Belarus Biomass Project Promotes Renewable Energy

UNITED NATIONS DEVELOPMENT PROGRAMME
GLOBAL ENVIRONMENT FACILITY

PROJECT DOCUMENT
1. IDENTIFIERS:
PROJECT NAME Biomass Energy for Heating and Hot Financing
Water Supply in Belarus
PROJECT NUMBER BYE/02/G31 GEF: USD 3 129 000
UNDP/GEF PIMS NUMBER 1893 PDF B: USD 245 000
DURATION 48 months
Parallel Financing:
GEF IMPLEMENTING AGENCY United Nations Development Programme Committee on EE: USD 2 130 000
(UNDP) USD 62 000 (in-kind)
EXECUTING AGENCY Committee on Energy Efficiency Local organisations: USD 1 780 000
IMPLEMENTING AGENCY Committee on Energy Efficiency USD 1 590 000 (in-kind)
REQUESTING COUNTRY Belarus
ELIGIBILITY Belarus ratified the UNFCCC on 9 May 2000 Total excluding PDF: USD 8 691 000
GEF FOCAL AREA Climate Change Total : USD 8 936 000
GEF PROGRAMME FRAMEWORK OP#6: Promoting the adoption of renewable
energy by removing barriers and reducing implementation costs
LPAC MEETING: 4 December 2002
ACC/UNDP SECTOR: 0500 Energy
ACC/UNDP SUBSECTOR: 0504 New and Renewable Sources of Energy
2. SUMMARY
The proposed project will address the reduction of greenhouse gas (GHG) emissions in Belarus by increasing the
capacity of the government to support biomass energy projects and the capacity of customers to finance and
implement them. This project will focus on the following objectives: 1) strengthening institutional capacity to
support biomass energy projects; 2) establishing a track record for investments in sustainable biomass energy
projects, including both fuel supply and demand; 3) developing straightforward financial “starter” mechanisms in a
challenging investment climate that will allow continued financing for biomass energy projects; and 4) overcoming
negative perceptions of biomass energy and provide public and private investors with much-needed market
information. First, the project will address lack of biomass project experience by facilitating the investment of USD
2.1 million by the Committee on Energy Efficiency and USD 3.4 million by the private and public sectors by 2006
in biomass energy projects. The project will also address financial barriers by establishing a revolving fund with
initial capitalization of USD 1.54 million that will be based in part on the GEF contribution and dedicated to the
support of biomass energy. Direct fossil fuel savings as a result of this programme represent approximately 1.08
million tonnes of CO2 reduction over a 15-year period. Thus, for a GEF contribution of USD 3.129 million, the cost
per tonne of CO2 reduced is USD 2.9. Estimates of the potential impact on wood-fuel use resulting from this project
total an additional annual amount of 895,000 tonnes of CO2 by 2015.
On behalf of: Signature Date Name/title
Nikolai Zaichenko,
The Government: First Deputy Minister of Economy
________________ __________
________________________
Committee on Energy
Lev Dubovik, Chairman
Efficiency of the
________________ __________ ________________________
Republic of Belarus
Niel Buhne, UNDP Resident Representative

UNDP: and UN Resident Coordinator
________________ __________ ________________________
Co-financing commitments for all demonstration projects are provided, though two sub-project owners are not
specifying the co-financing amount. UNDP/GEF will not proceed with designing and implementing these
demonstration projects, unless co-financing is specified and committed.
Biomass Energy for Heating and Hot Water Supply in Belarus
TABLE OF CONTENTS
1 PROJECT OVERVIEW.....................................................................................................................................3
2 BACKGROUND AND CONTEXT...................................................................................................................3
3 BARRIERS......................................................................................................................................................10
4 OBJECTIVES..................................................................................................................................................12
4.1 Overall objective............................................................................................................................12
4.2 Specific objectives.........................................................................................................................13
4.3 GEF rationale.................................................................................................................................13
5 PROJECT COMPONENTS/ACTIVITIES AND EXPECTED RESULTS.......................................................14
5.1 Component 1: Institutional Capacity Development.......................................................................14
5.2 Component 2: Technical Capacity Development...........................................................................18
5.3 Component 3: Financial Capacity Development............................................................................22
5.4 Component 4: Information and Outreach to Increase Awareness...................................................24
6 RISKS AND SUSTAINABILITY....................................................................................................................26
6.1 External Risks................................................................................................................................26
6.2 Internal risks..................................................................................................................................27
6.3 Sustainability.................................................................................................................................28
7 STAKEHOLDER PARTICIPATION AND IMPLEMENTATION ARRANGEMENTS..................................28
7.1 Stakeholder participation...............................................................................................................28
7.2 Implementation arrangements........................................................................................................29
8 INCREMENTAL COSTS AND PROJECT FINANCING...............................................................................30
8.1 Incremental Costs..........................................................................................................................30
8.2 Project Financing...........................................................................................................................31
9 MONITORING AND EVALUATION.............................................................................................................32
10 LEGAL CONTEXT.........................................................................................................................................34
11 BUDGET.........................................................................................................................................................35
ANNEX A: Incremental cost....................................................................................................................................37
ANNEX B: Project planning matrix.........................................................................................................................40
ANNEX C1: STAP review.......................................................................................................................................50
ANNEX C2: Response to STAP review...................................................................................................................52
ANNEX D: Operational focal point endorsement....................................................................................................54
ANNEX E: Overview of boiler houses between 0.5 and 10 MW.............................................................................56
ANNEX F: Wood waste availability in Belarus.......................................................................................................58
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ANNEX G: Overview of relevant regulations..........................................................................................................60
ANNEX H: Selection of project sites and evaluation criteria...................................................................................61
ANNEX H bis: Sample calculation for demonstration project (#1, Option 2).........................................................61
ANNEX I: Investment project site fact sheets..........................................................................................................64
ANNEX J: CO2 emission calculation.......................................................................................................................91
ANNEX K: Signed letters of intent..........................................................................................................................93
ANNEX L: Equipment requirements.......................................................................................................................97
ANNEX M: Terms of reference for international and national experts and subcontractors....................................106
ANNEX N: Outline of Coordination efforts with the World Bank........................................................................120
ANNEX O. Revolving Fund Definition.................................................................................................................121
ANNEX P. Replication Plan Specifics...................................................................................................................128
ANNEX Q. Commitments of Project Beneficiaries...............................................................................................131
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1 PROJECT OVERVIEW
There are over 10,000 boiler houses with capacities below 10MW th 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 (commonly 20 to 30 years old), and operate far below their design
capacities (as a result of reduced industrial demand). Belarus depends heavily on imported fuels (over 85% of total
energy consumption comes from foreign sources), so the energy sector also places a considerable financial burden on
both the public and private sectors and slows economic growth. A comprehensive market and resource study, which
was carried out within the framework of the PDF B project (BYE/00/G42), indicates that about 2,000 boilers sized
between 0.5 and 10 MWth burning coal or heavy oil are suitable for conversion to wood fuel. On the fuel supply side,
approximately 6 million cubic meters of wood-waste, which are currently unused, could be used as fuel, increasing to
6.7 and 8.3 million cubic meters in 2005 and 2015 respectively. The principal barriers to be addressed in achieving this
potential, which are described in this project brief, were identified in the course of the PDF B project, and they will be
tackled through the proposed project activities. In particular, the proposed activities will remove barriers related to
perception and awareness, organisation, technical capacity, and financing.
The expected direct results of the successful implementation of the current proposal will facilitate the investment of
USD 2.1 million by the Committee on Energy Efficiency and USD 3.4 million by the private and public sectors by
2006. A revolving fund (with initial capitalization of USD 1.54 million) dedicated to the support of biomass energy
will be established, based on part of the GEF contribution. It is expected that by the end of 2006, the key elements will
be in place for the sustained development of wood-fuel supply and the implementation of biomass-fuelled boilers in
Belarus, able to respond to an increasing demand for biomass heating. Direct fossil fuel savings as a result of this
programme represent approximately 1.08 million tonnes of CO 2 reduction over a 15-year period. Thus for a GEF
contribution of USD 3.129 million, the cost per tonne reduced CO 2 is USD 2.9. Based on realistic estimates of the
potential impact on wood-fuel use resulting from this project (beyond existing plans of the Belarussian government)
reductions could amount to an additional annual amount of 895,000 tonnes of CO 2 by 2015 (from reductions
representing a coal equivalent of 400,000 tonnes, with an estimated 330,000 coming from mazut, 20,000 from gas, and
50,000 from coal-fired boilers).
The GEF support is requested to cover the incremental costs of activities that facilitate the development of the biomass
heating market through a barrier removal process whereby, by means of selected investment projects, biomass boilers
of 38,000 tce/year would be installed during a 4-year period, and initiatives undertaken to overcome barriers in fuel
supply through both project implementation and planning. Without the proposed GEF support the increase in uptake of
wood energy is unlikely to be efficient, sustainable and cost effective, and it is unlikely to occur in the near future,
resulting in an energy-intensive and costly pattern that will hinder ongoing economic reforms.
2 BACKGROUND AND CONTEXT
Belarus, which borders Poland to the west, Russia to the east, Ukraine to the south, and Latvia and Lithuania to the
north, has few traditional energy resources and is therefore highly dependent on imports. Natural resources are limited,
and, apart from small deposits of natural gas, oil and peat, the most important natural resource are the forests, which
cover 36% of the country. Winters are cold and summers are cool and moist, and there is a great need for heating
during the winter months. The country is divided into 6 oblasts (districts), and one municipality (consisting of the
capital Minsk).
Belarus was one of the Soviet Union's major industrial republics, specialised in the production of machinery and
equipment and, although industry has declined significantly since independence from the USSR in 1991, heavy
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 two-state union that envisions greater political and
economic integration. Belarus suffered greatly from the 1998 financial crisis in Russia but is recovering with a GDP
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growth of 6% in 2000. The industrial sector continued to be the source of this growth, at 10.3 in 1999 and 8 percent in
2000.
Investment climate
Inflation, although still the highest in Eastern Europe at approximately 100% in 2000, has decreased significantly from
the 1999 level of 251%, and this trend appears to be continuing in 2001 and 2002. In spite of this there have been a
number of very positive developments since the unification of official and market exchange rates in September 2000.
On 9 October, 2001, a new Investment Code of the Republic of Belarus, a comprehensive document that substituted
the existing multiple regulations on foreign investment, came into force. The Code 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 compensation, which should include interest payment calculated on the basis
of LIBOR rate starting from the date of nationalization to the date of actual compensation payment. The Investment
Code introduces concessions, a new form of investment in Belarus. The government has also worked out the National
Program for Attracting Investment, which is aimed at improving the general investment climate.
Belarus offers a number of considerable advantages to potential investors – its central location, well-educated and
relatively inexpensive work force, low crime rate and easy access to the Russian market. The Government of Belarus
officially welcomes foreign investment, which is seen as a source of much-needed currency. Nevertheless investments
in all sectors, including the energy sector, have been hindered by low levels of privatisation. Also foreign investors
usually connect risk with the fact that the banking system in Belarus is still incipient. Among the issues that raise the
concern of the government are problematic repayment of credits, high interest rates and low capitalization of banks.
The Bank System Development Concept is expected to pave the way for the necessary changes.
Energy sector
Energy resources such as oil and gas are limited in Belarus, and the country is highly dependent on imports. In 1999,
88% of total energy consumption in Belarus came from foreign sources, most of this in the form of natural gas from
Russia. These imports are purchased in part for hard currency, which gives the current government very strong
economic and political incentives to reduce energy consumption.
Belarus’ oil consumption is more than four times its oil production, despite a 50% reduction in the country's oil
consumption in the past eight years: since 1992, Belarus’ oil consumption has dropped dramatically, from 375,000
bbl/day to just 188,000 bbl/day in 2000. In spite of this, Belarus must import 75% of its oil, almost all of which comes
from Russia. Belarus has two refineries (the Naftan and Mazyr refineries), but despite high oil prices that have
increased Russian oil exports, Belarussian refineries received reduced supplies from Russia during much of 2000
because the Belarussian government lacked the funds to pay Russia for oil deliveries. There are plans to upgrade the
two refineries significantly to improve oil-processing effectiveness, the quality of oil products, and export potential.
This will mean a significant change in the fractions of heavy and light oils, which could have serious consequences for
the availability of heavy (mazut) oil, frequently used in boilers.
Belarus is also heavily reliant on natural gas imports from Russia, and it produces less than one fiftieth of the natural
gas that it consumes each year. Due in part to an inadequate payment recovery from consumers, the country has built
up large arrears to Russian gas supplier Gazprom in spite of a favourable purchase price of approximately USD 30 per
1,000 cubic metres (in comparison, Russia charges Ukraine approximately USD 50 per 1,000 cubic meters and
Lithuania USD 76 per 1,000 cubic meters of gas). Payment recovery has been changing for the better and Belarus has
paid for 100% of gas purchased in 2001, partially in cash and partially with supplies of material resources (farm
produce is exported to Russia under barter deals) to settle current payments and to cover existing arrears. The gas debt
to Russia has been reduced from USD 244 million in early 2000 to approximately USD 200 million by the end of
2001.
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One of the reasons that Russia charges Belarus lower prices for gas is that Russia receives reduced tariff rates for its
gas that transits Belarus to customers in Western Europe. Belarus is also gaining importance as a major transit point for
other Russian energy exports. Approximately 50% of Russia's net oil exports go through Belarus, and this fuel is not
subject to export duties due to the Russian-Belarussian Union agreement. In addition, Belarus is hoping to benefit as a
transit country for Russian electricity being exported to Europe.
Belarus has a power-generating capacity of 7,700 MW. Fossil fuels account for 99.9% of the total generation of 25.7
TWh (2000) of electricity, with natural gas-fired power plants accounting for 90%, oil-fired plants accounting for 10%,
and hydropower plants just 0.1%. Approximately 25% of the electricity demand is met through the import of electricity
from Lithuania and Russia, another source of hard-currency expenses for the government.
Heat and Hot Water Supply

Heating and hot water is predominantly supplied through two types of district heating systems: 1) large combined heat
and power (CHP) systems and heat-only boilers operated by the state energy company “Belenergo”, which has 23 CHP
plants, and 35 regional boiler houses with capacities from 80MW to 700MW; and 2) smaller, heat-only boilers
operated by the Ministry of Communal Services or other Ministries, state industrial enterprises, and private companies.
The Belenergo CHP plants and boilers are predominantly fuelled by natural gas (90%). The Ministry of Communal
Services owns about 1,700 heat-only boiler-houses with an average installed capacity of 5MW. Of these, 50% are gas-
fired, 40% run on heavy oil, 6% on coal, and the remainder on peat and wood. Individual municipalities operate the
boilers of the Ministry (with the Ministry of Communal Services providing political and administrative services), and
financial resources come via municipal budgets. In addition to the boilers of the Ministry of Communal Services, there
are about 10,000 boiler houses below 10MW heat capacity under the ownership of other Ministries, state and private
industrial enterprises, as well as schools, hospitals and sanatoriums, and include approximately:
 5,300 boiler houses with an installed capacity 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%), and coal, peat and wood (35%), are
typically 20 to 30 years old, are operated below their design capacity (meaning low efficiencies), and rely on boilers
made from cast iron, which are prone to starting problems. Boilers operated by both state and private industrial
enterprises, in addition to providing heat for their own needs, usually provided heat and hot water to surrounding
apartment buildings or the ministry of communal services in cities and villages.
Heat tariffs vary considerably from one city to another, as does the degree of cross-subsidy from industry and budget
entities (those that receive money from state budgets) to residential consumers. With a few exceptions, industry and
government customers subsidise residential consumers to meet the production cost of the respective regional/district
utility or boiler to which they are all connected. Heat tariffs declined in Belarus following the decline of the purchase
price for Russian natural gas during the last few years. At present, the average cross-subsidy for heat consumption is
2.4 USD/GJ (10 USD/Gcal). Non-payment for electricity and heat from end-consumers amounted to USD 110 million
in 2000. This reduces the incentive for new investments in heat and hot water production since there is, in some areas,
little hope of recovering the costs.
Outside the larger cities it is not uncommon that during summer months hot water is provided only on weekends. The
reasons for this include fuel shortages (meaning that fuel, when available, needs to be stored for the winter months
when supplies are scarce), and high fuel costs. Because of the high and unsustainable level of cross subsidies there is a
strong incentive at the government level to find lower cost fuels, and consequently fuel for a number of manually
stoked coal and peat-fired boilers have been substituted by wood fuel. Unfortunately, this practice has led most often
to low combustion efficiencies because of incorrect air-fuel ratios. The Ministry of Communal Services has converted
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120 boiler houses in this way, and is using an increasing amount of wood for fuel (2.7% of their energy mix was from
wood in 1999, 3.5% in 2000, and 4.0% in 2001, according to official statistics). It should be stressed that, although no
detailed analysis has been made, this fuel substitution approach can in no way be considered sustainable from a climate
change perspective since low efficiency wood combustion releases high levels of products of incomplete combustion
(more complex hydrocarbons such as methane) with high global warming factors. Local experts claim typical
efficiencies in the range of 55 to 60% (as opposed to modern biomass boilers which typically operate in the 80 to 85 %
efficiency range).
With respect to future fuel availability, there is growing pressure in the supply of heavy oil for mazut boilers (mazut
being the heavy fraction resulting from the refining of crude oil) and this is likely to worsen if the proposed upgrade of
the oil refineries goes ahead since the proportion of heavy fraction produced by the refineries is then expected to
decrease from the current level of 40% to a level of 20%. The supply of natural gas and coal depends on the ability to
pay, since both fuels are imported.
A comprehensive market study carried out within the framework of the PDF B project resulted in a database of 5,000
boiler houses in the 0.5 to 10 MW range. An analysis of the database shows that the Ministry of Communal Services
owns approximately 27% of boiler houses in this size range, with 20% in the agricultural sector, 21% in the social
sector (education and health), and 32% in industry (see Annex E for additional details).
Biomass Resources
In the Soviet period, Belarus was an important centre for the processing of wood, most of which came from Russia.
Following independence, Belarus has become more self-sufficient, and now makes use of its own forests for the wood-
processing sector. Forests cover approximately 36% of Belarus, and there is an estimated annual increase in biomass
resources of 25 million compressed cubic meters per year. As a result of the Chernobyl catastrophe in 1986, economic
activity on 36,000 hectares of forests is banned due to the high degree of contamination, but this represents less than
1% of the total forest cover1. The planned volume of uncontaminated wood cut is 10.8 million cubic meters for 2001
made up of 5.8 million cubic metres as timber for export or processing, and 5 million cubic meters as firewood in logs.
A detailed resource analysis of wood-waste availability, carried out under the PDF B, shows the technical potential as
6.1 million cubic meters in 2001 (see Annex F for details). This wood-waste comes predominantly from harvesting,
forest management, and, to a much lesser degree, from wood processing.
A number of mechanisms already exist in Belarus for the supply of fuel wood. The Oblast Fuel Enterprises situated in
each oblast (“Obltop”) are operated by the oblast administration. Every “Obltop” manages approximately 20 “Raitop”
or “Gortop” which are located in regional centres. These regional fuel enterprises are operated both by the regional
administration and by the corresponding “Obltop”. Regional fuel enterprises have 1 – 2 teams of workers which carry
out logging and transport units to supply fuel wood for population, commercial and budget (state) institutions. Taken
together the approx. 120 regional enterprises supply about 450 thousand m 3 of compressed wood (in the form of logs),
what is about 10% of total firewood consumption (about 4,200 thousand m 3 of compressed wood in year 2000.).
“Obltop” and “Raitop” are also responsible for supplying peat and coal. The Obltop, on a tender basis, purchases coal
and the supplier then delivers coal to each Raitop. The Raitop is responsible for selling this coal to end users in their
region.
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The use of wood from contaminated areas is explicitly excluded from this GEF project. It is however worthy of note that a study
by US, Danish and Belarusian experts carried out between 1994 and 1998 with the objective of reducing ‘the health, economic and
lifestyle impacts to the general population residing in or near the contaminated areas’ through biomass power production using
contaminated biomass and forest litter emphasised that ‘Commercial-scale demonstrations of the [combustion] process using fuels
doped with stable isotopes of the radionuclides of greatest concern have been completed in the US and demonstrate that a
relatively small fraction of the material escapes out of the stack even with modest particle capture systems’. Biomass energy
combustion was seen in that study as an efficient way of capturing radionuclides in the ash thus reducing volumes 200 times, and
providing economic incentives for operation of decontamination facilities. Source: Chernobyl Bioenergy Project: Power
Production from Radioactively Contaminated Biomass and Forest Litter in Belarus, Final Report, Phase 1, September 1998.
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There are also 88 Forest Enterprises (“Leshoz”) operated by the Ministry of Forestry. The Leshozes are involved both
into harvesting and thinning of forests; harvesting occupies only about 10% of their business and the rest is from
thinning, and they supply fuel wood, usually in the form of logs. As a rule every “Leshoz” has a sawmill with
processing capacity of around 1000 m3 per month.
Harvesting of wood is mainly made by “Lespromhozes” which belong to the “Bellesbumprom” forestry concern.
Almost all wood residues produced during harvesting are left in the forest, and are frequently burned directly in the
forest. This is also the case for waste wood from thinning. Waste wood is also made available through the Belarussian
Wood and Paper Industry (“Bellesbumprom”), which covers about 80% of all wood processed in Belarus. The main
wood processing and logging is carried out in 20 enterprises spread over the entire Republic, but concentrated in the
Minsk and Gomel oblasts. In 2000, of 780 thousand cubic metres of waste resulting from their logging and wood
processing activities, 540 thousand cubic metres were used (340 thousand m 3 used for production of wood chipboards,
fibre boards, etc., and 210 thousand m 3 as fuel for boilers) leaving 240 thousand m 3 unused. Sawdust is only used as
fuel at 6 enterprises, and at others it is landfilled, where it generates GHG emissions, or given to farmers for use as
floor covering in animal enclosures or supplied for alcohol production.
Belarus as a whole currently uses 0.77 million tonnes of oil equivalent (Mtoe) of wood and wood waste (or 1.1 Mt coal
equivalent) for fuel. The majority of this is for heating in individual rural households (0.56 Mtoe), a lesser amount is
used in small boiler houses (0.17 Mtoe as pieces) and the remainder is used within the wood processing industries (in
the form of offcuts and sawdust).
Environment and Energy Policies

The Government of Belarus ratified the United Nations Framework Convention on Climate Change (UNFCCC) on 9
May 2000, and the UNFCCC entered into force on 9 August 2000. In addition to the law ratifying the UNFCCC, the
basic documents relating to climate in Belarus are the Law of the Republic of Belarus “On the Protection of
Atmospheric Air” adopted in May 1997, and the National Climatic Programme. A significant part of the National
Climatic Programme is devoted to national policy, technologies and organisational measures for prevention of climatic
changes. The programme contributes to the development of a strategy and of measures aimed at the reduction of
anthropogenic influence on the climate, and it also deals with the necessary organisational measures to implement the
programme.
At the end of 2001, the government created the Ministry of Fuel and Energy on the basis of the Committee for Fuel
and Energy Complex and Chemical Industry, which had been housed in the Ministry of Economy. Government
programs on energy efficiency and renewable energy predate the Ministry; a reduction in the use of traditional fuel
sources in power stations and district heating systems through these areas has been part of the energy policy of the
Government of Belarus since 1996. It has been reiterated in the recently published energy policy for the period 2001
to 2015. Simultaneously, the government has developed a series of regulatory documents in the field of energy saving
to create a legislative, economic, financial, organisational and technical framework in the effective use of fuel and
energy resources, and the use of local fuels, waste products, and renewable energy. An overview of the relevant
regulations is provided in Annex G, and includes the following:
 The Law of the Republic of Belarus “On energy saving”;
 National Programme of energy saving and renewable energy utilisation for the period 2001 to 2005 (building
on the successful National Programme for the period until 2000);
 National policy on the development of small and non-conventional power engineering;
 Documents establishing the “Energy Saving ” national extra-budgetary fund;
 Policies introducing instrumental metering;
 Policies providing preferential credits for energy saving activities; and
 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 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).
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 New regulations related to provide incentives for budget institutions to save energy are under design in the
Committee for Energy Efficiency.
In addition, the government has recently approved the new “National programme on energy saving and renewable
energy utilisation for the years 2001-2005” and “Main directions of national energy policy.” The programme is
designed to encourage an economic transition towards energy saving and wide utilisation of renewable energy, and it
includes state financial support for energy saving and renewable energy projects, the creation of budgetary fund for
financing projects, and programmes related to utilisation of renewable energy sources. Within this programme are
serious plans to increase the use of wood waste as fuel in Belarus with a target of 1.6 million tonnes of coal equivalent
for 2005, and 2 million tonnes coal equivalent for 2015.
Relevant Planned and Ongoing Activities

In order to implement policies related to energy efficiency and renewable energy, the government established a State
Committee on Energy Efficiency and Control in 1993. This body, which was renamed the Committee on Energy
Efficiency in 2001, oversees a multi-level system to manage energy saving in national agencies, regions, districts,
cities, towns, municipalities and enterprises. The committee has established economic, financial and legal measures to
support energy saving; introduced renewable energy sources; provided information support for energy saving; and
instituted a system of training and continuing staff education. The Committee also has two subsidiary enterprises: an
engineering centre and a consulting company.
A special inter-agency Steering Committee was created in 1998 by a Decree of the Council of Ministers in order to
promote and co-ordinate efficient use of local energy sources, including wood and wood waste. This committee is
headed by the chairman of the Committee on Energy Efficiency and includes members of all key sectoral ministries,
regional departments, scientific institutions and state enterprises. Special interdisciplinary committees are also working
in the regions and in Minsk municipality.
In July 1997, the Government of Belarus created the national extra-budgetary fund “Energy Saving”. It is funded to a
small extent (2-3%) by fines levied from firms for irrational consumption of fuel and energy resources. The Committee
on Energy Efficiency which administers this fund (in addition to the extra-budgetary Innovation Fund) invests about
USD 2 million every year for the conversion of boiler houses to local fuels and can provide grants (100% for state-
owned and operated enterprises, and 50% for some private enterprises) or favourable loans (reduction of the local bank
interest rates by 50 % from the existing (and decreasing) level). The Committee has also provided money from the
Innovation Fund through favourable loans at rates of 20% of the National Bank refinancing rate to finance energy
efficiency projects. These loans should increase as money invested by the Committee returns to a special account and
could be used again for energy efficiency activities, and loan portfolio has increased over the past two years. In
addition, local banks actually invested a total of USD 2.85 million in 2000 and 2001 for energy projects in conjunction
with these loans and grants.
Between 1996 and 2000, USD 370 million was invested in energy saving activities under the National Programme on
Energy Saving. The bulk of this investment was on the installation of metering devices, design of new energy saving
materials and technologies, boiler rehabilitation, and replacement of old heat boilers with more efficient ones. The
government has also issued an order to banks authorised to service state programmes to issue soft loans to economic
entities, irrespective of the form of ownership, when these loans would support the implementation of energy saving
measures with priority value for the country.
In addition to financial support the Committee on Energy Efficiency is carrying out educational and research projects
related to the promotion of energy efficiency and energy saving. A programme on education and promotion of energy
efficiency in Belarus includes the production of information booklets and training through relevant courses. Research
is being carried out on the potential for the use of fast growing wood as fuel for heating. The aim is to produce about
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200 thousand tonnes of coal equivalent (tce) of fast growing willow by 2005, although less ambitious estimates are that
approximately 250 thousand tce/year of fast-growing wood will be in use by 2015.
The United Nations Economic Commission for Europe (UNECE) has been a strong and long-term supporter of energy
efficiency and renewable energy (including wood energy) in Belarus, and played an important part in encouraging
Belarus’ ratification of the UNFCCC in 2000. The UNECE has also been instrumental in, and has strongly supported
the development of the current UNDP/GEF wood-waste activities.
Other UNECE activities in Belarus include the Energy Efficiency 21 Project, which aims to assist Belarus in meeting
international environmental treaty obligations under the UNFCCC through the development of energy efficiency
investment projects. In this project energy saving measures are to be implemented within “Demonstration Zones” in
Baranovichy, Borovljany, Kedyshko, and Vitebsk, and include measures such as automatic control systems for heat
consumers, reconstruction of district heating system, reconstruction of street lighting, and conversion of heat only
boilers to co-generation plants. At present all these energy-saving measures are subject of business planning and
financial engineering activities within the framework of UNECE training courses. The UNECE and UNDP are also in
discussion with the Government on the developing a project to overcome barriers to energy efficiency investments, and
there are good possibilities for close co-operation with the financing arrangements developed during the course of the
project.
A World Bank loan “Social Infrastructure Retrofitting Project” (BY-7056) which has recently started, in addition to
investments in energy efficiency improvements, will invest approximately USD 7 million for boiler replacement or
conversion from oil and coal to gas and wood fuel (about 90 small size units) as well as make investments into the
partial reconstruction of District Heating Networks (29 networks in all, covering piping and temperature regulation).
The state enterprises “Belenergosberezhenie” and “Belinvestenergosberezhenie” were created in order to implement
investment projects and other activities in the area of energy efficiency and the latter was created to serve as the
Project Management Unit (PMU) for the World Bank project. The World Bank is interested to develop a project to the
GEF on energy efficiency that will include elements of wood-waste use and the upgrading of a district-heating network
closely related to their “Social Infrastructure Retrofitting Project” (BY-7056). Discussions have taken place to ensure
complimentarily of activities with this UNDP initiative. One element of the World Bank “Social Infrastructure
Retrofitting Project” (BY-7056) will provide assistance to the government to analyse the current tariff and subsidy
situation and to develop recommendations for change, which would directly complement the UNDP-GEF proposed
activities.
Strategic considerations for the GEF (justification of GEF involvement)

