Finnish Forest Research Institute 171 http://www.metla.fi/julkaisut/workingpapers/2010/mwp171.htm 6 Introduction Belarus, officially the Republic of Belarus, is a landlocked country in Eastern Europe with an area of 207,600 km² (Kostevich et al. 2010a). It has a common border with Latvia in the north, Lithua- nia in the north-west, Poland in the west, Russia in the north and east and Ukraine in the south. Belarus is landlocked, relatively flat, and contains large tracts of marshy land. Belarus’ highest point is Dzerzhynsk Hill (Дзержинская гора) at 345 metres, and the average elevation of Be- larus is 160 metres above sea level. Many streams and 11,000 lakes are found in Belarus. Three major rivers run through the country: the Neman (Неман), the Pripyat (Припять), and the Dnepr (Днепр). The Neman flows westwards towards the Baltic Sea, and the Pripyat flows eastwards to the Dnepr; the Dnepr flows southwards towards the Black Sea. Approximately 70% of the radia- tion from neighbouring Ukraine’s 1986 Chernobyl nuclear disaster entered Belarusian territory, and as of 2005 about one fifth of its area (principally farmland and forests in the south-eastern re- gions) continues to be affected by radiation fallout (Geography of Belarus 2010). The proximity of the Baltic Sea (257 kilometres at the closest point) means that the country has temperate continental climate. Winters last between 105 and 145 days, and summers last up to 150 days. Winters are cold and summers are cool and moist, and there is a great need for heating during the winter months. The climate ranges from harsh winters, with average January tempera- tures at −6 °C, to cool and moist summers with an average temperature of 18 °C in July. Belarus has an average annual rainfall of 550–700 mm. The country has a transitional form between con- tinental and maritime climate (Geography of Belarus 2010). Natural resources are limited and include peat deposits, small quantities of oil and natural gas, granite, dolomite (limestone), marl, chalk, sand, gravel and clay. The most important natural resource is the forests, which cover 40% of the country (FAOSTAT 2010, Gerasimov and Kar- jalainen 2010). Belarus with a population of 9.480 million is divided into regions (область), which are named after the cities (namely Brest, Grodno, Mogilev, Minsk, Gomel and Vitebsk) that serve as their administrative centres. Each region has a regional legislative authority, called a regional council (областной совет), which is elected by the region’s residents, and a regional executive authority, called a regional administration (областная администрация), whose leader is appointed by the president. Regions are further subdivided into districts (район). As with regions, each district has its own legislative authority, called a district council (районный совет) elected by its residents, and an executive authority, called a district administration (районная администрация), appoint- ed by higher executive powers. As of 2010, there are six regions, 118 districts, 112 towns and 94 urbanized settlements (Kostekevich 2010b). The city of Minsk itself is split into nine districts and is given a special status, due to the city serving as the national capital. Minsk city is run by an ex- ecutive committee and granted a charter of self-rule by the national government. Belarus was one of the USSR’s major industrial republics, specializing in the production of ma- chinery and agriculture. Although industry has declined significantly since independence from the USSR in 1991, industry and manufacturing continue to make an important contribution to the economy. Belarus has retained close political and economic ties with Russia, and has signed a treaty on a union that envisions greater political, trade and economic integration. Belarus suffered greatly from the 1998 financial crisis in Russia but is recovering with a GDP growth at 5% in 2002 (minimum), 11% in 2004 (maximum) and 10% in 2008. The industrial sector has continued to be Working Papers of the Finnish Forest Research Institute 171 http://www.metla.fi/julkaisut/workingpapers/2010/mwp171.htm 7 the source of this growth, at 5% in 2002 (minimum), 16% in 2004 (maximum) and 12% in 2008 (Kostevich et al. 2010b). The Government of Belarus officially welcomes foreign investment (National Investment Agency 2010). Belarus offers a number of considerable advantages to potential investors – its central lo- cation, well-educated and relatively inexpensive work force, low crime rate and easy access to the Russian market. The Investment Code of the Republic of Belarus came into force in 2001 and states that investors’ rights are guaranteed by the state. It guarantees property rights and the right to remit profits abroad. Investments cannot be nationalized without complete and timely compen- sation. The government has also worked out the National Programme for Attracting Investment, which is aimed at improving the general investment climate. Nevertheless investments in all sec- tors, including the energy sector, have been hindered by low levels of privatization. Working Papers of the Finnish Forest Research Institute 171 http://www.metla.fi/julkaisut/workingpapers/2010/mwp171.htm 8 1 Energy Sector 1.1 Macroeconomic role The energy sector makes up approximately 30% of the industrial structure of the country. The role of the sector is large both in exports (36% of the total export value1) and imports (39% of the total import value) (Gavrilova et al. 2010). The energy sector has played a key role in supporting Bela- rus’ recovery after the USSR collapsed by providing affordable, reliable, and sufficient energy to the national economy over the past decade. However, Belarus is a net importer of energy resourc- es, and it imports significant volumes of oil, gas and electricity. Furthermore, over 95% of all pri- mary energy supply comes from Russia. On the one hand, Russia supplies energy to Belarus for a considerably low price compared with world market price due to the specific relations between the countries. On the other hand, this creates significant risks to energy security. Russia’s recent actions to introduce market-based prices for its energy exports to the former USSR countries (CIS) are likely to result in the phasing out of Russian energy subsidies to Belarus. This creates a risk of depriving the sector of the hefty margins that allowed it to finance its investments directly from cash flows and compensate for weaknesses and limitations associated with state ownership and the vertical monopoly structure of the energy companies. This situation underscores the need for reforms that would allow the sector to raise financing and improve efficiency. Table 1.1. Energy exports. 2007 2008 2009 Crude oil Volume, million ton 0.851 1.453 1.716 Crude oil subtotal cost, US$ million 483.8 988.1 738.1 Price, US$/ton 568.5 680.0 430.1 Petroleum products Volume, million ton 15.1 15.2 15.5 Petroleum products subtotal cost, US$ million 7,626 10,613 7,005 Price, US$/ton 505.0 698.2 451.9 Electricity 547 613.4 349.4 Volume, TWh 0.558 Electricity subtotal cost, US$ million 35.269 Price, US cents/kWh 6.3 Peat Volume, million ton 0.2168 0.305 0.4332 Peat subtotal cost, US$ million 8.744 14.212 20.923 Price, US US$/ton 40.3 46.6 48.3 Woodfuels Volume, million ton 0.093 0.136 0.092 Woodfuels subtotal cost, US$ million 5.306 8.332 7.263 Price, US$/ton 57.2 61.4 78.9 Total fuel and energy export, US$ million 8,124 11,659 7,771 Total export, US$ million 24,275 32,571 21,282 Fuel and energy export to total export, % 33% 36% 37% GDP, US$ million 45,275 60,313 48,973 Fuel and energy export to GDP, % 18% 19% 16% Source: Belstat 2010 1 Real export of Belarusian energy without Russian transit energy flow Working Papers of the Finnish Forest Research Institute 171 http://www.metla.fi/julkaisut/workingpapers/2010/mwp171.htm 9 An important feature that emphasizes the macroeconomic role of the energy sector is that in al- most all previous years there was a rise in the contribution of exports of primary energy (oil) in the overall export growth in Belarus. Since 2005 Belarus has significantly increased exports of oil and petroleum products, which was the result of growth in the share of energy products in the exports from 8% in 2000 to 36% in 2009. This is made possible by the favourable conditions of crude oil deliveries to Belarus from Russia. Customer benefits of supply declined slightly after 1 January 2007, when Russia forced Belarus to pay part of its oil duties (one-third). Import of energy resources is also an essential part of all Belarusian imports. Belarusian indus- trial enterprises use a significant amount of intermediate imports – mostly energy resources and metals, producing products with low value added. It should be noted that the growth of exports and imports of energy resources are not equally reflected in the balance of foreign trade in en- ergy. Since 2006 it has been consistently negative, i.e. energy imports exceeded its exports. This is largely due to a gradual rise in prices for natural gas imported from Russia, but also due to a change in the terms of the supply of Russian oil (Gavrilova et al. 2010, Myroshnychenko 2006). Table 1.2. Energy imports. 