Bio-Energy in Vietnam Opportunities and · PDF filePPC (DPI) Proposal Investor Provincial Peoples Committee(PPC) Investment Approval FS Evaluation Committee PPC Business Registration

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4 June 2014

Bio-Energy in Vietnam Opportunities and Challenges

NGUYEN DANG ANH THI, M. Eng Director of Environment & Energy Efficiency

Table of contents

I. Renewable Energy resources in Vietnam II. Legal framework III. Bio-energy (biogas & biomass): Potential capacities IV. Business opportunities & challenges V. Conclusions & recommendations

Renewable Energy in Vietnam

Source: Institute of Energy, 2014






4.5% RE in 2020 & 6.0% RE in 2030 Source: Institute of Energy, 2014

Legal Framework

Legal Framework

PPC (DPI)

Proposal

Investor

Provincial Peoples

Committee(PPC)

Investment Approval FS Evaluation

Committee

PPC

Business Registration

Sign PPA

DOC

Approval to Construct

Construction

A B

C D E

Legal Framework: Approval Process

Legal Framework: Feed-in-Tariff

Legal Framework: Feed-in-Tariff

Decision 24/2014/QĐ-TTg: Biomass USCent 5.8/kWh for co-gen projects

Decision 31/2014/QĐ-TTg: WTE USCent 10.05/kWh for incineration USCent 7.28/kWh for landfill gas

Levelized Cost of Electricity (LCOE) of Bioenergy projects

(Source: Bloomberg New Energy Finance, 2014)

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Type of biomass Energy production (million tons/year)

Natural forest 14,07 Planted forest 9,07 Bare lands, deforested hills 2,47 Perennial industrial trees 2,00 Fruit trees 0,41 Scattered planted trees 7,79 Wood and carton residues 5,58 Sawdust 1,12 Construction wooden waste 0,80 Husks and straw 40,8 Bagasse and sugar cane leaves 15,6

Corn residues 9,2 Coffee residues 1,17 Others (coconut, peanut, cassava...)

6,37

Total 118,21

Prospects: Vietnam has great potential for biomass and biogas production

Biomass: more than 118 millions tons is produced annually Biogas (from husbandry activities): ~4.8 billion m3/year can be recovered

Biogas produced from waste

Husbandry waste Output

(million m3/year)

Buffalo 527.5

Cow 881

Pig 1875

Poultry 1540 Sub-total 4823.5

Production and processing waste Potential needs to be evaluated

Biogas & Biomass: Potential Capacities

Number of installed systems: Bagasse

Amount of sugar mills: 40 cogeneration

Total installed capacity: about 150MW

Number of plant selling to national grid: 5

Selling tariff: 4UScents/kWh on average

Needs to expand capacity: about 50%



10 Rice Husk power projects under pipeline



97 MW

Biomass projects under planning in Mekong River Delta, up to 2020



Biomass projects under planning in Mekong River Delta, up to 2030



Wood processing residues More than 30 wood processing plants have installed industrial boilers feeding with

wooden residues (low steam parameters) Steam is used to dry wood at the plants Biogas Household scale

More than 200,000 systems have been installed and operated Digester volume ranges from 5-20 m3

Biogas utility Cooking, lighting and electricity production for household use

Industrial scale To produce electricity: 2MW (4 small plants x 0.5MW) To produce heat: from 5-12 ton of steam/hr.


Applied technologies

Biogas: Household scale (small scale) Anaerobic digestion Materials: Bricks, nylon bags;

Composite

Pig farm scale (medium scale) Connected by blocks

Large scale: two main groups Pond and plug flow ACR; AF; DSFF; UASB; and FB.

