Draft Final Report

PROMOTION OF RENEWABLE ENERGY, ENERGY EFFICIENCY AND

GREENHOUSE GAS ABATEMENT (PREGA)

Viet Nam

Country Report

May 2004

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 TABLE OF CONTENTS

LIST OF TABLES iv
LIST OF FIGURES iv
ABBREVIATIONS v
EXECUTIVE SUMMARY vii

1 COUNTRY BACKGROUND 1
1.1 Geographical Conditions 1
1.2 Population 1
1.3 Administrative System 1
1.4 Economy 1
1.5 Energy Resources Potential and Development Status 2

2 ENERGY SECTOR OVERVIEW 5

2.1 General Background 5
2.2 Situation and Trend of Energy Supply and Demand 6
2.2.1 Energy Supply 6
2.2.2 Energy Demand 8
2.2.3 Energy Price 9
2.2.4 Energy Balance
2.3 Utilization of Renewable Energy 11
2.4 Energy Efficiency Programs 12
2.5 Rural Energy 13
2.5.1 Rural Electrification 13
2.5.2 Improved Cook Stoves 14
2.6 Policy Orientations 14
2.6.1 General Energy Policy 14
2.6.2 Current Status of Policy fro REGA Development 15
2.7 Organization Structure and Management in the Energy Sector 16
2.8 Program Coordination and International Assistance 17

3 TECHNICAL POTENTIAL FOR REGA TECHNOLOGIES 19

3.1 Potential for Renewable Energy 19

3.1.1 Small Hydropower Resources 19

3.1.2 Solar Energy Resources 20
3.1.3 Wind Power 23
3.1.4 Biomass for Energy Production 24
3.1.5 Geothermal Energy Resources 26
3.2 Potential for Energy Efficiency 26
3.2.1 Industrial Steam Boilers Replacement 26
3.2.2 Fuel Substitution 27

4 SKILLS AND INSTITUTIONAL CAPACITIES RELEVANT TO REGA 30

TECHNOLOGIES
4.1 Introduction 30
4.2 Skills and Experiences in REGA technologies 30
4.3 Institutional Capacities Relevant to REGA Technologies 31
4.4 Institutions Involved in REGA Technologies 32

5 POLICY AND INSTITUTIONAL FEATURES IMPACTING REGA 34

TECHNOLOGY DISSEMINATION
5.1 Renewable Energy Technology Dissemination 34
5.2 Development of Policies for Enhancing Renewable Energy 35
5.3 Energy Efficiency Technology Dissemination 37
5.4 Development of Policies for Enhancing Energy Efficiency 37

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 5.5 Greenhouse Gas Abatement Technology Dissemination 38

6 SUSTAINABLE DEVELOPMENT PRIORITIES 39

6.1 Renewable Energy 39
6.1.1 Renewable Energy Action Plan 39
6.2 Energy Efficiency 41

7 IDENTIFICATION AND PRIORITIZATION OF REGA TECHNOLOGIES 42

7.1 Preferred Projects on Renewable Energy 42
7.1.1 Geothermal Power Plants 42
7.1.2 Small Hydropower Plants 42
7.1.3 Wind Power Projects 44
7.1.4 Rice Husk Fired Power Plants 46
7.2 Projects on Energy Efficiency 48
7.2.1 Yellow Star Rubber Company ‘s Boilers Replacement Project 49
7.2.2 Viet Tri Sugar-Liquor-Beer Company’s Boiler Replacement 50
7.2.3 Thang Long Tobacco Company’s Boiler Replacement Project 50
7.2.4 Improvement and Upgrading of Power Plants 51
7.2.5 Fuel Switching for Porcelain Kilns 52

8 CONCLUSION 53

REFERENCES

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 List of Tables

Table 2.1 Viet Nam's Economic and Energy Data 5

Table 2.2 Energy Production in Viet Nam 6
Table 2.3 Trend of Gas and Crude Oil Production Development for Viet Nam, 7
1995-2020
Table 2.4 Trend in Electricity Production in the Period 1995-2020 8
Table 2.5 Trend of Final Energy Consumption by Sector, 1995-2020 9
Table 2.6 Average Energy Price, 1995-2000 9
Table 2.7 Energy Balance for Base Case 11
Table 3.1 List of Small Hydropower Plants to be rehabilitated and upgraded 20
Table 3.2 Average Daily Solar Insolation in Provinces 21
Table 3.3 Sunny Hours in Provinces 22
Table 3.4 Average Wind Speeds in Some Localities 23
Table 3.5 Main Biomass Potential for Generating Electricity in Viet Nam 25
Table 3.6 Public Rice Mills in Eight Provinces in Mekong River Delta 25
Table 3.7 Existing Industrial Steam Boilers with capacity over 1 Ton/h 26
Table 3.8 Energy Saving Potential in Viet Nam Steel Industry 27
Table 6.1 Potential and Current Use of Renewable Energy in Viet Nam 39
Table 7.1 Anticipated Sites for Developing Geothermal Power Plants 42
Table 7.2 Small Hydropower Potential in Viet Nam 42
Table 7.3 List of Candidate Small Hydropower Projects 44
Table 7.4 Annual Average Wind Velocity in Some Islands 44
Table 7.5 Potential Sites of Rice Husk for Power Generation 46
Table 7.6 Criteria Sorted by Types of Fuel for Upgrading, Replacement or 48
Remaining
Table 7.7 The Number of Boilers to be upgraded/replaced 49
Table 7.8 Specifications of the Existing Boilers 49
Table 7.9 Existing Thermal Power Plants in Viet Nam 51
Table 7.10 Comparative Criteria of Fuel Switching from Coal to LPG 52

LIST OF FIGURES

Figure 2.1 Trend of Historical GDP Growth Rate for Viet Nam 5
Figure 2.2 Trend of Vietnamese Crude Oil and Coal Production, 1995-2000 6
Figure 2.3 Trend of Gas and Crude Oil Production Development for Viet Nam 2000- 7
2020
Figure 2.4 Trend of Vietnamese Electricity Production, 1995-2020 8
Figure 2.5 Trend of Final Energy Consumption for Viet Nam, 1995-2020 9
Figure 2.6 Petroleum Products Average Price in the Period, 1995-2001 10
Figure 2.7 Organizational Structure and Management of Energy Sector 17

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 ABBREVIATIONS

ADB Asian Development Bank

AIT Asia Institute of Technology
ALGAS Asia Least- cost Greenhouse Gas Abatement Strategy
BOO Build- Own- Operation
BOT Build- Operation- Transfer
CDM Clean Development Mechanism
DSM Demand Side Management
EC Energy Conservation
EC& E Energy Conservation and Efficiency
EdF Electricite de France
EE Energy Efficiency
EU European Union
EVN Electricity of Viet Nam
FCCC Framework Convention on Climate Change
FO Fuel Oil
FS Feasibility Study
GDP Gross Domestic Product
GEF Global Environment Facility
GHG Greenhouse Gas
GOV Government of Viet Nam
GPC Government Pricing Committee
HPP Hydropower Plant
IE Institute of Energy
IPP Independent Power Plant
IRP Integrated Resource Planning
JICA Japan International Cooperation Agency
KP Kyoto Protocol
LEAP Long- Range Energy Alternatives Planning Model
LHV Low Heat Value
LPG Liquid Petroleum Gas
MNRE Ministry of Natural Resources and Environment
MOARD Ministry of Agriculture and Rural Development
MOC Ministry of Construction
MOET Ministry of Education and Training
MOF Ministry of Finance
MOI Ministry of Industry
MOST Ministry of Science Technology
MOSTE Ministry of Science Technology and Environment
MOT Ministry of Trade
MPI Ministry of Planning and Investment
NGO Nongovernmental Organization

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NIC National Implementation Committee
NTEs National Technical Experts
PC Power Company
PECSME Promoting Energy Conservation in Small and Medium Scale
Enterprise
Petechim PetroVietnam Trading Company
PPA Power Purchase Assignment
PPC Provincial People's Committee
PV Photovoltaic
R&D Research and Development
RE Renewable Energy
REAP Renewable Energy Action Plan
SIDA Swedish International Development Authority
TPP Thermal Power Plant
UGP Unique Gas & Petroleum
UNDP United Nations Development Programme
UNFCCC United Nations Framework Convention on Climate Change
VECP Vietnam Energy Conservation Program
WB World Bank
WTO World Trade Organization

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 EXECUTIVE SUMMARY

VIET NAM IN BRIEF

1. Viet Nam is a developing country in Southeast Asia. It has common borders with the People’s
Republic of China in the north, Laos and Cambodia in the west. The eastern and southern border is a
3,300-km long coastline, along the Gulf of Tokin, the South China Sea and the Gulf of Thailand. The total
area is about 33 million ha, 50% of which are in productive use. Of these, 21% or about 6.9 million ha are
used in agriculture while the remaining 9.8 million ha (29%) are productive forestlands. The country is
administratively divided in 61 provinces.
2. The population of Viet Nam in the year 2001 was 78.7 million, of which 59.2 million or 75.2% live
in rural areas. It has been estimated that the per capita gross domestic product (GDP) is around US$400
in 2001. Growth GDP was 6.8% in 2001, and estimated at 7.04% in 2002.

ENERGY SECTOR OVERVIEW

3. The total coal consumption in 1997 was about 6 million tons, of which over 2 million tons for
electric generation and about 3.5 million tons for export. Coal production in 2000 reached 10-12 million
tons. The current exploration capacity of coal is about 12 million tons per year. Crude oil production has
grown rapidly in recent years – from 8.8 million tons in 1996 to 16.3 million tons in 2000. Currently, Viet
Nam does not have a major oil refinery, but it is in the process of building its first. The US$1.3 billion
Dung Quat Refinery located in Quang Ngai province will have a capacity of about 6.2 million tons per
year. Initial construction has begun, and the facility is scheduled for completion by late 2006.
4. In 2001, the installed generation capacity was 8,750 MW with hydropower plants, 47.0 %, thermal
power plants, 20.8 %, gas turbines, 26.5 % and diesel 5.7 %. In that year, the current per capita use of
electricity was 390kWh/year, one of the lowest in many countries.
5. Viet Nam is richly endowed with renewable energy (RE) resources. Many pilot projects have been
undertaken in the country to demonstrate the technical feasibility of RE technologies to meet growing
energy demand, especially for remote power supply.

6. Since 2000, the energy consumption was about 11,599 KTOE. The country’s energy
consumption is projected to grow at an annual average rate of 7 per cent and reach 50,246 KTOE in
2020. The industry sector is forecast to have the highest growth rate of 9.1 per cent, followed by
residential and services sectors, 7.3 per cent. Meanwhile, the consumption of the agriculture sector is
projected to have the lowest growth rate of 2.6 per cent over the period 1995-2020, and reaching 723
KTOE by 2020.

TECHNICAL POTENTIAL for REGA TECHNOLOGIES

Renewable Energy
7. According to preliminary assessment of hydropower and hydraulic planning by local authorities,
total technical potential of small hydropower resources of Viet Nam is 1.6 to 2 million kW, with categories
as follows: (i) 500 small hydropower stations with capacity from 100 to 10,000 kW/station and with total
capacity of about 1,400,000 – 1,800,000 kW (accounting for 80 - 97% of total small hydro- power
stations); (ii) 2,500 sites of small hydropower stations with capacity from 5 to 100 kW per station with total
capacity of 100,000 kW to 150,000 kW (accounting for 5-7.5% of total small hydropower); and (iii) small
hydropower stations with capacity from 0.1 to 5 kW/station (also called as Micro-Hydro- Power Stations)
with total capacity of 50,000 - 100,000 kW (accounting for 2.5-5% of total Small Hydro- Power capacity).
8. Viet Nam has average wind energy potential in comparison with countries in the world and in the
region. The wind speed in the mainland is low (about 2-3m/s) and is not suitable for electric power
generation. However, with its 3,000 km of coastal line, and mountainous land area accounting for 70% of
the country area, wind power may be further developed. One study carried out by the Institute of Energy
on 9 islands indicated that the average wind speed is in the range of 4.1 to 7.1m/s.

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8. Viet Nam has significant biomass resources such as sugar cane dredges, rice husks, coffee
husks, coconut shells and wood residues, but only a portion of sugar cane dredges is used for electricity
generation. The biomass resources used for power generation/co-generation in Vie Nam, apart from
sugar cane dredges, are wood residues, rice husks and rice straws. It is estimated that about 1.5-2.5
million tons of sugar cane dredges and 2.5-3.8 million tons of rice husks can be used for energy
production. Residues from wood processing such as saw dusts, wood chips from hundreds of wood
processing facilities may be considered.
9. Viet Nam has over 300 hot mineral water resources with surface temperature up to 105oC in the
central region. Preliminary assessment indicated that total capacity of thermal power plants possible to
be developed is about 200MW. Based on the investigation results on over 100 drilled wells in hot water
areas carried out by Viet Nam Geological Department and ORMAT company (USA), 6 sites namely Mo
Duc, Nghia Thang (Quang Ngai province), Danh Thanh, Tu Bong (Khanh Hoa province), Hoi Van (Binh
Dinh province) and Le Thuy (Quang Binh province) can provide hot water at 140-180oC for geothermal
power plants.
Energy Efficiency

10. As of 1999, there were 1,125 operational industrial steam boilers in the country. The industrial
steam boilers in Viet Nam are old, backward, with low efficiency and high fuel consumption rate. It is
urgently necessary that these old boilers be rehabilitated or replaced.

11. At present, total installed capacity of Viet Nam's power plants is 8,450 MW (dependable capacity
of 8,150 MW), in which, hydro shares 48.5%, gas turbine shares 26%, diesel 4% and thermal power
plants shares 21.5% (capacity of 1,823 MW). With the exception of Pha Lai II Coal fired power plant
2x300 MW that is being commissioned, other thermal power plants of Viet Nam (Pha Lai 1, Uong Bi, Ninh
Binh, Thu Duc, Can Tho) have been constructed 20 to 30 years ago and are now obsolete in comparison
with international technology. Their equipment are aged, seriously degraded and have to be carefully
operated with operation parameters and instruction/guidance. The present boiler's efficiency is about 70-
84%.
12. According to statistical data, the country has about 1,000 porcelain enterprises both for domestic
consumption and export with the revenue of 150 millions US$ per year. In porcelain production, fuel cost
shares about 30-40% of production cost. Coal is used as fuel in the North while wood fuel and rice husk
are used in the South. Since 1999, LPG has been applied in porcelain kiln with technical assistance of
GTZ (Germany). From initial evaluation, LPG reduces fuel, time, workforce and environmental pollution in
porcelain production, especially in porcelain handicraft villages.

SKILLS AND INSTITUTIONAL CAPACITIES

13. Viet Nam has experience in designing, installing and operating demonstration projects on
renewable energy such as small hydropower, wind power, photovoltaic and rice husk fired cogeneration
projects. However, due to insufficient skills and capacities of local experts and technicians mostly based
in the institutes and universities, and the lack of facilities, full implementation of such projects have not
been pushed through. There is a need for capacity building through training and transfer of RE
technologies as well as models/software on economic-financial analysis and environmental impact
assessment of projects.

14. Some experts and institutions have gained a lot of experiences in the design, manufacture and
installation of small hydro turbines and demonstration projects on wind power turbines serving residents
in remote and rural areas. However, the locally made products are more expensive than the imported
ones, of low quality and not mass produced. It is expected that the technology transfer of small hydro
machines from industrialized countries will be favorable and competitive in the near future.

15. Other RE technologies such as geothermal, biomass (except bagasse) projects have been
implemented or at the stage of pre-feasibility study. Industrial steam boilers with steam pressure of 39
kg/cm2, output of 120 tons/hr and small kilns are locally manufactured in Viet Nam.

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16. Preliminary studies on energy conservation and efficiency have been carried out in Viet Nam with
assistance from multilateral and bilateral donor agencies. Energy efficiency and conservation projects like
fuel switching from coal to LPG in porcelain kilns and compact lamps are being done in Viet Nam. But
such projects implemented in recent years are inconsiderable.
17. Energy technology development in Viet Nam is the responsibility of the government. Energy
planning and national energy policymaking is under the Ministry of Industry while the Electricity of Viet
Nam is in charge of power generation, transmission and distribution. The Institute of Energy is the
scientific/technology research and planning organization for the development of energy. The Ministry of
Science and Technology, Ministry of Agriculture and Rural Development and the Ministry of Education
and Training and other organizations are also involved in energy research and market development.

POLICY AND INSTITUTIONAL FEATURES IMPACTING REGA TECHNOLOGY DISSEMINATION

18. Since 1985, RE technologies were formally considered and disseminated in the framework of a
national research named as 52-C Renewable Energy Program. This program was established under the
central government’s guidance and financed by government budget and different funds provided by
international organizations, NGOs, foreign universities, professional agencies etc. to carry out different
RE pilot projects for applying and disseminating RE technologies like solar energy, wind energy, biogas,
biomass and mini-hydropower. However, after the 52-C RE Research ended in 1995, the application and
dissemination of RE technologies was entrusted to different domestic research institutions, agencies,
companies, universities etc. that conducted their RE development projects according to their financial
capability

19. Also from 1985, energy efficiency-related policies have been investigated and considered in the
framework of a great energy management program financed by WB and named as "Energy Demand Side
Management” in major economic sectors like industry, electricity and household sectors. A research
project on "Energy Conservation and Saving" has also been implemented by the Ministry of Science and
Technology to develop policy recommendations for conserving energy in Viet Nam, including EE
enhancement. At the same time, the Ministry of Finance has conducted a research project on "Energy
Saving" that recommended a policy on institutionalizing energy saving through a government decree and
fund. The decree is being drafted and the fund is being established.

20. Though EE technology dissemination in Viet Nam indicates the lack of central government policy
and strategy in planning for high efficiency options for energy supply and demand, i.e. energy-electricity
pricing and energy-related taxing policies, the Government of Viet Nam encourages energy saving
through enhancing EE in energy production and energy end-use. Such policies should be detailed,
concretized and institutionalized in the future.

21. Viet Nam is a party to the UNFCCC, but GHG abatement and global warming are not prime
considerations of the GOV and its ministries as well as other socioeconomic sectors in the country. GHG
abatement is a fresh concept in Viet Nam, a developing country with low industrialization level and low
fossil fuel consumption. As of date, there are no policies and /or institutions at the national level involved
in GHG abatement technology dissemination in Viet Nam.

SUSTAINABLE DEVELOPMENT PRIORITIES

22. The depletion of energy resources and environment pollution due to rapid increase in energy
demand are the concerns of the international community in general and the GOV in particular. For the
past years, GOV has invested and implemented projects on sustainable energy development, which is a
priority concern. A national program on "Building the Strategy and Policy for Sustainable Energy
Development in Viet Nam until 2020" has been carried out during the period 1996-2000 involving
scientists from related sectors. The program’s final report is a National Energy Policy (NEP) for the period
2000-2020. NEP has been completed based on the study results of the program and submitted to the
GOV for ratification. The two issues strongly focused in the policy are EE and RE development.

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23. Viet Nam is richly endowed with renewable energy resources and sustainable energy is an
important alternative in the rural areas where there is no other option. At present, 80 percent of the
population that live in the rural areas have to rely on local energy resources, despite expansion of the
rural electrification grid. This will remain the case for many years. Research and development of RE
technologies have been ongoing for decades in other parts of the world, including Viet Nam. More than
40 studies and project reports are available. Thus, rather than focusing on new R&D efforts and pilot
projects, the RE program can focus on implementation, dissemination and commercialization of efficient
use of RE in general, and development of RE for rural electrification and grid supply in particular.

IDENTIFIFICATION AND PRIORITIZATION OF REGA TECHNOLOGIES

24. Viet Nam is one of the countries with high RE potential. The Isolated Power Supply based on RE
sources such as small hydropower, biomass, wind power, geothermal sources, and rice-husk power
plants for the residents in areas far away from the national electric grid will be a priority order in rural
electrification program in view of its socioeconomic and environmental benefits.
25. The current status of technology in the industry sector is still backward, with obsolete equipment,
and low energy conversion efficiency affecting the production costs as well as causing damage to the
environment. A number of old operating industrial steam boilers with low energy efficiency/high fuel
consumption needs to be rehabilitated or replaced.
26. In the power sector, electricity demand is increasing with an average growth rate of 13% (1996-
2000) leading to the building of new power plants as well as improvement, upgrading and expansion of
the existing power plants. The two categories of EE preferred are replacement of industrial boilers and
rehabilitation of the existing power plants.

CONCLUSION

27. Viet Nam is a country endowed with RE resources. Moreover, there is large potential of EE and
energy conservation, especially in the industry sector. Many studies and pilot projects on RE, EE and
energy conservation have been carried out in the past years; however, the dissemination of REGA
technologies is still not significant in comparison with their potential.

