Expert Group Meeting Using Energy Management Standards to stimulate persistent application of Energy Efficiency in Industry 21-22 March 2007, UNIDO, Vienna

Expert Group MeetingUsing Energy Management Standards to stimulate

persistent application of Energy Efficiency in Industry21-22 March 2007, UNIDO, Vienna

ENERGY EFFICIENCY IN INDUSTRYIN VIETNAM

By: Nguyen Manh Hung

Deputy general director of Energy&Petro Dept.

Ministry of Industry - Vietnam

CONTENT

Introduction of Vietnam

Vietnam’s energy: production and consumption

Current energy conservation and efficiency use in Vietnam (EE&C)

Energy efficiency in industry: barriers and solutions

Introduction of Vietnam

Main features: Location: on Eastern Sea of the Indochina

Peninsula

Area: 331,000 km2

Population: 84 million (as of 2006)

Capital: Hanoi

Climate: tropical country

Main religion: Buddhism

GDP: 55.5 bill. USD (as of 2006)

Vietnam’s energy: Production and Consumption (1) - Overview

Vietnam is now known as a country of reform and integration with remarkable initial successes in socio-economic development,

Energy demand also grows rapidly to meet the development of the national economy,

Total commercial energy exploitation increased from 7,1 MTOE in 1990 to 46,604 MTOE in 2005 (13.5% annual average growth),

Final energy consumption increased from 4,21 MTOE in 1990 to 21 MTOE in 2005 (12% annual average growth).

Energy intensity (energy consumption per GDP) of Vietnam is ~ 500: 1.5 times as much as of Thailand and twice as much as the average level of the world.

Vietnam’s energy: Production and Consumption (2)

Energy production in 2005:

Electricity generation: 53.462 bil.kWh

Oil production: 18.6 mil.tons

Gas production: 6,890 mil.cub.m

Coal production: 32.4 mil. tons

Vietnam’s energy: Production and Consumption (3)

Energy consumption by sector in 2005:

Industry: 8.5 MTOE

Transport: 6.5 MTOE

Service: 1.76 MTOE

Agriculture: 0.54 MTOE

Residential use: 3.3 MTOE

Industry sector is the largest energy consumer.

Industry

Transport

Service

Agriculture

Residential use

Vietnam’s energy: Production and Consumption (4) - Forecast

Year 2010: Final commercial energy consumption is forecasted at 47.63-49.62 MTOE (Annual average growth in period of 2004-2010 is projected at 8.8-10.8%).

Year 2020: Final commercial energy consumption is forecasted at 97.3-123.8 MTOE (Annual average growth in period of 2010-2020 is projected at 6.6-7.1%).

Industry sector will remain the largest energy consumer until 2020.

Energy consumption forecast until 2025

0

20

40

60

80

100

120

140

2000 2010 2015 2020 2025

MTO

E Base scenario

High scenario

Energy consumption mix by sector

0%

20%

40%

60%

80%

100%

2000 2010 2020

Residential use

Service

Transport

Agriculture

Industry

Vietnam’s energy: Production and Consumption (5) – Issues to be addressed

How to ensure national energy security? Restructuring the energy sector structure and opening up the

market for energy

Finding investment capital for energy development

Energy price control

Developing renewable energies

Advancing energy science and technology

International cooperation on import and export of energy and fuel;

………

Effective and efficient use of energy, esp. in industry sector, is the most sustainable solution for the country’s continuing economic growth and the environment protection.

Current energy conservation and energy efficiency in Vietnam (1)

Setting of legal framework

Establishment of EE&C Office

EE&C Activities

EE&C Projects

Current energy conservation and efficiency use in Vietnam (2) – Legal framework

Law of Electricity enacted in 2005

In September 2003 the Government of Viet Nam (GOV) had issued Decree No. 102/ND-CP on Efficient Utilization of Energy and Energy Conservation. Subsequently in 2004 the Ministry of Industry (MOI) issued a Circular providing guidance for implementing energy conservation in all enterprises.

