THE FEED-IN TARIFF FOR ON-GRID BIOMASS POWER PROJECTS IN VIETNAM - AVAILABLE BUT NOT ENOUGH ATTRACTIVE ?

1. Role of biomass power source in PDP VIII and its current status

According to Decision No.500/QD-Ttg dated May 15^th, 2023 by the Prime Minister on the approval of the National Power development plan for the period of 2021-2030, vision to 2050 (“PDP VIII”), biomass power sources are continued to develop and increase proportion in both power sources structure and electricity production. Capacity of biomass and waste to energy source ... which are prioritized and encouraged to develop, planned to reach to 2,270MW in 2030 and 6,015MW in 2050. Larger-scale development is possible if we have sufficient raw material resources, high land-use efficiency, environmental treatment requirements, grid conditions, electricity prices and transmission costs are reasonable.

The potential biomass power resources in Vietnam are about 7,000MW. Currently, the total capacity of on-grid biomass power plants have been installed is only about 366.6MW, which are as below:  

Thus, the potential for developing the on-grid biomass power plant by 2030 and a vision to 2050 is really huge.

2. The Feed-in Tariff (“FIT”) status for on-grid biomass power projects in Vietnam

3. FIT proposal to promote the development of on-grid biomass power

Despite the Feed-in Tariff (FIT) for Combined heat and power (“CHP”) biomass power projects had been increased from 5.8 UScents/kWh to 7.03 UScents/kWh from April 25^th 2020, only bagasse-burning CHP biomass in sugar cane plants had been developed and operated on a modest scale.

Since April 25^th 2020, FIT for non-CHP biomass power projects (burning biomass only for power generation, biomass is as fuel source and all energy from fuel combustion is applied to generate steam to spin turbine and generator) has been issued. However, up to now, there is no non-CHP biomass power plant in operation, only some projects capacity of 10-20MW are developed and under construction; larger projects capacity of 30-50MW are under development (planning & basic design). 

Meanwhile, FIT for biomass power projects in Thailand has been around 12-16 UScents/kWh (source: Energy Policy & Planning Office of Thailand, Ministry of Energy as of 2015), nearly double than Vietnam. As a result, Thailand had achieved 2,452MW of biomass power in 2014, what a very impressive number.

In Vietnam, by analyzing investment efficiency for a typical non-CHP biomass power project, discounting cash flow applied, input parameters such as: loan /ownership structure is 80/20, loan interest rate of 7%/year, investment rate of 2 million USD/MW, 20-year of project cycle life, the investors usually expect a payback period of less than 12 years, therefore the FIT should be at least 10 UScents/kWh or higher.

In conclusion, to obtain the target of installed capacity of on-grid biomass power source in Power Plan VIII, VATEC recommends that it is necessary to increase the FIT for on-grid biomass power project and regardless of whether CHP or non-CHP biomass power projects.  

VATEC is an experienced consulting firms in the biomass power sector. Please do not hesitate to contact us if you want to seek biomass power opportunities in Vietnam.

Prepared by: Mr. Nguyen Duc Thang (Richard) – Director of Thermo & Mechanical Engineering Dept.
                      Mr. Nguyen Van Dien (Kevin) – Director of Economic and Estimating Dept.