The government of Belarus is clearly committed to improving energy efficiency and increasing the use of wood and
wood waste as boiler fuel, and there is evidence that the use of wood fuel in boilers is increasing – at least within the
Ministry of Communal Services and wood processing industries. In addition, the government’s dominant role in the
energy market (as a consumer, service-provider, and supplier) ensures that its support for biomass energy will have a
large-scale impact.
However, the ad-hoc approach of wood substitution in coal-fired boilers followed by the Ministry for reasons of fuel
security is not sustainable from a global environmental perspective. There is also doubt about whether the current
approach is financially sustainable in the long term. While there is solid groundwork for sustainable financial support
for biomass energy, there is little experience in the field beyond government grants. In addition, progress outside the
Ministry of Communal Services’ majority of boilers in increasing biomass as an energy source has been slow despite
the obvious local benefits and the availability of state support to promote it.
It is clearly necessary to address the underlying causes of these problems (e.g., wood substitution in gas boilers on one
hand and slow uptake on the other) through a barrier removal process. This project addresses that need and offers the
opportunity to build on the positive national policies in Belarus by ensuring an environmentally sustainable approach
that results in global environmental benefits. The project will finance actions that provide lessons beyond their
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immediate impact and provide long-term and sustainable global benefits, including the introduction of alternative,
environmentally-sound, and viable approaches for using wood resources. By using GEF funds to enhance local efforts
in a way that will secure global environmental benefits, the approach will thus have a multiplier effect.
3 BARRIERS
The barriers given below are divided into four categories: perception and awareness barriers, financial barriers,
technical barriers, and organisational barriers. Within each category the barriers are given roughly in order of priority
(importance and urgency), although this ordering is to some extent subjective.
A) Institutional barriers
i. Lack of programmatic and co-ordinated national planning, matching wood resources with energy needs, which
would allow decision-making to follow the most efficient approach (integrated resource management).
ii. The need for individual boiler houses to arrange the fuel supply for wood energy (on a case by case basis and,
in the case of state entities using their own resources) when supply of fossil fuels is frequently organised for
them, meaning additional time burdens, risks, and uncertainties, and the comparative certainty and ease of use
of coal, oil and gas.
iii. Lack of infrastructure for the storage and supply of wood fuel.
iv. Lack of a concerted, co-ordinated effort to support and promote wood-energy based activities.
v. Lack of legislative and supportive policy context, in particular one that gives incentives to decision makers to
choose wood fuel.
B) Technical barriers
i. Lack of a management and planning system addressing the fuel supply chain/market on a large scale, impeding
the efficient harvest, processing, storage and delivery of fuel.
ii. Lack of tools to guide decision-makers in selecting the most cost effective heating and hot water alternatives
on a national, regional and local level.
iii. Lack of wood fuel standards.
iv. Lack of technical experience of automated fuel feeding systems for medium sized biomass boilers.
v. Lack of modern technology for fuel combustion at a medium scale.
C) Financial barriers
i. Lack of funds for the establishment of efficient fuel supply systems and conversion of boiler houses to wood
fuel, which leads to the use of simplified, low efficiency, and environmentally unsustainable equipment and
technologies.
ii. State entities such as municipalities, hospitals, schools and state enterprises, need to purchase wood fuel
themselves (using their own budgets), whereas coal, oil or gas is frequently purchased by oblasts (district
administrations) and paid for using regional budgets. This provides a strong disincentive since fossil fuels
appear to cost virtually nothing from the state entity point of view.
iii. Current cross subsidises of the population (by industry) in the energy sector.
iv. High prices for wood fuel in some areas, caused by inefficient supply systems, leading to wood-fuel prices
comparable to brown coal, and competitive natural gas supplies.
v. Uncertainties on the long term market price of fuel wood and the level of heat and power tariffs.
vi. Lack of interest from the banking sector because of lack of experience with biomass energy, uncertain
investment climate.
vii. High project preparation costs without the assurance of obtaining financing.
D) Perception and awareness barriers

i. Lack of knowledge among decision-makers of the benefits (social, employment, environmental, economic),
opportunities and versatility of biomass energy.
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ii. Perception of biomass boilers as a small scale, dirty, and inefficient technology (due to inefficient and
polluting old biomass boilers or ‘converted’ coal boilers).
iii. Lack of information about modern technologies of harvesting, processing, storage and combustion of wood
waste. Wood fuel is usually associated with obsolete manual technologies.
iv. Lack of local “success stories” of modern biomass based district heating projects in Belarus.
v. Lack of information to determine accurately the specific investment and operational costs of biomass based
district heating plants in Belarus.
In the absence of GEF support to overcome the barriers defined above, the progress in increasing the use of biomass as an
energy source will remain slow or stop entirely, and the Government target to increase the share of biomass by
approximately 50% in the primary energy consumption by the year 2010 is not likely to be achieved, and growth beyond
these targets will not take place. The proposed project will tackle all barriers identified above in order to increase
effectiveness and introduce sustainability to ongoing efforts in the biomass sector. The link between project activities and
the barriers identified is summarised in Table 1 below:
Table 1: Barriers and the Activities Addressing Them
Barrier description Key outputs addressing this barrier

A: Institutional barriers
i Lack of programmatic and co-ordinated national Output 1.4: Training conducted to strengthen capacity of in-
planning matching wood resources with energy needs country experts
which would allow decision-making to follow the
most efficient approach (integrated resource
management)
ii The need for individual boiler houses to arrange the Output 1.3: Findings from the investment projects, study
fuel supply for wood energy tours and developed planning tools are internalised and the
implications for policy assessed
Output 2.2: Wood Supply Investment Project Organized and
Implemented
iii Lack of infrastructure for the storage and supply of Output 2.2: Wood Supply Investment Project Organized and
wood fuel Implemented
iv Lack of concerted effort to support and promote Output 1.5: Plan for Sustaining/Replicating Project Results
wood-energy based activities Developed and Launched
Output 3.1: Pipeline of biomass investment projects
developed
Output 4.1: Relevant decision-makers at ministerial, oblast,
and regional level are fully informed of the potential for
wood energy as part of a modern fuel system
v Lack of legislative and supportive policy context, in Output 1.3: Findings from the investment projects, study
particular one that gives incentives to decision tours and developed planning tools are internalised and the
makers to choose wood fuel implications for policy assessed
B: Technical Barriers
i Lack of technical framework addressing the fuel Output 2.2: Wood Supply Investment Project Organized and
supply chain/market on a large scale, impeding Implemented
efficient fuel harvest, processing, storage, delivery.
ii Lack of tools to guide decision-makers in selecting Output 1.2: National wood energy plan developed based on
the most cost effective heating and hot water least-cost planning principles are developed.
alternatives on a national, regional and local level Output 4.1: Relevant decision-makers at ministerial, oblast,
and regional level are fully informed of the potential for
iii Lack of wood fuel standards Output 1.3: Findings from the investment projects, study
tours and developed planning tools are internalised and the
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Barrier description Key outputs addressing this barrier

iv Lack of technical experience of automated fuel Output 1.4: Training conducted to strengthen capacity of in-
feeding systems for medium sized biomass boilers country experts
Output 2.1: Boiler Conversion Investment Projects
Implemented
Implemented
v Lack of modern technology for fuel combustion at a Output 2.1: Boiler Conversion Investment Projects
medium scale Implemented
Implemented
C: Financial Barriers
i Lack of funds for the establishment of efficient fuel Output 3.2 Revolving fund for biomass energy established
supply systems and conversion of boiler houses to
wood fuel
ii For state enterprises the need to purchase wood fuel Output 1.3: Findings from the investment projects, study
by organisation when coal, oil and gas is frequently tours and developed planning tools are internalised and the
purchased from oblast budgets implications for policy assessed
iii Lack of interest from the banking sector because of Output 2.1: Boiler Conversion Investment Projects
lack of experience Implemented
Output 3.2: Revolving fund for biomass energy established
D: Information/Awareness and Perception Barriers
i Lack of knowledge among decision-makers of Output 4.1: Relevant decision-makers at ministerial, oblast,
benefits opportunities and versatility of biomass and regional level are fully informed of the potential for
energy wood energy as part of a modern fuel system
ii Perception of biomass boilers as a small scale, dirty, Output 2.1: Boiler Conversion Investment Projects
and inefficient technology Implemented
Implemented
iii Lack of information about modern technologies of Output 1.1: Project Management Unit Established and
harvesting, processing, storage and combustion of Capacity Development Provided to the Government and
wood waste Other Potential Investors on an Ongoing Basis
Implemented
Implemented
iv Lack of examples from "success stories" of modern Output 1.3: Findings from the investment projects, study
biomass projects in Belarus tours and developed planning tools are internalised and the
Implemented
Implemented
v Lack of information to determine the specific Output 3.1 Pipeline of biomass investment projects
investment and operational costs developed
4 OBJECTIVES
4.1 Overall objective

The objective of this project is to reduce the GHG emissions of Belarus by removing the barriers to economically feasible
wood and wood waste utilisation for heat, hot water and power supply. Target areas include district heating for residential,
industrial and public buildings such as schools, hospitals and sanatoriums.
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4.2 Specific objectives

This project will address the principal barriers to the implementation of wood and wood-waste boilers through a
process of barrier removal involving boiler conversion and fuel supply side projects, planning for replication through
awareness raising, development of decision-making tools, policy assessment, the establishment of a revolving fund for
sustainability and the development of an investment pipeline. An exit strategy will be developed ensuring that
activities continue after the close of the project.
Objective 1: Strengthen institutional capacity to support biomass energy projects

Objective 2: Establish a track record for investments in sustainable biomass energy projects, including both fuel
supply and demand.
Objective 3: Develop straightforward financial “starter” mechanisms in a challenging investment climate that will
allow continued financing for biomass energy projects.
Objective 4: Overcome negative perceptions of biomass energy and provide public and private investors with
much-needed market information.
4.3 GEF rationale

While there are compelling economic and environmental incentives for biomass energy use, there is a clear need for
assistance in addressing barriers to a market in this sector. The project ultimately aims to support market mechanisms
since this is most likely to lead to the development of an efficient (least-cost) development strategy in both financial
and economic terms.
On one hand, the Government of Belarus has demonstrated proven support for energy efficiency and renewable energy
that is unusually strong compared with other CIS countries, including strategy documents, government programs, fines
for inefficient energy use, and direct investments in clean energy projects. For example, the State Committee invested
USD 2.0 million in 2001 for the conversion of boiler houses to local fuels. On the other hand, the government directly
controls approximately 80% of the economy, which limits the market-based approaches that are compatible with
current conditions. The financing mechanisms proposed in the activities of the project reflect this mixed situation and
realistically assess the potential for market growth in difficult conditions. For example, the project does not consider
loan guarantees in the context of its activities. The lack of institutional capital, unavailability of political risk insurance,
and insufficiently mature capital markets would not make this a viable option. Instead, the project will build upon the
strong institutional foundation for project development and precedent grant financing by supporting the government in
the development of a loan mechanism through which it can leverage existing funds channelled into biomass energy
projects. It will address existing risks through the design of the activities; such as indexing the loan fund for inflation.
It is also clear that the federal government has two compelling reasons to invest in biomass energy for reasons other
than environmental sustainability: economic savings and security issues. Biomass is a less expensive fuel than coal,
mazut, or natural gas in Belarus, and increased investment in biomass would allow the government to save twice – first
when paying for fuel for budgetary organizations, such as hospitals; and again when reducing subsidies currently
expended in the residential sector.
However, an equally compelling motivation exists in the form of energy security. Belarus receives all of its natural gas
from a single supplier – the Russian Federation. Two years ago, this supply was actually cut off due to disagreements.
Clearly, high levels of natural gas dependency in a country with a long winter would be politically unwise.
Unfortunately, Belarus does not have many sources of indigenous energy. The primary source used currently is peat,
which has led to land degradation and air pollution through its use. Indigenously grown biomass, in this case, is a very
attractive choice.
In short, this project is envisioned as a market development project that will serve as a bridge between the current
situation of low awareness and lack of capital to an eventual situation where the government and private investors can
introduce additional means of developing the market. These measures will complement ongoing government efforts to
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address barriers in the overall energy market, such as the planned programme of price liberalisation to reduce subsidies
and cross subsidies in energy.
The proposed project has the potential to make a significant contribution to the reduction of GHG emissions in
Belarus, because it will replace carbon-intensive fuels with clean energy from the sustainable harvesting of biomass,
which does not contribute to the net increase of the GHG. Direct fossil fuel savings as a result of this programme
represent approximately 1.08 million tonnes of CO 2 reduction over a 15-year period. The CO2 emission reductions as a
result of this project are expected to reach 895,000 tonnes per year in 2015.
5 PROJECT COMPONENTS/ACTIVITIES AND EXPECTED RESULTS
The proposed full-scale project will consist of 4 key components designed to overcome the 4 categories of barriers
identified during the implementation of the PDF B project. Each component consists of a number of activities
contributing directly to overcoming specific barriers (but clearly contributing to the reduction of other related barriers).
The investment projects, for example, while primarily contributing to the reduction of technical barriers also have the
potential to play an important role in overcoming awareness, capacity and information related barriers.
The components and activities have been designed in such a way as to ensure sustainability and benefit long after the
end of the full-scale GEF project. In all activities the programme will make use of international and national expertise
as appropriate.
The project focuses on the following four types of barrier removal:

 Institutional Capacity Development;
 Technical Capacity Development;
 Financial Capacity Development; and,
 Information and Outreach to Increase Awareness.
5.1 Component 1: Institutional Capacity Development
Output 1.1 Project Management Unit Established and Capacity Development Provided to the Government and
Other Potential Investors on an Ongoing Basis
Output 1.2 National wood energy plan developed based on least-cost planning principles are developed
Output 1.3 Findings from the investment projects, study tours and developed planning tools are internalised and
the implications for policy assessed
Output 1.4 Training conducted to strengthen capacity of in-country experts
Output 1.5 Plan for Sustaining/Replicating Project Results Developed and Launched
Output 1.1 Project Management Unit Established and Capacity Development Provided to the Government and
Other Potential Investors on an Ongoing Basis
Approach:
The purpose of the start-up and management arrangements is to strengthen the institutional capacity of organisations in
Belarus in the facilitation and promotion of viable biomass energy projects to key stakeholders. This will take the form
of twinning between the Project Management Unit (PMU) and a ‘Twinned Institute’ in another country. The foreign
institute will act as the foreign hub, facilitating twinning activities between Belarus and the twinned country. The twin
institute in the foreign country will benefit from research partnerships with its Belarussian colleagues. The PMU will
play a similar role as the co-ordinator in Belarus. The activities will focus on addressing awareness-raising needs, as
well as technical and organisational needs to support the project activities. Under the proposed activities in institutional
capacity development, including study tours, training workshops and secondments, the foreign institute will be the
foreign facilitator and will work closely with the PMU to identify suitable content.
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The twinned institute has concrete tasks to be carried out for capacity development, as well as a more strategic long-
term role, both of which are to be described in detail in the terms of reference to be included in the project document.
The rationale behind this approach is two-fold: 1) to provide a coherent foundation linking and integrating institutional
and financial capacity development, and 2) to establish a basis for long-term international co-operation well after the
GEF project finishes. Without the proposed twinning, the capacity development activities risk becoming merely steps
to completion of the project rather than foundations for long-term replication. The proposed twinning encourages
strategic planning for the future long after the end of the UNDP/GEF project, and a strategy for continuing the
partnership between the two institutions will form a part of the activities under Output 1.5.
Activities:
1.1.0 Establish Project Steering Committee.
1.1.1 Hire project manager, technical assistant (junior) and administrative staff.
1.1.2 Establish the Project Management Unit and open office.
1.1.3 Finalize work plan and review institutional and management arrangements for project implementation
(inception report), including a draft version of a plan to support replicability of project activities.
1.1.4 Draw up shortlist of local and foreign experts for key project activities.
1.1.5 Call for expression of interest and draw up shortlist of potential contractors for initial projects.
1.1.6 Identify potential twinning institutes, and call for tenders. Establish twinning arrangement and hold yearly
planning/management meetings between the Project Management Unit, and the twinned institute.
1.1.7 On an ongoing basis, prepare and implement Monitoring and Evaluation reviews including the Annual Project
Workplan, the Annual Project Report, the tripartite review meetings, the annual Project Implementation
Review, the Mid-term and final independent evaluation, the project Terminal Review, the terminal tripartite
review, and the yearly project audits (see the section on Monitoring and Evaluation for details and proposed
Workplan).
Indicators:
 By the end of month 2 after the project starts the project manager and administrative staff is contracted.
 By the end of month 3 a call for expression of interest for the investment projects have been issued, and a
shortlist of potential contractors identified.
 By the end of month 3 a shortlist of long- and short- term consultants / companies for key project activities is
developed.
 By the end of month 6 a twinning arrangement has been established and is functioning.
 By the end of the project monitoring and evaluation has been carried out according to plan and results have
been used to provide for continual refinement of project activities.
Output 1.2: National wood energy plan developed based on least-cost planning principles are developed
Approach: The development of a national plan will be critical to the development of a wood energy market, as it will
simultaneously enhance the ability of the government to plan where investments might be most strategic and the ability
of potential investors to assess the market for biomass energy projects.
A Geographical Information Systems (GIS) will be developed for Belarus, which includes geographical data on
existing boilers, heating needs, wood-waste resources, wood enterprises, existing government wood supply
organisation, and transport systems (rail, road, water). This will allow for the development of integrated and co-
ordinated approaches for the planning of replication, and providing tools for financial decision-making. This activity is
seen to be especially relevant for Belarus with its strongly centrally planned approach. The approach will emphasise
the training of local experts in the development of relevant GIS resources. In addition to GIS, improving local capacity
for the monitoring of wood-fuel characteristics and quality, and the measurement of boiler emissions will further
strengthen decision-making capabilities.
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Note: Attention will be given to environmental issues, such as particulate control and “clean” operating practices for
wood-fired boilers, during the development of policy and during training and outreach.
Activities:
1.2.1 Conduct review of the current GIS and Resource Management capabilities in Belarus and identify possibilities
to build on this capability. Consult with stakeholders on possible synergies with other planning activities in
the energy sector.
1.2.2 Review of international experiences in information-based decision-making tools for national wood energy
planning and the potential for this to be used in Belarus.
1.2.3 Develop detailed implementation schedule.
1.2.4 Select and hire a consultant to assist in development of GIS on wood fuel.
1.2.5 Arrange training for 2 Belarussians abroad in a tailor-made MSc programme (or similar) in the use of a GIS
and with their thesis/fieldwork focusing on designing and implementing a GIS as per the project requirements.
1.2.6 Update and develop the database on wood waste resources and existing boiler houses developed during the
PDF B, and get it into a format suitable for the GIS.
1.2.7 Carry out training in wood resource planning and in the implementation of a system for monitoring emissions
and wood fuel quality.
1.2.8 Purchase necessary hardware and software for GIS system and for the implementation of the quality control
system (for measurements of boiler emissions and wood fuel quality).
1.2.9 Develop planning scenarios (proposals) based on the developed system for the use of the Committee on
Energy Efficiency.
Indicators:
 By the end of the project 2-3 people have been trained in the use of Geographical Information Systems (GIS)
for biomass resource planning.
 By the end of year 3 a GIS system with relevant biomass planning data is functioning.
 By the end of the project the Committee on Energy Efficiency have made use of the GIS system to develop
least cost activities for replication.
 The national capacity to monitor boiler emissions and measure wood fuel quality will be increased by the end
of year 3.
Output 1.3: Findings from the investment projects, study tours and developed planning tools are internalised and
the implications for policy assessed
Approach:
In year 4, the lessons learnt from the investment projects, awareness campaign, and resource planning activities will be
assessed. In addition, targeted recommendations on the legislative and policy framework needed to facilitate future
replication of the investment projects and wider use of modern wood energy will be developed. A dialogue with
decision-makers focused on policy will be initiated, and a seminar attended by relevant stakeholders will be held.
Activities:
1.3.1 Using the results of outputs 1.1 to 1.5, identify findings and implications for Belarussian planning and policy
and assess the impact on potential replication of the project.
1.3.2 Prepare a document with suggestions for policy and disseminate to key stakeholders for comment.
1.3.3 Hold a seminar / dialogue with selected (government) stakeholders to debate and review the suggestions.
Indicators:
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 Positive feedback from stakeholders attending the policy seminar.

 Positive feedback from the Council of Ministers is received on the policy recommendations.
 Growth of funding for conversion of biomass fuel for the next period of planning (after completion of the
project), including, arrangements for financial resources to be set aside for the project development phases of
wood energy projects.
 Changes in policy or, at minimum, progress in the adaptation of policy initiated by, for example, the
Committee on Energy Efficiency.
Output 1.4 Training Conducted to Strengthen Capacity of In-Country Experts
Approach:
The development of local capacity through targeted training forms an important element of the project and this is
reflected throughout the project design, as it will address other barriers in addition to institutional barriers (financial
barriers in particular). Training takes various forms such as ‘on-the-job’ training, study tours and exchange visits,
focused study, and seminars and workshops. In particular, the following training is envisioned:
Activities:
1.4.1 Develop training plan within project management unit for both project staff and other stakeholders with a view
to replicability and sustainability of the project.
1.4.2 On-the-job training: Hire a junior technical assistant in the project management unit to receive training from
the project manager.
1.4.3 Local experts and trainees will also be hired in the investment projects, and secondments in project
engineering and implementation will be a contractual obligation of project developers and equipment
suppliers.
1.4.4 The suppliers will also be required to provide training to operators and maintenance staff for the investment
sites.
1.4.5 On the job training will also take place in biomass resource planning within the information and awareness
component.
1.4.6 Study tours and exchange visits: Study tours and exchange visits will take place in the biomass fuel supply
demonstration and under awareness raising, as well as in secondments under the proposed twinning
arrangement (described below).
1.4.7 Dedicated study: As a part of the wood fuel plan (information-based decision making tools) resources are
allocated to facilitate training for two Belarussians abroad in a tailor-made MSc programme (or similar) in the
use of a GIS and with their thesis/fieldwork focusing on designing and implementing a GIS as per the project
requirements. There are a number of institutes worldwide that can provide such training if it cannot take place
entirely under the twinning arrangement. A stipulation in the training program will require students to spend a
minimum number of months or years with the project office (the exact amount will be determined during the
project initiation phase).
Output 1.5: Plan for Sustaining/Replicating Project Results Developed and Launched
Approach:
A plan for the “scaling-up” of wood energy implementation after the end of the project will be developed. The plan
will review the status of the barrier removal process, initiated within the GEF project and identify remaining
information, training, capacity, financing, and hardware requirements. A concrete set of future activities will be
identified based on the policies that have been put into place over the course of the project. In this way information,
training, capacity, financing and hardware requirements will be scaled-up based on previous outputs. Through these
activities barriers remaining at the end of the project will be assessed and planning made for continued and wide-scale
implementation of wood-energy. While these activities are grouped under institutional capacity, they address all the
17
identified barriers by putting into place mechanisms that will continue to overcome barriers after the end of the GEF
project.
During the exit strategy, the twinned institute will act as advisor, providing international expertise to those
implementing each output, and access to additional resources (information / contacts) where required. The facilitative
role of the twinning arrangement is shown under the sub-section “Supplementary Information on Project Activities.”
Activities:
1.5.1 Prepare 'best practice' guidebooks for potential future project developers and decision makers. These
guidebooks will include a substantial section on project identification and development.
1.5.2 Develop scale-up plan based on the project outputs, reviewing, for example financial mechanisms for
replication of projects that are appropriate for Belarus.
1.5.3 Carry out conclusion workshop for the promotion of the project results and discussion of the scale-up plan.
Indicators:
 During the project lifetime a "best practice" guidebook is published.
 By the end of the project a concrete and realistic plan for continuation and scaling up results is developed and
disseminated, and next steps identified.
5.2 Component 2: Technical Capacity Development
Output 2.1 Biomass Boiler Conversion Investment Projects Implemented

Output 2.2 Wood Supply Investment Project Organized and Implemented
Output 2.1 Biomass Boiler Conversion Investment Projects Implemented
Approach: Five boiler conversion projects will be implemented to jump-start the market for clean-burning biomass
and to ensure that potential public and private sector customers understand that wood fuel is a viable, cost effective and
modern alternative to fossil fuels, challenging negative perceptions of wood energy. The introductory projects will
feature a range of wood energy conversion techniques (various boiler sizes and types including combined heat and
power (CHP)) so that they will be able to serve as project development templates for subsequent project. In addition,
the project will support the creation of a regional fuel supply system in order to ensure future supply of wood fuel in a
growing market.
The investment sites were selected based on a careful screening and evaluation process as part of the PDF B. Potential
sites were initially screened from the database of over 4500 sites compiled by local specialists (see Annex E). The
screening criteria included the capacity of the boiler house, year-round heat demand, availability of wood waste
resources, and the existence of institutional consumers, in addition to industrial heat demand. Following the initial
screening of the database, approximately 30 boiler houses were visited and additional data collected. The evaluation of
the 30 boiler houses, carried out by a team of local experts and international consultants, included the assessment of
the long-term viability of the enterprise or organisation (sustainability), the potential of the project to “jump-start” the
market (visibility and accessibility), replication potential, availability of co-funding, and the technical and economic
feasibility of the proposed project. The list of 30 boiler houses identified during the screening phase was reduced to 5
key sites during this evaluation process. A summary of the selection criteria used to select the investment sites is given
in Annex H and fact sheets giving a detailed description of the selected sites according to the evaluation criteria is
given in Annex I (a summary of which is given in Table 2 below). 5 possible alternative investment sites in a reserve
list located between Minsk and Brest are also given in Annex I. The physical locations of the key sites are shown in the
accompanying Figure 1.
While CHP is not the primary focus of the proposed project, favourable power purchase tariffs make CHP an attractive
option. On one hand, high up-front costs mean that the majority of wood waste boiler installations in the future will be
18
heat-only systems (thus justifying the focus on heat-only boilers). On the other hand, the value of successful biomass-
fired CHP investments in overcoming negative perceptions should not be underestimated, thus justifying the inclusion
two CHP systems in the group of five projects.
Note: In spite the GEF funding to the Project is fully provided as a grant to the Republic of Belarus, each of the
investors in the introductory projects will be required to return the GEF portion of the funding (totalling
USD 1,310,000 for the 5 boiler conversion investment projects) to a revolving fund managed by the Committee for
Energy Efficiency of Belarus following a grace period and repayment period. Project site owners have agreed with the
Committee on a 2-year grace and 7-year repayment period, but this arrangement is preliminary and will be finalized by
the project team during implementation. A revolving fund will be established with the returned funds that will be used
for replication activities consistent with the investment activities conducted under the project (see Component 3:
Financial Capacity Development).
Table 2: Overview of Initial Investment Project Sites

SITE NUMBER 1 2 3 4 5
Project name Poultry Farm Furniture Factory Uzda VOLAT-1 Farinovo District ‘Radon’
‘Molodechno’ ‘Stroidetali’ company Heating Plant sanatorium
Location Olekhnovichi, Vileika, Uzda, Farino City, Dyatlovo,
Minsk Oblast Minsk Oblast Minsk Oblast Polosk Oblast Grodno oblast
Ownership To be privatised Joint Stock Co. Private company Municipality Public company
status
Existing system Mazut oil Mazut oil Electrical Mazut oil Natural gas
Biomass biomass fuel Sufficient wood Sufficient wood Adjacent To be supplied
resources supply project waste to meet waste to meet furniture factory from Dyatlovo
own needs own needs forest company
Proposed CHP CHP Heat only Heat only Heat only
measures 7.5 MWth 7.5 MWth 1 x 1 MWth 12 MWth 3.5 MWth
0.5 MWel 0.75 MWel 1 x 0.7 MWth gasification unit
14 bar steam 23 or 39 bar and existing
(low pressure) steam boiler
(high pressure)
Estimated cost and sources (all figures in USD)
Owners 860 000 800 000 320 000 50 000 320 000
Others IKEA 700 000
Committee 510 000 550 000 190 000 450 000 190 000
GEF loan 350 000 400 000 130 000 300 000 130 000
TOTAL 1 720 000 1 750 000 640 000 1 500 000 640 000
CO2 reduction
21 000 22 000 2 000 24 000 3 000
(tonnes / yr)
Mitigation costs
for GEF funds
1.1 1.2 4.3 0.8 2.9
over 15 years
(USD/Mg CO2)
SO2 reduction
159 158 - 197 -
(tonnes / yr)
Involvement of local experts will be an integral part of the process. The installation supplier(s) will be expected to
provide on-the-job training in all phases of the project engineering and implementation and capacity building to local
experts (in the form of a secondment or some similar training) is to be part of the terms of reference of the supplier(s).
A promotional campaign including workshops and study tours of decision-makers and technical experts to the projects
will be designed and implemented to support the awareness raising elements of the project as part of this component.
Barriers addressed:
19
While these investments will strengthen technical capacity, they will also raise awareness among decision makers of
wood energy as a modern, clean, cost-effective and efficient fuel for medium scale (5-10MW) applications, eliminate
negative perceptions of wood energy, demonstrate the applicability of various system arrangements for wide scale use
in Belarus, and provide opportunities for training in all aspects of project development and management. Financial
barriers will be addressed indirectly through the impact on government budget policies as a result of increased
awareness and the establishment of a dedicated revolving fund.
Activities:
2.1.1 Hire local experts (and trainees) for overall management and support activities of the investment projects. Hire
international advisor to assist with planning, assessment of tenders, and implementation of projects.
2.1.2 Review technical, physical and timing requirements for the project sites prepared in the PDF B and revise if
necessary. Prepare detailed procurement and implementation plan.
2.1.3 Develop detailed terms of reference for the project sites, prepare public call for tenders, short-listing,
evaluation and selection.
2.1.4 Prepare and sign contracts with experts and companies.
2.1.5 Implement and commission the investment projects.
2.1.6 Conduct on-site monitoring, and document findings for inclusion into policy review (feeding into Output 1.3).
Indicators:
 By the end of year 3 the investment projects are operating as designed.
 Monitoring is in operation at all sites throughout the project.
 Total fuel savings, from all 5 projects of approximately 35,000 tonnes coal equivalent per year and emission
reductions of 72,000 tonnes per year is achieved from year 4.
Output 2.2: Wood Supply Investment Project

