Angelika Wasielke

Mai 8th 2009, Hanoi

The Policy Framework for Renewable Energy Development in Viet Nam

Chances and Barriers for the Private Sector

Angelika Wasielke

Background

VN is well endowed with RE resources which are distributed through-out the country.

These resources can be exploited to meet Vietnam’s rapidly increasing energy demand as well as environmental protection.

The majority of Vietnam’s existing RE resources in VN are small hydro power, biomass, wind energy, solar energy and geothermal energy.

Despite the high potential, RE electricity production in Vietnam is still negligible.

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Background

Power sources Capacity(MW) %

Traditional electricity 11198 97.497

Coal fired 1,515 13.191

Oil fired 575 5.006

Gas turbines 4,665 40.617

Diesel 245 2.133

Large scale hydropower 4,198 36.550

Renewable electricity 287.48 2.503

Wind 1.23 0.011

Small scale hydropower 135 1.175

Solar energy 1.25 0.011

Biomass 150 1.306

Total 11485.48 100.000

Structure of RE in the Vietnamese power sources

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Potentiales

Potential for wind energy

Wind speed Aspects

Low < 6m/s

Medium 6 - 7m/s

Mid-high 7 - 8m/s

High 8 - 9m/s

Very high >9m/s

Areas, km2 197,342 100,361 25,679 2,178 113

%/total area 60.6 30.8 7.9 0.7 0.0

Potential, MW 401,444 102,716 8,748 452

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Legal Framework

The Government of VN has recognized the importance of RE especially for rural off-grid areas.

The Electricity Law requires support for RE

Decision No.110/2007/QD-TTg, aiming targeting RE of 4051 MW by 2025

Decision No.1855/QD-TTg, it sets up the target with share of RE (3%-2010; 5%2020)

MoIT commissioned the preparation of Strategy, Master Plan on RE Development for the Period up to 2015 with Outlook to 2025, and first draft report was prepared. by Institute of Energy

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Existing Legal Framework

The following legislation sets out the RE policy and legal framework:

Electricity LawLaw on Protection of the Environment Investment Law

Various Decisions including:Decision No. 177/2007: Scheme on Developments of Biofuels up to 2015, with 2025 Vision

Decision No. 1855/2007: National Energy Development Strategy up to 2020, with 2050 Vision

Decision 158/2008: National Target Program to respond to climate change

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Electricity Law

Electricity Law & RE

Article 4 – Electricity Development Policies

Clause 4.4: “To step up the exploitation and use of sources of new energies, renewable energy for electricity generation.”

Article 13 – Policies and measures to encourage and promote electricity saving (…)

Clause 1: Investment projects for the development of electricity plants using renewable energy will enjoy preferential investment, electricity price and tariff according to the guidance of Ministry of Finance.

Angelika Wasielke Hanoi 19.02.2009

Legal Framework

Although the overall policy is positive and forward thinking, the existing legislative framework in the RE sector is somewhat complex and overlapping

At this stage there is no:

Finalized RE Master PlanRenewable Energy LawRenewable Energy AuthorityStandard Power Plant Agreement (finalized since beginning of 2009)

Angelika Wasielke

Legal Framework

Summary

The legislation provides general support and encouragement for RE;

but : detailed implementation measures are still lackingThe legislation contemplates incentives for the sector but at this stage there is no comprehensive approach with regard to RE

Important questions not answered: reliable electricity pricing during project lifetime

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Masterplan for Renewable Energy

Objective

To achieve the national goal for developing new and renewable energies as defined in the National Stretegy for Energy Development to 2020 with prospect to 2050.

Increase the share of RE to 3% by the year 2015, and to about 5% of the total capacity by the year 2025.

To implement national goal on the development of bio energy; by the year 2015, the output of ethanol and vegetable oil will reach 250 thousand tons, meeting 1% of total national demand; by the year 2025, the output of ethanol and vegetable oil will reach 1.8 million tons, meeting about 5% of the total national demand on oil and gas.

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Scenario for exploitation of RE sources

Capacity of RE sources in the period 2009 – 2025 (basic scenario)

No. RE 2009 2010 2011 2012 2013 2014 2015 2020 2025

1 Small hydro 1140 1166 1256 1349 1476 1584 1642 1988 2454

2 Biomass 157.7 165.7 207.7 229.7 234.7 247.7 316.2 380.7 395.7

3 Biogas 0 0.5 1 2 3.5 7 8 11 12

4 Solar 1.654 1.654 1.654 1.654 1.654 1.654 2.65 3.25 3.25

5 Wind 9 89.5 89.5 89.5 109.5 109.5 217 443 493

6 Geo-thermo 0 0 0 0 18 36 51 214.1 239.1

7 Bio-energy 0 0 0 0 0 0 0 0 0

8 Tidal wave 0 0 0 0 0 0 0 5 15

9 Garbage 7.4 11.9 11.9 15.4 15.9 15.9 20.4 47.4 97.4

  Total (MW) 1315 1435 1568 1687 1859 2002 2257 3093 3709

Angelika Wasielke Hanoi 19.02.2009

Capacity of RE sources in the period 2009 – 2025 (high scenario)