The Decree regulated EE&C in production, building, and equipment, power intensive machines and residential use; addressing various issues such as measures to reduce import tariff on selected EE equipment, to support its implementation.

In 2005 MOI prepared a “National Targeted Program on Energy Efficiency and Conservation (EEC) for the Period 2006-2015", approved and enforced on 14 April 2006 by Prime Minister. The National Program calls for a concerted efforts in improving energy efficiency and cutting down energy losses and stronger measures for conservation of energy.

These are very important legal basis to implement new EE&C programs and projects in Vietnam.

Current energy conservation and efficiency use in Vietnam (3) – EE&C Office

- In the Decision No. 79/2006/QD-TTG dated April 14, 2006, the Prime Minister entrusted Minister of Industry to establish the Board and the EE & C Office and to be a Chairman of the Board.

- Under the MOI’s Ministerial Decision No.919/QD-BCN dated April 7, 2006, the EE & C Office under MOI was established.

Organization Structure of the EE&C Office(Proposed to exist until 2008)

Assistant General Manager

Advisors (2 persons)

General Manager

(Deputy General Director of S&T Department)

Minister of Industry

EE&C in Transportatio

n

EE&C Development Group

(06 persons)

EE&C Implementation Group

(5 persons)

Policy & Planning

Efficiecy of Energy

Instruments

EE&C in Building & Residence

EE&C in Industry

Training

Public Relation

Information & Data

Management

Standard & Labeling

Alternative & RE

Finance, Accounting

International Cooperation

General Director of S&T Department

Assistant General Manager

Advisors (2 persons)

General Manager

(Deputy General Director of S&T Department)

Minister of Industry

EE&C in Transportation

EE&C Development Group

(06 persons)

EE&C Implementation Group

(5 persons)

Policy & Planning

Efficiecy of Energy

Instruments

EE&C in Building & Residence

EE&C in Industry

Training

Public Relation

Information & Data

Management

Standard & Labeling

Alternative & RE

Finance, Accounting

International Cooperation

General Director of S&T Department

Current energy conservation and efficiency use in Vietnam (4) – Activities

Residential EE&C activities: promoting sales of 1 mil. Compact fluorescent lamps (CFLs) to households in the areas of high load

Surveys of Energy Consumption in 65 Buildings and Hotels for benchmarking

20 Buildings and Hotels in Ho Chi MinhCity 36 Buildings and Hotels in Hanoi City Energy audit at 2 companies:

- Rang Dong (Dawn) Lamp and Thermos Flash Company

- Hanoi Industrial Canvas Textile Company

Tiềm năng tiết kiệm năng lượng

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

2006 2008 2010 2012 2014 2016

Năm

Energy saving potential in VietnamPotential for energy conservation in several industrial factories can be as high as 20% of the current consumption level

Energy conservation and efficiency use in Vietnam (5) – Projects

SDC Project on EE & Environment Management in Brick Making Industry (USD 1 mil.)

The Netherlands supported project to the Biogas Program for Animal Husbandry Sector in selective provinces in Vietnam (2003-2006, USD 2 mil.)

The WB/GEF/EVN DSM Phase 2 (USD 8. 22 mil. )

Commercial EE Pilot Program 2004-2007 (USD 2-4mil. from GEF + 5mil. from Private Sector)

The WB/GEF/MOI: Vietnam System Efficiency Improvement, Equitization and Renewables (SEIER) (2002-2007, USD 220 mill.

UNDP/GEF/MOST Project on Promoting Energy Conservation in SMEsVIE/01/G41 Aug 2002-March 2005) USD 384,000

UNDP/GEF VIE/00/G43 Energy Efficient Public Lighting March 2001-Aug 2002 374,900 USD.