28. The absence of REGA technology-related policy/institutional/organizational framework in the

national (governmental) and sectoral levels including the lack of user-friendly energy pricing/taxing
mechanism is a major barrier in the entry of REGA technologies.

29. The application of RE technologies and high-EE technologies could be considered as effective
technological measure to abate GHG emissions and are priorities in the energy sustainable development
program of Viet Nam. To promote such REGA technologies based on the technical potential, it is
important to strengthen institutional capacity in undertaking pre-feasibility and feasibility studies and in
generating a pipeline of REGA investment projects.
30. To establish a basis for future investment in the development of REGA technologies in the
coming years and to meet the needs of the sustainable socioeconomic development plans and strategies
of the GOV, it is necessary to study and disseminate the country strategies to overcome the policy /
institutional barriers and to have the specialized financing mechanisms for REGA technology
dissemination in Viet Nam.

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 FOREWORD

Vietnam has achieved remarkable economic progress during the last decade. With the rapid
growth of economy, the demand on energy consumption in production and life are also
increasing while the energy sector is facing with the problems, especially the limitation of energy
resources, the backward equipments, low energy efficiencies and the increased air pollution
emission.
Vietnam is richly endowed with renewable energy resources, which can be used to meet the local
energy needs of isolated households and communities that can not receive electricity service
from the national grid with cost effective electricity. Besides, the energy conservation potentials
from improving, upgrading the energy usage and supply equipment, and fuel substitution in the
industry sectors are very great.
The project on “Promotion of Renewable Energy, Energy Efficiency, Greenhouse Gas
Abatement” sponsored by ADB has met the Vietnam’s objectives and desire for the energy
efficiency use and supply as well as GHG abatement in Vietnam.
This “Vietnam Country Report” has mentioned and analyzed detailly on energy demand,
technical potential, institution and GHG abatement in Vietnam, and through that we can select
the feasibility projects, promote the proper policy solutions to encourage renewable energy and
energy efficiency.
We hope that this study will be the good reference material for the Vietnam energy policy
makers in concerning with the policy solutions during the official energy policy was prepared, in
order to remove the barriers, encourage renewable energy and energy efficiency, and contribute
to dealing with the global environmental issues, especially the GHG abatement.

On behalf of National Counterpart Agency -NCA

Tran Minh Huan

General Director of International Cooperation Department-MOI
Vice Director of NCA

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1. COUNTRY BACKGROUND

1.1. Geographical Conditions

Viet Nam, a developing country in the Southeast Asia has common borders with the People’s
Republic of China (PRC) in the north, Laos and Cambodia in the west. The eastern and southern border
is 3,300-km long coastline, along the Gulf of Tokin, the South-China Sea and the Gulf of Thailand. Viet
Nam has a surface area of about 330,000 sq. km, which stretches over a length of 1,600 km between the
northern latitudes of 80 and 230.

Of the total area of about 330,000 sq.km or 33 million ha, 50% are in productive use. Of this,
21%, or about 6.9 million ha, is used in agriculture and the remaining 9.8 million ha (29%) are productive
forestlands. The dominant plain in the north is the Red River Delta stretching for more than 200 km from
the coast to the northwestern mountain ranges. The southern end of the high plateaus of eastern Tibet
and Yunnan province of PRC, extend up to the eastern coastline and continue southward becoming
narrow and rugged. Further south, the mountain ranges widen into high land, where coffee, tea and
rubber are grown. Extending further southward, the highlands descend into an enormous delta formed by
the Mekong River. The Mekong delta is the most important agricultural area of Viet Nam. The country is
administratively divided into 61 provinces.

1.2. Population

According to the general population census in April 1999, the Vietnamese population was 76.3
million. The population has an increase of 11.9 million and an average demographic growth rate of 1.7%
per year during 10 years. The population of Viet Nam in 2001 was 78.7 million, of which 59.2 million or
75.2% live in rural areas.

There are about 54 ethnic groups scattered throughout the country, 85-90% of whom belong to
the Vietnamese group. The remaining 10-15% belong to other groups, such as Chinese, Muong, Thai,
H'mong, Khmer, Man, Cham. The official language is Vietnamese, which is understood in the whole
country.

1.3. Administrative System

Nearly all public services are delivered through the formal government administrative system.
Within the unitary system of government, the central state authority is extended to local administrations in
provinces, districts and communes, with 4 local levels as follows: (i) Central Government, (ii) 61 provinces
and cities directly under the Central Government, (iii) the units directly under each province comprise 62
towns, 33 urban districts and 565 rural districts, and (iv) directly under a district, there are 1,026 precincts,
565 district towns and 8,950 communes.

The Central Government, which is the executive agent of the National Assembly, implements the
Constitution, directs central ministries and people’s committees at the provincial level, drafts laws and
decrees for National Assembly, and manages the duties of the state.

1.4. Economy

Since the early 1980s, the Government of Viet Nam (GOV) has liberalized economic production
and exchange. In 1981, some market elements were formally introduced, and in 1989, Viet Nam has
undertaken a comprehensive reform called Doi Moi.

Since 1990, gross domestic product (GDP) has grown at an annual average rate of 8.2% with all
sectors growing rapidly. Investment in percent of GDP increased from 12% in 1990 to 27% in 1995 with a
large increase in foreign investment reaching nearly 25% of the total investment in 1995. It has been
estimated that the per capita GDP is around US$400 in 2001.

2
 Viet Nam's economy has weathered the global economic slowdown of 2001 better than most
other Asian economies, largely due to the fact that it is less integrated into the world economy and less
vulnerable to declines in demand for its exports. Growth in real GDP was 6.8% in 2001, and estimated at
7.04% in 2002. One positive development is the entry into force earlier this year of a treaty with the
United States providing for Normal Trade Relations (NTR), which was ratified by the United States Senate
in October 2001. It is still expected to be at least several years before Viet Nam would be ready to join the
World Trade Organization (WTO).

1.5. Energy Resources Potential and Development Status

Much of Viet Nam's large population relies heavily on non-commercial biomass energy sources
such as wood, dung, and rice husks. Viet Nam's per capita commercial energy consumption is among the
lowest in Asia. While consumption is expected to remain low relative to other countries, growth in
Vietnamese energy consumption, especially natural gas, is predicted to rise substantially in the coming
years.

1.5.1 Coal

Viet Nam has coal reserves estimated at 3,880 million tons, the majority of which is anthracite.
Production has increased dramatically in recent years, doubling between 1994 and 1998. This has
resulted to an increase in exports (primarily to Japan) and coal stockpiles. Export markets have been
shrinking, which has exacerbated Viet Nam's oversupply problem. The state Coal Company, Vinacoal, cut
back production in 1999 in response to oversupply, but raised it again in 2000 as domestic demand
increased.

The total coal consumption in 1997 is about 6 millions tons, of which over 2 millions tons for
electric generation and about 3.5 millions tons for export. The current exploitation capacity of coal mines
is about 12 millions tons per year. Coal production in 2000 reached 10-12 millions tons.

1.5.2 Oil Production

As of December 1998, Viet Nam has 390 million tons of proven oil reserves, and further
discoveries are likely. Crude oil production was 16.3 million tons in 2000. Production has grown rapidly in
recent years, from only 8.8 million tons in 1996 to 16.3 million tons in 2000. Viet Nam currently has no
operating oil refineries, thus almost all of its crude oil production is exported. Export markets include
Japan (the largest importer of Vietnamese oil), Singapore, United States, and South Korea. Oil export of
Viet Nam is one of the country's largest foreign currency earners.

Currently, Viet Nam does not have a major refinery, but it is in the process of building its first. The
$1.3 billion Dung Quat Refinery, which is located in Quang Ngai province, will have a capacity of about
6.2 million tons per year. Initial construction has begun, and the facility is scheduled for completion by late
2006. A second refinery project is under consideration. Mitsubishi and JGC Corporation signed a
memorandum of understanding with PetroVietnam in October 2001 covering a feasibility study for the
project. The location being considered is Ngai Son, in Thanhhoa province.

1.5.3 Natural Gas

Viet Nam's natural gas consumption is rising, with further increases expected as additional fields
come on stream. The Cuu Long basin is the largest Vietnamese natural gas production area, mostly
associated gas from oil production. An existing 100-kilometer (62-mile) pipeline from the Bach Ho field is
operating near peak capacity. The Ruby and Rang Dong oil fields, both of which have considerable
amounts of associated natural gas, are near the pipeline. However, the Bach Ho pipeline has insufficient
capacity to carry gas from these fields, which is flared.

3
 BP, Conoco, and ONGC (India) have formed a joint venture with PetroVietnam to develop natural
gas resources in the Nam Con Son basin, in the Lan Tay and Lan Do fields. Conoco purchased its stake
from Norway's State oil, which sold off its Vietnamese assets in October 2001. The fields contain an
estimated 2 Tcf of natural gas. A new 370-kilometer (230-mile) pipeline will connect the fields to the
Vietnamese mainland at Vung Tau. Pipeline capacity will exceed production from the fields, with extra
pipeline capacity intended to transport gas from the nearby Hai Tach, Moc Tinh, and Rong Doi fields. In
September 2000, the GOV agreed to restructure the production sharing agreement on the project based
on the 1998 foreign investment law, and construction of the US$565 million pipeline began in June 2001.
The pipeline will come ashore near the Dinh Co Gas Terminal, and an extension will take some of the gas
inland about 20 miles to the Phu My power plant. The pipeline will have a capacity of 247 billion cubic feet
(Bcf) per year once all phases of construction are completed. This exceeds the expected output of the
Lan Tay and Lan Do natural gas fields, so excess capacity will be available for probable future gas finds
in the area.

1.5.4 Liquefied Petroleum Gas

Viet Nam is a growing consumer and exporter of liquefied petroleum gas (LPG). Japan is the
major consumer of Vietnamese LPG exports, receiving the country's first export shipment in May of 1999.
Domestic consumption is increasing rapidly, expected to reach up to 20% annual growth for the next few
years. Viet Nam consumed an estimated 250,000 tons of LPG in 2000.

Viet Nam's LPG sector has been open to foreign companies since 1998. Saigon Petro, Elf Gas,
Petrolimex, and Mobil Unique (a consortium of Mobil, Mitsui, and Unique Gas & Petrochemical), and PTT
of Thailand are the major companies involved in the sector. Unique Gas & Petrochemical (UGP), which is
involved in the Thai LPG market, could enter the Vietnamese market in the near future. The country's first
liquefaction plant at Dinh Co receives gas from the Bach Ho field. It is 100% foreign-owned and is now
operating near capacity.

1.5.5 Electricity

Viet Nam is well endowed with energy resources and has the opportunity to provide local
industries and households with electricity, and export electricity to neighboring countries. Nevertheless,
the per capita use of electricity (in 2001) was one of the lowest countries with 390 kWh per year. In 2001,
the installed capacity was of 8,750 MW, of which hydropower plants accounted for 47.0 %, thermal power
plants, 20.8 %, gas turbines, 26.5 % and diesel, 5.7 %. Power consumption has been growing rapidly
over the last decade at 11.8 % per year. According to the forecast of the Electricity of Viet Nam (EVN),
this growth rate will continue until 2010, when electricity consumption per capita is forecasted to more
than double at 734 kWh per year. Installed capacity is expected to triple, to about 16 GW. Hydro is
expected to remain dominant, although its share will drop to 40 %. Coal will play an increasing role in the
north, and gas resources in the south.

1.5.6 Renewable Energy Resources

Viet Nam is richly endowed with renewable energy (RE) resources. Over the past two decades,
many pilot projects have been undertaken in Viet Nam to demonstrate the technical feasibility of RE
technologies especially for remote power supply. However, the RE technology dissemination is still
insignificant in comparison with its available resources.
Small Hydropower
Viet Nam’s technical potential for small hydropower is 1600-2000 MW, mainly in the north and
central areas. There are now about 60MW of grid-connected mini-hydro installed in 48 sites, ranging from
100 to 7,500 kW capacities. Over 300 community-based small hydro systems with total capacity of 70MW
have been installed. Individual systems ranging from 5 to 200 kW are mostly installed in north and central
Viet Nam.

4
 A Pico hydro system is a small family scale (with capacity of 100-1000W) that can be placed in
streams of small rivers near the home. It is estimated that there are about 100,000-150,000 systems that
have been sold in open markets. The further potential of these systems is considerable.
Solar energy
Viet Nam has good constant solar resources in the south and central regions but substantial
seasonal fluctuations in the north. Solar radiation levels in the south and central regions average just
below 5 kWh/m2/day and are almost constant during the year, ranging from 4.0 to 5.9 kWh/m2/day. The
solar regime in the north exhibits averages around 4 kWh/m2/day, but has wide variation ranging from 2.4
to 5.6 kWh/m2/day.
Biomass Cogeneration
The main biomass sources that can be used to generate electricity are sugarcane bagasse, cane
trash, and rice husks. An estimated 2.5 million tons of bagasse (1999) and 3.8 million tons of rice husks
(1996) are available. Existing sugar mills provide heat and power for sugar production and the rest of
power is supplied to the grid. Production of electricity from rice husks is also an important but untapped
resource.
Wind Energy
With over 3,000 km of seashore and 70 percent of the country mountainous, there is likely
potential for wind power. However, the potential cannot be quantified, as no systematic wind resource
measurements are available. Data from meteorological stations have measurement sites and height level
(at 10 meter) but not appropriate for wind farms. Despite the existence of extensive hydro meteorological
data in Viet Nam, the only measurement of wind energy potential (at 30 meters height) has been
available for proposed larger scale projects, but considered confidential.

While there are no grid-connected wind energy systems in Viet Nam, many decentralized wind
power home systems using small wind turbines are installed in coastal and island areas throughout the
country. Almost all wind turbines have been purchased by the government and provided to end-users.
Geothermal Energy
The geothermal resource potential in Viet Nam has been initially estimated at 200 MW, mainly
available in Central Viet Nam.

5
2. ENERGY SECTOR REVIEW

2.1 General Background

Similarly with the other Southeast Asian countries, Viet Nam’s economy grew rapidly before
1998. The annual average growth rate of GDP was nearly 9 per cent over the period 1992-1997. In the
period 1997-1999, it had a decreased trend due to the negative impact of the Asian financial crisis on
Vietnamese economy. However, the average economic growth rate has recovered from 2000-2002. The
growth was 6.8 % in 2001, and is estimated at 7.04 % in 2002 (Figure 2.1).

Figure 2.1. Trend of Historical GDP Growth Rate for Viet Nam

Historical GDP Growth Rate for Vietnam

12

10
Growth rate (%)

0
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
Year

Source: Institute of Energy, Viet Nam, 2002

Energy is a key component in Viet Nam’s economy because the development and utilization of
energy resources contribute to industrialization and socioeconomic welfare of people as well as increase
earnings from export. Viet Nam is endowed with fossil energy resources like oil, gas and coal, as well as
renewables such as hydro, biomass and solar energy. Table 2.1 reflects Viet Nam’s basic energy data in
2000.

Table 2.1. Viet Nam’s Economic and Energy Data

Item Energy Reserves

Population (million) 77.685* Oil*** 390 Million Tons
Primary Energy Supply (KTOE) 17,595 Gas*** 600 Billion cm3
Final Energy Demand (KTOE) 12,005 Coal*** 3,880 Million Tons
Electricity Demand (GWh) 26,594 Hydropower*** 17,700 MW capacity
GDP Billion USD** 31.250
Sources: * General Statistics Office 2001.
** Statistical Yearbook, Statistical Publishing House, Hanoi, 2001;
Exchange Rate: 14500VND= 1US$.
*** Institute of Energy, Master Plan Study on Power Development, 2000.

6
2. 2. Situation and Trend of Energy Supply and Demand

2.2.1 Energy Supply

The conventional energy production and supply consisting of coal, crude oil, natural gas and
electricity to meet the demand of rapidly economy’s development of Viet Nam has achieved great
progress, especially since 1995. The data on energy supply are presented in Table 2.2 below:

Table 2.2. Energy Production in Viet Nam

Item Unit 1995 1996 1997 1998 1999 2000

Coal * Million tons 8.19 9.7 11.27 11.36 9.31 11.05
Crude oil Million tons 7.6 8.8 10.1 12.6 15.2 16.3
3
Natural gas Million m 185 270 550 880 1,535. 1,600
Electric Million kWh 14,636 16,960 19,165 21,654 23,558 26,594
generation
Source: Institute of Energy, Viet Nam, Master Plan Study on Power Development, 2000.

* Energy Database of Viet Nam

Coal: In 1997, Viet Nam produced 11.27 million tons of coal with an annual average growth rate of about
17.3 % in the period 1995-1997. However, in the period 1998-1999, coal production growth rate
decreased at minus 18 per cent because of the Asian financial crisis that affected quantity of coal
exported to foreign markets. The production of coal has increased and reached at 11.05 million tons in
2000 (Figure 2.2) and 12.5 million tons in 2001. Viet Nam's coal consumption is expected to increase, as
it becomes a larger electricity producer. Viet Nam previously had focused much more on hydropower, and
the shift to coal marks an important change in Viet Nam's energy sector. Under the Revised Master Plan
Study on Development of Coal, production of coal has been estimated to be from 24-26 million tons by
2020. As a result, the annual average growth rate of coal production would be 4-5 per cent over the
period 2000-2020.

Figure 2.2. Trend of Vietnamese Crude Oil and Coal Production, 1995-2000

Vietnamese Crude oil and Coal Production, 1995-2000

18000
16000
14000
12000
Thousand ton

10000 Crude Oil

8000 Coal
6000
4000
2000
0
1995 1996 1997 1998 1999 2000
Year

Oil and gas: The crude oil production in the period 1995-2000 has substantially increased to 16.5 per
cent per year. However, for the next 20 years, the annual growth rate of crude oil is expected to decrease
by 3.2 per cent per year due to limited resources. Up to now, most of Viet Nam’s crude oil production is
being exported. In 2000, exported crude oil was 15.423 million tons accounting for 94.62 per cent of the

7
total crude oil production in Viet Nam. The export markets include Japan, Singapore, Korea, PRC and the
United States. Refinery number 1, a joint venture of PetroVietnam and Russia with capacity of 6.2 million
tons of petroleum products is under construction and will be commissioned in 2005. At the same time,
refineries number 2 and number 3 are being considered by the GOV for next stages.

The gas industry has grown steadily since 1995 as it has been used as fuel for the Baria power
plant. The gas sub sector has the highest growth rate among energy sub sectors with about 54 per cent
per year over the period 1995-2000. When the South Conson gas pipeline is fully commissioned, gas
production will substantially increase from 1,600 million cubic meters in 2000 to 6,000 million cubic meters
in 2005. The development in Malay-Thochu basin might proceed after 2005 and total gas production in
Viet Nam is expected to be 15-20 billion cubic meters by 2020.

The GOV controls both the oil and gas upstream and downstream activities. For upstream
activities, Viet Nam Oil and Gas Corporation (PetroVietnam), a government-owned company, is the only
firm authorised to conduct petroleum operations. Any petroleum exploration and production activities by
foreign investors must be conducted in cooperation with PetroVietnam. For downstream activities, several
government-owned companies, such as Petrolimex and Petechim under the Ministry of Trade,
PetroVietnam Trading Company (Petechim) under PetroVietnam, SaigonPetro under Ho Chi Minh City
People's Committee, and Vinapco under Viet Nam Airlines, have been licensed to import petroleum
products. Petrolimex is the largest petroleum product importer. Viet Nam has issued 41 investment
licenses for oil and gas exploration since the industry was opened to foreign partners in 1998. About 30
companies, including American, European, Korean, and Japanese firms, now operate in offshore Viet
Nam.

Table 2.3. Trend of Gas and Crude Oil Production Development for Viet Nam, 1995-2020

Year 1995 2000 2010 2020

Gas (mil. Cubic Metres) 1500 6 000 10 000 20 000

Crude Oil (Thousand tons) 16 000 20 000 23 000 30 000

Source: Master Plan Study on Power Development, Phase 5, 2000

Figure 2.3. Trend of Gas and Crude Oil Production Development for Viet Nam, 2000-2020

Trend of Gas and Crude Oil Production Development, 2000-2020

Million Cubic metres and

35000

30000
Thousand ton

25000

20000 Gas

15000 Crude Oil

10000

5000

0
2000 2005 2010 2020
Year

Electricity: In 1995, electricity generation was nearly 15 TWh, a 3-fold increase from 1985 and the
average annual growth rate in this period was 11.4 %. Although the economic growth rate has been
slowing down in Viet Nam, the growth rate of electricity production still grew by 12.9 % over period 1995-
1999. Over two recent years, 2000-2001, the growth rate of electricity has increased rapidly at 15 % and

8
this trend is still expected for the coming years. In 2001, the total installed capacity was 8,750 MW and
the electricity production was 30,603 TWh, of which 59.5 % was from hydropower, 21.1 % from thermal
power, and 19.4 % from gas turbine and diesel units. The Master Plan Study on Power Development
carried out by the Institute of Energy showed that total power capacity would reach 30GW in 2020, of
which, hydropower would account for 30 %, followed by thermal power 50 %, imported power 13 %, and
nuclear and geothermal power to contribute 7 %. According to this Master Plan, installed capacity of gas-
fired power plants would increase rapidly from 1,076 MW in 2000 to 10,000 MW in 2020. As a result, the
share of electricity production generated from gas-fired power plants will account for 35 % of the total in
2020.