2000 2005 2007 2008 2009 Natural gas Volume, billion m³ 17.1 20.12 20.6 21.1 17.6 Natural gas subtotal cost, US$ million 525 949.5 2,088.7 2,675.5 2,601.1 Price, US$/1000 m³ 30.7 47.2 101.4 126.8 147.8 Crude oil Volume, million ton 12.01 19.32 20 21.5 21.5 Crude oil subtotal cost, US$ million 1,636 4,222 7,234 9,492 7,065 Price, US$/ton 136.2 218.5 361.7 441.5 328.6 Petroleum products Volume, million ton 1.08 0.57 0.89 2.49 3.78 Petroleum products subtotal cost, US$ million 210.1 152.6 486.8 1,527.3 1,320.8 Price, US$/ton 194.5 267.7 547.0 613.4 349.4 Electricity Volume, TWh 7.2 4.94 4.34 2.4 4.48 Electricity subtotal cost, US$ million 128.9 99.93 129.1 113.1 193.8 Price, US cents/kWh 1.8 2.0 3.0 4.7 4.3 Total fuel and energy import, US$ million 2,500 5,424 9,939 13,808 11,181 Total import, US$ million 28,693 39,381 28,564 Fuel and energy import to total import, % 35% 35% 39% GDP, US$ million 11,417 29,575 45,275 60,313 48,973 Fuel and energy Import to GDP, % 22% 18% 22% 23% 23% Source: Belstat 2010 The energy sector of the country not only plays an important macroeconomic role, but also en- sures the reliability of transit, in addition to the geopolitical importance of bringing the country profit (Rakova 2010, Myroshnychenko 2006). The capacity of transit gas pipelines in Belarus is 63 billion m³ per year (Figure 1.1). In 2008, Belarus transited to Western Europe 51.2 billion m³ of natural gas and 44.2 billion m³ in 2009. Transit of natural gas is mainly controlled by the Russian side, thus providing transit revenues worth about US$ 250 million. Construction of the natural gas pipeline “Nord Stream” in Baltic Sea has reduced the importance of the Belarusian direction. Working Papers of the Finnish Forest Research Institute 171 http://www.metla.fi/julkaisut/workingpapers/2010/mwp171.htm 10 All attempts of the Belarusian government to convince Russia of the benefits of building a second branch of the Russian gas pipeline ”Yamal–Europe” have failed. The volume of oil transportation through pipelines in Belarus in 2009 amounted to 89.6 million tons, an increase of 53% compared with 2008. Oil transit also tends to reduce its significance in terms of financial flows. Closing the Russia–Baltic pipeline ”Friendship” and the construction of new pipelines have reduced the importance of the Belarusian direction. The growing role of Belarus in the transit of electricity from Russia to the Baltic countries and Kaliningrad Region after closing the Ignalina nuclear power plant in Lithuania in 2010 should be particularly emphasized. This may explain the conflict with Russia which emerged in early 2010, when Belarus demanded a significant increase in transit fees. Figure 1.1. Main natural gas (red) and oil (green) pipelines in Eastern Europe (Source: Wikipedia) Working Papers of the Finnish Forest Research Institute 171 http://www.metla.fi/julkaisut/workingpapers/2010/mwp171.htm 11 1.2 Energy source and supply Energy use by source and by sector for Belarus in 2007 is presented in Table 1.3 and Figure 1.2. Table 1.3. Energy use by source and by sector for Belarus in 2007 in 1,000 ton of oil equivalent (ktoe). Source and consumption Coal and peat Crude oil Petroleum products Natural gas Hydro Combus- tible renewables and waste Electri- city Heat Total 1. Energy sectors 1.1. Electricity plants 0 0 15 3,753 3 0 0 0 3,771 1.2. CHP plants 19 0 56 5,909 0 51 0 0 6,035 1.3. Heat plants 108 0 300 2,969 0 452 0 0 3,829 1.4. Petroleum refineries 0 19,411 0 0 0 0 0 0 19,411 1.5. Own use 13 0 513 0 0 22 322 358 1,228 1.6. Distribution Losses 44 385 14 154 0 0 320 617 1,534 2. Industry sector 57 0 564 1,692 0 157 1,214 1,980 5,664 3. Transport sector 7 0 1,698 432 0 0 157 0 2,295 4. Other sectors 4.1. Residential 231 0 1,214 1,199 0 580 517 2,230 5,972 4.2. Commercial and public services 2 0 4 3 0 155 297 1,127 1,589 4.3. Agriculture/Forestry 3 0 760 40 0 37 123 157 1,120 4.4. Non-specified 58 0 62 16 0 0 160 0 296 5. Non-energy use 10 1,659 453 1,179 0 0 0 0 3,301 Source: IEA 2010 Electricity plants 7 % CHP plants 11 % Heat plants 7 % Petroleum refineries 35 % Own use of energy sector 2 % Distribution losses 3 % Industry sector 10 % Transport sector 4 % Residential 11 % Commercial and public services 3 % Agriculture and forestry 2 % Non-energy use 6 % Figure 1.2. Distribution of energy use by sector. Working Papers of the Finnish Forest Research Institute 171 http://www.metla.fi/julkaisut/workingpapers/2010/mwp171.htm 12 Energy resources such as oil and gas are limited in Belarus, and the country is highly dependent on imports. In 2009, 88% of the total energy consumption in Belarus came from foreign sources, most of this in the form of natural gas from Russia (Gavrilova et al. 2010). These imports are pur- chased partly by hard currency, which gives the current government very strong economic and political incentives to reduce energy consumption. As indicated in Table 1.4, Belarus consumes approximately 26 million tons of oil equivalents (Mtoe) of primary energy resources annually but produces only a little over 4 Mtoe. The balance is imported from Russia, with crude oil and natu- ral gas topping energy imports. While the bulk of imported crude oil is processed at the Belarus refining complex and then petroleum products are exported, imported natural gas is fully con- sumed domestically. As a result, imported gas accounts for about 70% of the country’s primary energy consumption. Energy exports and imports have substantial macroeconomic implications for Belarus. As indicat- ed in Table 1.2, the cost of energy imports amounted to about 23% of the country’s GDP in 2008. Revenues stemming from energy exports (largely dominated by petroleum products) reached 19% of GDP in the same year. Though the revenues from energy exports largely offset the cost of energy imports, the latter, especially natural gas imports, do cause a significant strain on the Belarusian trade balance. Table 1.4. Belarus primary energy supply and consumption 2000 2005 2007 2008 2009 Production Crude oil, million tons 1.851 1.785 1.760 1.740 1.720 Natural gas, billion m³ 0.257 0.228 0.201 0.203 0.205 Peat and wood, million ton 6.6 7 7 7 7 Hydropower, TWh 0.03 0.03 0.03 0.03 0.03 Total production, million toe 4.02 4.06 4.03 3.95 3.93 Import Crude oil, million ton 12.01 19.32 20 21.5 21.5 Natural gas, billion m³ 17.12 20.12 20.6 21.1 17.6 Petroleum products, million ton 1.08 0.57 0.89 2.49 3.78 Electricity, TWh 7.22 4.94 4.34 2.40 4.48 Coal, million ton 0.43 0.14 0.05 0.05 0.05 Total import, million toe 26.68 35.07 36.27 39.29 38.59 Export Crude oil, million ton 0.35 1.35 0.85 1.45 1.72 Petroleum products, million ton 7.78 13.49 15.1 15.2 15.5 Peat and wood, million ton Electricity, TWh 0.9 0.56 Total export, million toe 8.13 15.0398 15.95 16.77 17.22 Primary energy consumption, million toe 22.57 24.09 24.35 26.47 25.31 Source: Belstat 2010 Note: The applied conversion factors are: crude oil and petroleum products – 1.0; natural gas – 0.86; coal – 0.7; peat and wood – 0.3; electricity – 0.22. Working Papers of the Finnish Forest Research Institute 171 http://www.metla.fi/julkaisut/workingpapers/2010/mwp171.htm 13 Existing infrastructure and geographical proximity ensure that Russia will be Belarus’ primary source of energy supply for the foreseeable future. However Belarus would benefit from enlarged use of domestic energy resources. 1.3 Energy sub-sectors 1.3.1 Oil The oil business plays a significant role in the Belarusian economy. The oil sub-sector is repre- sented by two oil refineries in Novopolotsk (Vitebsk region) and Mozyr (Gomel region): “Bela- rusneft” (oil and gas production, oil service, hydrocarbon processing, sales of oil and gas inside country and abroad) and the state oil trader “Belarusian Oil Company” (БНК). In addition to this, there are independent oil suppliers to the refineries. In 2009, Novopolotsk and Mozyr refineries processed 21.6 million tons of oil; 10.7 and 10.9 mil- lion tons respectively. Both plants were privatized in 2002 with a view to the subsequent sale of a controlling stake to Russian investors. About 43% of shares of the Mozyr refinery belong to Russian investors, while the Novopolotsk refinery is virtually 100% owned by the Belarusian government. “Belarusneft” produces about 1.7 million tons of oil per year – 6% of needs. Despite the lack of its own raw materials, export of petroleum products remained one of the main Belarusian export products, and the proceeds from their sale are an important source of foreign currency into the country. Exports of Belarusian petroleum products during previous years grew steadily: from 7.7 million tons in 2001 to 15.5 million tons in 2009. At the same time the profitability of the oil processing industry gradually declined: 5.3% in 2009 versus 7% in 2008 and 12% in 2007, and it is lower than the average in Belarusian industry. As a result the inflow from the oil refining busi- ness to the Belarusian budget in 2009 compared to 2008 fell almost twofold due to the decreasing prices of exports and the continued increasing duties on imported Russian oil. Revenue from ex- port duty on exported oil was less than 7% of all revenues in 2009 (12% in 2008) (Rakova 2010). The development of fuel prices of producers in Belarus in 2000–2009 is shown in Table 1.5. At present, the fuel oil for residential customers is Br 580/kg or €0.15/kg. Table 1.5. Development of average residual fuel prices in Belarus in 2000–2009. Fuel 2000 2005 2006 2007 2008 2009 Residual fuel oil, 1,000 Br per ton 113.2 289.1 384.2 452.1 562.9 579.6 Diesel fuel, 1,000 Br per ton 278.0 468.7 738.9 999.2 1,037.2 1,239.8 Peat briquettes, 1,000 Br per ton 18.9 53.6 63.0 76.5 92.4 108.3 Source: Palkovskaya et al. 2010 1.3.2 Natural gas Natural gas is a strategic raw material for the Belarusian economy. By trying to reduce production costs of domestic producers through the use of cheap Russian gas, Belarus increased the share of natural gas consumption in the energy sector from 43% in 1990 to 80% by 2000. This greatly increased the risks of the country in terms of energy security, especially taking into account the dominant role of natural gas in the energy balance of the country and the only actual monopoly supplier of natural gas – Russia. Working Papers of the Finnish Forest Research Institute 171 http://www.metla.fi/julkaisut/workingpapers/2010/mwp171.htm 14 In 2009, Belarus consumed 17.6 billion m³ of natural gas and continued to buy it from Russia at a relatively low price. According to the contract on natural gas supply and transit in 2007–2011, which was signed by “Gazprom” and “Beltransgaz” (the Russian side owned 37.5% of “Beltran- gaz” shares in 2009), the formula for calculating the natural gas price for Belarus is tied to the average price with the discount factor. In 2009, Belarus had to pay 80% of the average European price minus transportation costs and customs duties (30% of the selling price of “Gazprom”), US$ 150 per m³ in average. For comparison, the average European price was around US$ 280 per 1,000 m³ (Rakova 2010). 