UNDP - Georgia Barriers_Final_R4

United Nations Development Project

Government of the Republic of Georgia

UNDP/GEF Project: Promotion of Biomass Production and

Utilization in Georgia (Project #)

Report 1: Barriers to Biomass Energy in Georgia

Mission Members

Marina Shvangiradze Dmitry Goloubovsky Francesco Tubiello Kevin Whitlock

December 2010

UNDP – Government of the Republic of Georgia Promotion of Biomass Production and Utilization

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Table of Contents Page Acknowledgements .................................................................................................................................................... 4

Executive Summary .................................................................................................................................................... 6

1. Introduction ....................................................................................................................................................... 7

1.1 Project Background& Overview ................................................................................................................. 8

1.2 Overview of Georgia’s Energy Sector....................................................................................................... 17

1.3 Overview of heat demand and supply in pilot regions ............................................................................ 21

2 Biomass Resources and Their Utilization ......................................................................................................... 23

2.1 What is densified Biomass fuel? .............................................................................................................. 24

2.1.1 Wood Waste ........................................................................................................................................ 26

2.1.2 Hazelnut Shells ..................................................................................................................................... 28

2.1.3 Environmental Impact of Biomass Burning .......................................................................................... 29

2.2 Densification Process ............................................................................................................................... 30

2.2.1 Pelletizing ............................................................................................................................................. 31

2.2.2 Briquetting ........................................................................................................................................... 32

2.3 Densification Capital Cost ........................................................................................................................ 34

2.4 Combustion Technologies ........................................................................................................................ 35

2.5 Fuel Switching: Gas to Biomass in Boilers for Heating ............................................................................. 37

3 Barriers to Biomass Energy in Georgia ............................................................................................................. 38

3.1 Government/Policy .................................................................................................................................. 40

3.2 Feedstock ................................................................................................................................................. 41

3.3 Technological Barriers .............................................................................................................................. 42

3.4 Institutional Capacity ............................................................................................................................... 43

3.5 Financial Barriers ...................................................................................................................................... 43

3.6 Lack of Awareness .................................................................................................................................... 44

4 Risk & Returns .................................................................................................................................................. 45

4.1 Risk ........................................................................................................................................................... 47

4.2 Returns ..................................................................................................................................................... 48

5 Conclusion ........................................................................................................................................................ 50


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Annex ....................................................................................................................................................................... 52

A.1 Mission Terms of Reference .................................................................................................................... 52

A.2 List of Persons Interviewed ...................................................................................................................... 55

A.3 MENRP, Heat Supply of Households in Georgia, 2007. - Fuel wood deficit ............................................. 56

A.4 MENRP, Heat Supply of Households in Georgia, 2007- Existing feedstock in Pilot Region ..................... 57

A.5 Forest Areas according to the 2003 Inventory and Harvest Volumes ..................................................... 58

Table 1, Forest Area ............................................................................................................................................. 58

Table 2, Legal Harvest Volumes ........................................................................................................................... 58

Table 3, Illegal Harvest Volumes .......................................................................................................................... 59

A.6 Pellet Production Costs ............................................................................................................................ 60

Table 1 - Pellet Production costs for 45,000 ton per year capacity plant (2010 USD $), adapted from Mani et al.,

2006 ..................................................................................................................................................................... 60

Table 2 - Pellet Production costs for a 24,000 ton per year capacity plant (2010 USD $), adapted from Thek and

Obernberger 2004 ................................................................................................................................................ 61

A.7 Briquetting Operational and Capital Cost ................................................................................................ 62

A.8 Private Sector Companies in Georgia with Interest in Biomass ............................................................... 63

A.9 Documents Reviewed/Bibliography/Reference ...................................................................................... 64


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Acknowledgements

I wish to acknowledge with gratitude, the time, effort and hospitality extended by all project

participants and stakeholders during our initial mission. The interviews provided valuable insights,

candid perspectives, and made the process informative and enjoyable for the entire team. In particular, I

would like to thank Ms. Marina Shvangiradze for showing Georgian hospitality and her considerable

efforts in arranging mission logistics and itinerary, and accommodating the schedule of the Team

members; Dmitry Goloubovsky, Francesco Tubiello, Kevin Whitlock, and John O’Brien. I hope that this

report will be a valuable contribution to the overall development of biomass and other renewable

energy developments in Georgia.

Disclaimer

This report was prepared as an account of work sponsored in whole or in part by the United Nations

Development Program. The authors make no warranty, expressed or implied, or assumes and legal

liability or responsibility for the accuracy, completeness, or usefulness of the information, apparatus,

product, or process disclosed, or represents that its use would not infringe privately owned rights.

Reference herein to any specific commercial product, process or service by trade name, trademark,

manufacturer or otherwise, does not necessarily constitute or imply its endorsement, recommendation,

or favoring by the UNDP. The views and opinions of the authors expressed herein do not necessarily

state or reflect those of the UNDP.


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Abbreviations/Acronyms

ACF – Action Against Hunger, humanitarian organization

APA – Agency of Protected Area

BDT – Bone Dry Ton

C – Celsius

Ca – Calcium

CEO – Chief Executive Officer

Cl - Chlorine

CO – Carbon Monoxide

CO2 – Carbon Dioxide

EBRD- European Bank for Reconstruction and Development

EE – Energy Efficiency

EPA – Economic Policy Agency

Fe – Iron

GCC - Global Climate Change

GDP - Gross Domestic Product

GEF - Global Environmental Facility

GHG - Greenhouse Gases

GIS – Geographic Information Systems

GJ – Giga Joule

GoG- Government of Georgia

GTZ - German Development Cooperation Organization

Ha - Hectare

JNA – Joint Needs Assessment

K – Potassium

kg – kilogram

Km – kilometers

m3 – Cubic Meters

MENRP – Ministry of Environment, Natural Resource Protection

Mg - Manganese

mg - milligram

MJ – Mega Joule

Mn – Magnesium

MOE- Ministry of Energy

MSW – Municipal Solid Waste

MW – Mega watt

Na – Sodium

NGO - Non-governmental organization

Pa – Pressure Altitude

PA – Protected Area

PPA – Power Purchase Agreement

PPG - Project Preparation Grant

RE – Renewable Energy

REF – Renewable Energy Fund

TA – Technical assistance

TOR – Terms of Reference

TWHE - Terawatt Hour of Electricity

UN – United Nations

UNDP – United Nations Development Project

UNEP – United Nations Environmental Program

UNHCR – Office of United Nations High Commissioner for Refugees

USD – United States Dollar


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Executive Summary

The overall objective of the proposed Global Environment Facility (GEF) project is to create an enabling

environment in Georgia to promote wider utilization of biomass resources to meet the country’s energy needs

in a sustainable and efficient way, thereby reducing dependence on fossil fuels and limit future greenhouse gas

(GHG) emissions. To achieve the objective, a comprehensive strategy is proposed, including promotion of

demand and supply of biomass and demonstration activities such as the launch of a pilot plant for making

briquettes from biomass waste, one that can be replicated throughout the country.

We identify a number of barriers in Georgia that hinder the development of a local production and utilization of

biomass based fuels. The most important are technical knowledge, economic barriers, policy and institutional

barriers. More specifically, there is very limited knowledge among decision makers, private sector and local

communities about densified wood technologies and the potential benefits of using biomass as a fuel. There is

no enabling environment, including policy framework for development of biomass and particularly, pellet or

briquette production and utilization. At the know-how level, it is noted that although there are several industries

in Georgia interested in producing biomass fuel, they do not have enough technical capacity to establish and

operate such industries.

Historically, one of the biggest technical barriers to the development of densified biomass feedstock as a fuel

source has been the serious problem with combustion. The main outstanding challenge has been how to burn

these fuels without causing problems with clinker formation and boiler corrosion as well as avoiding the creation

of ambient air pollution. A very rapid technological development of small and medium scale combustion systems

is occurring globally as a result of the pressing need to develop clean and green renewable fuels.

With the current world focus on climate change, global warming and greenhouse gas emissions, renewable

energy sources, including biomass (which currently provides about 10% of the world’s primary energy supplies),

are expected to supply a larger percentage of the world’s energy needs in the future. The profitability of

biomass in the form of chip or briquette is largely dependent upon the availability of low cost wood waste, low

utility cost, and economical methods of getting this type of biomass fuel to market. Georgia has abundant raw

material, and utility price for power is relatively low. While transportation to the market is a significant expense,

a reasonable profit margin may nonetheless exist, due to the location of the operation near the feedstock and

regional markets. Based on this preliminary study, there is sufficient demand for biomass fuel; further analysis

will be required to quantify this aspect of the market.

Ultimately, the benefit to Georgia will be added security in the energy sector; stable, well-paying manufacturing

jobs; a strong market for wood waste and low grade timber (improved waste management); a clean –burning

environmentally–friendly renewable energy product that will displace the use of oil, natural gas and other fossil

fuels in heating homes, businesses, and public buildings.


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1. Introduction

Georgia is a uniquely bio-diverse country located in the south Caucasus region, with a population of

approximately 4.6 million people, bordering the Black Sea, Turkey, Armenia, Azerbaijan and Russia. About 40%

of Georgia's territory (2.75 million hectares) is covered by forests. Heavily forested watersheds cover the

Greater Caucasus Mountains and the Lesser Caucasus along with lowlands and foothills. They provide natural

protection against landslides and floods, as well as shelter for various species of wild animals and birds in

Georgia and a significant amount of timber for heating and cooking. Georgian forests, a significant part of which

are still virgin, are rich with endemic species and contain ecosystems of global significance. They are largely state

owned and fall under the Forestry Agency within the Ministry of Environment, Natural Resources Protection

(MENRP).

About 7% (495,892 hectares) of Georgia is designated as protected areas (PA). Of that designated area, about

75% (372,000 hectares) are covered by forests. There are five categories of Protected Areas in Georgia in

conformance with United National Environment Program (UNEP) guidelines, the primary function being to

protect the natural heritage of the country. The PAs are managed by the Agency of Protected Areas (APA) within

the MENRP. The Kolkheti lowland (wetland) in Adjara is the major of several flyways for migratory birds and is a

Ramsar site.

Georgia has aggressively pursued economic and democratic reforms since 2003, resulting in robust economic

growth, positive but incomplete democratic changes, and improved social services. Georgia’s reform progress

was abruptly interrupted and its territorial authority reduced by the August 2008 Russian invasion of Georgia.

Immediately following the conflict, Georgia’s economy suffered a second blow from the global economic crisis.

Since much of Georgia’s previous economic growth was reliant on foreign direct investment and access to

capital, the global economic crisis magnified the conflict’s negative effect on the economy.

The war between Georgia and Russia resulted in a humanitarian crisis that required close coordination within

the donor community. This led to the October 2008 European Commission and World Bank Georgia Donor

Conference that resulted in bilateral and multilateral donors pledging $4.5 billion based on the Joint Needs

Assessment (JNA) led by the World Bank. The JNA is fully endorsed by the Government of Georgia (GoG) and will

continue to serve as the primary definition of needs in the economic and social sectors. Democracy and

governance needs are commonly recognized by those donors active in these sector and are likely to intensify,

given the need for additional transparency and public dialogue as well as the key opportunity for the GoG to

engage the public in the rebuilding process.

Since September 2008 President Saakashvili has announced various packages of measures to ‘strengthen

democracy,’ including measures to modify the constitution, strengthen parliamentary oversight, strengthen the

independence of the judiciary, expand media freedom and further protect property rights. While skeptical of the

President’s commitment to carry through on his reform promises, opposition leaders and Georgian


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nongovernmental organization (NGO) leaders seem reinvigorated to hold the government accountable for both

these pledges and the appropriate use of the new significant inflow of foreign aid.

Prior to August 2008 the Georgian economy was one of the fastest growing in the world, with growth in real

GDP reaching 12 percent in 2007. The World Bank’s Doing Business analysis ranked Georgia as the number one

economic reformer in the world in 2007, when its standing jumped from 112th to 18th in terms of ease of doing

business. As a result of the Government of Georgia’s zeal in reforming the laws and regulations facing

businesses, that ranking improved to 11th in 2009. Georgia has also achieved considerable progress in reducing

corruption. In 2008, Transparency International ranked it 67th in its Corruption Perceptions Index, representing

the best result among former Soviet countries and a dramatic improvement on its score in 2004, when the

country ranked 133rd.i

Georgia has signed and ratified several international protocols and conventions to protect global and local

environment and biodiversity. Such as: UNFCCC, the Kyoto Protocol, CBD, CCD, and the Ramsaar Convention.

Under the UNFCC, increased use of biomass is one way of reducing GHG emissions helping Georgia contribute to

GHG mitigation.

1.1 Project Background& Overview

The United Nations Development Program (UNDP), acting as an implementing agency of the Global Environment

Facility (GEF), is providing assistance to the Georgian Government with the implementation of the project

“Promotion of Biomass Production and Utilization in Georgia”. The overall objective of the project is to launch

and develop a market for biomass utilization in Georgia, with a specific focus on four main outcomes as

identified in the missions Terms of Reference, Annex 1 and on projects in two pilot regions, Tbilisi and

Samegrelo. During the initial assessment, the team focused on the four main outcomes. Based on the research,

it was clear, that in order to meet the overall objective, the project outcomes needed to change to meet the

countries current socio-economic and political conditions. The following are four specific outcomes for this

project:

Outcome 1: Increased market confidence in the feasibility of production of upgraded biomass fuels and

enhanced capacity of domestic biomass producers

The purpose of this outcome is to support establishment of two pilot facilities for production and supply of

upgraded biomass fuels (pellets, briquettes or woodchips) through: i) Estimation of the available biomass

feedstock; ii) Selection of optimal harvesting/collection and upgrading technologies; iii) Elaboration of in-depth

financial and technical feasibility studies of the plants; and iv) Assistance with their startup.

A number of potential options have been investigated at project preparation stage via a pre-feasibility study,

identifying and involving the major players in the sector, including Ferrero, Dioskuria, Georgian Wood and

Industrial Development Co. Ltd. One of the conclusions of the study is that there is a scope “for creating an


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upgraded biomass fuel industry in Samegrelo, based on substantial and secured supply of cheap wood waste

from Ferrero’s plantations,” which could be tied up with other biomass waste streams – currently untapped –

coming from forestry or wood processing industries. Similarly, the 8,000 ha of forested area in and around Tbilisi

that is under the management of Tbilisi Municipality, coupled with substantial urban forestry waste that is

currently being disposed via landfilling, could sustain a small- to medium-scale biomass upgrading plant that

could supply renewable fuel to the municipality, thereby facilitating switch from natural gas and heavy fuel oil

based boilers to biomass.

Specific outputs and related activities under Outcome 1 will include:

Output 1.1 Feasibility studies and business plans for two biomass upgrading pilot plants:

Long-term security of biomass feedstock supply is an absolute prerequisite for a biomass upgrading plant.

Potential investors need to be confident that a reliable supply of required quality and quantity of biomass

feedstock will be forthcoming during the pilot plant’s lifetime, either from own resources (as could be the case

for Ferrero’s plantations) or from external sources (as could be the case for Dioskuria, sourcing its feedstock

from other players like Ferrero, Georgian Wood and Industrial Development Co. Ltd.). The cost of biomass

feedstock – that has proven to be a major factor determining the price of the biomass fuel end product– should

be carefully calculated and properly reflected in the pilot’s business plan, to ensure its viability. The full-scale

feasibility assessments will be undertaken in both pilot regions: (i) Samegrelo, where private sector interests

(e.g., Ferrero, Dioskuria) exists in exploring biomass feedstock utilization, perhaps with a larger emphasis on

exports, due to relatively low domestic demand in the region and proximity to a seaport; and (ii) Tbilisi, where

municipality-led demand for fuel switch from fossils to biomass in public buildings could be tied to a respective

stream of biomass feed stocks originating from the urban forests and municipality-managed forest areas around

the city. A preliminary assessment completed during the preparation stage has concluded that a biomass

briquetting facility located in Samegrelo near the Ferrero plantations, with capacity of 10,000 ton annually,

could prove economically attractive and could supply biomass fuel at cost to participating municipalities in

Samegrelo and Tbilisi – provided a large portion of production is exported to the European market in order to

achieve positive returns on investment. These preliminary results will be refined as part of this output.

Activity 1.1.1 - Quantify the available and technically extractable biomass feedstock in the pilot plant region of

Samegrelo and in Tbilisi, so as to enable selection of proper technology and its right sizing.

Activity 1.1.2 - Identify modalities of operational arrangements of the pilot biomass plant, including exploring

feasibility of external sourcing contract agreements between owners of biomass feedstock and producer(s).

Activity 1.1.3 - Identify, on the basis of the available biomass feedstock and international experience with their

utilization, optimal technology for biomass harvesting/collection, transportation, upgrading (pelletizing,

briquetting or chipping; or a combination thereof).


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Activity 1.1.4 - Undertake detail assessment of pilot biomass plant’s investment and operational costs and

develop a business plan, including third party review of the pilot’s economics.

Activity 1.1.5 - Identify modalities and opportunities for exporting upgraded biomass fuels, including issues of

product quality and standards.

