Ukraine s promising market segments for heating with solid biomass (> 100 kw)

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1 Ukraine s promising market segments for heating with solid biomass (> 100 kw) Horizon 2020 Coordination and Support Action number : Bioenergy for Business Uptake of Solid Bioenergy in European Commercial Sectors Deliverable No. Dissemination Level Partner Name Work Package Status D.2.1 Country Summary Report of promising market segments for use of bioenergy Public Scientific Engineering Centre Biomass Work package 2 In-depth analysis of market segments Final Version Task 2.4 REPORT Authors Georgii Geletukha Tetiana Zheliezna Olha Haidai Client European Commission Innovation and Networks Executive Agency Horizon 2020, LCE-14, 2014 Date: Kyiv, July 2015

2 LEGAL DISCLAIMER This document is funded under the LCE Support Programme Market uptake of existing and emerging sustainable bioenergy, as part of the Horizon 2020 Framework Programme by the European Community. The content of this document reflects solely the views of its authors. The European Commission is not liable for any use that may be made of the information contained therein. The Bioenergy4Business consortium members shall have no liability for damages of any kind including, without limitation, direct, special, indirect, or consequential damages that may result from the use of these materials. IMPRINT Published and produced by: Науково-технічний центр «Біомаса» Scientific Engineering Centre Biomass Zhelyabov str. 2A, 0680, Kyiv, Ukraine, Phone/Fax Internet: Editor in Chief: Dr Georgii Geletukha Project management: Dr Georgii Geletukha Reviewing: Tetiana Zheliezna Layout: Olha Haidai Produced and published in Kyiv Reprint allowed in parts and with detailed reference only. Printed on non-chlorine bleached paper SEC Biomass has compiled the contents of this study with meticulous care and to the best of its knowledge. However, we cannot assume any liability for the up-to-dateness, completeness or accuracy of any of the contents.

3 Executive Summary In Ukraine, the main energy carriers remain natural gas (35% of the total primary energy supply - TPES) and coal (37%). Renewable energy sources account only for 2.8% of TPES and 2% of the final energy consumption. Main sources of biomass are forestry and agriculture. Both sectors are well developed in Ukraine. The volume of harvested marketable wood has been million m 3 /yr lately, including firewood m 3 /yr. Felling of wood followed by the wood processing and production of finished products is the source of various wastes and residues. Sustainable potential of wood biomass can be assessed at about 16,282 GWh/yr, the contribution of firewood being the biggest, 65% of the total. Firewood is completely utilized by population and different enterprises for heating. Wood biomass in the form of chips is also in high demand in the bioenergy market. Felling residues often remain unutilized and sometimes are combusted in forest. At present wood is the mostly used type of biomass for energy production in Ukraine though its resources are comparatively limited. Annual consumption of wood fuel for heating is about 3780 kt that correspond to 10,500 GWh/yr. Main by-products of wood-based industries are wood processing waste of different types like sawdust, shavings, lump wood and others. Average annual amount of the waste is kt. Part of the waste is used for heating and for the production of pellets and briquettes. Production of solid biofuels is a fast developing and very prospective sector of Ukrainian bioenergy. It has grown rapidly during past 5-6 years. At the beginning, the main feedstock was wood, then it turned to sunflower, and since 2010 straw has also been used as feedstock for the production of pellets and briquettes. Any reliable information on the use of pellets/briquettes for heating (amount, installed capacity) is not available. Roughly, it can be estimated at 6,360 GWh/yr (2013). Straw and other agricultural residues are one of the biggest and most important sources of biomass for energy in Ukraine. Big amount of agro-residues is available due to historically highly developed agriculture (especially crop sector) and gradually increasing production of main crops (like wheat, maize, and sunflower). Potential of the main primary agricultural residues available for energy is estimated at over 86,000 GWh/yr. Despite availability of a big potential of agro-residues, its utilization for energy is very low (about 1%). Production of energy crops is on the early commercial stage in the country. Now only up to 2,000 ha are under energy crops (mostly willow) though the total area that can be used for that purpose is estimated at 3-4 million ha. Now there are no biomass plants running on energy crops though construction of a number of them is already planned and started. To meet the targets set by Ukraine s NREAP for biomass by 2020 it is necessary to widely involve energy crops (along with agro-residues) in energy production. For Ukraine, the most suitable energy crops are willow, miscanthus and poplar. The area under energy crops in 2020 is estimated to be over 118,000 ha. As a whole, the market of biomass as fuel in Ukraine can be characterized as undeveloped. There are no wellestablished and reliable relations between suppliers and consumers; there are no companies whose core business is to provide a biomass plant with biofuel. The owner of a biomass plant has to solve this problem himself, that is why the most reliable option is to use own feedstock. At that, the situation with the supply of biomass of different types is not the same. The most reliable and available is supply of biomass by state forestry enterprises. There are up to 20 big producers of biomass pellets and briquettes in Ukraine and dozens of middle and small manufacturers located almost in all the regions. As usual, they all are private companies that can be considered more or less reliable suppliers of solid biofuel. Situation with the supply of straw as fuel is the most uncertain. Very often farmers do not consider straw to be a biofuel; usually they use it only for agricultural purposes (as organic fertilizer and feed or litter for animals). Unutilized remainder is burnt on the field. The most reliable option is when the owner of a straw fired boiler provides it with his own feedstock that is with bales made of surplus straw. Ukraine s solid biomass boilers beyond 100 kw heat load are predominately fuelled by wood chips, sunflower husk and straw. These biomass boilers supply in-house heat for communal buildings, multi-storey buildings, commercial and industrial applications and heat for local and district heating. Promising market segments for the introduction of biomass boilers over 100 kw are the existing and new small DH, public buildings, agriculture and forestry, wood industry. The interviews performed with biomass boiler manufacturers and some related persons showed, that the most promising fossil fuel to be substituted by solid biomass for all the sectors is natural gas in Ukraine. III

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5 Contents 1 INTRODUCTION 7 2 FOSSIL FUEL USAGE IN UKRAINE Share of fossil fuels in energy supply and consumption Domestic usage of fossil fuels Origin of fossil fuels Prices of fossil fuels 11 3 UKRAINE S SUPPLY SITUATION OF SOLID BIOENERGY Energy wood from domestic forests By-products of wood-based industries Pellets and Briquettes Straw and other agricultural residues Development stage of domestic biomass supply side Development stage of domestic solid biomass combustion technology 24 4 UKRAINE S SOLID BIOMASS BOILER MARKET BEYOND 100 KW HEAT LOAD Number of domestic installations of solid biomass boilers Capacity of domestic installations of solid biomass boilers 27 5 RESULT OF STAKEHOLDER INTERVIEWS List of interviewees The most promising bioenergy sources The most promising market segments Criteria for selection of promising market segments and their influence regarding market penetration Summary of the most important factors that influence the success of market introduction at the most promising market segments Most promising market segments abroad view from Ukrainian market actors 32 6 CHARACTERISATION OF PROMISING MARKET SEGMENTS (FACTS & FIGURES) Summary selection of most promising market segments Residential sector and DH systems Structural and business data Final energy consumption Estimation of the CO 2 -mitigation potential Public buildings Structural and business data Final energy consumption Estimation of the CO 2 -mitigation potential Agriculture and Forestry Structural and business data Final energy consumption Estimation of the CO 2 -mitigation potential 39

6 6.5 Woodworking industry Structural and business data Final energy consumption Estimation of the CO 2 -mitigation potential 40 7 LITERATURE 41 8 ABBREVIATIONS 43