TT RE 2009 2010 2011 2012 2013 2014 2015 2020 2025

1 Small hydro 1195 1222 1402 1594 1721 1930 1988 2684 3249

2 Biomass 157.7 170.7 197.7 219.7 234.7 247.7 316.2 400.7 462.7

  Bagasse 157.7 167.7 167.7 172.7 177.7 180.7 212.7 267.7 307.7

  Rice husk 0 3 30 46 51 61 86 110 110

  Others 0 0 0 1 6 6 17.5 23 45

3 Biogas 0 0.5 1 2 3.5 7 8 11 12

4 Solar energy 1.654 1.654 1.654 1.654 1.654 1.654 2.65 3.25 3.25

5 Wind energy 9 89.5 89.5 89.5 109.5 109.5 217 484 556

6 Geo-thermo 0 0 0 0 18 36 51 214.1 259.1

7 Bio-fuel 0 0 0 0 0 0 0 0 0

8 Tidal wave 0 0 0 0 0 0 0 5 15

9 Garbage 7.4 11.9 11.9 15.4 15.9 15.9 20.4 57.4 232.4

  Total (MW) 1371 1496 1703 1922 2104 2348 2603 3859 4790

Scenario for exploitation of RE sources

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Masterplan for Renewable Energy

Total investment and fund mobilization measures

For grid connected renewable electricity: Total investment for the whole period is 53,891 billion VND, equivelant to 3,170 billion/year on average. However, rather than coming from public investent, this fund is mobilzed by private companies.

For off grid power: Total investment for the whole period is 21,447 billion VND. This total investment is the total support amount. This supporting fund is Government’s investment (because if the Government does not provide this support, it still has to invest into grid development to meeting the target of 100% of household having access to eletricity by the year 2025).

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Masterplan for Renewable Energy

Mobilization of fund for supporting wind energy

Within Viet Nam: surtax from electricity or from carbon emission charge, or deduction from mineral exploition tax

International support: This source is always available in some cases and in many forms such as ODA, soft loan, preferential certificate, carbon fund and carbon certificate...

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Development Policies for RE

The Government encourage and support investment into grid-connected RE projects.

Enterprise investing into grid connected renewable electricity will receive investment support policies in the forms of preferential credit and tax.

Prices will be indentified for each type of RE based on calculation of avoided costs as well as consideration for compensation for investment costs, operational costs, and reproduction and expansion of investing enterprises.

RE Investment projects comply with full administrative procedure will be considered pursuant to MOIT regulation on investment mangement and construction of independent electricty projects.

Licencing and operation of RE project will follow the current regulation of the Government on invetsment project management.

Power generated from RE sources will be purchased by local EVN branches based on small contract form as regulated by EVN.

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Development Policies for RE

Financial incentives

Organizations and individuals within and outside Vietnam invest into renewable electricity projects will receive coporate income tax exemption for producing RE in 10 – 15 years.

Equipment, materials and technologies imported for RE projects will receive import tax exemption, VAT exemption and some other additional cost support provided that these items have not been produced within Vietnam.

RE projects will receive natural resource tax exemption.

RE projects will be able to make medium and long term loans (7 to 10 years) at preferential interest rates from the Renewable Energy Development Fund.

The Government need to have concrete policies for price subsidy for 1kWh of electricity produced from renewbale energy.

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Project goal:

Establishment of a legal framework and improvement of technical capacities for grid - connected wind power development in

Viet Nam

Project proposal for cooperation received from MoIT

Project is financed by the German Federal Ministry for

the Environment and Nuclear Safety (BMU)

Project phase: 2009 - 2011

GTZ Wind Energy Project

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Main Focus: Finding suitable instruments to support wind power development

First Step: Study tour for policy making stakeholders to Germany in November 2008

Further steps to be taken: Tender procedure for study “Identifying legal frameworks for supporting wind

energy development in Vietnam.” Design of support mechanism Financing mechanism Implementation… Workshops with ministries, other donors, private sector, public

GTZ Wind Energy ProjectL

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Support Instruments

Tendering system

Tax incentives

Green tariffsGeneration based

Contribution ProgramsVoluntary agreements

Shareholder ProgramsInvestment focussed

Voluntary

Rate-based incentives

Quota obligation (RPS)

based on TGCs

Feed-in tariffs

Generation based

Tax incentives

Environmental taxes

Tendering system

I nvestment subsidiesInvestment

focussed

Regulatory

Quantity-drivenPrice-drivenI ndirect

Direct

Tendering system

Tax incentives

Green tariffsGeneration based

Contribution ProgramsVoluntary agreements

Shareholder ProgramsInvestment focussed

Voluntary

Rate-based incentives

Quota obligation (RPS)

based on TGCs

Feed-in tariffs

Generation based

Tax incentives

Environmental taxes

Tendering system

I nvestment subsidiesInvestment

focussed

Regulatory

Quantity-drivenPrice-drivenI ndirect

Direct

Classification of energy policy instruments

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Important regulations for wind development in Germany - as included in Renewable Energy Sources Act (EEG)

Fixed feed-in tariff over period of 20 years – investor security

Tariffs adapted to technology and site quality (in the case of wind)\

Obligation/Priority purchase, transmission and distribution of RES electricity

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Effectiveness and efficiency of support

Support instruments have to be

• effective for increasing the penetration of RES-E and

• efficient with respect to minimising the resulting public costs over time.