Output 1.2 Biomass supply companies established:

The level of complexity of a biomass production facility (with issues ranging from securing feedstock supplies,

ensuring plant operation, maintenance and sale of the end product) may warrant a consortium of private

players, or a Public Private Partnership (PPP), to be managing the biomass supply chain, rather than a single

private company. This output, therefore, will seek to support the project stakeholders in Samegrelo and Tbilisi to

set up viable business arrangements for the pilot biomass plant that would help secure feedstock supplies,

proper plant operation and ultimate marketing of the biomass fuels.

Activity 1.2.1 - Identify optimal arrangements for local biomass supply companies (joint ventures, consortiums)

to develop long-term supply agreement with users of biomass in Samegrelo and Tbilisi and ensure long-term

supply of feedstock.

Activity 1.2.2 - Develop business plans for the new companies and assist with financial closure, as relevant.

Activity 1.2.3 - Design model biomass supply contracts.

Activity 1.2.4 - Facilitate establishment Public Private Partnership (PPP) programs in the biomass supply sector.

Output 1.3 Commissioned pilot biomass upgrading plants:

The full-blown feasibility studies and supply chain arrangements completed as part of the previous outputs will

inform the next phase, wherein detailed technical designs of the pilot biomass upgrading plants will be drawn

and relevant support provided by the project to ensure ultimate commissioning of the pilot facilities in

Samegrelo and Tbilisi and start of production of upgraded biomass fuels.

Activity 1.3.1 - Prepare a detailed technical design of the pilot biomass upgrading plant, ensuring compliance

with the local regulations and technology requirements.

Activity 1.3.2 - Provide assistance with obtaining relevant clearances and permits at the municipal and/or

national level.

Activity 1.3.3 - Provide assistance with capital raising / financial closure (as required).

Activity 1.3.4 - Provide technical assistance with selection and procurement of optimal equipment and

construction for the pilot biomass plant.


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Outcome 2: Created local demand for upgraded biomass-based heating applications

The purpose of this outcome is to support pilot municipalities from Samegrelo region and municipality of Tbilisi

in identifying cost-effective opportunities for fuel switch in heating applications from natural gas or fuel oil to

upgraded biomass, and secure long-term biomass fuel supply contracts including working with some of the

supply companies developed under outcome 1. Tbilisi Municipality currently spends an equivalent of US$ 1.8

million annually to pay for energy resources for 217 buildings under municipal management, with the bulk of

payments going toward electricity bills. However, payments for fossil fuels (natural gas, diesel) account for over

70% of the heating-related bills. Aside from putting an ever increasing financial burden on the municipal budget,

continued use of fossil fuels is associated with considerable GHG emissions. At the same time, being a signatory

of the Covenant of Mayors, Tbilisi has committed to reducing its CO2 footprint by at least 20% by 2020 against

2005 levels. Switching from fossil fuels to biomass for heating can provide a valuable contribution for the

municipality in meeting its GHG abatement goals, while alleviating dependence on imported natural gas and fuel

oil. As with any investment, fuel switching to biomass has to make economic sense, and the project will support

the partner municipalities in selecting the most cost-effective options for installing new biomass boilers

(particularly in case of new constructions) or retrofitting existing boilers to enable utilization of upgraded

biomass as a primary fuel and natural gas or heating oil as a back-up.

Specific outputs and related activities under Outcome 2 will include:

Output 2.1 Feasibility studies for installing/ retrofitting biomass boilers:

Prospective investments into new biomass heating systems or retrofits of existing fossil fuel-fired systems to

enable biomass combustion will require careful assessment of the associated costs, returns and risks, to ensure

that biomass systems make economic sense compared to the business-as-usual situation. As concluded by the

pre-feasibility assessment done at the preparatory stage, 250-500 kW heat boiler systems typical of medium-

scale structures (such as municipal buildings for schools and administration), could be replicated in

municipalities in Samegrelo as well as in Tbilisi that wish to switch from fossil fuels (some currently using diesel,

but mostly natural gas) to biomass to reduce costs, ease dependence on fossil fuels and limit GHG emissions. On

top of that, Ferrero’s hazelnut business in Samegrelo will focus on providing an internally coherent supply-

demand renewable energy cycle, whereby agricultural waste from its hazelnut plantations could be utilized to

provide useful heat to its operation, plus supplying excess biomass feedstock to an upgrading (briquetting)

facility (set up under Outcome 1). Initial estimations in support of a switch from a 500 kW diesel oil-fired boiler

to a respectively sized biomass boiler at Ferrero’s plantations, representing the first demonstration of large scale

biomass energy use from waste activity with potential for expansion in coming years, will be refined and

finalized as part of this output.

Activity 2.1.1 - Select a cluster of pilot end-users in Tbilisi and Samegrelo (e.g. municipality-managed buildings,

kindergartens, schools) to develop a set of model biomass boiler heating systems (for new installations and/or

retrofits).


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Activity 2.1.2 - Assess feasibility of fuel switch for at least 15 individual fossils-to-biomass pilots in Tbilisi and

Samegrelo.

Activity 2.1.3 - Promote feasibility study results in order to increase awareness of advantages of biomass heating

systems among other municipalities across the country.

Activity 2.1.4 - Develop business plans for switching municipal boilers to biomass, and provide other relevant

assistance, so as to facilitate investment decision by the municipalities.

Output 2.2 Pilot biomass-based heating systems installed and operational

Building on the results of feasibility assessments undertaken as part of the previous output, this output will

support installation of biomass-fired boilers or retrofitting of existing fossil fuel-fired boilers at Ferrero’s

plantations in Samegrelo and in Tbilisi municipality-managed buildings. At least 15 individual biomass-based

heating systems are projected to be installed in both pilot areas.

Activity 2.2.1 - Preparation of technical specification for the individual biomass boiler installations and retrofits.

Activity 2.2.2 - Assistance with procurement and commissioning of biomass heating systems for the pilots at

Ferrero and Tbilisi municipality.

Activity 2.2.3 - Facilitation of interactions between municipalities and biomass fuel suppliers in order to secure

long-term supply contracts.

Output 2.3 Feasibility of biomass heating service contracting explored

This output will support a detailed and critical assessment of potential for ESCO-type heating service provision in

the context of Georgia, whereby private companies (e.g. an urban forestry cleaning company in consortium with

a biomass boiler supplier) could be contracted to supply heat rather than fuel to municipalities. Such companies

may also own the combustion equipment, may be contracted to maintain it, or may lease it from another

company, but are paid on the basis of heat delivered. This model has been widely applied in Europe, particularly

for site and building heating systems, and their suitability for the Georgian environment will be investigated and

refined under this output to enable replication across the country.

Activity 2.3.1 - Assess feasibility of heating service contracting to be provided by biomass fuel

producers/suppliers to municipal end-users.

Activity 2.3.2 - Develop model contracts and facilitate interaction between potential heating service providers

and end users (municipalities).

Activity 2.3.3 - Prepare case study reports for dissemination to business and municipal stakeholders.


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Outcome 3: Enhanced policy and regulatory framework for efficient utilization of biomass energy

This outcome will focus on supporting the Government of Georgia in developing a strategy and an action plan

for promotion of efficient utilization of currently wasted biomass resources for energy supply, including via

production of upgraded biomass fuels. A national bioenergy strategy and action plan will provide a

comprehensive inventory and mapping of the available biomass resources in Georgia, an exact evaluation of the

technical and economic potential for extracting useful energy from these resources, as well as a roadmap for

tapping this potential. The available financial mechanisms will be assessed in terms of suitability for biomass

promotion and respective recommendations drawn.

Output 3.1 - Bioenergy Strategy and Action Plan (BSAP).

Clearly defined strategy and targets, supported by well-developed action plans, have proved essential in

developing biomass energy by providing a “sense of direction” and confidence to biomass heating businesses. A

longer term perspective on market development, which takes into account the learning curves of different

market actors and the expansion of production and installation capacities, is important for developing a healthy

industry. Even though biomass is currently seen by the Government of Georgia as not having sufficient potential

for grid-connected electricity generation, upgraded biomass could still play an important role in filling-in the

existing gaps in heating demand, reduce country’s vulnerability and dependence on energy imports during cold

season and contribute to reduction of the national carbon footprint. Toward this end, a comprehensive

inventory of available biomass resources will be carried out for the entire country, including classification of

sources (varieties, residues), production estimates, relevant constraints and technical parameters. The data

collected will be analysed and captured in a GIS system for correlation with spatial information, to enable

informed decision-making on development of bioenergy systems in individual regions of Georgia. Building on the

results obtained and based on the best international experiences, a national strategy and an action plan for

bioenergy promotion in Georgia will be developed in close coordination with key government, business, NGO

and other stakeholders.

Activity 3.1.1 - Undertake a comprehensive inventory and mapping of the available biomass resources in Georgia

based on primary data collection to obtain a comprehensive overview of the biomass potential in Georgia

Activity 3.1.2 - Assess the potential for development (increase) of local biomass resources (plantation of forests

or agricultural plants) in the regions with wood deficit

Activity 3.1.3 - Complete a study on the technical, economic and financial feasibility of the different bioenergy

technologies in Georgian context

Activity 3.1.4 - Draft Bioenergy Strategy and Action Plan, facilitate stakeholder consultations and eventual

government endorsement which includes outputs from 3.1.1, 3.1.2, 3.1.3, and 3.1.4.


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Output 3.2 Quality standards for upgraded biomass fuels and biomass heating systems

The majority of biomass systems have a very specific range of fuel requirements if they are to operate

efficiently, with low levels of emissions and without blockage of the fuel feed system. Biomass fuel

standardization has been a critical success factor in the early stages of biomass development in advanced

markets like Austria or Sweden. Further, fuel standardization supports consumer confidence, as well as

bioenergy system operation in line with the designed parameters. Similarly, high-efficiency biomass burning

equipment that meets stringent emissions and quality standards is crucial for market transformation. This

output will therefore support the development and introduction of quality standards for upgraded biomass fuels

(woodchips, briquettes and pellets), as well as emissions, safety and performance standards for biomass-based

boilers. The standards will be supported with a certification system that is going to be rolled out on a voluntary

basis for the initial phase, eventually to be mandated under the national regime with relevant enforcement

mechanisms.

Activity 3.2.1 - Develop specifications and quality standards for upgraded biomass fuels (briquettes, woodchips,

pellets) on the basis of best international practice.

Activity 3.2.2 - Develop requirements for emissions, safety, operation and performance standards of biomass

boilers.

Activity 3.2.3 - Develop and pilot-launch a voluntary testing and certification system for upgraded biomass fuels.

Output 3.3 Access to financing for bioenergy in Georgia increased.

Affordable financing is essential to both sides of the biomass market – biomass fuel producers/suppliers and

bioenergy end users. The rates prevailing in the Georgian financial market (upward of 18-20%) make commercial

bank loans prohibitively expensive, particularly for capital-intensive and high-risk (perceived) investments in

biomass energy production and utilization. There are a number of facilities in Georgia (e.g. KfW’s Renewable

Energy Fund, EBRD’s Energy Efficiency Credit Line, Tbilisi Municipality Development Fund) that could be valuable

sources of much-needed finance for bioenergy projects in the country. However, these facilities have not been

specifically designed for supporting biomass investments and may require certain degree of fine-tuning and

adjustment before they can engage in lending to bioenergy projects. This output will therefore address this

barrier by supporting development of bankable biomass project proposals and facilitating their assessment to

help minimize perceived risks and, hence, improve lending terms.

Activity 3.3.1 - Provide technical assistance to potential biomass business in order to elaborate bankable

business plans and minimize perceived risks.

Activity 3.3.2 - Collaborate with the existing financial instruments to facilitate lending to biomass business plans.


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Activity 3.3.3 - Explore feasibility of establishing a new credit window with KfW (or other financial partner) to

finance biomass projects, and facilitate greater lending for biomass projects in Georgia.

Output 3.4 Established biomass monitoring system

This output will focus on the required on-going monitoring and evaluation of the impact of the project

implementation by updating the project baseline, assessing progress toward stated indicators, and evaluating

progress toward objective at mid-term and end of the project. The output will also support the design of a

system to collect and analyse biomass-related data, so as to enable a continuous feedback and inputs into the

national bioenergy strategy.

Activity 3.4.1 - Update baseline study against which the impact of the project will be measured.

Activity 3.4.2 - Undertake project mid-term and final evaluations and other required reviews and reports.

Activity 3.4.3 - Design a system for gathering and processing biomass-related data and ensure its integration in

the national statistics infrastructure.

Activity 3.4.4 - Design a system for monitoring and reporting on GHG emission reductions from bioenergy

applications across Georgia.

Outcome 4: Improved knowledge and stakeholder capacity for bioenergy development

Understanding and effectively communicating the benefits of biomass energy beyond just climate and

environmental considerations (e.g. energy independence through local fuels, local employment in rural areas,

innovation, etc.) is an essential component of any successful market development program. The awareness of

the various groups of market stakeholders of the availability, costs, and benefits of biomass energy systems will

be raised through targeted outreach and training programs, and creating and disseminating various knowledge

products.

Output 4.1 Set of targeted promotional materials on sustainable biomass production and utilization

Awareness programs that are independent of the sales of a product and service are crucial to market growth;

this is especially true for an emerging industry that has limited resources for marketing. Successful promotion is

characterized by a smart and effective mix of communication instruments. This output will support design and

implementation of promotional activities for bioenergy, including printed and electronic materials, videos, web.

Activity 4.1.1 - Design and disseminate printed and electronic materials for promotion of sustainable production

and utilization of upgraded biomass fuels in Georgia.

Activity 4.1.2 - Disseminate the national bioenergy strategy and action plan to ensure maximum stakeholder

coverage.


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Activity 4.1.3 - Design and launch a national bioenergy web portal to provide up-to-date information on the

available bioenergy technologies, model systems, costs, available resources etc.

Activity 4.1.4 - Develop and disseminate knowledge products including manuals and case studies on the use of

upgraded biomass fuels and biomass-based boilers.

Output 4.2 Bioenergy Association Established

The bioenergy sector in Georgia is small and poorly coordinated, which is not conducive to healthy market

growth. This output will therefore create a local biomass energy association bringing together stakeholders from

the forestry, agriculture, wood-processing, biomass processing equipment, combustion equipment and service

industries.

Activity 4.2.1 - Compile a database of key Bioenergy stakeholders

Activity 4.2.2 - Organize a kick-off workshop to work out administrative issues, followed by a series of

substantive meetings to involve both supply and demand side stakeholders.

Activity 4.2.3 - Establish the Bioenergy Association of Georgia as a Legal Entity and appoint the first Director and

provide funding for the first 12 months.

Activity 4.2.4 - Develop a sustainable business plan for the Bioenergy Association whereby fees can be collected

from members.

Activity 4.2.5 - Facilitate initial contacts with leading foreign bioenergy associations (e.g. Austria, Sweden)

Output 4.3 Trained cadre of bioenergy specialists

One of the main challenges encountered in all emerging biomass markets is that stakeholders generally lack

confidence in, and knowledge of, biomass systems, both on the production and end-use sides. Therefore

dedicated training needs to be proactively offered to all actors along the value chain as a part of a policy

package; it should target producers, installers and users of bioenergy systems. This output will generate a set of

training packages tailored to the different bioenergy market actors to facilitate smooth progression along the

learning curve.

Activity 4.3.1 - Design and deliver trainings for stakeholders potentially interested in developing biomass

production business (including such aspects as biomass feedstock sourcing, transportation logistics, upgrading

technologies, costs, etc.).

Activity 4.3.2 - Design and deliver trainings for suppliers and installers of bio-heat systems focusing on design,

installation, maintenance and operation of biomass systems.

Activity 4.3.3 - Work with Georgian universities to introduce a curriculum on bioenergy.


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The project preparatory grant (PPG) is to prepare medium-size project documentation: a GEF CEO Endorsement

Request and a UNDP Project Document that will be submitted for approval to the GEF Secretariat in early 2011.

The project document preparation phase started in November 2010 and will last until early 2011.

1.2 Overview of Georgia’s Energy Sector

Shock waves from the conflict with Russia in August 2008 reawakened energy vulnerabilities thought to have

been part of a past era when Abkhazian authorities, supported by Russia, threatened foreign control over the

country’s largest power asset and natural gas supplies. Russia has also openly stated a foreign policy objective to

manipulate and control economic assets in the former territories of the Soviet Union as a means to exert power

in a perceived proprietary sphere of influence. Therefore, energy security for Georgia can only be attained when

Georgia is free from external manipulation – a long-term, multi-faceted objective.

Of the roughly 120 PJ of total energy consumption in 2009, about 15% came from biomass and 24% from natural

gas. However, as specified in detail below, the electricity sector is dominated by hydropower—which supplies

85% of electricity generation, roughly 9 TWHE in 2009; hydro supplies 100% of generation in spring and summer;

thermal generation and imports supply about 20% in winter and fall). On the contrary, heat energy is dominated

by wood and natural gas, especially wood in rural areas.

Georgia is a net exporter of power. The GoG’s plans for increasing the share renewable energy therefore focuses

largely on hydropower, given a large, yet untapped potential, as well as the significant financial incentive to

export electricity to Turkey. Indeed, the GoG plans to reach 100% electricity supply through hydropower. The

GoG government does not consider biomass to have sufficient potential for use to supply grid electricity;

similarly, the indication is that rural areas will quickly turn to natural gas as soon as pipelines are extended

there.