7 1 Introduction The Horizon 2020 project Bioenergy4Business aims to increase the usage of bioenergy through an (at least partial) fuel-switch from coal, oil or natural gas, which are used in in-house boilers in commercial sectors for heat purposes or in district heating, to solid biomass sources. The erection of completely new biomass heat applications is considered as an option as well. Bioenergy4Business focuses on solid biomass sources and on medium and large heat-only boilers (> 100 kw heat load) providing low temperature and process heat for commercial usage. Bioenergy4Business builds bridges between policies and markets to support the creation of an enabling environment, the use of sound business and financing models and the careful assessment and implementation of bioenergy heat in local and district heating and in in-house applications. These aspects are considered for the most promising market segments among industry and commerce, residential buildings, agriculture and commercial and public services. Bioenergy4Business involves partners from 12 EU Member States and Ukraine. 11 of these project partners (AT, DE, BG, CR, FI, GR, NL, PL, RO, SK and UA, except BE and DK) are target countries, where tailor-made activities for the most promising market segments will take place from January 2015 until August Figure 1: Countries where Bioenergy4Business is implemented. Bioenergy4Business helps exploiting the considerable economic and sustainable potential of European bioenergy sources for heating, which are locally available at reasonable prices. These can offer a viable alternative to vulnerable European businesses currently depending on fossil resources, which are often imported from politically unstable regions. Bioenergy4Business makes new market segments for solid biomass usage accessible and enhances the use of both more solid biomass sources and so far not used ones (e.g. pellets, straw etc.) in European heat markets. National contact point: Tetiana Zheliezna / zhelyezna@biomass.kiev.ua /

8 2 Fossil fuel usage in Ukraine All figures show the status of 2013 in GWh 2.1 Share of fossil fuels in energy supply and consumption Energy balance of Ukraine prepared and issued by the State Statistics Service gives information on the total primary energy supply and the final consumption for energy and non-energy uses. Energy balance based on European pattern is now in the process of development under Ukraine s obligation as a member of Energy Community and heading on to European integration. Figure 2.1 shows the structure of Ukraine s total primary energy supply (TPES). Main energy carriers remain natural gas (35% of TPES) and coal (37%). Renewable energy sources account only for 2.8% of the total primary energy supply. Total primary energy supply in Ukraine, 2013 (GWh) 36,821 11,630 Coal& peat 254, ,796 Oil& Oil products Natural Gas Nuclear RES Heat 458, ,207 Fig Total primary energy supply in Ukraine, 2013 [4]. Figure 2.2 shows the final energy consumption (FEC), in total 751,577 GWh, divided into fossil and non-fossil energy carriers. In 2013 the fossil fuels, namely coal, oil products and natural gas made up 464,921 GWh or 62% of FEC. Only 2% of the final energy consumption (13,002 GWh) was supplied by RES, basically by bioenergy. 8

9 Final energy consumption in Ukraine 2013 (GWh) Coal&peat Oil&oil products Natural Gas RES Heat Electricity 96, , ,094 13, , ,662 Fig Final energy consumption in Ukraine, 2013 [4]. 2.2 Domestic usage of fossil fuels Figure 2.3 shows division of coal consumption in Ukraine where main consumers are electricity plants with 231,542 GWh (48% of the total comsumption), industry with 86,609 GWh (18%) and agriculture with 53,579 GWh (11%). Division of caol consumption in Ukraine 2013 (TWh) 26,98 15,03 Industry 231,54 4,47 1,33 0,14 8,49 0,14 53,58 86,61 30,71 2,66 16,56 3,56 Transport Residential Agriculture/forestry Other cunsumers NON-ENERGY USE Electricity Plants CHP Plants District Heating Blast furnaces Briquettes production Other Transformation Energy sector own use Losses 9

10 Fig Division of coal consumption in Ukraine, 2013 [4] Figure 2.4 shows division of oil and oil products by sectors. As it can be seen from the figure, main consumer of oil and oil product is transport sector with 66% (95,075 GWh) of the total consumption. Agriculture/forestry and industry are standing beside with 16,177 GWh (11,3%) and 11,956 GWh (8,3%) respectively. Figure 2.5 shows that residential sector is the major consumer of natural gas with 157,156 GWh or 34 % of the total consumption. This can be explained by high usage of gas by cookers and private gas convectors. However DH systems also consume rather big amount of NG, 94,261 GWh (20.5%). Division of Oil & Oil products consumption in Ukraine 2013(GWh) 95,08 11,96 0,35 5,42 0,15 16,18 1,09 6,57 0,79 0,83 1,66 1,93 1,69 Industry Transport Residential Agriculture/forestry Other cunsumers NON-ENERGY USE Electricity Plants CHP Plants District Heating Oil Refineries Other Transformation Energy sector own use Losses Fig Division of oil and oil products consumption in Ukraine, 2013 [4] 46,322 6,594 2, ,156 Division of gas consumption in Ukraine 2013 (GWh) 3,652 56,417 26,784 94,261 9,292 5,489 50,707 Industry Transport Residential Agriculture/forestry Other cunsumers NON-ENERGY USE Electricity Plants CHP Plants District Heating Energy sector own use Losses 10

11 Eur/MWh UKRAINE S PROMISING MARKET SEGMENTS FOR HEATING WITH SOLID BIOMASS (> 100 KW) Fig Division of natural gas consumption in Ukraine, 2013 [4] 2.3 Origin of fossil fuels This chapter describes the situation as it was before 2014 (more or less stable). Current situation is very changeable and unstable. Oil. Ukraine's domestic production of oil covers approximately 15-18% of its oil needs. The supply of oil to Ukraine s refineries was provided by 85-90% by import from Russia (Urals oil) and Kazakhstan that come through the existing system of pipelines through Russia. Import of oil from Azerbaijan and Turkmenistan also had been under discussion but failed. Existing oil pipeline Odessa-Brody creates technical possibilities for oil import from Caspian Sea, the Gulf countries, North and West Africa. Coal. Accelerated aging of mines and, as a consequence, reduction of the production capacity has resulted in a decrease in coal production to 78 million tons per year that is insufficient to meet the needs of the national economy and leads to coal import. Main exporter for coal is Russian Federation due to availability of similar type of coal that is needed by Ukrainian energy sector. From the late 1990 th the share of imported coal increased from 15% up to 38% in 2011 and it s keeping growing due to low quality of produced Ukrainian coal. Natural gas. Ukraine can cover its demand in natural gas at the expense of the domestic production only by about 30%, the rest is imported. Traditionally, the major exporter of natural gas (over 90% of the total amount) used to be Russian Federation. This can be explained by close relationship existed for many years. But now, due to the tense political situations in both countries, Ukraine is looking for new suppliers of gas. One of the possible solutions is to reverse natural gas from Slovakia. Reducing the use of imported gas and at the same time increasing its production inside the country is one of the main courses for Ukraine nowadays. 2.4 Prices of fossil fuels Figure 2.6 shows dynamics of import prices of natural gas, oil and coal for the period Raw oil, import price Natural Gas, import price Coal, import price Fig Import prices of natural gas, oil and coal in Ukraine, Euro/MWh [20] 11

12 It should be noted that natural gas for population has been subsidised during past 10 years. Figure 2.7 shows the difference between NG import price, average purchase price for population and average sale price for population. Since 2012 the difference has been decreasing. Fig Import price of natural gas in Ukraine in USD/1000 m 3 [21] 1 1 Ratio EUR/USD has ranged within