UNDP/GEF public lighting projects under implementation: 5 mil. USD

Energy efficiency in industry: Barriers and Solutions (1)

Barriers:

High losses and low efficiency due to obsolete technologies and equipment – require an initial huge capital amount to replace;

Lack of demand side management practices;

Unawareness of the public of social benefits of energy conservation; Lack of technical expertise by end-users, manufacturers/suppliers and potential service providers on modern efficient technologies and practices, efficiency potentials, energy audits and inspections, actual performance of EE measures, etc.


Barriers (cont.):

Economic instruments to imporve energy efficiency in industry are still limited and government fuel subsidies encourage industry to use more energy;

Policy for promoting energy efficiency and energy conservation is voluntary rather than mandatory;

Inadequate information on potential EE improvements, costs and benefits of EE equipment, potential low-cost measures, and new technologies/practices;


Solutions: Improve the effectiveness of legislative instruments

to improve EE.

Increase the use of economic instruments to improve EE and remove barriers, for e.g. removing fuel subsidies, tax breaks for investing in EE technologies, providing incentives to decision makers to promote EE&C, etc.

Capacity building activities for company leaders to promote energy efficiency,

Marketing of EE, conducting research and information disseminating about the benefits of EE implementation to end-users,


Solutions (cont.): Investment grants to encourage high EE products,

Lessons learned from other countries: Canada (Industrial Building Incentive Program , Canadian Industry Program for Energy), China – tax breaks offered for the manufacture of energy-efficient products by industrial enterprises, e.g. producing energy-efficient wall materials for buildings; a 50 percent reduction of value-added tax on energy-efficient products sold, Malaysia – sales tax exemption on all equipment, Chinese Taipei – investment tax credits of 5 percent to 20 percent of the cost of equipment against the industrial firm’s income

International cooperation: support of the world community for the new EE technologies is crucial for developing countries in generally and Vietnam in particular.

We welcome all opportunities to improve EE&C in Vietnam!

References information

EE&C office under MOI

National Targeted Program on Energy Efficiency and Conservation in period 2006-2015.

Brief of existing EE&C projects and programs in Vietnam

Roles of the EE&C Office

1. Propose the Mechanisms, Policies and Measures for promoting EE&C activities to submit Prime Minister for approval and enforcement

2. Set up the short term, medium term and long term EE&C programs to submit Prime Minister for approval and enforcement

3. Work as a Focal Point to organize and develop EE&C Management System from Ministries to the localities levels for effectively implementing EE&C Program at all local levels.

4. Cooperate with other Governmental Organizations to monitor and treat the problems arose during implementing the program.

5. Organize the EE&C Awareness and Propagation Program for the enterprises and community.

6. Establish the energy consumption database for management

7. Cooperate with International Organizations to push up the cooperation in EE&C.

National Targeted Program on Energy Efficiency and Conservation in period 2006-2015

I. The program’s objectives

• In period 2006-2010: Reduction of national energy consumption 3%-5% in comparison with energy demand forecast (BAU cases)

• In period 2011-2015: Reduction of national energy consumption 5%-8% in comparison with energy demand forecast (BAU cases)

II. The implementation plan

1) Institution establishment on EE&C: Energy Management System from the State Management to the economic-social activities, establishment of 8 EE&C Centers in 3 regions of the country.

Enforcement of legal document on EE&C in period 2006-2010, issuance of 10 MEPS for 10 types of equipment, carrying out the EE&C Labeling


Compulsory Application of Buildings Code for new Buildings from 2006.

Completion of energy pricing to promote EE&C activities

Application of energy management system in 40% of designated enterprises in period 2006-2010 and 100% in period 2006-2015.

2) Introduction of high energy efficiency equipment, replacement of low energy efficiency equipment, reduction of energy intensity

3) Efficient utilization of transportation system to reduce energy consumption, fuel shifting from gasoline to LPG in the cities.


III. The Projects under EE&C Program

The program comprises of 11 projects:

1) The first projec: Completing legal framework on EE&C in all activities.

2) The second project: Propagandizing to raise community’s awareness of energy saving and effective use.

3) The third project: Put education of energy saving and effective use into national education system.