Power Sector

According to the Resolution of the Parliament of Georgia, the main direction of State policy in the power sector

is the full satisfaction of the demands of industry and domestic –communal sector on energy resources through

diversification of the supply sources, and the achievement of economic independence and sustainability of the

sector. However, it should be emphasized, that according to the Ministry of Energy, the state energy policy

prioritizes hydrological power over all other renewable energy sources in the near to medium term. Biomass is

not seen by the GoG as having sufficient potential to sustain on-grid generation capacity.

Despite the fact that over 80% of Georgia’s electricity is generated from hydropower plants, 19.7% comes from

imported natural gas. Energy is wasted on inefficient heating, cooling, lighting and transportation systems. Low

output from aging, largely depleted oil and gas fields means Georgia is reliant on imported oil and natural gas.

The reestablishment of greater oil and gas connections with Azerbaijan has provided an alternative to over-

reliance on fossil fuels from Russia, yet Georgia can do much more to improve its independence.


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In order to attain the greatest degree of security in the shortest time possible, the GoG and international donor

community agreed that electricity is Georgia’s economic “ace-in-the-hole.” Hydropower should be developed in

tandem with transmission infrastructure that takes advantage of the growing and needy market for power in

Turkey, which, based on current estimates, could result in power exports being the largest contributor to the

GDP within several years. Strengthening and encouraging Georgia’s integration into the regional energy markets

and institutions through planning and strategic opportunity analysis with neighboring countries will expand

trade and transit opportunities and may support the future development of greater gas and electricity transit

opportunities through the Caucasus to Europe and beyond. Efficiency measures can improve the impact of

power in the system, making more rational use of energy, and offsetting the need for costly new installations. In

tandem, the rehabilitation and/or extension of pipelines can supply new gas service to vulnerable populations

and industry, resulting in improved livelihoods and increased foreign and local investments, especially in

Georgia’s new free industrial zone. Georgia has embarked on an ambitious program to construct a new $400

million (€270 million) power line to Turkey, but does not have the PPAs to develop the hydropower needed to

fill the power line with electricity.

Power Production: Currently, less than 25 percent of economically viable hydropower resources are being

exploited, thus expansion of hydropower production is seen by the GoG as critical in the near term. Small and

medium size hydropower plants based on run-of-river diversion designs can quickly tap over 1,000MW of

Georgia’s hydro potential, offset winter imports of electricity and gas, contribute greatly to Georgia’s energy

independence, and offset the adverse impacts of global climate change. Plants in the range of 10-70 megawatts

can be built in as few as 24-36 months because of their size and the fact `that they are less environmentally

problematic than larger designs.

Power Transmission: Weak and out of date transmission infrastructure causes failures that cause blackouts

throughout the country. In such circumstances the network is not capable of transmitting enough power from

Georgia’s major hydro installation Enguri hydropower plant in the west to the rest of the country, especially the

major urban center of Tbilisi in the east. An unreliable power transmission network that cannot ensure power

delivery hinders attracting investments in hydropower development and the development of a Caucasus energy

corridor since the principal future market is in exports to Turkey and Europe. Efficient use of energy resources:

Georgia’s inefficient use and untapped realization of renewable energy potential contributes to its energy

security vulnerability, especially during winter, when additional energy supplies must be imported. Vast

amounts of electricity are wasted in outdated, inefficient lighting devices and heating systems, contributing to

the need for imported gas. Replacing these outdated single fuel heating systems with more modern bi or tri –

fuel alternatives is an economic proposition that shows a good return and relatively quick payback. Addressing

these problems could significantly reduce Georgia’s winter energy import demand, improving the reach of

existing domestic hydropower, reducing the share of natural gas in the energy balance, and thus advancing the

energy security of the country.ii


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Heat Supply Sector

There are different energy sources used by the heating sector in Georgia: natural gas (mainly in urban areas),

firewood and other waste biomass (mainly in rural regions), electricity (by refugees and well-off rural population

without gas supply), Kerosene and coal (also in rural residential locations).

Gas Transmission: The deteriorated, eroded condition of the east-west transmission pipeline that delivers

natural gas to the entire nation results in huge losses each year. Customers throughout the country experience

inadequate supplies of natural gas, especially during the winter when demand increases throughout the country

and the east-west gas transmission pipeline is not capable of insuring reliable and secure transit. E.G. the

current lack of natural gas supplies for Poti and the adjacent free industrial zone makes it impossible for the GoG

to service tens of thousands of people and attract expected investments for industry development to support

economic growth of the nation.

Despite the already significant contribution of hydropower to the energy mix in Georgia, heat supply is

dominated by wood biomass in rural areas, especially in the western part of Georgia. As discussed, wood energy

supplies about 50% of total thermal energy consumption. However, wood in rural villages is used very

inefficiently. First, biomass is sources locally form both legal and illegal cutting, other wood and agricultural

waste such as hazelnut shells, and is burned without additional processing (for instance, densification via

pelletizing or briquetting) in low-efficiency ovens. Secondly, rural homes are badly insulated.

There is therefore a significant scope for investigating the role that biomass energy could play in Georgia within

much improved (i.e., more efficient) production and supply systems, and whether it could compete with either

traditional usage or with the likely future availability of natural gas. Likewise, there is scope to investigate needs

for creating the right government policy environment so that both producers and consumers find incentives to

invest in this area. The larger goal should be to investigate the role that renewable biomass could have in

replacing fossil fuels in heat and power during the high-energy demanding winter months.

A significant number of customers for improved biomass energy products should be identified in rural areas that

already dominate the biomass consumption figures in Georgia. However urban centers may be targeted as well,

in order to reduce natural gas demand in winter months.

For instance, among potential consumers of densified biomass, the Municipality of Tbilisi, which currently

consumes natural gas for heating purposes, is a potential candidate. The incentives for Tbilisi to do so are

several. Firstly, duel fuel, biomass/ natural gas burners could provide for a way to lessen dependency on natural

gas, both in terms of imports as well as, potentially, economic attractiveness; secondly, biomass use would

reduce the city’s GHG emissions.

Currently, the Municipality spends approximately 150,000 Lari per year on heat energy and 250,000 Lari per

year on electricity in their buildings, including City Hall, kindergartens, and polyclinics. There are 170

kindergartens under Municipality management in Tbilisi. Each kindergarten gets an annual voucher to pay for


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energy; any savings are retained by the entities. The Asian Development Bank (ADB) has expressed interest in

financing the rehabilitation of kindergartens. In order for the Municipality to make the move toward biomass,

proof must be provided that shows the economic benefit of retro-fitting, or completely changing the existing

boiler systems to a dual-fuel burning unit, biomass and natural gas.

A potential financial mechanism includes the Municipalities own revolving fund with an annual budget of

1,000,000 Lari. The funds are available for loans on preferential terms (10% or less) through four partner banks

for projects which benefit the city, according to Mr. Archuadze, Head of Agency, Economic Policy, Tbilisi City

Hall.

Firewood covered almost 50% of the population’s thermal energy demand during the last 15 years and this has

created significant problems. Today, the demand for firewood is higher than the supply in most of the country.

According to the Ministry of Environment Protection and Natural Resources, Heat Supply of Households in

Georgia, 2007 report, there is a deficit of available firewood resource of 1.3 Million Cubic meters throughout the

country. See Annex 3, Ministry of Environment Protection and Natural Resources, Heat Supply of Households in

Georgia, 2007.

Georgian forestry, the main firewood source, can sustainably satisfy about 15% of Georgia’s thermal energy

demand. Therefore the present use of forestry at such wasteful pace, and including illegal wood supply (Annex

5, Table 3), has the potential to create environmental catastrophe associated to forest degradation and

deforestation, such as landslides, soil degradation, and sedimentation of rivers. On the other hand, there is a

limited yet important supply of biomass waste in rural areas, chiefly hazelnut shells, which are used in some

regions for supplying heating to homes.

In Georgia, firewood is mainly used in domestic ovens with low capacity and effectiveness. Part of the problem is

the use of very low efficiency ovens, as well as the poor insulation conditions of many rural homes. Indeed,

USAID identified poor home insulation as possibly responsible for up to 70-75% of total energy losses. Recently,

within the country of Georgia there has been some attempt to construct more efficient ovens. Currently, high

efficiency stoves, ovens, and boilers exist in the European and North American markets.

Currently the use of biomass in Georgia is being made inefficiently and unsustainably. Replication of small

densified wood facilities throughout the rural areas of Georgia can alleviate this problem by utilizing both

agricultural and forestry waste streams.

The market opportunity is not enough to further develop and expand this energy sector; world experience

shows that State support is essential. The State has to prioritize biomass utilization development and reflect this

in renewable energy law and other laws and regulations. There are many examples of State support; the

approach pursued in Germany obliged the country’s energy system to purchase renewable energy at fixed feed-

in tariffs, assuring the sector’s development. Additionally, Germany supports banks that give beneficial credits to

create and develop renewable energy enterprises. In order to promote the utilization of existing biomass


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potential, it is also important to enact the law on biomass residues disposal whereby large cities, large animal

farms, the wood processing industry and other industrial biomass sources would be obliged to recycle their

residues.iii

Current legislation in Georgia does not yet provide for the sustainable development of the forestry sector. To

improve the situation, forest reform is underway, aimed at growing the role of private investors within the

sector. The state budget income from forest products is small and totalled just 4 million Lari in 2009.

At the moment, forest use is conducted in accordance with the Georgian law “On licenses and permits” and the

Governmental Provision “On rules and terms for licensing for forest use”. Of the total area of 2,456,232 ha of

Forest Fund, licenses for long-term use were issued in 2007 for 47,912 ha, in 2008 for 58,140 ha, and 2009 for

35,536 ha. In total during 2007-2009 160,108 ha of Forest Fund was given out for long-term commercial use.iv

The current policy does not consider heat supply alternatives and strategy and doesn’t specifically state

“biomass” as a renewable energy resource. However, the policy does not rule out biomass, leaving the door

open to develop small, energy efficient biomass facilities in those regions with ample feedstock. One of the main

tasks of state policy to be carried out in the power sector is maximum support of the activity of local and foreign

companies and minimizing bureaucratic mechanisms and procedures. The first priority in the power sector is

optimization of all types of licenses and permits and simplification of the procedures for their issuance. Georgian

legislative and executive bodies, power, oil, and gas national regulatory commissions, ensure the support of

“studying and putting into operation measures necessary for the use of thermal and co-generation systems, also

renewable sources of energy.”

1.3 Overview of heat demand and supply in pilot regions

According to the Ministry of Environment Protection and Natural Resources, Heat Supply of Households in

Georgia, 2007 report, there is a 170,000 cubic meter deficit in available firewood resources in the Samegrelo-

ZemoSvaneti pilot region, in addition to a 300,000 cubic meter deficit in the Imereti region and a 45,000 cubic

meter deficit in the Guria region. Imereti and Guria are adjacent to the Samegrelo pilot region.

According to the Samgrelo Regional Administration, natural gas only covers five percent of the population in

Samegrelo region; however the long term goal is to provide 100 percent coverage. Subsidies for biomass are not

realistic in the Georgian context; however direct purchase of densified wood to supply rural areas with heat

energy as a substitute for natural gas may be acceptable according to the Ministry of Regional Development.

Further analysis is necessary to secure the demand side commitment.

According to the data provided by Socar Georgia Gas Ltd gas connections completed in the Samegrelo and Guria

region in 2009 were 6,849 households, 59% of planned production for year. The 2010 production was not much

better providing gas connection to 6,849 households which give in total for these regions 13,331 households, or

12% of total households. There are approximately 107,000 households with the two regions; 79,000 in the

Samegrelo-Zemo Svaneti region, and 28,000 in the Guria region.


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In Senaki (one of the Municipalities in the pilot region), only 15% of the households are covered with natural gas,

and 100% coverage is a long-term perspective. So, current and medium-term demand for fuel wood is

significant. As such, the municipality could finance procurement of efficient stoves for their social facilities

(schools etc.) as well as biomass fuels from their annual energy budget as they currently buy firewood or gas. To

this end, the biomass fuel must be competitively priced with natural gas, for the municipality to be able to

procure it. According to the Senaki Municipalities, Senaki is not rich in forest resources, but hazelnut and

sawdust resources are available.

The city of Tbilisi and its surroundings, an area of 726 km² (280.3 square miles), consume imported gas,

predominantly from Russia and Azerbaijan. There are an estimated 170,000 households which already have

access to central gas supply networks and the Government of Georgia is pursuing further extension of the gas

grid; but reaching out to some of the remaining 600,000 households could prove technically or economically

infeasible (particularly in mountainous areas). Further, operation of the obsolete gas grid to supply an increasing

number of households is associated with significant problems – the gas mains were never designed for supplying

gas for heating (they were only supposed to feed gas for cooking and occasional water heating); therefore

pressure has to be increased to cope with increased demand, which leads to even greater gas losses through

leaks. At the same time, experts estimatev that the majority of Georgian households heat only part (30-50%) of

their residence, which is indicative of a considerable gap between the current level of thermal energy supply

from all the available source (mainly firewood and natural gas) and the minimum acceptable level of thermal

energy service that could be expected by the consumers. Thus, the available energy resources prove insufficient

to meet the country’s thermal energy needs in a sustainable and cost-efficient way.

The majority of municipal buildings in Tbilisi and regional/municipal centres (including pilot region of Samegrelo)

will continue to use natural gas as the primary source of energy (at 65%, with firewood at 30% and diesel oil at

5%) for meeting their heating needs, putting increasing pressure on municipal budgets because of the growing

natural gas import prices.

As previously stated, Tbilisi Municipality currently spends an equivalent of US$ 1.8 million annually to pay for

energy resources for 217 buildings under municipal management, with the bulk of payments going toward

electricity bills. According to the Tbilisi City Hall Energy Efficiency Concept Paper, 2008, it is assumed that the

energy demand for Tbilisi City will increase with 4-8 % per year. This will result in annual increase of electricity

with 80 -158 million kWh and natural gas with 15 to 30 million Nm3. If profitable energy conservation projects,

like fuel switching and duel fuel boiler conversions, are implemented in buildings under municipal management,

the municipality could see a significant savings in the annual payment for energy as boiler efficiency can increase

from 10 to 50% depending on the boilers output steam parameters such as flow rate, temperature and pressure.


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2 Biomass Resources and Their Utilization

The term “biomass” covers a range of organic materials produced from plants and animals. The biomass can be

collected and converted into useful energy. Such bioenergy includes usage of waste, for instance crop residues,

forest and wood process residues, animal wastes including human sewage, municipal solid waste (MSW)

(excluding plastics and non-organic components), food processing wastes; as well as purposely grown material,

such as energy crops and rotation forests.

The solid or liquid biomass feedstock can be converted using numerous technologies to provide more

convenient energy carriers in the form of solid fuels (e.g. wood chips, pellets, briquettes), liquid fuels (e.g.

methanol, ethanol, biodiesel, bio-oil), gaseous fuels (synthesis gas, biogas, hydrogen) or direct heat. The

production of heat by the direct combustion of biomass is the leading bio-energy application throughout the

world in terms of total use. There is likewise significant and strongly growing demand –and development

efforts— towards production of liquid bio-fuels for transportation. Technologies for heating purposes range

from rudimentary stoves to sophisticated modern appliances. For a more energy efficient use of the biomass

resource, modern, large-scale heat applications are often combined with electricity production in combined heat

and power (CHP) systems.

Different technologies exist or are being developed to produce electricity from biomass. Co-combustion (also

called co-firing) in coal-based power plants is the most cost effective use of biomass for power generation.

Dedicated biomass combustion plants, including MSW combustion plants, are also in successful commercial

operation, and many are industrial or district heating CHP facilities. For sludge, liquids and wet organic

materials, anaerobic digestion is currently the best-suited option for producing electricity and/or heat from

biomass, although its economic feasibility relies heavily on the availability of low cost feedstock. All these

technologies are well established and commercially available.

The idea of using wood or wood derived products as a substitute of coal, gas and electricity has a long history.

Several decades ago it was common in Northern Italy to burn “bricks” made of pressed dry grape skins and

bones in cast-iron or ceramic stoves as an alternative to wood and coal. The “bricks” were brittle and produced

unpleasant odor and lot of dust during combustion. The poor quality of this bio-fuel and its inefficient

combustion was a result of ineffectively designed stoves as well as poor drying and pressing techniques. It was

only after the introduction of relatively low cost energy sources such as heavy oil, heating oil, gas oil and later

methane, that the population abandoned this type of heating. However, through the last decade, the rising costs

of the listed energy sources caused many consumers to switch back to wood and wood-related fuels. It was this

shift that opened the new market for wood and wood derived fuels as well as for the new types of High

Efficiency burners and fireplaces. The first high-efficiency burners, which constituted a quantum leap in

combustion technologies, increased the energy output thanks to an optimized burning chamber, which allowed

for safer and more effective combustion by transforming CO into CO2.


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The first market development was the redesigning of conventional fireplaces in order to increase their energy

efficiency while diminishing unpleasant smoke, sparks and ash. The rising prices of fossil fuels and proven

advantages of energy efficient fire places were the main factors that paved the way for the development of High

Efficiency stoves solely dedicated to heating. The rapid growth of the densified biomass (pellets and briquettes)

market was driven by consumers’ demand for a cleaner, consumer friendly, easy to handle and higher style fuel

(stoves were mostly intended for houses and apartments in towns where proper wood storage would be a

problem). This market soon recorded such high rates of growth that it became one of the most popular

destinations of Western Europe’s investment in renewable energy.