13 3 Ukraine s supply situation of solid bioenergy 3.1 Energy wood from domestic forests Total area of forests in Ukraine is 9.6 million ha, the average percentage of forest land being 15.9%. Main features of the forests are: - comparatively low average percentage of the forest land; - location of the forests in different natural and climatic zones (Polissia, Forest-Steppe, Steppe, Ukrainian Carpathians and mountain Crimea) that results in different methods of forestry applied; - high share (up to 50%) of forests of limited exploitation due to some ecological restrictions; - high share (15.8%) of protection forests and existing stable trend to growing the percentage; - the forests belong to a big number of permanent users (enterprises, institutions, ministries etc.) the biggest owner being the State Agency of Forest Resources of Ukraine (66% of the total forest area); - considerable forest area is located in the zone of radioactive contamination; - half Ukrainian forests are artificially created and therefore require intensive care. During the last 50 years the forest area increased by 21% and the wood stock by almost 3 times. The total wood stock is estimated at 2102 million m 3. The average annual increase (growth) of wood is 4 m 3 /ha (that is 35 million m 3 /yr), ranging from 2.5 m 3 /ha in Steppe zone to 5 m 3 /ha in the Carpathians. Distribution of forests over the country territory is very uneven; they are mostly concentrated in Polissia and Ukrainian Carpathians. The average percentage of cutting of the wood stock is about 50%; the wood stock has stable trend to grow. The volume of harvested marketable wood has been million m 3 /yr lately, including firewood m 3 /yr (Fig. 3.1). Felling of wood followed by wood processing and production of finished products is the source of various wastes and residues (Fig. 3.2). Sustainable potential of wood biomass can be assessed at about 16,282 GWh/yr, the contribution of firewood being the biggest, 65% of the total. Major part of the potential is concentrated in western and north-western regions of the country. Firewood is completely utilized by population and different enterprises for heating. Wood biomass in the form of chips is also in high demand in bioenergy market. Felling residues often remain unutilized and sometimes are combusted in forest. At present wood is the mostly used type of biomass for energy production in Ukraine though its resources are comparatively limited. Annual consumption of wood fuel for heating is about 3780 kt that correspond to 10,500 GWh/yr. Prices of wood biomass vary within rather wide range depending on biomass type and supplier (Table 3.1). Table 3.2 shows dynamics of the average prices since

14 20,0 18,0 16,0 15,2 16,1 17,5 17,5 18,0 18,3 14,0 12,0 million m 3 10,0 8,0 6,0 4,0 4,4 4,1 4,37 4,58 5,37 5,57 2,0 0, Marketable wood harvested Firewood Fig Harvesting of marketable wood and firewood in Ukraine Fig Generation of wood residues and waste in Ukraine 14

15 Table 3.1. Price of wood biomass in Ukraine (2015) [7] Type of wood biomass Price range, EUR/solid m 3 (incl. VAT) State forestry enterprises Firewood (soft wood) 6-10 Firewood (hard wood) Technological firewood (soft wood) Technological firewood (hard wood) Wood residues 2-4 Private companies Wood residues 4-6 Firewood (soft wood) Firewood (hard wood) Wood chips 9-36 Table 3.2. Dynamics of average prices of wood biomass in Ukraine [8] Type of wood biomass Wood residues Firewood Wood chips By-products of wood-based industries Main by-products of wood-based industries are wood processing waste of different types like sawdust, shavings, lump wood and others (see Fig. 3.2). Average annual amount of the waste is kt (Table 3.3). Part of the waste is used for heating and for the production of pellets and briquettes. Current prices of wood waste range within 4-8 EUR/solid m 3. The same price range has remained since Table 3.3. Amount of wood processing waste in Ukraine [13] Type of wood biomass Wood processing waste, kt Pellets and Briquettes Production of solid biofuels is a fast developing and very prospective sector of Ukrainian bioenergy. It has grown rapidly during past 5-6 years. At the beginning the main feedstock was wood; then it turned to sunflower, and since 2010 straw has also been used as feedstock for the production of pellets and briquettes. Statistics of the production of biomass pellets and briquettes is not kept in Ukraine; all the data presented here are expert estimations. According to the latest available data (forecast for 2013) [5], production volume of solid biofuels was: wood pellets 260 kt, sunflower husk pellets 900 kt, straw pellets 50 kt (Fig. 3.3). Before 2013 the lion share of the solid biofuels (up to 90%) was exported, mainly to European countries. Then the situation began gradually changing towards some bigger use of the biofuels in the domestic market. That was connected with some problems of exporting to Poland (as the country abolished its green certificates scheme for biomass used at CHP plants) and a growing demand for biomass as a substitute of natural gas in Ukraine. In 2015 Poland 15

16 is resuming the introduction of an improved version of the green certificates scheme and the exports of solid biofuels to Poland are gradually growing again. Probably it finally will result in some reasonable balance between the export and internal use of the solid biofuels produced in Ukraine. forecast forecast a) Wood pellets (t) b) Wood briquettes (t) forecast forecast c) sunflower husk pellets (t) d) sunflower husk briquettes (t) forecast e) straw pellets (t) f) straw briquettes (t) Fig Dynamics of the production of solid biofuels in Ukraine [5, 6] 16

17 Gross harvest of cereal crops and sunflower, Mt UKRAINE S PROMISING MARKET SEGMENTS FOR HEATING WITH SOLID BIOMASS (> 100 KW) Reliable information on the use of pellets/briquettes for heating (amount, installed capacity) is not available. Roughly it can be estimated at 6,360 GWh/yr (2013). The range of current prices in the domestic market is presented in Table 3.4. Table 3.5 shows dynamics of the average prices since Table 3.4. Price of solid biofuels in Ukraine (2015) [7] Type of solid biofuel Range of price, UAH/t (incl. VAT) Wood pellets Wood briquettes Sunflower husk pellets Straw pellets Straw briquettes 85 Table 3.5. Dynamics of average prices of solid biofuels in Ukraine [8] Type of wood biomass Wood pellets Sunflower husk pellets Straw pellets No production Straw and other agricultural residues Straw and other agricultural residues are one of the biggest and most important sources of biomass for energy in Ukraine. Big amount of agro-residues is available due to historically highly developed agriculture (especially crop sector) in the country and gradually increasing production of main crops (Fig. 3.4). Potential of main primary agricultural residues available for energy is estimated at over 86,000 GWh/yr (Table 3.6) ,7 30,8 27,4 33,9 22,8 25,3 20,9 32,1 30,9 35,35 28, ,8 3,5 7,2 4,7 11,9 6,8 8,7 8,4 11,0 10, All cereal crops (without corn) Corn Sunflower Fig Gross harvest of cereal crops and sunflower in Ukraine [1, 2] 17

18 Table 3.6. Energy potential of crop residues in Ukraine (2013) [3] Biomass type Crop yields, Mt Total amount of residues (theoretical potential), Mt Share available for energy needs Mt W, % Energy potential LHV, MJ/kg Straw of cereal crops grain crops (without corn): % ,634 Residues from grain corn production: total, including* corn: 30, % ,820 - stalks (with ,1 26,865 leaves) - cobs 5.6 2,2 4,885 Residues of sunflower production: total, including sunflower: % ,840 - stalks (with ,770 leaves) - baskets ,070 Total ,294 * The rest is husk leaves with shanks. Despite availability of a big potential, its utilization for energy is very low (about 1%). At present there are over 100 straw fired boilers in operation of about 55 MW total installed capacity in the country. They consume 94 kt/yr of straw that corresponds to 365 GWh/yr. Besides, there is the only boiler for maize cobs working in a DH system. GWh Very low use of straw and other primary agro-residues for energy can be explained by two facts. First, prevailing harvesting technologies envisage comminution of the residues and scattering over the field. Second, most of farmers are not aware that straw and other crop residues can be used as biofuel (and not only as organic fertilizer and feed for animals). Fig. 3.5 shows collecting straw by so called streaming technology that is widely used in Ukraine. Straw is shredded by a combine harvester, collected in replaceable trailers and transported to a storage place. If the trailer is not available, the straw is scattered over the field. 18

