Biomass and biogas markets in Vietnam: Status and Prospects

1. Vietnam – German Forum Bioenergy in Vietnam Biomass and biogas markets in Vietnam:Status and Prospects Hochiminh City, 16 September 2013 By: Nguyen Duc Cuong Vietnam Institute of Energy

2. Contents • NỘI DUNG TRÌNH BÀY

3. 1.1. Current Status • Current status and prospects for • biomass energy and biogas development in Vietnam 1.1.1. Vietnam Electricity system (up to 31st December 2012) • Total capacity: 26.47 GW • Total electricity volume produced: 120.2 TWh • Renewable electricity: 4.5 TW (3.7%) • 4 types of renewable energy contributing to the electricity grid: Small hydropower, biomass, solid waste and wind • Electrification in Vietnam: approximately 97%

4. 1.1. Current status (cont.) 1.1.2. Number of installed systems Bagasse • 40 CHP-cogeneration systems applying direct burning technology are in operation • Total capacity: 150MWe • Scale of the installed capacity: ranging from 1 to 25MWe • Main purpose: production of heat and power for sugar production • 5 plants are selling surplus electricity to national grid at the average price of 4UScents/kWh. Husks • Currently there is only one thermo power plant applying fluidized bed combusion technology. • Currently this plant has not produced electricity; it sells steam for neighbouring households at 25 – 30USD/ton (saturated steam, 7 bar). • Plant expansion is planned with the installment of turbine and power generator for selling electricity to grid. • Current status and prospects for • biomass energy and biogas development in Vietnam

5. Current status and prospects for • biomass energy and biogas development in Vietnam 1.1. Current Status (cont.) 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 ultility: • 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.

6. Current status and prospects for • biomass energy and biogas development in Vietnam 1.1. Current status (cont.) 1.1.3. Applied technologies • Biogas: Household scale (small scale) • Anaerobic digestion • Materials: Bricks, nilong 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.

7. Current status and prospects for • biomass energy and biogas development in Vietnam 1.1. Current Status (cont.) • Small scale: • Wood processing • Boiler: direct buring, 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 Boiler burning pellets

8. Current status and prospects for • biomass energy and biogas development in Vietnam 1.1. Current status (cont.) • 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 Pellet press machine Rice husk briquette and briquetting machine Mixed rice husk&bagasse pellets Bagasse pellets Rice husk pellets

9. 1.2. Prospect • 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 • Current status and prospects for • biomass energy and biogas development in Vietnam

10. 1.2. Prospect (cont.) • Current status and prospects for • biomass energy and biogas development in Vietnam • 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): VND1,554.6 thousand billion, making an average annual demand of about VND3.7 billion US$ • 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)

11. 1.2. Prospect biogas solar • Current status and prospects for • biomass energy and biogas development in Vietnam • Orientation to develop biomass and biogas in 2011 – 2030 • Renewable energy: Account for 9,4% of the system capacity. • Average: 600MW/year Including: • From biomass: 2000 MW • From biogas: 100 MW • Biomass electricity planning is under going • Developing investment supporting mechanism Geothermal Waste including Small hydropower Biomass (solid) wind

12. 2.1. Opportunities to take advantage of supporting mechanism • 2. Market conditions and business opportunities for • biomass thermo – electricity and biogas sector • Being given preferences in terms of investment credits (soft loan, etc) • Import tax: not applied to products that Vietnam cannot manufacture • Corporate income tax: reduced or exempted for projects under special investment incentives: • Exempted in the first 4 years, reduced to 50% in the next 9 years • Being allowed to apply quick amortization approach • Land incentives: reduced or exempted • Environmental protection fee: exempted • Price subsidy: • Biomass electricity tariff and mechanism are being drafted and expected to be approved late 2013 and come into force earl 2014. • Tariff shall be included in a contract template, nonnegotiable. • Price: 3 options (FIT 1 component; 2 components and avoidable costs) • Applied for electricity produced from bagasse and other biomass.

13. 2. Market conditions and business opportunities for • biomass thermo – electricity and biogas sector 2.2. Regulations: restrictive condition(*) • Biomass power investment project must follow the approved regional biomass electricity plan and electricity master plan. • Investor must submit report to Ministry of Technology and Trade for approval if the investment project is not included in these plan. • Connection points are determined by two parties in negotiation process. • Investor is responsible for the investment, operation and maintenance of the grid connecting biomass power plant to the connection point. • The construction of investment project can be implemented if it meet the following requirements: • Investment certificated granted • Electricity purchasing documents established • Connection agreement made • Technical designs appraised Note (*). According Draft version No. 4

14. 3.1. Regulations and procedures • 3. Investment into biomass and biogas: • Issues to consider • Investment certificate procedure: depends on • Project models (BOT, BOO, BT, IPP, PPP, etc.) • Project scale (below or above VND1,500 billion) • Connection or not connection to electricity grid • Produce electricity or heat or both (CHP) • Apply current incentive and supports to reduce investment cost and improve cash flow • Income and import tax reduction/ exemption • Land and environmental protection fee reduction/ exemption • Subsidy for CDM products • Other supports (soft loans, investment contribution, funding the formulation of investment project, etc.) • Selection of local partners for project implementation

15. 3.2. Obstacles • 3. . Investment into biomass and biogas: • Issues to consider

16. 3. Summary and conclusion • 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.

17. Contact: Mr. Nguyen Duc Cuong Director of Center for Renewable Energy and CDM Institute of Energy Tel: 84-4-38527085; Mobi: 84 (0) 912009700 • Fax: 84-4-38523311 • Email:cuongnd.re@gmail.com or cuongnd_ie@fpt.vn Thank you for your attention!