Organized and Implemented
Approach:
A regional fuel supply system will be established at the
wood harvesting Joint Stock Company “Molodechnoles”
in Molodechno close to Vileika (site number 2 in the
map above). The fuel supply system, covering
harvesting, processing, storage, and delivery of wood
chips, will primarily aim to supply fuel to the boiler site
at the poultry farm in Olekhnovichi (site number 1
above), but will additionally be established with a view
to supplying fuel to smaller, regional, wood-fired boilers
to be established as a result of the GEF project activities.
Involvement of local experts and the training of both
experts and users will be an integral part of the project
implementation process. A promotional campaign
including workshops and study tours to the projects of
decision-makers and technical experts will be
implemented in output 1.4. The GEF contribution Figure 1: Demonstration project sites
(USD$230,000), which is a grant for Belarus will be
made for the site in the form of a loan to be returned to the revolving fund under the scheme described in Component
3.2.
Barriers addressed:
This project component will tackle barriers of awareness and perception, technical barriers on the fuel supply side, and
institutional barriers. In particular the project will raise awareness among decision makers of modern methods for the
20
planning and operation of a wood-chip supply organisation, and showcase an efficient fuel supply chain under
Belarussian conditions. In addition the project will demonstrate how costs of fuel supply can be reduced using
appropriate fuel supply systems, illustrate how the risks and uncertainties of fuel supply may be reduced with a
regional supply organisation, and provide lessons for replication and training. As for the proceeding outputs, financial
barriers will be addressed indirectly through the impact on government budget policies as a result of increased
awareness.
Activities:
2.2.1 Hire local technical expert (and trainee) for the management of the overall project on fuel supply. Hire
international advisor.
2.2.2 Conduct review of approaches (technologies) for fuel supply (including study tour, workshop etc.) involving
the key stakeholders in the proposed project in the identification of best practice and relevance to the Belarus
situation
2.2.3 Prepare detailed plan for all the activities, including selection of technologies, design, procurement, and supply
of equipment for wood fuel enterprise.
2.2.4 Call for expression of interest and draw up short list of suppliers and producers of equipment and machines for
a wood fuel supply company. Conduct necessary procurement procedures (tender, contracts, etc.) to produce
and supply machines and equipment for wood fuel production and transportation.
2.2.5 Ensure successful implementation of the project, including set up of the new wood fuel supply organisation.
2.2.6 Provide support to the Committee on Energy Efficiency addressing elaboration of wood fuel standards.
2.2.7 Conduct on-site monitoring and document experiences for inclusion into policy review (output 1.3)
Indicators:
 By the end of year 3 the 'biomass fuel supply’ project is operating efficiently and cost effectively according to
design parameters
 Reduction in long-term fuel preparation and delivery costs in wood harvesting as compared to existing
organizations that currently operate in forests. for the wood harvesting company of over 20% as a result of the
techniques implemented in the project
 More boilers in a 70 km radius supplied by – and operated on – wood fuel/chips
Operating Assumptions:
An overview of assumptions used for the investment projects is provided in Annex H bis., a series of sample
calculations for Olekhnovichi. The prices for wood fuel used in the calculations were taken on the basis of
calculations done by the project team jointly with accountants at each site. For example, the Olekhnovichi boiler
house will use wood residues after harvesting as fuel. This wood waste will be supplied from the Joint Stock Company
(JSC) "Molodechnoles" (the market supply demonstration site). The distance to the site is about 40 km. The wood fuel
sale price there is 5 USD/m3 loose wood. This price was calculated by the financial accountant of the "Molodechnoles"
JSC. In this case cost of wood waste for "Olekhnovichi" is 5 USD, too. The "Radon" sanatorium will purchase wood
fuel from a local forestry enterprise. This wood fuel is actually wood that is collected after thinning the forests located
around the sanatorium. Distance to the collection point is maximum 5-10 km. The sanatorium has already received a
letter of confirmation from the forestry enterprise that it is ready to supply the necessary amount of wood fuel at 2
USD/m3 loose wood.
The other three sites have sufficient wood waste on site at each enterprise after wood processing. In principle, this
wood waste is free of charge. Nevertheless, the project team asked financial accountants at these sites to make
assessments of wood waste prices inside each enterprise. This price includes mainly transportation costs and the cost of
storage at each enterprise. Figures given to the team were used in its calculations. A wood waste price of 0.5 USD/m 3
loose wood was given by the "Vileika" and "Uzda" wood processing enterprises and the "Farinovo" furniture factory.
21
From the reserve sites, there is a price of 0.3 USD/m 3 from the Ivatsevvichi wood processing enterprise. Boiler house
in "Telekhany" will be supplied with wood waste from the forest by means similar to the "Molodechnoles" company.
Because of this, the team used a price of 5 USD/m 3 -- similar to Olekhnovichi – in its calculations.
If the pre-contractual prices for wood waste supply as indicated above and in Annex Q ‘Commitments of Project
Beneficiaries’ are not met (i.e., equal to or less than) then these project sites will not be permitted to participate in the
UNDP/GEF project.
The sales price of heat in Belarus is very different from region to region and from boiler house to boiler house. In the
calculations for the investment projects, the project team used the actual heat sale price for each site.
The sales price of electricity is common all over the Republic. For all the sites, it is 0,035 USD/kWh.
In our calculations, we used a standard 10% discount rate for an option without GEF contribution and 9% discount rate
with GEF grant. The reasoning behind a 9% discount rate was as follows: GEF provides 20% contribution for
hardware to be paid back by the site owner at theoretical 5% interest rate to a revolving fund. (5% was assumed, but
perhaps the decision will be even 0%. It depends on the revolving fund conditions). Therefore, 20% of the necessary
investment in a site given by GEF can reduce standard 10% discount rate to 9%. If it were 0%, the discount rate would
be 8%.
A project lifetime of 15 years was assumed across the board except for a figure of 10 years for the market supply
demonstration site and 25 years for the communal service boiler house in Telekhany. 15 years is a minimal lifetime for
boiler house equipment. Usually, it lasts between 15-25 years. For the market supply demonstration, the lifetime will
be shorter because lorries, tractors, and other equipment working in the forest have shorter service lifetimes.
5.3 Component 3: Financial Capacity Development
Output 3.1 Pipeline of biomass investment projects developed

Output 3.2 Revolving fund for biomass energy established
Output 3.1 Pipeline of biomass investment projects developed
Approach:
Making use of the decision-making tools developed in preceding outputs, a pipeline of 5 to 10 potential projects will
be developed (at least 1 or 2 of which will be on fuel supply). An ‘investment brief’ covering financial and technical
analysis of each project will be prepared, and presented to potential funders (private, government, local and foreign).
Activities:
3.1.1 Using the results of output 1.2, identify 5 to 10 projects meeting the principles of demand and least cost.
3.1.2 Carry out energy audits, and economic analysis of proposal (business plan).
3.1.3 Prepare a portfolio of projects for presentation to potential funders.
3.1.4 Hold meetings with selected funders to present the project portfolio and seek letters of interest.
Indicators:
 Investment briefs on 5 to 10 replication projects (covering the technical and business case for each) are
available in the second half of year 3 of the project allowing time for finding and allocating financial resources
for a) further development of the concept papers and b) implementation of the second generation projects.
 Funding sources for the replication projects identified and expressions of interest received from the relevant
organisations.
22
Output 3.2 Revolving fund for biomass energy established
A revolving fund will be established within the project out of the GEF grant. This fund will be used for biomass energy
replication activities consistent with the activities. The government will be able to develop this loan fund through into
a perpetual revolving fund for biomass energy projects and would be in a position to contribute funds from the ‘Energy
Saving Innovation’ fund, thus ensuring sustainability.
The revolving fund is created on the basis of the GEF contribution to the Project. All GEF funding is a grant to the
Republic of Belarus totalling 3,129,000 USD. A part of this to the amount of 1,540,000 USD is the funding for the
investment projects. The boiler conversion hardware funding is 1,310,000 USD and the biomass fuel supply hardware
funding is 230,000 USD. The hardware funding will be given to the sites owners in the form of a low interest (5%)
loan to be returned to a revolving fund that is established within the Project. The revolving fund will be managed by
Belinvestenergosberezhenie (or a branch of this institution), which is one of the two subsidiary companies affiliated
with the State Committee. These funds will be used to make additional investments after the end of the project. The
loans will be indexed to inflation in order to prevent the risk that current annual inflation levels (approximately 40%)
deplete the value of funds paid back into the fund. A financial feasibility study of the most appropriate loan package
and recipient will be conducted during the activities to establish the fund.
The government will be able to ensure sustainability of the fund by seeking additional contributions into the revolving
fund; for example, contributions from the Energy Saving Funds administered by the Committee on Energy Efficiency.
Belinvestenergosberezhenie (or a branch of this organisation), under the Committee’s supervision, will administer the
biomass energy revolving fund. The specific terms and conditions of the fund, as well as legal agreements and
administrative criteria will be determined at this time so as to ensure that it meet the needs and operating environment
in Belarus. In this way, the project will work with the government to broaden its focus on loan schemes as opposed to
grant schemes for promising investment projects, allowing its limited funding to be leveraged.
The Government of Belarus has the advantage of already having a legal mechanism in place by which it can offer
loans for energy-saving projects. In case of favourable loans provided by local banks, the State Committee can
compensate 50% of the refinancing rate of the National Bank. In 2000 and 2001, the State Committee spent USD
470,000 and USD 360,000, respectively, to cover this half of refinancing rate for favourable loans. All this money was
then accumulated in commercial banks. The government is also providing money from the innovation fund as
favourable loans at 20% of the National Bank refinancing rate to finance energy efficiency projects. The money
invested by the Committee will return to a special account and could be used again for energy efficiency activities.
The activities supporting this output will address financial barriers, in particular the identification of funding for long-
term replication.
Activities:
3.2.1 Establish conditions of the revolving fund most conducive to operation in current conditions.
3.2.2 Finalise legal agreements and administrative criteria.
3.2.3 Ensure adequate, trained, staffing for the fund by drafting appropriate terms of reference and recommending
training as necessary.
3.2.4 Establish the revolving fund on the basis of an existing or new lending mechanism (with preference given to a
viable existing mechanism).
3.2.5 Seek additional contributors to the fund for longer-term sustainability.
Indicators:
 The revolving fund will be established using the appropriate charter documents.
 The revolving fund will be operating effectively with appropriate staffing.
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 The government will leverage a certain percentage of its current funding for energy projects through the fund’s
mechanism.
5.4 Component 4: Information and Outreach to Increase Awareness
Output 4.1 Relevant decision-makers at ministerial, oblast, and regional level are fully informed of the potential for
Approach:
A dissemination strategy comprising preparation and targeted distribution of promotional material (brochures, videos
etc.), regular study tours (both in-country and international), magazine articles and press releases, seminars and
workshops, will be developed and implemented. These activities principally tackle awareness barriers. In particular
these activities will get decision makers interested in the potential for wood energy, and facilitating informed decision-
making, raise awareness at a ministerial, oblast and regional level of the potential for wood energy, and how wood
energy can be part of a modern fuel system, and provide training and capacity building. Financial barriers will be
addressed through an exchange visit to a relevant revolving fund successfully established in a foreign country in
preparation for the establishment of the Belarusian revolving fund.
Activities:
4.1.1 Review project dissemination and awareness activities.
4.1.2 Identify key decision-makers at ministerial, oblast, and regional levels (including, for example, deputy
ministers, managers of forest enterprises, directors of joint stock companies, and technical managers) and the
most appropriate awareness raising approaches for each target group.
4.1.3 Conduct local study tours (to the sites), workshops, and seminars to raise the awareness.
4.1.4 Establish exchange visits and secondments (including one in preparation for establishment revolving fund).
4.1.5 Conduct a survey at the end of year 2 and 4 on the impact of the awareness campaign.
Indicators:
 Surveys at the end of year 2 and 4 on participants in the study tours (internally to the sites, and externally to
countries where biomass is in common use) shows growing interest in the use of biomass in Belarus.
 There is a growing interest, indicated by increased requests to the PMU for information, from decision-makers
targeted by the dissemination activities.
 Information leaflets, brochures and videos are published and distributed to target audiences each year.
 The project is mentioned at the council of ministers (or in other interdepartmental government meetings) at
least 3 times a year, and regularly in the press.
 By the end of the project, demand for biomass boiler installations has increased.
Supplementary Information on Project Activities
‘Twinning’ to Address Existing Barriers

All components of the project will feature a twinning arrangement to a certain extent. The rationale is to provide a
coherent foundation linking and integrating the different components based on current, cutting-edge experience and to
establish a basis for long-term international co-operation well after the GEF project finishes.
The facilitative role of the twinning arrangement is shown diagrammatically in Figure 2 below.
24
Figure 2: Proposed twinning arrangement illustrating facilitative role of the proposed co-operation
BELARUS TWINNED COUNTRY

Government Government
Committee on Energy Efficiency
Committee on Forestry Municipalities
Ministry of Communal Services
Twinned Enterprises, Manufacturers
GEF PMU
Regional Government Institute
Institutes and Universities
Private and State Enterprises
Biomass Energy
Institutes and Universities Association
Co-operation in the form of: exchange visits, study tours, secondments, joint workshops,
seminars, joint participation in relevant trade fair, and identification of future joint activities
Phasing of Activities
 Project management, awareness raising throughout
 Investments in the first 3 years
 Revolving fund, project pipeline towards the end
 Exit strategy and lessons learned more intensively at the conclusion.
It should be noted that replication will not be limited to the exit strategy in the final year of the project. In fact,
replicability has already been taken into account in identifying the potential market for biomass boilers and in
developing a short list of promising projects – both activities undertaken during the project design phase.
During project implementation, replication will be handled in two ways. Direct activities will include training and the
development of a pipeline of investment projects. Indirect activities will include the support of the financial
mechanism, awareness-raising, the focus on policy development, cooperation with the World Bank SIRP project, and
the use of the Steering Committee to spur interest in the project and to disseminate its results.
Expected Results and Outputs

At its conclusion, the project team will have leveraged substantial progress in the elimination of barriers to the
widespread use of wood-waste for fuel in Belarus. Six investment projects will have been implemented. Replication
will have been ensured through awareness-raising activities, as well as the design of decision-making tools, an
assessment of policy, the establishment of a revolving fund for biomass energy investments and the development of a
portfolio of investment projects (investment pipeline). An exit strategy will have been developed and put in place, and
a close, working relationship with a counterpart institute will have developed over the course of the project. These
activities will have made a significant impact on the reduction of all the barriers identified in Section 2 above.
As a result of the 4-year project, biomass boilers burning wood-waste equivalent to 35,000 tonnes of coal will be
installed through the conversion of 3 mazut oil-fired boilers and 2 gas-fired boilers. The annual CO 2 emission
reduction due to the installation of the boilers will be about 72,000 tonnes (67,000 from the oil boilers and 5,000 from
the gas-fired boilers). Assuming a boiler system lifetime of 15 years (many boilers in Belarus are currently well over
25 years), then the life cycle CO 2 emission reduction is 1.08 million tonnes. This reduction is a direct result of the
proposed intervention. For a GEF contribution of USD 3.129 million, the cost per tonne of reduced CO 2 is USD 2.9
per tonne.
25
Based on recent feasibility studies conducted in Belarus, the total realistic medium-term potential for biomass energy
as a result of the proposed GEF project represents a coal equivalent of 400,000 tonnes, 330,000 coming from mazut
boilers, 20,000 from gas, and 50,000 from coal. This represents an annual CO2 saving of approximately 900,000
tonnes.
The above results and outputs expected from successful implementation of the proposed project will ensure that the
overall objective (development of waste wood hot water and heating systems) of the project is achieved.
6 RISKS AND SUSTAINABILITY
The proposed project involves the participation and coordination of several main committees and ministries (including
the Committee on Energy Efficiency, the Committee of Forestry, the Ministry of Communal Services, the Ministry of
Natural Resources and Environmental Protection, and the Ministry of Economy), municipalities, regional and oblast
authorities, entrepreneurs, manufacturers, NGOs, and R& D institutions at various levels. A project of this nature is
likely to face risks, ranging from changes in world fuel prices to lack of commitment of various stakeholders, some of
which lie outside the control of the project stakeholders (external risks), and some within the control of the project
participants (internal risks).
6.1 External Risks

External risks by definition lie outside the control of the project and represent the external logic or assumptions in a
project. The project has been designed so as to minimise the impact of external risks. During the project, the project
team is responsible for monitoring changes in assumptions, and where possible works to influence the probability that
the project assumptions hold true. The project’s external risks are:
The risk of a lack of ongoing, long-term government support for biomass energy: The success of the project to meet its
objectives depends on the continued strong support from the Committee on Energy Efficiency and other government
organisations, ensuring that biomass energy activities continue after the end of the project. The current level of
enthusiastic support from the Committee and its sustained commitment over the past several years to putting
supportive policies into place for renewable energy indicate that this risk is small. The risk is further mitigated by
project activities that raise awareness of government organisations and decision-makers, create tools for long-term
planning, and assist in the establishment of institutional arrangements that will continue to be effective after the period
of GEF support (through the twinning arrangement). It should also be noted that the UNECE, UNDP and World Bank
are active in the promotion of renewable energy, and the government has indicated a clear commitment (enacted in
laws and regulations) to the support of biomass energy.
The risk of low fossil fuel prices: The achievement of the immediate and global environmental objectives of the project
depends on a gradual increase in the end user prices for competing fuels, and a reduction in the existing price
distortions (at the border – the special tariffs agreed to with Russia – and the cross subsidies for energy end-users).
Current trends, and future indications are positive, and the assumption that prices will continue to increase appears to
be good; as a result, this risk appears to be low. Even with relatively low world fuel prices, Belarus will face strong
incentives to use domestic fuel, as it will free up hard currency for other projects.
The risk of a poor investment climate: Large-scale investment by government or the private sector in infrastructure
such as the upgrading of district heating networks to biomass fuels requires a positive investment climate. This
depends in part on political stability with continuity of investment-enabling policies, and continuing economic growth
and inflation reduction. The prospects for these conditions to be met are good – reforms, although gradual, are
continuing. In the medium-term the possible two-state union with Russia will necessitate economic liberalisation, and
a reduction of government controls on investment.
26
6.2 Internal risks

The risk of poor co-operation between project stakeholders: To be successful, the project needs input and co-operation
from several main ministries and other institutions in Belarus as well as their serious commitment to continue the
promotion of the biomass and other renewable energy technologies. The project will mitigate this risk by establishing a
Project Steering Committee (PSC) as a main body to co-ordinate the project activities with other ongoing activities in
Belarus, as well as to discuss and introduce the eventual legal and regulatory changes needed to promote the use of
biomass as an energy source.
The risk of withdrawal of baseline funding (sponsor risk): Despite the technical and financial support to project
recipients there is a risk that the required “baseline” funding for the projects is withdrawn. During the preparation of
the project, this risk has been minimised by broad consultations with the key stakeholders. The project will minimize
the risk of withdrawal by ensuring that participants in the projects continue to be kept fully informed of, involved in,
and committed to the project. In addition, local participants will be involved in all phases of project implementation
(including planning, implementation and training).
Letters of intent, signed both by relevant mayors/officials and directors of organisations involved, have been received
for all proposed projects. The project preparation team has also held repeated meetings with the stakeholders to assess
their commitment and provide them with support. Particular attention is drawn to two sub - project owners where
amounts of their contributions have not been specified. To further reduce the risk that baseline financing is not
forthcoming, UNDP/GEF will not proceed with designing and implementing these demonstration projects, unless co-
financing is specified and committed.
The risk of inadequate project implementation: In a project of this complexity a top quality project management is
absolutely essential for the success of it. Besides the experience and good knowledge of biomass energy activities in
general, the qualifications of the project management should include a proven track record and experience on
promoting and managing projects of a similar size and complexity. These risks will be minimised by taking them into
account while defining the Terms of Reference for the project managers and the other project personnel (this will be
done at the Project Document stage). Inadequate financial and administrative implementation capacities of the
Government for the overall programme management as well as local institutions and authorities for executing their
respective subcontracts could also impede the project implementation and reduce the efficient utilisation of project
funds. This risk will be minimised by close monitoring of the implementation of project activities by the UNDP and
the UNECE. The UNDP country office is also prepared to provide support services to the Government upon their
request.
The risk of cost overrun and time delays (completion risk): This risk relates to possible cost-overrun and time-delay
risks of project completion. This risk will be minimized by the negotiation of fixed-price "turnkey" contracts with
suppliers and experts and careful selection of contractors.
The risk of use of inappropriate technologies (technology risk): Any technology, which is at the “leading edge” of
current practice, may be considered to present a technology risk. In this project this risk is minimised by only making
use of technologies with a satisfactory track record, and ensuring that only experienced contractors are used. The
project implementers (international and local experts) should be highly experienced and bring together expertise to
overcome this risk. In addition hardware will be required to be supplied with favourable guarantees and maintenance
contracts with the recipients
The risk of a lack of available biomass fuel (input and supply risk): This is the risk relating to the provision of biomass
fuel of sufficient quality and quantity. During the PDF B phase of the project, the large availability of suitable waste-
wood was confirmed. The biomass boiler conversion projects have been selected based on detailed fuel supply analysis
thus minimising this risk, and systems have been sized conservatively based on available fuel resources. The fuel
supply project addresses this risk directly. In addition, hardware will be carefully selected to ensure that the widest
possible range of feedstock may be used. Regarding the cost of the biomass fuel, if the pre-contractual prices for wood
27
waste supply as indicated in Annex Q “Commitments of Project Beneficiaries” are not met then these project sites will
not be permitted to participate in the UNDP/GEF project.
The potential for deforestation could be considered a risk associated with the availability of biomass fuel. However, in
the case of Belarus, deforestation will not be a significant threat from either a legislative or a resource point of view.
The Belarusian forests are managed forests, and logging takes place under licence, so there is little chance of
unplanned, uncontrolled logging on a large scale. The harvesting and thinning of forests is controlled by special
institutions under the Committee on Forestry (formerly Ministry of Forestry). As there are already safeguards to
prevent this, from a project point of view there is low risk that the increased demand for biomass might lead to
deforestation. In addition, from a resource point of view, there is an annual increase of forest biomass in Belarus of 25
million compressed cubic meters per year, so the projected impact of the GEF project of 2.1 million cubic meters in
2015, even if it were to come entirely from new logging and not from residues (unlikely) is well below the annual
increase (bearing in mind that for 2015 the planned cut is 19 million cubic metres resulting in unused wood waste of
8.3 million cubic metres – see Annex F). Under that scenario, the Belarusian forests will still be increasing by about 4
million cubic meters per year - and still a long way from the possibility of deforestation.
The risk of failure of investment projects (operation risk): Operation risk is the risk to sustained operation arising from
the failure of operations of the technical capacity component of the project. The project has mitigated this risk in the
way that the financing for the projects is structured. Since the recipients are all making significant investment in the
systems (overall more than 50% of the costs) they thus carry a reasonable equity and their commitment to successful
operation will be great. In addition the hardware suppliers will give detailed training in the operation of the system,
ensuring that the systems are operated as intended.
6.3 Sustainability
The issue of sustainability is addressed both directly and indirectly through the throughout the design of the project.
Activities that indirectly support the sustainability of the project include training, information dissemination and the
development a national strategy. Financial sustainability is directly addressed through the establishment of the
revolving fund, whereas institutional sustainability is supported through training of key individuals and development
of an ongoing partnership with a foreign institution (twinning arrangement). Explicit attention is also given to the
development of the post-project strategy that is part of the project activities (specific information is included under
Output 1.5: “Plan for Sustaining/Replicating Project Results Developed and Launched”).
7 STAKEHOLDER PARTICIPATION AND IMPLEMENTATION ARRANGEMENTS
7.1 Stakeholder participation

All project stakeholders have been consulted during project preparation and participated in the preparation of this
project through the PDF B project. During the PDF B, two seminars were held in which participants were able to give
comments and input into the project design, and numerous meetings were held with a wide range of stakeholders.
These include:
 Council of Ministers;
 Committee on Energy Efficiency and oblast branches;
 Committee on Forestry;
 Ministry of Natural Resources and Environment;
 Ministry of Economy;
 Ministry of Housing and Communal Services;
 Committee on State Control;
 Energy concern “Belenergo”;
 Pulp and Paper concern “Bellesbumprom”;
 Scientific and educational institutes (Polytechnical Academy, Thermal Engineering, Heat and Mass Transfer
Institute, “Belnipienergoprom”, Sakharov’s);
28
 Representatives of Municipalities from the cities of Uzda and Polotsk;

 Non government institutions and private companies (EcoMir fund, Pragma-plus, Lotius, “Belkotloprom”,
Sakharov’s institute, “Energotekhno”);
 Representatives of all potential investment sites;
 Representatives of the mass media (TV, Radio-1, “Energy Efficiency” magazine, “Respublika” newspaper)
 UNECE; and, UNDP, World Bank, IFC, and EBRD.
Consultation with, and engagement of, these same stakeholders will be an important part of the proposed full-scale
GEF project, particularly participating in awareness raising. Their involvement will be facilitated through information
dissemination and consultation within each project component.
7.2 Implementation arrangements

Based on the extensive discussions with project stakeholders, a robust project implementation structure has been
developed as given in Figure 3 below.
Figure 3: Implementation Arrangements

executing agency
PROJECT
OVERSIGHT
Project Steering Committee (incl. UNDP, UNECE, WB)
Belinvestenergosberezhenie
(Existing state energy investment enterprise)
PROJECT
ACTIVITY Revolving Fund Project Management Twinned Institute
established Unit (PMU)
Local Experts International

experts / advisors
P R O J E C T T A R G E T S T A K E H O L D E R S7 / BENEFICERIES
Government decision- Technical institutes, Demonstration project

makers, and other public universities, private sector stakeholders (enterprises and
sector stakeholders NGOs, media state organisations)
The executing agency for this project will be the Committee on Energy Efficiency of the Republic of Belarus, which
was created in 1993. The committee heads a multi-level management system to ensure the efficient control of energy
saving that encompasses national agencies, regions, districts, cities, towns, municipalities and enterprises. The
committee has established a developing and adaptive system of economical, financial and legal support of energy
saving and introduction of renewable energy sources; information support for energy saving; and a system of training
and continuing staff education.
A special inter-sectoral steering committee was created within the Committee on Energy Efficiency in 1998 by a
Decree of the Council of Ministers in order to promote and coordinate efficient use of local energy sources, including
29
wood and wood waste. This steering committee is headed by the chairman of the Committee on Energy Efficiency and
includes members of all key sectoral ministries, regional departments, scientific institutions and state enterprises. A
special working group set up under this steering committee, is envisaged as the basis for the Project Steering
Committee. Other key participants of the Project Steering Committee will be representatives of the UNDP, the UNECE
and the World Bank. The World Bank, which is considering submitting a project to the GEF on energy efficiency
including elements of wood-waste use and closely related to their “Social Infrastructure Retrofitting Project” (BY-
7056) will be invited to have a representative on the Project Steering Committee, in a reciprocal arrangement designed
to ensure co-operation and complimentarily of activities between the two projects.
The UNECE secretariat, which worked in support of the PDF phases of this project, will play an important role in the
implementation of the full-scale project, providing, where necessary:
1. Technical backstopping for the project execution consisting of assistance to the Executing Agencies in Minsk and
local implementation units including development of terms of reference, consultant contract oversight,
monitoring and reporting, dissemination of information and experience to energy efficiency demonstration zones
in the Russian Federation and abroad, and reporting to UNDP on project implementation.
2. Additional resources on an 'in-kind' contribution basis to the project by the Energy Efficiency 21 Project such as
international fora for the consideration of policy reforms in relation to western and eastern European best
practice. Within the same framework, support could include the presentation of project opportunities to foreign
business and financial community, provision of training materials for business planning and financial
engineering, and the preparation of proposals for leveraging additional support for investments or technical
assistance (especially for the national and international dissemination of results as they emerge).
The Project Management Unit, will be established within the state enterprise “Belinvestenergosberezhenie” which also
serves as the Project Management Unit for the World Bank “social infrastructure retrofitting project”. A possible
sharing of Project Management Unit functions and facilities with any eventual World Bank GEF project will be
explored.
As part of Component 3, a revolving fund that will be used for replication activities consistent with the investment
project activities conducted in this project will be established within Belinvestenergosberezhenie (or a branch of this
organisation), under the Committee’s supervision. The operation of this fund, and the opportunity to ensure
sustainability by securing additional local and international capital, will also be determined during the implementation
of activities under Component 3.
The executing agency will work closely with the Ministry of Natural Resources and Environmental Protection, which
is designated as the government implementing agency under the UNFCCC and is also responsible for monitoring air
quality.
8 INCREMENTAL COSTS AND PROJECT FINANCING
8.1 Incremental Costs

The detailed Incremental Cost analysis is given in Annex A.
The support from GEF is USD 3.129 million. This will result in direct CO 2 reductions of about 72,000 tonnes per year
and CO2 reductions of about 1.08 million tonnes based on a 15-year lifetime for the systems. The cost per tonne of CO 2
reduced over the 15-year period is 2.9 USD.
30
8.2 Project Financing
A breakdown of the project’s financing is provided in Table 3 by project component. The workplan by project
component is provided in Figure 4. Signed letters of intent for co-financing and in-kind contributions are listed in
Annex K and provided as an attachment to this proposal.
Table 3: Project Financing (in US Dollars)

Component Total Baseline Increment
Project
Cost
Total Local Local Committee Govt. GEF
Organiza- Organiza- on Energy (in-kind)
tions tions Efficiency
(in-kind) (cash)
Institutional Capacity
1.1 Project Mgmt. 303,000 36,000 267,000
1.2 Nat. Wood Plan 326,000 326,000
1.3 Findings/Policy 76,000 12,000 64,000
1.4 Training*
1.5 Replication Plan 102,000 102,000
Technical Capacity
2.1 Investment Projects 6,511,000 4,940,000 1,380,000 1,670,000 1,890,000 1,571,000
2.2 Wood Supply Project 996,000 560,000 210,000 110,000 240,000 436,000
Financial Capacity
3.1 Pipeline of Projects 19,000 19,000
3.2 Revolving Fund 40,000 40,000
Info/Awareness-Raising
4.1 Outreach 318,000 14,000 304,000
TOTAL (USD) 8,691,000 5,500,000 1,590,000 1,780,000 2,130,000 62,000 3,129,000

% 63% 18% 20% 25% 1% 36%
* While training is listed as a separate line item for activity purposes, it will be funded across the budget lines in
which training will be conducted. The project staff will draw up a training plan that includes all of these proposed
activities at the inception of the project in order to provide a comprehensive overview of the activities.
Note: While the Financial Capacity component of the project will involve a grant to the Government of Belarus, the
funds will be used as loans and not grants within the project. The $40,000 allocated to the revolving fund will cover
initial legal and staffing expenses. The capital of the fund itself will come from the repayment of the investment funds
for the biomass fuel supply and boiler conversion investment projects outlined in Component 2 of the project. The
project team will also undertake negotiations with the Government on providing additional capital for the fund, and it
will discuss possible capitalization by other financial institutions.
31
Figure 4 – Draft Workplan by Project Component