19 1000 ha UKRAINE S PROMISING MARKET SEGMENTS FOR HEATING WITH SOLID BIOMASS (> 100 KW) Fig Collecting straw in Ukraine by so called streaming technology [3] Situation with secondary agro-residues, namely sunflower husk, is much better. By now almost all oil extraction plants and other enterprises of fat-and-oil industry have installed boilers or CHP plants operating on sunflower husk. Total installed capacity of the equipment is 260 MW th (+ 8 MW e ). In total they consume about 380 kt/yr of husk (1,582 GWh) that is 41% of its economic potential. Current price of straw bales ranges within EUR/t and is rather unstable. Table 3.7 shows dynamics of the average prices since Table 3.7. Dynamics of average prices of solid biofuels in Ukraine [8] Type of wood biomass Sunflower husk Straw (loose) Straw bales Energy crops Production of energy crops is on the early commercial stage in the country. Now only up to 2,000 ha are under energy crops (mostly willow) though the total area that can be used for that purpose is estimated at 3-4 million ha. At the moment there are no biomass plants running on energy crops though construction of a number of them is already planned. To meet the targets set by Ukraine s NREAP for biomass by 2020 it is necessary to widely involve energy crops in energy production. For Ukraine the most suitable energy crops are willow, miscanthus and poplar. The area under energy crops in 2020 is estimated at over 118,000 ha (Fig. 3.6). 120,0 100,0 80,0 55,5 60,0 40,0 23,5 32,9 42,4 20,8 27,3 Willow Poplar Miscanthus 20,0 0,0 16,2 14,1 11,6 35,3 6,9 26,9 20,9 14,9 9,0 1,8 1,4 2,8 0,0 0,0 2013* 2014** 2015** 2016** 2017** 2018** 2019** 2020** * Estimation based on Ukraine s energy balance. ** Forecast based on NREAP and UABio s assumptions Fig Area under energy crops in Ukraine [11] 19

20 The problem related to energy crops is that most of them still are not included in the state registry of the approved plant species, so their cultivation on agricultural lands is prohibited. Current procedure for the inclusion into the register is too long since it requires field trials during more than 3 years. We consider it necessary to simplify the existing procedure for energy crops. 3.5 Development stage of domestic biomass supply side As a whole, the market of biomass as fuel in Ukraine can be characterized as undeveloped. There are no wellestablished and reliable relations between suppliers and consumers; there are no companies whose business is to provide a biomass plant with biofuel. The owner of a biomass plant has to solve this problem himself, that is why the most reliable option is to use own feedstock. At that the situation with supply of biomass of different types is not the same. Wood biomass The most reliable and available is supply of biomass by state forestry enterprises. The enterprises are subordinate to Ukraine s State Agency of Forest Resources that owns 66% of the forest fund in Ukraine (Fig. 3.7). The rest is divided between many more or less small owners, the biggest being Ukraine s Ministry of Agrarian Policy and Food. Forests of Ukraine by owners SFA 66% Other 2% SE 2% Reserve land 8% MI 1% MENR 1% Local governments 12% MD 2% MAPF 6% SFA The State Forestry Agency of Ukraine SE The State Emergency of Ukraine MI Ministry of Infrastructure of Ukraine MENR Ministry of Ecology and Natural Resources of Ukraine MAPF Ministry of Agrarian Policy and Food of Ukraine MD Ministry of Defense of Ukraine Fig Forests of Ukraine by owners [9] 20

21 As a rule the state forestry enterprises (FEs) can be suppliers of firewood and felling residues while they cannot offer wood chips as most of them do not have chippers (mostly due to financial reasons). Wood chips as well as firewood can be supplied by private companies. The problem is that private companies have rather limited access to the state forests and therefore limited amount of wood biomass. Bioenergy Association of Ukraine (UABio) is aware of this problem and tries to resolve it legally by developing amendments to related legislation. Another problem is that state FEs has limits for felling established for 10 years ahead. To increase the limit they have to go through a very long bureaucratic procedure that is practically impossible. UABio is also aware of this problem and tries to resolve it legally. General conception for the future is that state FEs should be interested in supplying wood biomass; they should increase production of wood fuels including wood chips and profitably sell them to consumers. At the same time private companies should have easy access to the state forests and also be suppliers of wood biomass. Biomass pellets and briquettes There are up to 20 big producers of biomass pellets and briquettes in Ukraine and dozens of middle and small manufacturers located almost in all regions (Fig. 3.8). As usual they all are private companies that can be considered more or less reliable suppliers of solid biofuel. Associated risks are of general nature: unstable economic and political situation, unexpected changes in the legislation that may negatively affect the manufacturers. An additional problem may be connected with export orientation of the manufacturers. But we can quite soundly suppose that in case of a good price the producers will be also interested to supply their product in the domestic market. Fig Map of location of the producers of biomass pellets and briquettes in Ukraine [10] 21

22 Agricultural residues Situation with the supply of straw as fuel is the most uncertain. Very often farmers do not consider straw to be a biofuel; usually they use it for agricultural purposes (as organic fertilizer and feed or litter for animals) and combust the unutilized remainder on the field (Fig. 3.9, 3.10). The most reliable option is when the owner of a straw fired boiler provides it with his own feedstock that is with bales made of surplus straw. Fig Production and use of straw in Ukraine [3] Fig Examples of burning straw on Ukraine s fields [3] Possible suppliers of primary agro-residues, namely maize cobs, may be seed plants which grow crops for obtaining high quality seeds. The plants perform stationary thrashing of maize ears and therefore can collect cobs (that is impossible during thrashing on the field). At present there exists the only example when a seed plant supplies maize cobs for the boiler operating in a DH system. We believe that this project may be successfully replicated in the future. 22

23 TWh UKRAINE S PROMISING MARKET SEGMENTS FOR HEATING WITH SOLID BIOMASS (> 100 KW) Sunflower husk is generated at oil extraction plants and for the most part is used there for heating, for technology purposes and for the production of pellets/briquettes. Surplus husk is sold to other producers of solid biofuels. At present it is rather difficult to find unutilized sunflower husk (for example with the purpose to start a new manufacture of pellets or briquettes). To reach objectives set by NREAP for biomass by 2020, Ukraine should actively develop the market of agricultural residues for energy. As a result, by 2020 the contribution of primary agro-residues to energy production must be the biggest of all other types of biofuels (Fig. 3.11). At that the rise in use of wood fuels is comparatively low. 80,00 70,00 6,67 60,00 5,08 2,80 2,45 50,00 40,00 30,00 20,00 10,00 0,41 0,00 1,71 0,00 6,36 5,34 2,37 3,95 2,26 2,28 1,88 33,03 2,82 2,17 1,51 24,29 1,69 19,02 2,08 1,13 11,11 1,75 0,34 5,27 0,75 1,71 0,79 0,00 1,73 0,00 8,36 8,39 8,42 8,44 8,46 8,47 7,93 5,57 6,42 6,99 7,32 7,66 7,89 8,12 Energy crops Sunflower husk Straw pellets Straw/stalks (bales) Wood pellets Wood chips Firewood 0,00 6,83 8,24 8,41 8,44 8,46 8,49 8,50 8, * 2014** 2015** 2016** 2017** 2018** 2019** 2020** * Estimation based on Ukraine s energy balance. ** Forecast based on NREAP and UABio s assumptions Fig Structure of biofuels for energy production in Ukraine [11] Energy crops Production of energy crops is dynamically developing in Ukraine, at least in some regions. That means that in the near future producers of energy crops will be able to act as biomass suppliers. At the moment the only company can supply energy crops, namely willow, in the country. The company owns several willow plantations and is performing first commercial harvesting this year. The company has entered its willow species in the state registry of approved plant species and therefore has the right to grow it on unused agricultural lands. 23

