1. Angelika Wasielke Mai 8 th 2009, Hanoi The Policy Framework for Renewable Energy Development in Viet Nam Chances and Barriers for the Private Sector

2. Angelika Wasielke Background VN is well endowed with RE resources which are distributed through-out the country. These resources can be exploited to meet Vietnams rapidly increasing energy demand as well as environmental protection. The majority of Vietnams 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.

3. Angelika Wasielke Background Power sourcesCapacity(MW)% Traditional electricity1119897.497 Coal fired 1,51513.191 Oil fired 5755.006 Gas turbines 4,66540.617 Diesel 2452.133 Large scale hydropower 4,19836.550 Renewable electricity 287.482.503 Wind 1.230.011 Small scale hydropower 1351.175 Solar energy 1.250.011 Biomass 1501.306 Total11485.48100.000 Structure of RE in the Vietnamese power sources

4. Angelika Wasielke 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, km 2 197,342100,36125,6792,178113 %/total area60.630.87.90.70.0 Potential, MW401,444102,7168,748452

5. Angelika Wasielke 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

6. Angelika Wasielke Existing Legal Framework The following legislation sets out the RE policy and legal framework: Electricity Law Law 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

7. Angelika Wasielke 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.

8. 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 Plan Renewable Energy Law Renewable Energy Authority Standard Power Plant Agreement (finalized since beginning of 2009)

9. Angelika Wasielke Legal Framework Summary The legislation provides general support and encouragement for RE; but : detailed implementation measures are still lacking The 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

10. Angelika Wasielke 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.

11. Angelika Wasielke Scenario for exploitation of RE sources Capacity of RE sources in the period 2009 – 2025 (basic scenario) No.RE200920102011201220132014201520202025 1Small hydro114011661256134914761584164219882454 2Biomass157.7165.7207.7229.7234.7247.7316.2380.7395.7 3Biogas00.5123.5781112 4 Solar 1.654 2.653.25 5Wind989.5 109.5 217443493 6Geo-thermo0000183651214.1239.1 7Bio-energy000000000 8Tidal wave0000000515 9Garbage7.411.9 15.415.9 20.447.497.4 Total (MW)131514351568168718592002225730933709

12. Angelika Wasielke Hanoi 19.02.2009 Capacity of RE sources in the period 2009 – 2025 (high scenario) TTRE200920102011201220132014201520202025 1Small hydro119512221402159417211930198826843249 2Biomass157.7170.7197.7219.7234.7247.7316.2400.7462.7 Bagasse157.7167.7 172.7177.7180.7212.7267.7307.7 Rice husk033046516186110 Others00016617.52345 3Biogas00.5123.5781112 4 Solar energy 1.654 2.653.25 5Wind energy989.5 109.5 217484556 6Geo-thermo0000183651214.1259.1 7Bio-fuel000000000 8Tidal wave0000000515 9Garbage7.411.9 15.415.9 20.457.4232.4 T otal (MW )137114961703192221042348260338594790 Scenario for exploitation of RE sources

13. Angelika Wasielke 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 Governments 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).

14. Angelika Wasielke 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...

15. Angelika Wasielke 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.

16. Angelika Wasielke 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.

17. Angelika Wasielke 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

18. Angelika Wasielke 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 Project Legal Framework Conditions

19. Angelika Wasielke Support Instruments Classification of energy policy instruments

20. Angelika Wasielke 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

21. Angelika Wasielke 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 /MWh Market price conventional electricity = 60 /MWh Financial premium = 90 – 60 = 30 /MWh Yearly transfer cost = Premium * Generation = = 30*2000 = 60 k/year 2000 MWh/year premium: 30 /MWh Yearly transfer cost: 60,000 /year p con : 60 /MWh FIT: 90 /MWh

22. Angelika Wasielke 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."

23. Angelika Wasielke Redistribution of Costs of the EEG for a kWh (18,6 ct)

24. Angelika Wasielke Ranges of feed-in tariffs paid for electricity from new built plants in 2007 Type of resource usedRange of feed-in tariffs (ct/kWh) Hydro power3.58 – 9.67 Biomass8.03 – 20.99 Geothermal7.16 – 15.00 Wind power5,17 - 9,10 Photovoltaics37,96 – 54,21

25. Angelika Wasielke Wind Power in Germany Development of feed-in tariffs for Wind power in Germany

26. Angelika Wasielke Renewable Energy Promotion Policies

28. Angelika Wasielke Development of Wind Energy Wind Power Capacity, Top 10 Countries, 2006

29. Angelika Wasielke Development of Wind Energy Wind Power, Existing World Capacity, 1995-2007

30. Angelika Wasielke Development of Renewable Energy REN 21

31. Angelika Wasielke

35. Thank you for your attention! Angelika.Wasielke@gtz.de Mobile: 0906218568