Year 1 Year 2 Year 3 Year 4
Q1
Q1
Q2
Q1
Q2
Q3
Q2
Q3
Q2
Q3
Q4
Q3
Q4
Q4
Q1
Q4
Project Component
Component 1.1 Project
management, capacity
development
Component 1.2
National Wood Energy
Plan
Component 1.3 Lessons
Learned
Component 1.4
Training for decision-
makers
Component 1.5 Plan for
sustainability
Component 2.1
Demand-side
investment projects
Component 2.2 Supply-
side Investment Project

Component 3.1
Pipeline of projects
Component 3.2
Revolving Fund
Component 4.1
Information/Outreach
9 MONITORING AND EVALUATION
The project will be monitored and evaluated in line with UNDP rules and procedures, and the GEF guidelines for
monitoring and evaluation, and the report formats to be used are those given in the UNDP/GEF Information Kit on
Monitoring and Evaluation. The project indicators, as given in the Project Planning Matrix in Annex B, are the
benchmark against which Monitoring and Evaluation will take place and a number of specific Monitoring and
Evaluation activities are given under sub-section b below.
a) The standard Monitoring and Evaluation activities include:

 The inception report which constitutes the finalization of project design and presents the overall work plan as
well as the first detailed annual work plan. The inception report is due at the beginning of the project
implementation (month 3) and is the responsibility of the Project Manager.
 The Annual Project Workplan describes in detail the provision of inputs, activities, and expected results for the
project in a given year or for the life of the project, indicating schedules and the persons or institutions
responsible for providing the inputs and producing results. The workplan will be updated and revised each year
by the Project Manager.
 The Annual Project Report (APR) aims to obtain the independent views of the main stakeholders of a project
on its relevance, performance and the likelihood of its success and will be prepared each year by the Project
Management under the leadership of the UNDP office in Minsk, together with key stakeholders including are
the target groups, project management, and the Committee on Energy Efficiency, and submitted to the annual
tripartite review.
32
 To minimize paperwork and processing time, the APR will be held in conjunction with the annual Project
Implementation Review (PIR). The annual PIR reviews financial status, procurement data, impact achievement
and progress in implementation. A Harmonized APR/PIR report will be prepared each year between June and
September under the leadership of the UNDP Minsk office together with other project stakeholders and with
the support of the UNDP/GEF regional co-ordinator and the GEF Monitoring and Evaluation Team. The
Annual PIR prepared by the UNDP CO is intended for submission to the GEF, and is an annual obligation to
the GEF Secretariat. The PIR is the main tool used by the GEF for monitoring its portfolio. Additional
progress reports and reviews may be requested, as necessary, during the project's implementation.
 The tripartite review (TPR) is the highest policy-level meeting of the parties directly involved in the
implementation of a project and will include the Belarussian Committee on Energy Efficiency, the Minsk
Office of the UNDP, the project management, and the direct beneficiaries and other stakeholders. They
consider the progress of a project based on the APR. The TPR meetings will be held once a year (the first
within 12 months of the start of the project) under the leadership of the UNDP office in Minsk. The Minsk
UNDP office will prepare tripartite review reports immediately following the TPR meeting.
 Mid-term and final evaluation are independent evaluations organised mid-way through the project
implementation (focuses on the effectiveness, efficiency and timeliness of project implementation; highlights
issues requiring decisions and actions), and at the end of the project (in addition identifying impacts and
sustainability of results). The project team, the UNDP office in Minsk, and the UNDP/GEF Regional Office in
Bratislava are responsible for organizing the evaluations, under the leadership of the Minsk UNDP office.
 The terminal report is the overall assessment of the project by its stakeholders and additionally aims to serve
as a source of lessons and recommendations for follow-up activities. It will be prepared during the final two
months of the project.
 The terminal tripartite review considers the implementation of the project as a whole, paying particular
attention to whether the project has achieved its immediate objectives and contributed to the broader
environmental objective, and decides on future actions. This review will be carried out in the final month of
the project.
 Audit - the Government will provide UNDP with certified annual financial statements relating to the status of
UNDP/GEF funds, including an independent annual audit of these financial statements, according to the
procedures of the UNDP. The audit will be conducted by the legally recognised auditor of the Government, or
by a commercial auditor engaged by the Government, and at the cost of the executing agency. During the
course of the project there are three audits (in the second quarter of years 2, 3, and 4), and a fourth to be
conducted after the close of the project
b) Specific Monitoring and Evaluation activities:

As part of the assessment of the impact of awareness raising activities (output 4.1) a survey of attitudes among key
decision-makers will be carried out at the end of year 2 and year 4. Throughout the project data will be collected to
allow the verification of achievement on the indicators given in the Project Planning Matrix (Annex B). The Project
Planning Matrix gives details of indicators, verification sources, units, frequency and responsibility.
33
c) Tentative M&E Plan
Year 1 Year 2 Year 3 Year 4

Quarter
Activity 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16
Inception report
Workplan
Annual Project Report (APR)
Tripartite review (TPR)
Project Implementation Review (PIR)
Mid-term evaluation
Audit
Final evaluation
Terminal report
Terminal tripartite review
d) Reporting to the Government of Belarus

Besides reporting to the UNDP, the Project Management Unit in accordance with Belarussian regulations will report to
the Ministry of Economy about progress of the Project’s implementation following standard forms on a semi-annual
basis.
10 LEGAL CONTEXT
This project document shall be the instrument referred to as such in Article I of the Standard Basic Assistance
Agreement (SBAA) between the Government of Belarus and the United Nations Development Programme, signed by
the parties on 24 September 1992.
Revisions may be made to this project document with the signature of the UNDP Resident Representative, provided
that he or she is assured that the other signatories of the project document have no objections to the proposed changes
concerning:
a. Revisions in, or addition to, any of the annexes to the project document;
b. Revisions which do not involve significant changes in the immediate objectives, outputs or activities
of a project, but are caused by the rearrangement of inputs already agreed to or by cost increases due
to inflation; and
c. Mandatory annual revisions, which rephrase the delivery of agreed project inputs or increased expert
or other cost due to inflation or take into account expenditure flexibility.
34
11 BUDGET
Total Year 1 Year 2 Year 3 Year 4

CMBL Description w/ USD w/m USD w/m USD w/m USD w/m USD
m
10 Personnel
11 International consultants
including travel and DSA
11_01 Technical advisory.services 6 99000 2 24750 2 24750 2 24750 2 24750
(combustion.)
11_02 Technical advisory services 6 92000 2 23000 2 23000 2 23000 2 23000
(supply)
11_99 Line total 14 191000 4 47750 4 47750 5 47750 5 47750
13 Administrative support
13_01 Administrative assistance 48 19200 12 4800 12 4800 12 4800 12 4800
13-99 Line total 48 19200 12 4800 12 4800 12 4800 12 4800
15 Monitoring & evaluation

15_01 Duty travel (in country) 30000 7500 7500 7500 7500
15_99 Line total 30000 0 7500 0 7500 0 7500 0 7500
16 Mission costs
16_01 Mission costs 24000 12000 12000
16_02 UNECE duty travel and DSA 4 28000 1 7000 1 7000 1 7000 1 7000
16_03 Project evaluation missions 2 39000 0 7000 1 16000 1 16000
16-99 Line total 4 91000 1 7000 1 14000 1 35000 1 35000
17 National professionals
17_01 Project manager 48 38400 12 9600 12 9600 12 9600 12 9600
17_02 PM technical assistant 48 21600 12 5400 12 5400 12 5400 12 5400
17_04 Technical advisor (combustion) 48 26400 12 6600 12 6600 12 6600 12 6600
17_05 Technical advisor (fuel supply) 48 26400 12 6600 12 6600 12 6600 12 6600
17_06 Marketing advisor 36 19800 12 6600 12 6600 12 6600
17_07 GIS elaboration 96 52800 24 13200 24 13200 24 13200 24 13200
17_08 Policy assessment 46 25300 10 5500 18 9900 18 9900
17_51 Short-term national experts 239 125700 47 25600 56 30800 56 30800 70 38500
17_99 Line total 609 336400 119 67000 150 84300 158 88700 172 96400
19 Project personnel total 675 667600 129 134050 157 158350 167 183750 181 191450
20 Contracts
21_01 International subcontractor 12 190700 1,5 22500 1,5 28000 3 50100 6 90100
(twinning)
22_01 National suncontractor 46400 23200 23200

(investm.pipeline)
29 Subcontracts total 12 237100 2 22500 2 28000 3 73300 6 113300
30 Training
31 Fellowships
31_01 GIS training fellowships 52800 26400 26400
35
31_99 Line total 52800 26400 26400
32 Other training
32_01 Trainee- technic.advisor 36 18000 9 4500 9 4500 9 4500 9 4500
(combustion)
32_02 Trainee- technic.advisor (fuel 36 18000 9 4500 9 4500 9 4500 9 4500
supply)
32_03 Training courses (in country) 64000 10000 18000 18000 18000
32_04 Study tours 110000 20000 30000 30000 30000
32_05 Seminar/workshop costs 23000 5000 5000 5000 8000
32.06 Conferences 29500 6000 8000 8000 7500
32_99 Line total 262500 18 50000 18 70000 18 70000 18 72500
39 Training total 315300 18 50000 18 96400 18 96400 18 72500
40 Equipment
45 Equipment
45_01 Expendable equipment 12000 3000 3000 3000 3000
45_02 Non-expendable equipment 272000
45_021 Office equipment 13000 7000 3000 3000
45_022 Flue gases and fuel quality monitoring 259000 75000 184000
equipment
45_03 GIS information software 20000 10000 10000
45-99 Line total 3044000 95000 200000 6000 3000
49 Equipment total 304000 95000 200000 6000 3000
50 Miscellaneous
52 Reporting and publishing costs 57000 10000 10000 15000 22000
52_99 Line total 57000 10000 10000 15000 22000
53 Sundries
53-01 UNDP Audit 8000 2000 2000 2000 2000
53_99 Line total 8000 2000 2000 2000 2000
59 Miscellaneous total 65000 12000 12000 17000 24000
71 Micro-capital grants - credit

71-01 Biomass energy revolving fund 1540000 530000 710000 300000
79 Micro-capital grants - credit 1540000 530000 710000 300000
total
99 Grand total 3129000 843550 1204750 676450 404250
Covers trainings for approximately 40 persons, include for example training for decision makers on policy and legislation,
training for technical specialists in boilers, wood fuel supply, etc.
36
ANNEX A: INCREMENTAL COST
Broad Development Goals
The overall development objective of this project is the provision of heat and hot water to communities in Belarus to
meet local and national needs at the lowest possible cost. Without GEF intervention, meeting this goal will require
increased use of imported fossil fuels, along with the inefficient use of local resources.
Baseline
The Belarus Government is strongly committed to greater use of wood-waste for fuel, and has set ambitious targets,
aiming to increase biomass use from the current level of 5.6 million cubic meters (90% of which is firewood in the
form of logs) to 6.8 million m 3 in 2005 and 8.8 million m3 in 2015 (from a present level of 1.1 million tonnes of coal
equivalent (tce) to 1.6 million tce for 2005, and 2 million tce for 2015). While the above may be taken as a baseline it
should be noted that, based on the type and scale of barriers to the growth of wood energy identified during the PDF B
phase of this project, these targets are themselves unlikely to be met without GEF support. Although far from
conclusive, early indications are, for example, that the ‘conversion’ of boilers by the Ministry of Communal Services
could be slowing since the most easily converted sites have been converted first (wood energy comprising about 2.7%
of their energy mix was from wood in 1999, 3.5% in 2000, and an estimated 4.0% in 2001). The long-term incremental
costs may consequently be underestimated.
Global Environmental Objective
The global environmental objective is the reduction of GHG emissions by removing the major barriers to the
development of wood-waste heat and hot water generation to replace fossil fuel use in Belarus. The project has been
designed to be consistent with the GEF Operational Programme 6 'Promoting the adoption of renewable energy by
removing barriers and reducing implementation costs'.
GEF Alternative
The proposed GEF activities tackle the barriers to the widespread use of wood-waste for energy in Belarus. Biomass
resource assessments have indicated that Belarus has a current annual potential of 11.7 million m 3, 6.1 million m3 of
which is currently unused, representing over 1 million tonnes of coal equivalent. The total potential, the predicted
growth as a result of government actions, and the additional impact of the proposed GEF activities is show in Table 4
and Figure 5 below:
Table 4: Wood fuel resource availability and use in million cubic meters (solid)
Factor 2000 2005 2015

Total potential (firewood and wood waste) 11.7 13.5 17.1
Used in households, boilers, and enterprises 5.6 6.8 8.8
Used, including projected GEF impact 5.6 7.0 10.8
Projected impact of GEF project (difference) - 0.2 2.1
37
Baseline and Projected GEF impact
2500
2000
GEF impact
Wood use (tonnes coal equivalent)
1500
1000
BASELINE
500
0
2000 2005 2010 2015
Year
Figure 5: Baseline and projected GEF impact on wood use in Belarus
Incremental Cost Matrix

The Incremental Cost Matrix is provided directly below this summary. Under the baseline, the use of biomass energy
in Belarus grows according to Government targets and reaches a level of 1,800 tonnes coal equivalent in 2015. Heat
needs not met by wood energy will be met by fossil fuels, principally coal and mazut in the size range and location of
boilers being considered in this project.
Under the GEF alternative, and during the 4-year project, biomass boilers burning wood-waste equivalent to 35,000
tonnes of coal will be installed through the conversion of 3 mazut oil-fired boilers and 2 gas-fired boilers. The annual
CO2 emission reduction due to the installation of the boilers will be about 72 000 tonnes (67,000 from the oil boilers
and 5 000 from the gas-fired boilers). Assuming a boiler system lifetime of 15 years (many boilers in Belarus are
currently well over 25 years), then the life cycle CO 2 emission reduction is 1.08 million tonnes. This reduction is a
direct result of the proposed intervention. For a GEF contribution of USD 3.129 million, the cost per tonne of reduced
CO2 is USD 2.9 per tonne.
Based on recent feasibility studies conducted in Belarus, the total realistic medium-term potential for biomass energy
as a result of the proposed GEF project represents a coal equivalent of 400,000 tonnes, 330,000 coming from mazut
boilers, 20,000 from gas, and 50,000 from coal. This represents an annual CO 2 saving of approximately 900,000
tonnes.
Additional Benefits
This project will bring many additional domestic benefits to Belarus. The Government is particularly interested in
increasing fuel security, and this is a very strong incentive for biomass energy. In addition, biomass energy has been
shown to help increase industrial capabilities, provide employment for local people in construction and operation, and
bring a high level of local satisfaction (see “Evaluation of the socio-economic impacts of renewable energies: global
survey to decision-makers”, European Commission 1999). In the medium term, this project is likely to result in
conversion of coal fired boilers, which will bring local air quality improvements (estimated for 2015 as 50 000 tonnes
coal equivalent, meaning a reduction of 750 tonnes of SO 2 per year). In addition, SO2 reductions from displaced mazut
are estimated at 5,900 tonnes per year.
38
Incremental Cost Matrix

Component Baseline Alternative Increment
Global Barriers limit growth of biomass energy beyond the Perception/awareness, financial, technical and organisational barriers Significant GHG emission reductions are
Environ- baseline (taken as the government 2005 and 2015 are substantially reduced, resulting in increased use of wood-waste attained.
mental targets). In the baseline wood fuel use increased from for fuel and reduced GHG emissions associated with mazut oil, coal
Benefits 1122 tce in 2000 to 1800 tce in 2015. Total CO 2 and gas boilers. In the GEF alternative, 62 000 tce of mazut and Annual direct CO2 emission reductions in
baseline emissions in the district heating sector are 41 10 000 tce of natural gas is replaced with biomass. 2005 are 72 000 tonnes. The 15-year CO2
241 000 tonnes in 2005 and 40 823 000 tonnes in reductions are approximately 1.08 million
2015. GEF alternative CO2 emissions for the sector are 41 169 000 tonnes tonnes.
in 2005 and 39 928 000 in 2015.
Indirect CO2 emission reductions in 2015 as a
result of this project are projected to be 895
000 tonnes per year.
Domestic Under the baseline domestic benefits are likely to In addition to increased employment and added fuel security, the Increased local employment, added fuel
Benefits include growth in local employment and increased fuel modern systems introduced through this project will increase security, improved industrial capabilities,
security. industrial capabilities and improve local air quality. better local air quality (including SO 2
emissions reduced by 6650 tonnes per year in
2015)
Components:
Technical and Present level of adoption of biomass energy systems Five boiler conversion investment projects are put in place The perception of wood energy as a viable
Financial continues, with simple, inefficient and unsustainable evidencing modern, clean and versatile use of wood energy. A wood alternative to oil and gas is dramatically
Capacity conversion techniques. Upgrades of boilers at the supply investment will showcase an efficient fuel supply chain under improved. Decision-makers start to see wood
sites, if they occur at all, are to equivalent gas or oil Belarussian conditions and show how costs of fuel supply can be energy as clean, modern, versatile, and cost
systems. Fuel supply is planned on a case-by-case reduced using appropriate fuel supply systems. effective.
basis.
Cost: USD 1 590 000 (site owners, in kind) USD 7 507 000 USD 2 007 000
USD 1 780 000 (site owners, cash)
USD 2 130 000 (Government, cash)
Institutional Measures are put into place to meet government wood- Government measures are enhanced through replication activities Replication of the fuel supply and fuel use
Capacity and energy targets. National co-ordination remains limited. focused on awareness raising, the development of national decision- projects is ensured. The lessons learned in the
Awareness A portfolio of ‘bankable proposals’ is not developed, making tools, policy assessment, the establishment of a revolving projects are applied, and biomass energy use
Raising and projects are selected in a loosely co-ordinated fund for similar investments, and the development of an investment grows. Benefits continue after project
fashion. No specific activities are put in place to scale pipeline after the end of the project. A plan for scaling up concludes and use of biomass energy
up activities learnt from boiler conversions under the implementation after the end of the project is developed, and continues to increase in a sustainable way.
government programme are not scaled up. continuing information, training, capacity, financing and hardware Barriers have been permanently reduced.
requirements are identified. A concrete set of future activities is
identified and activities and funding sources for post-project
continuation are secured.
Cost: - USD 1 122 000 USD 62 000 (Government, in kind)
USD 1 060 000 (GEF)
TOTAL Cost Total baseline costs: Total project costs: Total Incremental costs:
USD 5 500 000 from local sources USD 8 691 000 (including 267 000 (GEF) and 36 000 (Government) USD 3 129 000 requested from GEF (36%)
project management costs in included above) USD 62 000 from the Government
Co-financing commitments for all demonstration projects are provided, though two sub-project owners are not specifying the co-financing amount. UNDP/GEF
will not proceed with designing and implementing these demonstration projects, unless co-financing is specified and committed.
ANNEX B: PROJECT PLANNING MATRIX
Project Strategy Indicator Sources of Verification Assumptions

Global Environmental Objective
Greenhouse gas emissions are reduced CO2 emissions are reduced by an accumulated total Yearly reports of projects (given in tonnes
of 720,000 tonnes at the sites up to the year 2015 CO2, yearly report submitted to UNDP
Fossil fuel consumption is reduced (10 years) and 1.08 million tonnes in 15 years office prepared by site energy managers)
Immediate objective
Sustainable use of biomass as an energy By the end of the project the biomass used per year Final report of the project (in cubic meters Ongoing support from Government and
source is promoted and increased in for district heating is increased by 280,000 m³ of or tce, responsibility of PMU) the Committee on Energy Efficiency
Belarus wood chips (loose) or 35 000 tonnes coal equivalent.
By the end of the project 5 sites are operating clean Reports from the project sites, and project Fossil fuel prices continue to increase
and efficient biomass district heating units, and a evaluation (reports from project sites,
fuel delivery mechanism is being successfully responsibility of PMU) Fuel price distortions are reduced
demonstrated
By the end of the project wood waste is promoted by Reports from the Committee on Energy There is an increasing willingness to
Government officials at national, oblast, regional Efficiency, and the Committee on Forestry recover energy costs from consumers
and municipal levels as a viable fuel for district Feedback from Council of Ministers
heating
By the end of the project the Government is in a Reports from Committee on Energy Investment climate continues to
position to identify the most cost-effective boiler Efficiency improve
conversion sites and biomass fuel delivery
mechanisms and has developed a plan for
implementation
By the end of the project the Government has Government legislation

allocated additional funding to the conversion of
boilers to biomass fuels
Co-financing commitments for all demonstration projects are provided, though two sub-project owners are not specifying the co-financing amount. UNDP/GEF
will not proceed with designing and implementing these demonstration projects, unless co-financing is specified and committed.
Outputs
Output 1.1: Project management is in By the end of month 2 after the project starts the Contracts signed Project co-ordination body continues to
place and functioning project manager and administrative staff is function after the end of the project
contracted
By the end of month 3 a call for expression of Documentation of call, expressions of Continued strong support from the
interest for the projects have been issued, and a interest from organisations Committee on Energy Efficiency
shortlist of potential contractors identified
By the end of month 3 a shortlist of long- and short- Expressions of interest from consultants / Market price of wood for fuel is
term consultants / companies for key project companies transparent and reflects costs
activities is developed
By the end of month 6 a twinning arrangement has Minutes from meetings of PMU and Prices for competing fuels increase over
been established and is functioning twinned institute time and subsidies are reduced
By the end of month 6 the basic operating modalities Reporting as in the M&E plan
of the revolving fund will have been determined and
legal/institutional arrangements made
By the end of the project monitoring and evaluation

has been carried out according to plan and results
have been used to provide for continual refinement
of project activities
Output 1.2: Information-based decision By the end of the project 2-3 people have been Final project report
making tools for a sustainable and co- trained in the use of Geographical Information
ordinated national wood energy plan, Systems (GIS) for biomass resource planning
based on least-cost planning principles are
developed By the end of year 3 a GIS system with relevant Yearly project reports
biomass planning data is functioning
By the end of the project the Committee on Energy Policy document

Efficiency have made use of the GIS system to Feedback from Council of Ministers
develop least cost activities for replication
The national capacity to monitor boiler emissions

and measure wood fuel quality will be increased by
the end of year 3
41
Output 1.3: Findings from the projects, Positive feedback from stakeholders attending the Policy document
study tours and developed planning tools policy seminar
are internalised and the implications for
policy assessed Positive feedback from the Council of Ministers is Yearly project reports
received on the policy recommendations
Growth of funding for conversion of biomass fuel Government reports and resolutions
for the next period of planning (after completion of
the project)
Changes in policy or, at minimum, progress in the Government reports and resolutions
adaptation of policy initiated by, for example, the
Output 1.4: Training conducted to See notes below in activity description

strengthen capacity of in-country experts
Output 1.5: Information, training, During the project lifetime a "best practice" Guidebook
capacity, financing and hardware guidebook is published
requirements are scaled-up based on all
previous outputs (strategy for
By the end of the project a concrete and realistic Document containing plan
sustainability, replication) plan for continuation and scaling up results is
developed and disseminated, and next steps
identified
Output 2.1 Projects showing that wood By the end of year 3 the 'end use' sites are operating Yearly project status reports from the sites
energy is modern, clean, versatile, cost- as designed
effective and efficient are implemented
(boiler conversion investments) Monitoring is in operation at all sites throughout the Project reports (monitoring data
project processed)
Total fuel savings, from all 5 projects of Project status reports

approximately 35000 tonnes coal equivalent per
year and emission reductions of 72 000 tonnes per
year achieved from year 4.
42
Output 2.2: Investment project showing By the end of year 3 the 'biomass fuel supply' Yearly report from the project site Woodwaste fuel supplied at or below
that risks and uncertainties of fuel supply project is operating efficiently and cost effectively the pre-contractual estimated cost.
can be reduced with a functional regional according to design parameters
supply organisation (biomass fuel supply
investment) Reduction in long-term fuel preparation and delivery Yearly report from project site
costs for the wood harvesting company of over 20%
as a result of the techniques implemented in the
project
More boilers in a 70 km radius supplied by – and Yearly report from project site
operated on – wood fuel/chips
Output 3.1: Pipeline of investment Investment briefs on 5 to 10 replication projects Printed project portfolios
projects developed (covering the technical and business case for each)
are available in the second half of year 3 of the
project
Funding sources for the replication projects Report

identified and expressions of interest received from
the relevant organisations
Output 3.2: Revolving Fund for Biomass The revolving fund will be established and will be Regular reporting from fund managers
Energy Developed operating effectively by the end of the project.
Charter documents/MOU (if necessary)
Output 4.1 Relevant decision-makers at Surveys at the end of year 2 and 4 on participants in Results of questionnaire
ministerial, oblast, and regional level are the study tours (internally to the sites, and
fully informed of the potential for wood externally to countries where biomass is in common
energy as part of a modern fuel system use) shows growing interest in the use of biomass in
Belarus
There is a growing interest, indicated by increased Yearly project report

requests to the PMU for information, from decision-
makers targeted by the dissemination activities
Information leaflets, brochures and videos are Leaflets, brochures and videos, records of
published and distributed to target audiences each feedback (letters, phone calls, emails)
year from users
The project is mentioned at the Council of Ministers Reports from Council of Ministers and the
(or in other interdepartmental government meetings) Committee on Energy Efficiency.
at least 3 times a year, and regularly in the press. Newspaper clippings, recordings
By the end of the project demand for biomass boiler Number of requests to Committee on EE
installations has increased by the municipalities, enterprises.
Government reports, yearly project report
43
Activities Inputs Costs

Under Output 1.1 Office room hire Summary: Continued strong support from the
1.1.1 Establish Project Steering Committee Salary of project manager USD 303 000 over the 4 year project, of
which
1.1.2 Hire project manager, technical Salary of junior (PMU technical assistant)
assistant, and administrative staff USD 36 000, in kind, Committee on EE
Administrative assistant
1.1.3 Establishment of Project USD 267 000, GEF
Management Unit Allowances for short-term students and interns
1.1.4 Finalize work plan and review Office equipment

institutional and management Evaluation missions (2) including DSA, Travel
arrangements for project implementation
(inception report) Operational budget for PMU travel, accommodation,
workshops and training etc.
1.1.5 Draw up shortlist of local and foreign
experts for key project activities Project financial audits (4)
1.1.6 Call for expression of interest and UNECE regional advisor travel and DSA
draw up shortlist of potential contractors
for turn key projects
1.1.7 Establish twinning arrangement and
hold yearly planning/management
meetings between the Project Management
Unit, and the twinned institute
1.1.8 Prepare and implement Monitoring
and Evaluation reviews.
Under Output 1.2
1.2.1 Conduct review of the current GIS National experts (1 full time for 4 years, 2 full time Summary:
and Resource Management capabilities in for 2 years to update and implement database)
Belarus and identify possibilities to build USD 326 000, of which
on this capability International expert or institution
USD 326 000 GEF
1.2.2 Review of international experiences Training budget
in information-based decision-making Travel
tools for national wood energy planning
and the potential for this to be used in Hardware (computers, emissions testing, wood
Belarus quality measurement)
1.2.3 Develop detailed implementation Information (existing, relevant GIS datasets)

schedule Software
1.2.4 Select and hire a consultant to assist
in development of GIS on wood fuel
1.2.5 Arrange training for 2 Belarussians
abroad in a tailor-made MSc programme
(or similar) in the use of a GIS and with
44
their thesis/fieldwork focusing on
designing and implementing a GIS as per
the project requirements.
1.2.6 Update and develop the database on
wood waste resources and existing boiler
houses developed during the PDF B, and
get it into a format suitable for the GIS
1.2.7 Carry out training in wood resource
planning
1.2.8 Purchase necessary hardware and
software for GIS system and for the
implementation of the quality control
system
1.2.9 Develop planning scenarios
(proposals) based on the developed system
for the use of the Committee on Energy
Efficiency
Under Output 1.3
1.3.1 Using the results of outputs 1 to 4, Local experts (1 or 2 full time for 1 year) Summary:
identify findings and implications for
Belarussian planning and policy Seminar costs (2 to 3 seminars) USD 76 000, of which
1.3.2 Prepare a document with suggestions International expert or institution USD 12 000 (in kind), Committee on EE
for policy and disseminate to key Travel USD 64 000 GEF
stakeholders for comment
1.3.3 Hold a seminar / dialogue with
selected (government) stakeholders to
debate and review the suggestions
45
Under Output 1.4
1.4.1 Develop a training plan for staff
and project stakeholders under
the project management
component.
1.4.2 On-the-job training: Hire a
junior technical assistant in the
project management unit to
receive training from the project
manager. While training is listed as a separate line item for activity purposes, it will be funded across the
1.4.3 Hire and train local experts in budget lines in which training will be conducted. The project staff will draw up a training plan
the investment projects, and that includes all of these proposed activities at the inception of the project in order to provide a
secondments in project comprehensive overview of the activities.
engineering and implementation
will be a contractual obligation
of equipment suppliers.
1.4.4 Provide training to operators and
maintenance staff for the
investment sites.
1.4.8 On the job training will also take
place in biomass resource
planning within the information
and awareness component.
1.4.9 Study tours and exchange visits:
Study tours and exchange visits
will take place in the biomass
fuel supply demonstration and
under awareness raising, as well
as in secondments under the
proposed twinning arrangement
1.4.10 Dedicated study in GIS for
biomass planning
Under Output 1.5
1.5.1 Prepare 'best practice' guidebooks for Local expert (5 full time for 1 year, 3 50% time for 1 Summary:
potential future project developers and year),
decision makers USD 102 000, of which
International expert or institution
1.5.2 Develop scale-up plan based on USD 102 000 GEF
outputs 2 to 6, reviewing, for example Best practice guidebook development, publishing,
financial mechanisms for replication of printing, and distribution
projects that are appropriate for Belarus Workshop
1.5.3 Carry out conclusion workshop for
the promotion of the project results and
discussion of the scale-up plan
46
Under Output 2.1
2.1.1 Hire local experts (and trainees) forLocal experts hired in Activity 1.1 (1 full time for 4 Summary:
overall management and support activities years, 1 full time trainee, 3 part time at 50% for 4
of the projects. Hire international advisoryears, 4-6 full time for 6 to 8 months) USD 6 511 000, of which
to assist with planning, assessment of
tenders, and implementation of projects International advisor (120 days, 6 visits to Belarus) USD 1 380 000 in kind from system
owners
2.1.2 Review technical, physical and Project equipment engineering, supply and
USD 1 670 000 cash from system owners
timing requirements for the sites prepared installation
in the PDF B and revise if necessary. USD 1 890 000 from Committee on EE
Prepare detailed procurement and
implementation plan
USD 1 571 000 GEF
2.1.3 Develop detailed ToRs for sites,
prepare public call for tenders, short-
listing, evaluation and selection
2.1.4 Prepare and sign contracts with
experts and companies
2.1.5 Implement and commission sites
2.1.6 Conduct on-site monitoring, and
document findings for inclusion into
policy review (component 1.4)
Under Output 2.2 Woodwaste fuel supplied at or below
the pre-contractual estimated cost.
2.2.1 Hire local technical expert (and Local experts hired in Activity 2.1 (1 full time for 4 Summary:
trainee) for management of the overall years, 1 full time trainee for 4 years, 4 to 5 full time
project on fuel supply. Hire international for 6 to 8 months) USD 996 000, of which
advisor. USD 210 000 in kind from system owners
International advisor (120 days, 4 visits to Belarus -
2.2.2 Prepare detailed plan for all the note: this could be the same advisor as in output 1 if USD 110 000 cash from system owners
activities, including selection of the necessary skills are available)
technologies, design, procurement, and USD 240 000 from Committee on EE
supply of equipment for wood fuel project equipment USD 436 000 GEF
enterprise. Study tour on fuel supply
2.2.3 Conduct review of approaches
(technologies) for fuel supply (including
study tour, workshop etc.) involving the
key stakeholders in the proposed project
in the identification of best practice and
relevance to the Belarus situation
2.2.4 Call for expression of interest and
draw up short list of suppliers and
producers of equipment and machines for a
wood fuel supply company. Conduct
47
necessary procurement procedures (tender,
contracts, etc.) to produce and supply
machines and equipment for wood fuel
production and transportation.
2.2.5 Ensure successful implementation of
the project, including set up of the new
wood fuel supply organisation.
2.2.6 Provide support to the Committee on
Energy Efficiency addressing elaboration
of wood fuel standards.
2.2.7 Conduct on-site monitoring and
document experiences for inclusion into
policy review (output 5)
Under Output 3.1
3.1.1 Using the (ongoing) results of output Local subcontractor Summary:
4, identify 5 to 10 projects meeting the
principles of demand and least cost Local travel USD 19 000, of which
3.1.2 Carry out energy audits, and USD 19 000 GEF

economic analysis of proposal (business
plan)
3.1.3 Prepare a portfolio of projects for
presentation to potential funders
3.1.4 Hold meetings with selected funders
to present the project portfolio and seek
letters of interest
Under Output 3.2 Shared with output 3.1

