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IDENTIFICATION OF BIOMASS MARKET
OPPORTUNITIES IN VIETNAM

www.renewables-made-in-germany.com
IDENTIFICATION OF BIOMASS
MARKET OPPORTUNITIES IN VIETNAM
Authors
Nguyen Duc Cuong et al
November 2011
Editor
Deutsche Gesellschaft für Internationale
Zusammenarbeit (GIZ) GmbH
On ...
Identification of Biomass Market Opportunities in Vietnam

I

Content
PREFACE

1

1

3

REVIEW AND ANALYSIS OF VIETNAMESE ...
Identification of Biomass Market Opportunities in Vietnam

II

4 PROPOSAL ON DEVELOPMENT OF POTENTIAL PROJECTS IN THE BIOM...
Identification of Biomass Market Opportunities in Vietnam

III

List of Tables
Table 1-1. Harvestable amount of wood energ...
Identification of Biomass Market Opportunities in Vietnam

IV

Currency
1 USD =
1 EUR =

VND 20.83 (Sep 2011)
VND 28.384 (...
Identification of Biomass Market Opportunities in Vietnam

List of Acronyms
ADB

Asian Development Bank

BMWi

German Fede...
Identification of Biomass Market Opportunities in Vietnam

1

Preface
The targets and orientations for the development of ...
Identification of Biomass Market Opportunities in Vietnam

■

2

to the development of renewable energy/biomass energy. Ad...
Identification of Biomass Market Opportunities in Vietnam

1

3

Review and Analysis of Vietnamese Power Industry

1.1. De...
Identification of Biomass Market Opportunities in Vietnam

4

Classification by ownership

PVN
11%

Imported
5%

Others
1%...
Identification of Biomass Market Opportunities in Vietnam

5

1.2. Current sale rates
Since the issue of Decision No. 26/2...
Identification of Biomass Market Opportunities in Vietnam

6

The Avoided cost Tariff table for 2011 (issued together with...
Identification of Biomass Market Opportunities in Vietnam

7

Vietnam’s demand for power is likely to increase 3.3fold in ...
Identification of Biomass Market Opportunities in Vietnam

■

8

To achieve 75,000 MW in total power capacity by 2020, of ...
Identification of Biomass Market Opportunities in Vietnam

9

The competitive power generation market operates on the basi...
Identification of Biomass Market Opportunities in Vietnam

10

2 Identification and Evaluation of biomass energy market in...
Identification of Biomass Market Opportunities in Vietnam

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rates, the total wood fuel harvested from natural forests a...
Identification of Biomass Market Opportunities in Vietnam

12

The amount of wood fuel from the above mentioned sources ar...
Identification of Biomass Market Opportunities in Vietnam

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iii) Agricultural waste
Annual agricultural waste comes in ...
Identification of Biomass Market Opportunities in Vietnam

14

Figure 2-1. Rice husks in the Mekong Delta
Bagasse: Bagasse...
Identification of Biomass Market Opportunities in Vietnam

15

Table 2-3. Agricultural waste
Agricultural waste
Rice straw...
Identification of Biomass Market Opportunities in Vietnam

16

accounts for 38% of the total 3 million tons produced annua...
Identification of Biomass Market Opportunities in Vietnam

17

Table 2-4. Listed consumptions of biomass by type and user ...
Identification of Biomass Market Opportunities in Vietnam

18

Likewise, the coconut processors use raw biomass as fuel, w...
Identification of Biomass Market Opportunities in Vietnam

19

These candidate projects concentrate in Mekong Delta provin...
Identification of Biomass Market Opportunities in Vietnam

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Table 2-5. Summarized information on husk-fuelled power pla...
Identification of Biomass Market Opportunities in Vietnam

21

iii) Energy cogeneration
Bagasse from sugar mills and black...
Identification of Biomass Market Opportunities in Vietnam

•

22

A 12.5-MW bagasse-burning combined heat and power factor...
Identification of Biomass Market Opportunities in Vietnam

No

Factory/Plant

Capacity

Origin of
equipment

12

Tri An su...
Identification of Biomass Market Opportunities in Vietnam

No

Factory/Plant

Capacity

Quang Phu sugar mill
in Quang Ngai...
Identification of Biomass Market Opportunities in Vietnam

25

The Institute of Energy has pioneered to introduce the adva...
Identification of Biomass Market Opportunities in Vietnam

26

at random) in the provinces of Can Tho, An Giang, Kien Gian...
Identification of Biomass Market Opportunities in Vietnam

27

The following is an illustrative figure of development of r...
Identification of Biomass Market Opportunities in Vietnam

28

Table 2-7. Overview of information on cooperation projects ...
Identification of Biomass Market Opportunities in Vietnam

Project name

29

Project objectives

Project parties

Scope an...
Identification of Biomass Market Opportunities in Vietnam

30

2.5 Economical nature of biomass projects
Any project, such...
Identification of Biomass Market Opportunities in Vietnam

31

Table 2-8. Investment unit costs of biomass burning power p...
Identification of Biomass Market Opportunities in Vietnam

32

multiplying investment unit cost (kg/kWh or m3/kWh) with op...
Identification of Biomass Market Opportunities in Vietnam

33

(i) Revenue from selling electricity
Revenue from selling e...
Identification of Biomass Market Opportunities in Vietnam

34

(ii) Revenue from selling thermal/steam
The thermal-power c...
Identification of Biomass Market Opportunities in Vietnam

35

Greenhouse gas emission coefficient of Vietnam grid is 0.57...
Identification of Biomass Market Opportunities in Vietnam

36

2.6 The actual state of biomass energy technologies in Viet...
Identification of Biomass Market Opportunities in Vietnam

Type of technology,
equipment

Domestic

Overseas

37

Note

2....
Identification of Biomass Market Opportunities in Vietnam

Type of technology,
equipment

Domestic

4. Gasification of Bio...
Identification of Biomass Market Opportunities in Vietnam

39

2.7 Transportation of biomass, raw biomass price and transp...
Identification of Biomass Market Opportunities in Vietnam

Figure 2-7. Transporting rice husk to power plant from rice mil...
Identification of Biomass Market Opportunities in Vietnam

41

2.8 Information on potential companies which may become par...
Identification of Biomass Market Opportunities in Vietnam

42

The below are relevant information on potential investors w...
Identification of Biomass Market Opportunities in Vietnam

No.