1.3.3 Electricity generation In 2009, Belarus produced 30.4 TWh of electricity, which is 14% (4.7 TWh) less than was pro- duced in 2008. Belarus can provide its own electricity, but imports in the summer are economi- cally feasible. In 2009 Belarus imported 4.1 TWh, including 2.9 TWh from Russia, which is 86% (2.1 TWh) more than in 2008 (Rakova 2010). Figure 1.3. Energy system of Belarus (Source: Kuzmich 2009) Item name Description Item name Description Nuclear Power Plant Overhead transmission line OHTL 750 kV CHP, Power Station OHTL 330 kV Substation 750 kV OHTL 220 kV Substation 330 kV OHTL 110 kV (double-circuit) Substation 220 kV Working Papers of the Finnish Forest Research Institute 171 http://www.metla.fi/julkaisut/workingpapers/2010/mwp171.htm 15 Natural gas plays a vital role in electricity generation  in Belarus. The total installed electrical capacity of 2 condenser type (only-electricity) power plants and 32 combined heat power plants (CHP) using natural gas is 8,247 MW (Belenergo 2010). Moreover in the electricity generation system there are 35 small hydropower stations with a total installed capacity of 14.99 MW and 71 power electrical stations at industry with installed electrical capacity of 336.6 MW. The locations of the main power stations are presented in Figure 1.3. The power sector in Belarus is managed by the state production association “Belenergo” (Belen- ergo 2010), which is responsible for the production, delivery and distribution of electricity and heat. It consists of six regional energy enterprises (обленерго), a joint dispatch management unit “ODU” (Объединенное Диспечерское Объединение), as well as several other related elec- tric power companies (construction, governments, research and development, repair, installation, etc.). There is no special operator of the electricity transmission system in Belarus. This function is divided between “Belenergo”, regional electricity enterprises and “ODU”. The system of en- ergy transfer is in public ownership, and controlled by the regional energy enterprises. In 2009 the power plants belonging to “Belenergo” produced 28.6 TWh of electricity or 94% of the total electricity production in Belarus (Table 1.6). The Vitebsk region is the biggest producer of electricity (over 40% of the total production), and the Grodno region is the smallest (only 4%). There are no significant independent (private) power plants, and “Belenergo” is the sole purchaser of all electricity (including imported or produced in the country’s small independent producers of wind energy). The tariff for electricity exchange between regions is set by the Ministry of Energy (Minenergy 2010) and does not reflect the real costs. The main purpose of the Ministry is to maintain finan- cial stability in regional enterprises in accordance with the annual plans and the targets set by the government. The development of electricity producer prices and tariffs for residential customers in Belarus in 2000–2009 is shown in Table 1.7. At present, the electricity tariff for residential customers is 173 Br/kWh or 0.045 €/kWh by the decision of the Council of Ministers of the Republic of Belarus on 16 December 2008 № 1942 (Minzhilkomhoz 2010). Table 1.6. Electricity production in Belarus in 2008–2009, billion kWh. Region 2008 2009 2009/2008, % Brest 4.852 3.489 72 Vitebsk 15.138 12.150 80 Gomel 3.039 2.604 86 Grodno 0.985 1.021 104 Minsk 8.225 7.855 96 Mogilev  1.422 1.501 106 “Belenergo” 33.66 28.62 85 Belarus 35.1 30.4 87 Source: Belenergo 2010, Kostevich 2010b Working Papers of the Finnish Forest Research Institute 171 http://www.metla.fi/julkaisut/workingpapers/2010/mwp171.htm 16 Table 1.7. Development of average electricity prices and tariffs for residential customers in Belarus in 2000–2009. 2000 2005 2006 2007 2008 2009 Electricity price of producers, Br per kWh 476.3 114.0 140.4 190.0 241.0 298.0 Electricity charge in residential houses not equipped with electric cooker, Br per kWh 14.4 88.1 93.4 112.1 145.0 173.0 Source: Palkovskaya et al. 2010 1.3.4 Heat generation Heat supply in cities and urban settlements is carried out from CHP, district boiler houses, and boiler houses of industrial plants. Heating and hot water is predominantly supplied through two types of district heating systems. The first type is the large CHP systems and heat-only boilers operated by the state energy com- pany “Belenergo”, which has 32 CHP plants, and 35 regional boiler houses with capacities from 80MW to 700MW. The “Belenergo” CHP plants and boilers are predominantly fuelled by natural gas (90%). In 2009 the power plants belonging to “Belenergo” produced 142.3 million GJ (Table 1.8) or about a half of the total heat production in Belarus (Mihalevich 2009). The Minsk region is the biggest producer of heat (over 37% of the total production), and the Brest region is the smallest (only 7%). The second type is the smaller, heat-only boilers operated by the Ministry of Communal Services and other ministries, state industrial enterprises, and private companies. There are over 10,000 boiler houses with capacities below 10 MWth that provide district heating and process heat in the Republic of Belarus, where the majority of these (65%) burn heavy oil (mazut), diesel and coal, and the remainder burn natural gas. The combustion of these fossil fuels leads to high levels of greenhouse gas (GHG) emissions since boilers are frequently inefficient because of age (com- monly 20 to 30 years old), and operate far below their design capacities as a result of reduced in- dustrial demand (Department for Energy Efficiency 2010). Table 1.8. Heat production in Belarus in 2008–2009, million Gcal. Region 2008 2009 2009/2008, % Brest 2.253 2.428 107.8 Vitebsk 4.918 5.423 110.3 Gomel 5.143 5.144 100.0 Grodno 3.152 3.420 108.5 Minsk 12.132 12.638 104.2 Mogilev 5.012 4.939 98.5 “Belenergo” 32.61 33.99 104.2 Source: Belenergo 2010 Working Papers of the Finnish Forest Research Institute 171 http://www.metla.fi/julkaisut/workingpapers/2010/mwp171.htm 17 The Ministry of Communal Services owns about 1,700 heat-only boiler-houses with an average installed capacity of 5 MW. Of these, 50% run on natural gas, 40% on heavy oil, 6% on coal, and the rest (4%) on peat and wood. They operate in 204 cities and towns. Individual municipalities operate the boilers of the Ministry of Communal Services, and financial resources come via mu- nicipal budgets. Heat power equipment is produced in Gomel city by the companies “Energy” and “Kommunalnik” under the Ministry of Communal Services of the Republic of Belarus or are exported. Since 2004 Belarusian companies have produced boilers for various woodfuels such as firewood, wood chips and wood pellets (Minzhilhoz 2010). In addition to the boilers of the Ministry of Communal Services, there are about 10,000 boiler houses with below 10MW heat capacity under the ownership of other ministries, state and private industrial enterprises, schools and hospitals. They include approximately (Department for Energy Efficiency 2010, Biomass Energy 2010): • 5 300 boiler houses with an installed capacity of less than 0.5 MW; • 3 350 boiler houses with an installed capacity from 0.5 to 3 MW; • 740 boiler houses with an installed capacity from 3 MW to 5 MW; and • 580 boiler houses with an installed capacity from 5 to 10 MW. These boiler houses operate on natural gas (35%), heavy oil and diesel oil (30%), as well as on coal, peat and wood (35%). They are typically 20 to 30 years old and are operated below their design capacity (meaning low efficiencies). Boilers are operated by both state and private indus- trial enterprises. In addition to providing heat for their own needs, they usually provide heat and hot water to surrounding apartment buildings or the Ministry of Communal Services in cities and villages. A comprehensive market study carried out within the framework of the EU project BYE/00/G42 shows that the Ministry of Communal Services owns approximately 27% of boiler houses in 0.5– 10 MWth size, with 20% in the agricultural sector, 21% in the social sector (education and health), and 32% in industry (Department for Energy Efficiency 2010). About 2,000 boilers sized between 0.5 and 10 MWth burning coal or heavy oil are suitable for conversion to woodfuels. On the fuel supply side, approximately 4.7 million m³ of woody biomass, which are currently unused, could be used as fuel, increasing to 12.9 million cubic metres in 2015 (Woodfuels Programme 2009). The development of average heat producer prices and tariffs for the population in Belarus in 2000–2009 is shown in Table 1.9. At present, the heat tariff for residential houses is 10.38 Br/GJ or about 2.7 €/GJ by the decision of the Council of Ministers of the Republic of Belarus on 16 December 2008 № 1942 (Minzhilkomhoz 2010). Table 1.9. Development of average heat prices and tariffs for residential customers in Belarus in 2000– 2009. Charges 2000 2005 2006 2007 2008 2009 Heat energy of producers, 1,000 Br per Gcal 21.702 33.010 40.044 51.057 56.382 70.407 Central heating charge, Br per m2 of total floor space 70 587 607 732 722 889 Hot water charge in residential houses, monthly 1,000 Br per person 0.396 6.884 7.225 8.515 8.571 10.538 Source: Palkovskaya et al. 2010 Working Papers of the Finnish Forest Research Institute 171 http://www.metla.fi/julkaisut/workingpapers/2010/mwp171.htm 18 1.4 Energy policies The government has begun properly and promptly to raise issues of energy efficiency and renew- able energy, and set targets for improvements. There are two major state bodies responsible for energy policy in Belarus. In 1993 the State Committee of Energy Saving under the Council of Ministers of the Republic of Belarus (Комитет по энергосбережению) was formed, which was mandated to develop and implement a national strategy to improve energy efficiency. This Com- mittee was later transformed into the Department of Energy Efficiency of the State Committee on Standardization (Департамент по энергоэффективности Государственного комитета по стандартизации) of the Republic of Belarus. At the end of 2001, the government created the Ministry of Fuel and Energy (Минтопэнерго). This Ministry was later transformed into the Min- istry of Energy (Минэнерго). The need for action in these areas has been recognized by the government and has been reflected in a number of strategic programmes that outline the government’s strategy and develop concrete action plans to modernize the energy sector, improve energy efficiency, and increase the use of domestic energy resources. The main energy sector strategic documents developed by the govern- ment in the past years are as follows: • The Law of the Republic of Belarus “On energy saving” (Закон Республики Беларусь ”Об энергосбережении”). • The National Programme on energy saving and renewable energy utilization in 2001–2005 (Республиканская программа энергосбережения на 2001–2005 годы). • National Energy Saving Programme for 2006–2010 (Республиканская программа энергосбережения на 2006–2010 годы). • State Integrated Programme for Modernization of Basic Production Assets of Belarus Energy System, Energy Saving and Enhanced Use of Local Fuels and Energy Resourc- es for 2006–2010 (Государственная комплексная программа модернизации основных производственных фондов белорусской энергетической сиcтемы, энергосбережения и увеличения доли использования в республике собственных топливно-энергетических ресурсов в 2006 – 2010 годах). • The concept of energy security of the Republic of Belarus (Концепция энергетической безопасности Республики Беларусь). • Main Areas of Belarus Energy Policy for the Period up to 2020 (Основные направления энергетической политики Республики Беларусь на 2001 - 2005 годы и на период до 2015 года). • Target Programme of Ensuring Generation of at least 25% of Electricity and Heat from Lo- cal Fuels and Alternative Energy Sources in Belarus for the Period up to 2012 (Целевая программа обеспечения в республике не менее 25 процентов объема производства электрической и тепловой энергии за счет использования местных видов топлива и альтернативных источников энергии на период до 2012 года). • National programme to transform the boilers in the mini-CHP, 2007–2010 (Республиканская программа по преобразованию котельных в мини-ТЭЦ на 2007–2010 годы). The government has developed five-year programmes for energy saving and the use of domestic energy resources, as well as has implemented a number of other initiatives, including education and providing information. Government policies on energy are supported by appropriate funding. The amount of energy efficiency funding has been increased from US$ 47.7 million in 1996 to US$ 1,213.9 million in 2008. Working Papers of the Finnish Forest Research Institute 171 http://www.metla.fi/julkaisut/workingpapers/2010/mwp171.htm 19 The first document was the National Programme on Energy Saving up to 2000, approved in 1996, but a more systematic document was the second National Programme on Energy Saving for 2001–2005. 