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Vietnam _Investment Guide on Energy

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Vietnam _Investment Guide on Energy

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Vietnam _Investment Guide on Energy

  1. 1. 09.05.2014 Vietnam initiates "energy turnaround" to coal consumption Until 2020 thermal power plant will be mainly connected to the grid / 2014 Feed-in tariffs for renewable energy / By Thomas Hundt Hanoi (gtai) - Due to the increasing hunger for energy in Vietnam, the construction of coal power plants have absolutely priority. But the country also has immense potential in the field of renewable energy, however this has hardly played a role until now. With new feed-in tariffs in 2014 some movement will come into this market. Wind power and biomass plants are most heavily promoted. The practical implementation remains to be seen. Some pilot projects show the way. (Contact addresses) 1 Long-term plans for expansion, investment and support for renewable energy sources Vietnam's state owned power master plan provides for an increase of the share of renewable energy sources (RES, small sized hydropower, biomass, wind, solar) to the power generation from currently about 3.0 to 4.5% till 2020. The focuses of the future funding are wind power and biomass: The targets for capacity is until 2020 about 1,000 MW or 500 MW. For energy policy in the government the Ministry of Economic Affairs (Ministry of Industry and Trade; MOIT) is responsible. The Research institute for Energy is currently revising the 7th current master plan of MOIT (period 2010-2020) and will submit a new version of the end of 2014. The targets in the RES sector is likely to remain preserved. The project deadlines for conventional energy sources can however be extended. Energy data Vietnam 2012 1) 2020 2) power consumption (TWh) 105.4 no information agriculture, forestry, fisheries (%) 1.4 n.i. industry and building industry (%) 52.5 N. i Commerce and services (%) 4.7 n.i. Budget (%) 36.4 n.i. Other (%) 4.9 n.i. Growth of power consumption (%) 11.0 9.2 3)
  2. 2. 2 Electricity production (TWh) 120.0 225.2 Coal / oil / gas (%) 53.8 72.4 Nuclear power (%) 0.0 0 Water power (%) 43.9 27.6 Biomass, small sized hydropower (%) 2.9 n.i. Wind, solar (%) 0.1 n.i. Growth of power production (%) 11.2 8.8 3) Power production capacity (GW) 26.5 52.6 Coal / Oil/ gas (%) 52.0 69.3 Nuclear power (%) 0 0 water power (%) 47.8 30.7 renewable energies (wind, solar, %) 0.2 n.i. electricity imports (TWh) 2.7 n.i. Electricity exports (TWh) 1.2 n.i. Blackouts (Number 2013) Households: 27 Plants: 32 n.i. transmission losses (% of the production) 10 n.i. CO2-Emissions (million ton, 2010) 130.5 n.i. 1) Estimation, 2) prognosis, 3) average growth 2013 to 2020 Source: EVN, Institute for Energy, BMI Wind Detailed measurements of the wind potential at individual locations are taking place and should be collected and published in a wind atlas under the "Energy Sector Management Assistance Program (ESMAP)," of the World Bank. The areas along 3,300 km-long coastline and some
  3. 3. 3 locations in the highlands are considered to be particularly suitable for the production of electricity from wind energy. Since 2011 a tariff for the purchase of wind energy power has been in the equivalent of 7.8 USCent per kWh. EVN paid it to windmill operators. Investors regard this tariff to be too low and suggest around 14 cent. The government is considering an increase in remuneration, which could give the sector a major boost. Vietnam authorities have actually approved 42 wind power projects with a capacity from 6 to 150 MW since 2011. The following parks have been transposed so far: Binh Thuan (30 MW, plant of Fuhrländer), Bac Lieu (16 MW, plant of GE, expansion of 100 MW planed), Phu Quy (6 MW, Vestas) and Bach Long Vi (1 MW, Made). The German Bank for Reconstruction (KfW) is currently financing the wind park Phu Lac with 35 million euros, in which in the first phase wind turbines with a capacity of 24 MW should be built. The tender for the planning, procurement, delivery and turnkey construction of the wind park was initiated in January 2014. Water Hydropower is so far the most important energy carrier of Vietnam's electricity sector. Hydropower plants delivered in 2013 according to estimation of Business Monitor International (BMI) 40 TWh and according to information of the Institute for Energy 53 TWh, i.e. 32 or 43% of the electricity volume. BMI expects production in 2020 will increase to 61 TWh, and the proportion falls to 27%. The potential for large hydropower plants have been exhausted, according to experts. New major projects, therefore, are not in the pipeline. Even in small hydro power plants (under 30 MW) a rethinking is being held. 319 small hydropower plants in total with a capacity of 3,443 MW should be applied. 42 turbines have been built so far with a capacity of 278 MW. Accreditation offices are currently considering other projects in terms of their cost-effectiveness and environmental compatibility. The provinces have already revoked the permits of some too slow running projects. Pumped storage power plants have not been built. In particular, in South Vietnam, where supply and demand of electricity are currently not in balance, the storage technology could make important contributions to control the network and for more uniform utilization. According to the Institute for Energy and to the electricity master plan, there are three project ideas for South Vietnam and two for North Vietnam. Pumped storage power plants should reach until 2020 a total capacity of 1,800 MW and until 2030 a capacity of 5,700 MW. Solar Vietnam has good conditions for use of photovoltaic (PV). This is especially true for the southern parts of the country. The Renewable Energy Research Center (RERC) at the University of Technology in Hanoi calculated that the sun in the north can supply on average about 4 kWh of energy per square meter per day. In the south, there’s daily average of 5 kWh / square meter in use. The sunshine duration at 150 kcal / square meter in the south with 2000-2600 hours per year is higher than in the North (1600-2200 hours).