7

8

Company name

Address

43

Field

Thermal power plan...
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  1. 1. IDENTIFICATION OF BIOMASS MARKET OPPORTUNITIES IN VIETNAM www.renewables-made-in-germany.com
  2. 2. IDENTIFICATION OF BIOMASS MARKET OPPORTUNITIES IN VIETNAM
  3. 3. Authors Nguyen Duc Cuong et al November 2011 Editor Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH On behalf of the German Federal Ministry of Economics and Technology (BMWi) Contact Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH Köthener Str. 2, 10963 Berlin, Germany Fax: +49 (0)30 408 190 22 253 Email: pep-southeastasia@giz.de Web: www.giz.de/projektentwicklungsprogramm Web: www.exportinitiative.bmwi.de This report is part of the Project Development Programme (PDP) South-East Asia. PDP South-East Asia is implemented by the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH on behalf of the German Federal Ministry of Economics and Technology (BMWi) under the “renewables – Made in Germany” initiative. More information about PDP and about renewable energy markets in South-East Asia: www.giz.de/projektentwicklungsprogramm This publication, including all its information, is protected by copyright. GIZ cannot be liable for any material or immaterial damages caused directly indirectly by the use or disuse of parts. Any use that is not expressly permitted under copyright legislation requires the prior consent of GIZ. All contents were created with the utmost care and in good faith. GIZ assumes no responsibility for the accuracy, timeliness, completeness or quality of the information provided.
  4. 4. Identification of Biomass Market Opportunities in Vietnam I Content PREFACE 1 1 3 REVIEW AND ANALYSIS OF VIETNAMESE POWER INDUSTRY 1.1. Demand and growth of power in period 2001-2010 3 1.2. Current sale rates 5 1.5. Players in the power market 8 1.6. Roadmap to competitive power market 9 1.7. Grid 9 2 IDENTIFICATION AND EVALUATION OF BIOMASS ENERGY MARKET IN VIETNAM 10 2.1 Identification and Evaluation of Biomass Energy Market in Vietnam Biomass sources 10 2.2 Use of Biomass in Vietnam 15 2.3 Status and prospects of projects using biomass for energy production in Vietnam 17 2.3.1 Status 17 2.3.2 Potential and uses of biomass for energy production (heat only, power only or combined heat and power at industrial scale in Vietnam) 25 2.4 A number of information on the current situation of cooperation projects between Vietnam and international biomass organizations 27 2.5 Economical nature of biomass projects 2.5.1 Investment costs 2.5.2 Operation & maintenance costs 2.5.3 Revenue of biomass power project 30 30 31 32 2.6 The actual state of biomass energy technologies in Vietnam (lists of domestic and overseas technology suppliers) 36 2.7 Transportation of biomass, raw biomass price and transport cost in Vietnam 2.8 Information on potential companies which may become partners of German companies in the development of biomass energy in Vietnam 3 REVIEW, STUDY AND DEFINITION OF POLICY FRAMEWORK FOR BIOMASS/RENEWABLE ENERGY DEVELOPMENT IN VIETNAM 39 41 44
  5. 5. Identification of Biomass Market Opportunities in Vietnam II 4 PROPOSAL ON DEVELOPMENT OF POTENTIAL PROJECTS IN THE BIOMASS ENERGY TECHNOLOGY MARKET 61 4.1. Identifying needs for technologies, services, specific products and opportunities for Vietnam-German business cooperation 61 4.2. Information on market entry possibilities and procedures for interested German companies who might join in business (import/export) or investment (license, joint venture) activities in the area of biomass energy 65 4.3. Information of Vietnam’s related organisations and their contact details – information on roles and responsibilities of related bodies and various organisations in the biomass field 68 REFERENCES 71 ANNEX 1 LISTED CAPACITIES OF POWER PLANTS IN 2010 BY OWERSHIP 72 ANNEX 2 - RETAIL RATES OF POWER IN 2011 75 ANNEX 3 – ROADMAP TO COMPETITIVE POWER MARKET 78
  6. 6. Identification of Biomass Market Opportunities in Vietnam III List of Tables Table 1-1. Harvestable amount of wood energy Table 2-1. Harvestable amount of wood energy Table 2-2. Wood waste usable for energy production Table 2-3. Agricultural waste Table 2-4. Listed consumptions of biomass by type and user (ktoe in 2010) Table 2-5. Summarized information on husk-fuelled power plants Table 2-6. Brief information on bagasse-based heat and power cogeneration factories at sugar mills Table 2-7. Overview of information on cooperation projects between Vietnam and International organizations Table 2-8. Investment unit costs of biomass burning power plant (USD/kW) Table 2-9. Fuel consumption rate and its opportunity cost Table 2-10. Operating time, auxiliary electricity rate and electricity amount sold Table 2-11. List of biomass technology and equipment suppliers Table 2-12. Relevant information on potential investors who can cooperate in biomass power development Table 3-1. Summary of legal frameworks for renewable energy development in Vietnam Table 3-2. Groups of obstacles and explanations and illustrations Table 3-3. Framework orientations biomass energy development Table 4-1. Potentials and possibilities for exploiting biomass energies Table 4-2. Summary of grid-connected renewable electricity sources in operations Table 4-3. Information of key related organizations in biomass energies 6 12 12 15 17 20 22 28 31 32 33 36 42 45 53 58 63 63 68 List of Figures Figure 1-1. Demand and growth of power in 2001-2010 Figure 1-2. Percentage of power supply by ownership Figure 1-3. Percentage of power supply by feedstock and fuel Figure 1-4. Power source structure by 2020 Figure 2-1. Rice husks in the Mekong Delta Figure 2-2. The husk-burning combined heat and power project demonstrated in Long An province Figure 2-3. A biomass briquetter in Tien Giang (photo by N.D.Cuong) Figure 2-4. Biomass-based power development plan of Vietnam Figure 2-5. Wood drying boiler of Vietnam Boiler Joint-Stock Company installed in Hanoi Figure 2-6. Diagram of transportation of biomass Figure 2-7. Transporting rice husk to power plant from rice milling factory (photo by N.D.Cuong) Figure 4-1. Balance between needs and exploitation capacities for primary energies Figure 4-2. Biomass pellet compressing machine (source: Amadeus-Kahl) Figure 4-3. Biomass briquette pressing, source: N.D.Cuong,IE 3 4 4 8 14 21 25 27 38 39 40 62 64 65
  7. 7. Identification of Biomass Market Opportunities in Vietnam IV Currency 1 USD = 1 EUR = VND 20.83 (Sep 2011) VND 28.384 (Sep 2011) Measurement W kW MW GW Watt Kilowatt Megawatt Gigawatt Wp kWp MWp GWp Watt peak Kilowatt peak Megawatt peak Gigawatt peak Wh kWh MWh GWh Watt hour Kilowatt hour Megawatt hour Gigawatt hour
  8. 8. Identification of Biomass Market Opportunities in Vietnam List of Acronyms ADB Asian Development Bank BMWi German Federal Ministry of Economics and Technology CDM Clean Development Mechanism CERs Certified Emission Reductions CHP Combined Heat and Power EU European Union EVN Electricity of Vietnam Corporation FBC Fluidized Bed Combustion GDP Gross Domestic Product GHG Greenhouse Gas GIZ German Agency for International Cooperation GT Gas Turbine GW Gigawatt HCMC Hochiminh City IE Institute of Energy IP Industrial Park IPP Independent Power Producer JICA Japanese International Cooperation Agency JSC Joint Stock Company Kcal Kilocalory kWh Kilowatts per hour LNG Liquefied Natural Gas MARD Ministry of Agriculture and Rural Development MOIT Ministry of Industry and Trade MW Megawatt Mwe Megawatt electrical ODA Official Development Assistance PEP-SOA Project Development Program for Southeast Asia PPA Power Purchase Agreement PDD Project Design Document PVN PetroVietnam REAP Renewable Energy Action Plan SIDA Swedish International Development Agency ST Steam Turbine TKV Vietnam Coal and Mineral Group toe Ton of Oil Equivalent VCB Vietcombank (Vietnam Foreign Trade Bank) VND Vietnam Dong WB World Bank V
  9. 9. Identification of Biomass Market Opportunities in Vietnam 1 Preface The targets and orientations for the development of Vietnam’s national electricity industry for the coming period are set in Decision No.1208/QD-TTg issued by the Prime Minister on July 21st, 2011 to approve the “Vietnam Power Development Plan in the Period 2011 – 2020 with vision to 2030”, in which, the priority and incentives will be given to developing renewable resources to increase the electricity production of renewable power from the neglect able to 5.6% and 9.4% by 2020 and 2030 respectively (based on their design capacity and inclusive only of small hydropower plants with the capacity of up to 30MW). Of these targeted renewable resources, biomass-generated power will make up 0.6% and 1.1%, or 500 MW and 2000 MW, respectively of the total power supply by 2020 and 2030. The developing country of Vietnam has the geological position, climate and agro-forestry powered economy that give rise to the availability of renewable feedstock for energy production for both meeting the domestic needs and helping protect the environment as fossil fuel substitutes (by reducing GHGs, acid rain – inducing emissions, and dust). The GIZ-implemented Project Development Programme (PDP) Southeast Asia, funded by the German Federal Ministry of Economics and Technology (BMWi), is designed to enhance business cooperation and experience exchange between Vietnamese and German companies. This study is part of the project. The study aims to give an overview of production and use of biomass in Vietnam and identify the potentiality and challenges faced by the local biomass technology market. The specific contents are as follows: ■ ■ ■ ■ Overview of the Vietnamese power industry; Identification of the Vietnamese biomass market; Review of legal framework for renewable energy development in Vietnam; Proposed ways to develop the biomass energy technology and market. As a result, the study is made up of 4 components: ■ ■ ■ Component 1 is “Overview of the Vietnamese power industry”. This part states the status of power use, power sources, power demand, and targets for power sources in 10 years to 2020. Included in this part are tables of power prices by user, covering those offered small hydropower plants of less than 30MW and windmills. A roadmap towards a competitive power market and players in this market are also incorporated. Component 2 is “Identification of the biomass market in Vietnam”. This part is focused on the analysis and evaluation of the production and use of biomass by type of biomass and status of on-going biomass projects. Also included is a review of the viability and technological applications. There are updated statistics on the business activity in the biomass sphere and presentations on prospects of technological applications and biomass availability. Component 3 is “Review of legal framework for renewable energy development in Vietnam”. This part lists the brief summary of legal documents such as strategies/plans and policies related
  10. 10. Identification of Biomass Market Opportunities in Vietnam ■ 2 to the development of renewable energy/biomass energy. Advantages and obstacles are identified and justified. Component 4 is “Proposed ways to develop the biomass energy technology and market”. The identification of biomass demand, prospects of technology development, and Government’s targets for biomass power are summarized and analyzed in this part. Investment opportunities and information on markets and international partners involved in the Vietnamese biomass are reviewed and commented on. Despite the great efforts put in the collection of information and data on biomass in Vietnam as presented in this paper, there remain some limitations of expected data and information. These limitations have been triggered by the unavailability of sources, data and statistics on resources, use and technology biomass that is a new sphere in Vietnam1 (i.e., there is no agency responsible for making, updating and reporting biomass statistics). The access to and collection of information on biomass is challenging, no matter it is from domestic or international side. Biomass projects often come in small or medium size (Category B or Category C projects2 like rice husk and bagasse power-generating projects. Under the rule, they are licensed by local (provincial) governments to operate. It takes time to approach investors and local authorities for information. In some cases, the approached are reluctant to provide information. 1 Biomass is the first type of renewable energy to be mentioned in the Government’s renewables development plan (Decision No.1208/QD-TTg of July 21st, 2011). 2 Small and medium projects (Category B and Category C or smaller than Category C) have total investment of up to 1500 billion VND (73 million USD) each.
  11. 11. Identification of Biomass Market Opportunities in Vietnam 1 3 Review and Analysis of Vietnamese Power Industry 1.1. Demand and growth of power in period 2001-2010 In the 10 years from 2001 to 2010, commercial power provided to meet economic and domestic needs increased constantly at the average annual growth of 14.5%. Commercial power rose from 31.1 billion kWh in 2001 to 99.1 billion in 2010, almost a triple increase. The commercial power amount in 2010 of 99.1 billion kWh represented a 14.3% jump from the 2009 level and this growth rate was 2.5 times higher than that of GDP. The following chart illustrates the demand and growth of power energy in Vietnam between 2001 and 2010. Power demand 2001 - 2010 120,000 18% 17.0% 14.4% 14.3% 14% 13.7% 12.9% 13.0% 12.8% 12.8% 80,000 12% 10% 60,000 8% 40,000 Growth rate (%) Power demand (GWh) 16% 15.5% 100,000 6% Power demand 20,000 4% Growth rate 2% 0 2000 0% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Figure 1-1. Demand and growth of power in 2001-2010 Statistical data of late 2010 put the total installed capacity of all power sources in Vietnam at 21,542 MW, of which EVN accounted for 11,848 MW (55%) and outside-EVN sources (inclusive of institutions where EVN is a shareholder); 9,694 MW (45%). Power sources at the time of 2010 are shown in the following tables and charts by ownership, feedstock and technology applied.