Foreign companies are becoming involved in the growing Vietnamese power market. In 2001
electricity production generated from IPP was about 2,122 GWh and accounted for 6.9% of total power
generation. EVN and a consortium including Tokyo Electric Power, Sumitomo, and Electricite de France
(EdF) plan to construct a 715-MW plant ("Phu My 2-2") in the Mekong Delta. The facility is planned to
begin commercial operation in 2004. It is intended that the plant be fueled by gas from Nam Con Son
Basin, which is planned to be tapped by the BP, Conoco, and ONGC consortium. In April 2001, BP also
received approval for the 720-MW Phu My 3 project, located in the same area. Siemens will be
undertaking the construction work for the facility. Both projects are Build-Operate-Transfer (BOT) projects,
where foreign investors would operate the plants for a set period of time.
Table 2.4. Trend in Electricity Production in the Period 1995-2020
Unit: GWh
Year 1995 2000 2005 2010 2015 2020
Electricity 14636 26000 44230 70437 126949 167023
Source: Master Plan Study on Power Development, Phase 5, 2000

Figure 2.4. Trend of Vietnamese Electricity Production, 1995-2020

Electricity Production, 1995-2020

180000
160000
140000
120000
GWh

100000
Electricity Production
80000
60000
40000
20000
0
1995 2000 2005 2010 2015 2020
Year

2.2.2 Energy Demand

The energy demand scenario based on base case economic scenario and trend of final energy
consumption for Viet Nam are shown in Table 2.5 and Figure 2.5.

9
 Table 2.5. Trend of Consumption by Sector, 1995-2020
Unit: KTOE
Year 1995 2000 2005 2010 2015 2020
Industry 2580 4021 6742 10599 15742 22736
Agriculture 380 429 514 610 662 723
Transport 3355 4614 6739 9811 13145 17621
Residence & Service 1582 2535 3724 5223 6944 9166
Total 7896 11599 17719 26243 36942 50246

Source: Master Plan Study on Power Development, Phase 5, 2000

Figure 2.5. Trend of Final Energy Consumption for Viet Nam, 1995-2020

Final energy consumption by sector, 1995-2020

60000

50000

40000 Industry
Agriculture
Ktoe

30000 Transport
Res.and Serv.
20000 Total

10000

0
1995 2000 2005 2010 2015 2020
Years

Energy consumption in 1998 was 9,068 KTOE, a decrease of 1.3 per cent compared to 1997. It
was the first decline over the period 1990-1998 and reflected negative impact of the Asian financial crisis
on Viet Nam’s economy. However, since 2000 the final energy consumption had been increasing again to
about 11,599 KTOE. For the period 1995-2020 the total final energy consumption of Viet Nam is
projected to grow at an annual average rate of 7 per cent and will reach 50,246 KTOE in 2020. The
industry sector is forecasted to have the highest growth rate of 9.1 per cent, followed by residential and
services sectors with 7.3 per cent. Meanwhile, the consumption of the agriculture sector is projected to
have the lowest growth rate of 2.6 per cent over the period 1995-2020, reaching 723 KTOE.

2.2.3 Energy Price

Table 2.6. Average Energy Price, 1995-2000

Year 1995 1996 1997 1998 1999 2000 2001

Average auto gasoline price

($/ton) 411 472 470 447.4 417.8 521.1 542.8
Average DO price ($/ton) 267 268 347 324 261 260 283
Average kerosene price ($/ton) 301 389 385 338 326 333 335
Average FO price ($/ton) 132 131 142 127 129 136 157

10
 Average gas price ($/mil. BTU) 1.2 1.2 1.87 1.87 2 2.2 2.2
Average coal price ($/ton) 22.89 24.28 23.55 20.78 18.65 19.54 21.09

Source: APEC Data Base, 2002, I.E.

Petroleum price: Due to the fluctuation of exchange rate, average fuel price increases annually. As Viet
Nam has to import nearly all kinds of petroleum products, their import prices are therefore influenced by
international market. However, domestic selling prices are regulated by the GOV based on regulations of
ceiling price and import tax rate. Increase in natural gas price for electricity generation reflects the cost of
gas supply. Gas price in the period of 1995-2001 was low as the supplied gas was associated gas
exploited from Cuulong basin.

Average price of petroleum products (including auto petroleum, DO, FO and kerosene) in the
period 1995-2001 are presented in Table 3.6. Generally, auto petroleum and DO have fluctuated from
411 US$/ton in 1995 to 542 US$/ton in 2001 for auto petroleum and from 267 to 283 US$/ton for DO.
Average price growth rate in that period is 4.74%/year for auto petroleum and 0.9%/year for DO. There is
a big change in petroleum prices since they were dependent on oil price in international market. Prices of
kerosene and FO fluctuated slightly from 301 US$/ton in 1995 to 335 US$/ton for kerosene in 2001 and
from 132 to 157 US$/ton for FO.

Figure 2.6. Petroleum Products Average Price, 1995-2001

Petroleum products average price in the period of 1995-2001

600

500
Average auto gasoline
400 price
$/ton

Average DO price
300

200 Average kerosene

price
100 Average FO price

0
1995 1996 1997 1998 1999 2000 2001

Year

Coal selling price: Generally speaking, average coal selling price increased from 5.46 US$/ton in 1990
to 21.09 US$/ton in 2001 with an average growth rate of 12.5% per year. In the period 1990-2001,
domestic coal price was in contrast with exported coal prices, while domestic coal price has been
increased annually, export price decreased due to different reasons. Domestic coal price increased to
marginal cost to reflect cost of production, while export price decreased because exchange rate altered
and price in international market tend to decrease. Up to now, there is crossed subsidy in coal selling
price. Coal industry has to take benefits from export to compensate cost for domestic use.

Electricity selling price: For the recent 5 years, policy of electricity tariff has changed from the previous
years, corresponding to economic development of the country as well as income level of the people.
From 1994, electricity tariff has been adjusted six times. However, electricity price was very low in the
past with backward generation technologies made difficult for implementing plan of electricity tariff

11
increase. Average price increased from 616 VND/kWh in 1996 to 722 VND/kWh in 1999 (with the
exchange rate of 11000 VND/US$ in 1996 and 14000 VND/US$ in 1999).

The current electricity retail tariff schedules applied throughout the country were adjusted recently
pursuant to Circular No. 03/2003/TT-BCN dated 25/9/2002 by MOI and became effective on 1 October
2002 in compliance with mapping of electricity tariff increase, which has been studied and proposed
previously. The average electricity price is increased to 5.6 UScent/kWh. So far, adjustments of electricity
retail tariffs are mainly to increase electricity retail price to the value of long run marginal costs. In May
2002, GOV approved electricity tariff increase schedule from 2002 to 2005 with target of 7 UScent/kWh

The electricity tariffs are varied according to level of voltage, peak and off-peak hours. Industrial,
agricultural, commercial and residential customers pay for electricity use according to the accumulated
electricity. However, this is only one component of electricity tariff for electricity consumption as there is
not yet two-component tariff, i.e. capacity and energy, seasonal price and price applied for own
generators as in other countries in region.

2.2.4 Energy Balance

Based on energy demand forecast and domestic energy supply assessment, energy balances
have been made for base case of energy demand in Table 2.8.

Table 2.8. Energy Balance for Base Case

Unit: KTOE

Energy Type 1995 2000 2005 2010 2020

Primary Energy Demand 10932 17191 24635 36208 70292

Domestic Supply Possibility 7741 10629 19750 32962 59883

Of which: - Coal
4676 5600 5263 8400 11200
- Petroleum Products
- - 6617 13234 19851
- Natural Gas
167 1080 4079 6024 17959
- Hydro Energy
2898 4139 3791 5304 10873

Balance: - Surplus (+)

- Deficit (-) -3191 -6372 -4885 -3246 -10409

Source: Master Plan Study on Power Development, Phase 5, 2000

2.3 Utilization of Renewable Energy

Because the majority of Vietnamese households are farmers living in rural and mountainous
areas, consuming a limited conventional energy quantity (oil/gas, electricity, coal) while using a
tremendous volume of biomass (crop residues, fuel wood, etc) for their domestic usage (cooking, space
heating, etc) in rural energy self-sufficiency mechanism, GOV is focusing on development of local energy
resources to raise their living standards. The situation of current RE utilization in Viet Nam is summarised
as follows:

12
Solar energy: Photovoltaic (PV) was initially used with PV systems for household lighting,
telecommunication (TV, radio etc.) and traffic lamps. The total PV installed capacity in Viet Nam until
2002 was about 800 kWp and the biggest project had put into operation in 1999 with the capacity of 100
kW. Solar water heaters were used by a limited number of households, clinics, hospitals, etc. About 50
units with collector area of 1-2 m2 each, providing 50-100 litters of hot water per day have been installed.

Biomass energy: Biomass is the basic energy type that meets the rural and mountainous households’
energy demand. The main bio fuels are fuel wood, crop residues, animal wastes, etc. The biomass-
based energy consumption is about 60-70 % of total rural energy demand.

Small-hydropower resources: The total potential small hydropower resource was estimated at 1,600-
2,000 MW with about 600 mini-hydropower feasible sites and installed capacity of 1,300 MW. Among
different projects of new and RE development in Viet Nam, the national research program on exploiting
mini-hydropower resources was the most attractive. It was implemented during the period 1975-1985 as a
unique energy program fully subsidised by the national budget for improving energy supply of the rural
and mountainous areas and contributing to the rural electrification in Viet Nam.

Wind Energy: Wind energy has been applied with a limited number of wind power turbines for water
pumping and electricity generation. However, because of limited wind potential and unstable wind
frequency in Viet Nam, the potential for large scale exploiting wind energy for producing the conventional
and commercial wind electricity has to be carefully explored and estimated.

2.4 Energy Efficiency Programs

The Ministry of Science and Technology (MOST) developed “The Master Plan of energy
conservation and efficiency programs (EC&E)” with bilateral financial sponsors, mostly from the
Netherlands and Germany. This overall program with the support of policy frameworks, has formed
energy efficiency (EE) programs at national level, implement energy auditing programs, establish energy
conservation centers in provinces and cities which carry out EE technical support functions and create a
public fund to sponsor EE activities of energy consumers. This plan for energy conservation development
and efficient energy utilization was published in 1998.

The research study, which carried out within the scope of this project, consists of the contribution
of the largest electricity consumers as well as the lighting loads of residential and industrial sectors during
peak hours. The EC&E program proposed to set priority to these facilities to reduce load in peak hours.
This program also contributed to the plan for reasonable energy utilization and conservation from 1996 to
2000 with the following objectives.

(i) Reduce 8-10% of total final energy consumption (equivalent to 1.2-1.4 million TOE) in
2000.

(ii) Reduce capacity of 150-200 MW in peak hours of peak load.

(iii) Remain energy intensity at 0.4 KTOE/(US$ GDP) constant in comparison with annual GDP
current growth rate at 10%.

(iv) Draw up a specific schedule for implementation up to 2000. A decree of energy

conservation and energy efficiency was submitted to the Prime Minister in 2001.

13
 From 1992 to 1997, Viet Nam experienced unprecedented economic growth averaging 8.2
percent annually. During this period, energy demand grew 40 percent faster than GDP and electricity 70
percent faster. The ability of Viet Nam to continue meeting such an aggressive economic growth rate
would require substantial expansion of the energy sector and, in particular, the electric power sector. The
World Bank estimates that the power utility, EVN, will face a three-fold increase in demand over the next
10 years, from 26.651 GWh in 2000 to over 70.437 GWh by 2010, with annual demand growth of 10.2
percent. Generation-level peak power demand is also projected to increase from the 2000 level of 4890
MW to about 11,650 MW by 2010, requiring an associated capital investment of about US$15.78 billion.

In 1997, EVN, with WB assistance, commissioned the “Demand-Side Management Assessment

for Viet Nam,” to determine the potential for demand side management (DSM) to assist the power sector
in meeting the country’s future power resource requirements. The DSM Assessment concluded that DSM
had a potentially significant role to play in managing the growth of electricity demand in Viet Nam and
identified important opportunities for cost-effective electricity savings in a number of sectors and end-use
applications. It recommended a two or three-phased approach for implementing DSM, which would save
an estimated 770 MW of capacity and more than 3,550 GWh/yr. (about 5 million TOE) by the year 2010.
Under the first phase, supported by a SEK 29 million (about US$3.0 million) Swedish SIDA grant, a DSM
Cell within EVN has been established to build its load research capability, implement a pilot load
management and several pilot DSM programs, develop audit capability within EVN, and develop a policy
framework for initial and future DSM activities; the Ministry of Construction (MOC) will develop an EE
building code, and the MOST will introduce energy efficiency lighting and industrial motor standards.
Overall project coordination is being managed by MOI.

2.5. Rural Energy

2.5.1 Rural Electrification
EVN and its subsidiaries are making substantial progress in rural electrification. In 2000, 81
percent of the communes (7,245) and 71 percent of rural households (9.3 million) had electricity service
from the grid. GOV aims to provide electricity to 90 percent of rural households by 2005. Implementing
rural electrification is the responsibility of the following government agencies:

(i) MOI manages overall planning, provides guidance and supervises implementation.

(ii) MPI, together with the Ministry of Finance (MOF), prepares an annual investment plan
(from State Budget, confessional credit, and Official Development Assistance (ODA) funds)

(iii) MOF defines the State Budget, mobilizes and provides confessional credits

(iv) Provincial People’s Committees (PPCs) prepare investment plans and manage rural
electrification programs in their territories

(v) The State Bank instructs commercial banks to provide confessional loans for poorest
households.

There is a uniform national rural residential retail ceiling tariff of 4.5 US cents per kWh for
communes connected to the grid. On an exceptional basis, GOV allows flexibility in rural tariffs, to allow
the recovery of distribution costs by the local authorities selling power. This has been allowed under a
GOV decree that permits peoples’ committees to decide on exception to the 4.5 US cents per kWh rural
residential tariff rule. In 1997, the average rural tariff was 4.3 US cents per kWh. Nevertheless, about 7
percent of consumers paid more than 5.8 US cents, 32 percent paid 4.5-5.8 US cents, and 61 percent
paid 2.9-4.5 US cents per kWh. The PCs sell electricity to the local rural distribution company at a
wholesale price approved by the government 2.3 US cents per kWh, which is less than the cost of
generation. This implies that there is a cross subsidy to rural consumers from other consumers.

14
2.5.2 Improved Cook Stoves
In order to solve fuel shortage especially fuel for residential cooking, and protect the environment,
GOV has encouraged researching for improved cook stoves. Assessment of improved cook stove
projects in Viet Nam shows that it has good efficiency. Application of cook stove models brought good
results both in economic, social and environmental aspects such as reducing fuel consumption,
emissions and cooking time and got acceptance of consumers and local authorities. For example,
improved cook stove development in Ninh Binh province was implemented in large scale. The objective is
to achieve 50 percent of rural households (about 50,000) using improved cook stoves up to 2005. Women
Union created groups to help each other in installing and using improved cook stoves in all districts.
Capital resources are from people contributions, investment for research and loans. Up to now, more than
20,000 households in Ninh Binh province are using improved cook stoves.

In comparison with conventional cookers, improved cook stoves have many advantages such as
enhancing combustion techniques, heat conductibility and cooking smoke exhaust, hence the efficiency
increases considerably. Actually, utilization of conventional cookers with low efficiency results in high fuel
consumption and incomplete combustion products thus increasing GHG and other toxic pollutants
emissions, as well as destruction of forests. In Viet Nam, nearly 10 million households use conventional
cookers that need to be replaced. This is a large market of improved cook stoves in the coming years.

2.6. Policy Orientations

Under current policies, the Prime Minister’s Office and MOI are responsible of formulating the
National Energy Policy of Viet Nam, and in regulating service quality of the agencies operating in the
energy sector. However, in practice, state energy companies develop medium and long term plans that
are incorporated in the five or ten year plan produced by MPI, which then is subject to the Office of
Government approval and project funding. As the market economy develops, emphasis will need to be
shifted from direct government control toward indirect, policy-based control. Energy policy for the medium
– and long term should go beyond specific projects, setting policy directions for each part of the energy
sector. The basic contents of the national energy policy draft are as follows:

2.6.1 General Energy Policy

(i) Reforming the energy sector in terms of institutional structure, energy pricing and energy
finance.

(ii) Diversification of energy resources based on development of indigenous energy recourses

and expansion of regional energy cooperation.

(iii) Ensuring adequate energy supplies to meet the energy demand of socioeconomic
development and population growth.

(iv) Consideration of energy conservation and efficient energy use for economic development
and reduction of negative environmental impacts.

(v) Prioritizing the exploration and utilization of natural gas.

(vi) Increasing the share of electricity production generated from gas fired power plants in order
to increase efficiency and stability of supply of electricity.

(vii) Carrying out necessary work for the energy trade through power and gas pipeline
interconnection with neighboring countries in the region; and consideration of the
development of nuclear power plants in the future.

(viii) Diversification of the ownership of energy activities in energy production, transmission and
distribution.

15
 (ix) Encouragement of the study and use of new and renewable energy forms with the focus on
islands and remote areas.

2.6.2 Current Status of Policy for REGA Development

Renewable energy, energy efficiency and greenhouse gas abatement (REGA) could play a
significant role in providing electricity services to rural people in Viet Nam. In 2000, about 3.9 million
households or about 18 million people in rural areas of Viet Nam had no access to electricity. To improve
this situation, the GOV is carrying out an ambitious rural electrification program that aims to extend the
national grid to 90% of rural households by 2005. Decentralized sources of electricity, especially those
based on REGA offer the remaining households the only opportunity to experience the benefits of modern
lighting, communication and appliances. Renewable electricity plants connected to the grid could cost-
effectively supplement grid electricity, reducing losses and improving grid stability while providing
generation at the far reaches of the grid.

The Rural Electrification Policy adopted in early 2000 by MOI, sets the basic principles of
diversifying ownership, providing incentives for local electricity supply businesses and encouraging
decentralized power generation.

By 2010, the draft Master Plan of Power Development for 2001-2010 calls for 1,500 new
communes to be electrified through grid extension, and 400 remote communes not physically or
economically connected to the grid, to be electrified through renewable energy (RE) technologies such as
micro hydro, solar, wind power or diesel. Northern mountainous and central highland provinces are
identified as regions for off-grid RE development. According to Decision 22, financing for extending the
grid is as follows: (a) the medium voltage network is to be funded from State Budget, EVN Depreciation
Fund, GOV Annual Concessionary Credit and Official Development Assistance or ODA funds; (b) low
voltage network is to be constructed using local funding; (c) GOV will supplement the local contributions
for the poorest areas; and (d) service drops to houses are to be funded by households.

Soon, the GOV is expected to announce a decree/decision on investment sources for

decentralized grids. This decision will allow the tariff in such projects to be decided by the Provincial
People’s Committees (PPCs) to allow cost recovery and reasonable profits for distribution. The sources of
funds for investment in decentralized grids are the following:

(i) For the poorest communes, international support and contributions from economic sectors
or other provinces provide the funds through national multipurpose investment programs.
Contributions from local population are locally available materials, and labor.

(ii) For other mountainous communes, local network is funded by local government budget and
other resources mobilized locally. The support from GOV budget is less than 30% of the
project cost. Domestic investors in electricity network for communes in remote,
mountainous or poor areas, including private investors, can borrow concessionary credits
from the National Assistance Fund or other funds with interest rate reduced by 50%.

Approvals on isolated power systems are to be simplified and decentralized to provincial

authority. Proposed for approval by PPC are isolated power projects with less than 5000 kW or with lower
levels depending on scale of investment. If the project is to be connected to the national grid, a Power
Purchase Agreement (PPA) with EVN is also required.

While the Rural Electrification Policy and the Master Plan for Power Development for 2001-2010
state a clear intention to encourage off-grid electrification, there are no clear and detailed regulations on
financing, management or operation of decentralized grids or off-grid supply. There are also no clear
guidelines for transparent channeling of subsidies to rural communities for off-grid electrification.

16
 At the request of EVN, WB assisted in preparing the Renewable Energy Action Plan (REAP), a
framework for international assistance to scale-up renewable electricity development in Viet Nam for rural
electrification and grid supply. It proposes a ten-year program with two five-year phases: Phase 1 for
institutional and capacity building and Phase 2 for implementation. REAP’s objective is to provide
renewable electricity for economic and social development in isolated households and communities in
remote areas that cannot be reached economically by the grid. Private and public sector companies, as
well as nongovernmental organizations (NGOs), will supply cost-effective, reliable renewable electricity
equipment and services to households and communities on a commercial basis.