One of the principal impacts of unsustainable practices is land degradation, which is severe in Georgia and has

become recognized as a major global environmental threat. The biodiversity of the Caucasus eco-region is being

lost at a rapid rate; the level of deforestation, desertification and loss of biodiversity is alarming. Erosion and, to

a lesser extent, desertification constitute threats to the country's ecology (specifically mountain ecosystems,

forests, wetlands and related biodiversity). This situation is caused by a lack of economic alternatives,

unsustainable nature resource management, improper agriculture practices, absence of integrated watershed

management, and might worsen under increased climate change-induced pressures on ecosystems.

Land degradation in Georgia, has significantly affected local households in terms of its contribution to a decrease

in land fertility, lesser yields, lower quality crops and, finally, an increase in poverty. The problem is complex and

calls for environmental, social and economic solutions and the development of effective regional and national

environment action plans, it would benefit greatly through the development of integrated natural resource

planning and management at the watershed level. Such work envisions a comprehensive intervention

encompassing the needs of people, their farming/husbandry, business, and industry, coupled with analysis of

the needs of the ecosystem to maintain sufficient biological function to keep all healthy and vigorous.vi(

2.1 What is densified Biomass fuel?

The term “biomass” describes a suite of organic substances of animal and plant origins. It can be divided into

primary biomass— plants, animals, microorganisms, and secondary biomass— residues from primary biomass

conversion and animal life activity.vii

Examples of secondary biomass are:

• Felled firewood, • Residues from forest exploitation, • Residues from the wood industry, • Residues from agriculture crops, • Residues from the agriculture processing industry, • Residues from farming, • Residues from sewage treatment, and • Residential waste. (This green part could be sent to the section of definitions.)


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Biomass accounts for one-third of all energy in developing countries. Modernized biomass technologies can

contribute to sustainable human development:viii

Cleaner energy

Promote environmental protection

Displace fossil fuels

Improve living conditions

The use of biomass in the energy sector has the following positive consequences:

• This resource is renewable and therefore not limited (provided sustainability requirements are met); • Biomass is spread almost everywhere; • It is comparably priced to fossil fuel; • Biomass can be used directly or converted into other appropriate fuel, stored and used when

needed; • It significantly reduces greenhouse gas emissions; • Biomass can significantly contribute to the energy supply; and

Biomass development will create new jobs in the regions.

Compared to other renewable energy sources, the thermal use of biomass or bio-waste fuels corresponds to an

economically and technically feasible alternative to contribute to the reduction of the global CO2 emissions, a

main goal of the Kyoto protocol.ix

Estimating biomass quantity and energy potential is important for bio energy development (Unfortunately, the complete evaluation of biomass energy potential in Georgia has not been carried out. The data obtained and quoted by different authors significantly differs).

More in general, because of the wide variety of biomass sources, different methods are used for energy

production or for its conversion into the other type of fuel. Methods of biomass conversion differ according to

its dampness. If moisture content is less than 50%, thermo-chemical processes are used for biomass conversion

into energy or another fuel type. If the water content exceeds 50%, it is appropriate to use biologic or bio

technical processes.x

Thermo-chemical processes comprise:

• Direct combustion for heat generation, • Pyrolysis (thermal decomposition), • Gasification, and • Liquefying for production of liquid fuel.

Woody biomass feedstock is generally delivered to the plant in one of two forms: unconsolidated material, and

comminuted material (chipped).


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Unconsolidated material is what remains after the trunk of the tree has been harvested. This may include

stumps, bark, leaves, needles, branches, and sometimes even the trunk itself. Historically, this material was

considered un-merchantable and left on the logging site or piled up at a landing —the place where wood is de-

limbed, bucked into various products, sorted, and loaded onto trucks for transport. Advances in biomass

utilization provide new opportunities for the utilization of unconsolidated woody biomass feedstock. In many

cases, unconsolidated harvesting residue is used as hog fuel at wood manufacturing or bio-energy facilities. Hog

fuel is a combination of chipped wood and wood waste used to generate power or on-site combined heat and

power.

A major obstacle with unconsolidated material as a source of woody biomass is the cost of collection,

transportation, and handling. This material has a low bulk density in its native form, and is usually transported

by dump truck or roll-off bin. Compressing the material by chipping, bundling, or crushing helps increase bulk

density and reduce the transportation costs to the plant.

Chipping is the most common method of increasing bulk density. This is because commercial chippers are well

integrated into conventional harvesting and other tree removal operations. Chippers have high output and can

blow chipped material into truck vans or roll-off truck bins for hauling. Tub grinders and large-scale stationary

commercial chippers are usually employed at wood processing facilities. In-woods operations need to avoid the

incorporation of non-wood debris and pay attention to the required specifications for chip size, bark content

and species mixing.

2.1.1 Wood Waste

The principle source of woody biomass in Georgia is in-forest residues from forest management commercial

logging (slash) forest health and hazardous fuels reduction treatments; sanitation cuttings in the wake of major

insect and disease outbreaks; downed woody debris following major wind and ice storms; and residues from

clearings along utility corridors and transportation rights-of-way – generally these are un-merchantable

materials as compared to sawlogs or pulpwood which can be sold for higher value uses.

Woody biomass also includes residues left on-site from forest harvesting operations such as branches and tops;

low-quality commercially grown trees, dead wood, and other noncommercial tree species. Other potential

sources and types of woody biomass include wood that has been cleared during land conversion; construction

and demolition wood; forest products manufacturing residuals (e.g. bark, sawdust, chips, and slabwood, etc.);

orchard trimmings, municipal solid waste (MSW) green waste; and wood harvested from short rotation woody

crop plantations.

Only after feedstock supply is established and the sources are reliable and sustained, can organizations start to

promote the usefulness of wood pellet heating. On the one hand, businesses interested in production and sale

of such biomass product need to know that there is supply of raw input sufficient to sustain their investments

for a number of years; on the other, potential makers of and customers for wood pellets and associated stoves


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and boilers will not risk the capital investment in the new technology without having the guarantee that wood

pellet fuel prices will stay competitive with alternatives (fossil fuels, electricity) in the long run.

Woody biomass resources available in Georgia

As previously stated, the Country as a whole has 52 concessions licensed. Each concession can vary from 5 to 20

years. According to the 2003 Forest Inventory (Annex 5, Table1) there is a total of 1.7 million ha of forested area

(excluding Adjara and occupied territories) of which 173,000 ha are under licensed concessions. In addition, 10

year concessions, recently auctioned include the 3,400 ha with an annual harvest of 6,000m3 in the Samegrelo

Zemo Svaneti region and approximately 27,000 ha with an annual harvest of 32,000m3 throughout the country.

According to the National Statistics Service of Georgia (www.geostat.ge), approximately 820,000 m3 of lumber

was logged in 2008. There is some confusion in the language as lumber recovery from logs often results in an

overrun, meaning that log volume usually provides more lumber volume, all things being equal. However, this

number does correspond with the Legal Harvest Volumes reported by the Ministry of Environment, Forestry

Department in Annex 5, Table 2.

It should be noted that approximately 8,000 ha of forested area adjacent to the City of Tbilisi, is now under the

management of the Tbilisi Municipality. The area was inventoried and a management plan was prepared in

2005. Unfortunately, the city does not have an up-to date urban forestry plan, or inventory of the trees within

the city. It is estimated that both areas, the property adjacent to the City, and that which lies within the City

could provide annual biomass waste material in excess of 30,000 tons.

In addition, the D&V (Georgia Timber International), an Italian company, operating through its wholly owned

Georgian subsidiary GTI, has seven years left on a 6,000 ha concession of chestnut forest in the Zestafoni region

and implements sanitary cuttings, yielding an estimated 200-300,000 tons of waste biomass. This entity doesn’t

work in pilot region.

During the research for this report it was learned that the Georgian Wood and Industrial Development Co. Ltd

holds license on 46,000 ha in the territory and the company reported an annual harvesting is 88,000 m3.

In addition, sawdust is available in Georgia, together with low quality wood, wood waste and other usable

wood-like materials. Available sawdust is a waste of previous industrial activities. The data on the current

production of sawdust in Georgia was estimated by the Ministry of Environment Protection and Natural

Resources in the 2007 report, Heat Supply of Households in Georgia (See Annex 4).

According to the report, sawdust is neither available from a single supplier, nor can it be found in small numbers

of large deposits. It is only available in a large number of small deposits raising the costs of its transportation.

According to the Regional Forestry Department in Zugdidi, there are 25 forest concessions in the Samegrelo

region. In country as a whole, there are 52 concessions licensed. Each concession can vary from 5 to 20 years.


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The total available area in the Samegrelo Zemo Svaneti region is 283,000 ha with 77,000 ha currently under

concessions. This is approximately 55,000 m3 of wood biomass available annually for harvesting within the

region. Additional 10 year concessions, recently auctioned include 3,400 ha with an annual harvest of 6,000m3 in

the Samegrelo Zemo Svaneti region.

The above mentioned Georgian Wood and Industrial Development Co. Ltd holds 38,000 ha in Zugdidi (pilot

region) with annual harvesting of 31,000m3 in Zugdidi

2.1.2 Hazelnut Shells

Due to the appropriate climatic conditions, cultivation of hazelnut –a tree endemic to the Black Sea coastal areas

of Georgia and Eastern Turkey—has been a traditional activity in Georgia but it never had broad commercial

meaning, as the hazelnut trees were grown in small household farms. It is especially popular in the West Georgia

(Samegrelo, Guria, Apkhazia regions). For the last 20 years, this business has been increasingly scaled up and

commercialized. The Samegrelo (Zugdidi) region is leading in cultivating and processing the hazelnuts. Since

2007, Ferrero, the famous producer of confectionary and other food products has been involved in the

development of the hazelnut business in Georgia. It has already purchased and has been planting 3,000 ha of

land in Zugdidi region. Ferrero is going to increase this business in Georgia and make the country one of the

biggest suppliers of hazelnuts to their own industry. According to the rough estimates, Georgia is the 6th largest

hazelnut producer in the world market, producing and exporting annually 20,000 tons of processed hazelnuts,

50% of which is produced in Samegrelo region. Considering that the ratio of kernels to waste is 1:1, about

10,000 tons of hazelnut waste is produced in Samegrelo annually. Some of the biomass fuel (shells, husks) is

used by hazelnut processing plants for their own heat requirementsxi, while the remainder is used locally for

heating homes and businesses, with an increasing component going to export.

Approximately 20% of population in Samegrelo Zemo Svaneti region already uses hazelnut shells for meeting

their heat energy needs. As previously stated, approximately 10,000 tons of shells are available for

consumption. The household cost of the shells is 120 Lari/ton with an approximate household use of 2 tons per

season, often burning shells in retrofit stoves which enable semi-automatic feeding of shells.

Currently, Dioskuria Ltd., a major processor of hazelnut in Samegrelo region, sells around half of the regional

production, approximately 2,000 tons of un-processed hazelnuts per year, 50% of which (i.e. 1,000 tons) are

hazelnut shells; there are at least 5 companies in Samegrelo that have similar capacity The majority of shells are

sold locally for domestic energy consumption. An estimated 5,000 tons of hazelnut shells per year are available

in Samegrelo region. A recent trend has emerged for hazelnuts to be sold un-cracked to China (which is cheaper

due to the 50% waste content), this could cause a future reduction in the amount of waste shells left in Georgia

for further use.

Those who can afford firewood prefer using firewood as their primary heat source. The cost of the firewood is

approximately 30-60 Lari/m3, with an approximate house hold use of 7 m3 per season.


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Available biomass from hazelnut production is very low nationally; 20,000 tons. These production figures

translate into 460 TJ or about 10,000 toe, approximately 2-3% of total heat energy needs. In the Samegrelo

region, 10,000 tons compare more substantially with locally available waste wood (up to 10%).

Based on the information gathered, it appears that the Samegrelo region has a sufficient amount of available

biomass in both hazelnut shells and wood waste to support a small, 10 to 15,000 ton per year biomass

densification pilot plant that could be replicated throughout the territories and within the City of Tbilisi. In

addition, it appears that a market, though limited to rural areas without natural gas connections exists in both

the sale of firewood and hazelnut shells for residential heat.

2.1.3 Environmental Impact of Biomass Burning

Biomass fuel used in Georgia is currently either discarded in the environment or burned in inefficient stoves and

boilers, wasting a significant amount of heat energy. An additional source of waste is the very poor insulation

condition of many of the urban and rural homes.

Biomass as an energy source produces emissions that should be considered in the overall analysis. As an

agricultural waste, hazelnut shells are not an exemption.

In a 2009 study on trace elements of biomass fuel, hazelnut samples were burned to determine their ash

content using the standard test method for ash in biomass.xii During this heating process the biomass

decomposes into volatile gases and solid char. Biomass typically has a high volatile matter content up to 80–

90%.xiii Hazelnut shells contained volatile matter within the range for woody biomass. Higher volatile matter

content of the biomass causes an improved combustion, resulting in a better burn out and lower unburned

carbon in the ash.

The phosphorous content of all of the ashes used in the study was in the range of 3.2–4.6%, which could classify

these biomass ashes as useful plant nutrients.xiv However, high contents of sulphur in the biomasses of the

present work, (hazelnut shell: 9.8%) may also be considered as an increased risk of corrosion. Hazelnut shell did

not contain any amounts of Cl.

Ashes of hazelnut shells contained more Mg (6000–11,000 mg/ kg) than P (4000–7000 mg/kg) and also

contained Fe and Mn as the highest concentration trace metals. The concentrations of these metals in the ashes

of hazelnut shells were found to be comparable. The concentrations of Fe and Mn changed in the range of

1400–2200 mg/kg and 1200–2000 mg/kg, respectively, depending on the temperature of digestion and type of

digestion acid mixture. The temperature of highest concentrations of leaching was found to be 105 C.

“Dioskuria” commissioned a test for the assessment of heat parameters of hazelnuts they are processing. The

results are as follow: ash content of the sample –0.1%; hydrogen (H) content-1.87%; sulfur (S) -0.02%; maximum

heat capacity at the burning 23,799 kJ/kg; minimum heat capacity at the burning 23,343 kJ/kg (the test has been

conducted by the Technical University of Georgia; measurement accuracy ±1.5).


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The optimal temperature and the best process for dry ashing of lingo-cellulosic biomass are currently matters of

debate and investigation. Generally, the lingo-cellulosic biomass dry ashing is carried out in the laboratory at

temperatures of up to 600 C, as is shown in the norm for determining the ash content in wood,xv where 580–

600C is the temperature range selected. For many biomass materials, however, a significant portion of the

inorganic material is volatile at the conventional ashing temperatures for coal, and an ashing temperature of 550

C has been adopted as standard for ash content determination, to avoid underestimation of the ash content of

the fuel, due to loss of the volatile inorganic

Ash contents of hazelnut shells were 1.2%, which is well within the average values of ash for biomass.xvi

Based on the research, hazelnut biomass is comparable to other woody biomass for use in densified fuel

products.

2.2 Densification Process

Worldwide, the current efforts are presently focused on utilizing agricultural waste in a densified form for

combustion applications since agriculture can produce an annual crop which provides for a reliable feedstock

stream. To date commercial manufacturers of agricultural fuels have focused on pellets, but use of briquettes is

also developing as this is promising technology for commercial fuel production. In general, it appears that

briquetting holds the most promise for producing low cost densified commercial fuels while pellets appear best

suited to smaller combustion appliances.xviiThere are many advantages of densified fuels:

The amount of dust produced is minimized;

The fuel is free flowing, which facilitates material handling and rate of flow control;

The energy density is increased, easing storage and transportation;

The capital cost and building footprint required for the combustion appliance is reduced considerably compared to burning bulk biomass;

Uniformity and stability permit more efficient combustion control;

There are less particulates produced during the combustion process;

There are considerable reductions in labor for feedstock handling; and

Risk of fire is reduced considerably as the biomass can be stored in an enclosed bin and is more easily separated from the combustion process.

As home and commercial heating cost continue to rise, market forces encourage users to replace old, high cost,

high emission technology, with new, low emission systems. If cost is the significant driver, then densified wood

products are a viable, low emission, renewable resource answer.

A pilot biomass densification plant could be established in the Zugdidi region (Samegrelo, West Georgia) of

Georgia to demonstrate the benefits of biomass utilization in the form of densified fuel (pellet or briquettes) in

order to meet the needs of the rural population. This example could be replicated throughout those territories

with similar resources, and limited access to natural gas.


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2.2.1 Pelletizing

All types of woody biomass are suitable for the production of wood pellets. Dry sawdust and wood shavings are

commonly used in order to save the production costs that would be incurred from drying, chopping and grinding

the wood. Large plants normally add bark, straw and agricultural crops to the wood to increase the volume of

raw material. Profitability is higher for large-scale plants, but small scale plants may also be profitable given the

local market demand and suppliers of raw materials.

The process of pellet making was developed for the livestock feed industry. A brief overview of the process for

converting wood waste into fuel pellets is described below. Each step in the process can add value in exceeds of

its cost. Support activities apply to the entire value chain and the costs should be included as general operating

cost. While there is some variability within the operation, those variations are small compared to the cost of

feedstock, transportation, and delivery of product. Companies that can optimize the process by minimizing

those costs are rewarded with higher margins and higher profits.