  12. 12. Identification of Biomass Market Opportunities in Vietnam 4 Classification by ownership PVN 11% Imported 5% Others 1% Foreign invested 10% EVN 55% TKV 5% Joint stock Private 11% 2% Figure 1-2. Percentage of power supply by ownership Classification by type of production Imports 5% Others 2% Hydropower 38% Gas turbine 32% Oil thermal power 3% Coal thermal power 18% Coal thermal power 2% Figure 1-3. Percentage of power supply by feedstock and fuel Updated statistics show that in 2010, newly started sources of power supply totalled 2,546MW. However, as most went into operation in late 2010, their contribution to the total supply of 2010 was insignificant.
  13. 13. Identification of Biomass Market Opportunities in Vietnam 5 1.2. Current sale rates Since the issue of Decision No. 26/2006/QD-TTg by the Prime Minister in December 2006 to marketise power rates, there have been 5 increases. The first increase came on January 1st, 2007 when the price climbed to 842 VND/kWh, an increase of 7.6% from the 2006 level. In each of the ensuing years, the price went up steadily in the range of 5 -10%. The highest rise was recorded on March 1st, 2011 when it surged 15.28% to 1,242 VND/kWh, equivalent to 6 US cents at the September 30th 2011 exchange rate of VND/USD published by VCB. On April 15th, 2011, the Prime Minister issued Decision No. 24/2001/QD – TTg, whereby, instead of being changed once a year on March 1st every year, the price of power would be revised every 3 months. On August 19th, 2001, the Ministry of Industry and Trade promulgated Circular 31/2011/TT-BCT to provide guidance on how to revise the power rates, depending on the fluctuations of 3 parameters, i.e. i) Fuel price; ii) VND-USD exchange rate; and iii) contribution by power suppliers to the national grid3. The decision, which enables the pricing to change automatically, is effective on September 1st, 2011. Following is a summary of what the April 15th, 2011 Prime Ministerial decision prescribes the revision of power sale rates in open-market principles. If the fuel prices or the VND-USD exchange rate increases from the parameters used to calculate the current rates or the contribution by power suppliers changes from the plan approved by the MOIT as the basis to calculate the current price, the current rate might be revised upwards: a) by 5%, where the EVN reports to the MOIT and seeks its approval; or b) by more than 5%, where the EVN reports to the MOIT and refers the new pricing scheme to the Ministry of Finance for appraisal. Fifteen days after the MOIT has submitted the new pricing scheme to the Prime Minister, if the Government gives no feedback, the EVN can automatically raise the price by 5%. Current power rate table for 2011 is described in detailed in Annex 2. Table of wind power rates The buyer of power must buy all the power produced by a wind mill with the price at the delivery point of 1,614 VND/kWh (excluding VAT and equivalent to 7.8 UScent/kWh). The bid price is subject to fluctuations in the exchange rate between VND and USD4. 3 Composition of power production is subject to change due to the difference in contributions by coal, hydro or gas power producers and their price. 4 In Vietnamese law, the currency used in purchase and sale contracts on the Vietnamese territory is VND. So, the decision specifies that the purchase price calculated for the investor must use VND. At the time of the decision making, 1 USD is equivalent to 20692 VND, so the coefficient is 7.8%. The decision to allow the power purchase price to adjust to the VND-USD exchange rate favors the investor. It is understood that any wind power projects selling power after the issue of this Decision can base on the current exchange rate to know the power purchase price. For example, in June 2012 when a wind power plant sells power to the VND, the exchange rate is 22000 VND/USD, then the power price stated in the contract will be 22000x7.8% = 1716 VND/kWh (not 1614 VND).
  14. 14. Identification of Biomass Market Opportunities in Vietnam 6 The Avoided cost Tariff table for 2011 (issued together with Decision 66/QĐ-ĐTĐL issued on December 31st, 2010 by the Director of the Power Regulation Department). Table 1-1. Harvestable amount of wood energy (VCB-offered September 30th 2011 exchange rate: USD=20,830 VND) Item Dry season MidOffOn-peak peak peak Power rate (VND/kWh) North 603 Middle 573 South 575 Capacity rate (apply to 3 1,772 regions) (VND/kWh) 590 567 568 561 563 555 Onpeak Midpeak 529 481 511 498 468 501 Wet season Offpeak 484 460 492 Residual power 242 230 246 The average avoided cost tariff, according to this table, is 916 VND/kWh (equivalent to 4.43 UScents/kWh). However, such a low price can apply only to the small hydropower plants as renewable energy projects that are near the road, connected to the national grid and have large availability of water supply. 1.3. Power generation and potential to 2020 (next 10 years) In terms of power generation, the Power Development Planning for the Period 2011 – 2020 and Vision to 2030 set the following targets: ■ ■ ■ To provide sufficient power for domestic use with the total of generated and imported power ranging from 194 – 210 billion kWh by 2015 and range 330 - 362 billion kWh by 2020. To develop renewable resources for power generation, increase the share of power generated from this source from the insignificant to 5.6% of the total power production by 2020. To achieve 330 billion kWh in generated and imported power by 2020 with hydropower accounting for 19.6%; coal-burning thermal power, 46.8%; gas-burning thermal power, 24% (LNG 19.6%); renewable energy power, 4.5%; nuclear power, 2.1%; and imported power, 3%. 1.4. Existing power generating sources and predictions in next 10 years As mentioned in 1.1 about the power demand in the period 2001 – 2010, the installed capacity at the time of December 31st 2010 of all power sources in Vietnam was 21,542MW, of which the usable capacity was 19,735MW.
  15. 15. Identification of Biomass Market Opportunities in Vietnam 7 Vietnam’s demand for power is likely to increase 3.3fold in 10 years, from 100.071 billion kWh in 2010 to 194 billion kWh by 2015 and 330 billion kWh by 20205. To have sufficient power for national development and backup, the Government offers to: ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ Achieve balanced development of power sources in terms of capacity in each of the 3 regions of North, Middle and South; Increase the backup capacity by 6%-7% to take in account the often delay of 1-2 years in the building of power plants; Achieve the balanced supply of coal and natural gas by tapping more natural gas fields; Increase the share of coal thermal power in the Middle and South; Keep the coal thermal power under 60% of the total power supply; Build more small hydropower plants and renewable energy plants to a proper proportion; Introduce pumped-storage hydropower plants in the South to put the number of hydropower plants on a level with thermal power plants; Build nuclear power plants to reduce reliance on fossil fuels; Increase the importation of power from Laos, Cambodia and China; Carry out more BOT and BOO projects; In light of those points of view, the roadmap for the development of power sources in Vietnam over the next 10 years is set as follows (pursuant to Decision No. 1208/QD-TTg dated July 21st, 2011 by the Prime Minister); ■ ■ ■ ■ ■ ■ ■ ■ To develop biomass power as a source of burning and generating to achieve 500 MW by 2020; To increase the wind power capacity from the neglectable to 1,000 MW by 2020; To give priority to the development of hydropower plants, especially those have the double functions of food protection, water supply and power generation to bring the total capacity of hydropower plants from 9,200 MW now to 17,400 MW by 2020; To put into operation pumped-storage hydropower plants to increase the efficiency of the power system and achieve 1,800 MW to be generated by pumped-storage hydropower plants by 2020; To reach 10,400 MW in natural gas thermal power by 2020; To make good use of domestically produced coal to feed thermal plants and prioritize locally made coal for Northern thermal plants to achieve 36,000 MW in coal – burning thermal power by 2020. To build nuclear power plants to offset the primary energy sources when they have been exhausted and commission the first in 2020; To build power plants feeding on LNG to diversify power feedstock for power and gas security and achieve 2,000 MW in LNG-run power by 2020; 5 Decision No.1208/QD-TTg of July 21st, 2011 by the Prime Minister to approve the national power development planning for the period 2011 – 2020, taking into account a vision to 2030.
  16. 16. Identification of Biomass Market Opportunities in Vietnam ■ 8 To achieve 75,000 MW in total power capacity by 2020, of which hydropower accounts for 23.1%; pumped-storage hydropower, 2.4%; coal-burning thermal power, 48%; gas-burning thermal power, 16.5% (including LNG, 2.6%); renewables, 5.6%; nuclear power, 1.4%; and imported power, 3.1%. Details are illustrated in the following chart: Power source structure by 2020 Coal-burning Pumped storage Thermal power Hydropower 48.0% 2.4% Hydropower Gas-burning 23.1% Thermal power Imported Power 3.1% Renewables 5.6% Nuclear Power 1.3% 16.5% Figure 1-4. Power source structure by 2020 1.5. Players in the power market The EVN is holding equity in most power plants and the entire power transmission, operation, distribution and retail system. In power production, it is holding the controlling 70% equity in the power plant market. The rest is shared by State corporations such as PVN, TKV, Song Da, etc.; international investors (in BOT and IPP projects) and private Vietnamese investors as Independent Power Producers (IPPs). These plants sell power to the EVN under longer-term Power Purchasing Agreement (PPA) (see further Table 1.1). However, under the approved industry development roadmap, the Vietnamese power market will be composed of three markets, as follows: ■ Power generation market ■ Power wholesale market; and ■ Power retail market
  17. 17. Identification of Biomass Market Opportunities in Vietnam 9 The competitive power generation market operates on the basis of a single power buyer. All power producers will sell power to this only buyer under the PPA and offer their prices on the instant delivery market. Power distributors under the EVN will be re-arranged to become financially interdependent firms. In the coming period, (see 1.6 below for further details), the competitive power generation market will come into operation under a charted roadmap. Players in this market include: ■ ■ ■ ■ ■ Power producers: power plants with the capacity of 30 MW or higher, connected with the national rid (except windmills and geothermal plants); A single power buyer: EVN Power Purchasing Company; Power system and power market regulator: National Power System Regulation Centre; Provider of power measuring data collection and management services: Information Technology Centre under the EVN Information-Telecommunication Company; and Power transmission service provider: National Power Transmission Corporation. 1.6. Roadmap to competitive power market Pursuant to Prime Minister Decision No. 26/2006 of January 26th, 2006 specifying the roadmap, conditions and levels of a competitive power market in Vietnam, the Vietnamese power market will inch toward a competitive market through 3 levels: ■ ■ ■ Level 1 (2005 - 2014): to make the power generation market competitive. Level 2 (2015 - 2022): to make the power wholesale market competitive. Level 3 (from 2022 on): to make the power retail market competitive. Details of the roadmap to competitive power market are described in Annex 3. 1.7. Grid The Vietnamese power transmission grid is operating at voltage 500kV, 220kV and 110/66kV. The 500kV lines link the North, Middle and South. The 220kV lines cover the whole nation with the total length of 8,500 km (in 2010). The total length of the 110/66kV lines is about 12,500km. A general assessment of the Vietnamese power grid development suggests that up to 2010, many transmission grid projects had been carried out but able to meet just 50% of the plan6, specifically the 500kV grid meeting just 41% and 220kV grid, about 50%. Causes for this failure to fulfil the plan are lack of funds, problems with site clearance, rising input material price and limited contractor ability, to name a few. 6 Decision number 110 of the Prime Minister to approve the Power development planning of Vietnam to 2015 with vision to 2025 (Master Plan VI)