1.4.1 National Programme on Energy Saving 2001–2005 The government set a conceptual task to ensure planned GDP growth without increasing the con- sumption of energy resources, i.e. reducing the energy intensity of GDP in 2005 in reference to 2000 by 15–19% while the growth rate of GDP over the same period was 18–23%. In fact GDP in 2005 compared with 2000 increased by 42.5%, while gross consumption of energy resourc- es increased only by 6.5% (Table 1.10). The plan to save energy resources in 2005 compared with 2000 by reducing the energy intensity of GDP was estimated at 4.3–5.6 Mtoe, but in fact it amounted to 7.4 Mtoe. Table 1.10. Key results of implementing the National Programme on Energy Saving in Belarus in 2001–2005. Indicators 2000 2001 2002 2003 2004 2005 2001– 2005 GDP growth rate, % 5.8 4.7 5.0 7.0 11.4 9.4 37.5 Gross consumption of primary energy, % 0.5 -0.9 1.5 2.8 2.6 6.5 Reducing energy intensity of GDP, % 5.3 4.0 5.6 5.1 7.5 6.1 25.3 Funding for energy saving, US$ million 92.5 91.3 205.7 360.1 438.9 1,188.5 Source: Energy Saving Programme 2006–2010 It should be noted that due to the desire to increase the efficiency of large Belarusian CHPs and re- duce carbon dioxide emissions, share of natural gas in the gross fuel and energy consumption rose from 58% to 63% in 2001–2005. In addition, the value of imported electricity dropped sharply in 2005; its share in the gross consumption of primary energy in 2000 was 6% versus 3% in 2005. The energy intensity of GDP for five years decreased by 25% (Fedoseev 2006). 1.4.2. National Programme on Energy Saving 2006–2010 The third National Programme on Energy Saving was adopted in 2006. Its adoption was needed due to a high proportion of imported energy resources (85%) and high energy output. In addition, prior to its appearance the country had already established an entire regulatory framework of pro- grammes and concepts, as follows: • The concept of energy security of the Republic of Belarus (Presidential Decree of the Re- public of Belarus on 17 September 2007 № 433) • Directive of the President of the Republic of Belarus of 14 June 2007 № 3 ”Economy and thrift – the principal factors of the economic security of the state” • State complex programme of modernization of basic production funds of the Belarusian energy system, energy efficiency and increasing the share of own energy resources for the period until 2011 (Decree of the President of the Republic of Belarus on 15 November 2007 № 575). • Programme of Socio-Economic Development of Belarus in 2006–2010 (Decree of the President of the Republic of Belarus on 12 June 2006 № 384) • Target Programme of Ensuring Generation of at least 25% of Electricity and Heat from Lo- cal Fuels and Alternative Energy Sources in Belarus for the Period up to 2012 (Decision of Working Papers of the Finnish Forest Research Institute 171 http://www.metla.fi/julkaisut/workingpapers/2010/mwp171.htm 20 the Council of Ministers on 30 December 2004 № 1680) • The Main Directions of Energy Policy of the Republic of Belarus for 2001–2005 and until 2015 (Decision of the Council of Ministers on 27 October 2000 № 1667). In 2006–2010 the government has been tasked to reduce the complete energy capacity of the GDP by at least 31% and the growth rate of GDP by 56%. The target is to save 6.4–6.9 million ton of oil equivalent (toe) during 2006–2010 (Table 1.11). To achieve such significant savings the following organizational, economic and technical activi- ties are pointed in the program: • The adoption of the Law “On the use of alternative and renewable sources of energy” • Improving the normative framework in the production and use of local fuels • Development of new market mechanisms for financing energy efficiency in the state sector • Improving state expertise for energy efficiency in the development of industries and design solutions. • Certification of products by energy and power consumption • Creation of conditions for increased use of bank loans for the implementation of energy- efficient innovation projects • Introduction of widespread institutional and personal incentives for energy saving in or- ganizations financed from the budget, and other public organizations • Creation of economic and institutional conditions to reduce the payback time of alternative and renewable sources of energy for subsequent large-scale introduction, etc. Under the programme, the main sources of financing for energy efficiency projects will be own means of enterprises (50%), funding in the form of equity participation from the national and lo- cal budgets (15%), and innovation funds of the national bodies subordinated to the Government of the Republic of Belarus (20%). The funding will be provided to social organizations and the public sector and organizations implementing effective interventions in priority areas of energy saving. Implementation of activities to improve the efficiency of energy resources and increase the share of local fuels demands US$ 5.2–5.85 billion. At the same time credits, loans and other attracted funds amount to 10% of the total funding. Table 1.11. Key indicators of economic development of Belarus in 2006–2010. Indicators 2006 2007 2008 2009 2010 GDP growth rate, % 9.9 8.6 8.5–10.0 (10.2)* 8.5–10.0 (0.2) 8.5–10 Gross consumption of primary energy, Mtoe 27.3 (28.27) 27.3 (27.29) 27.2–27.4 (27.10) 27.0–27.4 (25.99) 27.2–27.9 Savings of primary energy, Mtoe 1.18 1.27 1.23–1.36 1.32–1.50 1.39–1.59 Increased use of local fuel to the previous year, 1,000 toe 207.3 215.9 208.7 267.5 323.7 Reducing energy intensity of GDP, % 4.3 7–8 7–8 7–8 7–8 Funding for energy saving, US$ million 599.9 775–803 959–1,150 1,260–1,500 1,606–1,798 Source: Energy Saving Programme 2006–2010 *Actual value (in brackets) according to the Department of Energy Efficiency of the State Committee on Standardization (energoeffekt.gov.by) Working Papers of the Finnish Forest Research Institute 171 http://www.metla.fi/julkaisut/workingpapers/2010/mwp171.htm 21 Thus, as noted above, programs have resulted in decreasing energy intensity. Over the period 1996–2008 energy consumption in Belarus has fallen almost 50%. This is an important param- eter of the growth of national competitiveness. The main factor in this success was a state policy aimed at both the capacity of a specialized state body (Department of Energy Efficiency of the State Committee Standardization), and providing substantial funding for relevant programmes. However, despite the measures taken, energy efficiency in Belarus is still lower than in Western countries. 1.4.3 Measures to improve the efficiency of energy resources up to 2012 At the beginning of 2010 the government adopted another document on more efficient use of en- ergy resources in Belarus which provides a list of objects for introducing new power technologies and improving current processes and equipment by the Decision of the Council of Ministers on 22 February 2010 № 248 (О мерах по повышению эффективности использования топливно- энергетических ресурсов на период до 2012 года. Постановление Совета Министров Республики Беларусь от 22 февраля 2010 г. № 248). This document includes the modernization of boiler equipment and reconstruction and repair of heating systems. It is planned to exclude the commissioning of new boiler equipment using natural gas (except “Belenergo” boilers) with fuel consumption for heat supply of more than 26.92 kg of oil equivalent (koe) per GJ in 2011 and more than 26.75 kg of oil equivalent (koe) per GJ in 2012. Administration bodies together with the State Committee for Standardization of the Republic of Belarus (Госстандарт) should develop and introduce the norms of the energy resources consump- tion on the production of tractors, trucks, glass and its products, mineral fertilizer, automobile and motorcycle tyres, oil refining, transportation of oil, production of chemical fibres and yarns and other products. The Ministry of Energy should develop and approve a programme on the re- duction of energy losses in the electric network in 2010–2012. A programme of construction and import substitution of biogas plants will also be developed. Many other activities have called for the development and implementation of energy efficiency. The State Committee for the Stand- ardization of the Republic of Belarus is monitoring the implementation of the planned measures. 