At present, the utilization of timber in the Northern part of the Scottish Highlands is low due to a lack of a wood utilizing industry. As a consequence, the majority of forest owners do not receive any income from timber and in some cases stumpage prices can even be negative. At the same time, increasing prices of oil, gas and electricity pose a great challenge for local industries and homeowners. The establishment of wood fueled heating systems is therefore expected to improve the situation and at the same time create a market for the local timber resources. Consequently, a local energy source to produce heat and electricity at a competitive price would have positive benefits for both local industries and forest owners. Due to the current lack of competition, roundwood could be chipped for fuel, which has many associated benefits compared to the harvesting and chipping of logging residues. It is the aim of this research to apply existing Finnish know-how in regards to wood fuel harvesting in order to develop and investigate the price level of sustainable and local wood fuel supply chains. To determine the most suitable supply chain for forest fuels, various research methods were applied. An estimation of the forest resources in the Wick area was the first step of the research. The different cost components of the supply chain such as cutting, forwarding and chipping were then calculated based on Finnish experiences and adapted to conditions in Northern Scotland. Detailed transportation distance calculations and cost of transportation were calculated using GIS tools. Of the various supply chain designs considered, chipping at the landing seems to be the most suitable option. Chipping the roundwood at a central terminal would also be feasible; however, a suitable site would have to be identified since chipping of the material at the heating plant is not an option. Calculations indicate that forest chips can be delivered starting from approximately 20 (sic)MWh(-1) within a 50 km transportation distance when chipping is at roadside. If the transportation distance is 100 km wood chips could be delivered at approximately 23(sic)MWh(-1). Results from the GIS analysis indicate that a sufficient supply of raw material will be available in the future. According to these calculations forest fuels can be a competitive energy source for heat and electricity production in Northern Scotland. (C) 2011 Elsevier Ltd. All rights reserved.