Vietnam has huge biomass potential, but policy tweak needed

By Anh Tran    December 16, 2018 | 05:15 pm PT
Vietnam has huge biomass potential, but policy tweak needed
Bagasse used to generate power at Lasuco, Thanh Hoa Province. Photo by VnExpress/Anh Tran
Vietnam has the potential to add hundreds of megawatts of power from biomass if it makes changes to its energy policies.

Lam Son Sugar Joint Stock Corporation (Lasuco) is willing to double its bagasse-fired power generation period to 300 days a year once the tariff is increased to match other renewables like wind and solar, Le Van Tam, its chairman, said.

Lasuco has installed a bagasse-fired power generation system in its sugar production line in the central province of Thanh Hoa. It can generate more than 20 MW of electricity at the peak of the sugarcane crushing season.

Half the output is used for the sugar mill’s operation and the rest is sold to the national grid through the Vietnam Electricity group (EVN).

The company has been making a loss of VND600 (2.5 US cent) per kWh of electricity it sells to the grid. The feed-in tariff (FiT) fixed for bagasse-fired power based on combined heat power (CHP) technology stands at 5.8 cents per kWh while the cost is 8.3 cents.

Lasuco’s case finds mention in a newly released report by the Global Green Growth Institute (GGGI) and German agency for international cooperation (GIZ).

"Vietnam has huge untapped potential for biomass energy, and with some simple changes in policy we can see 737 MW of clean energy resulting in significant emissions reductions," Adam Ward, Vietnam country representative of the GGGI, said.

Biomass energy potential of Vietnams sugar industry. Source: GGGI and GIZ report/December 2018

Biomass energy potential of Vietnam’s sugar industry. Source: GGGI and GIZ report/December 2018

The current FiT of 5.8 cents is insufficient to capture the potential 737 MW capacity in the sugar industry, and at this rate, no further capacity is estimated to be economically viable to add to the existing 352 MW of installed capacity, the report said.

At 7.4 cents currently fixed for non-CHP biomass power, the report shows an increase in capacity to 514 MW using multiple fuels while net present values are still negative in a single-fuel scenario.

To capture the full 737 MW potential, the FiT should be 9.35 cents and rely on multifuel instead of single fuel generation, it noted.

Pham Quoc Doanh, chairman of the Vietnam Sugarcane and Sugar Association, said the FiT rate for bagasse-fired power of 5.8 cents squanders away an opportunity to produce power amid the increasing demand in the country.

The price of 7.4 cents mentioned in the Prime Minister’s Decision 24 dated March 24, 2014 on mechanisms to support biomass power projects has not yielded fruitful results since straw- and sawdust – fired power generation remains sluggish.

The FiT rate for biomass energy in Vietnam is very low, less than half the rates in Thailand (13 US cents) and the Philippines (12.4 US cents), the paper said.

Even compared with the rates for other renewables in Vietnam, biomass suffers: they are 9.35 cents for solar energy, 8.5 cents for onshore wind energy and 9.8 cents for offshore and 10.5 US cents for electricity from waste.

Not surprisingly, Vietnam’s installed capacity to produce energy from biomass is very low: 352 MW compared with Thailand’s 3.3 GW and Indonesia’s 1.7 GW.

Thailand has been leading Southeast Asia in biomass energy due to its abundant resources, available grid connection and favorable policies.

The report criticized the "unfair treatment" for different types of renewable energy, resulting in unequal opportunities for independent developers as well as investors in biomass energy.

It said besides the tariff increase, the power purchase agreement also needs to be revised to improve the bankability for investors and address the issues of dispute resolution, extension rights, grid connections, and termination rights.

It also called for greater use of multiple fuel sources together with bagasse to extend the run time of the energy plants.

In its revised Power Development Plan 7 (PDP7), Vietnam has set targets for various sources of renewable energy, with biomass accounting for 2.1 percent of total production by 2030.

It envisages the total renewables installed capacity to reach 12 GW by 2025 and 27 GW by 2030, the latter representing 21 percent of overall power capacity.

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