Raw materials are delivered. The raw materials are green, wood or agriculture waste with average moisture content of 35%. This material is measured in “green tons”, provided from forestry or farming projects.

The green wood waste is debarked; all feedstock is chipped to a specific size, and screened for tramp materials (dirt, metal).

The feedstock is dried in a rotary dryer typically between 6%-10% moisture content, measured in “bone dry tons” or BDT. Some experts suggest the optimal moisture content is 15% before densification.xviii

Using a hammer mill, the fiber is continuously fed into a cavity, where it is directed equally on either side of the edges, formed by the rollers and the inside face of the die. The rollers turn as the die rotates, forcing the material through the die holes by the extreme pressure caused by the wedging action. As the pellets are extruded, adjustable knives cut them to the desired length. The goal is to produce a pellet with a good hardness and a minimum production of fines (material broken off in the pelleting and handling process).Generally, there are no additives when using wood as the feedstock as the wood lignin softens under temperature and pressure to become the binding agent.

The pellets are cooled and screened for residual fibers.

The pellets are packed for delivery.

A pellet mill deals exclusively in the conversion of green waste into densified fuel pellets. A pellet plant will

require approximately 1.35 tons of raw materials to produce 1 ton of product.

A number of properties are commonly known to affect the success of pelleting, including:

Moisture content of the feedstock; Feedstock moisture has an important effect on improving pellet density and durability. As water softens lignin, moisture often can improve durability if densification temperatures are low. However, low moisture contents of 8-12% moisture provided higher density pellets than 15% moisture content materials when other factors such as grinding and temperature are optimized.xix

Density of the raw material;

Particle size of the raw material;

Fiber strength of the raw material;


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Lubricating characteristics of the raw material; and

Natural binders.

Pelleting productivity is measured by manufacturers in terms of production yield, in units of pounds or kg per

hour. In the case of sawdust residues, this value varies from about 15-35 pounds per hour, depending on the

source of the wood residue; hardwoods are in the low range and softwoods are in the high range.xx In theory,

the more pliable the fiber, the easier it is to exude through the roller die. Other factors influencing productive

yields include steam and residency time (cooking or conditioning) in order to create a more pliable fiber. The

overall goal is to create a more fluid pelleting process, where a lower friction coefficient is created between the

die extrusion surface and the fiber.

Reviews of the binding process and characteristics of plant tissues to form pellets have been completed in

recent yearsxxixxiixxiii. The mechanism of binding is made possible by natural cohesion between particles and the

mechanical load that forces inter-particle contact.

The pellet is bound together by the lignin exuded from the feedstock. This process results when fiber passes

through the extrusion holes, heating up the die and creating elevating temperatures (7585°C). Lignin within the

material starts to flow from the fiber cell walls and has the effect of binding with other fibers during extrusion.

During the process some moisture is driven off as steam. The resulting product is a uniform flowing material

with a bulk density several times higher than that of the starting raw material.xxiv

The requirements for pellet fuel quality in Europe vary from country to country. Sweden established its standard

in 1999, dividing pellets into 3 groups according to quality standards. Austria probably has the most advanced

control system, which ensures that only natural and high quality raw materials are used in the process of

production.xxv Since densified fuel is a new and potential market in Georgia, pellet fuel quality standards do not

exist, and should be established in line with European standards, in order to facilitate exchange of technology

and/or open an import/export market.

The limited availability of sawdust/wood in Western Europe created an important import market from eastern

Countries (Czech Republic, Ukraine) and even from Canada despite the high cost of transportation. The advent

of pellet heaters caused the slight shrinking of the wood briquette market, since most residential consumers

moved to this more efficient and easy-to-use pellet heaters. However, briquettes maintained its market position

in the commercial and industrial market and would be more desirable in the rural areas of Georgia as the

consumer could use the briquettes in their existing wood burning stoves.

2.2.2 Briquetting

In industrialized countries there are two main processes being used to produce commercial fuel briquettes: the

piston press and the screw press. The piston press can be of both mechanical and hydraulic drive type.


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In contrast to significant private sector investment in improving pelleting processes, there has been limited

recent innovation in the field of briquetting. However with the rapid development of the pellet industry and

increasing interest in larger densified fuels for large combustion appliances, there is increasing interest

especially in ram type briquetting systems such as those marketed by Nielsen, i.e., the Bogma screw press. A

piston press is a reciprocating type where the biomass is pressed in a die by a reciprocating ram at a very high

pressure.xxvi The force exerted by a ram reaches a level that is sufficient to overcome the friction of all briquettes

in the pressing channel and the backpressure caused by the column of briquettes in the cooling channel. The

entire line of briquettes moves forward, with the force remaining approximately constant, and a new briquette

emerges from the mouth of the press. At the beginning of the backstroke, the ram face does not separate at first

from the briquette because of considerable elastic expansion of the briquette. It is important, however, to note

that the surface produced by the ram face is so highly densified that, during the next stroke, it acts as the

bottom of a confined volume densification chamber until friction is overcome and the product column moves

forward. During the entire production sequence the surfaces of adjacent briquettes do not develop significant

bonding; therefore, on discharge from the cooling channel, the product can separate easily into single briquettes

similar in shape to hockey pucks.

The hydraulic piston press is different from the mechanical piston press in that the energy to the piston is

transmitted from an electric motor via a high-pressure hydraulic oil system. This machine is compact and light.

The briquettes produced have a bulk density lower than 1000 kg/m3because the pressure is limited to 392 to

1324 Pa. This machine tolerates higher moisture contents than the usually accepted 15% moisture for

mechanical piston presses.xxvii

During the country survey, it was learned of an unsuccessful attempt from a local NGO in Samegrelo to launch a

briquetting production facility. The NGO Mizani, was set up about a year ago to help refugees in Zugdidi improve

their lives. The NGO approached UNHCR with a proposal to set up a sawdust briquetting facility at the

mechanical plant in Zugdidi (where some 1000 refugees currently live), with the intention to supply part of the

produced briquettes for free to the refugees (up to 20% of production) and sell the rest on the market. The

UNHCR involved a Spanish subsidiary of the international humanitarian organization ACF

(http://www.actionagainsthunger.org/) to assist Mizani with the project proposal. The project proposal appears

to have been approved by UNHCR for funding and a bidding process announced to supply briquetting

machinery; however, the bidding has been cancelled; further details are yet to be obtained from UNHCR/ACF.

According to Mr. Gardava Bachuki, Director of the Zugdidi Mechanical Plant, the plant was a major industrial

hub for the aviation industry in the soviet times. The plant currently manufacturers complete hazelnut

processing lines (from cracking to packing), as well as improved stoves to burn hazelnut shells. The plant was

intended to host the Mizani project on sawdust briquetting; however, at the time, no reliable feedstock was

available in Zugdidi, therefore the feedstock was planned to be transported from within a 70 km radius of

Zugdidi. There is considerable feedstock potential in the neighboring Svaneti region where it was told that the

sawdust and potential feedstock was often disposed of in rivers.

http://www.actionagainsthunger.org/


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2.3 Densification Capital Cost

Densification of biomass, as previously described, increase the bulk density of the raw material by approximately

1.35 to 1, creating a fuel source that is easier to handle, store and transport. Thek and Obernberger (2004)

reportedly pellet production costs in Sweden and Austria are between $78 and $112 per ton, while Samson et

al., (2000) estimated costs from $72 to $102 (not including drying), and depending upon the raw material

costs.xxviii,xxixThe main difference in both studies was a larger plant capacity in the first, as well as a lower cost for

electricity in Sweden.xxx It is important to understand that the costs incurred for densification are highly related

to plant size, including fixed (capital) and operating costs.

In developed markets, the market is strongly affected by current trends in the economy and energy sector. Basic

market principles apply: when the value of the currency is low and energy costs are high, there is a surge in

demand that affects densified wood stoves, boilers and pellet or briquette fuel.

The size of the densification plant (tons/year), operating time (hours/day), personnel costs, equipment costs,

and raw material costs all play a large role in the final costs of the product, whether it be pellet or briquette.

Several estimates of pelleting plant costs have been made for wood pellet plants in North America. In May of

2008, a 78,000 t/y wood pellet plant was proposed for Loyalton, California at an estimated cost of $14 million

dollars or approximately $8.97/GJ.xxxiIn December of 2007, a 90,000 t/yr wood pellet plant opened in Schuyler,

New York costing $10 million dollars or approximately $5.89/GJ. Similarly a case study of a 132,000 t/y wood

pellet plant in William’s Lake, British Columbia had a construction cost of $15.5 million or $6.28/GJ of wood

pellet energy output.xxxii

A breakdown of the pellet plant costs into components was conducted by both Mani et al., (2006) and Thek and

Obernberger (2004). Annex 6, Tables 1 and 2 are adaptations from their studies and updated to 2010 USD. Mani

et al., (2006) used a base case of 6 tons of pellets per hour with an annual production of 45,000 tons. The plant

is assumed to operate for 24 hours for 310 days annually for a usage of 85%. Table 1 demonstrates the largest

costs in the pellet plant were both the drying operation and the pellet mill, representing approximately 25% of

the overall costs. The capital costs of the pellet plant represented $8.66 per ton.

The second analysis of pellet plant costs by Thek and Obernberger (2004) represents a smaller sized European

plant. Annex 6, Table 2 shows the main differences in cost that the European plant experienced was due to a

much higher raw material cost per ton than the plant in British Columbia, as well as a higher drying cost per ton

of production. Grinding and pelleting costs in the case of both mills are modest compared to raw material,

drying and personnel costs.

One way to reduce cost is to spread overhead costs by creating a certain scale of production. An increase in the

pellet production rate (plant capacity) will substantially decrease the pellet production, due to the economies of

scale for the larger plants.


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A major opportunity to reduce overall costs for densification may be to adopt a simpler transformation process

such as briquetting. There is increasing interest in the development of briquettes for processing agricultural and

wood residues. Several projects have been developed in the US including the installation for a briquetting unit at

Ernst Seeds in Meadville, PA and Iowa. These units have successfully briquetted agricultural waste with use of

only a tub grinder for preprocessing. According to Wayne Winkler of Briquetting Systems in Vancouver, an 8000

ton per year systems can be established for about 500,000 USD. The capital cost of a 2 ton per hour briquetting

unit is about $260,000. It is important to note, that the overall cost per ton (capital and operating cost) is often

half that of producing wood pellets. A Briquetting Operational and Capital Costs per ton can be found in Annex

7.

Typical briquetting systems producing 12-15,000 ton per year can be expected to be about $9/ton for operating

costs and $9/ton for capital costs for a total of $18/ton. Innovative biomass installation are being developed

such as installing the briquetting units in a processing room located underneath a large 300m3

storage bin.

The installation of a briquetting facility may be a potential solution to reduce densified fuel production costs by

enabling lower capital investments, reduced grinding costs and lower feedstock delivery costs than a pellet

plant. Mechanical briquetting systems can have total (operational and capital) costs of less than $20/ton or

approximately $1/GJ with plants of 10,000 ton per year.xxxiii

The main advantage of densified biomass is that it can meet a wider variety of energy market applications and it

is also well known in the European market. The most significant markets outside of North America are in Europe

including the countries of Sweden, Denmark, Netherlands, Germany, United Kingdom, Italy, France and Spain.

An additional emerging market includes Japan. Additional markets are expected to develop in China and Russia;

given its vast forest areas, the latter may become a net exporter of wood pellets.

2.4 Combustion Technologies

A very rapid technological development of small and medium scale combustion systems is occurring globally as a

result of the pressing need to develop clean and green renewable fuels. In particular countries like Sweden,

Denmark, Austria and Germany have very dynamic advances in research and market development.

The major advances in combustion technology are overviewed in this section as they relate to improving

performance and ambient air emissions from combustion appliances.

The 3 main factors to consider in developing clean combustion design technologies are the 3 T’s: time,

temperature and turbulence. Complete combustion of gases occurs through effective air mixing in the

secondary combustion, achieving long residence times for gases to burn in the appliances along with reaching

adequately high temperatures in the combustion process.

Research and experience has shown that the volume, and supply method of combustion air is of paramount

importance to achieving optimization of the combustion process. All clean combustion appliances now divide


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the combustion chamber into primary and secondary air to enable two stage combustion. The primary

combustion zone is the area where pyrolysis occurs and the dry fuel is transformed such that combustible

volatile components are rapidly released while the residual char is slower to oxidize. Effective secondary

combustion is achieved through developing a well-designed geometry of the combustion chamber to create

turbulence and through an effective arrangement and design of the air nozzles. The air also needs to be

introduced with adequate velocity. The main objectives are to create effective turbulence for gas mixing and

residence time to ensure complete gas combustion.xxxiv

Many combustion systems are now being designed to be multi-fuel appliances or boilers burning wood,

agricultural feedstock, coal and natural gas. However there are major differences between coal and biomass as

combustion fuels. A primary difference between the fuels, which affects the combustion process, is the amount

of volatiles. In coal, most of the carbon is fixed and is more slowly released during the combustion processes. In

contrast, biomass fuels have high levels of volatiles and hence the fuel releases its energy more rapidly.

Consequently, biomass feedstock requires significantly more overfire air than coal to enable clean combustion

by thoroughly burning the volatiles, Table 1.

Table 1 Proximate analysis of typical samples of softwood, hardwood and bituminous coalxxxv

Softwood Hardwood Bituminous coal

Volatiles 75.2 77.8 34.3

Fixed carbon 23.1 19.5 57.7

Ash 1.7% 2.7% 8%

A major problem in burning high ash fuels that have significant levels of aerosol forming compounds like

potassium, chlorine, sodium and sulfur are that they have a low ash melting point. This causes several problems

including clinker formation and corrosion of appliances. A major problem with burning fuels at high

temperatures is the occurrence of alkali species migration where potassium compounds form on the inside walls

of the combustion unit.xxxviOne of the main strategies to address this problem is to use a lower temperature to

initiate the release of gases in the primary combustion area. The problematic compounds will remain on the

fuel-bed where they are eventually removed through the bottom ash avoiding the secondary combustion area

and boiler tubes. In larger more sophisticated combustion systems a staged combustion can occur where the

temperature is gradually increased through the combustion process. Larger well designed combustion

technologies are being used in large greenhouses in Canada, such as Binder and Vyncke brands, successfully

utilize this approach to burn more difficult fuels with high efficiency. The more successful combustion units that

are burning higher ash fuels have fuel bed systems which continuously remove ash and avoid a remixing of the

burning char and burnt out ash with newly introduced fuel. This is particularly important in small boilers and

stoves where the fuel-bed is quite small and fuels are commonly fed from above. Ensuring there is limited to no

mixing of fresh fuel and burnt out fuel, will help prevent the formation of soft surface bridging on the fuel-bed,

which has been widely reported when burning higher ash fuels.


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It has also been well documented that the volume of excess air needs to be minimized to prevent excessive heat

losses out of the combustion stack that commonly occurs when excess air required for effective combustion is

employed.

Major progress has been made in improving boiler design. The main factors that have recently been identified to

contribute to reducing particulate load are the use of a lamda (oxygen controlled) boiler and the use of a

condensing boiler. However, recent advances in solid log boiler combustion design that include use of a heat

sink have also demonstrated the potential for exceptionally low emissions at 4.4-5.7 mg/MJ.xxxvii

The most important parameter influencing the total mass of aerosols formed during combustion is the amount

of volatile aerosol forming elements from the fuel, which mainly depends on the chemical composition of the

fuel. In particular Ca, Mg, Na, and K are the most important elements.xxxviii In terms of aerosol loading potential

of fuels, wood pellets and briquettes are lower than most agricultural sources of fuels.

2.5 Fuel Switching: Gas to Biomass in Boilers for Heating

There are many potential advantages to using biomass instead of fossil fuels for meeting energy needs. Specific

benefits depend upon the intended use and fuel source, but often include: greenhouse gas (particularly carbon

dioxide [CO2]) and other air pollutant reductions, energy cost savings, local economic development, waste

reduction, and the security of a domestic fuel supply.

The major source of GHG emissions from a boiler system is carbon dioxide (CO2) from the combustion of fossil

fuels in the boiler. Other minor sources of GHGs can include methane (CH4) from leaks in the natural gas

distribution system and CH4 and nitrous oxide (N2O) as byproducts of combustion processes.

Commercial boilers can use a number of different fuels including coal (bituminous, sub bituminous, anthracite,

lignite), fuel oil, natural gas, biomass (wood residue, bagasse), liquefied petroleum gas, and a variety of process

gases and waste materials. Each of these fuels has different combustion characteristics and produces distinct

GHG emissions. Coal is the highest CO2 producer in commercial boilers with an average emission factor of 93.98

kg CO2/million British thermal units (MMBtu); natural gas has the lowest emissions of CO2 from commercial

boilers with an average emission factor of 53.06 kg CO2/MMBtu.xxxix

The environmental impact of the fuel switching methods is a potential reduction of greenhouse gasses or other

elements which give negative impact to the environment. The common potential reductions include carbon

dioxide CO2, sulfur dioxide SO2 and nitrogen oxide NOx.

Fuel switching refers to a change in the boilers hardware to accommodate complete (100 percent) replacement

of one fuel with another fuel. Fuel switching from a coal, fuel oil, or diesel-fired boiler to a biomass-fired boiler

can result in decreased emissions. Switching from natural gas to biomass requires:


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• In public buildings the heating system must be operated automatically without permanent observation. To find

locations for the installation of wood chip boilers several criteria must be taken into account. Because the

investment costs for small boilers are rather high, only boiler houses with an annual consumption of more than

500 to 1000 MWh should be considered.