Public costs or transfer cost for consumer / society (due to the promotion of RES-E) …… are typically paid by the electricity consumer producer… do not consider any indirect costs / benefits or externalities

Example: Feed-in tariff for a wind power plant (1 MW, 2000 MWh/year)Feed-in tariff = 90 €/MWhMarket price conventional electricity = 60 €/MWh

Financial premium = 90 – 60 = 30 €/MWh

Yearly transfer cost = Premium * Generation =

= 30*2000 = 60 k€/year

2000MWh/year

premium:

30€/MWh

Yearly transfer cost:

60,000€/year

pcon:

60€/MWh

FIT:

90€/MWh

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Past experience with promotion schemes in the EU

"This report presents an updated review of the performance of support schemes using the same indicators presented in the 2005 report. It finds that, as in 2005, well-adapted feed in tariff regimes are generally the most efficient and effective support schemes for promoting renewable electricity."

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Redistribution of Costs of the EEG for a kWh (18,6 ct)

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Ranges of feed-in tariffs paid for electricity

from new built plants in 2007

Type of resource used Range of feed-in tariffs(ct/kWh)

Hydro power 3.58 – 9.67

Biomass 8.03 – 20.99

Geothermal 7.16 – 15.00

Wind power 5,17 - 9,10

Photovoltaics 37,96 – 54,21

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Wind Power in Germany

Development of feed-in tariffs for Wind power in Germany

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Renewable Energy Promotion Policies

Renewable Energy Promotion Policies

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Development of Wind Energy

Wind Power Capacity, Top 10 Countries, 2006

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Development of Wind Energy

Wind Power, Existing World Capacity, 1995-2007

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Development of Renewable Energy

REN 21

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Contribution of renewable energy sources to Germany's energy supply

2.1

4.83.5

0.2

3.1

6.7

14.2

6.6 6.98.5

182)

141)

0

5

10

15

20

25

30

35

Share of RE in Total PrimaryEnergy Consumption

Share of RE in Total GrossElectricity Consumption

Share of RE in Total FinalEnergy Consumption for

Heat

Share of RE in FuelConsumption for Road

Traffic

Share of RE in Total FinalEnergy Consumption

(electricity, heat, fuels)

[%]

1998 2000 2002 2004

2006 2007 2020

3)

German Government

Targets 25% - 30%1)

1 )The Integrated Energy and Climate P rogramme of the German Government, 12.05.2007; 2) Directive of the Euopean P arlament and of the Council on the promotion of the use of energy from renewable sources, 12.03.2008;3) For calculating the share of primary energy consumption (P EC), the (official) physical energy content method has been used. Acc. to the substitution method: 9.1 % RE - renewable energies, Source: BMU according to Working Group on Renewable Energies / Statistics (AGEE-Stat); Version: March 2008; all figures provisional

German Government Targets

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Total CO2 avoidance through the use of

renewable energy sources

44 57

approx. 114

approx. 98

8575

65615452

4441

0

20

40

60

80

100

120

140

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

CO

2 a

void

ance

mill

ion

t

total electricity share EEG electricity

total heat total biofuels

Version: March 2008; all f igures provisionalSource: BMU according to Working Group on Renew able Energies / Statistics (AGEE-Stat)

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Total Turnover with renewable energy sourcesin Germany in 2007

Wind energy: EUR 5,699 m

(23.1%)

Solar energy2: EUR 7,255 m

(29.5%)

Biomass: EUR 9,871 m

(40.1%)

Hydropower: EUR 1,200 m (4.9%)

Geothermal

energy1: EUR 601 m

(2.4%)

Total: approx. € 24.6 bn

1 Large plants an heat pumps2 Photovoltaics and solar thermal energyVersion: March 2008; all f igures provisionalSource: Centre for Solar Energy and Hydrogen Research Baden-Württemberg (ZSW)

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Employees in the German renewable energy sector2004, 2006 and 2007

3,400

9,500

4,300

9,400

95,400

82,100

4,300

4,500

9,400

50,700

96,100

84,300

63,900

56,800

25,100

1,800

40,200

4,200

0 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 90,000 100,000 110,000

Geothermal energy

Hydropower

Solar energy

Biomass

Wind energy

Source: BMU Projekt "Kurz- und langfristige Ausw irkungen des Ausbaus der erneuerbaren Energien auf den deutschen Arbeitsmarkt", interim report March 2008

Public / Non-profit Sector Jobs

nützige Mittel

Increase: approx. 55 %

0

100,000

200,000

300,000

2004 2006 2007

160,500employees

235,600employees

249,300employees

Angelika Wasielke

Thank you for your attention!

Angelika.Wasielke@gtz.deMobile: 0906218568