1.4.4 Electricity and heat tariff policy In accordance with the laws of the Republic of Belarus (“On natural monopolies”, “On pricing”, the presidential decree “On some measures to stabilize prices (tariffs) in the Republic of Bela- rus”) electricity and heat tariffs for consumers in the open market are regulated by the Ministry of Economy of the Republic of Belarus, whereas the prices for residential customers are regulated by the Council of Ministers of the Republic of Belarus. In accordance with the degree of the Council of Ministers on 25 November 1992 № 709 ”On the uniform tariff for the electricity”, electrical energy in Belarus is released on state controlled uni- form tariffs which are differentiated by consumer groups. For industrial and similar consumers with a connected load of 750 kVA and above, two-part tar- iffs apply: • the main charge per 1 kWh of maximum load power; and • an additional charge per 1 kWh of the consumed energy. Working Papers of the Finnish Forest Research Institute 171 http://www.metla.fi/julkaisut/workingpapers/2010/mwp171.htm 22 For all other consumers of electric energy a uniform charge per 1 kWh of consumed energy is ap- plied depending on a consumer group (industry, transport, budget organization, rural and urban population, etc.). The heat energy charge depends on following factors: • a region; • a consumer group; • technical characteristics of the coolant – select pairs of different levels of pressure, sharp and reduced steam, hot water. For all consumers of heat energy a single tariff per 1 Gcal of heat energy consumption is applied, accounted for by commercial metering devices. Industry and government customers have to subsidize residential consumers to meet the produc- tion cost of the respective regional/district utility or boiler to which they are all connected. In fact tariffs for the residential customers, set by the Council of Ministers, do not cover the energy pro- duction costs (Table 1.12). The main reason is that the degree of increasing prices for natural gas imported into Belarus was over governmental tariffs. Table 1.12. Development of electricity and heat tariffs for residential customers and production costs in 2006–2009. Electricity Heat Tariff Br/kWh Production cost, Br/kWh % Tariff 1,000 Br/Gcal Production cost 1,000 Br/Gcal % 2006 88.3 95.5 92.5 29.144 41.536 70.2 2007 107.7 135.3 79.6 33.878 59.863 56.6 2008 130.2 159.1 81.8 34.551 70.595 48.9 2009 160.2 215.8 74.2 40.780 88.947 45.8 Source: Belenergo 2010 Working Papers of the Finnish Forest Research Institute 171 http://www.metla.fi/julkaisut/workingpapers/2010/mwp171.htm 23 2 Renewable Energy 2.1 Potential, actual and projected use Belarus is poorly endowed with fossil resources. Fossil resources have met only about 7% of the country’s primary energy consumption in past years. These resources can hardly be increased be- cause of geological conditions. However, Belarus has significant renewable energy resources. The total renewable energy potential in Belarus is about 12 million tons of oil equivalent (Mtoe) per year (Table 2.1). Estimates of the potential should be interpreted with caution, because they can vary widely depending on the assumptions made. This potential can be realized by introducing new technologies. According to the Local Fuels Programme (2004) the priority should be given to expand the use of wood, peat, and hydropower resources for small-scale energy generation, as well as sustaining oil production. The wide-scale use of other renewable options such as wind, solar, and geothermal energy seem to be less attractive from an economic standpoint because of Belarus’ geographical and geological conditions. Table 2.1 presents information on the projected use of various types of sources in Belarus in 2012, as well as the actual use in 2006. Table 2.1. Renewable energy potentials, actual and projected use, Mtoe per year. Energy source Potentials Actual use in 2006 Projected use in 2012 Woody biomass from forests 4.6 1.46 2.2 Woody biomass from plantations 0.9 0.05 Peat 1.0 0.52 0.8 Biogas from animal waste 1.0 0.03 Crop residues 1.0 Hydropower 0.2 0.006 0.08 Wind 1.4 0.001 0.002 Solar 0.4 Geothermal 1.2 Total 11.7 1.99 3.17 Source: Ermakovich et al 2006, Local Fuel Programme 2004 2.1.1 Woody biomass Harvesting of energy wood and generation of by-products from wood processing are concentrat- ed at enterprises of the Ministry of Forestry and the concern “Bellesbumprom”. The total annual use of woody biomass is about 1.46 million toe. The volume of woody biomass which comes to rural households through own harvestings is estimated to be 0.2–0.3 million toe. The potential use of wood as fuel can be determined from the natural annual increment of forests (28.6 million m³), which is roughly estimated at 4.6 million toe per year, including contaminated areas in the Gomel region (3,700 toe). Special technologies and equipment for gasification and deactivation have to be developed and deployed in order to use woody biomass from contaminated areas as fuel (Woodfuels Programme 2009). In Belarusian climatic conditions 1 ha of energy wood plantation (fast growing trees) is able to produce up to 10 tons of dry wood, equivalent to about 3.5 toe. By using better technology, the energy production per hectare can be doubled. Old peat deposits, where the conditions are not suitable for growing crops, are the most appropriate objects for energy plantations. The area of these deposits in Belarus is about 180,000 hectares, which can become a stable, environmentally Working Papers of the Finnish Forest Research Institute 171 http://www.metla.fi/julkaisut/workingpapers/2010/mwp171.htm 24 clean source of woodfuels producing 0.9 million toe per year. Lack of experience in using energy plantations for energy purposes does not allow the assessment of costs and future woodfuel pric- es, because the growing of energy plantations will require the development of special equipment, road infrastructure, processing plants, etc. However, the estimated cost is about US$ 50 per toe. More information about prices and volumes may be received after the development of experimen- tal plots of grey alder that are planted in the Gomel region. More detailed information about woody biomass resources and production of woodfuels in Bela- rus is given in chapter 3. 2.1.2 Peat Belarus has about 4 billion tons of peat reserves. It would allow to increase the extraction of peat for energy up to 1 million toe per year (Peat Programme 2008). In order to use this annual volume it is necessary to increase the consumption of fuel peat in Belarus by 0.51 million toe per year (2.2 million tons) by 2020 compared to 2006 by constructing boilers and CHP plants operating on peat fuel. To perform this task about 8,500 hectares of peat land should be taken for the extraction of peat and an investment of €306 million would be required into infrastructure and equipment, including: • € 115 million for the construction of mining and railroad tracks; • € 127 million for purchasing equipment for the extraction and transport; and • € 28 million for retooling pellet plants. The main source of financing is the Innovation Fund of the Ministry of Energy, plus own funds of peat enterprises, bank loans and the budget of the country. The development of peat briquette prices in Belarus in 2000–2009 is shown in Table 1.5. More detailed information about peat resources and production of peat fuels in Belarus is given in chap- ter 4. 2.1.3 Biogas from animal waste Agricultural sector of Belarus includes about 6,300 big cattle breeding and dairy farms, 100 big pig-breeding farms and 48 big poultry farms (Renewable Energy Association 2010). There are 4.15 million cattle, 3.79 million pigs, 52,000 sheeps, 75,000 goats, 125,000 horses and 34.1 mil- lion poultry (Poleschuk 2010). The potential for obtaining commercial biogas from livestock farms is 1 million toe per year (Ermashevich 2006). The main advantage is that, without addi- tional energy costs, livestock farms can get a clean high-quality organic fertilizer and therefore proportionately reduce the energy-intensive production of mineral fertilizers. The use of biogas plants will significantly improve the environment near large farms, livestock farms, and crop ar- eas, where the animal waste is discharged. Three biogas projects have been implemented in Belarus: “Western” farm (РУСН СГЦ “Западный”) in Brest region (0.5 MW of electrical power), Gomel poultry farm (ОАО “Гомельская птицефабрика”) in Gomel region (0.3 MW of electrical power) and “Belarusian” poultry farm (племптицезавод “Белорусский”) in Minsk region (0.3 MW of electrical power). Nine projects are in the planning phase with the total electrical power of 12 MW (Renewable En- ergy Association 2010). Working Papers of the Finnish Forest Research Institute 171 http://www.metla.fi/julkaisut/workingpapers/2010/mwp171.htm 25 2.1.4 Crop residues The use of crop residues as a fuel is a new direction of energy conservation in Belarus. The total potential of crop residues is estimated to be 1 million toe per year. Suitable amounts of combus- tion for fuel purposes should be addressed in relation to the specific needs of households on an individual basis (Kuznich and Usova 2006). 2.1.5 Hydropower The potential capacity of all the watercourses of Belarus is 850 MW, of which technically avail- able are 520 MW and economically viable 250 MW (Renewable Energy Association 2010). The installed power capacity of 30 hydropower plants (HHP) in Belarus is 12 MW. Annual electric- ity generation is 28 million kWh. One project, namely Grodno hydropower plant at Neman river (power capacity 17 MW), is under implementation. New projects include: • 4 hydropower power plant cascades at Dvina river (power capacity 120–140 MW); • 2 hydropower power plant cascades at Dnepr river (power capacity 20–30 MW); • construction of Neman hydropower plant at Neman river (power capacity 20 MW); • construction of small and micro hydropower plants (7 HPP in total, power capacity till 1,8 MW); • rehabilitation of small and micro hydropower plants (5 HPP in total, power capacity till 1,4 MW). 2.1.6 Wind power There are 1,840 identified sites for wind turbines with a theoretically possible energy potential of more than 1,600 MW in Belarus (Voytekhovich 2008). Wind electricity generation potential is 6.5 billion kWh. In 2009 the total installed capacity of 4 wind power plants amounted to 1.3 MW (Renewable Energy Association 2010), equal to 334 toe. The locations of wind power plants are Zanaroch in Minsk region (250 kW and 600 kW), Korelichi in Grodno region (200 kW), and the international ecological park “Volma” (200 kW). There are 5 projects under implementation with the total power capacity of 177.5 MW. New projects are located in the following places (Shenets 2009): • Lyozno district in Vitebsk region (60 МW); • Dzerzhinsk district in Minsk region (60 MW); • Novogrudok district in Grodno region (17.5 MW); • Oshmyany district in Grodno region (25 MW); • Smorgon district in Grodno region (15 MW). Until recently, the conversion of wind energy into electricity has been done by using traditional bladed wind turbines, which are ineffective in Belarus. However, modern technical solutions al- low the creation of wind power to start with the wind speed of 3 m/s the nominal operating speed being 7–8 m/s. Rising prices of imported natural gas willsignificantly increase the economic vi- ability of even existing wind technologies (Ermashevich et al. 2006). 