24 3.6 Development stage of domestic solid biomass combustion technology Utilization of biomass for energy in Ukraine In Ukraine, contribution of bioenergy to the total primary energy supply is 21.8 TWh that is 1.6% (2013) (Fig. 3.12). It is even bigger than the contribution of hydropower. The share of bioenergy in all renewables in TPES is almost 60%. Figure 3.13 shows structure of the domestic consumption of bioenergy in Ukraine in It can be seen that wood biomass in the form of firewood, wood chips and wood pellets accounts for the lion share in the domestic consumption. The lowest values are for biogas, LFG and straw. These data are UABio s assessments based on Ukraine s energy balance for 2013 and some relevant assumptions. BIOFUELS AND WASTE IN TPES, (GWH) 17,212 18,143 18,375 21, Fig Contribution of bioenergy to TPES in Ukraine (2013) [11] 0,5% 0,8% 2,8% 1,9% 7,9% 31,7% Firewood Wood pellets Wood chips 24,8% Straw Sunflower husk Biogas LFG 29,5% Motor biofuels Fig Structure of the domestic consumption of bioenergy in Ukraine (2013) [11] Status and prospects of Ukrainian biomass boiler industry Table 3.8 shows structure of bioenergy equipment in Ukraine in 2013 by sectors, types of the equipment and types of solid biomass. Total installed capacity of the equipment is almost 3670 MW th, including 1670 MW th for the boilers > 100 kw th. At that the biomass ovens and domestic boilers account for 2000 MW th ). Table 3.9 shows amount and types of bioenergy equipment that should be additionally introduced until 2020 to meet NREAP targets for solid biomass in the heating sector. One can see there some ambitious plans on the introduction of boilers and CHP plants running on agricultural residues and energy crops. Among others, it is planned to construct and introduce 50 CHP plants on straw/stalks and 50 CHP plants on energy crops. 24

25 Table 3.8. Energy production from solid biomass in Ukraine (2013) [11] Sector / Type of equipment Units Installed capacity, MW th (+ MW е ) Replacement of NG, bill m 3 /yr Production of heat, Tcal/yr Reduction of СО 2 emission, Mt/yr Population: Traditional wood ovens Domestic boilers for firewood and wood pellets, kw th Total for population Housing-communal sector and budgetfinanced sector: Wood boilers, MW th Wood CHP plants 1 10 (+6) Total for housing-communal sector and (+6) budget-financed sector 0.28 Industrial / commercial consumers Wood boilers, MW th Straw boilers, MW th Sunflower husk boilers Sunflower husk CHP plants 3 64 (+8) Total for industrial / commercial consumers (+8) Total (+ 14) Table 3.9. Introduction of additional equipment on solid biomass in Ukraine until 2020 as compared with 2013 (forecast) [11] Sector / Type of equipment Units Installed capacity, MW th (+ MW е ) Population: Domestic boilers for firewood and wood pellets, kw th Switchover of population from individual heating to moderately centralized DH: Boilers for straw/stalks, 1-10 MW th Replacement of NG, bill m 3 /yr Production of heat, Tcal/yr 3093 Reduction of СО 2 emission, Mt/yr Total for population Housing-communal sector and budgetfinanced sector: Wood boilers, MW th Boilers for straw/stalks, 1-10 MW th Wood CHP plants (+54) CHP plants on straw/stalks (+300) CHP plants on energy crops (+300) Total for housing-communal sector and budget-financed sector (+654) Industrial / commercial consumers Boilers for straw/stalks, MW th Sunflower husk boilers Wood CHP plants (+60) Sunflower husk CHP plants (+42) Total for industrial / commercial consumers (+102) Total (+ 756)

26 Now, there is the only wood CHP plant operating in a DH system. In the future we expect introduction of a big number of biomass boilers and CHP plants (mostly on agro-residues and energy crops) into existing and new DH systems. Moreover, we predict the process of population s gradual switching over from individual heating to moderately centralized biomass-based DH. Drivers and barriers to biomass combustion technology development Main driver and at the same time an obstacle for the development of biomass combustion technology is very strict norms for pollutant emissions. It should be noted that Ukrainian environmental legislation has some deficiencies which should be improved by its harmonizing with European legislation. The main deficiencies are described below [12]. The Order On approval of maximum permissible pollutant levels from stationary sources of Ukraine s Ministry of Environmental Protection (N 309 of ) introduced too strict norms for solid particles emission from biomass boilers. For the boilers with gross emission of particles 500 g/h (that corresponds to capacity of up to about 1 MW) maximum permissible level is 150 mg/nm 3 that is twice as less as that, for instance, in Denmark. For the boilers with gross emission of particles >500 g/h the norm is 50 mg/nm 3 that is much as less as that, for instance, in Austria and Germany. As opposed to a number of leading EU countries, in Ukraine s environmental regulation, there is no wellestablished practice to set maximum permissible pollutant levels depending on a boiler capacity. That means that the norms are similarly strict for small and big boilers. The problem is that as opposed to large-scale installations, small and middle-scale boilers cannot meet the norms from technical and economy points of view. To meet the norms on solid particles emission, small and middle biomass boilers (<10 MW) must be equipped with complex and expensive flue gas cleaning systems like electrostatic precipitator or bag filter. For the boilers below 10 MW it is practically impossible because installation of such filters can lead to so high cost that introduction of biomass boilers will become not feasible. Taking into account European experience, it is advisable for Ukraine to set technically acceptable norms for pollutants emission for small and middle biomass boilers and then gradually lower them as the development of boiler engineering progresses. Status of biomass combustion technology and outlook There are up to 20 domestic producers of wood fired boilers in Ukraine and about 3 manufacturers of straw fired boilers. In addition, a lot of companies offer biomass boilers of foreign make. Wood fired boilers of domestic manufacture cover a broad spectrum of biomass combustion technologies for heat production but their capacity is below 1 MW th. Straw fired boilers of Ukrainian make are batch boilers for round and big bales below 1 MW th. Steam biomass boilers are not manufactured in Ukraine. A couple of manufacturers declared their intentions to design and produce biomass boilers of over 1 MW th. We believe that the plans will be implemented in the near future. Long-term future developments may be also connected with designing steam biomass boilers. Certification of biomass boiler installers In Ukraine, there are companies that are licensed to construct and install energy equipment. But there are no installers, technicians and other specialists certified specifically for bioenergy equipment. 26

27 4 Ukraine s solid biomass boiler market beyond 100 kw heat load Ukraine s solid biomass boilers beyond 100 kw heat load are predominately fuelled by wood chips, sunflower husk and straw. These biomass boilers supply in-house heat for communal buildings, multi-storey buildings, commercial and industrial applications and heat for local and district heating. In Ukraine, there is no statistical data or any other exact information on the number and installed capacity of any solid biomass boilers. All the figures presented in this chapter are estimation of biomass experts. 4.1 Number of domestic installations of solid biomass boilers The current number of biomass boilers >100 kw can be estimated as: - wood fired boilers over 4000; - sunflower husk boilers about 70; - straw fired boilers over 100. Almost all the boilers were introduced in Ukraine during past 15 years. Before that the bioenergy sector practically was not developed in the country. The most active introduction of biomass boilers can be observed during the last couple of years, especially in It is mainly explained by the considerable increase in natural gas price. 4.2 Capacity of domestic installations of solid biomass boilers The current and expected in 2020 installed capacity of biomass boilers >100 kw is presented in Table 4.1. Table 4.1. Installed capacity of solid biomass boilers >100 kw Type of boiler 2013, MW (expert estimation) 2020, MW (forecast) Increase during , times Wood fired boilers Sunflower husk boilers Straw fired boilers * 127 Total * In 2020 the figure includes boilers running not only on straw but also on other agricultural residues (like stalks of maize and sunflower). It should be noted that for the future, introduction of boilers on straw and other agro-residues is much preferable to the introduction of wood fired boilers in Ukraine. It is explained by the fact that Ukraine has a huge potential of agro-residues available for energy and comparatively limited resources of wood biomass. 27