• Due to the fact that wood boilers are generally larger than standard gas boilers, several boundary conditions

must be taken into account: the buildings must allow large delivery trucks to reach the storage; the boiler house

must be large enough for a wood chip boiler; and the size and the condition of the chimney needs to be right.

Boiler efficiency improvements depend greatly on the existing boiler design and design modifications

implemented as part of the fuel switching project. However, the efficiency changes due to design modifications

are expected to be much smaller than the impact of the fuel composition.

In addition to CO2 emission impacts, switching to another fuel may have an impact on the other pollutants

(particulates, SO2, NOX, and mercury). Switching from coal or oil to other fuels reduces particulates and, in most

cases (natural gas, biofuels and biomass), SO2 emissions; the exact percentage SO2 reduction depends on the

sulfur content of the coal or oil. NOX emissions depend on the design of the boiler, but some NOX reduction is

expected as a result of fuel switching.

In the recent study, Energy Economical and Environmental Analysis of Industrial Boilers Using Fuel Switching,

January 2011, the study found that the total annual cost saving is higher when switching between diesel and

biomass than diesel and natural gas. Carbon dioxide reduction was another advantage of using biomass over

natural gas with approximately 12,000 ton annually of CO2 reduction in the case of diesel and biomass fuel

switching. The study found that when utilities switch to renewable energy sources, such as biomass, substantial

emissions reduction can be achieved.

3 Barriers to Biomass Energy in Georgia

Given the previous discussion on energy structure in Georgia, general biomass use and potential, as well as the

necessarily first-order analysis of available feedstock for biomass energy, it appears that the most efficient way

to promote an increased and more efficient use of biomass in Georgia is to supply efficient heat energy in urban

and rural settings. On the one hand, biomass can help overcome some of the discussed winter energy deficits in

urban areas, by supplying cheap alternative heating options; on the other, it can provide an improved (over

already established traditional use) way of filling the current, long-term gap in natural gas availability in rural

regions. There are several ways to improve efficiencies of biomass energy use in rural settings. One is improving

heat insulation in homes; in addition, improved efficiency of boiler systems by retrofitting a duel fuel system;

and finally, available waste biomass could be produced and sold in densified form (i.,e., pellets and/or

briquettes), in order to increase efficiency of collection, distribution and use of waste from a variety of sources,

mainly from the forestry sector and the agricultural residue sector, in particular hazelnut shells in Samegrelo.


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Several barriers can be identified in Georgia, and in particular in the pilot regions of Samegrelo and Tbilisi.

On the supply side, a major barrier is the ability to obtain adequate and consistent supplies of waste biomass. As

discussed in previous sections, there is no consistent localized source of sawdust; there is a lack of machinery to

be able to recover waste after forestry operations; and hazelnut shells are already used locally and increasingly

being sold for export. Nonetheless, there is scope for identifying enough supply to perhaps begin a pilot

operation in the regions, one that could serve as replicable activity once demonstrated profitable and/or useful

towards improving regional and national energy goals.

On the demand side, common practice is a major barrier; rural populations already use biomass—mostly

firewood and other wood waste from both legal and illegal cuttings, as well as hazelnut shells—for heating and

cooking in low efficient stoves. Income levels are likely insufficient to convince them to shift to more efficient

stoves that are more expensive and use fuel that is more costly than current sources. In addition, natural gas is a

tough competitor of biomass in urban centers, while gasification of Samegrelo, albeit slow, will eventually put

strong pressure on justifying investment into energy from biomass. At the same time, several incentives exist to

promote demand, as discussed, from the incentive of Tbilisi to reduce its own GHG emissions as part of the

Covenant of Mayors, to the possibility to offer products (pellets, briquettes, stoves and boilers) that, under the

right set of policy, may be marketed to the rural population as an attractive alternative to traditional ways, at

least since these seem to be jeopardized by, as well as jeopardize, the limited availability of natural stock.

In addition, a number of private players may be interested in either the demand or supply side of biomass

energy in Samegrelo, and therefore may be interested in investing in pilot projects that, while useful to test in

practice a market idea, can also demonstrate scalability and thus be subsequently adopted by market and policy

alike. These players include Ferrero (supply side: agricultural waste from its plantations in terms of hazelnut

shells and prunings; demand side: heating of own facilities at its plantations); the Chinese Company (Chinese

Forestry Enterprise; supply side: they are interested in investigating production of pellets or briquetted to

maximize their profit—for either domestic consumption or export); and the Italian Company (D&V (Georgia

Timber International); supply side: they may be interested in producing pellets/briquettes for maximizing profits

and/or support local populations within an internationally funded effort, including GEF).

In developing countries there is typically no organized market for biomass fuel.xl As a result, there is no price

consistency for biomass material. Lack of transportation infrastructure and the cost and availability of

transportation fuels limit the development of regional markets, resulting in fragmented and localized biomass

markets.xli The seasonal nature of biomass material, the variation in quantity, and the low density of such

material further complicate the development of an organized market for biomass. Biomass also faces significant

transaction costs resulting from the quantities of biomass required to be collected from large numbers of farms

and related to the security of this supply.xlii Contracts with small farmers for a guaranteed supply of biomass

would not likely be commercially practicable or enforceable, given that natural conditions play a major factor in

biomass production and enforcement costs would be prohibitive.


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3.1 Government/Policy

Barrier Potential Solution

Absence of national strategy or priority for promoting biomass energy use.

State regional development strategy 2010-2017 prioritizes environmental protection and development of renewable sources of energy, including biomass (Ministry of Regional Development). This project will set the stage for promoting biomass energy at the national level.

Insufficient organizational capacity devoted to renewable biomass energy development by the State. - Lack of a designated agency for promoting

biomass energy/plantation. - Lack of co-ordination among different

government agencies and their interaction with the private sector.

Development of a Biomass Action Plan. An action plan under the regional development strategy has been approved by the government; though it does not specifically earmark resources for biomass promotion, it can be amended as part of an annual update exercise (Ministry of Regional Development). However, a focused Biomass Action Plan would address the current environmental conditions, available feedstock, and market analysis to provide guidance to the Ministry.

Taxation system does not support Renewable Energy (RE) development.

Tax reductions or local tax exemptions are two very powerful economic tools that Georgia is currently under-utilizing to encourage RE development.

Fragmentary and ambiguous legal initiatives in support of RE - a lack of standardisation and no feed-in tarriffs for renewable energy.

In order to be enforceable and effective these legal initiatives require more objective reasoning, harmonization with other legislation, and the development of proper implementation mechanisms. A Biomass Action Plan would address these issues to better inform the Ministry.

Lack of subsidies or investment incentives for promoting biomass energy/plantation. Heat energy needs are particularly acute in remote mountainous regions, where there is no reliable supply of energy resources, and natural gas supplies are subsidized by the government.

It is possible that the government could switch subsidies from natural gas to biomass in the remote areas. Through direct purchase of densified wood for heat energy, rural areas would be provided with a low cost alternative to natural gas.


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3.2 Feedstock


There is a high spatial distribution of potential feedstock supplies and no reliable data on available feedstock.

The project proposes to develop a Biomass Action Plan that includes a regional feedstock study using the latest GIS information, statistical analysis, and ground truthing for an accurate assessment of the environmental conditions

Current lack of firewood to supply the demand.xliii Deficit of available firewood of 1.3 million m3 throughout the country. An estimated 170,000 m3 in Samegrlo – Zemo Svaneti region.

Potential for utilization of hazelnut shells and sawdust for heat generation is particularly high in Samegrelo region and will be used by the project to fill the deficit in firewood supply. By providing a low cost consumer choice, and environmental awareness, it is possible to reduce the amount of illegal harvesting by closing the deficit.

Accessibility to woody biomass in the forested areas (transportation).xliv

Road construction and re-construction is proposed for the deficit areas.

Barriers to proper forest management include: lack of management, ad-hoc actions (i.e. no long-term planning) and lack of financing (hence, inability to undertake inventory of all forests).

The project will provide economic incentive to concession holders to comply with the Forest Code. Using the market forces to meet the legal requirements.

Lack of investment in the forestry sector. The project will develop a market for biomass that is not currently utilized. This will stimulate forest sector investment.

Licensing procedure for forest harvesting is complicated (involves Ministry of Economy, Ministry of Environment and Forestry Agency to verify forest availability and inventory)

The project through the Biomass Action Plan will provide guidance to the Ministry in an effort to simplify the licensing procedure for forest harvesting through the systematic review of the current Forest code and related legislation.


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3.3 Technological Barriers

One of the biggest barriers to the development of

densified feedstock as a fuel sources has been the

problem with combustion. The main outstanding

challenge has been how to burn these fuels without

causing problems with clinker formation and boiler

corrosion as well as avoiding the creation of

ambient air pollution.

A very rapid technological development of small

and medium scale combustion systems is

occurring globally as a result of the pressing need

to develop clean and green renewable fuels.xlv

This project will provide for technology

advancement within the county and allow for

market development which spurs innovation.

Choosing proper technology for Georgia’s

conditions. Choosing relevant biomass.

The project will remove this barrier by drawing

on international expertise and experience. The

development of a Biomass Action Plan will help

to determine the current environmental

conditions, available feedstock, and market

analysis to provide guidance to the Ministry.

Determination of pilot plant scale and other

parameters

The project will remove this barrier by drawing

on international expertise and experience from

developed countries and the training of local

engineers. The development of a Biomass Action

Plan will help to determine the current

environmental conditions, available feedstock,

and market analysis to provide guidance to the

Ministry.

Competition with Natural Gas Using biomass energy as a Renewable Energy

source makes sense for the economy, energy

independence, and the environment. It’s an

abundant, renewable, carbon-neutral source of

energy.


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3.4 Institutional Capacity


Lack of coordination among institutions involved in biomass energy development and commercialization.

- Lack of mechanism for interaction between the private sector and public sector.

National research institutes can play a key role in promoting renewable energy technologies (RETs) through their involvement in adaptive research, local manufacturing of RET systems, providing consultancy service to the industrial users etc. Regional development strategy document considers the establishment of innovation centers which could be used in the process of commercialization of new technologies and biomass densification and combustion technologies among them. These centers should establish close cooperation between researchers and private sector.

3.5 Financial Barriers


Risk of feedstock (hazelnut shells) price growth due

to increased competition

This project will create competition which drives

the market. Market forces will control the risk of

an increase in feedstock cost through supply side

substitution.

Initial capital costs in the biomass industry are

traditionally high and often limit growth of the

industry.

Biomass projects often encompass more than one type of economic activity, and are usually linked to wider economic or social objectives. Economies of scale play an integral role when assessing the growth of an industry. This project will provide for additional support, allowing for innovation, combining natural resources, economics, and social objectives.

Lack of local availability of high performance pellet stoves.

This project will remove this barrier by providing

densified biomass in the form of briquettes. The

briquette can be burn in conventional stoves

without the need for high performance stoves.

Lack of purchasing power among poor rural population

This barrier will be removed as the product

production falls in line with competition.

Purchasing power among the rural poor still

allows for choice if one is available. By providing a

low cost alternative, the project is providing a

consumer choice.


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3.6 Lack of Awareness


Lack of local expertise/manufacturers/agents Training of experts. Establishment of local capacity in the framework of the project

Lack of information on currently commercial biomass energy technology is another barrier to wider use. In the absence of reliable information, potential users/entrepreneurs are likely to perceive investments in biomass energy systems as risky.

Permanently provide latest information to stakeholders – biomass suppliers, potential entrepreneurs producing densified biomass, potential end users and producers of efficient stoves and boilers about latest developments in this sector.

Lack of public knowledge about pellet heating systems and their financial and environmental benefits as well as lack about financial incentives available.

Special training programs should be developed; practical trainings and local demonstrations implemented, and energy consulting (innovation centers) centers should be established in the regions.

Public awareness on biomass energy potential and opportunities is low. There are very few information campaigns or analytical research projects underway that domestically promote biomass energy.

A series of national information campaigns should be prepared to overcome this problem. These campaigns should include information on simple applications of biomass energy, efficient stoves, and boilers, existing financial instruments, available loans, and tax benefits.


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4 Risk & Returns To invest in one small (or medium) scale pellet or briquette pilot plant that is conducive to help removing some

of the barriers discussed above that constrain current biomass energy options depends on ensuring that such

pilot can lead to replication of the technology at the national or regional levels, with penetration into the

national market. This requires a strategic plan for the replication and market penetration of a concrete

technology, while promoting private sector investment.xlvi

What woody biomass business planners and managers need is an effective and simple way for biomass

processing facilities to simultaneously consider both revenue and costs. Enterprise viability depends in part on

the dynamics of the available timber or biomass supply (cost of biomass delivered to the processing facility),

cost of converting the biomass into products (processing cost), and products markets (revenue from the sale of

biomass products). Evaluation of product value to delivered log cost and processing cost provides a good

starting point for preliminary feasibility analysis of the proposed enterprise.

In the final calculation, gross margin will be of greatest interest and importance to the biomass processing

enterprise planning team. Specifically, the gross margin is used to identify both the biomass feedstock and

product mix that offer the greatest potential for economic return, as well as those that pose the greatest

problems, risk of losses, or unacceptably low margins.

Small-diameter material and other woody biomass offers moderate to low quality and lower valued products.

Furthermore, small-diameter material and woody biomass is disproportionately more expensive to process than

other traditional forest products like sawlogs and present several challenges for the woody biomass operator.

Cost reduction and recovery of the highest value from the available biomass resource, are more critical with

small diameter material.

Permanent assets to be financed include land, plant, equipment, other assets, start-up losses, and a minimum

level of permanent working capital. Feedstock yard owners should have as much invested in their permanent

assets as do their lenders. The rule of thumb for permanent asset financing is 50% equity and 50% debt. Risk

reducers, such as project feasibility, firm marketing contracts, turn-key construction costs and quality

management can lower the equity requirement, but rarely to less than 35 to 40 percent.

Minimum permanent working capital is (a) required to annually zero-out‖ for 30 days, or (b) required to margin

loan advances of approximately 65% of acceptable inventories and 80% of acceptable receivables.

Annual principal repayments should take no more than 50-65% of annual cash flow (after taxes and less the

profits or patronage refunds received plus depreciation).

Currently, the European Bank for Reconstruction and Development (EBRD) in Georgia runs a $35m USD credit

line for REs and EE disbursed through local banks at 12-18% interest rate, supported by a TA facility that checks

and helps improve projects’ eligibility. According to Mr. Vardigoreli, Business Development Manager, the EBRD

could lend to viable biomass projects if, for example the GEF buys down tariff or finances a success fee.


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As part of the EE facility, British Petroleum pays back to individual households 15% of the total cost of the high

quality energy efficient products and devices, which are specified in the eligibility criteria which also includes

boilers and biomass stoves (http://energocredit.ge/?page_id=1120&language=en).

In addition, the German Development Bank KfW has a 5 million Euro Renewable Energy Fund (REF) focused

primarily on small hydro; providing financing at 8% to bankable projects. Partner banks are fully responsible for

picking projects and lending; hence, stringent quality checks are put in place, including sufficient collateral.

However this is currently not a funding option, since the REF is fully subscribed and potential replenishment may

not happen till at least 2012.

http://energocredit.ge/?page_id=1120&language=en


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4.1 Risk

Risk Risk Rating Risk Mitigation Strategy

Political risk of a renewed conflict may hinder the project implementation, especially those activities which will be implemented adjustment to the conflict zones

Moderate The UN, including UNDP is well-established in adjustment to conflict zones and currently implements various livelihood and post-conflict recovery and rehabilitation projects. The UNDP has on-the ground experience and expertise in how to work in post conflict zones.

Undeveloped internal market for densified wood products (a challenge that at the same time implies an attractive opportunity).

Low This risk could be reduced by exporting the product to the European market which is attractive (demand and price are high). This measure is considered as interim fall-back position should the development of the local market be delay.

Unpredictability of feedstock supply in the long term

Medium (because of

illegal cuttings)

For reducing this risk, the financial parameters of the pilot plant should be calculated for the lowest guaranteed supply of biomass A good feasibility study could easily mitigate this barrier.

Risk of reliable biomass supply to the local market in case a single private sector player is supported by the government (i.e. it may prove more profitable for the company to export the pellets, minimizing or stopping local supplies altogether)

Low This type of risk is not excluded but is minimized by the current policy of Government. Such type of risk is more anticipated at the regional level and to reduce such risk should be one of the GEF project tasks.

Proper management of the current project

Medium Could be removed by hiring proper experienced management and continuous monitoring from UNDP and Government.

Establishment of relevant legislation promoting the local biomass utilization

High In case if some changes or amendments to the existing legislation is necessary (or introduction of new rules) it takes long time


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4.2 Returns

Traditionally, the densification of biomass has a high capital cost, with the critical raw material cost as the crucial

variable cost driver. Economies of scale play an integral role when assessing the return on investment (ROI) and

payback period. Biomass energy has never been known for a high return on investment (ROI), however in

developing markets, where environmental consideration are included, a small pilot plant with a ROI of 9 percent

is reasonable and should not be discounted because it does not meet the 15 to 20 percent required by venture

capitalist or regional banks.