  18. 18. Identification of Biomass Market Opportunities in Vietnam 10 2 Identification and Evaluation of biomass energy market in Vietnam In the coming period 2011-2020, the following tasks are set7 for the Vietnamese transmission grid: ■ ■ ■ ■ To provide reliability in power delivery and transmission and reduce power loss in transmission; To ensure that all power hubs across the nation connect to the unified grid; To expand the 220 and 110kV grids to meet the transmission requirements when different power plants have been commissioned and To prepare a power plan complete with backup and flexibility to provide secure, stable and quality power in terms of voltage and frequency. 2.1 Identification and Evaluation of Biomass Energy Market in Vietnam Biomass sources Being an agricultural country, Vietnam boasts a wide variety of biomass sources in large volumes that are way usable to produce energy such as heat and power. Primary solid biomass sources in Vietnam comprise: (i) Wood energy; (ii) Wood processing waste (sawdust, butt ends, etc.); and iii) Agricultural waste. Agricultural waste includes post-harvest residues such as rice straw, sugarcane leaves and buds and residues from other agricultural crops such as groundnuts, beans, coconuts, etc., and food processing wastes such as rice husks, bagasse, coffee bean shell, cashew nut shell, etc.. The term ‘wood energy’ (wood fuel) is understood as wood-based fuel, including fuel wood such as tree trunk, tree branch, shrub, etc., that are collected by cutting or pruning trees. Wood fuel is harvested from natural forest (deforestation, forest fires, etc.), production forest, forest plantation, bare land8 and through the thinning and pruning of industrial perennials (tea, coffee, rubber, cashew, etc.), fruit trees (orange, longan, etc.) and scattered trees. i) Wood fuel/wood energy Wood energy from natural forests, production forests and forest plantations: Up to the end of 2008, the total area of forest in Vietnam was approximately 13.11 million ha, including 10.35 million ha of natural forest, 2.76 million ha of forest plantations9. The rates of sustainable logging of fuel wood are legally set at 1 ton/ha/year for natural forest and 2.5 tons/ha/year, for forest plantations. At such regulated 7 Decision number 1208 of the Prime Minister to approve the Power development planning of Vietnam to 2020, with vision to 2030 (Master plan VII) 8 Bareland includes unused land and harvested forest. It is often covered with grass, shrub and small woody trees. 9 Decision No. 1267/QD-BNN-KL of May 4th, 2009 by the MARD.
  19. 19. Identification of Biomass Market Opportunities in Vietnam 11 rates, the total wood fuel harvested from natural forests and forest plantations amount respectively to 10.35 million and 6.9 million tons a year. According to the Forest Development Strategy for the Period 2006 – 201010, the forest area is planned to reach 14.07 million ha in 2010, including 10.45 million ha under natural forests and 3.63 million ha under forest plantations. Using the sustainable logging rates, it is calculated that the wood amount in 2010 from natural forests is 14.07 million tons and 9.07 million tons from forest plantations. Bare land: In 2005, the area of bare land was 6.41 million ha11. These tree-bare lands produce 3.21 million tons of fuel wood per year. With the afforestation program in place, the area of bare land is planned to drop to 4.94 million ha by 2010. Using the regulated rate for sustainable harvesting of fuel wood of 0.5 ton/ha/year, the total amount of fuel wood in 2010 is planned to be 2.47 million tons. Industrial perennials: In 2005, the total area of industrial perennials was 1.63 million ha12, of which tea accounted for 7.5%; coffee, 30.5%; rubber, 29.6%; pepper, 3%; cashew, 21.3%; and coconut, 8.1%. Based on the sustainable fuel wood harvesting rate, the amount of fuel wood harvested in this year was 1.95 million toe and is planned to reach 2 million tons/year by 2010. Fruit trees: In 2005, the area under fruit trees was 0.767 million13, producing 0.38 million tons of fuel wood. Considering the expanding rate of fruit tree acreage of 10 ha/year, the fuel wood amount from fruit trees might reach 0.41 million tons by 2010. Scattered trees: In 2005, some 3.45 billion scattered trees were planted14, which is equivalent to 3.45 million ha planted at the density of 1,000 per ha. Scattered trees produced 6.04 million tons of fuel wood in 2005. In the period 2006-2020, about 200 million trees are planned to be planted every year. As a result, the amount of fuel wood to be harvested by 2010 is expected to reach 7.79 million tons. 10 Decision No. 18/2007/QD-TTg of July 5th, 2007. Decision No. 1267//QD-BNN-KL of May 4th, 2009 by the MARD on the status of national forest land. 12 Vietnam Statistical Yearbook of 2010 13 Vietnam Statistical Yearbook of 2010 14 Decision No. 1267//QD-BNN-KL of May 4th, 2009 by the MARD on the status of national forest land. 11
  20. 20. Identification of Biomass Market Opportunities in Vietnam 12 The amount of wood fuel from the above mentioned sources are shown in the following table. Table 2-1. Harvestable amount of wood energy Supply source of wood energy Natural forest Forest plantation Bare land Industrial perennial Fruit tree Scattered tree Total Harvestable amount of wood energy (million tons in 2010) 14.07 9.07 2.47 2.00 0.41 7.79 35.81 Note: The calculations result from using the formula: EF = A × CSE, where: EF – harvested wood amount (ton/year); A – area of forested land or tree planted area (ha); CSE – sustainable wood harvesting rate (ton/ha/year). ii) Wood waste Wood waste at wood processors (sawmills and furniture makers) include wood chips, butt ends, bark and sawdust. The amount of wood waste is calculated on the basis of domestic wood production and sawn wood15 that includes also the annually imported. In 2010, about 16 million m3 was processed to produce 6.5 million m3 of sawn wood. The ratio between wood waste and processing wood is 0.616 (10% of sawdust and 50% of other wood waste). The total amount of wood waste produced from sawmills in 2010 was 9.5 million m3, equivalent to 6.7 million tons, including 5.58 million tons of wood waste and 1.12 million tons of sawdust waste. Table 2-2. Wood waste usable for energy production Sources of wood waste Wood processing - Butt ends and tree bark - Sawdust and shavings Building (timber formwork and house repairs) Total Source: Study Team, Institute of Energy, 2011 15 16 Vietnam Statistical Yearbook of 2010 Institute of Energy, 2009, Vietnam Renewable Energy Planning. Wood waste useful for energy production (million tons in 2010) 5.58 1.12 0.80 7.50
  21. 21. Identification of Biomass Market Opportunities in Vietnam 13 iii) Agricultural waste Annual agricultural waste comes in 2 main types: i) postharvest residues such as rice straw, sugarcane leaves and buds, corn leaves and stems and cobs, cassava stems, coconut shells and coir, etc., and ii) food processing waste such as rice husks, bagasse, groundnuts shell and coffee bean shells, etc.. Rice straw: Postharvest rice residue is rice straw. The annual amount of rice straw depends on the annual harvest of rice17. The amount of rice straw produced in 2010 was 40 million tons (ratio of rice paddy/rice straw is 1:1). Post-harvest residues of sugarcanes: Postharvest sugarcane residues are cane roots, leaves and buds. The amount of sugarcane residues depends on the annual harvest of sugarcane18. The 2010 amount totalled 7.8 million tons (cane/residue ratio is 1:0.3). Post-harvest residues of corn: Postharvest corn residues are stems, leaves and cobs19. The kernel/corn residues ratio is 2. The 2010 residue amount was 9.2 million tons. Cassava stems: Postharvest cassava residue is stems. In rural areas, cassava stems are used to cook or hedge. The cassava root harvest of 2010 was 8.5 million tons20. The amount of residues was 2.49 million tons (ratio is 1:0.3). Rice husks: Rice husks are produced from rice processing. Each ton of paddy produces 0.2 ton of husks. The 40 million harvest in 201021 produced 8 million tons of husks. 17 Vietnam Statistical Yearbook of 2010 Vietnam Statistical Yearbook of 2010 19 Vietnam Statistical Yearbook of 2010 20 Vietnam Statistical Yearbook of 2010 21 Vietnam Statistical Yearbook of 2010 18
  22. 22. Identification of Biomass Market Opportunities in Vietnam 14 Figure 2-1. Rice husks in the Mekong Delta Bagasse: Bagasse is produced from sugarcane extraction. The sugarcane/bagasse ratio is 0.3. The 2010 amount of 24 million tons of crushed sugarcanes22 produced 7.8 million tons of bagasse. Groundnut shells: The 2010 harvest of groundnuts amounted to 0.49 million tons23. Groundnut processing by-product is ground nut shells. The groundnut/nutshells ratio is 0.3. The 2010 ground nut shells amount was 0.15 million tons. Coffee bean shells: The 2010 coffee bean harvest was 1.1 million tons24. Given the coffee bean shell/coffee bean ratio of 0.15, the 2010 coffee bean shells was 0.165 million tons. Cashew nut shells: The 2010 harvest of cashew nuts was 0.29 million tons25. With the cashew nut shells/cashew nut ratio of 0.3, the 2010 amount of cashew nut shells was 0.089 million tons. Coconut waste (coconut shells and coir) and other agricultural waste such as soybean plants, etc. ranges 4 – 5 million tons per year26. 22 Vietnam Statistical Yearbook of 2010 Vietnam Statistical Yearbook of 2010 24 Vietnam Statistical Yearbook of 2010 25 Vietnam Statistical Yearbook of 2010 26 Interpolation and estimation from Vietnamese renewables planning data, IE, 2009 23
  23. 23. Identification of Biomass Market Opportunities in Vietnam 15 Table 2-3. Agricultural waste Agricultural waste Rice straw Postharvest sugarcane residues Postharvest corn residues Cassava stems Rice husks Bagasse Groundnut shells Coffee bean shells Cashew nut shells Others (coconut, soybeans, etc.) Total Usable agricultural waste (million tons in 2010) 40.00 7.80 9.20 2.49 8.00 7.80 0.15 0.17 0.09 4.00 74.90 Source: The calculations result from the formula: CR = CP × RCR, where CR – agricultural crop residues (tons/year), CP – agricultural crop harvest (tons/year), RCR – residues/harvest ratio (tons of residues/tons of harvest). 2.2 Use of Biomass in Vietnam The biomass sources identified above are being used for energy or non-energy purposes or wasted by burning, dumping into rivers and canals, etc. Below is a summary of use of biomass by biomass type and by user. i) Use of biomass by biomass type Wood energy: Surveys and investigations by Vietnamese experts suggest that about 20% of the fuel wood changes hand in the market while the rest is collected for self consumption. Fuel wood is used for building material kilns, food processing and cooking. The total amount of fuel wood now stands at 22 million tons27. Rice straw: Previously, rice straw is used for cooking in rural areas. However, improved living conditions in the last 2 – 3 years have resulted in a switch to other fuels, encouraging farmers to leave rice straw behind in the field and roads after threshing and burn it to cause smoke and dust pollution to nearby urban population. The total amount of rice straw used as fuel reduced from 7.8 million tons in 2005 to 4 million in 2010, which is just 10% of the total rice straw produced. Rice husks: Rice husks are partially used for brick burning, pottery burning and rice drying (in the South). A small amount is used for cooking at farming households. The amount of rice husks as fuel now 27 Fuel wood has average humidity of 15% and heat value of as low as 3600 kcal/kg
  24. 24. Identification of Biomass Market Opportunities in Vietnam 16 accounts for 38% of the total 3 million tons produced annually. However, as brick kilns are planned to phase out28, the use of rice husks for firing is to drop soon. Bagasse: About 80% of bagasse at sugar mills is burned to feed boilers that produce electricity and heat for sugar refining. However, not connecting with the grid for selling the redundant power, the mills just burn the bagasse as a waste. Now, they are braining out ways to sell their redundant power to the grid. The total amount of bagasse to this aim is nearly 4 million tons. Other by-products: Coffee bean shells, peanut shells, corn stems and cobs, soybean plants, coconut shells, sugarcane leaves and buds, sawdust and wood chips can also be used as fuel. It is estimated that just 40% of the total amount of these biomass types is being used. The total amount for heat generation from this source of biomass is 1.688 million toe. ii) Use of biomass by user There are two main users of biomass: households and small rural industrial users. Household users: The household uses biomass as fuel for cooking human and animal meals and running small processing machines. Investigation data combined with previous studies show that the total amount of biomass used by these users is 10.6 million toe a year, or 76% of the total biomass consumption. Small rural industrial users: The small rural industrial user uses biomass for food processing, such as the making of rice noodles, cakes and tofu, liquor distilling, drying of tea, rubber and coffee, sugar refining, and producing of building materials such as bricks, tiles, lime, pottery, etc. The total amount of biomass used for heat generation by these users is 3.33 million toe per year, representing 24% of the total biomass consumption. 28 The Ministry of Construction, Plan to replace intermittent brick kilns
  25. 25. Identification of Biomass Market Opportunities in Vietnam 17 Table 2-4. Listed consumptions of biomass by type and user (ktoe in 2010) User Fuel wood Cooking stove (residential cooking) Kiln Burner Heat Husk Biomass type Straw Bagasse Others Total 6552 395 990 88 890 8915 663 1145 405 100 130 100 100 698 1168 2173 Combined Combined energy heat and 552 552 generation power Total 8360 900 1120 740 1688 12808 Source: Vietnam Institute of Energy, 2010, study report on renewables planning in Vietnam and estimation Note: Heat values of: + Wood fuel: 3800 kcal/kg + Rice husks: 3000 kcal/kg + Straw: 2800 kcal/kg + Bagasse: 1850 kcal/kg 2.3 Status and prospects of projects using biomass for energy production in Vietnam 2.3.1 Status At project level, there are 4 types of technologies applied to use biomass for energy production in Vietnam, namely: i) Heat generation only; ii) Power generation only; iii) Combined heat and power (CHP); and iv) Biomass briquetting/biomass palletizing. i) Biomass-based heat generation technologies There is great demand for use of heat for drying by rice, coconut, coffee and cashew processors. A primary survey of the use of biomass for wood processing in Dan Phuong, Hanoi and for coconut processing in Chau Thanh, Ben Tre province29 shows that there are tens of biomass burning kilns in each of these districts. At these wood processors, the kiln is designed to burn raw biomass. The output heat can be water vapour (steam) or hot air, which is used to dry wood products. Almost all the processors use butt ends produced from wood processing as fuel. They are of small size, each with the capacity ranging from 5 – 10 tons of saturated steam per hour and all made in Vietnam by the Vietnam Boilers Company. 29 Source: Institute of Energy, July 2011, Task Report 1, the project EEP Mekong