3.2.1 Establish conditions of the revolving Local experts (3 part-time time over 2 years) Summary:
fund
Local travel USD 40 000, of which
3.2.2 Finalise legal agreements and
administrative criteria International expert or institution USD 40 000 GEF
3.2.3 Develop profile for and hire

adequate, trained, staff.
3.2.4 Establish the revolving fund.
3.2.5 Seek additional contributors to the
fund for longer-term sustainability.
Under Output 4.1
48
4.1.1 Review project dissemination and Funding for travel (study tours) Summary:
awareness activities
Local marketing expert USD 318 000, of which
4.1.2 Identify key decision-makers at
ministerial, oblast, and regional levels Local biomass expert USD 14 000 (in kind) from Committee on
(including, for example, deputy ministers, International expert or institution EE
managers of forest enterprises, directors of USD 304 000 GEF
joint stock companies, and technical Training materials
managers) and the most appropriate Promotion materials
awareness raising approaches for each
target group Promotional campaign (in-country study tours,
videos, brochures, adverts etc.)
4.1.3 Conduct local study tours (to the
sites), workshops, and seminars to raise the
awareness
4.1.4 Establish exchange visits and
secondments
4.1.5 Conduct a survey at the end of year 2
and 4 on the impact of the awareness
campaign
49
ANNEX C1: STAP REVIEW
The overall project concept is good. The estimates of expected greenhouse gas emission reductions and associated
incremental cost are reasonable. The proposed institutional structure of the project appears to take well into
account the peculiarities of the Belarus economy and political framework. The proposed project will build on
existing Belarus plans for expanding biomass use. The existence of a prior official plan for expanding biomass use
bodes well for the likelihood of success of the GEF project. Similarly, the existence of the GEF project may
heighten the likelihood of success of the official government biomass plan. Below are my main comments on the
proposal. I have separately provided “track changes” comments directly in the draft proposal:
1. The idea of “twinning” the PMU with a knowledgeable foreign institute is interesting, but it is not entirely clear
what the twin would do. To clarify what the project has in mind, it would be helpful to cite two or three
examples of foreign institutes that could effectively play the role of twin. It would also be helpful if some
clarification could be provided regarding what benefit the foreign twin stands to derive from participation in the
project. Also, it is envisioned that the twin institute will continue its involvement beyond the end of the project
period. Where is funding expected from to support this involvement?
2. I understand that the 895,000 tCO2 mentioned in the abstract (and elsewhere in the document) is expected
savings from replication projects after the GEF project ends. In this context, the barriers to be removed by GEF
involvement don’t seem all that significant (since the project itself will result in 1.08 mtCO2 reduction). How
likely is it that the government targets for expanded wood fuel use (absent GEF) will be met? Can an argument
be made that the GEF project will actually help achieve the government baseline, so that the GHG emissions
impact of the GEF project will be greater than 1.08+0.895 mtCO2?
3. Given that Belarus gets “favorable” gas prices from Russia and (presumably) sufficient supplies of gas, will
biomass be able to compete with natural gas? Would it make more sense for Belarus to pursue boiler
conversions to gas than to wood?
4. Mention is made of 200,000 tce of fuelwood from plantations by 2005 or 250,000 tce by 2015. How do these
figure into the GEF project plans?
5. The World Bank loan “Social Infrastructure Retrofitting Project” (BY-7056) will, among other activities, invest
approximately USD 7 million for boiler replacement or conversion from oil and coal to gas and wood fuel
(about 90 small size units). These investments would appear to be doing some of the exact things the GEF
project will do. What is the rationale for not more-direct integration between the GEF project and the World
Bank program? There would seem to be substantial economies of scale to be gained.
6. What are typical prices for wood fuels in Belarus? It is difficult to get a sense of the overall economics for
biomass projects without a clear indication of prices.
7. Given that the MSc students are expected to return to Belarus to set up the GIS system, will the system be set
up soon enough for its use to be demonstrated with the proposed investment projects?
8. Regarding Output 1.3 (“Findings from the investment projects, study tours and developed planning tools are
internalised and the implications for policy assessed.”) I would suggest that the dialogue with decision makers
be initiated much earlier than in the last year of the project. In fact, I would suggest that it be started in the first
year. Regular briefings could be given to apprise decision makers of progress, together with soliciting of
advice at several key decision points in the early years of the project. By year 4, the decision makers will then
(hopefully) feel some ownership of the program, thereby enhancing the prospects for effective policy
Co-financing commitments for all demonstration projects are provided, though two sub-project owners are not specifying the
co-financing amount. UNDP/GEF will not proceed with designing and implementing these demonstration projects, unless co-
development and implementation. The latter are key to insuring replication of the project after the GEF
involvement ends.
9. The budget table shows only $40,000 committed to the revolving fund. I presume that the funds for investment
will essentially be disbursed by the fund and will provide the basis for repayments into the fund over time. If
this is correct, the discussion of the budget could be clarified to reflect this. Also, does the project steering
committee make the decisions on which projects will receive the investment financing during the project
period? How will the revolving fund make decisions about future projects?
10. The project calls for use of waste wood chips. Wood chips can also be made from whole trees, which may (or
may not) be cut sustainably. The draft proposal that I reviewed did not discuss safeguards against unsustainable
tree cutting. However, as indicated in some follow-up email communication I received, such safeguards are in
place in Belarus, and deforestation arising from the project (or subsequent replication efforts) is not a
significant risk. My understanding is that this issue will be discussed in an added paragraph in the final
proposal.
Eric D. Larson
Princeton Environmental Institute
Princeton University
51
ANNEX C2: RESPONSE TO STAP REVIEW
1. The idea of “twinning” the PMU with a knowledgeable foreign institute was developed as the result of
observing the benefits of similar arrangements in other economies in transition. For example, the European
Commission Twinergy program provided support for joint research, training, and mentoring for energy-related
institutions in the Eastern European region. Federal energy agencies or offices working in renewable energy in
countries in the Central Europe or Scandinavia such as Austria or Scandinavia (France) could share their
expertise in policy and program development related to biomass energy. Alternatively, research institutions
such as ETSU (UK) or the Wuppertal Institute (GER) could provide training and insight from a different
perspective. Ultimately, either type of institution would be in a position to develop capacity in Belarus for the
functions described in the project. For the participating foreign twin, there would be enhanced opportunities for
research and the benefits of working with an expanded team of strong technical experts. As a part of Output 1.5,
the PMU will investigate the possibility of funding an ongoing partnership. This funding might come in the
form of a grant from a bilateral donor (e.g. from the host country of the twinned institution) or from any
research grants received by the joint group of experts from the two institutions.
2. The estimates for CO2 reduction made in the project brief were conservative and designed to reflect direct,
quantifiable mitigation. An argument could be made that the GEF project will help to achieve the government
baseline. Conversely, it could be very difficult to achieve the government baseline without the strategic
assistance provided by the GEF project in resource planning and in establishing a sustainable financial
mechanism. In particular, the mechanism will allow the government to leverage the grant funding that it is
currently disbursing to projects into greater resources for loans, which would almost certainly increase the
indirect impacts of the project on emissions.
3. While Belarus currently receives “favorable” gas prices from Russia, these prices are still quite expensive and
divert valuable hard currency from the government’s budget. The price of natural gas is certain to increase over
time, and the large-scale installation of gas boilers would lock the country into energy consumption patterns
that could have strong, negative financial consequences in outlying years. The fact that the natural gas is
obtained from a single, foreign supplier should also be seen from an energy security perspective. There are
compelling arguments for increasing the share of domestic energy in Belarus, particularly when this source of
energy is as widely available and economically feasible as wood fuel.
4. Fuelwood from plantations is seen as an additional source of supply for wood-fired boilers supported through
the replication efforts of the project. The possible role of these plantations will be researched in the
development of the national strategy to be developed under Component 1 of the proposed project.
5. The proposed project differs from the World Bank activities under its social infrastructure project in that it will
use the loans repaid to the project to fund additional investments. In addition, the recipients of the loans will be
the project sites themselves in order to develop familiarity with financing boiler retrofits. UNDP-GEF and
UNDP Belarus have maintained regular contact with the World Bank mission in Minsk and with the World
Bank-GEF team in Washington, and both agencies will continue to communicate on their work with the
Government of Belarus in this area.
6. “Market” prices for biomass can be difficult to determine in the absence of an actual market for wood fuel. For
example, some fuel is used internally (i.e. wood waste used for a factory boiler on-site), or may even be
bartered. However, it should be noted that the suppliers are domestic, so that the prices do not include the
“opportunity cost” of payment in hard currency. A more detailed explanation of costs and prices will be
provided under separate cover.
52
7. The GIS system will be set up soon enough to assist with the preparation of the pipeline of projects described in
Component 3 and will be demonstrated during the proposed project replication. The initial projects in
Component 2 will inform the design of the system.
8. While Output 1.3 (“Findings from the investment projects, study tours and developed planning tools are
internalised and the implications for policy assessed.”) will begin during the latter half of the project, dialogue
with decision makers will certainly be initiated at the inception of the project. Both the information/outreach
activities in Component 4 and the capacity building described in Component 1 are designed to establish an
ongoing relationship with key policy-makers. As the reviewer suggests, the project will provide “regular
briefings to apprise decision makers of progress, together with soliciting of advice at several key decision
points in the early years of the project.” In fact, the Project Steering Committee and the annual Tripartite
Review of the project have these objectives as their mandate.
9. The funding for the revolving fund has been clarified in the text of the brief. The $40,000 allocated to the
revolving fund will cover initial legal and staffing expenses. The capital of the fund itself will come from the
repayment of the investment funds for the biomass fuel supply and biomass boiler conversion investment
projects outlined in Component 2 of the project. The project team will also undertake negotiations with the
Government on providing additional capital for the fund, and it will discuss possible capitalization by other
financial institutions. Decisions on which proposed projects will receive investment will be made by the staff
of the fund and a board of advisors in accordance with screening criteria. However, it should be noted that the
precise staffing and approval process will be developed under Output 3.2.
10. Factors that would mitigate the risk of unsustainable tree cutting are discussed under the section on Risks (see
section 6.2). In the case of Belarus, deforestation will not be a significant threat because of legislative issues
and also from a resource point of view. The Belarusian forests are managed forests, and logging takes place
under licence, so there is little chance of unplanned, uncontrolled logging on a large scale. The harvesting and
thinning of forests is controlled by special institutions under the Committee on Forestry (formerly Ministry of
Forestry). As there are already safeguards to prevent this, from a project point of view there is low risk that the
increased demand for biomass might lead to deforestation. In addition, from a resource point of view, there is
an annual increase of forest biomass in Belarus of 25 million compressed cubic meters per year, so the
projected impact of the GEF project of 2.1 million cubic meters in 2015, even if it were to come entirely from
new logging and not from residues (unlikely) is well below the annual increase (bearing in mind that for 2015
the planned cut is 19 million cubic metres resulting in unused wood waste of 8.3 million cubic metres – see
Annex F). Under that scenario, the Belarusian forests will still be increasing by about 4 million cubic meters
per year - and still a long way from the possibility of deforestation.
53
ANNEX D: OPERATIONAL FOCAL POINT ENDORSEMENT
Co-financing commitments for all demonstration projects are provided, though two sub-project owners are not specifying the
co-financing amount. UNDP/GEF will not proceed with designing and implementing these demonstration projects, unless co-
55
ANNEX E: OVERVIEW OF BOILER HOUSES BETWEEN 0.5 AND 10 MW
The database of boiler houses sized between 500 kW and 10 MW developed during the PDF B contains data on almost 5000 boiler houses
throughout Belarus. The following data gives an overview of information contained in the database:
Installed capacity of boiler houses: Installed capacity of boiler houses (Gcal/h)
5 to 10
Capacity (Gcal/h) Number
12%
0.5 to 3 3357
3 to 5 743
5 to 10 576
3 to 5
TOTAL 4676
16%
0.5 to 3
72%
Location of boiler houses:

Location of boiler houses
Region Number
Mogilev Brest
Brest 689
17% 15%
Vitebsk 785
Gomel 985
Grodna 489
Minsk (excl Minsk 919
Vitebsk
city) 17%
Mogilev 815 Minsk
TOTAL 4676 20%
Grodna Gomel
10% 21%
56
Boiler house ownership:

Boiler house ownership
Region Number % of total

Ministry of communal 1260 27 Ministry of
services communal
Industry
Agriculture 935 20 32% services
Education 845 18 27%
Health 140 3
Industry 1496 32
TOTAL 4676 100
Health
3%
Fuels used in boiler houses: Agriculture
Education
18% 20%
Fuel Number
Fuels used in boiler houses
Mazut only 739
Gas only 1355 Mazut only
Coal only 220 More than 16%
Wood only 433 one fuel
Peat only 325 26%
Diesel only 410
Other (more than 1 1194
fuels )
TOTAL 4676
Diesel only
9%
Gas only
28%
Peat only
7% Coal only
Wood only
5%
9%
57
ANNEX F: WOOD WASTE AVAILABILITY IN BELARUS
All units are in million cubic metres of compressed wood.
Year 2000 2005 2015

1 Total wood cut 10.8 13.3 19
Including:
1a Fire wood in logs, 5 5.2 6.4
1b Merchantable and other wood 5.8 8.1 12.6
2 Exported without processing 1 1.5 2
3 Goods made of merchantable wood 2.6 3.5 5.6
4 Wood waste during processing 2.2 3.1 5
Including:
4a Used as raw material for production 1 1.1 2
4b Wood waste for use as fuel 1.2 2 3
5 Forest residues from harvesting 4.3 5.3 7.6
5a Including residues could be used as fuel 3.2 4 5.7
6 Cleaning of littery forests and storage of fire wood left without use before 1.5 1.5 1.5
7 More careful care about (thinning of) young forests 0.8 0.8 0.8
8 Total potential (fire wood and wood waste could be used as fuel) 11.7 13.5 17.1
Including:
8a Used (without GEF impact) 5.6 6.8 8.8
8b Wood waste available for use (currently unused) 6.1 6.7 8.3
8c Projected total usage (with GEF impact) 5.6 7.0 10.9
8d Projected GEF impact on usage (8c - 8a) 0.0 0.2 2.1
9 Ratio of wood waste used as fuel to total wood waste available (without GEF impact) 48% 50,3% 52%
9a Same with GEF impact 52,1% 65%
Basic data in the estimates given in lines 1,2 and 3 for 2005 and 2015 are based on government projections.
58
Projected Wood Waste Availability
18.0
16.0
GEF impact
Wood waste (million m³ of compressed wood)
14.0
wood waste which could be used for fuel

12.0
10.0 unused (technically available for modern biomass energy)
8.0
6.0
4.0
used as firewood
2.0
0.0
2000 2005 2010 2015
Year
59
ANNEX G: OVERVIEW OF RELEVANT REGULATIONS
Regulations Objectives Key implementing agents

1. Law “On Energy Saving” The objective of this law is to improve effectiveness of fuel and energy Committee on Energy
resources use. Efficiency
This law sets energy saving as a priority of state policy

2. New “National programme on Promotion of state policy to save energy aiming for the reduction of energy Committee on Energy
energy saving for the years 2001- intensity per unit of GDP by 25% With preferences given to local energy Efficiency, Ministry of
2005” resources. Economy
This programme builds on the “National Programme on Energy Saving to

2000” which aimed for the growth of GDP between 1995-1999 by 28,3%
without growth in the use of energy resources. The target was substantially
met with a reduction of energy intensity per unit of GDP of 22,4%.
3. Budget Fund “Energy Funding of measures on energy saving. Funds come from fines for irrational Fund is managed by the
Efficiency” (inefficient) use of energy resources. The fund is used in the financing of Committee on Energy
energy saving measures. Efficiency
4. National policy on the To give support to non-conventional power plants. Owners of these plants Committee on Energy
development of small and non- may sell electricity to the power grid at double the industry tariff (USD 0.07 Efficiency
conventional power engineering per kWh). “Belenergo” concern
(defined by Decree N 400 of the
Council of Ministers)
5. Policies introducing Introduction of obligatory metering of fuel and energy resources. Today Committee on Energy
instrumental metering. about 75% of all consumers have heat and flow meters. Efficiency and other
Ministries
6. Policies providing preferential Funding of activities on energy efficiency. Commercial banks’ loans for Legal entities, Committee
credits for energy saving activities energy saving measures are provided at 50% of refinancing rate of the on Energy Efficiency,
National Bank about half of banks’ interest rate through match funding from Commercial banks
the Committee on Energy Efficiency
7. Funds «For Energy Saving» Funding of activities on energy efficiency and incentives. Funds are created Legal entities
introduced by the Council of within organisations to start and continue activities in energy efficiency
Ministers Decree N 504 sphere and provide bonuses for employees saving energy.
8. New regulations related to Creating incentives to save energy in budget sphere organisations. At Committee
incentives for budget sphere present this regulation is under design. Ministry of Finances
institutions to save energy.
60
ANNEX H: SELECTION OF PROJECT SITES AND EVALUATION CRITERIA
Screening
Selection of the sites was made in two steps. The initial step involved the screening of the extensive database of
over 4500 sites developed as part of the PDF B process. The boilers were screened according to the following
criteria:
 A boiler house capacity between 5 and 10 MW or more
 A stable heat demand all year
 The availability of sufficient wood waste resources for the present and future
 Sufficient space in the boiler room and around it for the new boiler technology, and the wood waste
delivery, processing and storage
 Necessity of a stable steam load (where combined heat and power production is proposed)
 Existence of social sphere consumers (apartment buildings, hospitals, etc.) connected to a boiler house
 The district heating system in a good condition to avoid losses during heat transportation
Following the screening of boilers from the database, approximately 30 boiler houses were visited and additional
data collected.
Evaluation Criteria
The boiler houses visited were evaluated according to the following criteria:
 Prospects for long-term viability of the enterprise or entity
 Visibility and accessibility (value for “jump-starting” the market)
 Replication potential
 Technical feasibility of proposed project
 Economic feasibility of proposed project
 Willingness to participate as a initial investment project site
 Contribution to addressing analysed barriers
 Availability of co-funding
The selected sites scored highly in all the above criteria.
ANNEX H BIS: SAMPLE CALCULATION FOR DEMONSTRATION PROJECT (#1, OPTION 2)
The following assumptions were made in calculations:

 “For calculations of fuel consumption the amount of heat production is assumed to be 45,500 Gcal/year
(see year 1999). The year 2000 was not typical for this farm and its boiler house).
 In 1999, according to heat-meter readings, the heat consumption during winter-time was equal to 28,400
Gcal and during summer time 17,100 Gcal/year.
p
The heating value of chips is taken as Q H = 2400 kcal/kg.
So, the necessary wood-fuel consumption will be
B = Qyear/(Qhp *  ) = 45500 * 109/(2400 * 103 * 0.79) = 24000 tonnes/year
where
g . w. g . w.
b - gross-weight efficiency of boiler;  b = 0.79 (as minimum)
61
Average heat production of the boiler during winter will be as follows:
Pb = Qwt/wt = 28400/4656 = 6.1 Gcal/hour or 7.1 MW.
For this reason, a wood-fired boiler similar to the DKVR 10-14-250 (10 tonnes of stream/hour, 14 bars and
250 oC) can be chosen.
Possible winter pick loads can be covered by reserved boiler available in the boiler house.
To select a turbine, the following formula was used:
the power –
Nturbine = {D(i1 – i2) * oe * g}/3600,
where
D – amount of stream, kg/hour;
i1 – inlet stream enthalpy, kJ/kg;
i2 – outlet stream enthalpy, kJ/kg;
oe – relative effective efficiency of turbine;
g – efficiency of turbogenerator.
Nturbine = {10000 (2895 – 2625) * 0.72 * 0.92}/3600  500 kW
The appropriate turbine could be a back pressure turbine similar to TG 0.5A/0.4 P13/3.7 of Joint-Stock
Company ‘Kaluga Turbine Works” (Russia)
During the summer, the heat production of boiler will be
Pbs = Qst /st = 17100/3624 = 4.72 Gcal/hour or 5.47 MW.

This means that steam production will be about 7.4 tonnes/hour and electrical power of turbine at that time
can be derived as
Nst = 7400 * (2895 – 2625) * 0.92/3600  370 kW.
The total amount of electricity produced per year will be
E = 500 * 4656 + 370 * 3624 = 3668880 kWh.
The cost of electricity produced during the year will be
Cel = 0.035 * 3 668 880 = 128411 USD.
The profit from substitution of oil by chips can be calculated as following.
The amount of oil to be used to produce the heat and electricity
Boil = 24000 tonnes of chips/year * (2400 kcal/kg / 9600 kcal/kg) = 6000 tonnes/year
The price of the oil -
Coil = 100 USD/tonne * 6000 tonnes/year = 600000 USD.
The price of chips –
62
Cchips = 10 USD/tonne * 24000 tonnes/year = 240000 USD.
The profit is
C = 600,000 – 240,000 =360,000 USD/year
The current expenses on maintenance and running of the equipment including cost of fuel, depreciation,
current maintenance, salary, other expenses will be 299,395 USD per year.
The total income is 600,000 – 299,395 +128,411 = 429,016 USD
Economical indices counted on the basis of standard formulas at 10% discount rate are as follows:
NPV = 154,000
Payback = 5.38
IRR = 24%
63
ANNEX I: INVESTMENT PROJECT SITE FACT SHEETS
Project 1: Combined Heat and Power Plant in the City of Olekhnovochi
Owner: Molodechno Poultry Farm, Olekhnovochi, Minsk oblast

Alexander Klimashevski, Director
Project sponsor: Committee for Energy Efficiency (Minsk department)
G.I.Kirilchik, Head of department
Contact:
Address: Olekhnovochi Telephone: 8-273-91-237
City: Olekhnovochi Fax: 8-273-91-239, 91-395
Oblast, postal code: Minsk, 222323 Email:
Existing system:
Plant capacity: 15 MW Distribution net 2500m within factory, 800m to
central heat distributor, and 2000m in
the city, 190000 m3
Type of boilers Mazut fired steam boilers Year of Boiler 1: 1974
installed: DKVR10/13 - 2 units construction: Boiler 2: 1974
Main end Technology, apartment buildings, communal services
users/customers:
Legal status of To be privatised
owner/sponsor
Existing energy consumption:

Fuel Energy meters Annual consumption Energy units Energy price in
installed USD
Yes/No 1999 2000
Oil 7448 5845 Tonnes 100/tonne
Gas
Electricity Yes 5951 4075 MWh 0.035/kWh
Heat production Yes 45500 33 000 Gcal/year 25/Gcal
Proposed intervention overview:

Description: It is planned to install a 7.5 MW wood-fired steam boiler (14 Bar steam pressure) with
combined heat and power production using a 0.5 MW backpressure steam turbine. Heat
and electricity production will cover almost all needs of the farm. A portion of the heat
will be sold to the Ministry of Communal services and excess electricity produced at
night will be sold to the national electric grid.
Benefits Oil fuel savings of 6200 tonnes / yr (9 000 tce/yr)
Electricity savings of 1000 tce / yr
CO2 emission reduction of 21 000 tonnes / yr
SO2 emission reduction by 160 tonnes / yr
New jobs
Replication potential There are about 580 boiler houses with heat capacity from 5 to 10 MW in Belarus. About
40% of them are natural gas fired, 50% are oil fired and about 10% are coal or peat fired.
More than 50% of them are located close to wood processing and forestry enterprises and
potentially could be converted to wood fuel.
64
Proposed measures and financing (including hardware and implementation costs):
OPTION 1
Object Measure Estimated investment in USD
2 Wood fired boilers 4 MW each, 14 Boiler similar to the KE 6,5-14 450 000 x 2 = 900 000
Bar with automatic control system MT, 12 tons of steam/hour
Back pressure turbine 0,5 MW 300 000 (incl. Implementation)
Boiler house building and wood waste 200 000

storage
Design 180 000

Implementation 190 000
Contingencies 160 000
Total investment and savings 1 930 000,

saving of 405 400 USD/yr
OPTION 2
Wood fired boiler 7.5 MW, 14 Bar Boiler similar to the DKVR 10-14- 720 000
with automatic control system 250, 10 tones of steam/hour, 14
bar, t=250C
Back pressure turbine 0.5 MW 300 000 (incl. Implementation)

storage
Design 160 000

Implementation and adjustment 180 000

ECONOMIC INDICATORS (over estimated project lifetime of 15 years)

OPTION 1 OPTION 2
Indicator Units
With GEF loan Without loan With GEF loan Without loan
SPBT Years 6.3 6.6 5.19 5.38
NPV USD 1 367 600 1 183 000 1 738 000 1 543 000
IRR % 20 20 24 24
CCC (for GEF) US$/Mg CO2 1.1
65
Option 2 is preferred
PRELIMINARY FINANCING PLAN

Cost USD % of Total
Owner's resources: 860 000 50
Sponsor resources: 510 000 30
GEF Loan: 350 000 20
Total: 1 720 000 100
Basic assumptions
wood fuel purchase price 5 USD/m3 loose
heat sale price 25 USD/Gcal
electricity sale price 0.035 USD/kWh
project lifetime 15 years
66
Project 2: Combined Heat and Power Plant in Vileika city
Owner: Joint Stock Company "Stroidetali"

Sergei Zhuck, Director
Project sponsor: Committee for Energy Efficiency
G.I. Kirilchik, Head of Department
Contact:
Address: Str Stachanovskaya 134 Telephone: 8-271-52-500
City: Vileika Fax: 8-271-54-259
Oblast, postal code: Minsk, 222410 Email:
Existing system:
Plant capacity: 14 MW Distribution net 2 km, with 6 substations, 1 building
with 18 apartments. A school N5 is
planned to be connected in 2003
Type of boilers Mazut fired steam boilers Year of Boiler 1: 1985
installed: DKVR6,5/13 - 2 units, construction: Boiler 2: 1985
DE10/14 - 1 unit Boiler 3: 1987
users/customers:
Legal status of Joint stock company
owner/sponsor

installed USD
Yes/No 1999 2000
Oil 3860 Tonnes 100/tonne
Gas
Electricity Yes 5031 MWh 0.035/kWh
Heat sale Yes 27935 Gcal/year 25/Gcal

Description: The boiler house will be converted to wood fuel with combined heat and power
generation. It is planned to install a new direct burning 7,5 MW steam boiler 23-39 Bar,
370-450°C and a 0,75 MW back pressure turbine. The new boiler will cover almost 100%
heat load and about 80% of the electricity load.
Benefits Oil fuel savings of 6000 tonnes / yr (9000 tce / yr)
Electricity savings equivalent to 2000 tce / yr
SO2 emission reduction of 160 tonnes / yr
New jobs
67
OPTION 1
2 Wood fired boilers 2 x 4 MW with 2 boilers KE-6.5-14 or similar 900 000
automatic control system During winter 2 boilers will be
operated, and in summer 1 boiler
Back pressure 0,75 MW turbine Turbine with generator similar to 320 000
TG 075/04 P13/2.
Wood waste storage and 180 000
Boiler house building
System of wood waste collection and 150 000
transportation
Implementation and 180 000
Adjustment
Design 160 000
Total investment and savings 1 990 000

saving of 619 700 per year
OPTION 2
1 wood fired boiler of 7,5 MW with Similar to DKVR 10/23-370, 10 750 000
automatic control system tons of steam/hour working all
Back pressure 0,75 MW turbine and year through. 320 000
generator
Wood waste storage and 120 000

Boiler house building
System of wood waste collection and 150 000
transportation
Adjustment
Design 150 000

savings of 730 000 per year

OPTION 1 OPTION 2
Indicator Units
SPBT Years 4,0 4.1 2.8 2.9
NPV USD 3 005 000 2 723 300 4 134 000 3 802 000
IRR % 31 31 42 42
68

Cost USD % of Total
GEF Loans: 400 000 23
Total: 1 750 000 100
Basic assumptions
wood fuel purchase price 0.5 USD/m3 loose (theoretical cost of own wood waste).
heat sale price 25 USD/Gcal or 100 USD per 1 tonne of oil saved
69
Project 3: Heat-only boiler in City of Uzda
Owner: Private enterprise "VOLAT-1"

Igor Petkevich, director
Victor Fedoseev
Contact:
Main office address 12, Olshevskogo s.str. Telephone: + 375 17 254 78 85
City: Minsk Fax: + 375 17 254 01 60
Oblast, postal code: Minsk Email:
Existing system:
Plant capacity: Electrical boiler house Distribution net N/a
800 kW capacity
Type of boilers 8 electrical boilers 100 kW Year of 1989. Shops were bought by “VOLAT-
installed: each construction: 1” in 2001
Main end Technology, office building
users/customers:
Legal status of Private company
owner/sponsor

installed USD
Yes/No 1999 2000
Oil
Gas
Heat sale Yes Gcal/year 45/Gcal

Description: A new wood fired heat only 1.7 MW boiler house will be installed in a separate building
instead of existing electrical boilers installed inside production premises. District heating
piping (outside laying 150 meters long) to connect boiler house to production shops will
be installed. The new wood fired boiler house will have a higher capacity than the old
one because of growing demand for production (additional wood processing equipment
and shops to be installed in the coming years – currently production growth is limited due
to high expenses for heat supply which is produced by electrical boilers). Due to saving
reasons temperature comfort in shops and in office is also limited.
Benefits Year round heat and hot water for technology and sanitary needs
Natural gas savings at power plant due to electricity savings amounting to 1000 tce / yr
Improved temperature comfort
New jobs
Replication potential There are about 3350 boiler houses with heat capacity from 0,5 to 3 MW in Belarus.
About 35% of them are natural gas fired, 50% are oil fired and about 15% are coal, peat
or wood fired.
70
OPTION 1
2 Wood fired boilers, automatically 1 boiler at 1 MW and 1 boiler at 250 000
operated 0.7 MW. The larger boiler will be
in operation during winter and the
Wood waste storage smaller one during summer. The 30 000
Boiler house building smaller boiler will also serve as a 70 000
Heat network reserve during winter. 50 000
Design 50 000
Implementation adjustment, training 90 000
Total investment and savings 640 000
savings of 162 200 per year
Indicator Units With GEF loan Without loan
SPBT Years 5.1 5.3

NPV USD 667 400 583 693
IRR % 24 24

Cost USD % of Total
GEF Loans: 130 000 20
Total: 640 000 100
Basic assumptions
wood fuel purchase price 0,5 USD/m3 loose (theoretical cost of own wood waste)
electricity sale price 0.026 USD/kWh (night tariff), 0,0132 day tariff for heating
71
Project 4: Heat-only boiler in the town of Farinovo
Owner: Polotsk municipality

Andrei Fialka, deputy head of Farinovo division of Vetrino municipality
Representative of Polotsk region municipality: Alexei Sedjuk, Deputy Major
Project sponsor: IKEA (Sweden)

Stefan Koletich, Dep. Head of Belarus office
Committee for Energy Efficiency
Victor Fedoseev, Dep. Chairman
Contact:
Address: RPO Zh K Ch Telephone: 8-0214 466 536, 445 452
City: Farinovo Fax: 8-0214 461 273
Oblast, postal code: Polotsk, 211412 Email: IKEA(Belarus) +375 17 206 53 91
Existing system:
Plant capacity: 50 MW Distribution net 3500 m
100% of net 20 years or older
(25-30% heat losses)
about 50 substations
Type of boilers Steam boiler DKVR 10/13 - Year of Boiler 1: 1973 Boiler 2: 1973
installed: 3 units. Steam boilers DE construction: Boiler 3: 1973 Boiler 4: 1974
25/14 - 2 units. One of them Boiler 5: 1974
is in disabled state
Main end Institutions and apartment buildings in Farinovo town
users/customers:
Legal status of Municipality
owner/sponsor

installed USD
Yes/No 1999 2000
Oil 3100 100 per tone
Gas
Electricity Yes MWh 0.035/kWh
Heat sale Yes 19 100 Gcal/year 48/Gcal

Description: There are two possible options:
1.The old boiler house and district heating pipeline for heat transportation from it to
Farinovo town will be closed. New wood fired heat only boiler house with separate
building will be constructed in Farinovo town instead of central heat substation. The
designed capacity of this boiler house is 5-7 MW.
2. Reconstruction of existing boiler house by installation of one 10-12 MW wood-fired
automatically controlled steam boiler. The method of conversion is replacement of 2 or 3
of the existing boilers, which are old, inefficient and in a poor condition. The other
mazut-fired boilers will be left with no changes and will serve as reserves (or to cover
pick loads only). A small wood waste storage facility will be constructed and equipped
with necessary devices for wood chips transportation to boiler. Wood waste will be
72
supplied from the neighbouring wood processing factory.