Success in reaching this objective will be measured by the following indicators:

(i) the number of renewable electricity systems operated by households and institutions;
(ii) the number of isolated grids installed with renewable electricity, the number of households
involved and the amount of electricity generated and sold in such grids;
(iii) electricity use per household with renewable electricity;
(iv) productive usage of electricity in communities with isolated grids; and
(v) the number of renewable electricity facilities selling electricity to the grid and the amount of
electricity sold.

2.7 Organization Structure and Management in the Energy Sector

The Ministry of Industry (MOI) provides state management to the industrial sector. Its scope
includes manufacturing, metallurgy, electronic and information technologies, chemical, geological, mineral
resources, mining, power and production of consumer goods. MOI’s main function is to implement
government decree No 74/CP on 1November 1995. For the power sector, MOI has several specific duties
to include:
(i) Prepare government approval of a National Master Plan for Power Development
(ii) Appraise and approve 5 year provincial power development plans prepared by provincial
governments
(iii) Prepare the draft Electricity Law and associated Decrees
(iv) Provide professional training for staffs from Departments of Provincial Industry
(v) Manage BOT contracts with potential developers on government behalf.
The duties of MPI are set out in Government Decree No 75/CP, dated 1 November 1995. The
main role of MPI is to evaluate macroeconomic plans prepared by other Ministries and to evaluate and
prepare large projects. The most important role of MPI is the allocation of annual government budget or
credits and appraisal of investment projects using ODA funds and government resources. MPI has also
been responsible for using business investment registration licenses for all businesses in the power
sector.

MNRE takes responsibility to prepare and issue environmental policy, plan and promulgate
standards of environment and environmental impact assessment, control pollution, manage
environmental information. Energy sectors have to obey these regulations of MNRE.

EVN was established in 1995, which is operated under Prime Minister’s office and MOI. Since
1998, there are seven distribution companies under EVN, namely: four transmission companies, thirteen
power plants and an energy research institute.

Most of coal is produced by Viet Nam National Coal Company (VINACOAL), which was
established in 1995 under the MOI. Market forces, subject to the minimum sales prices set by the Coal
Consumers Association, determine domestic coal prices. Minimum prices are set to ensure companies
producing coal break-even. However, GPC sets the selling prices to EVN.

Vietnam Oil and Gas Corporation (PetroVietnam) was a state-owned enterprise established in
1975 and controlled by the Prime Minister’s Office. It is responsible for crude oil and gas exploration,
production, and transportation.

17
 The Ministry of Trade (MOT) is responsible for exporting crude oil and importing petroleum
products and their distribution to consumers through its Petrolimex and Petechim Companies. In addition,
there are also other state-owned and joint venture enterprises involved in trading petroleum products.
However, Petrolimex and Petechim Companies cover about 60 per cent of domestic consumption on
these products.

GPC is responsible for setting prices taking into account of area characteristics such as rural,
mountainous areas.

Figure 2.7. Organizational Structure and Management of Energy Sector

2.8. Program of Coordination and International Assistance for Renewable Energy Development

There are many renewable energy development activities sponsored and coordinated by several
agencies within the GOV. Under the Ministry of Industry (MOI), EVN /Institute of Energy (IE), the
counterpart for the Rural Electrification Master Plan, has conducted many RE pilot projects in solar and
wind energy and has designed and implemented technologies to improve the utilization of biomass

18
resources. Renewable Energy Research Center of Hanoi University of Technology, Research Center for
Thermal Equipment and Renewable Energy of the Ho Chi Minh City University of Technology, and
Solarlab have implemented their own pilot projects and have developed a great deal of technical capacity
with solar, wind, and biomass energy system designs.

The Hydropower Department of IE/EVN is the lead agency in Viet Nam mandated to develop
hydropower resources in the country, while the Water Resources Department of the Ministry of
Agriculture and Rural Development has a mandate on land-use planning and development of water
resources. This department also designs and implements small hydropower projects throughout the
country.

The following support programs for RE development have been provided by international
agencies.

(i) The World Bank (WB) group has supported activities such as: A Master Plan for Rural
Electrification for Viet Nam (Danish Consultant Trust Fund); Preparation of an investment
pipeline for new small hydro sites (New Zealand Government); A macro level wind resource
map for the IndoChina region (Netherlands Partnership Program); and Investment and
business plan for micro hydro manufacturing business (Swiss Consultant Trust Fund).

(ii) The Government of Japan has provided assistance for RE activities including a
demonstration project of a hybrid system of photovoltaic micro-hydro-power generation in
Gialai Province (New Energy and Industrial Development Technology Organization or
NEDO of Japan), and a rural electrification plan for 265 communes in 17 provinces in the
north through the use of RE resources, i.e. micro-hydro, solar or wind energy (Japan
International Cooperation Agency of JICA); A project of photovoltaic- wind power hybrid
system in Kontum province (TOHOKU).

(iii) The Swedish International Development Agency (SIDA) has provided support for a
Regional Research and Dissemination Program on Renewable Energy Technology for Asia
to promote dissemination of technology through adaptation to local condition.

19
3. TECHNICAL POTENTIAL FOR REGA TECHNOLOGIES
3.1. Potential for Renewable Energy

Viet Nam is endowed with RE resources distributed throughout the country. Recent studies on
the technical potential of RE resources have shown that small hydropower has potential of 800-1400 MW
and biomass has 250- 400 MW potential. PV can supply electricity to about 50,000 households in
southern, central regions and some households in northern Viet Nam, while 200 MW of geothermal power
resources in central region could be explored.
In addition, there is potential in increasing RE and reducing GHG emissions through replacement
of old industrial steam boilers, fuel substitution and upgrading, and improvement of some thermal power
plants. About 300 industrial steam boilers need to be replaced, while fuel substitution from coal /wood to
gas is necessary for porcelain kilns in traditional porcelain making centers and villages.
3.1.1 Small Hydropower Resources

Hydropower stations with installed individual capacity up to 10 MW are considered small.

However, at present, small hydropower stations are divided into 3 categories: (i) 100- 10.000 kW; (ii) 5-
100 kW; and (iii) 0.1- 5 kW. According to preliminary assessment of local authorities, the total technical
potential of small hydropower resources of Viet Nam is 1.6 to 2 million kW categorized by capacity sizes
as follows:

(i) Small Hydropower Stations with capacity from 100 to 10,000 kW/station --- 500 sites with
total capacity of about 1,400,000 – 1,800,000 kW (accounting for 80 - 97% of total small
hydropower stations)

(ii) Small Hydropower Stations with capacity from 5 to 100 kW per station --- 2,500 sites with
total capacity of 100,000 kW to 150,000 kW (accounting for 5-7.5% of total small hydro-
power)

(iii) Small Hydropower Stations with capacity from 0.1 to 5 kW/station (also called as Micro-
Hydro- Power Stations) --- about 1 million sites with total capacity of 50,000 - 100,000 kW
(accounting for 2.5-5% of total Small Hydropower capacity).

The Small Hydropower Stations that have been constructed and in operation since 1994 are (a)
over 400 stations with capacity of 5-10,000 kW/station and a total capacity of 41,000 kW (total energy of
about 65-120 million kWh/year), and about 12,000 unit stations with capacity less than 5 kW/station (total
energy of 18-20 million kWh/year).

The amount of electricity produced by these small and micro hydropower stations has partially
contributed power supply for household lighting, agriculture, and handicraft activities that play significant
role in socioeconomic development for provinces in mountainous, highland and midland regions.
However, because the equipment is too old, lack of budgets for maintenance etc, only 40% of these
Small Hydropower Stations with capacity of 5-50 kW/station are still in operation. As there are no
permanent dams to maintain water during flood season, as most rock dams are temporary, micro
hydropower units (with capacity of 0.2-0.5 kW/unit) have to interrupt power generation and limit capacity
and operation time during the dry season due to shortage of water.

From now up to 2005, national and regional power networks could provide power to cities and
district towns of mountainous provinces. However, there would still many communities and villages in
remote and high areas especially in the northern and central regions that will not be reached by power
networks. Therefore, training on project development and investment of small and micro hydropower
resources to supply electricity in these areas is an urgent requirement and an important component of the
Viet Nam rural electrification program. To implement this program, big investment from power sector, the
GOV and international financial support will be required. According to the recently study on the current
status of 30 small hydro power plants managed by EVN, there are 13 plants with a total power of about

20
25 MW that could be rehabilitated and upgraded. The total investment budget for rehabilitating and
upgrading these plants is estimated about 11.5 million US$. The list of small hydropower plants is
presented in Table 3.1.

Table 3.1. List of Small Hydropower Plants to be rehabilitated and upgraded

With
Rehabilitation Rehabilitation
Installed
Name of Cost
No Capacity Location
Plant Probable (US$)
(kW)
Operating Life
(Year)
BAN ThanhHoa, ThoXuan,
1 960 15 1,860,000
THACH XuanQuang
2 Thac bay 2742 LaiChau, DienBienPhu 12 504,000
Chieng Sonla, ThuanChau,
3 1900 15 1,561,000
ngam ChiengNgam
4 Thac ba 300 GiaLai, MangYang 13 103,000
5 Iadrang 2 1200 GiaLai, ChuProng 18 320,000
6 Kon dao 600 KonTum, DakTo 11 345,000
7 Phu ning 2000 QuangNam, TamKy 11 315,000
8 An diem 5640 QuangNam 17 213,000
9 Nam suu 500 HaGiang, ViXuyen 13 897,000
10 Viet lam 800 HaGiang, ViXuyen 15 793,000
11 Nam ma 3600 HaGiang, ViXuyen 14 1,692,000
12 Thac thuy 1200 HaGiang, BacQuang 15 910,000
13 An kroet 4400 LamDong, LaDuong 14 1,938,000
Total Rehabilitation Cost 11,451,000
Source: Colenco- Technical Assistance for Preparation of Proposed Rural Energy Project- TA Package 7 -Volume
1,2,3. February 2000.
A pre-feasibility study report on small hydropower showed that there are about 10 sites that may
be economically and technical feasible to be developed with the total installed power of 50 MW for an
investment of 75 million US$. Community isolated hydro grids include two phases:

(i) Phase 1: There are about 20 to 80 communes with about 10,000 to 40,000 households in
the north of Viet Nam to be supplied electricity from isolated hydro grids. The total installed
power of small hydro power plants is about 2 to 6 MW.

(ii) Phase 2: Isolated hydro grids will supply electricity for about 80,000 to 110,000 households
in about 160 to 220 areas with the total installed power of 14 to 19 MW.

3.1.2 Solar Energy Resources

Viet Nam has stable high solar insolation in the southern and central regions but it fluctuates by
season in the northern region. Average solar in the south and central is about 5 kWh per m2 per day,
fluctuating from 4.0 to 5.9 kWh per m2 per day. The solar insolation in the North fluctuates from 2.4 to 5.6
kWh per m2 per day.

Solar PV power systems with total capacity of about 800 kW have been installed. The systems
are divided into 3 categories: exclusive systems (50%), institutional systems for institutions, hospitals,
population centers and battery charging stations (30%), and household systems (20%). Most solar power
systems installed in Viet Nam are working well. The solar modules are imported. Table 3.2 presents data
of solar insolation and the average number of sunny hours per year in typical provinces throughout the
country.

21
 Table 3.2. Average Daily Solar Insolation in Provinces
Unit: (kWh/m2/day)

Provin Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Year
ce

Ha 1.24 2.66 2.85 3.91 4.61 4.22 4.46 4.54 4.49 3.34 2.83 2.25 Data
Giang missin
g

Lao Cai 2.37 2.77 3.42 4.29 5.01 4.61 4.60 4.57 4.39 3.45 2.82 2.32 3.72

Yen Bai 2.16 2.58 3.13 4.59 4.44 4.68 4.68 4.59 3.84 3.05 2.19 2.49 3.54

Tuyen 2.37 2.39 2.70 3.40 5.00 4.25 4.97 4.80 4.70 3.91 3.11 2.52 3.69
Quang

Cao 2.25 2.45 3.04 4.07 5.42 5.35 5.29 5.85 5.19 4.16 3.22 2.77 4.15
Bang

Phu Tho 2.42 2.45 2.67 3.60 5.24 4.85 5.21 4.79 4.82 4.20 3.35 2.77 3.87

Lai 3.29 3.83 3.58 5.43 5.32 4.48 4.54 4.73 4.81 4.12 3.46 3.12 4.12
Chau

Hoa 2.62 2.66 2.94 3.81 5.00 4.53 4.86 4.56 4.36 4.04 3.21 2.73 3.78
Binh

Ha noi 2.44 2.40 2.53 3.46 5.23 5.31 5.59 5.10 4.79 4.18 3.45 2.97 4.08

Da 3.07 3.27 4.55 5.09 5.27 5.81 5.77 5.42 4.91 3.52 2.89 3.07 4.43
Nang

Binh 3.16 4.06 4.99 5.93 5.93 5.76 5.55 5.80 5.35 4.07 3.02 2.80 4.70
Dinh

Gia Lai 4.28 5.15 5.51 5.66 5.51 4.96 4.71 4.57 4.48 4.45 3.84 3.80 4.79

Kon 4.10 4.98 5.53 5.74 5.32 4.59 4.26 4.45 4.1 4.55 3.85 3.67 4.61
Tum

Dac Lac 4.07 4.82 5.06 5.23 4.73 4.45 4.24 4.21 3.97 3.91 3.61 3.54 4.32

Quang 2.86 3.78 4.68 5.68 5.87 5.83 5.74 5.75 5.33 3.99 2,88 2.71 4.60
Ngai

Nha 4.66 5.29 5.69 5.91 5.90 5.66 5.66 5.51 4.92 4.42 4.04 4.15 5.15
Trang

Tp HCM 4.65 5.19 5.43 5.45 4.79 4/67 4.34 4.78 4.42 4.40 4.31 4.28 4.72

Soc 4.81 5.35 5.54 5.55 4.49 4.28 4.53 4.50 4.35 4.22 4.44 4.44 4.71
Trang

Sources: Master Plan on Renewable Energy Resources in Vietnam, IE, 2001,

22
 Table 3.3. Sunny Hours in Provinces

Provin Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Year
ce

Lai 132 141 183 201 187 122 130 151 178 154 136 129 1873
Chau

Tuyen 69 48 55 89 182 167 194 182 181 160 130 103 1559
Quang

Ha noi 67 45 47 80 166 156 183 163 160 165 125 109 1465

Da 135 142 104 205 256 237 256 207 174 145 123 112 2096
Nang

Binh 173 207 269 262 278 232 270 233 202 183 131 130 2559
Dinh

Gia Lai 256 260 275 233 209 143 138 118 135 179 198 233 2377

Dac Lac 245 233 272 224 196 147 124 113 114 178 210 238 2280

Kon 249 233 272 224 196 147 124 113 114 178 210 238 2298
Tum

Nha 184 202 264 259 251 228 245 239 205 182 142 151 2554
Trang

Tp HCM 245 246 272 239 195 171 180 172 162 182 200 223 2489

An 282 256 293 238 232 161 208 183 193 211 225 250 2732
Giang

Sources: Master Plan on Renewable Energy Resources in Vietnam. IE, 2001.

Solar Insolation Potential Map

Solar insolation potential is evaluated according to average total solar insolation in a year,
expressed in kcal/cm2/year or kWh/cm2/year. In the PRC, potential of solar insolation are divided into 4
levels as follows:

Level I – Areas with total annual average insolation higher than 150kcal/cm2/year (1744.5 kWh/
m2/ year, or 4.8 kWh/ m2/day) are considered high potential.

Level II – Areas with total annual average insolation of 120-150 kcal/cm2/year (1395.6-1744.5
kWh per m2 per year or 3.8-4.8 kWh per m2 per day) and have potential appropriate for
application of solar PV systems.

Level III – The areas with total annual average insolation of 100-120 kcal/cm2/ year (1163-1395.6
kWh / m2 / year or 3.2-3.8 kWh / m2 / day) are considered not appropriate for application.

Level IV – The areas with total annual average insolation less than 100 kcal//cm2/year (1163kWh
/ m2 / year or 3.2kWh / m2 / day) are considered weak potential.

23
 Based on the above standard insolation levels and map of average annual insolation throughout
the country, Viet Nam is divided into 4 zones corresponding to the 4 above levels:

Zone I – Include provinces in Southern Central and Northern-South namely Khanh Hoa, Ninh
Thuan, Binh Thuan, Ba Ria - Vung Tau, Kon Tum, Gia Lai, Dac Lac, Lam Dong and Dong Nai.

Zone II – Include most remained territories of the country.

Zone III – Include provinces located in mid of Northern region namely Ha Giang, Lao Cai, Tuyen
Quang, Yen Bai, Phu Tho, Hoa Binh.

Zone IV – Included some highland provinces such as Ha Giang, Yen Bai.

In general, islands are suitable for solar energy applications. For coastal areas, it needs to pay
attention on protection of equipment from salted water vapor. The hybrid systems of solar and wind, solar
and diesel or wind and diesel can be economically used.

3.1.3 Wind Power

In general, Viet Nam has average wind energy potential compared to countries in the world and in
the region. However, the wind speed in the mainland is low, about 2-3m/s, and is not suitable for electric
power generation. In some inland areas with land wind speed of 4-5m/s such as Lao Cai and Ban Me
Thuat provinces the wind turbine-generators with various capacities can be applied. With above 3,000 km
of coastal line and mountainous land area accounting for 70% of the country area, wind power potential is
good enough. However, this potential has not yet been identified because there is no systematic
measurement of wind speeds. Data taken from meteorological stations is limited because their sites are
not suitable for wind power plants and their gauges are not regularly calibrated. A study by the Institute of
Energy in 9 islands indicated that average wind speed ranges from 4.1 to 7.1m/s. A wind map as the
result of the study for Indochina indicated that there are many wind pockets with speeds over 6m/s in
mountainous borderline areas to Laos and provinces in southern Da Nang City and northern Ho Chi Minh
City area.

Table 3.4 presents monthly and yearly average wind speeds at height of 10-12m in some typical
localities.
Table 3.4. Average Wind Speeds in Some Localities
Unit (m/s)

Location Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Year
Lai Chau 2.7 3.3 3.3 3.1 3.0 2.7 2.9 2.5 2.8 2.9 2.7 2.5 2.9
Lao Cai 5.4 6.7 5.9 5.1 3.8 3.9 3.3 2.8 2.9 3.3 3.1 4.5 4.2
Ha noi 1.5 2.4 2.3 2.5 2.4 2.4 2.1 1.8 1.8 1.8 1.9 2.0 2.0
Co To 4.5 4.3 3.8 3.2 3.5 3.5 4.7 3.7 4.3 4.9 5.0 4.8 4.2
Nam Dinh 3.7 3.7 3.5 3.8 4.2 4.1 4.4 3.3 3.0 3.7 3.6 3.6 3.8
Bach Long 8.0 7.7 6.5 5.9 6.5 6.8 7.7 5.9 6.6 7.7 8.2 7.8 7.1
Vi
Hoan Dau 4.8 3.6 4.4 4.7 5.6 5.7 6.0 4.7 4.6 5.0 4.9 4.7 5.0
Hon Ngu 4.0 3.9 3.2 3.2 3.5 3.8 4.2 3.5 4.0 4.6 4.4 4.3 3.9
Khe Sanh 3.4 3.5 3.2 2.6 2.7 3.1 3.7 3.2 1.8 2.6 3.6 3.4 3.0
Nha Trang 3.5 3.4 3.0 2.6 2.3 1.8 2.0 1.9 2.0 2.7 3.8 4.1 2.8

24
Truong Sa 8.3 6.7 5.3 3.7 3.4 5.7 5.8 7.4 5.4 4.9 6.1 8.3 5.9
Playcu 3.1 3.2 2.8 2.2 2.1 3.1 2.9 3.5 1.9 2.1 3.2 3.4 2.8
Ban Me 5.6 5.6 4.4 3.2 2.1 1.9 1.7 1.8 1.5 2.5 3.9 5.4 3.3
Thuat
Phu Quy 8.6 6.0 4.5 3.3 4.1 6.7 7.2 8.9 5.3 4.3 6.4 8.8 6.2
Vung Tau 3.2 4.6 4.7 3.8 2.7 3.2 2.8 2.9 2.3 2.0 2.4 2.1 3.1
TP HCM 2.3 3.1 3.0 3.3 2.5 2.7 2.9 3.8 2.7 2.2 2.2 2.0 2.8
Rach Gia 1.4 2.0 2.3 2.2 2.5 3.4 3.6 3.9 2.4 1.6 1.2 1.4 2.1

Source: IE, 2001, Master Plan on Renewable Energy in Viet Nam

Cost of wind power is competitive to conventional electricity. In Viet Nam, there are many sites
along the coastal line and islands that have good wind conditions suitable for construction of large power
wind farms, which can be connected to the national power grids. Some international agencies have
studied wind power projects in Viet Nam that may be developed in the near future. Following are 9 sites
proposed for pre-feasibility study on wind power development in Viet Nam:
(i) Co To Island, Quang Ninh province: Average speed of 4-6 m/s
(ii) Mui Ca Na Island, Ninh Thuan province: Average speed of 5-6m/s
(iii) Con Co Island, Quang Binh province: Average speed of 4-4.5 m/s
(iv) Ly Son Island, Quang Ngai province: Average speed of 5.4 m/s
(v) Tay Trang in Lai Chau province: Average speed of 6.2 m/s
(vi) Deo Tu Song in Khanh Hoa province: Average speed of 4-5 m/s
(vii) Bach Long Vi Island, Hai Phong province: Average speed of 7-8 m/s
(viii) Phu Quy Island, Binh Thuan province: Average speed of 6-7 m/s
(ix) Do Son in Hai Phong province: Average speed of 4-5 m/s

3.1.4 Biomass for Energy Production

Viet Nam has significant biomass resources such as sugar cane dredges, rice husks, coffee
husks, coconut shells and wood residues, but only a portion of sugar cane dredges is used for electricity
generation. The main biomass resources possibly used for biomass-based power generation and co-
generation apart from sugar cane dredges are wood residues, rice husks and rice straws.