  26. 26. Identification of Biomass Market Opportunities in Vietnam 18 Likewise, the coconut processors use raw biomass as fuel, which includes rice husks and coconut residues such as coconut shells and coir. The boilers are similar to those used at the mentioned wood processors. Besides, in the Mekong Delta, which is distant from coal mines in the Northern province of Quang Ninh, hence using coal at a price 1.5-2 times higher than in the North, rice husks are used for brick kiln firing in such provinces as Dong Thap, Vinh Long and Binh Duong and more investment is being poured into building such husk-burning kilns. Reports from the website ‘http://danviet.vn’30 say that one year into the use of the Hoffman kiln, a German continuous husk-burning brick kiln, the Kim Thach Co., Ltd., at the Tan Duong industrial park in Lai Vung, Dong Thap province has contributed to reducing the local pollution. The Hoffman kiln31, designed to burn bricks with 2 tunnels each with 10 continuous burning chambers, can produce 20,000 bricks per day-night. The new brick burning technology is reported to be more energy-efficient than the intermittent (traditional) kiln. The German-styled kiln consumes up to 0.35 kg of husks to burn 1 kg of brick while the conventional kiln uses 0.5 kg of husks for 1 kg of burnt brick. The new-style brick kiln helps save 30% of feedstock. Another plus is that the German kiln takes only 24 hours to complete the firing of ware while the conventional, 20 days. Another project is the study to improve the husk-burning brick kilns in the Mekong Delta, undertaken by the Ministry of Science and Technology under the sponsorship of the Swedish International Development Cooperation Agency (SIDA)32. The project aims to introduce the Thai-style continuous husk-burning brick kiln in An Giang province to reduce environmental pollution and make use of available rice husks and other agricultural by-products. The project’s success is being multiplied to other provinces in the delta such as Tay Ninh, Soc Trang and Dong Thap. This kiln’s working principle is that the firing temperature of the firing chamber is controlled to increase gradually until the ware is ripe. Workers can monitor the temperature by looking through a flame watch hole or at a heat meter. While the first chamber is working, the adjacent chamber starts its primary firing. The hot air passes through the primary firing chamber to the drying chamber. Consequently, the emissions after going from the firing chamber through the primary firing chamber and drying chamber become cooler and thus fuel has been put to effective use. Furthermore, the emissions flowing through the brickworks of the next chambers will be partially filtered, hence making the emissions spewed into the open air less polluting. ii) Biomass-based power generation projects To date, there is no operational biomass-burning power plant in Vietnam. However, data put together from local reports suggest that about 10 investors have applied to build such plants each averaging 10 MW. They include eight Vietnamese investors and two partnerships with foreign investors. The reports show that most are likely to use rice husk to generate power for sale to the national grid and employ the fluidized bed combustion (FBC) technology. 30 Source: http://danviet.vn/54183p1c34/khac-phuc-o-nhiem-bang-lo-gach-dot-trau-hoffman.htm Source: http://danviet.vn/54183p1c34/khac-phuc-o-nhiem-bang-lo-gach-dot-trau-hoffman.htm 32 Source: http://vaidiakythuat.net/nung-gach-bang-trau.html 31
  27. 27. Identification of Biomass Market Opportunities in Vietnam 19 These candidate projects concentrate in Mekong Delta provinces, specifically two in Tien Giang; three in Dong Thap; three in Can Tho; and one in Kien Giang. The following is a brief introduction of these projects. The reasons for their concentration in this region are: a) This region accounts for 55% of the national total of rice husk; b) This region is distant from fossil fuel sources, especially coal; and c) there is great demand for heat and power in this region, especially in the rice harvesting season. The 9-MW husk-burning heat and power cogeneration plant in Cần Thơ. The investor is the HCMC-based Dinh Hai Co., Ltd.. The plant produces 20 tons of steam per hour, which is sold to other companies inside the Tra Noc industrial park. Construction started in 2007 and is composed of three phases with Phase 1 installing a boiler of 20 tons of steam per hour serving companies in the industrial park; Phase 2 to install a 2-MW steam-turbine generator; and Phase 3 to expand its capacity to 9 MW. Schedule by phase is detailed as follows: – Phase 1: from 2007-2009; Capacity of 20 tons of steam/h; not generating power – Phase 2: from 2011-2012; Capacity of 20 tons of steam/h; generating 2 MW – Phase 3: from 2013-2014; Capacity of 70 tons of steam/h; generating 9 MW ■ ■ The 10-MW husk-burning power plant in Tien Giang. The investor is the HCMC-based Tan Hiep Phuc Power Installation and Construction JSC. The candidate site is Cai Be. The generated power will be sold to the grid. The investment cost is 1,860 $US/kW (inclusive of bank loans for two years’ construction) with the majority of equipment to be imported from Europe. A feasibility study was completed in 2007. However, the project has been delayed due to problems with land rental, PPA, husk purchase contracts and the recent rises in bank loan interest rates. The project is expecting a similar treatment in power purchase price to wind power. ■ The 10-MW husk-burning power plant in Can Tho. A feasibility study was conducted by the Dutch company TOPEC BV in 2007. The selection of investors is underway. The project is unlikely to start before 2011 for in the initial negotiations after the feasibility study, the bid price for power was offered at as low as 5 UScent/kWh by the EVN. Like the husk-burning power project by the Tan Hiep Phuc Power Installation and Construction Company, this project is pinning hope on special treatment in buying its power at a price higher than 5 UScent/kWh. ■ The 10-MW husk-burning power plant by HCMC-based Duy Phat Power JSC in Đồng Tháp. This project is still under study. ■ The 6-MW husk-burning power plant at the Ba Sao industrial park in Cao Lanh, Dong Thap. Formed in 2009 by the Korea Power Consulting Company, this plant is designed to burn husk to generate power, using the FBC technology with one boiler, one turbine and one generator. The selection of the project investor is underway. This project is also unlikely to start before 2011 for the same reasons above. ■ There are 5 – 6 husk-burning power plants each of 10 MW in An Giang, Kien Giang, Hau Giang and Long An now in the process of site selection and application for licensing from respective local authorities. However, no progress has been seen. A possible cause is the absence of a pricing system for biomass power. If the Time-of-Use price table for small hydropower plants applies to biomass-based power plants, it is discouraging to investors. Worse still, the high loan interest rates of over 20%, even 30% a year, make these projects hardly viable.
  28. 28. Identification of Biomass Market Opportunities in Vietnam 20 Table 2-5. Summarized information on husk-fuelled power plants No Project Capacity Expected technology Investor or investment report maker Status Fluidized Bed Combustion (FBC) Dinh Hai Thermal Power JSC Address: Lot 2.9A5, Road 10, Tra Noc 2 IP, Can Tho Tel: 0710 3744 295 # Fax: 0710.3744 296 – Tax code : 1800 646 683 Email: cogen@dinhhai.com Website: www.dinhhai.com Expected to expand capacity to 15-20MW on bank loans Investment Report completed on Dec 21st, 2009 1 Husk-burning heat and power cogeneration plant in Can Tho 2 Husk-burning heat and power cogeneration plant in Can Tho 10MW FBC J-Power (Electricity Power Development Co., Ltd and Chubu Electric Power Company Inc 3 10-MW husk-burning power plant in Can Tho 10 FBC TOPEC BV, the Netherlands NA 4 Husk-burning power plant in Cai Lay, Tien Giang 10 FBC HCMC-based Duy Phat Power JSC Investment Report completed in Jan 2009 10 FBC HCMC-based Duy Phát Power JSC 6 FBC Korea Power Corporation (KEPCO) 5 6 Husk-burning power plant in Cai Be, Tien Giang Husk-burning power plant at the Ba Sao IP, Cao Lanh, Dong Thap 9MW (3 phases) Investment Report completed in Nov 2010 Investment Report completed in Jan 2009 7 Proposed husk-burning power plant in Cho Gao, An Giang 10 FBC NA 8 Husk-burning power plant in Kien Giang 10 FBC NA 9 Husk-burning power plant in Long An 10 FBC NA NA 10 Husk-burning power plant in An Giang NA In the process of applying for permission to invest Note: NA, not available 10 FBC In the process of making an investment report In the process of applying for permission to invest
  29. 29. Identification of Biomass Market Opportunities in Vietnam 21 iii) Energy cogeneration Bagasse from sugar mills and black liquor from paper production are the key biomass feedstock for energy cogeneration plants. There are now 39 energy cogeneration plants (38 sugar mills and 1 paper mill) with the total installed capacity of 150MWe. Their capacity ranges from 1.5 to 24 Mwe. The power and steam generated from these plants is used to feed these very plants. The majority of energy produced is used to crush sugarcane and refine sugar. There are only 3 plants selling their redundant power to the national grid at the price of 4-5 UScents/kWh. Other plants are keen to sell their power on their expansion. However, the bid price for their power is discouraging. To make the matter worse, the vast majority of these plants are using the outdated technology, hence low efficiency. Renewing technology and improving capacity now top their concerns. In May 2011, the Vietnam Sugarcane and Sugar Association sent an official letter to the Government, MOIT and Ministry of Agriculture and Rural Development, asking that there be policy to buy power from the expanding sugar mills to take advantage of bagasse, and sugarcane leaves and buds, which are being wasted. The amount the association asks to be purchased is nearly 2000MW. Following is an illustration of a failing energy cogeneration project, which comprises an FBC boiler of 2.5 tons/h, a turbine-generator of 50 kW, a heat exchanger and 3 rice driers, and was commissioned in Long An in 1999 but has ceased to operate for not being viable. Figure 2-2. The husk-burning combined heat and power project demonstrated in Long An province Some sugar mills in the provinces of Phu Yen and Thanh Hoa are working against the clock to invest in expanding their bagasse-burning factories. Some key details are as follows: • A 16-MW bagasse-burning combined heat and power factory in Phu Yen. The investor is KCP Vietnam Industries (India), which is owning KCP Phu Yen sugar mill. Its investment report was completed in 2009. The expected power output for sale is 65,840 MWh/year. The energy equipment is to be imported from India.
  30. 30. Identification of Biomass Market Opportunities in Vietnam • 22 A 12.5-MW bagasse-burning combined heat and power factory expansion in Thanh Hóa. In August 2011, the investor – the Lam Son Sugarcane and Sugar JSC applied to the MOIT to expand its combined heat and power factory by 12.5MW. The expansion includes a boiler with the steam capacity of 80 tons/h and turbine-generator of 12.5 MW. The expected power output for sale is 81,900 MWh/year. The proposed offer price is 916 VND/kWh. The following is brief information on bagasse-burning combined heat and power factories at sugar mills. Table 2-6. Brief information on bagasse-based heat and power cogeneration factories at sugar mills33 No Factory/Plant Capacity Pho Phong sugar mill in Quảng Ngãi Nagarjuna sugar mill in Long An Vietnam – Taiwan sugar mill in Thanh Hoa Son Duong sugar mill in Tuyen Quang 1500 tons of sugarcane/day 3500 tons of sugarcane/day 5 To Hieu sugar mill in Son La 6 Hoa Binh sugar mill 7 Binh Dinh sugar mill 8 Bourbon sugar mill in Gia Lai 9 Kon Tum sugar mill 10 Dac Nong sugar mill 11 Binh Thuan sugar mill 1 2 3 4 Origin of equipment China India 6000 tons of sugarcane/day Taiwan and Australia 1000 tons of sugarcane/day China 1000 tons of sugarcane/day China 700 tons of sugarcane/day 1500 tons of sugarcane/day 1000 tons of sugarcane/day 1000 tons of sugarcane/day 1000 tons of sugarcane/day 1000 tons of sugarcane/day China China China China China China Output Heat and power for self consumption by the plant Heat and power for self consumption by the plant Heat and power for self consumption by the plant Heat and power for self consumption by the plant Having sold power to the grid at the price of 4 UScent/kWh Heat and power for self consumption by the plant Heat and power for self consumption by the plant Heat and power for self consumption by the plant Heat and power for self consumption by the plant Heat and power for self consumption by the plant Heat and power for self consumption by the plant 33 Sources from the Vietnam Sugarcane and Sugar Association say that all the listed sugar mills are keen to sell their redundant power to the grid from their expanded production processes (Official Letter 529/HHMĐ addressed to the Prime Minister, MOIT and MARD to request purchase of 1950 MW of bagasse-based power)