4) The fourth project: campaign on establishment of model named “Energy saving in each household”.

5) The fifth project: developing standards and putting energy-saving label on some targeted products.

6) The sixth project: Providing technical assistant to domestic manufacturers who meet the standards on energy efficiency.


7) The seventh project: Establishing Energy Management System in enterprises.

8) The eighth project: Assisting manufactories to upgrade, improve and rationalize production line for energy saving and effective utilization.

9) The ninth project: capability building and implementing activities of EE&C activities in designing and managing buildings.

10) The tenth project: Construct Pilot Buildings and put the EE&C activities in Buildings into discipline.

11) The eleventh project: Optimally exploit capacity of means of transportation, minimizing fuel consumption and reducing emission.


1. World Bank/Sida DSM Phase 1 Project (1999-2002)

DSM Policy Framework and Pilot DSM Programs (MOI)

Draft DSM policy framework, completed

DSM pilot programs in design phase

Preliminary load research program design, completed

Review of load management options, ongoing

Introduction to Appliance Labeling and Lighting and Motor Standards (MOSTE)

Building Code Development (MOC) enforced in December 2005


2. Utility DSM – GFE/WB 2.25 mill USD

EVN Phase 2 DSM Program (ongoing)

• Capacity Building for EVN DSM Cell , It will be upgraded to form the DSM Center under EVN

• Phase 2 Load Research Program: Design and implementation

• Implement load management program to reduce EVN peak load over 120 MW by 2006 and reduce GHGs emission by 70,000 tons per year by 2006:

o Pilot Load Management Program Development and implementation: TOU program design

o Energy audits

o Institutional strengthening and technology transfer

• Design and implement 5 pilot DSM programs are being designed by International


3. The Commercial EE Pilot Program (MOI) GFE/WB 3.25 mill USD

Objectives

Catalyze commercial EE market

Develop a small, sustainable commercial EE service industry and enhance their capability

Demonstrate EE project benefits

Components

Marketing: Promoting the program and energy efficiency retrofit projects to project agents and project proponents

Training: Increasing the skills of project agents and financial service providers

Sub-grants: Meeting part of feasibility study (investment grade audit) costs and Incentives for investment in energy efficiency retrofit projects


4. EE&C promotion in SMEs of Vietnam conducted by MOST, funded by UNDP/GEF, Vietnamese Government (2006-2010)

General objectives

Reduction of GHGs of 5 industrial sub-sectors (brick production, paper and pulp, textile and food processing) by implementing EE&C programs

Concrete Objectives

- Remove the barriers

- Improve the institution, policies, technology, information and finance to

promote technology and experiences on EE&C

4. EE&C promotion in SMEs of Vietnam conducted by MOST, funded by UNDP/GEF, Vietnamese Government

The expected results

• Capacity building for Central to Local Government Organizations in establishment and implementation of policies related to EE&C in SMEs

• Improve awareness of SMEs by implementation of propaganda program

• Provide information on EE&C to SMEs

• 5 years EE&C training programs for SMEs Set up the ESCOs Network to support SMEs on EE&C

• Facilitate SMEs in loans for EE&C projects from commercial financial sources and funds

• Implement 10 Pilot projects on technology, financing and multiply to 500 projects in 5 industrial sub sectors.

• Formulate the EE&C markets (technical supply and services)

4. EE&C promotion in SMEs of Vietnam conducted by MOST, funded by UNDP/GEF, Vietnamese Government

• Reduction of 950,000 tons of GHGs Energy saving of 140,000 TOE

• Energy cost reduction: 10% to 15%

• Increase competitiveness of industrial products

• Environmental pollution reduction in brick and ceramic production;

avoidance of factories movement

Thank you for attention and look forward to seeing you in Viet Nam – the land of hidden charm

Documents

Expert Group Meeting Using Energy Management Standards to stimulate persistent application of Energy Efficiency in Industry 21-22 March 2007, UNIDO, Vienna