Biomass projects often encompass more than one type of economic activity, and are usually linked to wider

economic or social objectives. The ROI is a performance measure used to evaluate the efficiency of an

investment or to compare the efficiency of a number of different investments and does not consider the socio-

economic or environmental conditions. Using our examples, Annex 6, Table 2, the ROI for the investment based

on a export price of $297 dollars per ton, all things being equal, meets the 15 to 20 percent required by venture

capitalist or regional banks. Another example, using the $14 million dollar, 78,000 ton per year pellet plant

identified in Section 2.3, has a ROI is 11 percent. 25% percent of the plant was equity investment, with 75% of

the debt amortized over the 10-year life of the project (equal annual payments).The plant was expected to meet

95% of the production capacity within two years of operations.

The analysis had no provision for the reinvestment of cash and the resulting return that would be realized from

the reinvestment. This assumes that no return on cash holdings presents a lower return on investment over the

life of the project than would actually be realized if all of the assumptions used in the analysis held true. Based

on the Break-even analysis, if the cost of wood chips increases but the price of wood pellets delivered and all

other key costs and prices remains at the assumed values, the project could endure an average cost of

$76.00/ton for wood chips. This was more than a 75% increase in wood chip costs in 2008 dollars, at the time;

the raw material cost was $43 dollars per ton.

It is obvious, that a pilot plant utilizing 10 to 15,000 tons annually will not have the benefit of economies of

scale.

In another example in 2000, the city of Stuttgart (Germany), an area one-third the size of Tbilisi, investigated

how the biomass growing within the city could be used to heat municipal buildings by either retrofitting or

changing existing boilers. Every year around 60,000 m³ of waste material (cut trees and bushes) was collected

from the parks and green areas in the city of Stuttgart. This waste was chopped and subsequently either

disposed of in the landfill or used in municipal parks.

The investigation identified that approximately 30 % of the waste material from the cut trees and bushes could

be used for heating. This is equivalent to 10,000 MWh/a and covered approximately 3 % of the municipal heat

load. In order to secure the wood chip supply to the heated buildings, a concept for the wood chips logistics

needed to be developed: choosing the right wood materials, securing efficient delivery, and guarantying the

quality of the wood chips etc.


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Using the wood material as a fuel, the costs of disposal was reduced by $68,000 € per year. This avoided costs

covered the cost for screening the wood chips and storage on the production site. Thus the remaining costs for

transportation between the storage site and the heated building was only $5 €/MWh.

The maintenance costs were a bit higher compared to gas or oil boilers. The additional costs were in the range of $6,000 to $8,000 €/year per system depending on the situation. The following aspects need regular monitoring and control: - Wood supply and the ash reservoir - Wood delivery - Changing of ash container and getting the containers picked up - Taking care of small problems with the wood supply (wood bridges etc.) - Switching on the boiler after interruptions. In the final analysis, the city of Stuttgart developed three, duel fuel, (fossil and wood-fired) systems which

produce 8700 MWh of thermal energy per year. The fraction covered by the wood boilers is approximately 80%,

reducing the fossil fuel consumption by 75%. The energy bill was reduced approximately $250,000 € per year.

Considering the additional expenses for ash disposal, operation, repairs and maintenance, the net savings were

$229,000 € per year.

The overall investment for construction and appliances of the biomass boilers was $1.93 million €; the payback

period was 8.4 years.

It is important to note that project economic analysis typically differs across different economic sectors, both as

to its overall scope and also the emphasis placed on particular areas of analysis (e.g., demand analysis and cost

recovery issues may figure large in power or transport projects but not in agriculture projects; farm/household-

level financial viability will need to be tested for agriculture projects but not for health or education projects;

cost-effectiveness analysis may be needed for social sector projects but not for infrastructure projects). As such,

this report is not a feasibility study, and includes this information only for discussion purposes. It is assumed that

the feasibility study will provide all the financials for the proposed project.


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5 Conclusion

As previously stated in the pilot region assessment, it appears that several territories within the county,

including the city of Tbilisi have sufficient amounts of available biomass to support small, 10 to 15,000 ton per

year biomass densification plants which could supply additional sources of residential and commercial heat. In

addition, it appears that a market exists provided there is a net benefit to the end user. This unfortunately

cannot be determined without an in-depth feasibility analysis.

Increased state involvement and activity are crucial factors in properly developing renewable energy sources in

Georgia. The institutional and legal framework for renewable energy development needs to be substantially

reworked and in many respects created anew.

A Biomass Strategy and Action Plan, with clearly defined priorities and quantitative targets, should be

formulated. This will help to harmonize the current fragmentary steps for RE development and coordinate the

efforts on:

o Cultivating the market for RE (especially heat energy for rural areas), by Implementing tax benefits for RE.

o Providing information and technology support for RE developers. o Harmonizing different parts of legislation for RE support, coming up with clear mission/policy objectives

statement on renewable energy (RE). o Coordinating the efforts of different donors, and o Create a department concerned with RE development issues. o Stricter environmental legislation on waste disposal and recycling should be introduced that would

forbid environmental contamination of waste streams with biological residues, and thus promote the development of biomass usage for energy purposes.

o Some countries have Investment subsidy is provided to all major renewable energy technologies. o 100% depreciation in the first year is allowed for certain equipment. o Other fiscal incentives include exemption/reduction in excise duty, and customs duty concessions on

imports. o Provisions for Power Purchase Agreements (PPA) right to sell electricity to the grid at a price giving them

a reasonable profit even if the price is higher than the grid’s average price level.

To attract the equity and debt capital needed to develop, construct and operate a new biomass to fuel facility,

usually requires 50 – 70% of the biomass raw material supply be secured under long-term contracts (usually a

minimum of 10 years) from multiple vendors who control the raw material and who appear like they will be in

business five years from now. Since development of a small industrial scale biomass to fuel facility usually will

take from 2 ½ years to 3 years this means before obtaining financing or started construction, contracts will have

to be obtained for a long term supply of raw material, or at least under a binding letter of intent. In addition, a

rule of thumb for available biomass inventories to a proposed facility is to have 2 ½ to 3 times more biomass

inventory available than is needed for the proposed commercial facility that is economically and

environmentally available.


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Limited information on national renewable energy resource base is a barrier to diffusion of biomass energy

technology in many developing countries. This is compounded by the fact that in the case of biomass, resource

data are needed at the local level. Considerable efforts and time are normally needed for establishing such

resource database.

Although the biomass energy supply accounts for a major share of infrastructure related investments in most

developing countries, investment in the field of bio-energy is still minimal in Georgia. This appears to be due to a

variety of reasons, including sufficient energy supply from hydro, a lack of information about the biomass

resource base, a lack of information about efficient and reliable technologies and, probably some sort of bias

against biomass energy. The perceived risks of bio-energy, acts as major barrier to investments by both the

public and private sectors.

Utilization of biomass potential in Georgia is essential for three main reasons.

1. Biomass utilization increases energy security, a primary goal of the country.

2. It decreases greenhouse gas emissions into the atmosphere that are beneficial from environmental and

economic points of view. Emissions from biomass fuels have less global warming impact than fossil fuels. In

Europe, where aggressive greenhouse gas (GHG) reduction directives have been issued, biomass fuel for home

and commercial heating has the advantage.

3. The process can be replicated throughout the rural areas of Georgia reducing the coal and fuel wood

consumption.

The licensing procedure for forest harvesting is complicated and involves multiple agencies within the Ministry

Economy, Ministry of Environment to verify forest availability, inventory and financial considerations.

Often due to institutional and technical barriers the effectiveness of forest harvesting on steep slopes is low. The

cost of timber harvesting cost upwards of 100 Lari/m3, and where steep slopes are concerned the price is almost

cost prohibitive due to a lack of value-added processing, as the demand does not justify the expense.


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Annex

A.1 Mission Terms of Reference

Terms of Reference for Biomass Technical Expert to Analyze Barriers to Biomass Energy in Georgia and Assess

Financial Viability of a Pilot Biomass Pellet Plant Background: United Nations Development Program (UNDP), acting as an implementing agency of the Global Environment Facility (GEF), is providing assistance to the Georgian Government with the implementation of the Promotion of Biomass Pellet Production and Utilization in Georgia project. The overall objective of the project is to launch and develop a market for biomass utilization in Georgia, with a specific focus on four main outcomes as follows: Outcome 1: Piloting of Biomass Pellet Production in Georgia – A pre-feasibility study and business plan will be carried out as part of the project activities with the objective of leveraging private sector investment into a pilot biomass pellet plant (using hazelnut as the feedstock). The purpose of the small amount of GEF support under this activity is to assist with the leveraging of a much larger amount of private sector investment. Outcome 2: Creation of the demand for pellet utilization – currently, there is no demand for pellet utilization in Georgia. The demand can be created by establishing pellet-based production of high efficiency stoves in Georgia and linking stove producers with pellet producers on the on hand, and pellet and high efficiency stove producers with potential consumers on the other hand. The project will explore how to create this demand. Outcome 3: Enabling policy framework for biomass resource development and utilization: - in order to create the enabling policy framework for biomass development in Georgia and more specifically, pellet production the project will elaborate a strategy for biomass development and policy options for pellet production and utilization and, facilitate the endorsement of the strategies and policies by the government Outcome 4: Promotion of pellet production and utilization - the project will raise awareness on pellet production and utilization through implementing public outreach program and creating and disseminating various knowledge products; The project preparatory grant (PPG) is to prepare medium-size project documentation: a GEF CEO Endorsement Request and a UNDP Project Document that will submitted for approval to the GEF Secretariat by the end of January 2011. The project document preparation phase will start in October 2010 and will last until the end of the end of January 2011. The major output of this phase will be the developed full size project documentation (Project Document and GEF Request for CEO endorsement), which will be accomplished through implementing the following activities:

Assessment of baseline information and preparation of feasibility study on establishing pellet plant in pilot area

Meeting on institutional, implementation/management, co-financing arrangements and stakeholder consultation process


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Barrier Analysis

Preparation of project strategy, including partnership strategy, incremental cost analysis and log frame defining the project goal, objective, outcomes, outputs and activities, including success indicators, targets and means of verifications.

The project documentation will be prepared by a team of national and international experts led by local national expert hired and managed through UNDP Georgia

Duties and Responsibilities: The principal responsibility of the ”International Technical Biomass Expert to Analyze Barriers to Biomass Energy in Georgia and Assess Financial Viability of a Pilot Biomass Pellet Plant” is to make substantive contributions to the development and structuring of the GEF CEO Endorsement Request document and the UNDP Project Document for the Medium Sized Project (MSP) using the standard GEF and UNDP templates, to provide technical expertise during the process of drafting the project document. The International Technical Expert will work in close cooperation with other members of the Biomass pellet project development team and relevant Georgian stakeholders including in particular the Ministry of Environment Protection and Natural Resources. In addition, the International Technical Biomass Expert will work with private sector partners on the project preparation activities. The incumbent will work under the direct supervision of UNDP Georgia Country Office and overall guidance of UNDP Regional Office in Bratislava, Slovakia. Within the framework of this ToR, the International Technical Biomass Expert is expected to perform the following duties:

Collect in cooperation with a national biomass expert and analyze information about the potential of biomass in Georgia focused on all types of biomass (waste, wood, and agricultural) focused on resource availability, supply, and ownership issues. Examine specifically the availability of hazelnuts in Georgia and provide assessment of market demand without the project (baseline situation) and with the project (GEF alternative) as an input to the work of the International “Biomass Expert to Draft a Full-fledged Project Documentation”, on incremental costs

Outline in detail all the barriers related to the development of a biomass industry in hazelnut based biomass in Georgia and provide an assessment of what should be undertaken to overcome these barriers

Prepare a technical report entitled ‘barriers to biomass energy in Georgia – with a specific emphasis on biomass from hazelnuts and on a specific proposed project which might be leveraged using private sector investment as part of this project

Contribute to pre-feasibility feasibility study report on ‘biomass from hazelnut – pilot pellet plant’ in terms of assessing the financial feasibility for establishing such a plant in Georgia

Deliverables:

Individual work plan

Participation in one-day kick-off workshop in Georgia (during a first mission), with particular emphasis on ensuring the adequate engagement of the national counterparts and local consultants. The workshop should clarify the objectives, approaches and outcomes of project design, and spell out the roles and


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contributions of different stakeholders, aiming at ensuring the national ownership from the very inception of the project.

Report 1: Barriers to Biomass Energy in Georgia, including analysis of potential of biomass in Georgia focused on all types of biomass (waste, wood, and agricultural) and such other aspects as resource availability, supply, ownership market demand without the project (baseline situation) and with the project (GEF alternative) as an input to the work of the International Biomass Expert to Draft a Full-fledged project documentation, on incremental costs.

Report 2: Biomass pellet production financial feasibility study: Participation in the second mission aimed at collecting/validating all the information relevant to the financial feasibility of biomass pellet production in order to prepare the biomass pellet production pre-feasibility study report. Development of pellet production financial viability study.


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A.2 List of Persons Interviewed

Ms.Sophie Kemkhadze, Assistant Resident Representative, UNDP

Ms. Mariam Shotadze, Team Leader, Energy and Environment, UNDP

Ms. KhatunaChikviladze, Waste management unit, Ministry of Environment

Ms. Nino Tkhilava, GEF Focal Point, Ministry of Environment Protection and Natural Resources

Mr. Michael Tushishvili, Head of Department of Integrated Environmental Management

Mr. KoteKhmaladze, head of Regional Economy Development Unit in the Department of Regional Development

Mr. Gogi Datunashvili, regional representative of Forestry Agency in Samegrelo, Regional office of Forestry Department in Senaki -

Mr. Gela Svirava, Regional Administration -

Mr. Malkhaz Rogava, representative of Chinese enterprise Georgian Forestry”, Chinese Enterprise -

Mr. Michele Pisetta, Ferrero–

Mr. GujaMikava, Dioskuria’ - contact person

Mr. Adamia, Head of Senaki Administration -

Mr. Nodar Khokhashvili, Department of Agriculture Development, Ministry of Agriculture - Head of Department

Mr. Michael Andres - KfW -

Mr. Zviad Archuadze, Tbilisi City Hall -

Mr. Mamuka Salukvadze, contact person

Mr. Paata Janelidze, Project manager GEF/UNDP project -

Mr. John O'Brien, UNDP/GEF RTA

Mr. MalkhazRogava, Central office of Chinese Wood Processing Enterprise

Mr. Grigol Lazriev, Climate Change Unit at the Ministry of Environment

Mr. Archil Nikoleishvili, Deputy Minister, Ministry of Energy - Ms. Marita Arabidze, contact person

Mr. GiorgiZedginidze, Deputy Minister, Ministry of Environment Protection and Natural Resources -

Mr. Dimitri Glonti, Deputy Chairman, Forestry Agency (L.E.P.L)

Ms. Liza, EBRD - Mr. Vardigoreli, contact person,


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A.3 MENRP, Heat Supply of Households in Georgia, 2007. - Fuel wood deficit


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A.4 MENRP, Heat Supply of Households in Georgia, 2007- Existing feedstock in Pilot

Region


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A.5 Forest Areas according to the 2003 Inventory and Harvest Volumes

Table 1, Forest Area

Regions Total Area (forested) in ha Concessions by regions (Already issued)

Samtskhe-Javakheti 141,606 (127,828) 5 concessions - for 20 years; 2 con.- for 10 years.

Racha-LechkhumiKv. Svaneti

275,817 (263,093) 2 concessions -for 10 years

Kakheti 324,999 (303,321) 3 con-for 20 years; 2 con.-for 10 years

Imereti 293,926 (286,332) 1 con.-for 20 years; 2 concessions- for 10 years

Samegrelo –Zm. Svaneti 283,931 (268,417) 2 con.-for 20 years; 2 con.- for 10 years;

21 con. –for 5 years

Mtskheta-Mtianeti 252,776 (241,285) 3 –for 20 years; 2-for 10 years.