28 5 Result of Stakeholder Interviews The main objective of the stakeholder interviews performed was to identify at least 3-4 market segments in total, where a business case for commercial in-house or district heating with solid biomass seems to be most likely. In every country 2-3 biomass boiler manufacturers and 2-3 district heating developers/operators were interviewed for this purpose. Where those target groups were not existing domestic representatives of foreign biomass boiler manufacturers or domestic biomass associations and biomass experts were interviewed instead. 5.1 List of interviewees Table 5.1. Overview of interviewed key stakeholders to identify promising market segments for Bioenergy4Business activities. Name Function Company Type of business Yevgen Representative of Renewable Sale Oliynyk Polytechnik in Ukraine, Energy Agency (promotion) Senior Expert of biomass (responsible for boilers in biomass boilers issues) Ukraine Volodymyr Senior Expert Renewable Biomass Kramar (responsible for DH Energy Agency district issues) heating plant (former Deputy planner Director of a DH company) Leonid Kriger Head Energy Holding Biomass Kriger boiler manufacture Natalia Director for regional Ukrteplo Biomass Korelska development and boiler investments manufacture Source: SEC Biomass All interviewees were asked the same following four questions. Intervie w details 10. March physical 12. March physical 23. March physical 30. March physical Website What are the most promising bioenergy sources being available in larger quantities locally (at reasonable prices) in Ukraine? What are promising market-segments (where a business case seems to be most likely) in Ukraine? Due to which technical, economic etc. criteria did you select these promising market segments and which influence do these criteria have regarding market penetration? In case you sell biomass boilers abroad: To which countries do you export and what are the promising market segments there? 28

29 The interview guide that was used for all interviews can be seen at ANNEX xx of deliverable D2.2 Summary overview of promising market segments for bioenergy. The identified market segments are those on which national project activities will be focused on throughout project lifetime. The market segments identified may vary from partner country to partner country. 5.2 The most promising bioenergy sources The most promising bioenergy sources are by-products from wood-based industries, forest wood-chips, pellets and straw. The best option for a company is to have its own biomass/biofuel for the implementation of a bioenergy project. 5.3 The most promising market segments The most prominent markets are: - existing and new small DH; - public buildings (schools, hospitals) new plants; - agriculture/forestry (greenhouses, drying plants) fuel switch and new plants; - wood industry (sawmills; furniture producers) fuel switch and new plants Criteria for selection of promising market segments and their influence regarding market penetration State Risk and support Factors related to the state risk and support are not of high importance for Ukraine now. They are not specific for biomass equipment. They have the same influence on the introduction of gas boilers and biomass boilers. Administrative procedure for implementing a bioenergy project is very bureaucratic and complicated in Ukraine. To construct and put into operation a biomass boiler plant it is necessary to obtain about 140 permissions. At that up to 20 related institutions ( actors ) are involved in the process. In many cases the construction begins and proceeds while all the required permissions are not obtained yet. There is no difference in the legal framework between Ukraine s oblasts. Usual time required for the implementation of a biomass heat project is about 18 months. In some simpler cases (for example, when land allocation is not required) the period can be reduced to 6-8 months. Obviously, to overcome the existing administrative barriers it is necessary to simplify the procedure. It is planned by the governmental document called Plan for short- and middle-term measures to reduce NG consumption until 2017 (approved in October 2014). In practice nothing has been done yet as it is a very difficult and slow process. Nevertheless some biomass experts have already developed their recommendations for simplifying the permission procedures. For example, Bioenergy Association of Ukraine (UABio) participated in the elaboration of a draft law aimed to simplify allocating land for the construction of biomass plants Technical questions The following factors are important: fuel quantity and long-time security of fuel supply; fuel supply logistics; emission thresholds. 29

30 The rest of the factors are not of high importance for Ukraine now. The number of biomass technical gatekeepers is very limited in Ukraine now. As a rule they are available only in companies engaged in manufacturing/installing biomass boilers. Quantity of bioenergy equipment producers and technical specialists must increase significantly so that to ensure stably growing bioenergy sector in the country Economic questions A special tariff for the heat produced from biomass (and all the other fuels/energy carriers which are different from natural gas) and supplied to population and budget-financed institutions (like schools, hospitals) was introduced in Ukraine in October The tariff is applied to boilers plants and does not apply to CHP plants. For the case of biomass heat supply to population, the duration of validity period of the special heat tariff is not limited. For biomass heat supply to budget-financed institutions, the special heat tariff is valid until 1 October It should be noted that due to some inaccuracy in the legal documents that had introduced the special heat tariff (the governmental Resolutions N 293 of and N 453 of ), the practical application of the special heat tariff has been rather limited by now. To improve the situation, the corrected versions of the Resolutions have been developed, and their official approval is expected in the nearest future. That will give an opportunity to accelerate the implementation of biomass heat projects in the sectors of housing-communal services and budget-financed organizations. Investment subsidy is available only for individual purchasers of small biomass boilers (in fact the state reimburses 20% of loan taken for the purchase). For big biomass plants there is no investment subsidy available. For the time being, the feed-in-tariff is preferred because it can really support and encourage the construction of biomass plants. Under present conditions (that is under the existing NG prices and heat tariffs for population and housing-communal services sector) introduction of investment subsidies (20% or even 30%) would not be enough to make a biomass project feasible. Thus, the feed-in-tariff is considered to be more effective instrument now. The following factors have a crucial impact: biomass fuel cost vs. costs of fossil fuels; feed-in-tariff for the heat produced; financial incentives; access to capital, bank loans; credit worthiness of the potential investor. Incentives for the fossil competitors are still available mostly in the form of subsidized NG price. The prices of natural gas for population and housing-communal services sector are lower than their market values and are subsidized from the state budget. The prices were considerably increased recently (in March-April 2015) but have not achieved the commercial level yet. It is expected that NG prices for all types of consumers will reach the commercial level by In addition the state still provides some subventions for Ukraine s coal mining regions so that to reduce the coal price. Also, electricity price for population is under its market level and subsidized by the state (a big share of power is produced from fossil fuels). We consider that all the subsidies and subventions should be ceased and fossil fuels prices increased to their market level. A few banks in Ukraine have some experience in financing bioenergy projects. As usual the banks operate within credit lines opened by international financing organizations (like EBRD, IFC) for RE projects Organisational questions Of the organisational questions the following factors are of some importance: regulatory frameworks and regional/national change agent. The rest of the factors have rather low influence. 30