  4. 4. 4 PV systems have been installed mainly "off-grid". Among others, the numerous islands along the coast can be considered as further locations. Experts estimate the capacity of grid-independent and-tailed systems about 4 to 5 MWp. The Center for Renewable Energy itself and the Solarlab of the Vietnam Academy of Science Technology in Ho Chi Minh City have built about 100 grid-independent PV projects on behalf of local authorities and development organizations. In general, it’s about hybrid systems (i.e. PV coupled with diesel, wind power or hydroelectric power generators). The solar cells originate mostly from China or Japan. As donor countries engaged in the PV sector up to date, among others Japan, Sweden, France, Spain, the USA, Korea (Rep.) and Germany. Plants for schools, hospitals and public buildings or public battery charging stations were built. Also operators of resorts and industrial companies occur as client.. The numerous islands along the coast can also be considered as the locations for further off-grid solar systems. Clients are apartment complexes, industrial companies or local governments. In the field of solar thermal technology there’s a breakthrough. The buyers of solar systems for hot water can save costs and are more independent during power outages. Biogas / biomass In the increasingly intensive agriculture and forestry greater amounts of usable biomass are always required. The greatest possibilities of energy use are for rice straw (40 million tonnes / year), rice husk (8 million tonnes) and bagasse (8 million tonnes, remains of sugar production). The major rice-growing areas are in the Southvietnamese Mekong Delta and in the Red River Delta in North Vietnam. The first projects of power generation from rice husk are in the Can Tho and An Giang province. About 40 sugar factories should have licenses for combined heat and power installations with a total capacity of 150 MW. More are being planned. On 05th October 2014 in Vietnam “Decision on the support mechanism for the development of biomass power projects" (No. 24 / 2014/QĐ-TTg) shall enter into force. It provides a feed-in tariff for electricity generation from solid biomass such as bagasse, rice or wood waste, in the amount of 5.8 US-cents per kWh with a term of 20 years. The remuneration is valid, but only for systems using combined heat and power, i.e. producing electricity and heat. All other systems will receive a feed-in tariff based on the "avoided cost," which would have been incurred by the production of kilowatt-hour of electricity by imported coal. This tariff will be recalculated annually. Moreover, the government plans to introduce in 2014 more tariffs for electricity from waste and biogas Landfills, livestock farming and agricultural waste have alltogether potential to produce 10 billion cubic meters of biogas. Farmers have already used biogas in their household for own consumption (for example: for cooking). With the support of development funds 220,000 small biogas plants should have been installed, which cost the equivalent of only 500 to 700 U.S. $ Geothermal energy
  5. 5. 5 Vietnam also has potential for utilization of geothermal energy, particularly in Central Vietnam. However, no geothermal power plants has been built so far. According to the Federal Institute for Geosciences and Natural Resources, there are 300 sources with water temperatures of above 30 degrees. 45 sources of them have temperatures above 60 degrees. A more detailed investigation of the geothermal energy is still necessary. 2 Long-term plans for expansion, investment and support for conventional energy sources The power generation capacity in Vietnam was according to EVN in 2013 about 26.7 GW. The actual amount was more than 20.4 GW, which met a peak demand of 18.6 GW. Especially in the south of the country the supply and demand are out of balance. Nationally there’s always power outages, because the demand for electricity is about twice as much as the gross domestic product. The expansion of power generation capacity and transmission networks have therefore high priority, but the progressing is not as fast as planned. According to the seventh energy master plan from the year 2011 the capacity should be tripled from 25 to 75 GW until 2020. The plan lists all power plant projects to be executed. Meanwhile delay in many projects requires its revision. Coal On 11th December 2013 the Prime Minister issued with the decision "2414/QD-TTg" a revised list of projects that have to be put into operation between 2013 and 2020. It is about coal-fired power plants with a total capacity of about 35 GW. As urgent projects, the decision named Long Phu 1 (Investor: PetroVietnam, Building contract with Power Machines, Russia), Vinh Tan 4 (Electricity of Viet Nam, contract with Doosan, Korea / Rep.), The