  31. 31. Identification of Biomass Market Opportunities in Vietnam No Factory/Plant Capacity Origin of equipment 12 Tri An sugar mill in Dong Nai 1000 tons of sugarcane/day China 13 Bourbon sugar mill in Tay Ninh 8000 tons of sugarcane/day France 14 Cao Bang sugar mill 15 Quảng Nam sugar mill 16 17 Tay Ninh raw sugar mill Vi Thanh sugar mill in Hau Giang 18 Soc Trang sugar mill 19 Kien Giang sugar mill 20 Tra Vinh sugar mill 21 Quang Binh sugar mill 22 Nghe An-Tate&Lyle sugar mill in Nghe An 23 Ben Tre sugar mill 24 Phung Hiep sugar mill 25 26 27 28 29 KCP sugar mill in Phu Yen Thoi Binh sugar mill in Ca Mau Cam Ranh sugar mill in Khanh Hoa Nong Cong sugar mill in Thanh Hoa An Khe sugar mill in Gia Lai 700 tons of sugarcane/day 1000 tons of sugarcane/day 2500 tons of sugarcane/day 1500 tons of sugarcane/day 1500 tons of sugarcane/day 1000 tons of sugarcane/day 1500 tons of sugarcane/day 2000 tons of sugarcane/day 6000 tons of sugarcane/day 2000 tons of sugarcane/day 1250 tons of sugarcane/day 4000 tons of sugarcane/day 1000 tons of sugarcane/day 6000 tons of sugarcane/day 1500 tons of sugarcane/day 2000 tons of sugarcane/day China Australia Australia China China China China China The UK China India India Australia The US Poland and India China 23 Output Heat and power for self consumption by the plant Having sold power to the grid at the price of 4.5 UScent/kWh Heat and power for self consumption by the plant Heat and power for self consumption by the plant Heat and power for self consumption by the plant Heat and power for self consumption by the plant Heat and power for self consumption by the plant Heat and power for self consumption by the plant Heat and power for self consumption by the plant Heat and power for self consumption by the plant Heat and power for self consumption by the plant Heat and power for self consumption by the plant Heat and power for self consumption by the plant Working on the project to sell 16MW to the grid Heat and power for self consumption by the plant Heat and power for self consumption by the plant Heat and power for self consumption by the plant Heat and power for self consumption by the plant
  32. 32. Identification of Biomass Market Opportunities in Vietnam No Factory/Plant Capacity Quang Phu sugar mill in Quang Ngai Song Con sugar mill in Nghệ An Lam Son sugar mill in Thanh Hoa 333 sugar mill in Dac Lac Tuy Hoa sugar mill in Phu Yen Ninh Hoa sugar mill in Khanh Hoa Tuyen Quang sugar mill in Tuyen Quang 2500 tons of sugarcane/day 1250 tons of sugarcane/day 6000 tons of sugarcane/day 500 tons of sugarcane/day 1250 tons of sugarcane/day 1250 tons of sugarcane/day 700 tons of sugarcane/day 37 La Nga sugar mill in Dong Nai 2000 tons of sugarcane/day 38 Hiep Hoa sugar mill in Long An 39 Bai Bang paper mill 2000 tons of sugarcane/day Black liquor boiler 30 31 32 33 34 35 36 Origin of equipment France China France and Japan China India China China Denmark France France 24 Output Heat and power for self consumption by the plant Heat and power for self consumption by the plant Still working on the project to sell 12.5MW Heat and power for self consumption by the plant Heat and power for self consumption by the plant Heat and power for self consumption by the plant Heat and power for self consumption by the plant Having sold power to the grid at the price of 4 UScent/kWh Heat and power for self consumption by the plant Heat and power for self consumption by the plant Biomass gasification: In Vietnam, biomass gasification came into the spotlight in the early 1980s when there were shortages of petroleum and power at that time. Gas compounds from wood liquefaction were then used for buses. The rice husk gasification combined with power generation developed in the South in 1980s with 15 systems of 75 MW in total installed in the Mekong Delta and HCMC. However, this technology was then neglected on the improvements in petroleum and power supply and the use of rice for other purposes such as the firing of brick and pottery kilns) that has brought in higher economic benefits. The Post Harvest Institute has designed and manufactured some rice husk gasification facilities on a trial basis. The gas compounds from these facilities are used to feed rice driers. Generally, biomass gasification remains strange to Vietnam and Vietnam has little experience in this respect. iv) Biomass pelletising/briquetting The briquetting/pelletising of biomass such as rice husk and sawdust, though helping solve the low relative-density problem, has so far attracted little attention. In Vietnam, biomass is briquetted for limited uses, mainly heat generation (cooking) in the family. Efforts are being made in the field of research and development to make biomass briquettes more viable and popular among users.
  33. 33. Identification of Biomass Market Opportunities in Vietnam 25 The Institute of Energy has pioneered to introduce the advanced briquetting technology into Vietnam34. Under a renewable energy project funded by the SIDA and the Bangkok-based Asian Institute of Technology (AIT), the institute has imported from Thailand a fuel briquetter to try on the domestic feedstock of rice husks, sawdust, coffee bean shells and bagasse). After that, it recognized the need to improve this screw-model briquetter and offered some improved versions of it. Research was made to lengthen the longevity of the screws. The improved version was then demonstrated at different places nationwide for widespread promotion to people. Training was also provided to business and technicians. Accompanying the briquetter, the institute and AIT also promoted stoves specifically designed to burn briquettes. A small investigation conducted by the institute shows that in some Mekong Delta provinces such as Tien Giang and Can Tho, private sector businesses have embraced this rice-husk briquetter, each installing 1-2 units. Some install up to 10 units. The pressing capacity is 70-100kg of rice husks/h. The investment cost for a briquette ranges from 35-40 million VND. Briquette products are sold locally at 800-1000 VND/kg for small businesses that make cakes, rice noodles or confectionary or for families for cooking. There are reports that some traders have started to collect these briquettes for export to Japan or South Korea. Still, production scale remains small and domestically made briquetters often break down, interrupting the briquetting process. Figure 2-3. A biomass briquetter in Tien Giang (photo by N.D.Cuong) 2.3.2 Potential and uses of biomass for energy production (heat only, power only or combined heat and power at industrial scale in Vietnam) In Vietnam, the amount of rice husks produced from rice processing is about 8 million tons annually. There is about 40 million tons of rice straw annually, of which only 3 million tons is utilized. A survey conducted by the Institute of Research and Development in the Mekong Delta at 108 rice mills (selected 34 Activities and Achievements of a Biomass Briquetting Project in Vietnam. Pham Khanh Toan, Nguyen Duc Cuong, and M. Augustus Leon. Downloadable at: http://www.retsasia.ait.ac.th/Publications/WRERC%202005/IE%20paper-final.pdf
  34. 34. Identification of Biomass Market Opportunities in Vietnam 26 at random) in the provinces of Can Tho, An Giang, Kien Giang, Hau Giang and Soc Trang shows that about 50% of the rice husks produced by rice mills is sold as residential fuel or fertilizer. The offer price ranges from 50-300 VND/kg, depending on the area and time of the year. These mills have large redundant amounts of rice husks, which total 232,000 tons/year. The redundancy concentrates in the peak months of harvest (from February to July) at small and medium mills. The harvestable amount of rice husks for power generation in the Mekong Delta can reach 2 million tons each year in the period to 2015 and 4 million tons to 2020. In the large rice producing provinces of An Giang, Dong Thap, Tien Giang, Long An, Kien Giang and Can Tho, if an average rice-husk burning power plant run by a rice mill to make use of its residual rice husks consumes between 65,000 -80,000 tons of husks to generate 10 MW a year, it is possible to build 100 such plants with the capacity ranging from 500 KW to 20 MW. The use of rice husks for power generation is also helpful to reducing pollution caused by its dumping into rivers and canals. The Dinh Hai Power JSC, the first rice husk-burning thermal power plant to run in Vietnam, reports that there are about 10 projects like it in the Mekong Delta now. However, some causes such as low bid price and high loan interest have hindered them from starting. Sharing the same problems faced by rice mills, sugar mills are also discouraged from running bagassefuelled power plants (including boilers, turbines and generators). On April 8th, 2011, the Vietnam Sugarcane and Sugar Association sent Official Dispatch No. 529/HHMD to the Prime Minister, MOIT and MARD to ask for the financing of 1950 MW to be generated from sugarcane residues. In light of the country’s ever rising demand for energy, limited reserves of energy sources (coal imports expected after 2015) and great prospects of biomass supply, it is highly feasible technologically, economically and environmentally to use the available biomass supply for power-only generation and combined heat and power cogeneration. Prime Minister Decision 1208 to approve the general plan for power development in the period 2011-2020 with a vision 2030 (General Plan 7) serves as the legal framework for biomass development in Vietnam. The decision on biomass development sets the specific targets of: ■ ■ generating 500 MW of biomass power by 2020; generating 2,000 MW of biomass power by 2030 (annual growth of 100MW).
  35. 35. Identification of Biomass Market Opportunities in Vietnam 27 The following is an illustrative figure of development of renewables in general and biomass in particular in Vietnam in the period 2011-2030. 16000 Biogas Solar (PV) 14000 12000 MW 10000 Geothermal pow er MSW SHP Biomass (solid) 8000 Wind Pow er 6000 4000 2000 20 29 20 27 20 25 20 23 20 21 20 19 20 17 20 15 20 13 20 11 0 Figure 2-4. Biomass-based power development plan of Vietnam The potential biomass thermal power plants in Vietnam in the coming period will be rice husk, bagasse, coffee bean shell, wood waste and rice straw-based. The more viable economically and environmentally are bagasse, rice husk and wood waste-based projects. 2.4 A number of information on the current situation of cooperation projects between Vietnam and international biomass organizations In spite of being considered as one of the countries with significant potential of biomass energy (being the world leading rice exporter, the world second largest coffee exporter, leading exporter in other products such as cashew, coconut and wooden products, etc), the exploitation of available biomass sources to provide fuel of medium and large energy production projects is insignificant (compared to Thailand, Malaysia, etc). The reason is probably that Vietnam is still a major coal exporter, the price of domestic fossil fuel is still subsidized (the domestic price of coal used for electricity production is only 35-40% the price of imported coal). Low electricity price (average electricity selling price from EVN to clients is only approximately US$ 6.2 cent/kWh) limited the opportunities for purchasing electricity from renewable energy projects in general and biomass projects in particular (as analyzed and mentioned above). In this context, so far there have not been many cooperation projects between Vietnam and international biomass organizations. The following table summarizes a number of cooperation projects in the biomass field in Vietnam to date.
  36. 36. Identification of Biomass Market Opportunities in Vietnam 28 Table 2-7. Overview of information on cooperation projects between Vietnam and International organizations Project name “Multi benefit solution to minimize climate change in Vietnam and South East Asian nations by development of biomass energy”. Project duration: 5 years since October 2011 to 2016 Greater Mekong Subregion (GMS) technical support project for increasing the usage of biomass waste sources Project duration: 4 years since December 2011 to Dec 2015 Feasibility study on energy production for Phu Quoc island district by biogas technology and biomass power plant Three phases of COGEN programme Project objectives To develop a transcendent biomass energy process in both economic and environmental factors (planting trees for fuel – production – consumption) and aiming toward promotion of worldwide usage of this process. Project parties Japan International Cooperation Agency (JICA) and Vietnam National University Scope and contents Japan contributes 5 million USD for the project. The project shall be carried out in 5 years (from October 2011 to 2016) with the contents such as: Planting trees for oil (Jatropha) and other plants on fallow and polluted areas; development of green technology in order to produce biological diesel ADB contributes US$ 4 million from Nordic Development Fund (NDF), the remaining US$ 600.000 is contributing fund from Cambodia, Laos and Vietnam Governments. Preparation for implementation of the project is carried out with items on sustainable biomass exploitation and usage Increase the rate of biomass waste usage in agriculture in order to meet the increasing demand for clean energy and food security for poor households in rural areas. The project is funded by Asian Development Bank (ADB) with US$ 4 million. Partners: 3 countries including Cambodia, Laos, Vietnam Preparation of a feasibility study on establishment of a biomass power plant and development of the technology for dry composition of residential waste used for electricity production Project is funded by EC-ASEAN Facilities. Partners: Can Tho University, Institution of Energy and a German agency Carried out in 2004 – 2005. Contents: Preparation of a feasibility study report on biomass power plant and the technology for dry composition of residential waste used for electricity production in Phu Quoc To promote the implementation of projects on Cogeneration– Combined Heat and Power technology in South East COGEN programme is initiated and funded by the European Commission and ASEAN. The project is Cogen 1: 1991-1994: including all kinds of fuel Cogen 2: 1995-1998, including all kinds of fuel Cogen 3: 2000-2004, only focusing
