Policies and regulatory framework promoting the ... · PDF filePolicies and regulatory framework promoting the application of biomass and biogas for power ... Proposal for project

Policies and regulatory framework promoting the

application of biomass and biogas for power

generation in Vietnam

27 June 2013

Contents

1. Biomass and biogas resources and development in Vietnam

2. Law and regulatory framework

3. Institutions and stakeholders

4. Economic regulations and Financial incentives

5. RE Standards

6. Procedures for application for power generation

7. Future prospects

Biomass and biogas consumption : 14,710 ktoe (2010) for heat, cooking, lighting…, account for 21.1% of total energy consumption in Vietnam

For power generation : 150 MW from Biomass; and < 1 MW from Biogas (21,500 MW total installed capacity in 2010 in Vietnam).

The GOV target:

• 2020 : 500 MW from biomass; no specific target for biogas generation

• 2030 : 2000 MW from biomass; no specific target for biogas generation

Most suitable biomass for power generation are:

• Bagasse; Rice husk; Wood; Rice straw

Biomass and biogas development in Vietnam

Solid biomass

• Rice husk & rice straw

• Corn cob& maize streak

•Coffee husk& fiber and

•Bagasse, sugar cane

•Peanut and bean shells

•Elephant grass

•Cassava

•Energy crops

•Wood and wood products

Liquid biomass

Biogas

Biomass and biogas resources summaries in Vietnam (source: NL agency)

Type #Ha Yield/ha % of resource is residue or waste

Theoretical Availability (ton)

Bamboo

800,000 plus

600,000 mixed

forest

10-13 t/ha 50-70% Around 7 million ton/year

Cassava 560.400 17t/ha

Stem is 30% of the cassava harvest

The peel: 3%

The cassava root: 40%(moisture 50%)

Waste water: 31%

3 million tons of cassava stem

Coconut 130.000 13t/ha 305 weight is husk, plus leaves and bark

it is 6.5 tons/ha of fuel wood

975 tons only husk+ 1.6 million

tons fuel wood+ 1 million tons pith

Coffee 500,000 1.8 ton/ha 15% of the dried cherry weight 135,000 tons

Corn

Cobb 1,125,000 ha 4.0 t/ha 20-50% 1,066,500 tons

Corn Stob 1,125,000 ha 4.0 t/ha 200% 9 million tons

Jatropha > 2,000 ha 1-5 t/ha Seed 30% oil; 70% cake Seed: 780t-1,200t

oil: 1,820t-2,800t cake

Manure -

±30,000 million

heads; manure

2kg/head

n.a Almost 1

million ton

Rice husk 7,500,000 ha 5.32 t/ha 20% 8 million ton

Rice

straw 7,500,000 ha 5.32 t/ha 85% (on average) 23 million ton

Sugar

Cane 266,000ha 51.7 ton/ha

Top:30%, Leaves: 10%,

Bagasse: 9%, Fructose: 1.8%, Others:

1.2%

Top: 4,110,150 ton; Leaves:

1,370,050 ton; Fructose: 246,609

ton; Others: 164,406 ton

Wood

residues 13 million ha

residues: 5 million

tons/year

40% Logging, Saw-milling

(38% solid, 12% sawdust)

11 million ton residues;

4 million m³ wood production

Price of some biomass products

Type VND/kg $/t

Rice husk 100-500 4.7 – 24

Bagasse (sugar cane) 0 – 250 0 – 12

Wood and its residues 400 – 600 18.8 – 28.2

Rice straw 400 – 600 18.8 – 28.2

Corn cob and stob 0 – 250 0 – 12

These prices are at local prices

Law and regulatory framework for RE power generation

Electricity Law was passed in 2005 and amended in 2012.

• Promote the exploitation and use of new and renewable energy sources to generate electricity : Invest in power plants using new and renewable energy sources ; Encourage organizations and individuals to invest in grid or building power stations using on-site energy, new and renewable energy to provide electricity to rural, mountainous and island areas; Investment in power development in rural, mountainous and island areas

• The support of the State policy include: + Support on investment; + Support for investment loan interest rates;

National Energy Development Strategies for Vietnam up to 2020 and outlook to 2050:

• The share of renewable energy was set at 3% of total primary energy supply by 2010, 5% by 2020, and 11% by 2050.

National Power Development Master Plan (2011-2020) with outlook to 2030, highlighted needs for development of RE, particularly biomass.

Green growth (9/2012): Reduce intensity of GHG emissions per unit of GDP by 8-10% in 2020, then 1.5-2%/y up to 2030

Biomass and biogas Stakeholders in Vietnam

Institutional agencies + MOIT

+ MONRE

+ MOC

+ MARD…..

R&D and consultants + Bioseed Vietnam

+ Hanoi University of

Agriculture

+ Agro-Forestry University

+ Institute of Agricultural

science of South Vietnam

+ IPP, IPSARD, ISPONRE,

IEVN, RCEE.