Viet Nam is one of world leading countries in rice export but at present, rice-milling facilities are
still small. If rice husks are efficiently collected from these milling facilities, electricity generation using rice
husks will be feasible. There is an opportunity to produce rice ash for sale at price of 200,000 VND/tone.

It is estimated that about 1.5-2.5 million tons of sugar cane dredges and 2.5-3.8 million tons of
rice husks can be used for energy production. Also, residues from wood processing such as saw dusts,
wood chips from hundreds wood processing facilities with large output can be considered. At present, out
of 43 sugar plants, only 3 are supplying surplus electricity to national power grids, namely: Son La sugar
plant in northern region, La Nga and Sucrerie de Bourdon in southern region. According to a plan of the
GOV, total output of large industrial sugar plants (>1000 tons/day) is anticipated to increase from 20,500
TCD in 1997 to 98,000 TCD in 2005.

Initial estimation shows that these sugar plants at designed capacity and enough input sugar
cane can provide surplus of about 100MW to the national power grid. Even without new sugar plants,
apart from 3 sugar plants selling surplus electricity to EVN, the sugar plants with output over 2,000 tons of
sugar cane/day and large rice milling plants also have opportunities to produce electricity from residues
for power grid. The sugar cane dredge-based-electricity generation projects are usually included in large
sugar projects with existing steam boilers' capacity not totally used. When using sugar cane dredge
residues as fuel, one more steam turbine can be installed for power generation. The potential of sugar

25
cane dredge residues and some main biomass resources for electricity generation are presented in Table
3.5.

Table 3.5. Main Biomass Potential for Generating Electricity in Viet Nam

Type of biomass Total amount (, Surplus available Biomass available Electricity

000 ton) factor (, 000 ton) generation (MW)

Rice husk 6,400 0.39 2,500 100-200

Bagasse 4,500 - - 150-200

Wood chip/saw - - - 1-5

dust

Rice milling plants with longer operation season and relatively high benefit from selling rice husk
ash are attractive for the development of rice-husk power plant with unit cost of 1,500-1,600 US$/kW.
However, because most rice milling plants are small, effective transport of rice husks necessary from rice
milling plants to the power plants should be considered in future.

According to the report "Potential for energy generation from wood and selected Agro-Industrial
Residues in Viet Nam", EC - ASEAN COGEN Program, Phase II (Le Hoang Viet & Tran Quang Cu,
1997), there are 128 rice milling plants dispersed throughout 40 provinces and cities. Milled rice outputs
of these plants range from 15 to 600 tons/shift/plant. However, the recent survey carried out by IE
indicated that most state owned rice-milling plants play only role of keeping rice. The same situation is in
the south of Viet Nam but at lower level. Also according to the above report, the areas with high potential
of rice husks for electricity generation are Long An, Tien Giang, An Giang, Kien Giang, Can Tho, So
Trang, Dong Thap and Tra Vinh. Apart from 15 rice plants with output over 100 tons/shift (Table 3.5).
There are ten private rice milling groups with about 30-50 member enterprises each and output of 100-
250 tons /day.

Table 3.6. Public Rice Mills in Eight Provinces in Mekong River Delta
No Province Name of rice mill Building Capacity Location (District)
year (Ton/shift)
I Long An
1 Quoc doanh 1 1992 120 Tan An town
2 Quoc doanh 2 " 100 Thanh Hoa
3 Quoc doanh 3 " 120 Tan An town
4 Quoc doanh 11 " 100 Tho gao Tan An
5 Quoc doanh 12 " 120 Tho gao Tan An
II An Giang
6 N/m xay xat 5 1991 100 Long Xuyen town
7 N/m xay xat 6 1992 100 Long Xuyen town
III Tien Giang
8 N/m huyen Cai Lay " 140 Cai Lay
9 N/m huyen Cai Be " 140 Cai Be
10 N/m huyen Cho " 100 Cho Gao
Gao
IV Tra Vinh

26
 11 Quoc doanh 2 1999 200 Chau Thanh
V Can Tho
12 N/m xay xat 1 1990 200 Tra Noc
13 N/m xay xat 1 1990 100 Rach Gia town
VI Soc Trang
14 Tan Thanh 1992 100 Soc Trang town
15 Soc Trang 1986 128 Soc Trang town

3.1.5 Geothermal Energy Resources

A few studies on geothermal energy resources that were carried out in Viet Nam indicate that the
country has over 300 hot mineral water resources in the central region with surface temperature up to
105oC. Preliminary assessment indicated that total capacity of potential thermal power plants to be
developed is about 200MW.

Based on the investigation results on over 100 drilled wells in hot water areas carried out by
Vietnam Geological Department and ORMAT company (USA), 6 sites namely Mo Duc. Nghia Thang
(Quang Ngai province), Danh Thanh, Tu Bong (Khanh Hoa province), Hoi Van (Binh Dinh province) and
Le Thuy (Quang Binh province) can provide hot water at 140-180oC for geothermal power plants.

3.2. Potential for Energy Efficiency

3.2.1 Industrial Steam Boilers Replacement

In Viet Nam, the industry sector generates only about 25% of GDP but it has the largest energy
consumption, about 43% of energy and 42% of electricity. Generally, technology level of the industry
sector is not high and the energy efficiency (EE) is still low as most industrial enterprises are using small
steam boilers.

In 1999, there were 1,125 industrial steam boilers operating in the whole country. These industrial
steam boilers, which still operate are old, obsolete, with low efficiency, high fuel consumption rate, not
ensured operation parameters (steam flow, steam pressure, temperature) and causing environmental
pollution. It is urgently necessary that these old boilers be rehabilitated or replaced.

In previous cooperation activities with NEDO, Japan on abatement of greenhouse gases (GHG),
a survey on the possibility to reduce fuel consumption in industrial steam boilers and develop energy
cogeneration in industrial facilities was carried out. The list of existing industrial steam boilers categorized
according to fuel types are shown in table below:

Table 3.7. Existing Industrial Steam Boilers with capacity over 1 Ton/h

Quantity Share (%) Efficiency (%)

Total number of boilers 565 100
By fuel type
- Coal 267 47 50 -70
- Oil 268 47 60 -80
- Other 30 6
By installation year
- Before 1975 275 48.5

27
 1976 – 1990 146 26
1991 – 1998 140 25
Not defined 4 0.7

Source: MOST, 1999, Energy conservation and Energy efficiency - KHCN 0908

3.2.2 Fuel Substitution

Viet Nam’s draft national policy indicates the necessity to focus on industries with high
energy/electricity consumption like cement, paper and steel but have high potential of energy saving.
There is potential of energy saving and fuel substitution in the porcelain production industry because this
sector has the highest energy share in production cost at present.
Cement Industry
Cement industry consumes the largest amount of energy in Viet Nam, accounting for 17% of total
industrial energy consumption. Energy cost accounts for 33.5% of total production cost. The cement
industry with output of 15.3 million tons in 2001 has backward technology and with actual fuel
consumption higher than design criteria. Energy saving measures may be applied in management,
combustion chamber improvement, and increase of cooling efficiency.
Steel Industry
The steel industry with 1.9 million tons of output in 2001 is second in terms of energy
consumption, accounting for 7.7% of total energy consumed by industries. In terms of electricity, steel
industry is the largest consumer with 56% of electricity consumption in all Industries and 22% electricity
consumption in total economic sectors. The kilns used in steel industry in Viet Nam are small with output
less than 30 tons/batch and energy consumption of 800 kWh/ton of products. In other countries, output of
100-180 tons/batch consumes about 400 kWh/ton of products. Expected energy saving measures
includes the use of fuel jet support kiln, adjustment of fuel-air ratio in fuel-air mix in kiln and installation of
heat recovery system for heating air or fuel, and preheating of winding disk. Energy saving potential in
some typical steel plants is presented in Table 3.8.

Table 3.8. Energy Saving Potential in Viet Nam Steel Industry

Reduction of energy consumption Energy

(thousand liters of oil/year) reduction level
Plant
(%)
Stage 1 Stage 2 Total
Luu Xa¸ Lo cao 150 310 460 8.5
Luu Xa¸ Lo ho quang 100 1970 2070 21.3
Luu Xa¸ can thep 330 450 780 14.4
Nha Be 810 2530 3340 22.1
Bien Hoa 800 2400 3200 15.3
Da Nang 80 260 340 7.9
Vietnam steel 2270 7920 10190 16.7
corporation
VPC 110 - 110 1.0
Vinasteel 60 170 230 3.8
Vinapape 30 - 30 2.3

28
 Vina Kyoei 110 - 110 0.6
Total of J.Vs 310 170 480 1.3
Total of steel 2580 8090 10670 10.9
Industry

Source: MOST, 1999, Saving and efficient energy use KHCN 0908
Porcelain Industry
Porcelain industry has an average output of 4.6 million products per year. In the past years,
porcelain production has developed rapidly, attracting many laborers, and export accounted for 4.2% of
total industrial export. At present, there are about 1,000 porcelain production facilities in the country,
mainly small and medium enterprises, traditional handicraft villages.

The State Science and Technology Program (KHCN-09-08) on energy conservation and EE
assessed that manufacture of construction materials and the porcelain industry have high potential of
energy savings. Porcelain technology production is handy, backward, and with high fuel consumption per
production unit (2-3 folds of that advanced technologies). Heat consumption per one product unit in Hai
Duong porcelain plant (bowl, plates, cups etc.) is 12,000 kcal. Handicraft kilns have lower energy
consumption level (7,000 kcal per one kg of porcelain) but they are not many. Energy fuel cost accounts
for 30-50% of porcelain product cost. The old porcelain production technology has the following features:
(i) unreasonable kiln design; (ii) heat of flue gas not recovered; (iii) poor thermal insulation, unreasonable
use of kilning bags; (iv) fuel with low quality and not stable; and (v) poor planning and management of
operation.

Before 1996, porcelain products were burnt in traditional kilns using coal in northern region and
wood in southern region. The shift in using coal into gas has been applied in order to reduce fuel
consumption and pollutant emissions. Some kiln technologies of other countries such as Taiwan,
Germany (transferred by GTZ of Germany) are being demonstrated. It is anticipated that replacement of
traditional kilns by gas burning ones may be strongly developed in future.

According to some studies on energy saving carried out in Hai Duong, and studies carried out by
Porcelain Corporation, the energy saving potential in porcelains production are as follows.

(i) For short-term measures with small investment such as reasonable production plan, fuel
preparation and kiln combustion, the potential of fuel saving is 15-20% translating to
50,000-70,000 tons of coal than can be saved.

(ii) For medium-term measures with certain investment to make kiln improvements, use of
disposed heat, the potential of fuel saving is 20-25%.

(iii) For long-term measures with larger investment replacing old technology by gas kiln, the
potential of fuel saving is higher, product quality is also better, and environment is cleaner.
Paper and Pulp Industry
The paper and pulp industry has 100 production units with total designed output of 240,000 tons
of paper/year and 170,000 tons of pulp/year, accounting for 4% of total GDP of industrial sector. Its
annual average growth rate is of 7%. Paper production technologies are still at low level. Only Bai Bang
and Tan Mai paper plants produce paper with technology recovering chemicals, while the other
enterprises produce paper with backward technology, high production cost and environmental pollution.
Most of these facilities were built in 1960s or earlier.

The paper industry also consumes a lot of energy, accounting for 5.1% of energy, 7% of
electricity and 9% of coal consumption in industrial sector. Fuel and electricity consumption rate per
product unit is very high. The measures of energy saving, which can be applied are (i) rehabilitation of

29
coal fired steam boilers; (ii) replacement of oil atomizers for oil fired boilers; and (iii) improvement of
steam piping systems.

According to studies carried out by the Paper Corporation, potential of energy saving in paper
and pulp industry is over 10% of present fuel consumption for production.
Thermal Power Plants
Except the new Pha Lai 2 thermal power plant (TPP), which is in the commissioning stage, the
other thermal power plants of Viet Nam (Pha Lai 1, Uong Bi, Ninh Binh, Thu Duc, Can Tho) were built 20-
35 years ago. Due to constraints of power networks like financial capability, and operation skills, the
technologies selected for these TTPs at that time were about 15-20 year backward in comparison with
world technology level.

The old TPPs have small units (unit capacity from 25 to 110 MW), low steam parameters (up to
100 ata /535oC), therefore efficiency of power plants is low, fuel consumption is high, own used electricity
rate is large and techno-economic indicators are low. They have no reheaters, causing limit of thermal
cycle efficiency, design of burners is not suitable for fuel types, especially for Viet Nam anthracite. Thus,
combustion is not stable, combustion efficiency is not high, and operation is difficult, needing regular
upgrading equipment. The other systems of TPPs were also unreasonably designed.

In recent years, the old TPPs were over operated because of fast load increase and power factor
reaching 50-60%. The operation of units was tense especially in dry seasons when hydropower plants
have reduced the generated capacity. Efficiency of coal-fired units has decreased, reaching only about
20-28%. Therefore unit fuel consumption is high, fluctuating in the range of 650-700 grams of standard
coal/kWh (for Pha Lai 1 TPP - it is about 450 gr. standard coal/kWh). The oil-fired units also have high
fuel consumption (about 280 gr. of FO/kWh).

After long time operation, most old TPPs reach designed lifetime. The main equipment of TPPs is
old and seriously deteriorated. However, in order to meet required demand they must have operated in
the conditions violating technical, maintenance, repairing regulations with low efficiency, making it
inefficient and uneconomical, and unreliable.

30
4. REVIEW OF SKILLS AND INSTITUTIONAL CAPACITIES RELEVANT TO REGA
TECHNOLOGIES
4.1. Introduction

Many demonstration projects on RE such as photovoltaic project with capacity of 800 kW, small
hydro project of 90 MW, wind power project of 400 kW, rice husk fired cogeneration project of 50 kW, are
designed, installed and operated in Viet Nam. EE and conservation projects like fuel switching from coal
to LPG in porcelain kilns and compact lamps are likewise implemented by some local organizations.
However, comparing to potential of developing REGA technologies mentioned in Section 3, the projects
and sizes of projects implemented in recent years are inconsiderable. Most of the renewable
demonstration projects are funded by international organizations and with imported equipment.

Viet Nam has experience in design and installation of small hydro and photovoltaic projects and
has crowded staff of experts and technicians at the Institutes and Universities. However, skills,
competence and managerial ability of these staff of experts, technicians and institutions are insufficient in
project implementation. Thus, there is a need for capacity building through training, and transfer of RE
technologies as well as models/software on economic-financial analysis and environmental impact
assessment of projects.

4.2. Skills and Experiences in REGA Technologies

The models on energy planning and environment such as Integrated Resource Planning (IRP);
Environmental Manual (EM), Long-Range Energy Alternatives Planning Model (LEAP), MEDEE-ENV,
EFOM-ENV have been explored and utilized by some institutions in recent years.

Some experts and institutions have gained a lot of experiences in the design, manufacture and
installation of small hydro turbines serving residents in remote and rural areas though there have been
constraints on the availability of facilities. Some organizations such as EVN, Ministry of Agriculture and
Rural Development, Ministry of Education and Training, Natural Science and National Technology Center,
etc have their own technical bases for developing their projects. The small hydro equipment made in Viet
Nam is better in quality compared to the same size (less than 500 W) on the market that is mainly made
in PRC. However, the locally made products are more expensive than the imported ones. It is expected
that the technology transfer of small hydro machines from industrialized countries will be favorable and
competitive in the near future.

In the last few years, Viet Nam has undertaken a series of researches on technology, design,
manufacture and installation of demonstration projects on wind power turbines with capacity of 0.2 to 0.5
kW for irrigation for rural areas and electricity charge for accumulators. The wind power turbines
manufactured are of low quality and not mass produced. In order to supply electricity to residents who
cannot access the national power grid, various projects have been implemented or proposed such as
installing a wind velocity measure station at the high level of 60 m at the center of Viet Nam, and carrying
out the study program on wind velocity for manufacturing wind turbines with capacity of 1 to 5 kW
(probably to be cooperated with Japan). The higher capacity wind turbines have to be imported.

Other RE technologies such as geothermal, biomass (except bagasse) projects have been
implemented or at the stage of pre-feasibility study. Industrial steam boilers with steam pressure of 39
kg/cm2, output of 120 tons/hr and small kilns are locally manufactured in Viet Nam. The following projects
have been implemented:

Energy Conservation and Efficiency Program. A comprehensive program on Energy Conservation and
Efficiency (EC&E) under MOSTE implemented in 1997-1998 was sponsored by the Netherlands
government and cofunded by EU and SIDA. The objectives of the EC&E program are (i) assessment of
EC potential, (ii) formulation of EC master plan, (iii) development of the policy structure for
implementation, and (iv) institution building of the implementing organizations and training of staff and
local consultants.

31
Energy Conservation and Efficiency project in Small &Medium Enterprises. Some preliminary studies
related to EC&E issues in Small & Medium Enterprises have been carried out with the technical
assistance of GTZ. An example is the fuel switching of ceramic kilns from coal to LPG using German
technology. The project trained a group of technicians in designing and disseminating the new
technology in ceramic manufacturing.

Demand Side Management (DSM) project. The DSM project was sponsored by WB and SIDA and
implemented by MOI with the participation of MOST, MOC, and EVN. The first phase focused on
determining the energy potential in the different sectors, proposing policy measurements and plans to
implement the EC&E in the power sector, building lighting and public lighting systems. The second phase
with focus on DSM and EC&E was prepared by MOI for tendering.

Asia Least-cost Greenhouse Gas Abatement Strategy (ALGAS) Project. The Hydrometeorology Service
of Viet Nam implemented the ALGAS project during 1995-1998, with the participation of MOI, EVN and
other related sectors and with sponsorship from UNDP/GEF and ADB. The project scope included the
study of GHGs inventory in energy sector, forestry and land-use change, agriculture sector; the
formulation of a national least-cost GHG abatement strategies; a portfolio of least-cost GHGs abatement
projects, a national GHG action plan; and recommendations on future actions.

Project of GHG Mitigation from Power Sector. The project was sponsored by SIDA, implemented by IE
and technically assisted by the Asian Institute of Technology (AIT). Phase 1 of the project was carried out
during 1999-2001, aiming to assess the current status of Viet Nam power system, plan for power system
development and propose the measurements, while Phase 2 would be carried out in the period of 2002-
2004 and will focus on the policy and strategy proposed for Greenhouse Gas Mitigation in Power Sector.

Study on the Measurements for Greenhouse Gas Mitigation in Quang Ninh province. The project was
implemented by the Geographical Institute and IE during 1999-2001, and sponsored by GTZ. The
objectives of project were to propose the measurements for GHG mitigation in Quang Ninh province by
disseminating the high technology appliances in manufacture and household sectors.

Determine the CDM project's potential in Viet Na. The project was implemented by the Institute of
Meteorology and Hydrology during 2001-2002, which was sponsored by WB and funding from Australian
Government. The project aimed at determining the CDM project's potential in the sectors such as
industry, power, agriculture, and transportation.

4.3. Institutional Capacities Relevant to REGA Technologies

The RE resource exploitation and utilization have lasted for 20 years in Viet Nam. In this period,
there was a National Study Program coded 52 C (1985-1990) managed by the former Ministry of
Universities and Colleges. Due to budget constraint, the program focused on six technologies, namely:
small hydro, improved stoves, wind energy, solar energy and geothermal to serve rural areas. At the end
of the program, the RE studies have been widely disseminated to many institutions but there was lack of
cooperation and common direction.