  37. 37. Identification of Biomass Market Opportunities in Vietnam Project name 29 Project objectives Project parties Scope and contents Asian nations coordinated in South East Asia by Asian Institute of Technology AIT located in Bangkok, Thailand and the Research Center for Energy and Environment is the partner carrying out Cogen 3 in Vietnam. on biomass To study, select and popularize the improved biomass compression system and cooking stoves using torrefyer biomass pellets in Vietnam Funded by SIDA – Sweden, Coordinated by Asian Institute of Technology AIT – Bangkok. Partner: Vietnam: Institute of Energy Funding: approximately US$ 150000. Contents: - Importing compressing machine; - Testing compressing machine - Improving compressing machine according to Vietnam conditions - Designing forms of cooking stoves using high-productivity torrefyer biomass pellets - Popularizing the technology “Studying the supply chain of biomass fuel to power plants and industrial boilers in Vietnam” project Project duration: 2 years from 2011 to 2012 Developing and establishing stable biomass supply chain (from sellers, transporters, purchasers) for power plants and industrial boilers in Vietnam Funded by the Ministry for Foreign Affairs of Finland and Nordic Development Fund. Partners: coordinated by Vietnam Institute of Energy, participated by Technical Research Centre VTT of Finland Carried out in 2 years 2011 – 2012. Contents include: - Evaluating the current situation on biomass supply chain - Proposing sample researches - Presenting sample researches for 2 factories - Popularizing the results Small biomass projects such as improved biomass cooking stoves, survey on biomass energy usage of residential households, survey on types of fire wood, etc carried out before 2000 Promoting effective usage of biomass and environmental protection in household rural areas and small-scale home craft World Bank, Food and Agriculture Organization of the United Nations (FAO), and a number of other organizations Key contents: - Studying the real situation (samples used, firing technology, supply sources, biomass prices) - Popularizing biomass equipment – high productivity cooking stoves replacing traditional stoves “Study and presentation of improved biomass compression system” project within the scope of regional study on renewable energy technologies in Asia Project duration: 6 years since 1997 to 2003
  38. 38. Identification of Biomass Market Opportunities in Vietnam 30 2.5 Economical nature of biomass projects Any project, such as building a power plant or co-generator for biomass burning, must be feasible in economic factor in order for investment to be carried out. Therefore it is vital to develop and analyze information on costs (including investment costs and costs for operation and maintenance) and revenues for such a project. The below are preliminary analysis on the economical nature of biomass projects in Vietnam. It should be noted that information on costs and revenue mentioned hereinafter is for reference purposes when review for investment decisions only. Exact information can only be obtained based on practical data such as suppliers, construction costs, biomass resource prices, selling price for thermal and rice husk, etc in the field. 2.5.1 Investment costs Investment costs for the Project (capital cost or initial cost) including equipment cost, cost for installation, project development and management costs, and other costs. Equipment costs: include cost for purchasing equipment, including cost for transporting such equipment to the project site. These costs depend on components of the power plant system, their technical characteristics as well as quality and productivity of the equipment. Costs for construction and equipment installation: include land rental, costs for land clearance, human resources, equipment installation, etc Project development and management costs: include costs for preparing of feasibility study, costs for technical design and construction design, costs for construction management, costs for environmental impact assessment and application of permits, services fees for construction supervision and examination, training costs, regulatory fees. Other costs: include taxes, insurances during the construction period, costs related to funding arrangement (for example, interests during the constructions period, banking fees, and insurance for loans). As discussed above, investment costs of a power generation or power-thermal co-generation project from biomass will depend on many factors that are typical for each kind of projects such as scale, location, type of biomass, form of transport, etc. The generalized costs below may not be used for a particular project, but can be used for preliminary estimation. For this purpose, the above data on investment costs are summarized based on reports from a number of projects to be carried out in Vietnam. Table 2.8 illustrates investment unit costs of power generation or power-thermal generation plants burning bagasse and rice husk in Vietnam. These costs exclude taxes and insurances during the construction period and the costs for funding arrangement.
  39. 39. Identification of Biomass Market Opportunities in Vietnam 31 Table 2-8. Investment unit costs of biomass burning power plant (USD/kW) Type of biomass/Capacity Only generating power Power-thermal generating 1-5 MW - 1,600 – 1,800 5-15 MW - 1,300 – 1,600 15-30 MW - 1,200 – 1,300 1-5 MW 1,800 – 2,000 2,000 – 2,200 5-15 MW 1,600 – 1,800 1,800 – 2,000 15-30 MW 1,400 – 1,600 1,600 – 1,800 Bagasse Rice husk Source: Institute of Energy, 2010, report on comprehensive planning of renewable energy for Vietnam, 2011-2020 period, with a vision to 2030, “schedules volume” With regard to small-scale steam turbine power plant burning biomass (1-5 MW), equipment costs often account for 75-80% total cost of investment. Installation costs account for 15-20% and the remaining 5% is project development and management. With regard to major project (> 5 MW), equipment costs make up 70-75%, installation costs account for 20-25%, and project development and management costs account for 5%. 2.5.2 Operation & maintenance costs Operation & maintenance costs (O&M): include fixed costs and variable costs. Fixed costs (like workers salary, land or premises rental, depreciation, loan interest, etc) are costs payable regardless of the fact that the power plant operates or not. Variable costs (including costs for fuel, materials for manufacturing) will depend on operating additional charge and operating schedule of the power plant. Fuel costs: are the costs making up largest part in operation costs, of approximately 70-80%, except in the case where fuel is secondary results from production or made from waste (bagasse in sugar factories). The particular prices of fuel or agreement between investors of biomass power project and fuel suppliers must be taken into consideration when calculating the fuel costs. The fuel costs may be calculated by
  40. 40. Identification of Biomass Market Opportunities in Vietnam 32 multiplying investment unit cost (kg/kWh or m3/kWh) with opportunity costs 35of biomass fuel (VND/kg or VND/m3). Table 2.9 illustrates fuel consumption rate and opportunity costs of biomass fuel with regard to power generating technologies and various types of biomass. Table 2-9. Fuel consumption rate and its opportunity cost Bagasse Opportunity cost, VND/kg (or m3) Rice husk 0 200-450 - 1,2-1,8 2,5-3,036 1,8-2,537 Fuel consumption rate, kg /kWh Steam turbine power plant Steam turbine power-thermal generating plant (> 35 bar) Source: Institute of Energy, 2010, report on comprehensive planning of renewable energy for Vietnam, 2011-2020 period, with a vision to 2030, “schedules volume” Not counting fuel cost, O&M costs of a biomass power plant often account for 2-5% total investment costs. However, due to the annual increase in costs for equipment maintenance and repair, O&M costs in the last years of the project’s life will be higher than those in the beginning of the project. Usually, it is assumed that O&M costs are equal to 3% of total investment costs during the first to fifth year of operation, 3.5% during the sixth to tenth year and 4% from the eleventh year onward. 2.5.3 Revenue of biomass power project Annual revenue from operating biomass power project includes (i) selling electricity, (ii) selling thermal/steam (in case of power-thermal co-generation), (iii) selling ash (in case of burning rice husk), and (i) selling certified emission reduction. 35 Opportunity cost: if biomass is not used it must be burnt out (in the field or on the street) or throw to the river. Consequently, there will be a negative impact to the society (environmental, health and other social impacts). Furthermore, the replacement of biomass for fossil fuel should be taken into consideration (for example import price of coal is 30-40% higher the the local price) 36 This is the volume of bagasse consumed in order to meet the demand of power from sugar factory and generating 1kWh of electricity 37 These data cannot be determined as they are largely subject to power-thermal ratio which varies for each particular project.
  41. 41. Identification of Biomass Market Opportunities in Vietnam 33 (i) Revenue from selling electricity Revenue from selling electricity depends on the amount of electricity sold to grid and electricity price. Avoided cost tariff issued annually by the Ministry of Industry and Trade can be used as reference for calculation of revenue from selling electricity. However this price level can only be applicable to small hydropower projects. Biomass power tariff is being proposed to develop in the form of feed-in tariff. The amount of electricity sold to grid depends on the rate of auxiliary electricity and the operating time of biomass power plant. Table 2.10 illustrates the typical elements of operating time, auxiliary electricity rate and amount of electricity sold to grid of various power plants and power-thermal generating plants in Vietnam. Table 2-10. Operating time, auxiliary electricity rate and electricity amount sold Operating time (hour/year) Biomass type Installed capacity (MW) Rainy season Dry season Total (July to October) 1 4,000 5 Auxiliary electricity (%) 360 3.640 - 15 4,000 360 3.640 - 12 4,000 360 3.640 - 10 15 4,000 360 3.640 - 7 20 4,000 360 3.640 - 6 30 4,000 360 3.640 - 5 1 4,800 1.920 2.880 12 15 5 4,800 1.920 2.880 10 12 10 4,800 1.920 2.880 8 10 15 4,800 1.920 2.880 5 7 20 4,800 1.920 2.880 4 6 30 Rice husk Thermalpower cogenerating 10 Bagasse (November to June) Only generating power 4,800 1.920 2.880 4 5 Source: Institute of Energy, 2010, report on comprehensive planning of renewable energy for Vietnam, 2011-2020 period, with a vision to 2030, “schedules volume”
  42. 42. Identification of Biomass Market Opportunities in Vietnam 34 (ii) Revenue from selling thermal/steam The thermal-power co-generating plants selling thermal/steam to nearby plants (for example plants in the same industrial zone) can earn a considerable amount from these transactions. However, in Vietnam, this option still faces with many difficulties due to the fact that the customers are still worried about the credibility of such thermal/steam provision from the thermal-power co-generating plants. In case the sale of thermal/steam can be carried out, its price will be determined by negotiation between thermal-power co-generating plant investors and customers. At present there is an entity which installed rice husk burning boiler with steam generating capacity of 20 tons/hour and is currently selling steam to consumers in Tra Noc industrial zone, Can Tho for a price of approximately VND 600,000/a ton of steam. (iii) Revenue from selling ash In case of burning rice husk in modern power plants, shapeless ashes with a small extra level of carbon may be created. Depending on the quality of rice husk ashes, it can be used in production of steel, building materials, fertilizer, refractory materials, moulds, transistors, rubber and oil recycling industry. Geography-wise, countries with highest demand for use of rice husk ashes are Japan, North America, Northern Europe, South Korea, China, Taiwan, Australia, etc The amount of rice husk ashes depends on the content of ashes in rice husk. According to analysis, the ashes account for 18-22% rice husk amount (20% in average). The quality of ashes depends a great deal on rice husk burning conditions, meaning depending on the technology of the rice husk burning boiler. In Vietnam the market for rice husk ashes has been established with the selling price at approximately VND 200/kg. The selling price for rice husk ashes in the international market is currently from USD 20/ton to USD 100/ton, depending on quality of ashes. It should be noted that there is an increasing trend in the selling price for rice husk ashes, with a possibility of such price going up to USD 200-400/ton in the future. (iv) Revenue from selling greenhouse emission reduction certificate Vietnam is a developing country, not in Appendix I (in the KYOTO Protocol) and a country which signed and ratified this Protocol, so the greenhouse emission reduction projects can apply for CDM.
