Biomass and biogas markets in Vietnam:Status and Prospects

Hochiminh City, 16 September 2013

By: Nguyen Duc CuongVietnam Institute of Energy

Vietnam – German Forum Bioenergy in Vietnam

NỘI DUNG TRÌNH BÀY

1• Current status and prospects for

biomass energy and biogas development in Vietnam

2• Market conditions and business

opportunities for heat and power from biomass and biogas

3 • Investment into biomass and biogas: issues to be dealt with

4 • Summary and ConclusionBIOMASS/BIO GAS FOR ENER GY

Contents

1.1. Current Status

1. Current status and prospects forbiomass energy and biogas development in Vietnam

1.1.1. Vietnam Electricity system (up to 31st December 2012) Total capacity: 26.47 GW Total electricity volume produced: 120.2 TWh

Renewable electricity: 4.5 TW (3.7%) 4 types of renewable energy contributing to the electricity grid: Small hydropower, biomass, solid waste and wind

Electrification in Vietnam: approximately 97%

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140Điện tái tạo (gồm TĐN)

Nhập khẩu

Nhiệt điện khí

Diezel

Tua bin khí chạy dầu

Tua bin khí+Đuôi hơi

Nhiệt điện dầu

Nhiệt điện than

Thủy điện lớn

1.1. Current status (cont.)1.1.2. Number of installed systemsBagasse 40 CHP-cogeneration systems applying direct burning technology are in operation

Total capacity: 150MWe

Scale of the installed capacity: ranging from 1 to 25MWe

Main purpose: production of heat and power for sugar production 5 plants are selling surplus electricity to national grid at the average price of

4UScents/kWh. Husks Currently there is only one thermo power plant applying fluidized bed combusion

technology. Currently this plant has not produced electricity; it sells steam for neighbouring households at 25 – 30USD/ton (saturated steam, 7 bar). Plant expansion is planned with the installment of turbine and power generator for selling electricity to grid.

1. Current status and prospects forbiomass energy and biogas development in Vietnam

Wood processing residues More than 30 wood processing plants have installed industrial

boilers feeding with wooden residues (low steam parameters) Steam is used to dry wood at the plantsBiogas Household scale:

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

Biogas ultility: Cooking, lighting and electricity production for household use

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

1. Current status and prospects forbiomass energy and biogas development in Vietnam

1.1. Current Status (cont.)

1.1.3. Applied technologies Biogas: Household scale (small

scale) Anaerobic digestionMaterials: Bricks, nilong bags; Composite

Pig farm scale (medium scale) Connected by blocks

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

1. Current status and prospects forbiomass energy and biogas development in Vietnam

1.1. Current status (cont.)

Small scale: Wood processing

Boiler: direct buring, fixed grades, low steam parameters Medium and large scale:

Sugar industry: cogeneration of heat and power Boiler: direct buring (fuel moisture: 50%) Turbine: back pressure, extraction

Rice processing industryBoiler: Fluidized bed boiler Turbine: condensing

Boiler burning pellets

1. Current status and prospects forbiomass energy and biogas development in Vietnam

1.1. Current Status (cont.)

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

Pellet press machine

Rice husk briquette and briquetting machine

Rice husk pellets Bagasse pellets

Mixed rice husk&bagasse pellets

1. Current status and prospects forbiomass energy and biogas development in Vietnam

1.1. Current status (cont.)

Type of biomass Energy production (million tons/year)

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

Corn residues 9,2

Coffee residues 1,17

Others (coconut, peanut, cassava, etc)

6,37

Total 118,21

1.2. Prospect

1. Current status and prospects forbiomass energy and biogas development in Vietnam

Vietnam has great potential for biomass and biogas production Biomass: more than 118 millions tons is produced annually Biogas (from husbandry activities): ~4.8 billion m3/year can be

recoveredBiogas produced from waste

Husbandry waste Output(million m3/year)