2.1.7 Solar energy Meteorological data of the Republic of Belarus shows an average of 150 cloudy days per year, with 185 days of variable cloudiness and 30 clear days (Voytekhovich 2008). The average annual Working Papers of the Finnish Forest Research Institute 171 http://www.metla.fi/julkaisut/workingpapers/2010/mwp171.htm 26 amount of solar energy at the Earth’s surface is 243 calories per 1 cm² per day, equivalent to 2.8 kWh per km²/day, and taking into account the efficiency of converting 12% – 0.3 kWh per m² per day. The potential of solar energy for hot water provision is estimated at 0.88 – 1.23 Mtoe per year, and for production of electricity – at 0.7–0.88 Mtoe per year (Kuznich and Usova 2006, Yer- mashkevich and Rumantseva 2004). The solar power sector has no industrial significance at the moment. Only several experimental systems exist at present. No use of solar energy on a wider scale is planned in Belarus in the nearest future due to the high cost of electricity production is solar systems at the moment. Technical progress in this area will, of course, help to reduce costs, but in the conditions of Belarus electricity production using solar energy will be almost unprof- itable for the considered period. The main areas of use for solar energy will be solar energy wa- ter heaters and a variety of solar systems for the intensification of drying and heating of water in agriculture and other domestic purposes. Under favourable economic and operating conditions it can be expected that during the forecasted period about 0.35–0.53 Mtoe per year may be replaced through the use of solar energy (Ermashevich et al. 2006). 2.1.8 Fuel ethanol and biodiesel A special state programme for biodiesel production in Belarus (Biodiesel Programme 2007) has been developed for the “Belneftekhim” concern (Belneftekhim 2010). Measures to ensure the achievement of the goals and objectives of this programme should be carried out in 2007–2010. Implementation of this programme in full will help to solve the energy supply problems of in the country’s economy using its own sources of renewable energy. Annually this will be no less than 100,000 tons of biodiesel and 2 million tons of a mix of biodiesel, which will reduce the country’s need for oil refining by about 300,000 tons per year and save the country approximately US$ 100 million. 2.2 Renewable energy policy The access to cheap gas from Russia and lack of energy diversification policies have prevented Belarus from developing its potential of renewable energy resources for energy generation. How- ever, in 2005 the government adopted a programme “Target Programme of Ensuring Generation of at least 25% of Electricity and Heat from Local Fuels and Alternative Energy Sources in Be- larus for the Period up to 2012” (Local Fuels Programme 2004). This programme set a target of nearly doubling the power and heat production from renewable energy resources by 2012. The available woody biomass and peat deposits are the main sources to meet this target. However, there is a risk that the targeted increase in the production of fuel wood may cause a raise in the use of high-quality logs as fuel wood, which will have negative environmental implications and result in a suboptimal exploitation of forest resources. Simultaneously, the government has developed a series of regulatory documents to create a leg- islative, economic, financial, organizational and technical framework for the use of renewable energy, including: • State Integrated Programme for Modernization of Basic Production Assets of Belarus En- ergy System, Energy Saving and Enhanced Use of Local Fuel and Energy Resources for 2006–2010 (Modernization Programme 2007). • Policies designed to provide incentives for economic entities to save energy, through which enterprises can create “energy saving funds”. Savings obtained due to energy efficiency Working Papers of the Finnish Forest Research Institute 171 http://www.metla.fi/julkaisut/workingpapers/2010/mwp171.htm 27 measures are accumulated in this fund and can be used for further activities in savings as well as for bonuses (up to 50% of this fund). • New regulations related to providing incentives for budget institutions to save energy are under design in the Committee for Energy Efficiency. The development of small-scale power generation using biomass and hydropower calls for enact- ing policies to facilitate investments in these types of renewable energy. The most critical barri- ers to small-scale power generation in Belarus include (Department for Energy Efficiency 2010): depressed prices for competing fuels (namely natural gas); unfavourable power pricing rules; an incomplete legal framework for independent power producers; and transmission access and interconnection requirements. Many of these issues are not unique to Belarus and are being faced by several countries planning to promote renewable energy. Working Papers of the Finnish Forest Research Institute 171 http://www.metla.fi/julkaisut/workingpapers/2010/mwp171.htm 28 3 Woody Biomass and Woodfuels Belarus has significant forest resources. Forests cover 8.6 million ha, or 39% of its territory with a growing stock of 1.57 billion m³. The annual increment of the forests is 28.6 million m³. Actual harvesting of timber in 2008 was 15.1 million m³ of which 6.6 million m³ final felling, – 5.7 mil- lion m³ thinnings, and 2.7 million m³ other fellings. About 80% of the annual allowable cut from final felling was realized (Shatravko 2010, Gerasimov and Karjalainen 2010). The relatively low degree of harvesting of forest resources can be attributed to a number of rea- sons, namely: • The structure of the forest industry. Belarus has a relatively low demand for pulpwood, es- pecially deciduous tree species (birch, aspen, alder). • The proportion of protected forest areas and specifically the proportion of special protected forest areas. About 18% of forest area is fully or partly restricted to wood harvesting. • Radioactive contamination on 22% of forest area. Wood harvesting is permitted in forests having contamination up to 185 kBq/m² (5 Ci/km²). • Inaccessibility of peat land forests. The wood harvesting in 17% of the forest area is di- rectly linked to weather conditions and only possible on frosty winters and dry summers. 3.1 Woody biomass The following woody biomass can be used in Belarus for the production of woodfuels: • energy logs, harvested during scheduled harvesting (low-quality roundwood); • logging by-products (branches, tops etc.); • energy plantation trees (grey alder); • energy short rotation trees (fast-growing over-mature deciduous tree species such as black alder, aspen); • energy forest trees (dead-felled and dead-standing trees); • wood processing industry by-products (saw dust, wood shavings, bark, cross-cut ends etc.). 3.1.1 Energy logs The main source of woodfuel in Belarus is energy logs (low-quality, roundwood not suitable as a raw material of forest industry), harvested during scheduled harvesting. The output of energy logs from final fellings is 27%, from thinnings 55%, and from other fellings 58% (Belstat 2010, For- estry Programme 2006). On average the share of energy logs is 41% of the total harvest. In 2008, about 6.2 million m³ of energy logs was harvested. According to the forecast calculations made for the period up to 2015 taking into account the changing age structure of forests in Belarus, the volume of energy logs will reach 7.8 million m³ (Lobas 2008). 3.1.2 Logging by-products Logging by-products (branches, tops etc.) are formed during felling, delimbing and bucking of trees at harvesting sites. Almost all wood harvesting by-products are left in the forest, and are fre- quently burned directly in the forest. Use of tree stumps and roots is not acceptable at the moment due to tree species composition, technological and economic conditions. The annual volume of logging by-products is estimated to amount to 2 million m³. Part of the residues from wood har- Working Papers of the Finnish Forest Research Institute 171 http://www.metla.fi/julkaisut/workingpapers/2010/mwp171.htm 29 vesting is used for improving the technological conditions of wood harvesting (building of skid trails). Nevertheless, abound 0.5 million m³ could be used as woodfuels annually (Woodfuels Pro- gramme 2009, Lednitsky 2009, Vasilenko 2007). 3.1.3 Energy plantations One of the governmental priorities of increasing the extracted volume of woody biomass for woodfuel production in Belarus is the use of low-grade grey alder plantations. Grey alder plan- tations occupy 184,000 ha or 2.4% of the forest lands with 22.6 million m³growing stock. The average stock of these plantations is 122 m³ per 1 ha. Over 90% of plantations are located in the Vitebsk region, where 11% of forest lands are occupied by them. Grey alder is one of the fastest growing tree species in Belarus, and differs from other species by rapid growth and high produc- tivity, especially at a young age. The rotation time of alder is short, and therefore the culmination of the growth is observed at the age of about 20 years. Then the growth slows down somewhat, and by 25–30 years it sharply declines. At the age of 30–40 years, alder becomes damaged by rot and natural mortality increases. In order to maximize the involvement of alder plantations for the woody biomass procurement the cutting age of grey alder was set at 21 years in 2008 (Age of Fell- ing 2008). The annual volume of extraction of grey alder for woodfuels could be about 1 million m³ (Woodfuels Programme 2009, Rusalenko 2008). 3.1.4 Short rotation energy wood Considerable forest area in Belarus (2.8 million ha, or 36% of stocked forest land) is represented by deciduous tree species (birch, black alder, aspen), growing in their typical growing conditions – in low-lying places with excessive moisture. Drainage of lands which they occupy has been pro- hibited on environmental reasons. Therefore, replacing these species with coniferous species in the process of forest harvesting and reforestation does not seem possible. At present, the current structure of the forest industry in Belarus does not allow complete processing of deciduous tree species. As a result, more and more deciduous tree stands are falling into the category of overma- ture stands. As a result, the relatively fast-growing deciduous tree species should be treated as a long-term resource for woodfuels. According to the inventory of the forest fund of Belarus (1 January 2009) 19 300 ha of overmature deciduous forests belonging to the Ministry of Forestry with the total growing stock of 4.6 million m³ are available for harvesting. The annual harvesting potential of overmature deciduous species for producing woodfuels (pellets, briquettes and chips) could be up to 1 million m³ (Woodfuels Programme 2009, Lednitsky 2009). 