Vietnam needs to pay more to incentivize biomass power

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Bagasse discharged from sugar cane extraction waits to be burned for power generation at Bourbon Tay Ninh Factory near Ho Chi Minh City. Photo courtesy of Tuoi Tre

Power from biomass is both economical and environmentally beneficial, but Vietnam is using little of its potential in this area since most investors are waiting for pricing support from the government.
Bagasse, the waste from sugarcane after making sugar, is used to generate 100 million kWh a year, while it could make ten times that since sugar mills produce 4.5 million tons of bagasse a year, enough to produce 1.2-1.4 billion kWh, according to a Tuoi Tre newspaper report.
But out of 41 plants, only six are using bagasse to generate electricity.
Bourbon Tay Ninh in Tay Ninh Province near Ho Chi Minh City is one.
It receives nearly 10,000 tons of sugarcane a day and churned out more than 3,000 tons of bagasse for a nearby power plant when it ran at full capacity during harvest time in late 2013.
Pham Van Dung, head of the power department at Bourbon, said bagasse can be used for producing paper, animal feed, fertilizers, and plywood, but the current trend is to use it for generating electricity, especially in developing countries and those in need of energy like Vietnam.
The power generation system was built as part of the factory in 1995 and has been running since 1997 to provide electricity to the factory and sell the excess to Electricity of Vietnam.
Dung said it sells around 360,000 kWh a day to the power monopoly during peak time at US 5 cents each.
But other investors said it is not that simple.
Pham Hong Duong, director of the sugar department at Ho Chi Minh City-based Thanh Thanh Cong Corporation, said a power plant using bagasse costs around $1 million a MW to build, twice the cost of a plant that uses oil or coal.
But the power price is too low, he said.
“Given such cost and pricing, no one dares to invest in it except for sugar mills who can afford to build their own plant to make use of the waste.”
Nguyen Van Loc, vice chairman of the bagasse power section at the Vietnam Sugar and Sugarcane Association, said only three of the six sugar plants generating power plan to expand and only because they are expecting the government to increase the price of power generated from bagasse.
Loc said the current prices of US3-5 cents are too low to stimulate the factories.
He said the government needs to roll out policies to increase generation from bagasse and other biomass -- like increasing the price to 7 cents a kWh and offering investors cheap loans.
The cost of generating power from bagasse is estimated at around 6.25 cents a kWh.
Analysts said power generation from bagasse can fill the gap during the dry season when supply from hydropower plants dwindles or even replace hydropower given the damage it causes to the environment.
It can also help reduce sugar prices, like in Thailand, the most efficient country in the region at biomass power generation.
Power generated from bagasse and other agricultural waste contributed 16 percent of the power used in that country last year and its government plans to increase that to 25 percent, or 3,630 MW by 2022.
The Vietnamese government targets total power generation of 75,000 MW in 2020, up from the current 28,000 MW, including 4.5 percent from renewable sources.
Renewable sources now account for 3.7 percent.
Nguyen Duc Cuong, director of the Recyclable and Clean Development Mechanism Center at the Ministry of Industry and Trade’s Institute of Energy, told Tuoi Tre that some financial support is needed to boost enthusiasm for investment in biomass power, which costs more than hydropower or thermal power.
He said his ministry has recommended that the government should help by paying 7.3 cents for power generated from rice husk and a little lower to bagasse plants.
EVN is buying from wind power plants at 7.8 cents a kWh.
Cuong said using biomass for electricity generation is a pressing matter since water resources for hydropower plants are running out and thermal power plants may have to import coal from 2015.
He cited studies showing that around 110 million tons of biomass are discarded every year, including 40 million tons of straw, eight million tons of rice husk, and six million tons of waste from processing coffee seeds, peanuts, and sugar cane, and wood.
“That is enough to build many large power plants.”
But instead, straw and rice husk are burned after every crop, not only causing waste but also environmental pollution and, possibly, traffic accidents, he said.
He said two plants in the Mekong Delta using rice husk as fuel have proven ineffective, with one now feeding boilers in an industrial zone and the other one closing after making losses.
No investments have been made in plants fueled by waste from coffee, cashew, or woodwork.
Analysts said that without government support biomass power investors would opt for cheap and poor technology.
Pollution caused by using poor technology would cause a negative perception of biomass energy, they warned.
How bagasse generates power at Bourbon Tay Ninh sugar factory:
 
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