  43. 43. Identification of Biomass Market Opportunities in Vietnam 35 Greenhouse gas emission coefficient of Vietnam grid is 0.574kg CO2/kWh38. If all the biomass power plants sold electricity to national grid, and the price of a ton of CO2 was USD 15 then the revenue gained from selling greenhouse emission reduction certificate will be US cent 1/kWh. In addition to this amount of the greenhouse gas emission (replacing an amount of electricity with renewable energy), the biomass projects can be accounted for an additional amount of CH4 emission reduction from the dispersal of such gas due to lack of usage. The revenue from this option accounts for 20-25% revenue from CO2 emission reduction. Summary on the economic nature of the biomass projects in Vietnam: ■ ■ ■ ■ 38 As mentioned above, most biomass projects in Vietnam have and are being established of small scale (1-30MW) due to: a) the nature of biomass with its small density (kg/m3) so far-distance transport is not economical, b) The supplying sources for biomass are dispersal (which limits collecting with huge amount). Investment into small-scale projects often requires cost 1.1 – 1.5 times higher than large-scale projects. This issue also has certain impact on investors’ perspective. Besides, the biggest concern of investors in biomass projects is the capacity of stable supply of raw biomass to power plants (in terms of quantity and price) and more importantly, the selling price of biomass products such as thermal and electricity. In the current circumstance, the projects of thermal-power co-generating from bagasse burning is economically feasible. There are currently 2 sugar factories expanding their capacity namely KCP, Phu Yen and Lam Son Sugar, Thanh Hoa, whose electricity price offered to EVN is only about US cent 5/kWh. The reason for such a low price is because in these factories there are available premises and supporting equipment such as supplying sources of electricity, water and bagasse – which is considered as waste of the factories. More than 30 existing sugar factories wish to expand their power generating capacity. The only shortcomings for them are capital, loan interests and current complicated procedures to access capital resources as well as the electricity price mechanism not yet encouraging biomass power. With regard to projects of rice husk electricity and other types of biomass wastes, because of the requirement for collection and transport, biomass price, type of biomass, transporting distance and transporting vehicle are one of the two key factors having significant impact on investment decision. The second factor is selling price of electricity. The current selling price is only UScent5 – 5.5/kWh which is not economically feasible. Preliminary calculation indicates that, in case of a rice husk power project with a capacity of 10MW, stable rice husk price of VND 400/kg (to the factory), operating time of more than 6,000 hours/year, the electricity price acceptable to investors must be more than US cent 6/kWh. For straw burning power projects, the electricity price must be above US cent 9/kWh to be feasible for investors. Nguyen Duc Cuong, 2009, Calculating the greenhouse emission coefficient for Vietnam’s DNA for application announcement
  44. 44. Identification of Biomass Market Opportunities in Vietnam 36 2.6 The actual state of biomass energy technologies in Vietnam (lists of domestic and overseas technology suppliers) As mentioned in section 2.2 of this report, there are currently 4 main types of technology being applied in Vietnam, which are: ■ ■ ■ ■ Burning biomass for electricity production to dry agricultural products (mostly at wood processing factories) Burning biomass for energy co-generating (mostly at sugar or paper factories) Burning biomass for electricity production (scheduled for construction or being carried out) Biomass compressing machines (briquettes or pellets) Although there is no official list made on types of biomass technologies as well as biomass technology suppliers, the following list of technology and equipment suppliers separated by the types of technology is compiled from reports, workshops and available information from the Institute of Energy: Table 2-11. List of biomass technology and equipment suppliers Type of technology, equipment Domestic Overseas 1. Burning biomass in thermal production for drying - Boilers burning - Vietnam Boiler NA wooden waste at Joint-Stock Company wood processing - Dong Anh Pressure factories Equipment Company - Bach Khoa Hanoi Boiler Joint-Stock Company - Rice husk burning boiler Wuxi Company, Huaguang, China Note Most of the boilers domestically manufactured have low boiler parameter (pressure temperature) and small capacity
  45. 45. Identification of Biomass Market Opportunities in Vietnam Type of technology, equipment Domestic Overseas 37 Note 2. Biomass burning for energy co-generating (electricity and thermal), with a total capacity of 150MW, installed at 39 factories, including 38 sugar factories and 1 paper factory - Bagasse, wooden No supplier 100% imported from Capacity of waste burning boiler countries such as approximately 20 – 70 China, France, India, tons of steam per Japan hour, pressure of 20 – 40 bar, temperature of 350 – 500oC - Turbine No supplier 100% imported from Mostly back-pressure China, France, India, turbine with capacity Japan of 1 to 20MW 3. Biomass burning for electricity production (no factory at present) Boiler At the moment Scheduled to import The need to develop Vietnam has not yet 100% from developed biomass power in manufactured any countries and some accordance with high-capacity boiler other countries such Decision No. 1208 of for electricity as China, India the Prime Minister production approving the power master plan 7: Turbine At the moment Scheduled to import Vietnam has not yet 100% from developed - Up to 2020, developing 500MW been able to countries and some of biomass power manufacture other countries such - To 2030, developing as China, India 2000MW of biomass power
  46. 46. Identification of Biomass Market Opportunities in Vietnam Type of technology, equipment Domestic 4. Gasification of Biomass (NA) 5. Biomass compressing (briquettes/pellets) Biomass Briquette Vietnam medium size Machine mechanical factories are capable of manufacturing this type of machine (designs from Taiwan, Japan and the Institute of Energy) Biomass Pellet Machine 38 Overseas Note Some entities in Mekong Delta imported approximately 10 machines from China and Japan - Type of machine: worm - Compressing capacity: approximately 70100kg/hour - Electrical engine power: 11KW Type of machine: reel - Compressing capacity: 250-400 kg/hour - Electrical engine power: 20-35kW Note: NA: not available Source: Research team –Institute of Energy, 2011 Figure 2-5. Wood drying boiler of Vietnam Boiler Joint-Stock Company installed in Hanoi
  47. 47. Identification of Biomass Market Opportunities in Vietnam 39 2.7 Transportation of biomass, raw biomass price and transport cost in Vietnam The below are general diagram describing the path of biomass from manufactory to consumers’ place. Rice/sugarcan e Milling factory/sugar mill Raw biomass (rice husk) Raw biomass (bagasse) Thermal-electricity co-generating plant Transport by boat Power plant Thermal – electricity Or both Ashes Figure 2-6. Diagram of transportation of biomass Description of the supply and transport procedure of rice husk to Dinh Ha thermal power plant in Can Tho: Dinh Hai thermal power company is the first company investing and installing the first industrial-scale rice husk burning boiler in Mekong delta region, Vietnam. The steam produced from factory of Dinh Hai Company is currently being supplied to 8 processing companies in Tra Noc industrial zone, Can Tho. The pipeline system’s length is approximately 5km. The parameters of the boiler are as follows: steam output 20 tons/hour, steam pressure 45 bars and superheat temperature is 4500C. The total rice husk amount consumed annually is approximately 37 500 tons. Rice husk is bought by the company from traders and carried to the power plant by boat with the capacity of approximately 20 tons/one boat. The rice husk price at the plant (in October 2011) is VND 400/kg (calories of approximately 3000 kcal/kg rice husk) including the purchasing price for rice husk at milling factories and costs of rice husk transport and loading and unloading. The below are images of transporting rice husk by boat in interlacing rivers of Mekong Delta region.
  48. 48. Identification of Biomass Market Opportunities in Vietnam Figure 2-7. Transporting rice husk to power plant from rice milling factory (photo by N.D.Cuong) 40
  49. 49. Identification of Biomass Market Opportunities in Vietnam 41 2.8 Information on potential companies which may become partners of German companies in the development of biomass energy in Vietnam There are currently about 10 domestic investors considering the choices of location, capacity size in order to develop rice husk burning thermal power plants in key provinces for rice growing of Mekong Delta such as An Giang, Tien Giang, Dong Thap, Can Tho, etc Beside rice husk, Vietnam Sugar and Sugarcane Association proposes to develop nearly 200MW electricity from waste of sugarcane. Existing sugar mills are the basis for expanding and increasing electrical power at these mills. Bagasse at sugar factories is currently not used or not used effectively. Leaves and sugarcane tops are not exploited and used, jute is also considered a potential source of waste. According to Vietnam Sugar and Sugarcane Association, sugar factories want to exercise self-control a part of the power used for production but they are facing with obstacles with regard to capital due to the fact that investment unit costs for initial equipment and machinery are significant, in which the most expensive equipment is boiler and turbine + electric generator. The Association requested authorities for prompt promulgation of supporting policies for this kind of energy, considering it as renewable energy and permitting it to be generated to national grid system, subsidizing in order to achieve a stable price ensuring effect during investment, especially for modern technology. In order to promote the strength of this renewable energy source, the Government has recently promulgated the Official Dispatch No. 2553/VPCP – KTN assigning the Ministry of Industry and Trade to bring the power generated from bagasse of sugar mills into the Strategy on Planning of Vietnam new and renewable energy development, submitting for the Prime Minister’s approval. In addition to rice husk and sugarcane trash, projects using waste in the course of their processing and production like wood, coffee, cashew and coconut also have great potential for biomass technology development thanks to the huge demand of energy of those processing establishments, the increasing price of energy and waste available on the premises, etc.
  50. 50. Identification of Biomass Market Opportunities in Vietnam 42 The below are relevant information on potential investors who can cooperate in biomass power development. Table 2-12. Relevant information on potential investors who can cooperate in biomass power development No. Company name 1 Tan Hiep Phuc Investment Joint-Stock Company 105A, Nguyen Van Quy, Tan Thuan Dong, District 7, Ho Chi Minh City. Tel: 84-08-22131012 Dinh Hai Thermal Power Joint-Stock Company Dinh Hai Thermal Power Joint-Stock Company Address: Road 10, Tra Noc 2 Industrial Zone, Can Tho City Tel: 0710 3744 295 Email: cogen@dinhhai.com Rice husk power of 30MW for 03 projects in Can Tho Duy Phat Power Joint-Stock Company (Ho Chi Minh City) Rice husk power of approximately 20MW for 02 projects in Lap Vo district, Dong Thap, Tien Giang 2 3 4 5 6 39 Duy Phat Thermal Power Joint-Stock Company Thermal power plant burning rice husk with capacity of 10 MW Thermal power plant burning rice husk with capacity of 10 MW Thermal power plant burning rice husk with capacity of 3 MW Address Dong Thanh – Song Hong Joint-Stock Company Environmental Investment and Regeneration 1 Company Mekong Delta Agricultural and Rural Development Joint-Stock Company Field Rice husk power project: 02 projects with capacity of each is 10MW at Tan Phuoc district, Tien Giang 10 MW located at An Hoa industrial zone, Cho Moi, An Giang 10 MW located at Vong Dong, Thoai Son district, An Giang 3MW, located at Tan Trung industrial cluster39. An Giang Information available at: http://socongthuong.angiang.gov.vn/wps/portal/!ut/p/c4/04_SB8K8xLLM9MSSzPy8xBz9CP0os3j3oBBLczdTEwN_XydzA0__MD8vd9dQQ_ 8wc_2CbEdFAEj9B54!/?PC_7_GRT97F540O0E90IOVFU9M40F66_WCM_CONTEXT=/wps/wcm/connect/socongthuong/congthongtinsocon gthuong/tintucsukien/antoancongnghiep/angianguudaidautuphattriencongnghiepnangluongmoi
  51. 51. Identification of Biomass Market Opportunities in Vietnam No. 7 8 Company name Address 43 Field Thermal power plant burning rice husk with capacity of 11 MW Vietnam China International Trade and Investment Joint-Stock Company Choosing location for building a rice husk power plant with capacity of 11MW in Kien Giang Vietnam Sugar and Sugarcane Association * Vietnam Sugar and Sugarcane Association, Chairman: Nguyen Thanh Long, 172/3A Nguyen Tat Thanh, Ward 13, District 4, Ho Chi Minh Tel/Fax: 08.39432570 Sugarcane trash power Note: (*): Vietnam Sugar and Sugarcane Association has 38 sugar factories and such sugar factories need for capacity expansion, installing and expanding thermal power plants burning waste from sugarcane (official letter 529/HHMD to the Prime Minister, the Ministry of Agriculture & Rural Development petitioning related to investment for development of 1950MW of power from sugarcane waste

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