3.1.5 Dead felled and dead standing trees More than half of the annual mortality (dead felled and deadstanding trees) is harvested in sched- uled harvesting and the other part is left in the forest for biodiversity conservation in accordance with the requirements of normative legal acts and forest certification. The current volumes of deadfelled and deadstanding trees in the forests belonging to the Ministry of Forestry are 0.7 and 7.2 million m³ respectively. Part of the mortality could be used for energy. However, the procure- ment of which would require creation of additional harvesting capacity, acquisition of equipment, vehicles, and construction of roads. Therefore, the mortality should be considered as a reserve of woodfuel resources; possible annual procurement could be approximately 0.6 million m³ (Wood- fuels Programme 2009). Working Papers of the Finnish Forest Research Institute 171 http://www.metla.fi/julkaisut/workingpapers/2010/mwp171.htm 30 3.1.6 Wood processing industry by-products The most efficient production of woodfuels can be organized by using sawmilling and woodwork- ing by-products (sawdust, wood shavings, lump, cross-cut ends etc). Currently, a large portion of wood processing by-products (about 1.8 million m³) is used as boiler and furnace fuel to produce heat and electricity, and is also used as a raw material in the woodworking industry. Some part of the wood processing by-products could be processed to higher grade woodfuels (pellets or bri- quettes). With the current amount of wood processing by-products, the potential for production of wood pellets and briquettes could be about 0.5 million m³. 3.1.7 Potential for energy use The forecast of average annual harvesting of woody biomass by source and region in Belarus in 2010–2015 is shown in Table 3.1. Annual harvesting potential of woody biomass in Belarus in 2010–2015 is 12.9 million m³. The Vitebsk region has the richest potential (3.3 million m³ per year), while Grodno and Brest regions have the lowest (around 1.5 million m³). The average con- sumption of woodfuels both for energy use and technological needs is 8.2 million m³. The pro- jected balance of woody biomass resources is 4.7 million m³, which is possible to use at the newly established power plants both for the production of wood pellets as well as briquettes (Woodfuels Programme 2009). The woody biomass potential in the Belarus regions is also presented in Fig- ure 3.1. Table 3.1. Forecast of woody biomass harvesting (in million m3 per year) in Belarus for 2010–2015. Woodfuels source Belarus Region Brest Bitebsk Gomel Grodno Minsk Mogilev 1. Total energy logs from scheduled harvesting, including 7.8 1.0 1.7 1.6 0.8 1.6 1.1 1.1. Final fellings 2.5 0.3 0.7 0.6 0.2 0.4 0.3 1.2. Thinnings 3.6 0.5 0.7 0.7 0.4 0.7 0.6 1.3. Other fellings 1.7 0.2 0.3 0.3 0.2 0.5 0.2 2. Wood processing by-products 2.0 0.3 0.3 0.3 0.2 0.5 0.4 3. Grey alder plantations 1.0 0.8 0.1 0.1 4. Overmature deciduous tree species forests 1.0 0.1 0.3 0.2 0.1 0.3 5. Wood harvesting by-products 0.5 0.05 0.1 0.1 0.05 0.1 0.1 6. Mortality (dead-felled and dead-standing trees) – 50% 0.6 0.1 0.1 0.1 0.1 0.1 0.1 Total woodfuels potentials 12.9 1.55 3.3 2.3 1.25 2.5 2.0 Use of woodfuels by energy plants, mills, private households 8.2 1.0 1.6 1.6 0.8 1.9 1.3 Balance of woodfuels, potentials for development 4.7 0.55 1.7 0.7 0.45 0.6 0.7 Source: Woodfuels Programme 2009 Working Papers of the Finnish Forest Research Institute 171 http://www.metla.fi/julkaisut/workingpapers/2010/mwp171.htm 31 Figure 3.1. The woody biomass potential in the Belarus regions. 3.2 Supply for woody biomass A number of mechanisms already exist in Belarus for the supply of woody biomass of 9 million m³ per year including 6.2 million m³ of energy logs and 2.8 million m³ of wood processing by- products. Almost all wood harvesting by-products (2.0 million m³) are left in the forest, and are frequently used for slash reinforcement or burned directly in the forest. The main capacities for woody biomass supply are located in wood procurement enterprises belonging to the Ministry of Forestry (43%) and the “Bellesbumprom” concern (24%), and fuel enterprises belonging to the “Obltop” at the regional administrations (6%). Moreover about 27% of total woody biomass in Belarus is harvested by private SMEs and the local population. About 8.5 million m³ (1.58 million toe) of woody biomass is available for energy production and the rest (0.5 million m³) is used for the production of wood-based panels and agriculture. Belarusian machinery industry produces a range of equipment for woody biomass harvesting (Gerasimov and Karjalainen 2010): woody biomass forwarders (Figure 3.2), chippers (Figures 3.3 and 3.4), chip trucks and trailers (Figure 3.5). Depending on equipment used, the wood chip production is done at the road side (Figure 3.6), or at the cutting area (Figure 3.7) or at the mill gate (Fyedorenchik and Lednitsky 2008, Fyedorenchik and Zhary 2009, Shatravko 2009). 0.2 0.2 0.2 0.3 0.5 0.3 0.6 0.4 0.5 0.7 0.7 0.7 0.3 0.2 0.3 0.6 0.4 0.7 0.1 0.1 0.8 0.05 0.1 0.05 0.1 0.1 0.1 0.2 0.4 0.3 0.3 0.5 0.3 Wood energy potential million m3 per year Final fellings Thinnings Other fellings Logging residues Energy wood plantations Woodworking residues Vitebsk Minsk Grodno Brest Mogilev Gomel Brest Borisov Minsk Bobruysk Baranovichi Pinsk Vitebsk Orsha Mogilev Grodno Gomel Kalinovichi Working Papers of the Finnish Forest Research Institute 171 http://www.metla.fi/julkaisut/workingpapers/2010/mwp171.htm 32 Figure 3.3. МR-40 mobile chipper Source: www.mozyrmash.by Figure 3.4. МRN-1Mobile chipper Source: www.mozyrmash.by Figure 3.2. Belarus МPТ-461 forwarder for woody biomass. Source: www.mozyrmash.by Working Papers of the Finnish Forest Research Institute 171 http://www.metla.fi/julkaisut/workingpapers/2010/mwp171.htm 33 Figure 3.5. PK-12 chip semi trailer Source: www.mozyrmash.by Figure 3.6. Wood chip production at the road side using a woody biomass forwarder and a mobile chipper. Source: Shatravko 2009, Wood Harvesting... 2010 Working Papers of the Finnish Forest Research Institute 171 http://www.metla.fi/julkaisut/workingpapers/2010/mwp171.htm 34 Figure 3.7. Wood chip production at the cutting area using a mobile chipper and a chip semi trailer. Source: Shatravko 2009 3.2.1 The Ministry of Forestry Over 90 forestry enterprises (лесхоз) belonging to the Ministry of Forestry (Figure 3.1) control the cutting permissions for 12.6 million m³ of annual harvest or about 84% of the total annual harvest in Belarus. The forestry enterprises undertake own harvesting operations providing about 7.7 million m³ per year or half of the total annual harvest in Belarus. This volume includes 2.0 million m³ from final felling, 4.5 million m³ from thinning and 1.2 million m³ from other felling. In terms of industrial wood (4.5 million m³), around 1 million m³ are processed, 2.3 million m³ are sold to the domestic market and 1.2 million m³ are exported. In terms of woody biomass, the total harvested volume of woody biomass is about 3.9 million m³ per year (43% of the total woody biomass available annually for harvest in Belarus) including 3.3 million m³ of energy logs and 0.5 million m³ of wood processing by-products. Most energy logs are sold to local power stations, boilers and households, 2,900 m³ are exported, 0.2 million m³ are processed to wood chips and 7,300 m³ are processed to wood pellets and briquettes. Most of the forestry enterprises (73) have small sized sawmills with a processing capacity of around 1,000 m³ per month. In 2009 the volume of processed industrial wood was 885,900 m³ and the volume of produced lumber 361,200 m³. The machinery fleet of forestry enterprises belonging to the Ministry of Forestry included 78 for- warders, 21 harvesters and 286 short-wood trucks, and 785 Belarus MPT-461 tractors in 2009. In 2009, 407 units of forest machinery were purchased, including 16 forwarders, 12 harvesters, 72 short-wood MAZ trucks, and 19 hydraulic cranes (Minleshoz 2010). According to the Wood Har- vesting Development Programme (2010), 1462 units of forest machines should be purchased for forestry enterprises belonging to the Ministry of Forestry in 2010–2015 (Table 3.2) including 260 short-wood trucks, 55 harvesters for final felling, 29 harvesters for thinning and 93 forwarders. Working Papers of the Finnish Forest Research Institute 171 http://www.metla.fi/julkaisut/workingpapers/2010/mwp171.htm 35 Table 3.2. Purchasing of wood harvesting machinery for forestry enterprises belonging to the Ministry of Forestry. Machine Year 2010 2011 2012 2013 2014 2015 pcs Br billion pcs Br billion pcs Br billion pcs Br billion pcs Br billion pcs Br billion Short-wood truck with trailer 80 24.80 34 10.54 31 9.61 35 10.85 38 11.78 42 13.02 Harvester for final felling 12 9.24 10 7.70 6 4.62 7 5.39 9 6.93 11 8.47 Harvester for thinning 4 4.00 2 2.00 5 5.00 6 6.00 6 6.00 6 6.00 Forwarder 25 11.50 12 5.52 11 5.06 12 5.52 15 6.90 18 8.28 Belarus MPT-461.1 70 9.80 65 9.10 43 6.02 42 5.88 46 6.44 49 6.86 Tractor “MTZ” 50 5.00 46 4.60 42 4.20 51 5.10 58 5.80 62 6.20 Crane 15 1.13 15 1.13 16 1.20 21 1.58 22 1.65 21 1.58 Semi-trailer with craine for tractor 20 1.40 20 1.40 14 0.98 15 1.05 17 1.19 16 1.12 Source: Wood Harvesting Development Programme 2010 According to the Innovation Forestry Programme (2007) the government should invest Br 87.6 billion for the modernization of woody biomass procurement machinery and purchased 70 chip- pers, 145 chip trucks and 24 chip loaders in 2007–2011 (Table 3.3). The Council of Ministers approved a set of measures to improve forest operations in 2010–2015 on 26 July 2010. The whole Forestry Development Programme for 2011–2015 has been submit- ted in the Council of Ministers in November 2010 (Forestry Programme 2010). According to the programme, the use of the annual allowable cut on final felling should be in- creased to 95% until the end of 2015 (the current use is 72%). Br 683 billion will be invested for the purchasing of modern logging