The substitution of natural gas with alternative energy sources is extremely important for Ukrainian municipalities today. Teplodar in Odesa Oblast is no exception. Last year, the local heating utility was not able to start the heating season on time because of its debt to NJSC Naftogaz, so the local residents were freezing in their homes. In order to avoid this situation in future, the Odesa Oblast Council, a USAID Municipal Energy Reform Project in Ukraine (USAID Project) partner, requested that the Project analyze the possibility of producing heat energy and electricity from biomass, and to assess the efficiency and feasibility of such a project. After conducting research, the USAID Project identified four possible solutions that would allow the city to reduce heat energy losses and to lower dependence on the natural gas suppliers. For instance, the use of pellets from sunflower husk as a possible fuel was considered. This is feasible because six powerful processing facilities are located within 50 km of the city. In addition, there are over 70 potential biomass suppliers operating in the district, and they may ensure fuel supply. Currently, several companies are already interested in implementing this project in Teplodar.