State owned companies

+ CASUCO

+ EVN; + PVN; + PV Oil + URENCO + VINACAFE, VINAFOOD…

Stakeholders

Others (Donors and Financial Inst.)

+ UNIDO

+ GIZ

+ USAID

+ WB

+ ADB

+ International & Local

Banks, VDB…

Developers and suppliers

+ Delta Energy Corp + Dinh Hai Cogen JSC + Hung Viet composite + Kim Nghia + Bourbon Tay Ninh JSC + Bien Hoa JSC

MPI - Responsible for developing policy and regulations : sectors are entitled to incentives

MARD – Policy & National plan on Agriculture and rural dev.

• Department of Crop Production

• Livestock production Department

• Vietnam Administration of Forestry

MONRE - Policy & National plan on Environment

• Vietnam Environment Administration

• Vietnam Environment Protection Fund

MOIT - Policy & National plan on Trade and Industry (power sector)

• General Directorate of Energy

• Electricity Regulatory Authority of Vietnam (ERAV)

• EVN (Single buyer of power)

MOST – Policy & National plan on Science and Technology, intellectual property, standards

MOC - Policy & National plan on Construction

• Department of Technical Infrastructure

Local Authorities (provinces, district and communes)

Institutional agencies

• Benefit/Cost ratio (B/C) • Economic Internal Rate of Return

(EIRR, %) • Net Present Value (NPV) • Payback period on investment (B/I)

Contracts are individually

negotiated with each project developer,

with a major determinant of price level negotiate with EVN (single buyer)

being project specific

Economic regulations

• Indicative price: Some Cogen. bagasse power plants sell electricity to EVN at price 4UScents/kWh

• EIRR on project : usually 12%-14%

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 RE 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%

FISCAL AND FINANCIAL INCENTIVES

Energy-related TCVNs are grouped in two subjects as section 27 - Energy and heat transfer engineering and section 29 - Electrical engineering

Electrical TCVN sub-system consists of 474 TCVNs (81 % harmonized with ISs).

Number of current (pure) energy TCVNs including energy efficiency is more than 30 TCVNs covering:

• Energy systems (Terms and definitions) – 01 TCVN;

• Electricity supply systems – 9 TCVNs;

• Solar energy engineering – 01 TCVN;

• Energy efficiency – > 20 TCVNs (+ 09 TCVNs planned to be developed in 2012).

National technical standards on emissions from Thermal power plant (QCVN 22/2009)

RE - related Vietnam standards (TCVN)

PROCEDURES FOR PROPOSING AND IMPLEMENTING A PROJECT

Main conditions for the Investor:

• Good experience in project implementation;

• Obtain written agreement on the purchase of electricity by the Electricity of Vietnam or electricity wholesale or retail units; (see next slide)

• Prove sources of capital to be mobilized and loan commitments of credit institutions or banks for the project implementation; and

• Have owner’s capital accounting for least 30% of the total investment capital (but could be lowered up to 20% in special cases).

Required forms for power projects: must be in the form of a BOT/BOO project or other forms as provided for by law (e.g.: PPP).

Recommendations for investors:

• Supply chain of biomass is of primary importance. Thorough investigation and control of biomass supply in long term is important.

• Thorough due diligence must be conducted.

Approval process for RE generation projects (<30 MW)

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

Procedure of proposing and implementing a small scale IPP

project (<30MW)

Proposal for project

Investor Project proposal PPC (DPI) Approval Add to project

list

Negotiation and draft of

contracts

Initial Project contract and other relevant contracts

Application dossier

Obtaining Investment Certificate

PPC

15 days

Relevant ministries

for consultation

opinions Amended project contract (10days)

Request for amendment (10 days)

Investor

Issuing Investment certificate Implementation

of the Project

Negotiating with authorized competent authority

Negotiation and sign PPA.

Design and agreement on SCADA/EMS (Optional for small IPP);

Metering agreement and designing

Negotiation on selling price;

Grid-connection study;

Preliminary PPA ;

Procedures for grid-connection and PPA for RE

MoIT’s Decision No. 32/2010/TT-BCT of 30 July 2010 provides detailed conditions and

procedures for connecting power plants to the power distribution network

Roadmap for liberalizing electricity market in Vietnam:

2005 – 2014: competitive generation market

2015 – 2022: competitive wholesaling market

After 2022: competitive retail market

For RE

RE law is on pipeline. RE master plan is under consideration

Proposal to establish funding and

complex incentives for RE are on-going (assistance from GIZ)

Specially for Biomass generation

Currently 10 projects in pipeline (average capacity 10 MW, 8 are domestic and 2 are Joint Stock Companies)

FIT for biomass is under preparation (the approval is expected in 2013- 2014)

Renewable/biomass energy development plans on provincial and national level are being developed

Outlook for Biomass generation in Vietnam

Thank you for your attention!

Contact:

Dr. Nguyen Anh Tuan

Director, International Cooperation Department,

Institute of Energy, MOIT

Website: www.ievn.com.vn

Email: [email protected]