Lithuania has a well developed district heating sector covering about 50% of all heat. The RES share in the total heat production in 2010 was 19% (1,9 TWh) with an installed bio fuel boiler capacity of 391 MW. The aim is to produce, by 2020, up to 6,5 TWh from RES with an expanded capacity up to 1.487 MW. An investment program of 319 million euro is needed to achieve this goal. In addition CHP plants on RES, produce 172 GWh electricity with 22 MW installed capacity. Towards 2020 this has to grow to 322 MW and will require an additional 355 million euro investment. The District Heating Company owned by Kaunas Municipality produced 1407,54 GWh in 2009. The Gazprom owned UAB Kauno Termoficacijos Electrine has a 15 year contract up to 2018 to deliver 80% of all heat needs in Kaunas. This study examines the Lithuanian CHP & district heating sector, the latest legal environment as well as the supply chains of biomass in perspective of the 2020 targets. A feasibility study is done for a cogeneration plant on biomass in one of the largest industrial parks in Lithuania: the Kaunas Free Economic Zone. Heat would be delivered to the Kaunas district heating network. In addition, a preliminary assessment is made on the possible instalment of a heat distribution network in the 500 ha park.