Guria 67,727 (64,940) 1-for 20 years

ShidaKartli 105,923 (97,421) 5 concessions – for 10 years

Kv. Kartli 148,682 (142,297) 0

Total 1,895,387 (1,794,934) Total area under concessions 173,000 ha

Table 2, Legal Harvest Volumes

Legal Harvest Volumes (Cubic Meters) Report for Various Years, Ministry of Environment, Forest Department

Year 1995 2000 2005 2006 2007 2008 2009

Tbilisi City 19,192 4,741 6,278 8,889

Apkhazia AR 3,651

Adjara AR 24,464 44,648 73,007 52,050

Sanegrelo/Zm.Svaneti 22,175 55,923 110,376 62,734 72,044 106,282 53,423

Guria 4,952 24,463 56,384 22,820 28,116 33,043 28,296

Imereti 19,098 45,270 103,718 91,031 118,035 84,907 84,455

Racha-Lechkhumi/Kv.Svaneti 16,509 52,706 52,713 29,032 46,081 36,559 41,690

ShidaKartli 13,623 23,227 52,369 45,875 94,077 84,430 82,439

Mtskheta-Mtianeti 20,341 36,029 68,938 72,288 93,132 86,426 66,466

Kakheti 44,890 61,893 119,479 68,868 159,177 184,164 15,1450

KvemoKartli 32,552 20,757 44,100 15,725 88,180 82,715 90,138

SamtskheJavakheti 71,916 72,483 123,253 85,286 106,581 119,705 99,104

Georgia, in Total 289,712 442,140 810,615 558,249 805,423 818,231 697,461


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Table 3, Illegal Harvest Volumes

Illegal Harvest Volumes (Cubic Meters) Report for Various Years, Ministry of Environment, Forest Department

Years 2001 2005 2006 2007 2008 2009

Tbilisi City 1,430 1,722 188

Apkhazia AR

Adjara AR 2,577 2,676 3,837

Sanegrelo/Zm.Svaneti 2,931 3,052 1,046 22,695 1,290 838

Guria 633 1,436 537 1515 306 333

Imereti 6,230 8,673 2,970 4,517 1,603 1,717

Racha-Lechkhumi/Kv.Svaneti 1,615 1672 3,658 8,624 2175 613

ShidaKartli 3,311 3,665 2,586 2,544 202 817

Mtskheta-Mtianeti 3,953 8,480 3,166 26,029 2,389 4,698

Kakheti 9,459 13,299 7,826 10,325 1,936 3,757

KvemoKartli 601 1,747 185 3,453 481 1,934

SamtskheJavakheti 9,547 16,342 11,441 18,973 10,949 15,977

Georgia, in Total 43,287 62,764 40,924 98,675 21,331 30,684


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A.6 Pellet Production Costs

Table 1 - Pellet Production costs for 45,000 ton per year capacity plant (2010 USD $), adapted from

Mani et al., 2006

Pellet Process Operations

Capital Cost ($/t)

Operating Cost ($/t)

Total Cost ($/t)

Percent Cost Distribution (%)

Raw Material 0.49 28.04 28.53 39.0

Drying Operation 3.56 11.34 14.89 20.4

Hammer Mill 0.36 1.01 1.38 1.8

Pellet Mill 2.06 2.72 4.79 6.5

Pellet Cooler 0.19 0.30 0.49 0.6

Screening 0.16 0.07 0.23 0.3

Packing 0.81 1.98 2.79 3.8

Pellet Storage 0.11 0.01 0.12 0.2

Misc. Equipment 0.61 0.47 1.09 1.4

Personnel Cost 0.00 18.42 18.42 25.2

Land use and Building 0.30 0.07 0.38 0.5

Total cost 8.66 64.47 73.13 100


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Table 2 - Pellet Production costs for a 24,000 ton per year capacity plant (2010 USD $), adapted from

Thek and Obernberger 2004

Pellet Plant Construction

Investment Costs ($)

Capital Cost ($)

Maintenance Costs ($)

Consumption Costs ($)

Operating Costs ($)

Other Costs

($)

Total Costs ($)

Specific Costs ($/t)

General Investments

1,060,997 100,689 8,505 0 0 5,304 114,499 5

Drying 685,895 75,307 17,147 991,407 0 3,429 1,087,291 45

Grinding 153,640 21,876 27,656 68,587 0 768 118,887 5

Pelletisation 347,520 49,480 34,752 244,314 0 1,738 330,283 14

Cooling 23,778 2,611 476 7,483 0 119 10,687 0

Storage 532,255 50,240 7,984 18,749 0 2,661 79,637 3

Peripheral Equipment

914,526 130,208 18,291 56,117 0 4,573 209,188 9

Personnel 0 0 0 0 557,330 0 557,330 23

Raw material

0 0 0 1,414,626 0 0 1,414,626 59

Total 3,718,610 430,410 114,809 2,801,285 557,330 18,593 3,922,430 163

Specific costs in $/t

18 5 117 23 1 163


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A.7 Briquetting Operational and Capital Cost

Nielsen Briquetters: 8 ton/hour workday, 21 days per month or 23 ton/hour workday, 21 days per

(www.briquettingsystems.com/home/selections.php )

Operational Costs per ton

Capital Costs / ton (based on length of term)

Total Costs / ton (based on length of term)

Model Tons/Yr Spares Service Electrical Maint Subtotal 3 Yrs 4 Yrs 5 Yrs 3 Yrs 4 Yrs 5 Yrs

Single Presses

BP3200 1,109 $3.80 $1.30 $5.80 $2.50 $13.4 $67 $52 $43 $80 $65 $57

BP4000 1,663 $3.80 $1.00 $6.00 $1.70 $12.5 $49 $38 $31 $62 $51 $44

BP5000 2,661 $2.35 $0.60 $4.40 $1.00 $8.4 $38 $29 $24 $46 $38 $33

BP5500 3,105 $1.95 $0.50 $4.90 $0.90 $8.3 $34 $27 $22 $43 $35 $30

BP6000 3,992 $1.50 $0.40 $4.40 $0.70 $7.0 $30 $23 $19 $37 $30 $26

BP4000 4,782 $3.80 $1.00 $6.00 $1.70 $12.5 $17 $13 $11 $30 $26 $23

BP5000 7,651 $2.35 $0.60 $4.40 $1.00 $8.4 $13 $10 $8 $22 $19 $17

BP5500 8,926 $1.95 $0.50 $4.90 $0.90 $8.3 $12 $9 $8 $20 $17 $16

BP6000 11,476 $1.50 $0.40 $4.40 $0.70 $7.0 $10 $8 $7 $17 $15 $14

Double Presses

BP4000 3,326 $3.80 $1.00 $6.00 $1.70 $12.5 $43 $33 $28 $56 $46 $40

BP5000 5,322 $2.35 $0.60 $4.40 $1.00 $8.4 $34 $26 $22 $43 $35 $30

BP5500 6,209 $1.95 $0.50 $4.90 $0.90 $8.3 $32 $24 $20 $40 $33 $28

BP6000 7,983 $1.50 $0.40 $4.40 $0.70 $7.0 $27 $21 $17 $34 $28 $24

BP4000 9,563 $3.80 $1.00 $6.00 $1.70 $12.5 $15 $12 $10 $28 $24 $22

BP5000 15,301 $2.35 $0.60 $4.40 $1.00 $8.4 $12 $9 $8 $20 $18 $16

BP5500 17,852 $1.95 $0.50 $4.90 $0.90 $8.3 $11 $8 $7 $19 $17 $15

BP6000 22,952 $1.50 $0.40 $4.40 $0.70 $7.0 $10 $7 $6 $17 $14 $13

Mobile Presses

BP3200 1,109 $3.80 $1.30 $5.80 $2.50 $13.4 $59 $46 $38 $73 $59 $51

BP4000 1,663 $3.80 $1.00 $6.00 $1.70 $12.5 $46 $36 $30 $59 $48 $42

BP5000 2,661 $2.35 $0.60 $4.40 $1.00 $8.4 $34 $26 $22 $43 $35 $30

BP3200 3,188 $3.80 $1.30 $5.80 $2.50 $13.4 $21 $16 $13 $34 $29 $27

BP4000 4,782 $3.80 $1.00 $6.00 $1.70 $12.5 $16 $12 $10 $29 $25 $23

BP5000 7,651 $2.35 $0.60 $4.40 $1.00 $8.4 $12 $9 $8 $20 $18 $16

- Capital costs are based on commercial lease rates.

- Operational costs based on 15 cents/kWh, $20/hour labor and $70/hour for service

- An experienced person can see that the total capital and operations costs per ton are less than pelleting

and similarly the more tonnage produced the less costs per ton. In some cases the total briquetting

costs in this table per ton are equal to just the operations costs of a pelleting plant.


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A.8 Private Sector Companies in Georgia with Interest in Biomass

Chinese Forestry Enterprise, Tbilisi and Zugdidi

Largest forest concessionee in Georgia with 4 licenses (20 years each) in Zugdidi, Kutaisi, Kakheti and

Kusheti; total licensed volume 88,000 m3/year?;

Have a wood processing facility in Zugdidi, plan to build another one in Kutaisi;

The company is required under license terms to clear forest of logging residues, but has problems with

addressing that due to lack of info on available technologies and cost estimates for biomass removal and

densification;

The company would be interested in exporting pellets to Europe;

Are interested in cooperating with the project to obtain relevant information, link with the machinery

manufacturers, obtain training etc. Could do a letter of co-financing.

D&V (Georgia Timber International), Zestafoni

The Italian company, through its wholly owned Georgian subsidiary GTI, has a 6,000 ha concession (7

years left) of chestnut forest in Zestafoni region and implements sanitary cuttings, yielding an estimated

200-300,000 tons of waste biomass;

At the moment, the waste is left in the forest, but the company is obligated to address the problem.

More precise estimates of waste volumes is expected in 2-3 months;

The company could consider acting as a supplier of biomass to a pelletizing plant; though, pellets are

NOT likely to work in Georgia (particularly at household level), rather briquettes which could go in

conventional stoves;

Transportation costs are going to be critical, hence possibility to use railroad for local transportation

could be important.

Could potentially provide a letter of co-financing, provided their role and contributions are better

delineated.

Ferrero

Ferrero, the famous producer of confectionary and other food products, has been involved in the

development of the hazelnut business in Georgia. It has already purchased and has been planting 3,000

ha of land in Zugdidi region. Ferrero is going to increase this business in Georgia and make the country

one of the biggest suppliers of hazelnuts to their own industry.

Ferrero intends to build up two factories for processing nuts on this territory. Amount of investment in

these factories will be € 6 million. Company will hire almost 2 thousand people from the local

population.


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A.9 Documents Reviewed/Bibliography/Reference

i USAID/GEORGIA – Performance Management Plan, May 2010 ii USAID/GEORGIA – Performance Management Plan, May 2010

iii USAID/GEORGIA - Renewable Energy Potential in Georgia and the Policy Options for Its Utilization

Prepared by World Energy Georgia for Winrock International Under Sub-Agreement 5708-07-04 February 2008 ivState of Environment Report, 2007-2009, Chapter 16

v The Role of Energy Conservation in Georgia’s Energy Supply, USAID, 2008

vi USAID/GEORGIA – Performance Management Plan, May 2010

vii USAID/GEORGIA - Renewable Energy Potential in Georgia and the Policy Options for Its Utilization

Prepared by World Energy Georgia for Winrock International Under Sub-Agreement 5708-07-04 February 2008 viii

Anderson, Rene,.Non-technical barriers to introduction of biomass energy systems. UNDP repot (no-date) ixCerenBakisgan, AhuGümrahDumanli, YudaYürüm , Trace elements in Turkish biomass fuels: Ashes of wheat straw, olive

bagasse and hazelnut shell Fuel 88 (2009) 1842–1851 Faculty of Engineering and Natural Sciences, Sabanci University, Orhanli, Tuzla, 34956 Istanbul, Turkey x USAID/GEORGIA - Renewable Energy Potential in Georgia and the Policy Options for Its Utilization

Prepared by World Energy Georgia for Winrock International Under Sub-Agreement 5708-07-04 February 2008 xi GEF – Project Identification Form – Project ID 4048

xii ASTM Standard E 1755-01. Standard test method for ash in biomass. West Conshohocken, PA: ASTM International; 2007.

<http://www.astm.org. xiii

Demirbas, A. Combustion characteristics of different biomass fuels. Prog Energy Combust Sci 2004; 30:219–30. xiv

Zhang FS, Yamasaki S, Nanzyo M. Waste ashes for use in agricultural production: I. Liming effect, contents of plant nutrients and chemical characteristics of some metals. Sci Total Environ 2002; 284:215–25. xv

ASTM Standard D 1102-84. Standard test method of ash in wood. West Conshohocken, PA: ASTM International; 1995. <www.astm.org>. xvi

CerenBakisgan, AhuGümrahDumanli, YudaYürüm , Trace elements in Turkish biomass fuels: Ashes of wheat straw, olive bagasse and hazelnut shell Fuel 88 (2009) 1842–1851 Faculty of Engineering and Natural Sciences, Sabanci University, Orhanli, Tuzla, 34956 Istanbul, Turkey xvii

Resource Efficient Agricultural Production (REAP)Canada, Assessing the Technology Options for Creating a BIOHEAT Industry in Alberta, March 20th, 2008 xviii

WoodPelletLine-Gemco Energy &Longchain Machinery, www.woodpelletline.com xix

Shaw, M., and Tabil, L. 2007.Compression and relaxation characteristics of selected biomass grinds. ASABR Paper No. 076183. St. Joseph, Mich.: ASABE. xx

Drisdelle, M. 1999. Del-Point Bioenergy Research (www.pelletstove.com), Blainville, Quebec. xxi

Tabil, L.G., S. Sokhansani, R.T. Tyler. 1997. Performance of different binders during alfalfa pelleting. Canadian Agricultural Engineering, Volume 39, Number 1, January/February/March 1997, pp. 1723. xxii

Sokhansanj, S., L. Tabil, W. Wang. 1999. Characteristics of Plant tissue to Form Pellets. Powder Handling and Processing: the International Journal of Storing, Handling and Processing Powder, Volume 11, Number 2, April/June 1999, pp. 149159. xxiii

Samson, R., Mani, S., Boddey, R., Sokhansanj, S., Quesada, D., Urquiaga, S., Reis, V. and C. Ho Lem. 2005. The potential of C4 perennial grasses for developing a global BIOHEAT industry. Critical Reviews in Plant Science 24: 461495. xxiv

Resource Efficient Agricultural Production (REAP)Canada, Assessing the Technology Options for Creating a BIOHEAT Industry in Alberta, March 20th, 2008 xxv

Pre-Feasibility Study on Producing High Efficiency Stoves, Fuel Pellets and Briquettes in Georgia, and Related Environmental, Social and Economic Benefits xxvi

Eriksson, S. and Prior, M. 1990.The briquetting of agricultural wastes for fuel. In: Food and Agricultural Organization of the United Nations. Rome, Italy. xxvii

Grover, P. D. and Mishra, S. K. 1996.Biomass briquetting: technology and practices. Regional Wood Energy Development

program in Asia, Field document No. 46. Food and Agriculture Organization of the United Nations, Bangkok, Thailand.

http://www.astm.org/

http://www.astm.org/


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xxviii

Thek, G., and Obernberger, I. 2004. Wood pellet production costs under Austrian and in comparison to Swedish

framework conditions. Biomass and Bioenergy 27: 671693. xxix

Samson, R., Duxbury, P., Drisdale, M. and C. Lapointe. 2000. Assessment of pelletized biofuels. REAP-Canada final report

to Natural Resources Canada. Ottawa. 27pp. xxx

Thek, G., and Obernberger, I. 2004. Wood pellet production costs under Austrian and in comparison to Swedish framework conditions. Biomass and Bioenergy 27: 671693. xxxi

Whitlock, K., Business Development Plan: Wood Pellet Mill. SEDCorp, May 2008 xxxii

Bradley, D. (2006, May). GHG impacts of pellet production from woody biomass sources in BC, Canada. xxxiii

Briquetting Systems. 2008. Retrieved in Feb, 2008. <www.briquettingsystems.com/ lease/costs.htm#pucksvspellets;

www.briquettingsystems.com/lease/costs.htm> xxxiv

Scharler, R., Obernberger, I., Längle, G., and Heinzle, J. 2000. CFD Analysis of Air Staging and Flue Gas Recirculation in biomass Grate Furnaces, Proceedings of the 1st World Conference and Exhibition on Biomass for Energy and Industry, June 2000, Seville, Spain. xxxv

Sims,R. 2002. Chapter 5. Thermochemical conversion by combustion and the steam cycle.In “The Brilliance of Bioenergy in Business and Practice” p. 113. xxxvi

Jenkins, B.M. L.L. Baxter, T.R. Miles Jr., T.R. Miles. 1998. Combustion properties of Biomass. Fuel processing technology.

54: 1746. xxxvii

Obernberger, I., T. Brunner and G. Barnthaler. 2007. Fine particulates from modern Austrian smallscale biomass

combustion plants. In: Proceedings of the15th

European Biomass Conference and Exhibition, Berlin, Germany. xxxviii

Obernberger, T. and Brunner, M. 2001.Characterization and formation of aerosols and flyashes from fixedbed biomass

combustion. In Aerosols from biomass combustion, international seminar at 27 June 2001 in Zurich by IEA Bioenergy Task

32 and Swiss Federal Office of Energy, Verenum, Zurich 2001.Thomas Nussbaumer (Ed.). p 6974. xxxix

United States Environmental Protection Agency (U.S. EPA), Office of Atmospheric Programs, Climate Protection Partnerships Division/Climate Change Division, Climate Leaders Greenhouse Gas Inventory Protocol Offset Project Methodology for Project Type: Industrial Boiler Efficiency (Industrial Process Applications), August 2008, Version 1.3 xlN.H. RavinDranath& D. O. Hall, biomass, energy &env't 14 (1995)

xliStéphane Straub, Infrastructure & Growth in Developing Countries: Recent Advances & Research Challenges (World Bank,

Policy Research Working Paper No. 4460, 2008) xlii

Evan N. Turgeon, Federal Forests, Biomass, & Ethanol: Energy Security Sabotaged, 39 envtl. l. rep. newS&analySiS 10140, 10148 (2009) xliii

Ministry of Environment Protection and Natural Resources, Heat Supply of Households in Georgia, 2007 xliv

Ministry of Environment Protection and Natural Resources, Heat Supply of Households in Georgia, 2007 xlv

Resource Efficient Agricultural Production (REAP)Canada, Assessing the Technology Options for Creating a BIOHEAT Industry in Alberta, March 20th, 2008 xlvi

GEF – Project Identification Form – Project ID 4048