equipment, including harvesters and forwarders. Modern har- vesting equipment will increase the volume of harvested wood in all types of cuttings from 7.7 million cubic m³ in 2009 to 9 million m³ in 2015. The brand new machines will provide an oppor- tunity to introduce modern technology of final felling and thinning, no less than 70% of the total harvest by forestry enterprises belonging to the Ministry of Forestry. Table 3.3. Investments in domestic machinery for woody biomass supply. Name Unit 2007 2008 2009 2010 2011 Total Chip loader pcs 1 3 7 7 6 24 Chip truck pcs 3 22 40 40 40 145 Chipper pcs 2 11 19 19 19 70 Short-wood truck pcs 2 5 12 12 12 43 Tractor TTP-401 pcs 35 61 61 61 218 Loading and transport machine pcs 5 16 36 36 36 129 Investments Br billion 2.6 12.3 24.3 24.3 24.1 87.6 Source: Forestry Programme 2006 The establishment of forestry enterprises is envisaged with 180 separate structural harvesting units in which the total volume of harvested timber to the end of 2015 will be at least 1 million Working Papers of the Finnish Forest Research Institute 171 http://www.metla.fi/julkaisut/workingpapers/2010/mwp171.htm 36 m³ per year. Possible options will be developed to improve the current system of forest manage- ment by separating the activities on forestry and raw material production (wood harvesting and processing). At least Br 20 billion will be invested annually in the modernization of existing wood production of forest enterprises in order to enhance the quality of products and degree of processing. There would be 28 new plants, which are planned to produce 25,000 tons of pellets and briquettes, and 36,000 m³ of chipped wood annually. A new facility for the production of 1.5 million m³ of wood chips per year will be established. For this purpose forestry enterprises will be equipped with modern technology from leading countries, such as Finland, Sweden and Germany. A further Br 85 billion will be invested on the development of forestry infrastructure, including construction of buildings, garages, fire and chemical plants, and repair and renovation of existing facilities. Until the end of 2015, 500 km of forest roads and 6 road repair enterprises (one in each region) for the maintenance and repair of roads are planned to be built using budget funding. Joint venture logging companies with the total harvesting capacity of at least 2 million m³ per year will be established for the provision of services for wood harvesting. 3.2.2. The “Bellesbumprom” concern The majority of wood processing in Belarus is carried out at the 20 companies belonging to the Belarusian wood and paper industry concern “Bellesbumprom”. The concern is operating allo- ver Belarus, but is mainly concentrated in the Minsk and Gomel regions (Bellesbumprom 2010). Logging companies of the concern harvest annually about 2.6 million m³ of timber including 1.1 million m³ of energy logs. Adding to this the 1.1 million m³ of wood processing by-products, the concern harvests annually about 2.2 million m³ of woody biomass (24% of the total harvested woody biomass in Belarus). According to the Forestry Programme (2006) 545 units of harvesting machines should be pur- chased for logging enterprises belonging to the “Bellesbumprom” concern (Table 3.4) including 190 short-wood and length-tree trucks with cranes, 6 harvesters, 22 forwarders and 43 skidders. Table 3.4. Purchasing of wood harvesting machinery for logging companies belonging to “Bellesbump- rom”. Machine Year Total 2007 2008 2009 2010  2011 pcs Br billion pcs Br billion pcs Br billion pcs Br billion pcs Br billion pcs Br billion Truck with crane 47 4.27 54 4.66 31 3.54 31 3.54 31 3.54 194 19.55 Harvester     1 0.326 1 0.326 2 0.326 2 0.326 6 1.30 Forwarder 6 1.64 7 2.01 3 1.01 3 1.01 3 1.01 22 6.68 Cable skidder 1 0.095 2 0.19 2 0.19 2 0.19 2 0.19 9 0.86 Skidder 5 0.74 5 0.74 5 0.74 5 0.74 5 0.74 25 3.70 Tractor- skidder 37 1.88 38 1.93 38 1.93 38 1.93 38 1.93 189 9.60 Crane 20 0.64 20 0.64 20 0.64 20 0.64 20 0.64 100 3.20 Total 116 9.3 127 10.5 100 8.4 101 8.4 101 8.4 545 44.89 Source: Forestry Programme 2006 Working Papers of the Finnish Forest Research Institute 171 http://www.metla.fi/julkaisut/workingpapers/2010/mwp171.htm 37 Wood processing by-products are also made available through the “Bellesbumprom” concern, which covers about 80% of all wood processed in Belarus. About 1.1 million m³ by-products come from their wood processing activities, 0.3 million m³ of this volume is used for the produc- tion of wood-based panels, 0.5 million m³ as fuel for boilers at woodworking mills within the “Bellesbumprom” concern, and 0.3 million m³ sold to households and collective farms. Given the existing balance, formation and consumption of wood residues, and prospects for their use in the coming years (rawmaterial for new wood-based panel industry and power plants using wood fuel), wood residues will not be an available raw material for new production of wood pel- lets and briquettes at the enterprises within the “Bellesbumprom” concern. 3.2.3 The Ministry of Communal Services The regional fuel enterprises “Obltop” (Облтоп) are situated in each region and are operated by the regional administration as a part of the Ministry of Communal Services. Every “Obltop” man- ages approximately 20 district fuel enterprises “Raitop” (Райтоп) or city fuel enterprises “Gor- top” (Гортоп) which are located in district centres. These district fuel enterprises are operated both by the regional administration and by the corresponding “Obltop”. District fuel enterprises have 1–2 teams of workers who carry out logging and transport to supply fuel wood for rural or town households, commercial and budget (state) institutions. Taken together, approximately 120 regional enterprises supply about 0.5 million m³ of energy logs, approximately 6% of the total woody biomass harvest in Belarus (Novitskaya 2008, Zhibul 2007, Department for Energy Ef- ficiency 2010). 3.3 Woodfuels Annually about 5.6 million m³ of energy wood in the rough, 1.5 million m³ of wood chips and offcuts, 57,000 tons of pellets and briquettes with a total energy content of approximately 1.58 million toe are produced from woody biomass in Belarus. Table 3.5. Use of woody biomass in Belarus. Products Woody biomass supply, million m3 per year Energy wood logs Wood processing by-products Total Woodfuels Energy wood in the rough 5.6 5.6 Wood chips and offcuts 0.2 1.3 1.5 Wood pellets and briquettes 0.2 0.2 Non-energy and losses Wood chips for wood-based panels, export, agriculture 0.7 1.0 1.7 Total 6.5 2.5 9.0 3.3.1 Production of energy wood in the rough About 5.6 million solid m³ of energy wood in the rough per year is produced in Belarus (Shat- ravko 2010, Lednitsky 2009). The most common raw material for split energy wood (so called firewood) is low-quality roundwood not suitable to be utilized as a raw material in the forest in- dustry. Pulpwood and rotten logs are also used to some extent. Working Papers of the Finnish Forest Research Institute 171 http://www.metla.fi/julkaisut/workingpapers/2010/mwp171.htm 38 The method of making split energy wood is very simple, only a chain-saw for cross-cutting and an axe for splitting are needed. Some enterprises belonging to the Ministry of Forestry (Buda-Ko- shelevo, Yelsk, Rechitsa, Dyatlovo) and the Ministry of Communal Services use more advanced firewood processors and dryers (Zhibul 2009). 3.3.2 Production of wood chips Most of the wood chips are produced by forestry enterprises belonging to the Ministry of Forestry (лесхозы), logging companies of the “Bellesbumprom” concern and enterprises belonging to the Ministry of Communal Services. Wood chips for energy use are produced in 33 forestry enterprises belonging to the Ministry of Forestry since 2007 with the total capacity of 511,000 tons per year (Shatravko 2010, Figure 3.8). There are four ways to organize wood chip production depending on customer and equipment used. The first approach is based on an existing customer and an existing modernized mobile chip- per in forest. This type of production has been organized at Telehany (Brest), Begoml (Vitebsk), Borisov, Uzda and Pukhovichi (Minsk) forestry enterprises. Vitebsk Brest Grodno Gomel Mogilev 2 6 Elsk KlichevOsipovichi Dyatlovo Pruzhany Mozyr Berezino Gorki Gorodok Vileyka 2 2 4 1 2 2 20 20 20 60 20 20 20 3 3 3 104 2 5 2 2 3 Gantsevichi Polotsk Kalinkovichi Beshenkovichi Surazhi Liozno Vitebsk Uzda Pukhovitchi Borisov Logoysk Telekany Glusk Bobruysk Begomlsk Capacity 1,000 m3 per year 20 10 2 Minsk Brest Minsk Baranovichi Pinsk Vitebsk Orsha Mogilev Grodno Gomel Kalinkovichi Borisov Figure 3.8. Capacity of wood chip production at forestry enterprises belonging to the Ministry of For- estry. Working Papers of the Finnish Forest Research Institute 171 http://www.metla.fi/julkaisut/workingpapers/2010/mwp171.htm 39 The second approach is based on an existing customer and an existing modernized stationary chipper at sawmill. This type of production has been organized at Gantsevichi (Brest), Polotsk, Beshenkovichi, Vitebsk, Liozno (Vitebsk), Kalinovichi, Yelsk (Gomel), Glussk, Osipovichi and Klinovichi (Mogilev) forestry enterprises. The third approach is based on a brand new power plant and a brand new mobile chipper in for- est. Several pilot projects have been set up to compare different technologies from Russia, Fin- land Austria and the Baltic countries. Cases are Vilejka with an annual capacity of 60,000 m³, and Gorodok, Mozyr, Dyatlovo, Logoyka, and Berezin each with an annual capacity of 20,000 m³. After the analysis, the best technology option will be chosen for other district capitals of Belarus. The fourth approach is based on a brand new power plant and a brand new yard machine chipper. This type of approach is used in the Pruzhany mini-CHP. Woodfuel supply of the plant (20,000 m³ of wood chips per year) is based on energy log transport from harvesting areas of Pruzhany forest- ry enterprise to the central processing yard. The woody biomass is chipped by the MR-40 chipper (made by Minsk Tractor Plant) and transported to mini-CHP by chip trucks (made by Minsk Auto- mobile Plant) at a distance of 30 km. In the future, wood harvesting by-products will be processed into wood chips. The price of the wood chips is about Br 73,000 per m³ (Zhibul 2010). Thus, a new woody biomass supply system based on domestic machinery and equipment has been organ- ized. Currently, attention is focused on reducing the cost of woodfuel production and increasing its competitiveness relative to fossil fuels by developing the most effective