Buffolo 527.5

Cow 881

Pig 1875

Poultry 1540

Sub - total 4823.5

Production and processing waste

Potential needs to be evaluated

1.2. Prospect (cont.)

1. Current status and prospects forbiomass energy and biogas development in Vietnam

Vietnam’s demand for energy and electricity for the next two decades is huge Electricity demand (2030): 695 billion kWh, 5.8% increase

against 2012 Demand for electricity investment (2011-2030): VND1,554.6

thousand billion, making an average annual demand of about VND3.7 billion US$

Electricity price should be increased: To ensure the cost recovery and proper profit margin. Electricity tariff should be incrementally increased to meet

marginal cost in long run (PDP VII) Biomass and biogas development is encouraged and

supported Formulate strategy and master plan for RE development in Vietnam (submitted to the Government of Vietnam) Climate change adaptation strategy: biomass and biogas is one of the options targeting at GHG emission reduction. Green Growth Strategy: Promote green energy/industry and low carbon technology development (conversing waste into energy)

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1.2. Prospect

1. Current status and prospects forbiomass energy and biogas development in Vietnam

Orientation to develop biomass and biogas in 2011 – 2030 Renewable energy: Account for 9,4% of the system capacity. Average: 600MW/year

Including: From biomass: 2000 MWFrom biogas: 100 MW

Biomass electricity planning is under going

Developing investment supporting mechanism

biogas

solar

Waste including

Geothermal

Small hydropowerBiomass (solid)

wind

2.1. Opportunities to take advantage of supporting mechanism

2. Market conditions and business opportunities for biomass thermo – electricity and biogas sector

Being given preferences in terms of investment credits (soft loan, etc)Import tax: not applied to products that Vietnam cannot manufactureCorporate income tax: reduced or exempted for projects under special investment incentives:

Exempted in the first 4 years, reduced to 50% in the next 9 yearsBeing allowed to apply quick amortization approach Land incentives: reduced or exempted Environmental protection fee: exemptedPrice subsidy:

Biomass electricity tariff and mechanism are being drafted and expected to be approved late 2013 and come into force earl 2014.

Tariff shall be included in a contract template, nonnegotiable. Price: 3 options (FIT 1 component; 2 components and avoidable

costs) Applied for electricity produced from bagasse and other biomass.

2.2. Regulations: restrictive condition(*)

2. Market conditions and business opportunities for biomass thermo – electricity and biogas sector

Biomass power investment project must follow the approved regional biomass electricity plan and electricity master plan. Investor must submit report to Ministry of Technology and Trade for approval if the investment project is not included in these plan.Connection points are determined by two parties in negotiation process.Investor is responsible for the investment, operation and maintenance of the grid connecting biomass power plant to the connection point. The construction of investment project can be implemented if it meet the following requirements:

Investment certificated grantedElectricity purchasing documents established Connection agreement madeTechnical designs appraised

Note (*). According Draft version No. 4

3. Investment into biomass and biogas: Issues to consider

3.1. Regulations and procedures

Investment certificate procedure: depends onProject models (BOT, BOO, BT, IPP, PPP, etc.) Project scale (below or above VND1,500 billion) Connection or not connection to electricity grid Produce electricity or heat or both (CHP)

Apply current incentive and supports to reduce investment cost and improve cash flow Income and import tax reduction/ exemption Land and environmental protection fee reduction/ exemption Subsidy for CDM products Other supports (soft loans, investment contribution, funding the formulation of investment project, etc.)

Selection of local partners for project implementation

3. . Investment into biomass and biogas: Issues to consider

3.2. Obstacles

Low price• Energy price is still

subsidied (e.g. coal, electricity)

• Only financial cost has been included, not external costs (eg, environment, social cost)

Lack of planning• Statistic data unavailable• Inadequate data reliability• Currently no provincial

electricity plan has been made. List of investment project has not been developed.

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

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

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

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

3. Summary and conclusion

Thank you for your attention!Contact: Mr. Nguyen Duc Cuong

Director of Center for Renewable Energy and CDMInstitute of EnergyTel: 84-4-38527085; Mobi: 84 (0) 912009700Fax: 84-4-38523311Email: cuongnd.re@gmail.com or cuongnd_ie@fpt.vn