Most hydropower stations with the large capacity (more than 100 kW) that serve the people in
mountainous provinces, are managed by EVN. The equipment of the stations are imported but well
maintained and managed. Manufacturing of turbines and spare parts of small hydro stations are locally
manufactured but of low quality. Management and post commissioning of mini-hydro projects such as
maintenance and overhaul are not properly taken cared of. Until September 1999, a hybrid small hydro-
solar voltaic power station of 125 kW, with the small hydro at 25 kW, was commissioned. The project
located at Trang Commune, Mang Yang district, Gia Lai province was funded by NEDO, Japan (and EVN
contributed by building the distribution line).

In late 1980s and early 1990s, wind generators with capacity of 150 W to 500 W were
dramatically implemented. The former Ministry of Energy (now Ministry of Industry) assigned IE to carry

32
out the study and implement small capacity wind power generators in islands and remote areas. To
supply electricity for households inaccessible to electric network, IE has studied and manufactured the
small capacity wind power generator of 150 W for charging accumulator at 15 V.
In recent years, Hanoi University of Technology implemented the following wind power
generators for households: (i) 3 wind power generators imported from PRC with capacity of 150 W each;
(ii) 5 wind power generators with patent of Institute of Transportation Technology, Viet Nam, 500 W each;
(iii) 12 wind power generators with patent of Ho Chi Minh University of Technology, Vietnam, 150 W each.
The Institute of Transportation Technology is the leading organization in wind power application.
After many years of experimenting on the 500W model, the Institute maintained its 6 wind power
generators. Unfortunately, due to reorganization in 1990, the Institute no longer carried out wind power
activities and produced these products.

The Machinery Design Institute has studied and manufactured the small capacity wind power
generator of 1.50 kW to 5.0 kW for many years, but it was not successful because of high production cost
and damage caused by storms. Since 1990, the Institute has no longer implemented wind power
activities.

The Institute of Energy Technology under the Natural Science and National Technology Center
also implemented and installed wind power generators to serve the households with capacity of 120W to
500W, mostly imported from PRC.

The Research Center for Thermal and New Energy Equipment under the Ho Chi Minh University
of Technology is the leading organization in the south researching and implementing small capacity wind
generators. The Center has built 3 wind power villages, two villages at Khanh Hoa with 50 units each and
one at Can Gio with 50 units. Total number installed by the Center is 900 units with capacity from 150W
to 200W.

Viet Nam does not yet manufacture large capacity wind generators with complicated technology.
These wind generators from Ventis (Germany) have to be imported for the Tu Bong Project - Khanh Hoa.
The Bach Long Vi Wind Power Island Project is proposed to be equipped with wind generators
manufactured by MEDA (Spain). The 2 kW wind power project at Kon Tum and the Hybrid wind power
and diesel project of 30 kW at Hai Thinh - Nam Dinh Province are also imported from Japan. Total
installed capacity is of 9 kW in which wind power 2 kW and Solar cells 7 kW. The system has been stably
operated for one year and supplying electricity to 40 households. The project is 90 % of investment cost
funded by TOHOKU-Japan and distribution network built by EVN.

The other institutions and manufacturers merely produce wind power units of 120W to 1 kW,
mainly in the range of 120-150-200-300 and 500W.

4.4. Institutions Involved in REGA Technologies

Energy technology development in Viet Nam is the responsibility of the GOV. The following
governmental institutions are involved in the power sector:

(i) MOI is responsible in energy planning and national energy policy including RE and directly
monitors EVN and it's subsidiaries. It manages the World Bank funded projects for the
development and planning of RE in remote areas.

(ii) EVN is the state owned corporation in charge of power generation, transmission and
distribution in the country. Under EVN, there are seven Power Companies (PC): Hanoi PC,
Ho Chi Minh City PC, PC N1 (in the North), PC N2 (In the South), PC N3 (in Central
region). Dong Nai PC and Hai Phong PC.

(iii) IE is a scientific/technology research, and planning organization for development of energy

and electricity, it has been a consultant for Government and acts as focal point of the

33
 sector, participates in planning National Energy Policy, Energy Economics and establishes
the Master Plan on Power System Development, provincial electrification planning, makes
pre-feasibility study and feasibility study of power plant and transmission lines projects
including nuclear power plants; researches and implements renewable energy
technologies.

(iv) MOST is responsible for promoting the development of science and technology in Viet Nam
while the Ministry of Agriculture and Rural Development is responsible for developing rural
areas, agriculture and forestry sectors, and participates in the development of small hydro
in rural and mountainous areas through its Hydrological Center in the Hydrological
Research Institute.

(v) The Ministry of Education and Training has RE energy research centers in Ho Chi Minh
University of Technology, Hanoi University of Technology, and Can Tho University.

There are also other organizations involved in applied research and market development for RE
technology in Viet Nam, i.e. Solar Lab-Ho Chi Minh City, SELCO-Vietnam's Women Union, Nationalities
and Mountainous Areas Committee,

The GOV has issued the legal documents to encourage infrastructure investment including BOT
scheme in the power sector. However, investors have been facing the following difficulties and constrains:

(a) Project development process is complicated and the guidelines, regulations and decrees on
investment are not clearly defined and change all the time.

(b) Processing of the required documents to support the business contracts/agreements

between partners is very slow.

(c) State owned companies are more privileged than international and local investors in terms
of investment opportunities, project approvals and Bank financing.

EVN and its subsidiaries have made considerable progress in rural electrification with 81% of
communes (7245) and 71% of rural households (9,3 millions) having access to national network. GOV
sets the target to supply 90% of rural households accessed to national network in 2005. The
organizations responsible for rural electrification include MOI, which is in-charge of planning and
implementation, MPI and MOF prepare condition for investment (from the State's budget, favorable
credits and ODA), and the Provincial People's Committees plan for investment in electrification at their
localities. The State Bank directs and guides the commercial banks to offer soft loans for poor rural
households.

34
5. POLICY AND INSTITUTIONAL FEATURES IMPACTING REGA TECHNOLOGY
DISSEMINATION

5.1. Renewable Energy Technology Dissemination

The dissemination of RE technologies in Viet Nam began from 1965 with the development of mini
- hydropower plants for mountainous areas in the North of Viet Nam. During the period 1965-1985,
electricity supply was principally provided by diesel and mini-hydropower sources in mountainous
provinces like Ha Giang, Cao Bang, Lai Chau, Son La, Bac Can, Gia Lai, Kon Tum. In line with clean
government policy and financial subsidy mechanism, GOV invested in these mini-hydropower plants with
installed capacity of less than 100 kW, and with equipment imported from PRC. The financial subsidy
mechanism for mini-hydropower development however has been gradually eradicated after 1985 in the
context of national economic reform. With the rapid development of national electricity network, which
could supply the mountainous areas with conventional grid electricity, the mini-hydropower development
was entrusted to different local investors, such as research institutions, cooperatives, provincial
authorities, military authorities, etc. But without a unique national guideline and financial assistance, the
mini-hydropower plants have rapidly degraded. Only 30%-40% of them are able to supply electricity
supplying under 50% of their installed capacities, while the others stopped their operations.

Since 1985, RE technologies were formally considered and disseminated in the framework of a
national research named by 52-C Renewable Energy Program. This program was established under the
central government’s guidance and financed by government budget and different funds provided by
international organizations, NGOs, foreign universities, professional agencies etc. The purpose of this
program was to carry out different RE pilot projects for applying and disseminating RE technologies like
solar energy, wind energy, biogas, biomass and mini-hydropower. However, after the 52-C RE Research
ended in 1995, the application and dissemination of RE technologies was entrusted to different domestic
research institutions, agencies, companies, universities etc. that conducted their RE development
projects according to their financial capability.

The following are achievements in applying and disseminating major RE technologies till 2000.
Small-Hydropower Plants
(i) Total installed capacity: 1600-2000MW (about 7%-10% of total hydropower potential in Viet
Nam)

(ii) Small-hydropower plants with plant installed capacities from 100kW to 10,000kW (located
in 23 provinces of the country):
• Total installed capacity: 738 MW
• Total number of installed plants: 480
• Total number of plants being developed: 114
(iii) Mini-hydropower plants with plant installed capacities under 100kW:
• Approximate total installed capacity: 600MW
• Total number of installed plants: no data available
• Approximate percentage of plants being developed: 30%-40%.

Solar Energy
(i) In the framework of 52-C RE Development Program, solar energy is considered as the
most promising RE sources in Viet Nam.

(ii) By the end of 2002, the total capacity of photovoltaic (PV) units installed in Viet Nam was
about 800 kWp. These PV units were used for post and telegraphy, charging batteries,
lighting, solar home systems, audio-visual equipment, navigation flashes, microwave
repeaters, satellite receiver stations etc.

35
 (iii) Open sun drying was the common method used for drying agriculture products. The forced
conventional solar dryer was used by a limited number of salt field in North Viet Nam.

(iv) Solar water heaters were used by a limited number of households, clinics, hospitals, etc.
with installation of about 50 units having collector area of 1-2 square meters, each for
providing 50 -100 liters of hot water per day.
Biogas
Until 2000, there were about 1,500 biogas digesters used in Viet Nam with unit capacities from 3
to 250 m3, most of them are of family sizes from 1.5 to 2.5m3/digesters. Biogas digesters were partially
subsidized by the government budget. However, this RE technology could not be largely disseminated for
Vietnamese rural population.

Wind Energy
Wind energy was applied with a limited number of small-scale wind power turbines for home
water pumping and home electricity generation. Due to limited and unstable wind potential in Viet Nam,
large-scale wind energy projects were not considerable. In order to develop wind energy, Viet Nam
should have database for 40-50m high.

Biomass Energy
Biomass - based energy consumption is 60%-70% of total rural household energy quantity. At the
same time, combustion of biomass - based fuel is usually realized by low efficiency (10%-15%) traditional
cooking stoves. In order to use biomass energy in a more effective manner, biomass end-using
technologies like improved cooking stoves, rice-husk gasification for electricity generation, rice husk
briquetting, and rice husk fired thermal power plant, were considered and applied in Viet Nam. But due to
lack of governmental support and insufficiency of technical and technological expertise, these
technologies could not be largely disseminated.

The following observations can be drawn from the dissemination of RE technologies

dissemination in Viet Nam since 1965 up to the present.

(i) RE technology dissemination was carried out in the absence of a central government policy
and institutions, including the RE policy and of an energy - related legislative framework to
to encourage the development and utilization of RE.

(ii) Guidance, financial and technical assistance and organization arrangements are absolutely
necessary for RE technology dissemination.

(iii) Lack of central RE technology management mechanism, technical expertise and financial
sources for rural and mountainous households are principal barriers in RE technology
dissemination.

There is also lack of policies on subsidies to stimulate trading and investments on RE. Moreover,
there is insufficiency of private financial sources, difficult access to loans and micro-loan credits, and
absence of policy measures to encourage RE investment through RE-related tax concession exemption
policies as well as complicated and bureaucratic financial and administrative procedures.

5.2. Development of Policies for Enhancing Renewable Energy

During 1985-1995, the national program on RE was given consideration. However, the role of RE
in the Vietnamese overall energy balance at present is still inconsiderable (under 1%).

During the years 1990, 1991 and 1993, a draft National Energy Policy was prepared by the IE.
However, the draft National Energy Policy was not officially approved and promulgated by the
government. Thus, there is no actual national policy on RE development.

36
 Long-term national policy on rural electrification for mountainous areas through the national grid
electricity and off-grid electricity (PV, wind, mini-and micro-hydropower, small diesels etc.) has been
implemented since 1954, and it would be continuously implemented up to 2020 for the modernization of
agriculture and rural areas.

(i) The national and ministerial policy to diversify the investment in the RE development on the
basis of encouraging private investors to contribute to applying and disseminating RE
technologies for on-site electricity generation plant and/or grids.

(ii) Favorable access to loaning, micro-loaning and / or subsidized crediting of different

commercial and development banks for rural electrification generally and RE technology
dissemination particularly.

(iii) Issue the Standardized Power Purchase Agreement (SPPA) with enclosed suitable
electricity prices between EVN and private investors of RE development projects of under
10MW. According to SPPA, EVN should purchase electricity generated from RE projects
with agreed electricity price.

(iv) Governmental Decision No 22 to recognize the least cost RE-based electricity generation
as one of two official rural electrification ways, namely national electric grid - based rural
electrification and off-grid-base rural electrification as well as the provincial people's
committees should be responsible for provincial electricity development planning and for
provincial RE development and management.

(v) A government decree concerning the investment in decentralized electricity projects is

being drafted. This decree could allow the PPCs to decide on the suitable price of electricity
generated by these projects.

(vi) Electricity Law is being reviewed in the framework of drafting the National Energy Policy;
The purposes of this Law are to attract the domestic and foreign investments in electricity
development generally and RE development particularly, to ensure the equality and sound
competition between state-owned and private electricity production and sale and protect
the legislative rights and benefits of electricity consumers.

(vii) Electricity Pricing Policy is being reformed and renovated to be profitable to RE technology
application and dissemination.

Although RE technologies offer appropriate and sustainable ways to meet the energy demand of
rural/mountainous population, RE technology development and dissemination requires removal of the
barriers faced by the entry of RE technologies. The following measures could be considered.

(i) Evaluation of the technical and technological status of past and ongoing RE technology
projects, especially mini-hydropower and solar energy projects.

(ii) Summing up the experiences drawn from past and ongoing RE technologies projects.

(iii) Carrying out two most important RE-related studies: National Energy Balance and National
Energy Policy;

(iv) Preparing the first white Paper on National Energy Policy for the period 2000-2010-2020,
including policy on RE development.

37
5.3. Energy Efficiency Technology Dissemination

The period 1955-1965 was the period of the first industrialization program. Due to the importance
of EE in energy saving, GOV, through its ministries issued following EE - related policies:

(i) Estimate and control the EE of all energy - producing equipment as well as major energy
end-using appliances and devices;

(ii) Based on the EE estimates, establish a system of norms of energy consumption per
product (coal, electricity, and oil).

During 1965-1975, all facilities in the energy, industry and transport sectors were heavily
bombarded. The implementation of the above EE - related government policies could not be continued
although energy savings have been considerably realized.

The period 1975-1985 was economic recession, but the implementation of above EE-related
policies was continued. The energy - producing equipment (boilers, turbines, generators) and several
important energy end-using appliances and devices have been tested at sector level in order to identify
and quantify their energy consumption and efficiency. A system of norms of energy consumption per
product of major sectors, like electricity, industry, and transport was established in order to serve the
integrated planning of energy development in Viet Nam.

From 1985 to the present is the period of economic reform. The EE-related policies have been
investigated and considered in the framework of a great energy management program financed by WB
and named as "Energy Demand Side Management" (DSM) in major economic sectors like industry,
electricity and household sectors. Essentially, DSM is a research study, which has identified energy end-
using sectors with great EE potential. Different EE - related projects and policy recommendations are
identified for energy saving and sustainable energy development. DSM is a multi-year program that
establishes two types of strategies, EE and load management in order to encourage energy consumers to
voluntarily modify their electricity consumption.

Besides the DSM program, a research project on "Energy Conservation and Saving" had been
implemented by MOST to develop policy recommendations for conserving energy in Viet Nam, including
EE enhancement. At the same time, the MOF has conducted a research project on "Energy Saving" that
recommended a policy on institutionalizing energy saving through a government decree and fund. The
decree is being drafted and the fund is being established.

The history of EE technology dissemination in Viet Nam indicates the lack of central government
policy and strategy in planning for high efficiency options for energy supply and demand. In particular, the
inappropriate energy-electricity pricing and energy-related taxing policies are the outstanding policy /
institutional entry barriers to EE in Viet Nam.

5.4. Development of Policies for Enhancing Energy Efficiency

The EE - oriented policies have reflected the great efforts of the GOV to encourage energy saving
through enhancing EE in energy production and energy end-use. However, the following policies should
be detailed, concretized, and institutionalized in the future.

(i) Eradicate gradually subsidized financial mechanism so that electricity price could reflect the
true values of different costs of electricity production, transmission, distribution and
utilization.

(ii) Ensure direct control and regulation of electricity consumption of consumers through rapidly
enhancing the number of meters installed for customers.

38
 (iii) Enhance relative EE by reducing peak demand and increasing the valley demand on the
basis of applying the timing of use (TOU). For this purpose, the electricity sector has
increased the number of TOU meters installed at important electricity customers;

(iv) Apply the great tax/tariff concession that encourages the import of foreign - manufactured
EE equipment, appliances and devices.

(v) Carry out EE - oriented information and propaganda campaign for raising public awareness
and gradually eradicating local customs and behavior that tend to maintain the status quo
in design, selection and operation of out-dated electrical appliances, equipment and
building systems.

(vi) Draft a policy to develop complementary legislative and institutional frameworks for
enhancing the EE of electricity production and utilization.

5.5. Greenhouse Gas Abatement Technology Dissemination

Viet Nam signed the United Nations Framework Convention on Climate Change (UNFCCC) in
June 1992 and ratified it in November 2004. It signed the Kyoto Protocol in November 1998 and ratified it
in September 2002. From 1993 to 1998, Viet Nam was a participating country in ADB’s Asia Least-cost
Greenhouse Gas Abatement Study or ALGAS and produced its National GHG Emissions Inventory. In
1996, Viet Nam’s Institute of Geography was involved in a GTZ-sponsored project on “Implementation of
FCCC Regional Study”.

Although Viet Nam is a party to the UNFCCC, GHG abatement and global warming are not prime
considerations of the GOV and its ministries as well as other socioeconomic sectors in the country. GHG
abatement is a fresh concept in Viet Nam, a developing country with low industrialization level and low
fossil fuel consumption.

The total national GHG emissions of the country in 1993 was 103.80 million tons of CO2
equivalent, comprising over 100 million tons of CO2, 2.5 million tons of CH4 and 4 million tons of N2O.
The structure of the national GHG emission by sources follows: Agriculture 50.5%; Energy 24.7%; Land -
Use Change 18.6%; Industrial Process 3.7%; and Wastes 2.5%. Though the energy sector ranks second
as GHG emission generating source, it has negative environmental impacts on dense population in urban
areas, tourism and recreation centers, industrial processing areas etc.

As of date, there are no policies and /or institutions at the national level involved in GHG
abatement technology dissemination in Viet Nam. The following policies may be developed to raise public
awareness on GHG- abatement technologies:

(i) Information dissemination on the UNFCCC and KP to the masses in Viet Nam through
audio-visual communication activities, handbills etc.
(ii) Establishment of a body of volunteers to broadcast GHG abatement measures.
(iii) Introduction of large-scale use of clean coal technologies for future coal-fired thermal power
plants, new methods of coal mining, and large application of improved cooking stoves.
(iv) Gradual reduction and stopping of waste disposal in the sea and rivers and urban waste
management system should be centralized.
(v) Application of cleaner and more efficient coal combustion technologies in different coal
end-using equipment, appliances and devices in the industry sector.
(vi) Expansion of the coverage of the National Afforestation Program to abate GHG emissions
at the national, regional and local levels.

39
 6. SUSTAINABLE DEVELOPMENT PRIORITIES

The depletion of energy resources and environment pollution due to rapid increase in energy
demand are the concerns of the international community in general and the GOV in particular. For the
past years, GOV has invested and implemented projects on sustainable energy development, which is a
priority concern. A national program on "Building the Strategy and Policy for Sustainable Energy
Development in Viet Nam until 2020" has been carried out during the period 1996-2000 involving
scientists from related sectors. The program’s final report is a National Energy Policy (NEP) for the period
2000-2020. NEP has been completed based on the study results of the program and submitted to the
GOV for ratification. The two issues strongly focused in the policy are EE and RE development.

6.1. Renewable Energy

There is a growing consensus that RE will play an important role in meeting energy requirements
worldwide. Viet Nam is richly endowed with RE energy resources. Renewable energy is an important
alternative in the rural areas where there is no other option. At present, 80 percent of the population that
live in the rural areas have to rely on local energy resources, despite expansion of the rural electrification
grid. This will remain the case for many years.

Research and development of RE technologies have been ongoing for decades in other parts of
the world, including Viet Nam. More than 40 studies and project reports are available. Thus, rather than
focusing on new R&D efforts and pilot projects, the RE program can focus on implementation,
dissemination and commercialization of efficient use of RE in general, and development of RE for rural
electrification and grid supply in particular.

6.1.1 Renewable Energy Action Plan

Viet Nam has a fast growing power sector, and is rich in RE resources for electricity generation.
MOI and World Bank developed the Renewable Energy Action Plan (REAP) in cooperation with EVN.
REAP aims to provide clean, cost effective electricity to help rural people improve their standard of living
and increase their income. As per REAP’s assessment, the summary of the potential and current use of
RE in Viet Nam is indicated in Table 6.1.