The second option will be implemented if IKEA Co from Sweden goes ahead with its
plans to purchase the neighbouring wood-processing factory (which is currently
bankrupt). In this case IKEA interested to be a sponsor of the proposed boiler house
reconstruction.
Benefits Oil fuel savings of 7 500 tonnes / yr (11 000 tce / yr)
New jobs
Replication potential There are about 300 boiler houses with heat capacities from 10 to 20 MW in Belarus.
About 53% of them are natural gas fired, 40% are oil fired and about 7% are coal or peat
fired. Almost all of them are equipped with the same type of boilers (DKVR type) used in
this site. More than 50% of them are located not far from wood processing and forestry
enterprises and potentially could be converted to wood fuel. This project will provide
experience with a replication potential for hundreds of similar boiler houses in Belarus.
OPTION 1
Wood fuel automatically operated New boiler house with 2 boilers (4 600 000
boiler 5-7 MW MW main and 3MW reserved)
Wood waste storage and boiler house installed in Farinovo town instead 150 000
building of old one outside of the town,
which is going to be closed. 150 000
Heat network reconstruction Improvement of district heating 30 000
Design system.
yearly savings of 268 200
OPTION 2
Wood fuel automatically operated New wood fired boiler will replace 800 000
boiler 10-12 MW 2 old and inefficient mazut fired
Wood waste storage and boiler house boilers in existing boiler house 150 000
building with improvements of the existing
district heating system. 150 000
Heat network reconstruction 150 000
Design
73

OPTION 1 OPTION 2
Indicator Units
SPBT Years 4.5 4.6 3.1 3.2
NPV USD 1 211 800 1 090 360 3 038 000 2 805 000
IRR % 27 27 38 38

Cost USD % of Total
Sponsor resources: Committee for Energy Efficiency 450 000 74

IKEA (Sweden) 700 000
GEF Loan: 300 000 20
Total: 1 500 000 100
Basic assumptions
wood fuel purchase price 0,5 USD/m3 loose
74
Project 5: Heat only boiler in the Radon Sanatorium
Owner: State own company Unitary sanatoriums enterprise (USE) "Belagrosdravnitsa"

Director of Sanatorium Radon Nikolai Mazur
Deputy director of USE “Belagrosdravnitsa” Alexander Subatch
Project sponsor: Grodno department of the Committee for Energy Efficiency
Head of department A.F. Nechai
Contact:
Address: Village of Boroviki Telephone: Minsk office +375 17 239 46 48
City: Dyatlovo Fax: + 375 17 288 69 16
Oblast, postal code: Grodno oblast Email:
Existing system:
Plant capacity: 8 MW Distribution net 3300 m
100% of net 14 years
(25-30% heat losses)
Type of boilers DKVR 6,5/13 - 2 units Year of construction: Boiler 1: 1986
installed: converted from steam to Boiler 2: 1987
water cycle. Water boilers Boiler 3 1996
"Fakel" - 2 units Boiler 4 1996
Main end Sanatorium "Radon", Children sanatorium "Borovichok"
users/customers:
Legal status of Public company
owner/sponsor

installed USD
Yes/No 1999 2000
Oil
Gas 1 717 000 1 630 000 m3 0.07/m3
Heat sale Yes 11 400 Gcal/year /Gcal
75
Description: Boiler house reconstruction by converting one of two DKVR 6,5/13 to wood fuel by
means of the installation of a gasification unit (pre-oven). The existing boiler is in good
condition and will be used to burn the gas generated in the gasification unit. The other
natural gas fired boiler will be left with no changes and will be used to cover pick loads
only. Two small size “Fakel” water boilers will be dismantled to make space for the
gasification unit. A small wood waste storage facility will be constructed and equipped
with necessary devices for wood chips transportation to gasification unit. A larger storage
facility for logs delivered from the forest will be established and equipped with a chipper
- wood chips will be produced directly on the territory of the boiler house. The “Dyatlovo
forestry company” will supply wood fuel to the boiler house. An agreement to supply
14000 m3 of wood in logs a year from forests thinning has been made.
The existing district heating network is in a bad condition. Heat losses due to leakages
and poor thermal insulation are estimated on the level of 25-30% of total heat production.
According to the recommendations of energy audit the most efficient way of improving
the system is the replacement of pipes with pre-insulated ones.
Benefits Reduction of natural gas consumption by 1,63 million m3 (2000 tce / yr),
Reduction of heat losses in the district heating system by 20-25%,
New jobs
or wood fired. Almost all of them are equipped with the same type of boilers (DKVR
type) used here. In a 1996 study, the potential in Belarus for the use of gasification units
in this size range has been shown to be high and cost effective where space is available in
the boiler house for the installation of the unit. More than 50% of them are located not far
from wood processing and forestry enterprises and potentially could be converted to
wood fuel. This project will give experience with the replication potential for hundreds of
similar boiler houses in Belarus.

Wood fuel automatically operated HOTAB, WERNER or similar 200 000
gasification unit 3,5 MW gasification unit instead of one of
Wood waste storage and boiler house two existing boilers 50 000
building
Wood logs storage and chipper 50 000
Design 50 000
Total investment 640 000
76

SPBT Years 6,2 6,5
NPV USD 329 000 285 384
IRR % 20,3 20,3

Cost USD % of Total
GEF Loans: 130 000 20
Total: 640 000 100
Basic assumptions
77
Reserve Project 1: Heat-only boiler in the City of Ivatsevichi
Owner: Joint Stock Company "Ivatsevichidrev"

Nikolay Poplavski, Chief Engineer
A.N.Kuzminchuk, Head of Department
Contact:
Address: Str Zavodskaja, 4 Telephone: 8-01645-214-46
City: Ivatsevichi Fax: 8-01645-214-82
Oblast, postal code: Brest, 225250 Email:
Existing system:
Plant capacity: 12 MW Distribution net 2 km, with 6 substations, 1 building
with 18 apartments. A school N5 is
planned to be connected in 2003
Type of boilers Gas fired steam boilers Year of construction: Boiler 1: 1982Boiler 2: 1985
installed: DKVR610/13 - 2 units
Main end Technology, heating of shops
users/customers:
Legal status of Joint stock company
owner/sponsor

installed USD
Yes/No 2000 2001
Oil
Gas 4150000 M3 70$/1000 m3
Electricity Yes
Heat sale Yes

Description: Boiler house conversion to wood fuel. It is planned to install heat only boiler 3-4 MW
capacity.
Benefits Gas fuel savings (~2 million cubic metres)
New jobs
CO2 reduction (~3000 tonnes per year)
Replication potential There are about 300 boiler houses with heat capacity from 10 to 20 MW. About 53% of
them are natural gas fired, 40% are oil fired and about 7% are coal or peat fired. Almost
all of them are equipped with similar boilers to the proposed project
78

1 Wood fired boiler 3 MW (2 Gcal/h) One steam boiler similar to KE- 500 000
with automatic control system 6.5-14
One wood fired boiler will cover
Boiler house building reconstruction both summer and winter load 20 000
Wood waste transportation system In case of surplus demand there is 50 000
Implementation and one more gas fired reserved
Adjustment boiler 60 000
Design 40 000
Contingencies New wood fired boiler will allow 80 000
Total investment and savings to save about 4 mill m3 of Natural 750 000
gas a year
saving of 281 500 per year

Option 1 Option 2
Indicator Units
SPBT Years 5.08 5.3 3.1 4.0
NPV USD 1 481 800 1 318 200 2 234 600 1 956 000
IRR % 25 25 39 31

Cost USD % of Total
GEF Loan: 150 000 20
Total: 750 000 100
Basic assumptions
wood fuel purchase price 0.3 USD/m3 loose (theoretical cost of own wood waste).
79
Reserve Project Site 2: Heat-only boiler in the City of Telekhany
Owner: Ivatsevichi municipality

Chief Engineer of Telekhany Communal service company
Vladimir Krasnikov

Andrey Kuzminchuk, Head of Brest oblast Division
Contact:
Address: RPO Zh K Ch Telephone: 8-01645 31 278
City: Telekhany Fax: 8-01645 31 278
Oblast, postal code: Brest, 211412 Email:
Existing system:
Plant capacity: 1.6 MW Distribution net 1500 m
100% of net 15 years old, air line in
relatively good condition
Type of boilers Steam boiler E 1/9 - 3 units. Year of Boiler 1: 1975 Boiler No 2: 1975
installed: construction: Boiler N 3 1978
Main end Institutions and apartment buildings in Telekhany town
users/customers:
Legal status of Municipality
owner/sponsor

installed USD
Yes/No 1999 2000
Oil 630 100 per tonne
Gas
Heat sale Yes Gcal/year /Gcal

Description: Reconstruction of existing boiler house by installation of 2 wood fired automatically
controlled water boilers 1MW capacity each. Method of conversion is replacement of 3
existing boilers, which are old, inefficient and in bad condition with 2 wood fired ones.
One small size wood waste storage will be constructed and equipped with necessary
devices for wood chips transportation to boiler. Wood waste will be supplied from
neighbouring forestry enterprise (5 km far).
Benefits Oil fuel savings 630 tonnes a year (900 tce)
New jobs
or wood fired.
80
OPTION 1
Wood fuel automatically operated New boiler house with 2 boilers (1 200 000
boiler house 1,6 MW MW each, main and reserved ones)
Wood waste storage and boiler house installed in Telekhany town instead 30 000
building of old ones
Design 20 000
Implementation adjustment, training
Total investment and savings 50 000
350 000

Option 1 Option 2
Indicator Units
With GEF fund Without GEF With GEF fund Without GEF
SPBT Years 8.8 9.4
NPV USD 225 300 187 600
IRR % 17 17

Cost USD % of Total
Sponsor resources: Committee for Energy Efficiency 105 000 30
GEF Loan: 70 000 20
Total: 350 000 100
Basic assumptions
wood fuel purchase price 5 USD/tonne
81
Reserve Project Site 3: Combined Heat and Power Plant in collective farm “Mayak kommuny”
Owner: Collective Farm “Mayak Kommuny”, v.Kupelka, Vitebsk oblast

Grigoriy Falko, Chairman
Project sponsor: Committee for Energy Efficiency (Minsk department)
V.G.Khron, Head of department
Contact:
Address: v. Kupelka Telephone: 8-02161-7-95-077
City: v. Kupelka Fax: 8-02161-7-94-44
Oblast, postal code: Vitebsk Email:
Existing system:
Plant capacity: 2 MW Distribution net 7500m from BelGRES; 1500 m to
v.Grishany, 2000 m to v.Vysokoe
Type of boilers Mazut fired boilers Year of Boiler 1: 1974
installed: “Universal” - 2 units construction: Boiler 2: 1974
users/customers:
Legal status of To be privatised
owner/sponsor

installed USD
Yes/No 1999 2000
Oil Tonnes 130/tonne
Gas Gas 49/th.m3
Heat consumption Yes 32750 34000 Gcal/year 25/Gcal

Description: At present the farm is supplied with heat from big size gas fired CHP, located in
Erekhovsk (Belgres) through the district heating system 7,5 km long. In summer period
the CHP operates as heat only boiler house. Thermal insulation of DH pipes is extremely
poor. Heat losses level is approx. 40% of heat supplied.
The farm owns an old obsolete low efficient non-operating boiler house. This boiler
house will be fully reconstructed. Its capacity will be essentially increased in order to
supply with heat not only farm itself, but also other consumers supplied from small size
low efficient coal fired boiler houses located nearby. In this connection local district
heating system will be rehabilitated and long distance poor insulated leaking pipes from
Orekhovsk will be disconnected. It is important to mention, that there are no any other
consumers connected to this long distance pipe. It is planned to install two 4 MW wood
fired steam boilers (14 Bar steam pressure). The boiler house will operate as CHP with
0.75 MW back pressure steam turbine. Heat and electricity production will cover all
needs of a farm. A part of the heat will be sold to the local utility of communal services
and electricity produced will be sold to the national electric grid. Wood fuel will be
supplied from the local forestry enterprise
Benefits Gas and coal fuel savings are a little bit more than 4200 toe/yr
New jobs
82
CO2 reduction

2 Wood fired boilers 4 MW each, 14 Boiler similar to the KE 6,5-14 450 000 x 2 = 900 000
Bar with automatic control system MT, 12-13 tons of steam/hour
Back pressure turbine 0,75 MW 270 000 (incl. Implementation)

storage
District heating system 150 000
Design 180 000
Implementation, adjustment, training 200 000


With GEF fund :Without GEF
Indicator Units
SPBT Years 3.48 4.56
NPV USD 2 783 000 2 373 000
IRR % 35.0 27,6
CCC (for investor) US$/Mg CO2
CCC (for GEF) US$/Mg CO2

Cost USD % of Total
Grants (demonstration project) GEF: 410 000 20
Total: 2 050 000 100
Basic assumptions
83
Reserve Project Site 4: Combined Heat and Power Plant in Luninets city
Owner: Concern “Belenergo”

Anatoliy Pavlukevich Director
G.I. Kirilchik, Head of Department
Contact:
Address: Str Stachanovskaya 134 Telephone: 8-01647 25794
City: Luninets Fax: 8-
Oblast, postal code: 225644 Brest oblast Email:
Existing system:
Plant capacity: 75 MW Distribution net 1.5 km to city distribution net
supplying with heat all the city of
45000 inhabitants, industrial
enterprises and social sector
Type of boilers Mazut fired steam boilers Year of Boiler 1: 1974, Boiler 4-1976
installed: DKVR 20/13 - 4 units, construction: Boiler 2: 1974, Boiler 5-1975
KVGM-100 - 2 units Boiler 3: 1975, Boiler 6-1976
users/customers:
Legal status of State company (utility)
owner/sponsor

installed USD
Yes/No 1999 2000
Oil 13500 Tonnes 130/tonne
Gas
Heat sale Yes 115000 Gcal/year 25/Gcal

Description: Existing boiler house is oil fired. It is planned to install one wood fired boiler instead of
old obsolete oil fired one. A 0.75 MW back-pressure turbine will be installed too. This
measure will permit to decrease mazut consumption. and give a hot running water to
Luninets’ citizens all the year round. Now dew to saving reasons domestic hot water
system of Luninets city is disconnected for the warm period (April - October). Wood fuel
will be supplied from the local forestry enterprise
Benefits Oil (gas) fuel savings
New jobs
CO2 reduction
them are natural gas fired, 30% are oil fired and about 5% are fired with more than 2
kinds of fuel, including wood. Almost all of them are equipped with the same type of
boilers as demonstration one
84

Wood fired boiler of 10 MW with1 boiler E-16-21-350 or KE-25-14-700 000
automatic control system 225 MTD-GM or similar to them
Wood fuel storage and supply system 150 000

Back pressure 0,75 MW turbine 270 000

Adjustment
Design 150 000
saving of 1 080 000 per year

Indicator Units
SPBT Years 1.34 1.7
NPV USD 6 920 000 6 594 000
IRR % 83.2 66.8

Cost USD % of Total
Total: 1 620 000 100
Basic assumptions
wood fuel purchase price 3.13 USD/m3 loose
85
Reserve Project Site 5: Heat only boiler in Mosty city Grodno oblast
Owner: Joint Stock Co “Mostydrev”

Alexander Onischenko Director
Project sponsor: Committee for Energy Efficiency, Grodno oblast department
A.F. Nechay, Head of Department
Contact:
Address: 38, Sovetskaya str. Telephone: 8-015 15 33218
City: Mosty Fax: 8-015 15 33676
Oblast, postal code: Grodno Email:
Existing system:
Plant capacity: 40 MW Distribution net 3 km to city distribution net within
enterprise and for supplying heat to the
city (25000 inhabitants, and social
sector)
Type of boilers Gas fired steam boiler DE/25 – Year of
installed: 2units, construction: Year 1980,
Gas water boilers Year 1972
DKVR/20/13-2 units
PTVM-30 – 1 unit Year 1980
Wood fired boilers
Tampella – 2 units Year 1947
users/customers:
Legal status of Joint Stock Co
owner/sponsor

installed USD
Yes/No 2000 2001
Oil Tonnes
Gas 20 050 17 955 Th. m3 49/th.m3
Heat sale Yes Gcal/year 14/Gcal

Description: Option 1.
It is planned to replace 1 steam gas fired boiler DE 25/14 with new automatically
operated wood fired steam low pressure boiler. This measure will permit to reduce natural
gas consumption. and give a hot tap water to citizens all the year long. Now from the
reason of fuel savings, domestic hot water is switched off for the summer period (since
April till October).
This enterprise has sufficient quantity of wood waste to provide all the existing boilers
with this kind of fuel. Lack of funding is the main barrier on the way to do it quickly.
A peculiarity of this wood waste is high level of water content: 60 – 70% in average. In
this case flue gases vapour is to be condensed to improve thermal efficiency of the boiler.
A condenser of flue gases vapour (heat recovery unit) will be installed as a part of a
boiler.
86
Option 2
Instead of gas fired low pressure steam boiler DE 25/14 one wood fired water boiler with
10 MW capacity is to be installed. This boiler will directly supply district heating system
of Mosty city with hot water all the year round (for heating purposes and for domestic hot
water preparation). This boiler is planned to be equipped with the flue gases heat
recovery unit too.
Benefits Gas fuel savings
New jobs
CO2 reduction
them are natural gas fired, 30% are oil fired and about 5% are fired with more than 2
kinds of fuel, including wood. Almost all of them are equipped with the same type of
boilers as demonstration one
Option 1
1 Wood fired steam boiler of 10 MW 1 boiler E-16-14-200 or similar 700 000
with automatic control system with flue gases heat recovery unit
will be installed
Heat recovery unit 250 000
Building and wood fuel storage 200 000

Adjustment
Design 150 000
saving of per year 712000

Indicator Units
SPBT Years 2.1 2.67
NPV USD 4 140 000 3 816 000
IRR % 55.0 44.2
Option 2
1 Wood fired water boiler of 10 MW1 boiler or similar with flue gases 700 000
with automatic control system heat recovery unit will be installed
Heat recovery unit 250 000
Building and wood fuel storage 200 000
87

Adjustment
Design 150 000
saving of per year 712 000

Indicator Units
SPBT Years 2.1 2.67
NPV USD 4 140 000 3 816 000
IRR % 55.0 44.2
Options 1 and 2 are similar on economic indicators. One of the options will be selected during technical
design on the basis of concept developed jointly with the Committee on Energy Efficiency and JSC
Mostydrev

Cost USD % of Total
Total: 1 600 000 100
Basic assumptions
wood fuel purchase price 1.1 USD/m3 loose
88
Biomass fuel supply Project: A Wood Processing Department in Molodechno
Owner: Joint Stock Company "Molodechnoles"

Leonid Stankevich, Director
Victor Fedoseev
Contact:
Address: 24, Vilenskaja str. Telephone: 273 7 10 33
City: Molodechno Fax: 273 7 77 61
Oblast, postal code: Minsk oblast Email:

Description: The ‘open end’ Joint Stock Company "Molodechnoles" which is specialised in wood
harvesting will establish a department or branch responsible for the collecting and
processing, storage, and distribution of wood residues left in the forest after harvesting.
The department will operate on a commercial basis selling wood chips to consumers. The
main consumers will initially be the boiler house at the Olekhnovochi poultry farm
supported by the GEF project loans and, as a backup, the project at the wood processing
JSC “Stroidetal” in Vileika. The project will purchase special equipment (mobile chippers
and forwarders) and transportation means (tractors, loaders and lorries) to store, produce
and deliver wood chips to consumers. The company will produce about 50,000 cubic
metres of loose wood chips per year and transporting them to local boiler houses.
The nature of the The current market for wood fuel used for heating purposes is very limited. For the time
market for the being wood fuel is mainly stored in logs. These logs are predominantly used as fuel for
enterprise' products or stoves in private houses and in small size boiler houses that belong mainly to the Ministry
services of Communal Services or to local municipalities. Although wood chips, sawdust and off-
cuts are produced as wood waste at wood processing enterprises most are used in their
own boiler houses as fuel. There is currently no demand for wood chips as fuel outside of
the wood-processing sector because there are of very few suitable boilers available. Wood
chips are only sold to enterprises specialised in alcohol production. In many cases
(excess) sawdust and wood chips are lost or disposed of in landfills. Forest residues from
wood harvesting, on the other hand, are currently not used for wood chips production
because of the lack of any demand and are simply burned in the forest.
The proposed company will be the first in the market of wood chips produced for heating
purposes in Belarus.
Benefits **Forest residues after harvesting which are lost now (burned directly in the forest) will
be collected, processed into chips and delivered to boiler houses. The amount of forest
residues that are currently lost during harvesting is about 3 million cubic metres (growing
to a forecasted 5.7 million cubic metres in 2015).
**New jobs
**CO2 reduction through enabling biomass energy activities
Replication potential Replication potential will depend on the number of boiler houses converted to wood fuel
and demand for wood fuel for these boiler houses as a result of GEF actions. As
mentioned above, the amount of wood residues created in the forest during harvesting
and fired in the forest is currently about 3 million cubic metres, and this project has a
capacity of 50 thousand cubic metres of wood chips loose. After the of modern
technologies, the willingness to build similar boiler houses will grow and new companies
dealing in production of wood chips will start operating.
The replication potential counted from the forest residues potential is around 100 wood
89
fuel enterprises with a similar capacity as the the proposed project. In reality, fewer wood
supply enterprises with larger capacities are expected in the market. Through the creation
of new wood fuel enterprises the wood fuel market will be established and competition
between enterprises with grow.
OPTION 1 (implementation cost is included)

Equipment and transportation units for Equipment for collecting, 790 000
wood storage company chipping, storage and transporting
of wood fuel
Total investments 790 000
SPBT Years 5.2 5.5

NPV USD 305 000 280 000
IRR % 19 19

Cost USD % of Total
GEF Loan: 230 000 29
Total: 790 000 100
Basic assumptions
wood fuel sale price 5 USD/m3 loose
90
ANNEX J: CO2 EMISSION CALCULATION
CO2 emission calculations are given in Table 5 on the following page, and are based on the following assumptions
and information sources:
 Year 2000 fuel usage figures from government reports. Projections for 2005 and 2015 are based on
government figures used in the regulations for the government’s “National Programme of Energy Saving
and Renewable Energy Utilisation for the period 2001 to 2005”. The figures include all kinds of fuels that
are used for energy production (heat and power) in Belarus.
 The CO2 emission factors used have been determined locally by the Belarussian Scientific-Research Centre
“Ecologia”, an agency of the Ministry of Natural Resources and Environmental Protection, as part of their
preparations for the first official National Communication. These figures relate closely to those used by the
IPCC (with small variations due to local conditions), and are as follows:
Fuel Emission factor (kg/MJ):

Mazut 73.530
Natural 56.339
gas
Coal 103.147
Peat 104.250
 Since all wood fuel in this analysis comes from renewable sources (i.e. it is harvested in sustainable way),
and emissions are subsequently reabsorbed, the wood fuel emissions are zero.
 CO2 emissions have been determined by multiplying fuel used by energy content and the emission factor.
So, for example, taking total consumption of Mazut in the year 2000 we have:
 2980 thousand tce, or in energy units
 87 339 MJ multiplied by the emission factor of 73530 g/MJ, we get
 6422 Gg of CO2, as given in the table.
 CO2 equivalent figures are given in the table for comparison, and are not used in descriptions and further
calculations given in the project brief.
91
Table 5: CO2 Emission Calculations
2000 2005 2015
Kind of fuel Th. tonnes of СО2 (th. СО2 SO2 Fuel (th. tce) СО2 (th. CO2 SO2 Fuel (th. tce) СО2 (th. CO2 SO2
coal eq (tce) tonnes/yr) equiv. (tonnes/yr) tonnes/yr) equiv. (tonnes/yr) tonnes/yr) equiv. (tonnes/yr)
Planned trends of fuel consumption without GEF impact
Gas 18,742 30,957 30,959 - 19,500 32,209 32,211 - 20,000 33,035 33,037 -
Mazut +diesel 2,980 6,422 6,424 53,440 2,637 5,683 5,685 47,289 2,200 4,741 4,743 39,452
Coal 396 1,197 1,197 5,940 350 1,058 1,058 5,250 250 756 756 3,750
Wood fuel* 1,122 - - - 1,400 - - - 1,800 - - -
Peat 769 2,349 2,350 - 750 2,291 2,292 - 750 2,291 2,292 -
Total 24,009 40,925 40,930 59,380 24,637 41,241 41,246 52,539 25,000 40,823 40,827 43,202
Savings from GEF intervention (demonstration (for 2005) and replication (for 2015))
Olekhnovichi
> Mazut 9 19 19 159
> Gas (elec.) 1 2 2 -
Vileika
> Mazut 9 19 19 158
> Gas (elec.) 2 3 3 -
Uzda
> Gas (elec.) 1 2 2 -
Farinovo
> Mazut 11 24 24 197
Radon
> Gas 2 3 3 -
Mazut in total 29 62 62 515 330 711 711 5,918
Gas in total 6 10 10 - 20 33 33 -
Coal in total - - - - 50 151 151 750
Total savings 35 72 72 515 400 895 895 6,668
Trends in fuel consumption taking into account GEF impact
Gas 18,742 30,957 30,959 - 19,494 32,199 32,201 - 19,980 33,002 33,004 -
Mazut + diesel 2,980 6,422 6,424 53,440 2,608 5,621 5,623 46,774 1,870 4,030 4,031 33,534
Coal 396 1,197 1,197 5,940 350 1,058 1,058 5,250 200 605 605 3,000
Wood fuel 1,122 - - - 1,435 - - - 2,200 - - -
Peat 769 2,349 2,350 - 750 2,291 2,292 - 750 2,291 2,292 -
Total 24,009 40,925 40,930 59,380 24,637 41,169 41,174 52,024 25,000 39,928 39,932 36,534
GEF impact on growth of wood fuel use and reduction of GHG emissions
Savings from
- - - - 35 72 72 515 400 895 895 6,668
wood fuel use
92
ANNEX K: SIGNED LETTERS OF INTENT
Letters indicating interest and commitment to the project have been received from all project participants.
Signed versions are available in English and Russian.
The list of commitment letters is as follows:
 Committee on Energy Efficiency, dated 29/04/2002
 Molodechno Battery Farm, dated 26/04/2002
 Vileika Joint Stock Co "Stroidetali", dated 25/04/2002
 Volat-1, dated 5/01/2002
 IKEA, dated 11/01/2002
 Farinovo, dated 14/01/2002
 Radon, dated 11/1/2002
 Molodechnoles, dated 28/12/2002
 Mostodrev, dated 22/4/2003
93
94
95
96
97
98
99
100
101
102
103
104
ANNEX L: EQUIPMENT REQUIREMENTS
The executing/implementing agency will maintain inventory records of non-expendable equipment. Non-
expendable equipment is capital goods procured once during the project and used through the whole project period.
The project will follow UNDP procurement procedures. UNDP/GEF supported equipment will remain UNDP’s
property until formally transferred will be made by the UNDP Resident Representative, in consultation with the
Parties concerned. The Executing/Implementing Agency will be responsible for ensuring that the use of equipment
and supplies procured with UNDP/GEF funds is strictly for the purpose of the project. It will see for its proper
custody, maintenance and care and provide UNDP, upon request, with information regarding the use, storage and
maintenance of such equipment.
Equipment requirements are to be finalised at the outset of project operations, based on the actual needs.
105
ANNEX M: TERMS OF REFERENCE FOR INTERNATIONAL AND NATIONAL EXPERTS AND