extension of Duyen Hai 3 (Electricity of Viet Nam, Chinese consortium) and the construction of the 500 kV-Switching station Pleiku. The government had decided in 2011 to build a total of 90 new coal-fired power plants with a total capacity of 106 GW until 2025. The funding, adequate supply of coal, development of locations and other factors delay, meanwhile, these projects. However, some of them have taken quite shape. The financially troubled domestic investors in coal power plants EVN, PetroVietnam and Vinacomin have to rely on loans. The money originates mostly from Japan, China and Korea (Rep.). In general, construction companies and equipment suppliers from the donor country are also be encouraged. German special components are used in exceptional cases. Even Samsung from Korea (Rep.), Sembcorp (Singapore), Sumitomo (Japan) and Jaks Resources (Malaysia) have expressed interest in investing in Vietnamese coal power plants. Their operator model projects have been delayed, however, because of protracted negotiations about conditions and financing problems. The efficiency of coal-fired plants located in Vietnam according to press reports is only 28-30%. Modern coal power plants can reach efficiency of 40 to 45%. For the local low efficiency according to experts both the technical equipment as well as the poor quality of domestic coal are responsible.
  6. 6. 6 The hard coal reserves of the South East Asian country are in the amount of about 3,116 million tons. The actual coal production will not be enough to meet the demand of the power plant operators. The state-owned concern Vinacomin promoted in 2013 about 42.6 million tons. A part of it is sold at subsidized prices to the power plant operators. Since 2015, Vietnam has imported for the power plant sector about 6 million tons of coal, says the Ministry of Economy. PetroVietnam signed already delivery contracts with Indonesia. Natural gas Vietnam's gas reserves amounted, according to the last available information in 2012 about 617 billion cubic meters. In South Vietnam, where the largest reserves are located, there’re so far the gas power plants Phu My (4,000 MW), Nhon Trach (1,500 MW) and Ca Mau (1,500 MW), which are supplied by a common gas line. The government has postponed the construction of new gas power plants to the period after 2020. Reasons are difficult price negotiations with foreign investors in funding projects. In 2009, the work of a consortium began officially, which consists of PetroVietnam and Chevron, to the production of gas in the blocks B and 48/95 in the Golf of Thailand. However, in February 2014 Chevron announced that it would sell its share in the project because the concern could not agree with PetroVietnam about a purchase price. The gas should be transported through a 400-km pipeline (of which 246 km offshore, costs approximately U.S. $ 1 billion) to the power complexes plant in O Mon near the city of Can Tho with a planned total capacity of 2,800 MW. The power plants O Mon 1 (660 MW) and O Mon 2 are already in operation and use fuel oil as fuel because of the lack of gas. The construction of a second turbine in O Mon 2 (330 MW) started in September 2012. This project was financed by Japan; it has been carried out by the construction companies Sojitz (Japan) and Daelim (Korea, Republic). The KfW Development Bank and the Asian Development Bank (ADB) want to finance the power plant O Mon 4 with a capacity of approximately 750 MW. The total cost is estimated at 666 million euros. However, because of the uncertain gas supply, a construction contract have not been granted yet. PetroVietnam and Exxon Mobil declared in March 2014 that they had discovered a new gas deposit 87 km off the coast of central Vietnam. According to initial plans this should be able to supply gas-fired power plants with a total capacity of 6000-6500 MW. The concerns are currently evaluating the feasibility of this U.S. $ 20 billion expensive major project. Nuclear power The first ideas for the use of nuclear power were from the year 1995. Vietnam's National Assembly passed in 2008 an Atomic Energy Law (No. 18/2008/QH12), which regulates domestic and foreign investment in this sector. A master plan for the development of nuclear energy was released with "Decision 906/2010/TTg" in 2010. It provides until 2030 for the