Table 6.1: Potential and Current Use of Renewable Energy in Viet Nam

Potential Current Usage

Resources MW Thousand MW Thousand Geographical
s of HH s of HH Potential
Served Served
Small hydro power 800-1400 110-155 North and center
- Pico-hydro 90-150 200-250 30-75 100 North and center
- Isolated mini-grids 300-600 300 20 - North and center
-Grid connected mini 400-600 - 60 - South and center
hydro
Biomass 250-400 - 50 - South and center
bagasse/rice husk...
Geothermal 50-200 - 0 - Center
Wind power TBD TBD 0.2 1 Center coastal
Total 1100- 500-600 160-215 106
1900

Source: ESMAP-Renewable Energy Action Plan. 2001

40
 To implement the above priorities, the GOV, in partnership with international agencies, will carry
out a 10-year program that will enable large-scale supply of reliable renewable electricity to communities.
Priority will be given to providing energy services in poorer isolated communes and villages, with
particular attention to supporting productive uses and social development activities.

REAP will be carried out in two phases, with duration of five years each. First is an institutional
and capacity building phase that will allow time to put in place the necessary policy, legislative and
regulatory base for RE activities to expand. It would also allow trial activities that would be focused in
particular provinces, which could test the proposed implementation activities and arrangements. The
second is an implementation phase. The priorities for renewable electricity would follow six strategic
principles:

(i) Renewable electricity will be used when it is least cost and economically viable. The two areas
where decentralized renewable electricity systems are cost effective in Viet Nam are households
in communes too far away to be reached by the grid, and in outlying areas to help improve grid
stability and reduce transmission losses.

(ii) Renewable electricity will be supplied on a commercial basis by all types of businesses.
Equipment and services will be supplied by private and public sector companies, cooperatives
and non-governmental organizations, on a commercial basis. The new Company Law issued in
2000 is supportive of companies, but the Program will also build on Viet Nam's strong base of
local community electricity units and cooperatives.

(iii) Communities, individual consumers and investors will actively contribute to and participate in the
Program. All stakeholders will participate actively in program design and implementation and
invest their own funds in the proposed activities and installations. The government and
international agencies will contribute, but there must be a concept of local community and
investor cost sharing, ownership and participation in the choice of technology and management
approach.

(iv) Government will act as a market enabler. Building on the principles in MOI's Rural Electrification
Policy, GOV will issue policies and establish the legislation and regulation to support commercial
development of renewable electricity. Government assistance will be provided for capacity
building in design, engineering, business and finance to support the RE sector and management
of the renewable facilities in rural communities. GOV will play an important role in assuring quality
and safety, as well as increasing awareness.

(v) Access to long-term credit will be increased to improve financial viability of businesses and
affordability of services. Financing will be needed by RE businesses for investment in facilities
and distribution networks and for working capital. The Program will facilitate provision of credit by
commercial banks, so that they gain experience on renewable electricity business and take its
financing as a normal activity. REAP will facilitate access to credit for individual households to
purchase systems or for communities or developers to finance larger scale plants.

(vI) Limited grant assistance will be provided in recognition of the social and environmental benefits,
but will be used carefully. Grant is needed to build the capacity for large-scale renewable
electricity development in government, business and communities, and to buy-down the costs of
pre-investment activities, and to some extent, renewable electricity facilities for rural
electrification. For grid-connected investment, an effective role for subsidy or grant funds is to
cover higher risk pre-investment costs such as feasibility/pre-feasibility studies, information
collection, resource assessment, training and capacity building. For off-grid facilities,
consideration will be given to subsidizing part of the capital costs of the facilities, as is now done
with grid extension. Grants will be sought from the GEF and others for global environmental
benefits and from the GOV and international agencies for local social and environmental benefits.

41
6.2. Energy Efficiency

EE is a high priority in sustainable energy development strategy for Viet Nam. The programs and
projects that have been implemented in past years are as follows:

The Energy Conservation and Efficiency (EC&E) program started in 1996 by the Project Office for
Master Plan for EC&E under the Ministry of Science, Technology and Environment, MOSTE, (now
changed into Ministry of Science and Technology- MOST). This program was implemented with the
participation of many ministries, such as MPI MOI, MOC, MOET, MOARD, Ministry of Transport and
many other society organizations.

The Master Plan for EC&E was the initial study that was implemented in 1997-1998 and
sponsored by the Netherlands government. It is involved in the ongoing Viet Nam Energy Conservation
Program (VECP), which targets all the EC activities in various enterprises in all sectors. The Netherlands
government initially sponsored the program. The major opportunities for EC&E in Viet Nam were
identified for the short-term improvement (15% saving), and for long-term, mainly in the cement industry
(50% saving), the ceramics industry (35%), and coal-fired power plant (25%). Long-term improvement
measures of similar magnitude are identified in most branches of the larger state-owned industries, where
the efficiency of old boilers is only 50%, and could be up to 90%. In the electric power sector, large
opportunities were identified for Energy Conservation and for reduction of the peak load, better known as
DSM. An implementation program consist of the following six subprograms for implementing projects: (i)
factories and large buildings, (ii) small & medium scale enterprises, (iii) production of EE equipment, (iv)
transportation sector, (v) R&D and transfer of technology, and (vi) RE for rural development.

Energy Efficiency Demonstration Project on Ceramic Kilns was implemented in 1998-1999 by the
MOSTE-GTZ Energy Conservation and Efficiency Demonstration Project on ceramic kilns. By August
1999, the first two fiber-lined kilns with the respective capacities of 5.5 m3 and 8.5 m3 were designed and
constructed using German technology. This project focused on technology transfer only. The extension of
this project is studied and disseminated by a group of technicians from the Viet Nam Ceramic and Glass
Cooperation.

Demand Side Management being implemented by MOI has objectives as follows: (i) to identify
potential of energy saving when DSM programs are implemented; and (ii) to prepare plan for
implementation of DSM programs. DSM project is a part of WB assistance on planning and SIDA
assistance for EVN and related institutions to identify DSM programs to manage electricity loads. DSM is
aimed at achieving 2 typical strategies: energy efficiency and load management. Phase 1 of the project
started in November 2000 and will end by the end of 2003. The main tasks are: development of
framework on DSM policies; identification of priorities of DSM programs; designing load research
program, load management program; technology transfer and institutional improvement; lighting for large
building; EC&EE standards for electrical appliances. The second phase of project is preparing.

Promoting Awareness on Renewable Energy and Energy Efficiency Project was implemented
by the Viet Nam Women Union with the objective of providing information on EC & EE, education of
women and people on RE & EE. Phase 1 sponsored by Dutch Government was implemented from 1999
to 2000 in 3 provinces of Hanoi, Haiphong and Thanhhoa. Phase 2 was implemented from 2001 to 2002
in 3 Mekong River countries – Viet Nam, Laos and Cambodia. Sponsored finance comes from SIDA and
EDP - Holland.

Project of Promoting Energy Conservation in Small and Medium Scale Enterprise (PECSME).
The proposed GEF- assisted PECSME project is intended to reduce the GHG emissions from small and
medium scale enterprises by removing existing policy, institutional, technical, information and financial
barriers to adoption of more energy efficient technologies and practices. The energy management
schemes that will be developed, promoted and demonstrated under this project will be replicated after
project completion. The project was sponsored by GEF and implemented from 2002-2003 by MOST.

42
7. IDENTIFICATION AND PRIORITIZATION OF REGA TECHNOLOGIES

Viet Nam is one of the countries with high RE potential. The Isolated Power Supply based on RE
sources such as small hydro, biomass, wind power, geothermal sources, etc for the residents in areas far
away from the national electric grid will be a priority order in rural electrification program in view of its
socioeconomic and environmental benefits.
The current status of technology in industry sector is still backward, with low energy conversion
efficiency affecting the production costs as well as environmental protection. According to survey data,
there are about 1,000 operating industrial steam boilers, almost all of them is obsolete with low energy
efficiency/high fuel consumption.
In the power sector, electricity demand is increasing with an average growth rate of 13% (1996-
2000) leading to the building of new power plants as well as improvement, upgrading and expansion of
the existing power plants. The two categories of EE preferred are replacement of industrial boilers and
rehabilitation of the existing power plants.

7.1. Preferred Projects on Renewable Energy

7.1.1 Geothermal Power Plants

There are about 300 areas in the country with high temperature mineral water sources with the
surface temperature up to 105oC located mainly in the central region of Viet Nam. Based on the survey of
100 drills in the hot mineral water areas, Vietnam Department of Geology and Mineral and Ormat
Company (USA) could select 6 areas: Mo Duc (Quang Ngai province), Hoi Van (Binh Dinh province),
Nghia Thang (Quang Ngai province), Danh Thanh (Khanh Hoa province), Tu Bong (Khanh Hoa province)
and Le Thuy (Quang Binh province) which are able to provide hot water with geographic layer
temperature of 140 to 180 oC to develop geothermal power plants with total preliminary capacity of 200
MW. The anticipated sites for developing geothermal power plants in Viet Nam are indicated in Table 7.1.
Table 7.1. Anticipated Sites for Developing Geothermal Power Plants

Location Flows (tons/hr) Temperature (0C) Capacity (MW)

Mo Duc 2600-2800 155-160 16.7-18.7

Hoi Van, Tu Bong, 2600-2900 145-150 13.3-17.3

Danh Thanh
Le Thuy 2050-2250 175-180 19.2-21.9

The geothermal projects intend to (i) mobilize and utilize clean energy sources for power
generation, (ii) enhance local power sources with low production cost for replacing diesel generation
units, and (iii) diversify new and renewable sources. For the first phase, three geothermal power plants
will be developed at Mo Duc, Hoi Van, and Le Thuy locations with total capacity of 50 MW.

7.1.2 Small Hydropower Plants

According to preliminary assessment, the total techno-economic potential of small hydropower
resources of Viet Nam ranges from 1.6 to 2 millions kW. For the Pre-FS, 610 sites, with total technical
potential of 1,310 MW are selected. The following table shows the sites of small hydropower plants in the
whole country.

43
 Table 7.2. Small Hydropower Potential in Viet Nam
(With Installed Capacity: N = 100 - 10000 kW/station)
Small Hydro- Power Potential
No Province Number of Sites Total of Capacity (MW)
1 Cao Bang 19 53.97
2 Bac Can 8 7.40
3 Thai Nguyen 7 27.00
4 Bac Giang 3 8.00
5 Lang Son 27 58.65
6 Ha Giang 23 33.90
7 Tuyen Quang 10 37.13
8 Yen Bai 18 28.66
9 Lao Cai 56 99.95
10 Quang Ninh 15 18.27
11 Lai Chau 34 63.94
12 Son La 42 86.53
13 Hoa Binh 3 0.80
14 Thanh Hoa 18 77.56
15 Nghe An - Ha Tinh 9 4.40
16 Q.Binh - Q.Tri – Thua Thien 20 61.00
17 Quang Nam 14 30.3
18 Quang Ngai – Binh Dinh 28 71.38
19 Phu Yen 16 53.35
20 Binh Duong – Binh Phuoc 20 26.63
21 Ninh Thuan – Binh Thuan 14 48.65
22 Lam Dong 26 61.07
23 Gia Lai 80 79.10
24 Cong Tum 49 71.58
25 Dac Lac 43 196.03
26 Tay Ninh 8 4.5
Total: 610 1310.00
Sources: Main Report on Hydropower in Vietnam. IE, 2001

By 1994, over 400 small hydropower stations (each with a capacity of 5-10,000 kW/station) have
been constructed with total capacity of 41,000 kW (total Energy of about 65-120 million kWh/year) and
about 120,000 units (capacity less than 5 kW/station with total energy of 18-20 millions kWh/year). These
small and micro-hydropower stations provided partial power supply for residential lighting and for
agricultural demand, handicraft activities in mountainous, highland and midland provinces, and have
played significant role in the socioeconomic development of the localities. However, due to old and
obsolete equipment, and lack of budget for maintenance, only 40% of these stations with capacity of 5-50
kW/station are in continuous operation. The micro hydropower units (with capacity of 0.2-0.5 kW/unit)
without permanent dams to reserve water (most of them are temporary sited rock dams), power
generation during flood season is interrupted. During dry season, there is lack of water, thus output and
time of generation are decreased.
Although national and regional power networks could provide power to all cities and district towns
of mountainous provinces up to 2005, there are still communities and villages in remote and high land
areas especially in northern and central regions that cannot access power networks. It is therefore urgent
to study the development of small and micro-hydropower resources to supply electricity for these areas.
The proposed sites of small hydropower plants are presented in the table below:

44
 Table 7.3. List of Candidate Small Hydropower Projects

No. Province Project River Potential Head Catchments Generation

name 2
District Name ( kW) (m) ( km ) flow ( m3/s)
I SON LA
1 Song Ma Keo Bac Nam Man 1800 310 55 0.8
2 Phu Yen Suoi Be Suoi Be 2000 120 170 2
3 Bac Yen Nam Chim Nam Chim 1500 100 110 1.5
II Lao Cai
4 Van Ban Nghia Do Nghia Do 1800 100 97 2
5 Sa Pa Coc San Coc San 1600 50 105 2.8
6 Sa Pa Thanh Phu Ngoi Bo 1000 60 75 1.75
7 Van Ban (*) Nam Khanh Nam 2000 100 80 2.5
Khanh
III LAI CHAU
8 Phong Tho Nam Gie Nam gie 1250 60 80 2.5
9 Dien Bien Pa Quang Nam Phan 1500 60 100 2.4
10 Dien Bien Nam Ngam Nam 1000 60 120 2.0
Ngam
IV NGHE AN
11 Que Phong Huu Van Nam Giao 1200 70 100 2.5
V LAM DONG
12 Lam Ha (*) Lien Tre Nha Lien Tre 1200 120 52 2
Nha
13 Lam Ha Dach Mo Dach Mo 1350 35 40 4.2
14 Lam Ha Da Sar Da Sar 1000 35 180 3
VI BINH THUAN
15 BT Nam Dan Sach Dan Sach 4500 170 135 4.5
16 BT Nam Song Quao Song 1500 30 300 4.5
Quao
VII BINH DINH
17 Van Canh (*) Khe Cach Khe Cach 2000 110 88 2.3
18 Au Toa Nuoc Luong Nuoc 2500 200 75 1.6
Luong
19 Au Toa Nuoc Trinh Nuoc Trinh 2000 150 80 1.7

Note: (*) Candidate projects for PREGA in first stage.

7.1.3 Wind Power Projects

With more than 3,000 km of seashore and several islands, Viet Nam has high wind power
potential. This potential is not accurately estimated due to lack of systemized wind velocity measurement.
The wind velocity data gathered from the Meteorological Stations is limited because of inconsistency of
station location and wind power project sites. The IE research shows that the annual average wind
velocity (from 1986-1996) is in the range of 2.9 to 7.1 m/s at the height of 12 m of 10 islands as shown in
Table 7.4.
Table 7.4. Annual Average Wind Velocity in Some Islands
o
N Islands Provinces Annual average wind
velocity (m/s)
1 Bach Long Vi Hai phong 7.1
2 Co To Quang ninh 4.2
3 Hon Dau Hai phong 5.0
4 Hon Ngu Nghe an 3.9
5 Con Co Quang binh 3.9
6 Ly Son Quang ngai 4.3

45
 7 Truong Sa Khanh hoa 5.9
8 Phu Quy Binh thuan 6.2
9 Con Dao Ba ria- Vung tau 3.1
10 Phu Quoc Kien giang 2.9
Source: IE, 2001, Master Plan of Renewable Energy Sources in Viet Nam.
From the recent updated survey, four possible sites are possible for pre-feasibility development
under the PREGA Project. They are Ly Son, Phu Quoc, Phu Qui and cape Ca Na in Ninh Thuan
Province. Bach Long Vi Island, where wind velocity is of 7.1 m/sec, is not selected as a PREGA project
because IE has already completed a Wind Power Feasibility Study. The project implementation is being
carried out with the installation of one unit of 800 kW supplied by MADE Manufacturer (Spain).
Ly Son is an island district of Quang Ngai province located in the North-East of Quang Ngai
province from 15022' to 15028' North latitude and 10905' to 109014 East longitudes, 18 miles from Sa Ky
port, Son Tinh district in South East direction. The natural area of the district is 997 hectares including 2
communes (2 islands), and there are 19,599 people or 3,995 households (6/2001 census). Ly Son district
comprises of two islands (big and small ones). The big island with length of 7 km, width of 3 km and area
of 997 hectares has population of 18,997 people or 3,917 households. The small island 3 kilometers
away from big one in the North with length of 1.5 km, width of 1 km and area of 7 hectares has population
of 503 people or 78 households. The island has flat topography and altitude of 20 to 30m above the sea
level. The weather is divided into dry and raining seasons. Its economy is based on fishing with
productivity of 6,500 tons per annum (year 2000). GDP per capita is $US200 per annum.
Power is supplied by two diesel sets, each located in one island. In the Big Island, there is a
diesel unit (installed in 7/1999) of 380 kVA/270 kW with output of 333,787 kWh (year 2000) generated to
22 kV grids. In the Small island, there is a diesel unit of 15 kVA generated to 0.4 kV grid supplying to the
households and offices for lighting. In 2001, there are only 50% of total households accessing to the grid
with average consumption of 140 kWh per household per year. It is forecasted that the capacity demands
increases from 273 kWh in 2000 to 900 kW and 1780 kW in 2005 and 2010, respectively. To meet the
increasing electricity demand and support to the diesel sets, there will be wind power sets of 2.5 MW
installed in Ly Son Island.
Ca Na is the cape to the sea of Ninh Phuoc district, Ninh Thuan province, where the project area
is flat salt field and convenient with transport roads. According to the survey data conducted by New
Energy and Thermal Equipment, Ho Chi Minh University of Technology, it has high potential of wind
energy with annual average wind velocity of 5.5 m/sec.
There are two existing lines of 15 kV and 22 kV passing by the project site. The 22 kV line is 2 km
far from the project site convenient to interconnection. The purpose of the project with estimated capacity
of 5-7 MW is to supply electricity to local grid and to Ninh Phuoc district.
Phu Quoc is an archipelago located in Southwest Sea of Viet Nam in Thailand gulf, having an
area of 600 km2 and population 72,487 people. At present, the grid is supplied by diesel sets with total
installed capacity of 3 MW and dependable capacity of 2 MW. The demands increase to 11 MW and 23
MW in 2005 and 2010, respectively.
According to measurements of 3 sites at Ham Thuan, Duong Co and Gianh Dau Cape
communes, the average wind velocity is rather high (higher than the one recorded by meteorological
Station), as high as at 6 m/sec. They already have port and a road to the project sites. The purpose of the
project with estimated capacity of 2.5 MW is to supply electricity to Phu Quoc Island's areas out of the
grid.
Phu Qui Island, located 90 km away from seashore in southwest of Ton kin gulf of Viet Nam,
belongs to Binh Thuan province and has an area of 32 km2 and population of 16,487 people. At present,
the grid is supplied by diesel sets with total installed capacity of 3 MW and dependable capacity of 75%.
The capacity demands increases to 5 MW in 2005.

46
 According to hydro meteorological measurement data, the average wind velocity is rather high at
6.2 m/sec and stable in all the seasons. The island has the highest potential in the central and southern
regions. The purpose of the project with estimated capacity of 2.5 MW is to supply electricity to Phu Qui
Island's areas out of grid.

