VietNamNet Bridge - While energy demands are rising and traditional energy sources are limited, the Vietnamese government is encouraging the development of renewable energy as an alternative source. However, few investors have come to the party.

The nation has suffered regular black outs, crippling industrial production, due to power droughts

The nation has suffered regular black outs, crippling industrial production, due to power droughts

Late in 2006, the Ho Chi Minh City-based Energy Conservation Research and Development Centre cooperated with a foreign partner to draw-up an investment plan for developing a power plant in southern Can Tho, fueled by rice-husks, a kind of biomass.

The centre was excited to introduce a new source of generating electricity in Vietnam. However, the project never got off the ground because the centre and its foreign partner could not find a heavyweight investor.

At the same time, many investors also expressed interests in building wind power plants in Vietnam, especially in southern provinces like Binh Dinh, Ninh Thuan and Binh Thuan. However, only one project has broken ground in the Phuong Mai peninsula in Binh Dinh province. Phuong Mai 3’s ground-breaking ceremony was a good news for the country as government officials and scientists said that Vietnam needed more power plants like it.

The government, in recent years, has been strongly calling for investment in renewable energy projects after realising that severe, nationwide electricity shortages were hurting the nation and traditional energies like coal and crude oil are limited. However, domestic and foreign investors appear to remain far away from in renewable energy projects, when thermoelectricity and hydroelectricity projects seem so tempting. And although Vietnam has never implemented a master study on renewable energy sources, based on the results researched by foreign and local organisations, scientists have underscored the considerable potential of renewable energy sources in Vietnam.

“We cannot say Vietnam has huge potential for developing renewable energies, but we can affirm that there are still a lot of opportunities for investors in this sector,” said Nguyen Thuong, a scientist from the Centre for Sustainable Energy Development in Vietnam.

Renewable energy potential

Located in the subequatorial region, Vietnam has good solar resources with solar radiation from 3–4.5 kilowatts per hour, per square metre, per day (kwh/m2/day) in winter to around 4.5–6.5 kWh/m2/day in summer. The number of hours of sunshine ranges between 1,800 and 2,700 per year, according to research data.

Experts say solar energy is an ideal source to meet the off-grid needs especially in the more diffuse pollution areas where mini-grids are not feasible. But until now, just some major organisations are active in implementing solar energy systems, namely the Ho Chi Minh City-based Solar Laboratory of the Vietnam Science Institute, the Hanoi-based Institute of Energy and the Hanoi University of Technology’s Renewable Energy Centre. There is also a major project initiated by the Solar Electric Light Company, in cooperation with the Vietnamese Women’s Union, which has over 600 systems in operation in the Mekong Delta.

Besides solar energy, scientists also claim Vietnam has rich potential for wind power. A Wind Energy Resource Atlas of South East Asia, published in 2001 identified suitable windswept regions primarily in the mountainous terrain on the Laos border and in the coastal provinces south of Danang and north of Ho Chi Minh City. Approximately 30 per cent of Vietnam’s inland territory has wind energy potential assessed as sufficient, seven meters per second wind velocity at the height of 65m and for another 8.6 per cent it is rated as good to very good, over 7m per second. An Institute of Energy study identifies nine islands with wind speeds of 4.1 to 7.1m per second at a height of 10m.

Biomass is another untapped resource for Vietnam. More than 50 million tonnes of biomass is created each year with only 30-40 per cent currently used for energy production. Currently biomass is generally treated as a non-commercial energy source, collected and used locally. The use of biomass for producing energy in a commercial sense has not received the attention of energy planners in the same way as sources such as solar power and hydroelectricity.

According to the fifth master plan on development of the energy sector, an additional 250-400 megawatts of electrical output is to be made available from biomass plants by 2010. Of this, 70-150MW could be obtained from rice-husk fuelled generation, 150-200MW from bagasse, 30-50MW from waste and other biomass products. However, considering Vietnam’s 42 existing sugar mills alone, just three of which so far feed electricity into the public grid under individually negotiated agreements with the total electrical output amounts to 150MW.

Rice husks have not been used for power generation so far. According to the Institute of Energy, an estimated 2.5 million of tonnes of rice husks are available for energy recovery. The potential is put at between 70-150MW. The fact that the waste is widely dispersed does make it more difficult to use. Altogether, Vietnam has more than 100,000 rice mills, although only about 50 are located in the main Mekong Delta growing region with a throughput of more than 5 tonnes per hour. This would be enough for the economic operation of power generating sets of 500 kW or more.