31 To facilitate development and implementation of bioenergy projects it is necessary to improve the existing RE legislation. The most required improvements/amendments are: Adopt the improved versions of the governmental Resolutions N 293 and N 453 regarding the special heat tariff for the biomass heat supplied to population and budget-financed institutions (described above). Amend the law On Heat Supply so that biomass heat producers should have an easy access to the existing heat networks. Amend some laws concerning land use to facilitate land allocation for the construction of biomass plants. Professional agents in place who would be able to plan and to install biomass plants and also repair- and service technicians in place who would carry out maintenance of boilers quickly are available but their number is very limited. Most available agents and technicians specialize in gas/coal boilers and do not have specific knowledge regarding biomass equipment Motivation of investors Important factors are: use fuel from the region and security of fuel supply. Such advisers as financier and bioenergy expert play a crucial role for the investor regarding investment into biomass boilers. Developers of new projects are mostly motivated by owners (operators or other related persons) of existing biomass plants. For example, UABio regularly holds meetings and seminars, during which representatives of biomass companies, bioenergy experts and other related persons meet each other and exchange knowledge and experience. In addition, some information on the existing biomass plants and planned biomass projects is disseminated by UABio monthly digest among interested parties Summary of the most important factors that influence the success of market introduction at the most promising market segments Promising market segments existing and new small DH public buildings (schools, hospitals) new plants agriculture/forestry (greenhouses, drying plants) fuel switch and new plants wood industry (sawmills; furniture producers) fuel switch and new plants What is needed to provide secure supply of biomass; to increase emission thresholds for biomass boilers; to provide bank loans on favourable conditions (fuel switch) to provide secure supply of biomass; to increase emission thresholds for biomass boilers; to provide secure supply of biomass; to increase emission thresholds for biomass boilers; to introduce feed-in tariff for the heat produced; to provide bank loans on favourable conditions (fuel switch) to increase emission thresholds for biomass boilers; to introduce feed-in tariff for the heat produced; to provide bank loans on favourable conditions (fuel switch) 31

32 5.4 Most promising market segments abroad view from Ukrainian market actors The most promising market segments abroad are existing and new small DH, public buildings (schools, hospitals, state/municipal offices), greenhouses, drying plants, furniture producers. Some Ukrainian manufacturers of biomass boilers sell their product to the neighbouring countries and participate in the boilers installation and maintenance. Ukrainian biomass experts are active in the neighbouring countries like Moldova and Belarus in case they are involved in the respective activity through some contracts or international projects. 32

33 6 Characterisation of promising market segments (facts & figures) 6.1 Summary selection of most promising market segments The interviews performed with biomass boiler manufacturers and some related persons, summarized in chapter Error! Reference source not found. showed, that the most promising fossil fuel to be substituted by solid biomass for all sectors is natural gas in Ukraine. Table 6.1 shows an overview how much natural gas was used between 2010 to 2013 at the average, according to statistical data and expert estimations, at the most promising market segments mentioned in the interviews in chapter Error! Reference source not found. to be most likely for a fuel-switch to solid biomass. More detailed data on the natural gas consumption in these sectors are not available. The last column in the table gives a ranking of sectors (1 means the highest), according to the relevance of the corresponding sector for Bioenergy4Business related activities to substitute natural gas by solid biomass. The choice was based on the interviews, the amount of fossil fuel still used and the potential size and number of biomass boilers that could potentially be introduced in those sectors with supportive framework conditions. For agriculture/forestry and public buildings biomass boilers <1 MW th are potentially interested. For DH systems and industry biomass boilers of 1-10 MW th seem to be in demand. Table 6.1. Consumption of natural gas, average from 2010 to 2013 in GWh in Ukraine. Sector/Branch Consumption of NG, GWh kt CO 2 -eq. savings* Selection/ Ranking Woodworking industry Budget-financed sector (public buildings) Residential Agriculture, forestry and fishing CHP and heat-only DH plants Total * GHG-reduction potential For the assessment of GHG-reduction potential stated in the middle column of Table 6.1, with the purpose of making the evaluation more reliable, the following level of a NG substitution potential was assumed: woodworking industry 100%, agriculture/forestry and public buildings 15%, residential sector 7%, DH systems 10%. GHG emission factor of 202 t/gwh (total for CO 2, CH 4 and N 2 O) was used in the calculation. 6.2 Residential sector and DH systems Structural and business data Residential sector of Ukraine includes 10.2 million houses of 1070 million m 2 total area, including 2.3% of houses in communal property (238,000 houses of 67.5 million m 2 total area). Figure 6.1 shows rate of construction of new residential area in the country. 33

34 TWh UKRAINE S PROMISING MARKET SEGMENTS FOR HEATING WITH SOLID BIOMASS (> 100 KW) 1000 m 2 Construction of new residential area, 1000 m 2 Rate of construction, % of the previous year Fig Rate of construction of new residential area in Ukraine [16]. Heat supply of cities and other settlements is performed by 7712 enterprises of all forms of property which operate 31,312 boiler installations of 155 GW total capacity. Total number of boilers is 72, % of the boiler installations are equipped with boilers of over 20 years operating time which have efficiency below 82%. Total number of the old boilers is There are DH systems and systems of individual heating in the country. DH covers about 60% of consumers including 11 million apartments, mostly in cities and urban settlements. About 7 million households (mostly in one-storey and low houses) use individual heating Final energy consumption Final energy consumption for residential sector of Ukraine Year Coal Gas RES Electricity Heat Oil & Oil products 34 Fig Structure of the final energy consumption in the residential sector of Ukraine [4, 17-19].

35 6.2.3 Estimation of the CO 2 -mitigation potential CO 2 -mitigation potential in the residential sector can be estimated at 2.2 Mt of CO2-eq. It corresponds to the substitution of natural gas by biomass in the sector on the level of about 7%. 6.3 Public buildings Structural and business data Public buildings belong to so called state budget-financed sector. It includes (in brackets is approximate number) kindergartens (15,000), schools (18,000), technical colleges (800), universities (660), hospitals and other medical institutions (11,600), research institutes (1,000), libraries (16,900) and similar institutions Final energy consumption Regarding energy consumption in public buildings, Ukrainian statistics provides information only for sectors of education and healthcare (Fig. 6.3, 6.4). Energy consumption in education sector in 2013 (GWh) Gas 1970,61 33% Oil 3148,69 53% RES 224,12 4% Oil Gas RES Coal Other Other 6,86 <1% Coal 605,26 10% Fig Energy consumption in education sector in 2013, GWh [20]. 35

36 Energy consumption in healthcare sector in 2013 (GWh) Oil 3514,89 56% Gas 1977,22 32% [ИМЯ КАТЕГОРИИ] 21,9 <1% Coal 590,95 9% RES 190,06 3% Oil Gas RES Coal Other Fig. 6.4 Energy consumption in healthcare sector in 2013, GWh [20] Estimation of the CO 2 -mitigation potential CO 2 -mitigation potential in the public buildings sector can be estimated at 232 kt of CO2-eq. It corresponds to the substitution of natural gas by biomass in the sector on the level of about 15%. For DH systems the GHGreduction potential is 1547 kt of CO2-eq assuming that 10% of NG will be replaced by biomass. 6.4 Agriculture and Forestry Structural and business data This sector is divided into the following divisions: Crop and animal production, hunting and related service activities Forestry and logging Fishery and aquaculture Some business data of agriculture and forestry are presented in Tables and Figure

37 Table 6.2. The number of operating enterprises by type in 2013 [13] Type of enterprise Agriculture and related services Forestry Fishery number % of total number % of total number % of total Enterprises, in total including: Economic associations Private companies Production cooperative Farms State enterprises Enterprises of other forms of economic activity Table 6.3. Number of employees in agriculture, forestry and fishing [1] Index Number of employees, 1000 persons Table 6.4. Turnover of agricultural production [16] Indexes Agricultural products - Total (million EUR) 22372, , ,21 Including: Agricultural enterprises 11588, , ,18 Households 10783, , ,03 including: Products of crop sector- Total, including: 15550, , ,83 Agricultural enterprises 8820, , ,08 Households 6729, , ,75 Products of animal husbandry Total, including: 6821, , ,38 Agricultural enterprises 2768, , ,10 Households 4053, , ,28 % as compared with 1990 Gross production of agriculture Production of crop sector Production of animal husbandry 37