SUBCONTRACTORS
INTERNATIONAL EXPERTS
Budget Line 11-01 Technical advisory services (combustion)
Position title: Technical expert on advisory services (combustion)

Budget line 11-01
Type of contract: Service Contract
Duration of contract: 120 working days over the 36 month period
Objectives of work: To provide international expertise necessary to ensure the successful implementation of
output 2.1 (demonstration projects showing that wood energy is modern, clean, versatile,
cost-effective and efficient are implemented)
Duties:  Together with local experts review and evaluate the feasibility studies and
investment proposals prepared during the PDF B
 Provide assistance for the preparation of the full technical design of the systems
and the tender documents for the equipment and services to be purchased
 Evaluate the tenders from suppliers and assist in the selection of suppliers
 Monitor the implementation of the demonstration projects ensuring that they meet
their intention of showcasing biomass energy potential.
 Troubleshoot and work to solve implementation barriers
 Elaborate possible long-term mechanisms to support the biomass energy projects
in conjunction with the other experts participating in the projects’
implementation.
Expected Results: Demonstration projects showing that wood energy is modern, clean, versatile, cost-
Schedule of work: Start of activities: 2003

End of activities: 2006
Qualifications:  Extensive practical hands-on experience (a minimum of 10 years) in the
implementation of state-of-the-art biomass energy technologies
 Relevant experiences in Eastern European countries with biomass energy projects
 good interpersonal skills and ability to transfer skills to local experts
 wide experience in elaboration of projects on wood and wood waste use as fuel,
feasibility studies for such projects
Special Terms: Experience in former Soviet Union Republics
Duty Station: UNDP Minsk
Supervisor: Project manager, National Project Co- ordinator

(Name and Title)
Subscriber:
(Name)
106
Budget Line 11-02 Technical advisory services (supply)
Position title: Technical expert on advisory services (fuel supply)

Budget line 11-02
Duration of contract: 120 working days over the 36 month period
Objectives of work: To provide international expertise necessary to ensure the successful implementation of
component 2.2 (demonstration project showing that risks and uncertainties of fuel
supply can be reduced with a functional regional supply organization)
Duties:  Together with local experts review the regional supply system proposed during
the PDF B, and propose adjustments as necessary
 Provide assistance for the preparation of the institutional, contractual and
hardware requirements and assist in the preparation of the tender documents
for the equipment and services to be purchased
 Evaluate the tenders from suppliers and assist in the selection of suppliers
 Monitor the implementation of the demonstration projects ensuring that they
meet their intention of showcasing biomass energy potential
 Elaborate possible long-term mechanisms to support the biomass energy
projects in conjunction with the other experts participating in the projects’
implementation.
 To arrange a small study tour (for approx 10 Belarusian experts who will be
involved in the fuel supply system to be set up under this activity) to countries
in which effective fuel supply systems are being implemented (including at
least 1 Eastern European country that is working on tacking biomass fuel
supply systems).
Expected Results: demonstration project showing that risks and uncertainties of fuel supply can be
reduced with a functional regional supply organisation

Qualifications:  Academic and practical background in the forestry product sector and/or
logistics
 Extensive practical hands-on experience (a minimum of 10 years) in the
arrangement and implementation of a regional biomass energy supply system
 Relevant regional experience in the arrangement of biomass fuel supply
systems
 Demonstrated ability to adjust and tailor advice to local conditions
 Good interpersonal skill and ability to transfer skills to local experts
Special Terms:
Supervisor:
Project manager, National Project Co- ordinator
(Name and Title)
Subscriber: (Name)
107
INTERNATIONAL SUBCONTRACTOR
Budget Line 21 Twinning subcontract
Outputs 3 to 7 of the proposed project, comprised of replication and exit strategy activities will take place within
the framework of a twinning arrangement with an international organisation. The rationale is to provide a coherent
foundation linking and integrating these outputs and to establish a basis for long-term and strategic international co-
operation well after the end of the GEF project.
This will take the form of twinning between the Project Management Unit (PMU) and a ‘Twinned Institute’ in
another country. The foreign institute will act as the foreign hub, facilitating twinning activities between Belarus
and the twinned country, strengthening the institutional capacity of the PMU and other Belarussian organisations in
the facilitation and promotion of viable biomass energy. Activities focus on addressing awareness-raising needs, as
well as technical and organisational needs to support the project activities.
For Output 1.4, which includes study tours, training workshops and secondments, the foreign institute will be the
foreign facilitator, and will work closely with the PMU to identify the most suitable content. During other outputs,
the twinned institute will act as advisor, providing international expertise to those implementing each output, and
access to additional resources (information / contacts) where required.
Position title: Consultant services on twinning arrangements

Budget line 21
Duration of contract: 12 working months over the 48 month period
Objectives of work: To provide the international expertise necessary to ensure the successful
implementation of component B and C of the project
Duties:  Assist the local marketing expert in the development of the project
dissemination strategy, advising on awareness raising and capacity building
activities based on international experience. In particular advise on how the
proposed study tours can best be used to raise awareness of and enthusiasm for
biomass energy systems.
 Arrange a total of 4 to 6 study tours over the four-year project duration for
groups of Belarusian stakeholders (policy, funding and operation of revolving
fund, equipment supply, end-users) for the purposes of training, capacity
building and awareness raising.
 Provide and adapt materials which can be used as the basis for the promotional
campaign
 Facilitate contacts and exchanges between Belarusian organisations and
International organisations
 Prepare a review/survey of the international experiences and state of the art in
information-based decision-making tools for national wood energy planning
and the potential for this to be used in Belarus
 Assist the project manager / GIS expert in the specification of local hardware,
software, institutional, skill and informational requirements for the
achievement of the required outputs
 Advise local specialists in the development of the GIS system, evaluating
progress, and development of models for interpreting results into concrete
plans
108
 Prepare an objective synthesis of experiences in project outputs to be used as a

basis for the policy assessment process
 Assist the project management unit in the exploration of concrete policy
options for removal of barriers to biomass energy
 Attend the seminar / dialogue to provide the international perspectives on
facilitative policies for biomass energy
 Advise on foundation documents / contracts for the revolving fund ensuring
that it is established soundly
 Facilitate dialogue between the Biomass Fund, the project management unit
and international donors for future contributions to the fund
 Review the business plans / project portfolios developed by local experts
ensuring that they comply with requirements of international donors
 Compile the package which will be used in the marketing of the projects and
make presentations to / hold negotiations with donors together with Belarusian
counterparts
 Draft sections of the best practice guidebooks in close co-operation with local
specialists
 Carry out an independent assessment of the barrier removal process identifying
the next barriers to be removed and proposing scale-up activities
 Assist local specialists in the development of the scale-up plan
Expected Results: The successful implementation of all components of the Project through twinning
arrangements

Qualifications:  Excellent international network with access to organisations and expertise

worldwide (including donors)
 Wide experience in the elaboration of projects on wood and wood waste use as
fuel, feasibility studies for such projects, marketing and promotion, business
plan development, national programmes, and policy assessment. Good
knowledge of international experience in this field
 Relevant regional experience working with a governmental, private sector, and
non-governmental organisations in Eastern Europe
 Demonstrated ability to adjust and tailor advice to local conditions, engage
with local stakeholders
Special Terms: Experience in former Soviet Republics
Supervisor:
(Name and Title)
Subscriber:
(Name)
109
ADMINISTRATIVE ASSISTANCE
Budget line 13-01 Administrative assistant
Position title: Administrative Assistant to the Project Manager

Budget line 13-01
Duration of contract: 48 months
Objectives of work: To provide assistance to the Project Manager, the UNDP office in Belarus and
the Committee for Energy Efficiency in implementing the project
Duties:  ensures proper functioning of the project office, equipment, office

supplies, etc.;
 assist the programme manager and local and foreign consultants in
conducting different activities within the framework of the project
(training, seminars, procurement of tickets, rent of premises,
arrangements on study tour, etc.);
 during the visits of foreign experts bears the responsibility for their visa
support, transportation, hotel accomodation etc;
 organises procurement of office consumables;
 organises control of budget expenditures by preparing payment
documents, and composing financial reports;
 keeping files with project documents, expert reports;
 controls the usage non expendable equipment (record keeping, drawing
up regular inventories);
 contacts local and foreign experts and consultants about to inform them
about the project details and changes.
 Performs other duties under the instruction of the project manager.
Expected Results: Successful project office operation

Qualifications:  Higher education,

 not less than 2 years experience in office administration, preferably
UN projects
 speaking and writing English,
 computer skills.
Special Terms: Citizen of Belarus
110
Supervisor:
(Name and Title)
Subscriber:
(Name)
NATIONAL EXPERTS
Budget Line 17-01 National project manager
Position title: Project manager
Objectives of work: Successful management and implementation of the project
Duties: As leader of the Project Management Unit, and in close consultation with the
Executing Agency, the Project Steering Committee and the UNDP, the project manager
is responsible for day-to-day management, co-ordination and supervision of the
implementation of the project activities.
Specifically, the project manager is responsible for:
 Overall co-ordination, management and supervision of project implementation
 Preparation of detailed work plans for the project, and drafting of terms of
reference for the subcontracts (in consultation with the Executing Agency and
UNDP)
 Organize and supervise workshops and training needed during the project
 Identify national experts and institutions to work for the project (in close co-
operation with the executing agency, project steering committee and the
UNDP)
 Supervise the work of the national and international experts working for the
project
 Liaise with relevant ministries, national and international research institutes,
NGOs and other relevant institutions in order to involve their staff in project
activities, and to gather and disseminate information relevant to the project
 Prepare periodic progress reports of the project, measuring project impact
against the project indicators given in the project planning matrix
 Monitor validity of project assumptions and in dialogue with the project
steering committee and the UNDP adapt the activities so as to ensure project
success
 Control expenditures and ensure an adequate management of the resources
provided for the project
Conduct negotiations on co-operation with the government and international actors and
financing instructions active in Belarus in order to identify and mobilize resources
Expected Results: Project implemented, demonstration sites operating, revolving fund established
Qualifications:  A master degree equivalent in an academic area directly relevant to energy,
111
environment, and sustainable development

 A minimum of 10 years working experience in the area of energy, energy
efficiency and biomass energy
 Extensive experience with project and corporate management, co-operating
with project personnel including government officials, scientific institutions,
NGOs, private sector and international organisations, and a demonstrated
ability to manage projects of this kind and complexity. Experience in
management of international projects.
 Excellent interpersonal and training skills
 Good computer skills
 Fluency in both Russian and English.
Duty Station: UNDP, Minsk
Supervisor: National Project co-ordinator, First Deputy Chairman of the Committee on Energy
Efficiency of Belarus
(Name and Title)
Subscriber:
(Name)
112
Budget Line 17-02 Technical assistant to project manager
Position title: Technical Assistant to Project Manager
Objectives of work: Technical assistance in successful project management and implementation
Duties:  Assistance the project manager in day-to-day project implementation activities

and project management. This is a technical position and this assistant will be
delegated technical activities, and in the process learning from the project
manager
 Prepare terms of reference for national experts, advisors, trainees and
contractors, study tours, training courses
 Coordination of foreign and local experts activities
 In coordination with UNDP office prepare technical bidding documents for
procurement goods and services for demonstration sites
 In consultations with local authorities and local subcontractor identification of
investment projects portfolio
 Management of other technical aspects of the project
 Overall technical supervision of project implementation
Expected Results: Demonstration sites are successfully operating, data bases and GIS are completed and
functioning


environment, and sustainable development
 A minimum of 5 years working experience energy, preferably in biomass
energy
 Experience with project management
 Excellent interpersonal and communication skills
 Good computer skills
 Fluency in both Russian and English.
Supervisor:
(Name and Title)
Subscriber:
(Name)
113
Budget Line 17-04 Technical advisor (combustion)
Position title: Technical expert on combustion

Budget line 17-04
Objectives of work: Successful management the implementation of the boiler conversion demonstration
projects (output 1).
Duties:  Review and evaluate the feasibility studies and investment proposals prepared
during the PDF B,
 Evaluate market of wood fired boilers and steam turbines in Belarus, Russia
and foreign countries in terms of price and quality
 Participation in the full technical design of the systems and the tender
documents for the equipment and services to be purchased
 Evaluate the tenders from suppliers and together with the project manager and
Executing Agency select preferred suppliers
 Monitor the day to day implementation of the demonstration projects
 Other duties relating implementation of boiler conversion demonstration sites
 Prepare proposals for combustion technologies and equipment relating the
portfolio of new projects
Expected Results: Demonstration projects showing that wood energy is modern, clean, versatile, cost-


combustion and environment.
 Extensive knowledge of state-of-the-art biomass energy technologies and
experiences and lessons learned in Belarus and/or other countries with biomass
energy projects;
 A minimum 5 years working experience in boiler houses design,
 Practical experience with implementing biomass energy projects in Belarus
and/or abroad;
 Good interpersonal and training skills;
 Ability to work in both Russian and English
Special Terms: Citizenship of Belarus
Supervisor:
114
(Name and Title)

Subscriber:
(Name)
Budget Line 17-05 Technical advisor (supply)
Position title: Technical expert on fuel supply

Budget line 17-05
Objectives of work: Successful management the implementation of the biomass fuel supply demonstration
projects (output 1).
Duties:  Review and evaluate the feasibility studies and investment proposals prepared
during the PDF B,
 Evaluate wood waste resources and existing market of wood fuel in Belarus in
terms of wood fuel availability, possible suppliers, quantity and quality,
 Review the regional supply system proposed during the PDF B, and propose
adjustments as necessary
 Prepare the institutional, contractual and hardware requirements and
preparation of the tender documents for the equipment and services to be
purchased for wood fuel processing and supply,
 Evaluate the tenders from suppliers and select of suppliers in close co-
operation with the project manager and executing agency
 Monitor the implementation of the demonstration projects ensuring that they
meet their intention of showcasing biomass energy potential
 Troubleshoot and solve implementation barriers
 Other duties relating implementation of biomass fuel supply demonstration
site,
 Prepare proposals on technologies of fuel supply for the portfolio of new
projects
Expected Results: Demonstration project showing that risks and uncertainties of fuel supply were reduced
with a functional regional supply organization

Qualifications:  Academic and practical background in the forestry product sector and/or
logistics
 Good knowledge of forest harvesting and wood processing technologies and
equipment,
 Extensive practical hands-on experience relevant to the project
 Practical experience with implementing biomass energy projects in Belarus
and/or abroad
 Demonstrated ability to develop economically sustainable activities in Belarus
(ie. with entrepreneurial experience)
 Ability to work in both Russian and English
115
Supervisor:
(Name and Title)
Subscriber:
(Name)
Budget Line 17-06 Marketing advisor
Position title: Marketing advisor

Budget line 17_06
Objectives of work: Supervising and supporting the market analysis, information dissemination,
facilitating the public participation in the elaboration and development of the
biomass energy projects.
Duties:  Review experiences and lessons learned from the realised wood biomass
energy projects in Belarus and abroad and their relevance to information
dissemination, public participation in and public acceptance of biomass energy
projects
 Develop information dissemination strategy and marketing campaign to
increase awareness and understanding of biomass energy technologies at the
local level, including information on their benefits and constraints
 Supervise and organise the information dissemination and marketing campaign
as designed above, including the development of appropriate materials, the
organisation of public hearings etc., and other activities as necessary
 Carry out surveys at the end of year 2 and 4 on participants in the study tours
to assess the impact of the awareness raising campaign, and make
improvements as required
 Assess the awareness of biomass energy in key stakeholder groups
 In close consultation with the other experts working for the project, elaboration
of the existing information and other related barriers to the realisation of
biomass energy activities;
Expected Results: Dissemination and awareness campaigns are implemented aiming to reduce
information and perception barriers
Qualifications:  Extensive knowledge of the state-of-the-art methodologies, strategies, tools
and practices for conducting market surveys, market analysis and information
dissemination and marketing campaigns for the introduction of new
technologies and commercial products;
 Extensive experience and demonstrated ability to conduct market surveys,
market analysis and information dissemination and marketing campaigns in
116
Belarus;
 Good computer skills;
 Fluency in Russian, ability to work in English highly desired
 Experience in and familiarity with the energy sector, biomass and other
renewable energy and energy efficiency technologies is considered a plus.

(Name and Title)
Subscriber:
(Name)
Budget Line 17-07 Geographic Information System elaboration
Position title: Expert on GIS system

Budget line 17_07
Objectives of work: Development the GIS system to facilitate the implementation of integrated and co-
ordinated approaches for the planning of replication, and providing tools for
financial decision-making.
Duties:  Carry out review of the current GIS and Resource Management capabilities in
Belarus and identify possibilities to build on this capability
 Supervise the review of international experiences in information-based
decision-making tools for national wood energy planning and assist with the
assessment of the potential for this to be used in Belarus
 Develop detailed implementation schedule for the Information System output
 Supervise the provision of training on GIS systems ensuring that it is relevant
to Belarusian circumstances and adapted as necessary.
 Manage the development of the data model, the data gathering and the input
process according to the requirements for the GIS system
 Working with other local specialists and the international experts to develop
planning scenarios (proposals) based on the developed GIS system for the use
of the Committee on Energy Efficiency

Expected Results: GIS system is developed and operating

Qualifications:  Extensive knowledge of local Belarusian infrastructure and resource planning
approaches and practical implementation;
 Extensive experience and demonstrated ability to work in a multi-disciplinary
117
environment and make use of multi-criteria decision-making tools;

 Good computer skills;
 Fluency in Russian, ability to work in English highly desired
 Experience in creating digital GIS datasets through digitizing paper source
documents, data-entry, editing, scanning and developing datasets within a GIS
environment would be a considerable advantage
 Experience in and familiarity with the energy sector, biomass and other
renewable energy and energy efficiency technologies is considered a plus.

(Name and Title)
Subscriber:
(Name)
NATIONAL SUBCONTRACTOR
Budget line 22 Investment projects pipeline
Position title: Consultant services on development of a pipeline of investment projects

Budget line 22
Duration of contract: 24 months period
Objectives of work: Develop a portfolio of 7-10 investment projects

Duties:  Select using the data base of boiler houses 15-20 potential sites undertake a
technical and economic feasibility analysis of the identified boiler energy
efficiency measures;
 Undertake energy audits of selected sites and identify availability of wood waste
necessary for conversion
 Estimate the total investment needs to realize the economically feasible potential to
reduce the energy production at the demand side;
 Estimate the total heat demand and the heat load density of the selected project
site/district before and after the realization of the (economically feasible) boiler
conversion energy efficiency measures;
 With respect to the foreseen heat demand and heat load density analyze the
technical, economic and environmental feasibility of the different biomass fuel
supply options and the measures to improve the energy efficiency of the fuel
supply side in general;
 Prioritize the different fuel supply side measures with respect to their technical,
economic, financial and environmental feasibility;
 Identify the existing barriers to the realization of the identified fuel supply side
energy efficiency measures;
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 Present and discuss the results of the analysis, with an objective to define the
framework and to select the measures and technologies for conversion to wood
fuel.
Expected Results: 7-10 sites for conversion to wood fuel are identified

Qualifications:  wide experience in making energy audits, elaboration of energy efficiency and
biomass projects, feasibility studies for such projects, good knowledge of
international experience in this field ,
 Availability of qualified personnel.
Special Terms:
Supervisor:
(Name and Title)
Subscriber:
(Name)
119
ANNEX N: OUTLINE OF COORDINATION EFFORTS WITH THE WORLD BANK
The project brief was actively discussed with World Bank staff, and UNDP held discussions both with the GEF
Secretariat and World Bank staff following the submission of the brief to the GEF Council to determine the
appropriate scope of cooperation under the project. The results of these discussions were as follows:
First, it was determined that direct integration of the proposed UNDP-GEF work into the ongoing World Bank loan
would not be possible. The World Bank Social Infrastructure Retrofitting Project (SIRP) focuses only on certain
institutional facilities in the social sector, such as schools, nurseries, hospitals, etc. The Loan Agreement between
the Government of Belarus and the World Bank does not allow funds to be used for any other sites or purposes.
These terms and conditions would limit the impact of the UNDP project to demonstrate the benefits of boiler
conversion across the market. A general description of the SIRP has been included in the project document (see
page 10).
Second, the World Bank had also specifically proposed using GEF grant funds to purchase and install equipment to
retrofit a boiler house at a health care facility in Belarus. The concern of the project team was that a grant for
equipment would work at cross-purposes with the concept that biomass boiler conversions could be cost-effective
and therefore supported by financial mechanisms such as loans. There was also some concern that it would not be
fair to offer a grant to one facility while asking other pilot investors to take loans for the same purpose. The project
proponents felt that loans would be more effective in addressing both financial barriers (more capital would be
available under a loan scheme) and awareness barriers (a working fund would send a powerful message to potential
investors and lenders about the viability of these investments).
The project team and UNDP-GEF have proposed the following solution: the proposed health facility project will
be included under consideration for support through the revolving fund. This solution would allow the facility to be
a candidate for the capital that will be generated from repayment to the revolving fund. The project might be
considered sooner if discussions on attracting additional capital for the fund are successful. Using this approach,
the facility would gain access to funding, and the revolving fund would receive a project that has already reached
an advanced state of preparation. This proposed solution would seem to be mutually beneficial while also
remaining consistent to the principles of market transformation. Furthermore, it would also be possible for other
promising projects identified during the course of the SIRP to be considered for funding in this manner.
All project stakeholders agreed that technical cooperation would be an important area for joint work, and that it
would be mutually beneficial to exchange technical experience from both projects. For example, a number of the
SIRP project sites are equipped with small boiler houses (200 – 500 kW), which will be converted to local fuels that
include wood fuel. The UNDP-GEF project will focus on medium and large boiler houses. It is clear that each
project will benefit from the experiences of the other, as the range of technologies for conversion will be slightly
different. In addition, the emphasis on clean-burning technologies meeting stringent environmental requirements
has been noted at the suggestion of the World Bank. Finally, it is anticipated that results from the SIRP project
would be included in the training and outreach activities of the UNDP-GEF project, and the UNDP-GEF project
activity on the development of a biomass resource atlas for Belarus should also benefit the SIRP in turn.
A World Bank SIRP project representative will be included in the Steering Committee of the UNDP/GEF Project
what was indicated in the Prodoc (see page 30 of the Prodoc). A Memorandum of Understanding between the
UNDP and the World Bank is, therefore, not seen to be necessary to ensure close coordination between the two
agencies.
120
ANNEX O. REVOLVING FUND DEFINITION
1.1 Definition and Description of the RF Administrator
In addition to the details on financing to set up the revolving fund (RF) and preliminary investment projects
conditions, which are presented in Output 3.2 of the Project Document, the following information covers the RF’s
political and administrative status.
The State Enterprise Belinvestenergozberezhenie (full name Investment and Consultancy National Unitary
Enterprise Belinvestenergosberezhenie) has been identified as the institution to administer the Revolving Fund to
be established under the project.
The Belinvestenergozberezhenie enterprise was founded in 1998 by the State Committee on Energy Efficiency
following a decree of the Council of Ministers 2 demanding its establishment. By its legal charter
Belinvestenergozberezhenie is a nation-wide state enterprise under control of a single founding agency (State
Committee) established according to the Civil Code and Law on Enterprises of Belarus for coordination of large
investment projects in the area of energy efficiency. The Legal Charter of the Belinvestenergozberezhenie allows
for establishment of subsidiary bodies and new legal entities (of which the Revolving Fund is going to be a one).
The summary of the mission of Belinvestenergozberezhenie (as per its Legal Charter) is:
- economic activity under international and national projects, including those funded by the World Bank and
other financial organizations, in the area of energy efficiency;
- pooling and re-distribution of national funding for energy efficiency enterprises, including those funds of
Belenergo Concern and other stakeholders assigned as co-financing to the World Bank project.
-
In order to enable implementation of its mission Belinvestenergozberezhenie does:
- management and coordination of international projects co-financed by the World Bank and other international
financial donors
- managerial control over the targeted and correct use of international funds and over the time-tables of
international projects,
- day-to-day financial and technical control over international projects,
- consultancy to national stakeholders on preparation of Terms of References, business plans, bidding
competitions, planning and implementation of projects and programs in the area of energy efficiency, and
- development of business plans for projects on highly efficiency use of fuel.
In support of the above activities, Belinvestenergozberezhenie is additionally licensed to implement:

- various forms of mediation in financial transactions in the area of energy efficiency (activity type # 65239 in
the official register),
- other activities to support financial mediation (# 67139),
- consultancy to managers and staff of private and public enterprises, PR activities, policy advice for planning,
organization and support of effective use of information for managers, targeted consultations for managers
(#74140-01),
- energy audits of enterprises (74140-02).
The operations of the enterprise are financed by the State Committee on Energy Efficiency as well as from support
costs and income from various investment projects the enterprise operates. The founder (the State Committee) has
the following responsibilities and control functions over Belinvestenergozberezhenie:
2
Annual program funds of the State Committee amount to USD 30 million on average
121
- approves the Legal Chargter of Belinvestenergozberezhenie, including its amendments and additions, defines
and amends the mission and types of activities of Belinvestenergozberezhenie,
- assigns and dismisses the Director of the enterprise,
- controls the use and safety of non-expandable items belonging to the enterprise,
- has final decision-making authority about creation of subsidiary bodies,
- approves the annual report of the enteprise,
- conducts regular financial and administrative checks of the enterprise, and
- approves decision on liquidation and/or reorganization of the enterprise.
Today Belinvestenergozberezhenie has 20 staff, including highly qualified investment equipment procurement
officers, national and international contract officers, crediting and investment techniques officers, etc. Regular
training is arranged for the specialists of the enterprise. Thus, in May 2003 two experts on procurement will be
trained for 3 weeks in Turin (Italy).
One of the key projects which the agency was recently assigned to handle is the World Bank Energy Efficiency for
Social Infrastructure Loan (a USD 40 million plus 4-year project, including 22.6 million of the World Bank
financing). The WB project covers 350 social infrastructure sites all over Belarus
As can be seen, not only the mandate, but the staff qualifications and financial solvency of the enterprise match the
objectives of the RF establishment and minimize the financial risks.
1.2 Scenario for establishment and empowerment of the RF
Technically, once the project is cleared (since the GEF component is a key bid for the fund), the supervising agency
– the State Committee for Energy Efficiency will issue a decree assigning Belinvestenergosberezhenie to administer
the RF. Based on the Legal Charter, a subsidiary body (Revolving Fund) will be established as an separate legal
entity assigned to Belinvestenergozberezhenie. The RF will act on the basis of its own Charter (the RF Charter), the
draft of which has been developed over the course of PDF B. In preparation for the establishment of the RF during
the PDF B stage, the legislation and procedural background was studied in full, the legal and administrative
grounds for establishment of the RF under Belinvestenergozberezhenie (once the funds were cleared) were found
fully satisfactory.
The draft RF Charter3 covers the following:
Definition of the RF. State Unitary Enterprise will be established by Belinvestenergozberezhenie and will act as a
separate legal entity, with its own bank accounts, financial and programmatic responsibility, its own obligations,
presentation of its interests in court, etc.
In accordance with the legislation of Belarus the RF will be assigned the mission to implement international and
national programs which include pooling and reallocation of investment resources of the state, as well as
international organizations.
Objectives and Activities. The key objective of the RF is to ensure financing (on the payback terms) of programs in
the area of energy efficiency, replacement of fossil fuel by alternative fuels, including biofuel.
The RF should mediate investment (on the payback terms) to enterprises of any type of ownership with the purpose
of increasing energy efficiency, decreasing use of fossil fuel, replacement of such fuels by alternative fuels,
including wood and woodwaste. Specifically, in accordance with the official register of activities of Belarus, the RF
will:
3
The text of the RF Charter is available in Russian. For the purpose of its presentation here key extracts were translated to English.
122
- undertake monetary and financial mediation (651, 652, 67), including specifically for securing funding and
payback:
- Finalization of legal contracts between all stakeholders involved in the use of RF funds, including
finalization of pay-back arrangements;
- Calculation, discussion and approval with each stakeholder of cashflows and timetable for payback;
- Control over the correctness of funds allocation and use;
- Control over observance of the payback timetables;
- Control over targeted use of finance achieved by recipients;
- Defining sanctions and their application when needed.
- undertake consultancy and installation of software related to the mandate (7220)
- render information services in accordance with legislation of Belarus (741)
- render assistance to enterprises on preparation of business plans (7414)
- render assistance to clients on check and control of the correct use by subcontactors of investment funds (7420).
The role of Belinvestenergozberezhenie as a founding agency. The founding agency:

- approves the Legal Chargter of Belinvestenergozberezhenie, including its amendments and additions, defines
and amends the mission and types of activities of Belinvestenergozberezhenie,
- assigns and dismisses the Director of the enterprise,
- controls the use and safety of non-expandable items belonging to the enterprise,
- has final decision-making authority about creation of subsidiary bodies,
- approves the annual report of the enterprise,
- conducts regular financial and administrative checks of the enterprise
- approves decision on liquidation and/or reorganization of the enterprise.
Additionally, the draft plan of launching activities of the RF stipulates:

- financial transaction arrangements: opening of a special bank account to enable full transparency of
transactions, development of technical procedures for issuance of and payback of grants,
- RF human resource management: hiring of personnel to ensure highly qualified and dedicated staffing of the
RF,
- Development of Operational Manual on the basis of the charter to ensure that each detail of the RF operationsis
identified, studied and duly stipulated,
- Relationships with other (state and private institutions).
The draft Charter was discussed with Ministry of Economy and Ministry of Finance and it has been decided that
once the contribution of the project towards the RF is cleared, a Decree of the President of Belarus will be drafted
and enforced to confirm all the administrative and financial arrangements about its operation and enable
preferential taxation of its operation.
1.3. Transparency of the RF
In order to prevent misuse and corruption a World Bank system of management of control and reporting will be
introduced to ensure transparency of operations of the Revolving Fund. This system is well-known as one of the
strictest compared to other systems of anti-corruption protection. It envisages among other things:
- full transparency of all operations related to bidding, starting from preparation of the invitation package and
ending with procedures for bid selection and assigning contracts;
- strict reporting at each stage of cooperation with potential subcontractors, as well as when approving
documents at each stage of the bidding competition and subsequent financial transactions through the RF;
- annual independent audits of RF.
123
The staff of Belinvestenergozberezhenie includes specialists with long experience in the use of such control and
reporting systems.
Apart from the internal reporting system and external audits, the operations of the RF will be subject to inspections
used in the banking sector of Belarus, which includes:
- meticulous study of financial viability of the to-be funds recipient, including evaluation of its fixed and liquid
assets, presentation of guarantees;
- strict analysis of each business plans, selection of the best plans and the most reliable to mitigate financial risks;
- production of legal procurement-delivery contracts to fix the price and other terms, as well as contracts on RF
loan payback.
Additionally, in terms of transparency and corruption issues, it is important to note that within the former Soviet
Union, Belarus is consistently rated as the least corrupt state, which is largely owing to a strict system for state
control (in fact bureaucratic barriers resulting from controls are consistently mentioned as a much greater deterrent
than corruption to foreign investment and national business development). The operations of the RF will be fully
subject to reporting and inspections of the State Committee on Energy Efficiency, National Bank and Committee on
State Control. The latter has a mandate to inspect use of RF funds by the state as well as by private enterprises and
individuals, very much reducing chances of corruption (furthermore our experience is that Government is especially
careful that international funds are managed honestly and transparently).
1.4. Financial viability, cash flow, and projected solvency of the RF
The RF is expected to have life time of at least 21 years as indicated in the cash flow analysis below (for the
purpose of cash-flow analysis a 2.5% discount rate was assumed with a grace period of 1 year) The RF will be
replenished from Innovation Fund of the State Committee on Energy Efficiency. The participation of the
Committee will be a grant to the RF, which will not need to be returned to the Innovation Fund (projections for
Committee’s grants to the RF beyond year 9 will be made in course of RF monitoring and evaluation exercises in
the future).
The RF cash flow analysis was drawn for 18 years and it assumes that the Committee on Energy Efficiency
continues to grant matching funds beyond the project proportional to the income of the RF made up through
payments. Thus, the Committee on Energy Efficiency remains firm in its decision to match the USD 1.5 million
GEF contribution to the EF by at least the equivalent USD 1.5 million grant from its Innovation Fund.
The cash flow also shows that the management of the fund in the beginning will be covered from the UNDP-GEF
project. Further on, its management will be covered partially from interest earned by the RF, but mainly from
consultancy services on business planning, etc. (which is one of the businesses the RF will do according to its
Charter). The interest will be pooled and reserved mainly for force-major conditions (such as default on specific
loans, etc.).
124
Map of cash Inflows and Outflows in case of 2,5% interest rate and 1 year grace period (USD)
Year
N Site name and Loan disbursement (green) and Payments back to Revolving Fund (red), including interest (yellow)
Amount of GEF loan 0 1 2 3 4 5 6 7 8 9 10 11 12
1 Molodechno poultry farm Interest 5000 8750 8750 7000 5250 3500 1750
Loan 350000 Debt 200000 150000 70000 70000 70000 70000 70000
2 Vileika "Stroidetal" Interest 5000 10000 10000 8000 6000 4000 2000
Loan 400000 Debt 200000 200000 80000 80000 80000 80000 80000
3 Sanatorium "Radon" Interest 3250 3250 2600 1950 1300 650
Loan 130000 Debt 130000 26000 26000 26000 26000 26000
4 Volat - 1 Interest 3250 3250 2600 1950 1300 650
Loan 130000 Debt 130000 26000 26000 26000 26000 26000
5 Farinovo Interest 7500 7500 6000 4500 3000 1500
Loan 300000 Debt 300000 60000 60000 60000 60000 60000
6 "Molodechnoles" Interest 5750 5750 4600 3450 2300 1150
Loan 230000 Debt 230000 46000 46000 46000 46000 46000
Total Repayment to RF from demonstration sites 106000 308000 308000 308000 308000 202000
Committee's Contribution to RF 106000 308000 308000 308000 308000 202000
7 Interest 5300 5300 4240 3180 2120 1060
New RF loan Debt 212000 42400 42400 42400 42400 42400
8 Interest 15400 15400 12320 9240 6160 3080
New RF loan Debt 616000 123200 123200 123200 123200 123200
9 Interest 16460 16460 13168 9876 6584 3292
New RF loan Debt 658400 131680 131680 131680 131680 131680
10 Interest 19540 19540 15632 11724 7816 3908
New RF loan Debt 781600 156320 156320 156320 156320 156320
11 Interest 22832 22832 18266 13700 9132
New RF loan Debt 913280 182656 182656 182656 182656
12 Interest 21450 21450 17160 12870
New RF loan Debt 858000 171600 171600 171600
13 Interest 15908 15908 12726
New RF loan Debt 636256 127251 127251
14 Interest 19138 19138
New RF loan Debt 765456 153090
15 Interest 19240
New RF loan Debt 769507
16 Interest
New RF loan Debt 790917
17 Interest
New RF loan Debt
18 Interest
New RF loan Debt
19 Interest
New RF loan Debt
20 Interest
New RF loan Debt
Interest total Interest 23250 38500 41150 48850 56550 64250 71950 77010 77012 77014 77014
RF management expenses 5000 6000 18000 27600 27600 27600 33600 33600 33600 33600 39600 39600 39600
Source of funding GEF GEF GEF GEF/RF RF RF RF RF RF RF RF RF RF
Expected RF incomes due to consultant services 55000 55000 68000 68000 75000 81000 81000 90000 95000
Notes:
RF Loan 125
Borrower's payment back to RF
Interest payment to RF
Under a normal case scenario, if the Committee on Energy Efficiency matches the RF contribution of
the GEF as currently planned, the RF will be sustainable in year 6 of RF’s existence. Under the worst case
scenario, sensitivity analyses based on the presumption of no replenishment from the State Committee
and a discount rate of 2.5% show that the RF will have to operate for at least 9 years to become
financially viable.
1.5 Financial sensitivity analysis for the RF
Influence of the return rate on NPV
The data above indicates, that if the RF operates over 9 years, it will remain solvent and self-sufficient
even if the discount rate is higher (2.5%).
Influence of non-payments on the NPV
If, for example, one of the largest recipient (Stroidetali from Vileika) fails to pay back the loan, the fund
will suffer some drawback and will spend additional 2 years to gain self-sufficiency and solvency (i.e. its
full payback period is increased to 11 years).
In case a smaller recipient fails (e.g. Radon), only one additional year will be required to gain self-
sufficiency (10 years).
Analysis also shows that delay in the payback is not extremely sensitive for the financial figures of the
RF.
The key to low sensitivity both to the non-payback and delays in payment is the guaranteed financial
contribution of the Committee on Energy Efficiency. At present, the intention of the State Committee is to
invest about USD 1.5 million to funds operations once the GEF grant is released.
1.6 Dealing with default problems.
Representation of its interest in court is a legal responsibility and right of any legal entity operating in
Belarus.
The loan agreements between the Belarusian RF enterprise and the loan-beneficiary will be a legal
instrument for the RF to give a loan and for the recipient to take and pay it back to the RF. Specific terms,
including non-payment penalties - will be reflected in the loan agreement. The RF enterprise will check
the established payback schedule on a quarterly basis. On the default subject the loan agreements will
envisage the following:
According to the legislation of Belarus, in case of default the lending enterprises can turn to economic
court to legally seek return of the loan and interest. The Law of Belarus protects the rights of lending
organizations and investors. The borrower, according to the legislation, is responsible for full repayment
of the loan as it was specified in the loan agreement. Appropriation of assets is also envisaged. The final
decision as to the type of penalty will be decided on by the economic court. The loan agreements will
stipulate guarantees for payback, including asset appropriation and other penalties. In order to draw
legally correct loan agreements a lawyer will be one of the personnel of the RF enterprise.
Apart from court action (and before it) the loan agreements will also stipulate the following:
- increase of the soft interest to the level of commercial bank currency loan interest rates (currently
15-18%)
- having financial and energy audits at the enterprise in order to analyze the efficiency of energy
use. In most cases inefficient use of energy results in financial inefficiency. If the audit reveals
misuses of energy, the Committee on Energy Efficiency (and this will be delegated to the RF
126
enterprise) will fine the company following a direct forced bank transfer procedure without court
action
- putting the company in the “black list” which in the future will be deprived of opportunities for
RF funding and other soft funding for energy efficiency measures.
The loan agreements, naturally, can only be drawn with each beneficiary once the funding of the RF is
confirmed and the RF is operationalized.
127
ANNEX P. REPLICATION PLAN SPECIFICS
In addition to the replication potential (market of suitable boilers, woodwaste supply and demand) and the
GHG emission reduction figures presented in the main body of the Project Document, which are hoped to
be achieved in and beyond the project once its outcomes are widely replicated, the following is a
description of how exactly such replication will be realized.
The replication plan will be fully in line with the Strategy for Wide Scale Replication of Wood and
Wastewood Use as Fuel in Belarus. The Strategy was a product of the PDF B stage facilitated by the GEF.
Specifically, it mentions the following steps:
- Establishment during the GEF project of a separate unit (a RF with its administrative mechanism
attached to Belenergozberezhenie of the Committee on Energy Efficiency of Council of Ministers
of Belarus) to coordinate large-scale replication of biomass use (primarily wood) in the Republic
of Belarus;
Project link: The twinning arrangement, which will be established in the project document, will
not only help establish the RF in Belarus, but also guide it all the way through its operations in
and beyond the project, replicating the best practices and lessons learned through publications,
workshops, seminars in and outside of Belarus.
- To enable wide-scale replication of experience, the GEF project team will facilitate preparation
and submission of a draft Council of Ministers’ Decree on Large-scale Utilization of Biomass as
Fuel by Various Sectors of Industry, covering the specific conditions of each industry, building on
the monitoring data of the GEF project and inventory processes;
Project link: The project team, through its Steering Committee and expertise will facilitate
drafting of the decree and arrange for participatory consultations before its adoption. The
Decree, once passed, will be the key replication element of the project, paving way for wide use
of wood and wood waste as fuel in Belarus.
- To support the Decree a National Program for large-scale utilization of wood as fuel will be
produced in coordination and with support from key stakeholders, including the ministries of
economy, finance, forestry, natural resources, communal services, State Committee on Energy
Efficiency, industries, etc. The Program will include specific targets in terms of woodfuel use in
various industries and markets, aimed at collectively achieving increased reductions in the
emissions of GHG;
Project link: The Steering Committee of the project supported by the experts, will be assigned by
the State Committee on Energy Efficiency the lead group for planning and drafting of the
Program and a mechanisms to ensure participatory approach to drafting the Program. Together
with national authorities, sectoral stakeholders and international partners – including the World
Bank – the justification and long-term plan for Program implementation will be drafted,
including planning of new projects for the Revolving Fund. Serving as a lead agency on this
state-level task means not only national ownership, but also the power and responsibility for
replication of its outcomes beyond project life.
- Contributions will be strengthened towards the RF from special centralized investment funds,
innovation funds and other financial sources provided by any party interested, legal entity or
person, including credits granted by local or international institutes;
Project link: Long-term planning of RF financing has started in the PDF B phase and will be
strengthened in the very early stages of project implementation. The financial solvency and
128
sensitivity analysis so far indicate that with guaranteed participation of two agents – GEF and
the State Committee of Energy Efficiency – the RF becomes fully self-sufficient in 9 years since
its launch. Continued support of the State Committee beyond that period – e.g. on a 20-year
planning scale – makes the fund not extremely sensitive neither to non-payment, nor to delayed
payment of debt4.
- Continued inventory of small and medium-sized boiler houses, primarily those fired by coal and
heavy oil and belonging to communal services or state entities, with the feasibility study of their
possible upgrading and conversion to woodfuels;
Project link: This will build on the GIS introduction (done in the project) to effectively monitor
the development of the replication strategy nation wide. Extensive support of local authorities in
this work will be achieved by the project.
- Development and implementation of new projects, building on the process and outcomes of the
GEF project with the purpose to show not only the modern technologies of combustion
(gasification) of biomass of various moisture content in highly automated state-of-the-art boiler
houses, but also the modern technologies and equipment for effective production, storage and
transportation of wood waste;
Project link: In order to enable this, local project experts will analyze the available boiler-house
data base, conduct additional audits of potential new sites and develop business plans for the
Revolving Fund beyond the project.
- Allocation of additional resources for provision of organizational, scientific and technical

expertise for woodwaste use projects building on the process and outcomes of the GEF project;
Project link: The project team will work with State Committee on Energy Efficiency to help streamline,
priorities and identify additional resources inside and outside the country to improve organization,
scientific and awareness raising activities on energy efficiency at the national level, including
workshops, seminars, trainings, GIS use, study tours, etc.
Corresponding sections will be introduced into the National Program for Large-Scale Utilization of
Wood and Woodwaste.
- Further improvement of legal framework covering all types, prices and tariffs, forms and methods
of accountability for woodfuels, emission standards for boiler houses, etc., all building on the
outcomes of the GEF project;
Project link: The expertise, equipment and software gained for this purpose in the framework of
the GEF project (e.g. procurement for emission measurement equipment) will continue to serve
its purpose fully beyond the project when replication is being implemented.
- Further improvement of favorable conditions for the wood fuel supply market in the country;
Project link: The Government is linking the development of wood fuel supply market very much
to such companies as Molodechnoles, which is one of the sites in the project. Legal and
administrative preferences are being envisaged to remain operational through the Revolving
Fund beyond the project. Opportunities for expanding energy forests in Belarus will be seriously
analyzed and reported to the State Committee on Energy Efficiency.
- Launch of new and continued implementation of various international project activities

addressing the issues of energy efficiency, utilization of biomass including different types of
4
More data on financial solvency and sensitivity analysis is presented in the attachment on Revolving Fund definition.
129
woodfuels (chips, pellets, briquettes, wood processing waste, etc.) for the purposes of heat supply
(projects of the World Bank, UNECE, etc.);
Project link: Already now Belinvestenergozberezhenie has experience of synergetically successful

management of UN ECE and World Bank initiatives. The Revolving Fund and strengthened
Belinvestenergozberezhenie will become a substantial benefit for obtaining new and additional
international assistance beyond the project.
- Awareness-raising campaign in mass media about the benefits of wood compared to fossil fuels;
Project link: Poject-related workshops, trainings, seminars, study tours, publications etc. will be
organized in a way so as to streamline and prioritize the PR and awareness raising activities
currently conducted by the state in this area, as well as improve use of resources and draw new
resources both from inside and outside the country. This project link is also equally relevant for
the following elements of the Strategy:
- Preparation and implementation of workshops, arrangement of working meetings (for managerial
personnel of industries, enterprises and organizations, technicians, etc.);
- Training for Belarusian decision-makers and experts (possibly abroad), experience sharing with
foreign partners about modern wood fuel utilization technologies and equipment;
- Assisting customers who could potentially sponsor construction of biomass-fired boiler houses in
conduction of express audits with identification of optimum construction (reconstruction)
variants, elaboration of business plans, execution of bank credit agreements, etc.
This is just a summary of the Strategy which in the course of the PDF B was discussed and successfully
adopted by the National Intersectoral Committee on Energy Efficiency (including all key ministries and
state committees). The adoption means that the Strategy has become a document, which is obligatory for
observance by the relevant national stakeholders.
A more detailed plan for replication will be developed in the project and become part of the Bill and
National Program (mentioned above) which – if the project is launched – will be produced by the
Government in the course of its implementation. This way both the legislation and the national
programme will be designed in ways, that address the rapidly changing economic and political
circumstances in Belarus (and in other countries in transition), which make inappropriate the traditional
detailed 10 – year plans. It is hoped that the GEF project, will contribute to rapid positive changes in the
energy efficiency sector of the country, and the replication plan – as expressed not only in the project
document but also in the Bill and the National Program (see above) – will largely build on this positive
dynamic.
However, already now, in anticipation for the GEF project’s approval, the first step for implementation of
the Strategy has been made: a number of proposals to the Government of Belarus were developed by the
State Committee on Energy Efficiency. All of them were subsequently adopted by the Council of
Minster’s Decree #1820 dated 27 December 2002. This Decree prescribed expansion of the use of wood
and woodwaste as fuel over the coming two years. It envisages 600,000 tons of coal equivalent of
woodwaste to be used additionally to what was approved earlier in the next two years.
This is a clear indication that the PDF-B of this project has already resulted in policy decisions favoring
wide expansion of the woodwaste and wood use as fuel in Belarus. The Government is very hopeful that
the GEF assistance for this purpose will continue. In this respect it is worth mentioning that the timing for
the Council of Ministers’ Decree was specifically coordinated with the potential launch date of the GEF
project, after it was approved by the GEF Council in the fall last year, and the Government at this stage is
still hopeful that its anticipation of GEF assistance will proved to be justified.
130
ANNEX Q. COMMITMENTS OF PROJECT BENEFICIARIES
The contractual details for the investment projects are expressed in Letters of Cooperation presented to
the project by the State Committee on Energy Efficiency and the corresponding partners. The summary of
their participation is presented in the table below:
# Project stakeholder Type of commitment Subject of the Size of financial

made commitment contribution to the
project committed,
USD
1. State Committee on Letter of Interest Obligation for co- 2 130 000 – in cash
Energy Efficiency financing of project 62 000 – in kind
activities, including the
Revolving Fund
2. Stroidetali Letter of Intent Co-financing commitment 350 000 – in cash
450 000 – in-kind
3. Molodechno Poultry Letter of Intent Co-financing commitment 400 000 – in cash
Farm 460 000 – in kind
4. Radon Letter of Intent Co-financing commitment Depending on the

contribution of GEF
and the State
Committee
5. Volat 1 Letter of Intent Co-financing commitment 120 000 – in cash
200 000 – in kind
6. Molodechnoles Letter of Intent Co-financing commitment 110 000 – in cash

210 000 – in kind
7a. IKEA (for Farinovo, Letter of Interest in Intent to cofinance the

Polotsk district) Participation project once decision on
construction of the IKEA
factory in Belarus is
finalized5.
7b. Polotsk district Letter of Interest in Co-financing commitment Depending on the
authorities (for Participation contribution of GEF
Farinovo, in case the and the State
IKEA case is Committee
withdrawn).
8 Mostodrev (reserve Letter of Interest in Co-financing commitment 350 000 - in cash
site) Participation 450 000 - in kind
One of the key criteria for the project was selection of end-user sites which themselves produce huge
amounts of woodwaste, excluding in this way the risk of non-compliance of any third-party supplier
driven mainly by commercial interest. If the third-party supply modality was chosen as a main one, this
would have indeed brought about a high risk of suppliers quitting their project obligations and turning to
more lucrative end-users of woodfuel. That is why the three core demonstration sites (Stroidetali from
Vileika, Volat from Uzda, and IKEA from Farinovo) plus two reserve sites were selected specifically
because they are both suppliers and end-users of woodfuel.
5
A reserve site has been fully prepared for the Farinovo case, which is the Polotsk district.
131
This does not mean that a third-party supply issue is not going to be considered, but rather, weighing all
the risks of currently unstable economic situation and absence of large demonstration projects before, a
decision was made to mitigate the supply non-compliance risk through a strategy of maximum
involvement of self-sufficient end-users. However to confirm that the work with third-party suppliers will
be also considered seriously – the Radon boilerhouse (end-user) was chosen specifically because it is
hoped to become a model for third-party supply. The Radon Boilerhouse has made a pre-contract (on the
basis of official correspondence exchange as mentioned above) with Diatlovo Forestry on supply of a
predetermined amount of woodwaste at a fixed price. It fixes the price and terms of delivery and is
subject to observance by both parties. However, before the project is launched and the RF provides a loan
for this site, the pre-contract can not be reformatted into a proper contract. Once the GEF project is
confirmed and the RF loan is operational, the legally biding contract on the same conditions will be
drawn.
One final case of third-party supply is Molodechnoles, which is going to supply woodwaste to
Molodechno poultry farm. Molodechnoles will supply woodwaste originating from felling and
woodprocessing. The Government has made the enterprise its key partners in arranging a woodsupply
market in Belarus. The economic department of the company has done a lengthy calculation of the supply
price they are going to charge, and that is $5 per loose m3 of woodwaste. There is a formal agreement
between the Energy Efficiency Committee, the Forestry Committee and the company that they will be
granted concession rights to collect woodwaste in the vicinity of Molodechno paltry – which is a very
lucrative proposal that the company is unlikely to reject because they will have considerable saving in
terms of operational and transportation costs. Their commitment to participate in the project is attached.
If the pre-contractual prices for wood waste supply as indicated in the table below are not met (i.e., equal
to or less than) then these project sites will not be allowed to participate in, and receive funding through,
the UNDP/GEF project.
The table below summarizes pre-contractual obligations for fuel supply:
# Name of project site Who supplies wood Type of contract Type of fuel, its size
fuel and price as defined
at the pre-contractual
stage
1. Stroidetali Stroidetali No contract needed since
no external wood supply
envisage (full self-supply
guaranteed)
2. Molodechno Poultry Molodechnoles Letter of Commitment Loose chips, 60000
Farm from Molodechnoles to m3/year,
Molodechno Paultry Farm 5 USD/ m3
3. Radon Diatlovo Forestry Letter of Commitment Woodwaste from
from Diatlovo Forestry to sanitary fellings,
Radon 10000 m3/year
2,0 USD/ m3 of loose
4. Volat-1 Volat-1 No contract needed since
guaranteed)
6. IKEA (for Farinovo) IKEA (for Farinovo) No contract needed since
guaranteed)
7. Polotsk district Polotsk forestry Commitment letter from Woodwaste from
Polotsk Forestry sanitary fellings,
132
unlimited amounts at
price below 5 USD per
m3
8 Mostodrev (reserve Mostodrev (reserve No contract needed since
site) site) no external wood supply
guaranteed)
The Project Document makes a reference to those letters in the text and the PDF files with all the letters
mentioned are on file. It is worth mentioning that the core and “reserve” project partners were carefully
selected at the PDF B stage to make sure they are not only financially and administratively stable and
market oriented, but are willing to participate on the price and cost-sharing conditions proposed by the
project.
The reliability of the partners selected (demonstration site owners) is confirmed by their positive financial
results, despite the current difficult national economic environment. They possess their own financial
resources which they are willing to grant to the project, which is confirmed by the Letters of Cooperation.
The end-user demonstration sites were selected out of a big list of potential sites and are considered to be
the best in meeting the project requirements, including their obligation to take in the woodfuel according
to project terms – this is also reflected in the Letters of Cooperation.
In accordance with the provisions of the PDF B document the full project was initially prepared to
employ a grant mechanisms to allocate funding to potential project stakeholders. However, over the
course of the PDF B stage the GEF rules changed whereupon a Revolving Fund idea was discussed and
successfully integrated into the project. Now allocation of funds to project stakeholders had to be made on
a compensatory and pay-back basis.
Taking into account changed financing rules of the GEF, the State Committee on Energy Efficiency has
held several working meetings with heads of all demonstration sites. Over the course of negotiations –
and this is a true indication of the commitment – all stakeholders have confirmed their willingness to
participate in the project on the new rules. The State Committee has also confirmed that its intention for
financial participation in the project remained unchanged. 30% of investment costs of each demonstration
site would be covered by the Committee’s in-cash funding. Having analyzed the new financial
projections, all stakeholders have confirmed that the project remained lucrative for them financially, and
they were willing to stick to the commitment of its participation, including the commitment to payback
the loans on the agreed terms.
Thus, the following structure for funding of investment projects was developed and voted for by each
participating stakeholder:
- 50% of the project investment cost is covered by the owners directly
- 30% is covered by the State Committee on Energy Efficiency as a direct grant to the beneficiary
- 20% would be a 5-year loan from the Revolving Fund established with GEF support. A 1-2 year
delay for repayment of the main debt will be granted. The average return rate will be 2-3%.
At one of the coordination group meetings during the PDF B stage the stakeholders recommended that the
project team should finalize the project concept following the approved condition and present it to the
GEF for financing.
The price relationship between producer and user of energy
133
In the project there is no need for legal contracts between producers of energy on the basis of woodwaste
and those who will buy it which is attributed to the specific character of laws regulating buying and
selling of energy in Belarus, as well as to the specifics of project sites covered.
On the latter argument, the project – in most cases – has no separate buyer of energy, i.e. the sites who
produce the energy on the basis of woodwaste are also those that use it for their own purposes (Stroidetali
from Vileika is 100% user of its own-produced energy, the same is true for Volat-1 in Uzda, Radon (it gets
the woodwaste delivered by Diatlovo, but burns it itself and uses its own energy itself fully). Mostodrev
and Olekhnovichi poultry farms are 80% both producers and self-users.
For each of the named sites production and self-use of energy is lucrative because it allows to reduce
costs of buying imported fossil fuels and make the products and services cheaper, increasing their
competitiveness.
In some cases the excess heat is being sold outside (which is the case in Farinovo and the 20% of energy
produced by the above named sites). HOWEVER, in Belarus the price for energy between the energy
supplier and the energy end-user is not regulated by the market (i.e. it can not be agreed by a commercial
contract). It is established and regulated by local executive authority (regional municipality), which has
special departments which do audits of the costs of producing energy at the boiler houses, losses in
transportation, subsidies for population, etc. The price per each district is established for each boiler
house. It is being revised annually based on the documents submitted by the boiler house owner and with
account of the government policies for subsidization, etc. Once the price is fixed the buyer is obligated to
buy the energy from the supplier at the fixed price, while the energy supplier is obligation to sell it at that
price.
In accordance with the current energy efficiency legislation, when a company invests in alternative energy
and energy efficiency and achieves certain reductions in cost, it has a right to retain the old price for the
product or service – the price which was enforced before the reduction was achieved due to technological
changes. This old price will stand until the enterprise fully pays back any loans taken for the purpose of
energy efficiency measures. It means that the local executive committee will not reduce the price of
energy for the end user despite the reduction in costs achieved by the producer until it pays back any
energy efficiency loans. This way the Government, under generally centrally planned economy,
introduced flexible mechanisms to stimulate energy efficiency investment, while at the same time
providing additional guarantee for payback of loans, including of the type the RF of the UNDP-GEF
project is going to provide for.
134

Belarus Biomass Project Promotes Renewable Energy

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UNITED NATIONS DEVELOPMENT PROGRAMME

GLOBAL ENVIRONMENT FACILITY

On behalf of: Signature Date Name/title

Niel Buhne, UNDP Resident Representative

2 BACKGROUND AND CONTEXT...................................................................................................................3

ANNEX A: Incremental cost....................................................................................................................................37

ANNEX B: Project planning matrix.........................................................................................................................40

ANNEX C1: STAP review.......................................................................................................................................50

ANNEX C2: Response to STAP review...................................................................................................................52

ANNEX D: Operational focal point endorsement....................................................................................................54

ANNEX E: Overview of boiler houses between 0.5 and 10 MW.............................................................................56

ANNEX F: Wood waste availability in Belarus.......................................................................................................58

ANNEX G: Overview of relevant regulations..........................................................................................................60

ANNEX H: Selection of project sites and evaluation criteria...................................................................................61

ANNEX I: Investment project site fact sheets..........................................................................................................64

ANNEX J: CO2 emission calculation.......................................................................................................................91

ANNEX K: Signed letters of intent..........................................................................................................................93

ANNEX L: Equipment requirements.......................................................................................................................97

ANNEX N: Outline of Coordination efforts with the World Bank........................................................................120

ANNEX O. Revolving Fund Definition.................................................................................................................121

ANNEX P. Replication Plan Specifics...................................................................................................................128

ANNEX Q. Commitments of Project Beneficiaries...............................................................................................131

2 BACKGROUND AND CONTEXT

Heat and Hot Water Supply

Environment and Energy Policies

Relevant Planned and Ongoing Activities

Strategic considerations for the GEF (justification of GEF involvement)

D) Perception and awareness barriers

Table 1: Barriers and the Activities Addressing Them

Barrier description Key outputs addressing this barrier

Barrier description Key outputs addressing this barrier

4.1 Overall objective

4.2 Specific objectives

Objective 1: Strengthen institutional capacity to support biomass energy projects

4.3 GEF rationale

5 PROJECT COMPONENTS/ACTIVITIES AND EXPECTED RESULTS

The project focuses on the following four types of barrier removal:

5.1 Component 1: Institutional Capacity Development

 Positive feedback from stakeholders attending the policy seminar.

Output 1.4 Training Conducted to Strengthen Capacity of In-Country Experts

5.2 Component 2: Technical Capacity Development

Output 2.1 Biomass Boiler Conversion Investment Projects Implemented

Output 2.1 Biomass Boiler Conversion Investment Projects Implemented

Table 2: Overview of Initial Investment Project Sites

Output 2.2: Wood Supply Investment Project

5.3 Component 3: Financial Capacity Development

Output 3.1 Pipeline of biomass investment projects developed

Output 3.1 Pipeline of biomass investment projects developed

Output 3.2 Revolving fund for biomass energy established

5.4 Component 4: Information and Outreach to Increase Awareness

Supplementary Information on Project Activities

‘Twinning’ to Address Existing Barriers

BELARUS TWINNED COUNTRY

Expected Results and Outputs

6 RISKS AND SUSTAINABILITY

6.1 External Risks

6.2 Internal risks

7 STAKEHOLDER PARTICIPATION AND IMPLEMENTATION ARRANGEMENTS

7.1 Stakeholder participation

 Representatives of Municipalities from the cities of Uzda and Polotsk;

7.2 Implementation arrangements

Figure 3: Implementation Arrangements