World Bank approves $90 million loan to Belarus for biomass district heating project

Date: 02/04/2014

The World Bank Group’s Board of Executive Directors has approved a loan in the amount of US$90 million to the Republic of Belarus for the “Biomass District Heating Project.”

In its announcement, the World Bank said that the project will help to scale up efficient use of renewable biomass in heat and electricity generation, thereby lowering operating cost and improving fuel security in thirteen towns of the country, enhancing living and working conditions of 79,000 Belarusians.

Lacking a sufficient energy resource base, Belarus relies heavily on imported energy resources to meet domestic energy demand. The Government plans to increase the share of local fuels, mainly biomass, in energy supply from 25 percent in 2011 to 32 percent in 2020.

The loan document states, “District heating plays an important role in the energy system of Belarus and is critical for meeting the basic heating needs of the population. Belarus has an extensive district heating system, including thousands of boilers operated by state-owned utilities under the Ministry of Energy and the Ministry of Housing and Utilities. The bulk of the system was built during 1970s and 1980s. Heat generation consumes about 8 billion cubic meters of gas annually—40 percent of the country’s gas consumption in 2008. Ninety percent of the population relies on district heating for heat supply….

“Heavy dependence on imported energy from a single source exposes Belarus to greater energy price volatility and supply disruption risks. In 2010, for example, deteriorating relations with Russia led to the temporary removal of discounts on energy imports, sharply increasing the current account deficit and contributing significantly to the 2011 foreign exchange crisis. Over time, gas import prices are expected to move towards market levels, affecting the balance of payments and fiscal situation if remedial measures are not taken in advance.”

“By improving energy efficiency and replacing imported natural gas and oil with less expensive local wood biomass, the project would reduce the cost of heat supply on average by 63 percent in participating project towns, thereby reducing the burden of heating cost on household budget,” said Fan Zhang, World Bank Task Team Leader for the Project.

The project will finance replacement of existing gas and oil boilers by biomass boilers, provision of wood chipping equipment and biomass fuel storage facilities, installation of individual building-level heat substations with temperature control, and upgrading of district heating networks. The project will also support participating utilities to communicate more proactively with their customers, including on existing grievance redress mechanisms and feedback analysis to enhance service delivery, and facilitate a shift from volume-based to energy-content-based biomass pricing. Finally, the project will contribute to the reduction of greenhouse gas emissions, with total projected lifetime carbon dioxide emissions savings to be 2.1 million tons.

“Forest is one of Belarus’s richest natural resources. The full potential of wood biomass as alternative renewable energy resource has yet to be realized in Belarus,” noted Young Chul Kim, World Bank Country Manager for Belarus. “Using low-quality wood, now treated as industrial waste, for heat and power generation will also contribute to the development of the wood processing industry, and is consistent with the national overall strategy to encourage sustainable forest management. It also allows new jobs and business opportunities to be created in these sectors.”

Since late 1990s, the Bank has assisted the country in improving energy efficiency and increasing the use of renewable energy through investment financing, policy advisory support, and technical assistance. These efforts have included two demand-side energy efficiency projects—the Social Infrastructure Retrofitting Project and the Post-Chernobyl Recovery Project—and a supply-side project aimed at improving energy efficiency in heat and power generation—the Energy Efficiency Project.

The Energy Sector Management Assistance Program (ESMAP) Study assisted in reviewing Belarus’s legal and regulatory framework for renewable energy and opportunities for harmonization with the European Union, provided recommendations on removing barriers to and options for increased use of biomass energy for heat production, and energy efficiency, as well as opportunities to increase private sector participation in the sector.

Belarus joined the World Bank in 1992. The current investment lending portfolio includes five operations for a total amount of US$647.5 million. Since Belarus joined the Bank, lending commitments to the country have totaled US$1.1 billion; in addition, 30 national programs have received grant financing totaling US$23.7 million. The World Bank’s analytical and advisory activity program addresses main challenges and reform priorities of the country.

Source: IDEA