Hydropower is the only renewable energy which has largely been exploited in Vietnam. The nation’s hydropower potential is estimated at approximately 300 terawatt-hour (TWh, a thousand billion watt-hour), per year. Of this, some 80TWh per year is economically exploitable and only a quarter of hydropower’s economic potential has been utilised so far.

Apart from a few exceptions, the yet unused potential lies in the development of medium- or small-sized plants with a capacity of less than 1,000MW. In the coming years, the mountainous centre of the country will be targeted to generate hydropower electricity. According to the national power plan, a total capacity of 5,000MW is to be installed there by 2010. By 2020, the aim is to have a capacity of 13,000-15,000MW available through the use of hydropower.

Investment opportunities in renewable energies.

After many years of studying renewable energy potential in Vietnam, Duong Manh Thao, chairman and general director of Vietnam Wind Power Joint Stock Company, sees a large development opportunity. “Renewable energy will play an important role in the future to solve energy shortages as the supply of coal and hydropower are limited,” he said.

His company is a shareholder in the Phuong Mai 3 wind power plants and also drawing investment plans for projects in Ninh Thuan, Binh Dinh and Binh Thuan provinces. Rapid commercial sector growth, population migration to major cities and elevated living standards have all contributed to a growing demand for electricity in Vietnam.

From 2000 to 2004, the amount of electricity sold to end customers rose from 22.4 to 39.7TWh. Some 30 million new electricity customers were added between 1996 and 2004, with electricity demand in Vietnam forecast to grow 15-16 per cent, per year until 2010.

To meet the demand, the government had to raise power imports from China and ask state-owned enterprises like Electricity of Vietnam (EVN) and Vietnam National Oil and Gas Group to boost the construction of new power plants. Recently, after EVN decided against investing in 13 thermoelectric projects due to a lack of investment capital, the Ministry of Industry and Trade also appointed state enterprises to be investors of thermoelectric projects and call for foreign investors to embrace other energy projects.

The government also announced a limit on coal exports from 2012 to ensure material supply for the country’s thermoelectric plants. Although a series of power plants are under the construction, analysts claim they would not be enough to meet Vietnam’s energy demands as living standards are rising and foreign direct investment projects are abundant.

Some rural region households can only be served cost-efficiently by using decentralised renewable energy sources. These are mainly to be found in 1,100 communities comprising 750,000 households and three million inhabitants which will remain out of reach of the national power grid in the short to medium-term. “There is no doubt investors have many opportunities to develop renewable energy plants in Vietnam at this time, which would help to ease the shortage of energy,” said Tran Viet Ngai, chairman of the Vietnam Energy Association.

Barriers to implementing renewable projects

The biggest barrier for implementing renewable projects in Vietnam is a lack of specific policies for these projects. In 1999 the government launched a Renewable Energy Action Plan. It sets out a 10-year framework to be delivered in two, five-year phases of international assistance to scale-up the development and use of renewable energy for rural electrification and grid supply.

But, investors and scientists claim the current policy and regulatory framework for encouraging the use of renewable energy was inadequate to provide the necessary drivers to accelerate the development of Vietnam’s renewable energy industry. For example the Phuong Mai 3 project broke ground in September 2007, but the investor is still worried about the project’s construction timeline.

Meanwhile, Thao had to petition the government for the support to get credit from banks. He said the government needed to issue a policies including incentives, government support and encouragement to renewable energy projects. Despite the Vietnamese government having eyed the development of renewable energy for about 30 years, it has pumped little investment into the sector.

Duong Huy Hoat, scientist at Vietnamese Academy Science and Technology, said: “The government has not given any practical, specific and effective measures or policies aimed at encouraging investors to get involved in projects. Thus, the development of renewable energy sector in Vietnam can not improve and play an important role in the energy supply system.”

Nguyen Thuong, director of Centre for Sustainable Energy Development, stressed that the government has to issue a Law on Renewable Energy to encourage investors. China, he said, applied the Renewable Energy Law and saw renewable energy immediately increase. Germany and Spain had a high development of renewable energy also because they had adopted renewable energy development laws which specified government supports and incentive policies for investors, he said.

Poor awareness of available technologies and their high investment costs are also turning off investors. “The imported equipment is pushing investment costs higher, while investors have trouble accessing finance,” said Thao. However, there seems to be light at the end of the tunnel.

The Ministry of Industry and Trade’s (MoIT) Energy Department general director Ta Van Huong recently said a strategy and master plan for the development of renewable energy in Vietnam till 2015 would soon be submitted to the prime minister. Huong added that the MoIT was also drawing up a decree with incentives and encouragement policies for renewable projects to be issued in 2009.

(Source: VIR)