38 (TWh) UKRAINE S PROMISING MARKET SEGMENTS FOR HEATING WITH SOLID BIOMASS (> 100 KW) Fig Indexes of agricultural production [13] Agro-holdings are important players in crop sector and animal husbandry. There are about 80 big agro-holdings in Ukraine, which own about 27% of agricultural land of agro-enterprises 2 (that is 6 million hectares) (Fig. 6.6). On average, over 11 big agro-holdings operate in each region of Ukraine. million ha Land-bank of agro-holdings % of agricultural land used by agro-enterprises Fig Land-bank of big agro-holdings in Ukraine [7] State forestry and forestry-hunting enterprises (in total, over 300) are mainly responsible for forestry in Ukraine. The enterprises are subordinate to Ukraine s State Agency of Forest Resources that owns 66% of the forest fund in Ukraine. The rest is divided between many more or less small owners, the biggest being Ukraine s Ministry of Agrarian Policy and Food Final energy consumption 30 Energy consumption agriculture/forestry sector of Ukraine Year Coal Oil& Oil products Natural gas Electricity Heat RES Fig Structure of the final energy consumption in agriculture/forestry of Ukraine [4, 17-19]. 2 Agricultural land includes land used by individuals and agricultural enterprises. 38

39 6.4.3 Estimation of the CO 2 -mitigation potential CO 2 -mitigation potential in agriculture/forestry can be estimated at 241 kt of CO2-eq. It corresponds to the substitution of natural gas by biomass in the sector on the level of about 15%. 6.5 Woodworking industry Structural and business data Woodworking industry includes three types of production: Primary woodworking (sawmills, production of sleepers) Secondary woodworking (production of parquet boards, plywood, furniture, wood chipboards, matches, standard wood houses and components and other). Chemical and mechanical processing of wood (production of fibreboards, wood plastics). Table 6.5. Manufacture of selected wood products in Ukraine [15] Type of product Sawn/split wood of > 6 mm thickness; untreated wood sleepers, million m 3 Plywood, veneered panels, 1000 m Unprocessed or polished wood chipboard, million m 3 (equivalent) Windows and their frames, balcony doors and their frames, doors and their frames, doorsteps, million m Table 6.6. Manufacture of selected furniture products in Ukraine (1000 units) [14] Type of product * Furniture for sitting Furniture for offices and trade enterprises Kitchen furniture Furniture for apartment interior * Fresher data are not available. Table 6.7. Turnover of woodworking industry in 2010* [14] Type of product million EUR % of total Wood products, in total including Products of wood sawing, shaving and soaking Plywood, boards, panels, veneer Wood building units, joineries Wood packing material Other wood products Furniture * Fresher data are not available. 39

40 TWh UKRAINE S PROMISING MARKET SEGMENTS FOR HEATING WITH SOLID BIOMASS (> 100 KW) Table 6.8. Average annual number of employees in woodworking industry (excluding furniture production)* [14] Index Number of employees 40,000 40,000 33,000 33,000 * Fresher data are not available Final energy consumption Energy consumption in woodworking industry of Ukraine 3,00 2,50 2,00 1,50 1,00 0,50 0, Year Heat Electricity Oil& Oil products Natural gas RES Fig Structure of the final energy consumption in woodworking industry of Ukraine [4, 17-19] Estimation of the CO 2 -mitigation potential CO 2 -mitigation potential in woodworking industry can be estimated at 6 kt of CO2-eq. It corresponds to the substitution of natural gas by biomass in the sector on the level of 100%. 40

41 7 Literature 1. Agriculture of Ukraine in Statistical Yearbook issued by the State Statistics Service of Ukraine, State of agriculture in Express-issue by the State Statistics Service of Ukraine of Prospects for the use of agricultural residues for energy production in Ukraine. Position Paper N 7 by the Bioenergy Association of Ukraine, UABIO-7-EN.pdf 4. Energy balance of Ukraine for Express-issue by the State Statistics Service of Ukraine of Viktor Andriyenko. Ukrainian market of solid biofuels. Structure, trends, prospects. Presentation at 9th International Conference on Biomass for Energy, September 2013, Kyiv, Ukraine. 6. Ukrainian market of solid biofuel. Analytical Report by IBCentre, Biomass availability and logistics analysis in Ukraine. SEC Biomass Report for IFC, Analysis of biofuel of vegetable origin in Ukraine and Kyiv region. SEC Biomass Report for Kyivenergo, Website of the State Agency of Forest Resources of Ukraine Website of Scientific Engineering Centre Biomass Prospects for the development of bioenergy as an instrument for natural gas replacement in Ukraine. Position Paper N 12 by the Bioenergy Association of Ukraine, Barriers to the development of bioenergy in Ukraine. Position Paper N 3 by the Bioenergy Association of Ukraine, Statistical Yearbook of Ukraine for Issued by the State Statistics Service of Ukraine, Industry of Ukraine in Statistical Yearbook issued by the State Statistics Service of Ukraine, Ukraine in figures Statistical Yearbook issued by the State Statistics Service of Ukraine, Ukraine Statistical Yearbook issued by the State Statistics Service of Ukraine, Energy balance of Ukraine for Express-issue by the State Statistics Service of Ukraine of Energy balance of Ukraine for Express-issue by the State Statistics Service of Ukraine of Energy balance of Ukraine for Express-issue by the State Statistics Service of Ukraine of Information obtained from the State Statistics Service of Ukraine on request. 21. Website of the national join-stock company Naftogaz of Ukraine ighlight=0,%d1%86%d1%96%d0%bd%d0%b0%20%d0%b3%d0%b0%d0%b7%d1%83%202013%20%d1%80 41

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43 8 Abbreviations CHP combined heat and power FE forestry enterprise FEC final energy consumption GHG green house gas LFG landfill gas NG natural gas TPES total primary energy supply UABio Bioenergy Association of Ukraine 43

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45 ABOUT THE AUTHORS About the authors DR. GEORGII GELETUKHA Director of SEC Biomass. He is a leading Ukrainian expert on bioenergy policy, biomass action plans, support incentives, development strategies. DR. TETIANA ZHELIEZNA Head of Division at SEC Biomass. Her field of expertize is analysis of bioenergy policy, assessment of biomass potential, preparation of analytical reports related to bioenergy and RES. MSc OLHA HAIDAI Consultant at SEC Biomass. Her field of expertize is energy and environmental assessment of bioenergy technologies, evaluation of biomass potential, preparation of analytical reports related to bioenergy. ABOUT SCIENTIFIC ENGINEERING CENTRE BIOMASS Scientific Engineering Centre Biomass is one of the leading Ukrainian companies in bioenergy sector. SECB provides consultations, performs research, analytic and engineering work in the following areas: bioenergy technologies, bioenergy policy, biomass potential, DH based on biomass, energy efficiency. R&D and consulting in the field of biomass-to-energy technologies is one of the corner stones of SECB s activities. Both fundamental investigations and technology development are carried out, usually in collaboration with Ukrainian and foreign partners. Related research laboratory was established in Total number or references in the R&D and consulting sectors is comprised of over 200 projects performed by SECB. SECB is among founders of the Bioenergy Association of Ukraine (UABio). Hence, its experts are engaged in development of policies and legislation aimed to strengthen the position and accelerate development of bioenergy, to impact policy documents in the energy sector of Ukraine, and to influence development of state and sector standards, norms etc.