7.1.4 Rice Husk Fired Power Plants

Being the leading rice exporting country, Viet Nam has high rice husk potential with estimated
production of 6 to 6.5 million tons per year. This potential is still not used as fuel for power generation as
there is a 50 kW project with fluidized bed combustion technology located at Long An province.
The Mekong river delta comprising of 11 provinces is a major rice production zone of Viet Nam
with productivity of 16.7 million tons in 2000, sharing 51.3% of the country’s rice production (Statistical
Yearbook 2001). Electricity supplied to rice mills is from the national grid. Shortage of electricity happens
during harvest time when electricity supply to rice mills is cut about 4 hours per day. For sufficiency of
electricity, the mills have to install diesel power themselves. (Source: IOE survey in Tien Giang).
The development of rice husk fired power plants is an efficient solution in decreasing dependence
on fossil fuels and transmission and distribution losses. It will solve the storage problem of rice husk in
rice mills. Although there is high potential in rice husks, there is not any pre-feasibility or feasibility studies
that have been undertaken so far.
Based from the study reports of the Provincial Agricultural and Rural Development Departments
in Angiang, Tien Giang, and Dong Thap (Potential for Energy Generation from wood and selected agro-
Industrial Residues-Phase II), the rice mills in Mekong river delta listed below are identified as possible
sources of rice husks and sites for rice husk fired power plants.
Table 7.5. Potential Sites of Rice Husks for Power Generation
Rice mill Rice husk Estimated
No Provinces Location capacity production electric Notes
(Tons/year) capacity
(kW)
I An Giang
1 Hoa Binh food An Hoa 3-4 5000 hours;
processing plant commune, (tons/hr) 4000 200 Rice hush
Chau Thanh consumption
District rate: 3 kg/kW
2 Vinh An food Vinh An 3-4 5000 hours;
processing plant commune, (tons/hr) 4000 200 Rice hush
Chau Thanh consumption
District rate: 3 kg/kW
II Tien giang
3 Group of private Hoi Cu, Hoa 216000 5000 hours;
mills at Da Bac, Cau Khanh, Cai (tons/a) 43200 2000 Rice hush
Xeo, Ha Khanh, Cai Be consumption
Be (69 mills) communes rate: 3 kg/kW
4 Group of private Tan Binh 5000 hours;
mills at Cai Lay commune, 246300 49200 2000 Rice hush
district (15 mills) Cai Lay (tons/a) consumption
district rate: 3 kg/kW
III Soc trang
5 Tan Thanh Soc Trang 5000 hours;
town 6 560 kW Rice hush
(tons/hr) consumption
rate: 3 kg/kW
IV Long An
6 Dong Thach Private Duc Hue 5000 hours;

47
 Rice Mill Town 5 500 kW Rice hush
(tons/hr) consumption
rate: 3 kg/kW
V Can Tho
7 Long My Enterprise Long My 5000 hours;
Commune 3 200 kW Rice hush
(tons/hr) consumption
rate: 3 kg/kW
VI Dong Thap
8 Thanh Binh An Long 5000 hours;
Enterprise commune, 3 2500 200 kW Rice hush
Tam Nong (tons/hr) consumption
district rate: 3 kg/kW
Sources: + Reports of the Provincial Agricultural and Rural Development Departments such as An giang, Tien Giang,
Dong Thap, etc.
+ Le Hoang Viet, Tran Quang Cu, 1997, Final Report (Potential for Energy Generation from wood and
selected agro-Industrial Residues-Phase II: “EC-ASEAN COGEN PROGRAMS”.

An Giang Rice Mill

Hoa Binh Food Purchasing and Processing Plant is located in the An Hoa commune, Chau
Thanh district, An Giang province at the southwest frontier between Viet Nam and Cambodia. An Giang is
considered one of the large rice cultivation areas in Viet Nam. Having more than 200 rice mills with
capacity above 100 tons of paddy per day, An Giang is a potential market for disseminating cogeneration
technology using rice husk as fuel. At the moment, the mill operates only one shift per day but during crop
seasons or when the rice supply contract is signed, the mill operates 24 hours per day.

There are only 9 workers permanently working in the mill as most workers are hired during
harvest seasons. Product loading and transporting are done manually by porters who are poor farmers
living in the vicinity of the mill. The rice mill started its operations in 1999 with locally manufactured
equipment. The paddy hulling chain has been designed with an electric motor of 132 kW capacity.
Another motor of 37 kW was installed for white rice polishing chain. After the hulling chain, rice is polished
in polishing machine driven by two electric motors of 75 kW each. In addition, there exists a sorting table
with one electric motor of 11 kW and 8 others of 1 kW each.

Hoa Binh Food Purchasing and Processing Unit is powered from the national grid through its own
power sub-station of 320 kVA at 15/0.4kV. Power capacity based on the installed capacity of the whole
plant in operation is 338 kW.

The designed milling capacity of the mill is of 5 T/h. Additionally, there is a private rice mill of 100
tons of paddy per day located just beside it that is in good condition for supplementary rice husk supply to
the power station when needed.

Tan Thanh Rice Mill

The Tan Thanh rice mill is located at the Tan Thanh district, about 8-km far from the central of
Soc Trang town, next to a sugar mill of 1.000 TCD, which is planned to use bagasse for paper fabrication.
It is close to the Tan Thanh River thus; boats transport most of its products. As a member of the SO Food
Co, the mill receives paddy or raw rice from the company and processes it to the final product. The total
mill layout area is about 2 hectares, but the land utilized is only a hectare so it is convenient to develop a
power station.
At present, the mill operates only for one shift of 8 hours per day, but during peak crop periods or
if there are problems in rice supply contracts, the working duration is 12 hrs/day. The total permanent
employees working in the mill is only 12 as most of the workers are temporarily hired. The products
charging and discharging are done manually by porters who are poor agricultural people living nearby.

48
 The rice mill was commissioned and put into operation in 1992 with locally manufactured
equipment. Its processing equipment has depreciated affecting its efficiency while some of its devices
was not designed properly and is no longer consistent with the other equipment in the processing chain.
The paddy hulling chain was designed with 4 brown rice and 4 white rice mortars but only 2 of each are
operated due to the rice broken ratio problem, so it can produce only raw rice which is then polished
in polishing machines. A rubber one has replaced one brown rice stone mortar. The maintenance of
electrical control room is not good; most important indicators are not working although the replacement is
not expensive.

As initially designed, the power consumption of the entire Tan Thanh rice mill is 610 kW in which
the power consumption of the paddy hulling plants and drying plant is 347 kW, comprising of four motors.
The Tan Thanh rice mill is powered from national power grid by a substation that also supplies electricity
to small-scale rice polishing private mill just beside the Tan Thanh rice mill area and about ten
neighboring households. All of them pay their electricity bills directly to the Tan Thanh rice mill. The
designed capacity of the Tan Thanh rice mill is 6 tons/hr though the average actual capacity is 4 tons/hr.

Dong Thanh Private Rice Mill

The Dong Thanh private rice mill is located in Duc Hue town, Long An province, 55 km far from
Ho Chi Minh city. The mill is situated just besides the main medium voltage power line supplying to Duc
Hue town. The mill has 5 technical employees and 14 unskilled workers with average salary of 2 million
VND per month.
Since the owner is also a rice dealer, the mill serves mainly to process her own paddy with
excess capacity serving other clients. The white rice is produced mainly from the mill owner's paddy and
served to domestic market. The majority of other clients use only the hulling service of the mill for brown
rice that is sold to state owned mills or food companies. Production is uncontrolled and the accounting
receipt is based on the consciousness of clients, who are familiar with each other.
The mill has two milling machines, which are designed to produce white rice of 5% broken ration
from paddy, but the hulling, sorting and blanching operations can operate independently. Most of the
equipment are locally manufactured and purchased mainly from Long An Mechanical Factory (Viet Nam)
and some private manufacturers in Ho Chi Minh City. The total installed electric load of the mill is only 77
kW with a registered milling capacity of 5 Tons/hr, but in fact the real capacity is not higher than 2 tons/hr.
The mill is powered directly from the low voltage grid through a three -phase line from a public
transformer. The power accounting is done by a main kilowatt meter and 2 sub-counters, as indicated by
the tax office, which permits to draw out separately the machine consumption and others such as lighting
domestic uses. Since the input and output products are not controlled, the machine's power consumption
is used for taxation accounting with the conventional value of 45 kg milled paddy per kWh.

7.2. Projects on Energy Efficiency and Energy Conservation

Industrial Boilers
In a survey in 1999, there are 1,125 steam boilers registered by the Business Companies, of
which 565 units have capacity of more than 1 ton/hr. In general, Viet Nam's industrial steam boilers are
obsolete, with low efficient/ high fuel consumption rate, hard to operate, and with great negative impact on
environment. They do not meet the production requirements. Table 7.6 shows the criteria sorted by types
of fuels for upgrading, replacement or remaining:
Table 7.6. Criteria Sorted by Types of Fuel for Upgrading, Replacement or Remaining
Type of boiler Replacement Upgrading Remaining
FO fired boilers efficiency ≤ 70% 70 ≤ efficiency ≤ 80% efficiency ≥ 80%
Coal fired boilers efficiency ≤ 65% 65 ≤ efficiency ≤ 75% efficiency ≥ 75%

From the above criteria, 330 out of the 565 boilers should be upgraded/replaced and presented
as follows:

49
 Table 7.7. Number of Boilers to be Upgraded/Replaced
Type of boiler Replacement Upgrading Remaining
FO fired boilers 115 (46%) 115 (46%) 19 (8%)
- in which:
Capacity: 1-5 tons/hr 69 69
Capacity: 5-10 tons/hr 40 40
Capacity: 10-50 tons/hr 6 6
Coal fired boilers 80 (52%) 15 (10%) 58 (38%)
- in which:
Capacity: 1-5 tons/hr 55 10
Capacity: 5-10 tons/hr 19 4
Capacity: 10-50 tons/hr 4 1
Capacity to 100 tons/hr 2 -

7.2.1 Yellow Star Rubber Company's Boilers Replacement Project

Yellow Star Rubber Company is a state owned firm founded in 1958 and located in inner Hanoi
City. It produces rubber products such as tube, conveyer belt, machine belt, and rubber pipes, etc. The
company is equipped with 5 coal-fired steam boilers with capacity of 6 to 6.5 tons/hr. These boilers are
obsolete, with low efficiency (40% to 60%), hard to operate, and with high environmental impact to the
vicinity of the city. Therefore, the company has planned for state of the art boiler replacement. The
specifications of the existing boilers are shown in Table 7.10.
Table 7.8. Specifications of the Existing Boilers
o
N Steam Year of Country Numbers Designed Actual efficiency
boilers commissioning of origin Specifications
1 CT-6.5/13, 1960 PRChina 2 Q=6,5 tons/hr, 40%
Coal fired P=13 bar
2 AKB-6.5/13, 1975 Russia 2 Q=6,5 tons/hr, 30%
Coal fired P=13 bar
3 SZL-6/13, 1993 PRChina 1 Q=6 tons/hr, 60%
Coal fired P=13 bar
4 OMNICAL, 1998 Germany 1 Q=6 tons/hr, 89%
FO fired P=13 bar

Almost all of the boilers are outdated technology with lower efficiency and productivity than as
designed. Low C&I level leads to hiring more operators as high as 185 people working in polluted
environment; it leads to high production cost and low competitiveness in the market.
Because of difficulty in regulation of the steam loads in coal-fired boilers to meet the production
requirement, high fuel consumption, and due to air pollution caused by low efficiency of scrubbers,
especially located inner City, replacement of the boilers is necessary. The purposes of the boilers
replacement project are to (i) meet the demand of rubber production with annual growth rate of 15% in
terms of revenue as well as productivity, (ii) reduce the energy portion in production cost, and (iii) meet
the requirement of environmental protection. The implementation time schedule follows.
(i) First stage, 2 years – Replacement of two coal-fired boilers by new FO fired boilers in
parallel with improvement of end use system.
(ii) Second stage, 2 years – Replacement of the remaining coal-fired boilers by new FO fired
boilers.
(iii) Third stage – Building of energy control center for monitoring steam flow, compressed air,
electricity consumption, water to the production processes.

50
7.2.2 Viet Tri Sugar- Liquor- Beer Company's Boiler Replacement
Sugar- Liquor- Beer Viet Tri Company is a state owned company founded in 1965 and located in
inner Viet Tri City. It produces sugar-based products such as sugar, liquor, beer, alcohol, cracker,
biscuits, etc. Sugar plant's capacity is 500 tons of sugar cane per day (40 tons of sugar per day). The
cogeneration technology was used to provide steam and electricity to meet the energy demand for sugar
production. Steam is provided for sugar processing such as sugar cane press using steam-driven engine,
sugar distillation and driving the turbine for power generation.
At present, the company is equipped with a boiler of 20 tons of steam/hr, 16 bar supplying steam
for sugar process and power generation with the designed power capacity of 1000 kW. The boiler is
dismantled from the dismissed sugar plant in PRC and installed in Viet Tri. The obsolete boiler has to
burn bituminous coal (Chinese coal) as the supporting fuel for sufficiency of steam requirement. In 1994,
the modification of boiler was done for burning anthracite coal (coal exploited in Viet Nam) but the result
is not so good because its efficiency of 70% and coal handling by hand could not meet steam
requirements.
The actual electric power is 750 kW with an annual electric output of around 300 MWh that is
enough for use by the company. Low C&I level leads to hiring more operators working in polluted
environment leading to high production cost and low competitiveness in the market. Because of difficulty
in regulation of the steam loads in coal fired boilers to meet the production requirement, high fuel
consumption; air pollution caused by low efficiency of scrubbers, especially located inner of Viet Tri City,
the replacement of the boiler is necessary.
The purposes of boiler replacement are to: (i) meet the demand for sugar production, (ii) increase
the electric capacity from 750 to 1000 kW, (iii) reduce the energy portion in production cost, (iv) meet the
requirement of environmental protection, and (v) improve the working conditions of the plant.
Bagasse - coal fired boilers are replaced by new fully bagasse fired boilers with the same
specification to meet requirement of sugar production and power generation (20 tons/hr; 1000 kW) with
FO supporting.
7.2.3 Thang Long Tobacco Company's Boiler Replacement Project
Thang long Tobacco Company is a state owned enterprise located in inner Hanoi City, which
produces 2.5 tons/hr of tobacco fiber or 449 million packages per year. This company is equipped with
two boilers manufactured by Germany and two others manufactured by PRC. The 2 OMNICAL boilers
manufactured by Germany was installed in 1993 and has capacity of 4,6 tons/hr; pressure of 11,5 kg/cm2,
efficiency of 84%, burning anthracite (LHV of 7000 kcal/kg), coal consumption rate of 478 kg/h, high level
of C&I, the sufficiency of emission control meeting Vietnamese standards. The 2 LHG1-7 boilers
manufactured by PRC were installed in 1967 and has capacity of 1.0 tons/hr, and pressure of 7.0 kg/cm2.
Due to degradation, the pressure is to reduce to 6.0 kg/cm2, capacity reduced to 70%, efficiency reduced
to 45-55%, coal consumption rate 270 kg/h (burning anthracite with LHV of 5000 kcal/kg), coal
consumption rate of 478 kg/h, high level of C&I, the sufficiency of emission control meeting Vietnamese
standards.
Coal supply and ash discharge are handled by hand and the flue gas emissions cause pollutant
concentration much higher than Vietnamese allowable standards. These two boilers with low parameters
are used for operations requiring low pressure such as air conditioning, tobacco drying and food services.
The production parameters needed are 5 tons/hr, pressure 11,5 kg/cm2 supplied by 2 OMNICAL boilers,
one boiler for safety operation mode, while the other on stand-by. Each could supply about 80% of steam
flow requirement. The company has to regulate the production by prolonging times of production chain
(one starts up and another shuts down). The company intends to replace two Chinese boilers to (i) meet
the demand of production, (ii) reduce the energy portion in production cost, and (iii) meet the
requirements of environmental protection. The two Chinese boilers will be replaced by LHG1-7 boilers by
one boiler with capacity of 4 tons/hr; pressure of 12 kg/cm2, burning anthracite, efficiency of 84 - 85% with
emission control equipment.

51
7.2.4 Improvement and Upgrading of Power Plants
From 1995-2001, electricity production increased twice with the growth rate of about 13.08%. In
2001, the total production of EVN is 28,480 million kWh and purchased from IPP is 2122 million kWh.
Production of hydropower plants reduced from 72% in 1995 to 59 % in 2001. The production by gas
turbine power plants increased from 7.7% in 1995 to 20 % in 2001.
At present, the total installed capacity of Viet Nam's power plants is 8,450 MW (dependable
capacity of 8150 MW), in which, hydropower shares 48.5%, gas turbine shares 26%, diesel 4% and
thermal power plants share 21.5% (capacity of 1,823 MW). Below are the existing power plants in Viet
Nam.
Table 7.9. Existing Thermal Power Plants in Viet Nam
o
N Name of plant Installed capacity (MW) Dependable capacity (MW)
1 Uong Bi (Coal) 110 105
2 Ninh Binh (Coal) 100 100
3 Pha Lai 1 (Coal) 440 360
4 Pha Lai 2 (Coal) 600 600
5 Thu Duc (FO) 165 156
6 Can Tho (FO) 33 32
7 Hiep Phuoc IPP( FO) 375 375
Total capacity 1,823 1,728

With the exception of Pha Lai II Coal fired power plant with 2x300 MW that has been
commissioned, other thermal power plants of Viet Nam (Pha Lai 1, Uong Bi, Ninh Binh, Thu Duc, Can
Tho) have been constructed for 20 to 30 years. Due to constraints of network, financial status, operation
skills, the technology for these power plants is already 15 to 20 years old, in comparison with international
technology. The power plants have low unit's capacity (from 25 to 110 MW) and low steam parameters
(highest 100 bar and 540 oC) leading to low efficiency/high fuel consumption rate, and high electricity for
self-use. There are no reheat super heaters contributing to low cycle efficiency. The burner and
combustion chambers are not suitable to Vietnamese anthracite causing unstable combustion, low
efficiency.
In recent years, the old steam power plants were highly mobilized to meet the increasing
demand. The capacity factor is of 50 to 60 %, especially during dry season. The plant efficiency is about
20-28 % leading to high coal consumption rate of 650 to 700 grams of standard coal /kWh (LHV of 7000
kcal/kg), Pha Lai I - 450 gram of standard coal/kWh
Most thermal power plants in the country have operated for a long time, nearly reached their
lifetime. The equipment are aged and seriously degraded, and have to operate within operation
parameters, and instructions/guidance. Poor maintenance and overhaul cause strong decrease of the
economic-technical criteria and reliability. The present boiler efficiency is about 70-84%.From the studies
of the consultants under EVN, it was found that the Pha Lai I needs high priority for improvement and
upgrading due to the following reasons: (i) As compared with others in the power network, Pha Lai I has
the longest remaining lifetime (from 10 to 12 years) and prolonging its lifetime up to the year 2020 has
been mentioned in the "Master Plan on Power System Development, stage V". Its lifetime may be
prolonged for more than 7 years; (ii) Pha Lai I has better technology (unit capacity and steam
parameters) and is easily applied to modern technology; (iii) It has high capacity factor easy to meet the
financial criteria.

52
 Since 1997 the plant has replaced the major parts of its boilers increasing their efficiency.
However, the following weaknesses have been noted: (i) the superheats are overloaded, (ii) burner
nozzles are deteriorated, and (iii) high airs induced into coal pulverizing system.
The plant has 8 ESPs in which, 4 ESPs has poor operation due to damage of vibration system.
Turbine’s efficiency decreases about 4.5% due to unstable operation of governor system. It forces the
plant to operate at lower steam parameters reducing the cycle efficiency. On the other hand, the leakage
at water heaters and condensers also cause low efficiency.
Control and instrumentation are analog, damaged, and difficult to maintain its optimum level. In
general, the plant's efficiency has been reduced from the designed one and cause high environment
pollution. Upgrading the plant will prolong the plant lifetime for at least 20 years.

7.2.5 Fuel Switching for Porcelain Kilns

According to statistical data, the country has about 1,000 porcelain enterprises with products both
for domestic consumption and export generating revenue of US$150 million per year.
In porcelain production, fuel cost shares about 30-40% of production cost. Fuels are coal in the
North and wood fuel and rice husk in the South. Since 1999, LPG has been applied in porcelain kiln with
technical assistance of GTZ (Germany). From initial evaluation, using LPG can reduce fuel, time and
workforce and environmental pollution in porcelain production, especially in porcelain handicraft villages.
Comparison of sifting from coal to LPG is shown in the table below:
Table 7.10. Comparative Criteria of Fuel Switching from Coal to LPG
Criteria Traditional Kiln Improved Kiln
(Fiber-lined Kiln)
Perfect product ratio 60-70% 95-99%
Kilning time 7 days 1 days
Layout 30 1
Manpower 10 manpower 1 manpower
Investment cost 1 10
Production cost 1 1
Environment Polluted Clean

Porcelain production is concentrated in Hanoi, Hungyen, Vinhlong, Binh duong and Dong nai
provinces, etc. For the PREGA Project, Battrang-Hanoi is the selected site for a pre-feasibility study on
fuel shifting. Battrang is 10 km away from Hanoi, and comprised of 1,000 coal burnt kilns causing heavy
environmental pollution in the area.

53
8 Conclusion

Viet Nam is a country endowed with RE resources. Moreover, there is large potential of EE and
energy conservation, especially in the industry sector. Many studies and pilot projects on RE, EE and
energy conservation have been carried out in the past years; however, the dissemination of REGA
technologies is still not significant in comparison with their potential.

The absence of REGA technology-related policy/institutional/organizational framework in the

national (governmental) and sectoral levels including the lack of user-friendly energy pricing/taxing
mechanism is a major barrier in the entry of REGA technologies.

The application of RE technologies and high-EE technologies could be considered as effective

technological measure to abate GHG emissions and are priorities in the energy sustainable development
program of Viet Nam. To promote such REGA technologies based on the technical potential, it is
important to strengthen institutional capacity in undertaking pre-feasibility and feasibility studies and in
generating a pipeline of REGA investment projects.
To establish a basis for future investment in the development of REGA technologies in the
coming years and to meet the needs of the sustainable socioeconomic development plans and strategies
of the GOV, it is necessary to study and disseminate the country strategies to overcome the policy /
institutional barriers and to have the specialized financing mechanisms for REGA technology
dissemination in Viet Nam.

54
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