Small scale Wood processing Boiler: direct burning, fixed grades,

low steam parameters

Medium and large scale Sugar industry: cogeneration of heat

and power Boiler: direct buring (fuel moisture:

50%) Turbine: back pressure, extraction Rice processing industry Boiler: Fluidized bed boiler Turbine: condensing


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Biomass briquette & pellet Briquetting machines: screw, heated die Capacity: 100kg/hr Pellet press machines: imported from Japan, China; Capacity: 300-500kg/hr Products: domestic use and export


Vietnam’s demand for energy and electricity for the next two decades is huge Electricity demand (2030): 695 billion kWh, 5.8% increase against 2012 Demand for electricity investment (2011-2030): US$74 billion, making an average

annual demand of about US$3.7 billion Electricity price should be increased

To ensure the cost recovery and proper profit margin. Electricity tariff should be incrementally increased to meet marginal cost in long

run (PDP VII) Biomass and biogas development is encouraged and supported

Formulate strategy and master plan for RE development in Vietnam (submitted to the Government of Vietnam)

Climate change adaptation strategy: biomass and biogas is one of the options targeting at GHG emission reduction.

Green Growth Strategy: Promote green energy/industry and low carbon technology development (conversing waste into energy)

Business Opportunities

Biomass Technology transfer and equipment supply Produce and sell of biomass briquette & pellet Capacity building Private investment

Biogas Organic municipal solid waste: currently 90% of solid waste in Vietnam is landfilled Biogas production and application: existing equipment is inefficient or out of date Household biogas technology: over 2 million household farms in Vietnam


Corporate income tax incentive rate: 10% for a period of 15 years to newly-established enterprises investing in power plant projects. Possibility of 10% tax rate being extended up to 30 years: if the projects are classified as large scale

projects, using high or new technology and in special need of investment. Tax exemption for the first 4 years; 50% tax reduction for the next 9 years

Exemption of import duties: for equipment and machinery imported to create fixed assets of the renewable energy projects.

Special encouraged projects: exemption/reduction of land use fee/rental (depending also on the location of the projects)

Capital incentives: Access to low-interest loan from VDB: can obtain loans of up to 70% of the investment cost, with the maximum term of 12 years at an interest rate equivalent to government bond interest rates with a term of 5 years plus 1%


Challenges Legal framework • Uncompleted legal framework on RE • FITs are fixed numbers with unclear revision progress. Unclear relationship between FITs and RE

development plans. Planning • Unreliable data • Lack of provincial electricity development master plan; list of investment project has not been

developed • Poor project preparation: FS, basic & detailed design, licensing and permitting Feedstock provision reliability? • How to ensure the adequate and stable provision of biomass throughout the project lifetime in

terms of quantity, quality and price? • How to ensure the adequate and stable provision of waste throughout the project lifetime in

terms of quantity and price? Put-or-pay contract? • Seasonal variation: quantity (biomass), composition (waste) • Collection and transportation (biomass) Feed-in-Tariff • Unattractive in biomass sector for co-gen projects while other power generation projects are

unknown.

Vietnam has great potential to develop biomass and biogas; however the exploitation is limited and not correspondent to the nation’s potential.

The Government of Vietnam set target for renewable energy development, including biomass development in a proper roadmap to 2020 and 2030.

Investment support and incentive mechanisms have been issued and improved. This is solid basis to promote the development of biomass and biogas markets in Vietnam.

Price subsidy, new tariff and planning of biomass electricity development is being implemented to facilitate the decisions of investor in terms of making direct investment, joint venture, facility provision and technology transfer.

Conclusion & Recommendations

Contact: NGUYEN DANG ANH THI, M. Eng

Director of Environment & Energy Efficiency Mekong Renewable Resources Fund (MRRF)

Indochina Capital Corporation Tel: + 84.8.3910 4855

Mobile: + 84.918 393 767 Email: [email protected]

[email protected]

Thank you for your attention!

mailto:[email protected]

Bio-Energy in Vietnam Opportunities and · PDF filePPC (DPI) Proposal Investor Provincial Peoples Committee(PPC) Investment Approval FS Evaluation Committee PPC Business Registration

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