  7. 7. 7 construction of in total 13 reactors with a total capacity of 15 GW. About the implementation of the construction plans Prime Minister still has to decide. In 2011 Vietnam signed with the Russian Rosatom an agreement to build the 2,000-megawatt nuclear power plant in Ninh Thuan 1. Japan should supply for the nuclear power plant Ninh Thuan 2. Vietnam agreed in 2012 with Korea (Rep.) to investigate the feasibility of additional reactors. Experts see, however, no sufficient conditions for operation of nuclear power plants. Early 2014 the press reported that the project was postponed because of security reasons. 3 Long-term expansion plans for transmission networks Distribution grid Subsidiaries of National Power Transmission Corporation (NPT), which on her part belongs to the EVN, operate the whole electricity transmission network in the country. The 220-kV high- voltage grid of the NPT in 2012 includes about 10,828 km, which should be expanded until 2020 to a length of 26,770 km. The 7th Power Master Plan also provides for the expansion of the 500 kV network from 4,847 km to 12,691 km in length. In addition, from 2011-2020 exact 362 transformers should be exchanged or replaced. The new networks should also minimize the current transmission losses. These are, according to information of the EVN at a national average 10%. The losses in the high voltage grid are likely about 2.3%. The planned expansion of the transmission network from 2011-2020 would cost about U.S. $ 10 billion. It should be financed by the International development organizations and commercial banks mostly. The pace of investment thus depends on the willingness to finance of external investors. The ADB is supporting the expansion of electricity transmission in the context of its multi- tranche Financing Facility ($ 730 million in total in three tranches). The German KfW is planning in the context of the financial cooperation to finance the expansion and improvement of the electricity transmission, including the framework of a project in the amount of EUR 160 million in co-financing with multi-tranche Financing Facility of the ADB. The World Bank is supporting the expansion of the high-voltage grid with approximately $ 300 million U.S. Japan is transforming nation-wide a "Power Transmission and Distribution Network Development Project". The NPT and the Hanoi Joint Stock Commercial Bank signed in December 2013 a loan agreement about 554.5 billion dong (approx. 20 million euros, 1 euro = approx 29,000 Dong), with which the projects in the Electricity Transmission are financed. Five regional grid operators of the EVN Group are responsible for the distribution of electricity at 110 kV. They also operate some 220 kV lines. The Hanoi Power Corporation (EVN Hanoi) and the Ho Chi Minh City Power Corporation (EVN HCMC) have the largest grids.
  8. 8. 8 The KfW is financing under the financial cooperation two projects in the total amount of 240 million euros to rehabilitate heavily loss-making medium and low voltage grids in rural regions of Vietnam. A in preparing situated new project extends the approach in urban areas (100 million euros, cooperation with the ADB). The appropriate projects of the ADB "Hanoi and Ho Chi Minh City Power Grid Development Sector Project" provide between 2014-2016 for investments of 342 million U.S. $ in the 220 kV and 110 kV grids in both cities. The World Bank provided a 448.9-million US $ Credit in 2012 for a "Distribution Efficiency Project", the other 313 million US $ Vietnam would contribute. In 2014, several consulting services and procurements are internationally announced. The project is running until 2018. Intelligent electricity grids (Smart Grids / Smart Metering) The Electricity Regulatory Authority of Vietnam thinks that the national power grid is outdated, not synchronized, hardly automated and the control technology is insufficient. The authority which belongs to the Ministry of Economics, has been looking after a smart grid program since 2012, which provides in the first phase until 2016 for pilot projects and the formulation of imilar framework agreements and standards. The EVN is also pursuing a smart grid plan whose implementation will cost about $ 2 billion. It provides, inter alia, for the procurement of equipment for a smart electricity grid. Development finance institutions such as the World Bank, ADB and KfW are supporting in the context of theirs ongoing and planned programs in the field of electricity transmission and distribution and the introduction of the first smart grid components. Contact addresses : Institute for Energy Ansprechpartner: H. Nguyen Anh Tuan, stellvertretender Direktor 6 Ton That Tung, Hanoi Tel.: 0084 4/38 52 37 30, Fax: -38 53 93 02 E-Mail: tuanna@ievn.com.vn, Internet: http://www.ievn.com.vn Ministry of Industry and Trade General Directory of Energy Ansprechpartner: H. Le Tuan Phong, stellvertretender Direktor 54 Hai Ba Trung, Hanoi Tel.: 0084 4/22 20 24-31, Fax: -32 E-Mail: phonglt@moit.gov.vn, Internet: http://www.moit.gov.vn
  9. 9. 9 GIZ Renewable Energy Project Ansprechpartner: H. Werner Kossmann, Chief Technical Advisor 85 Nguyen Du, Hanoi Tel.: 0084 4/39 41 26-05, Fax: -06 E-Mail: werner.kossmann@giz.de, Internet: http://www.windenergy.org.vn

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