ASEAN Wind 2005

ASEAN Wind 2005
Feasibility Assessment and Capacity Building for Wind Energy Development in Cambodia, Philippines and Vietnam
Wind Power Development in Vietnam Institutional, Policy and Market study
November 2006
Project reference: EuropeAid/119920/C/SV Document reference: Task3 Version: Nov06/IED/Tuan(Final)
RIS
IED
Mercapto
PNOCEDC
IE
MIME
ASEAN Wind 2005 - Fact Sheet

Main project data
Full project title: Objective: Feasibility Assessment and Capacity Building for Wind Energy Development in Cambodia, The Philippines and Vietnam The main objective of the project is to promote wind energy development and facilitate investments on wind energy projects in The Philippines, Vietnam and Cambodia through feasibility assessment and capacity building. February 2005 64.5 man-month EC-ASEAN Energy Facility (www.aseanenergy.org/eaef) 1 000 000 / 500 000 by European Community End: December 2006
Start: Total effort: Contracting Authority: Budget / Support:
Tasks
Task 1: Wind Resource Assessments Task 2: Power System Analyses Task 3: Policy & Market Studies Task 4: Technical Feasibility Studies Task 5: Economic Feasibility Studies Task 6: CDM Project Studies Task 7: Financial Framework Task 8: Dissemination RISO + IED; PNOC-EDC; IE RISO + PNOC-EDC; IE RISO + IED; Mercapto; PNOC-EDC; IE RISO + PNOC-EDC; IE IED + RISO; PNOC-EDC; IE Mercapto + All IED + All RISO + All (10.5 MM) (7.5 MM) (9.5 MM) (10 MM) (7 MM) (5.5 MM) (5.5 MM) (4.5 MM)
Project partners
RISO IED Mercapto PNOCEDC IoE MIME RIS National Laboratory Innovation Energie Dveloppement Mercapto Consult PNOC Energy Development Corporation Institute of Energy Ministry of Industry, Mines & Energy Denmark France Denmark Philippines Niels-Erik Clausen Anjali Shanker Bernt Frydenberg Samuel Hernando niels-erik.clausen@risoe.dk a.shanker@ied-sa.fr bernt@frydenberg.dk hernando@energy.com.ph
Vietnam Cambodia
Pham Khanh Toan Sovanna Toch
toanpk@fpt.vn mimedet@forum.org.kh
Wind Power Development in Vietnam Institution, Policy and Market study
By: Tuan A. Nguyen, IED Objective 1. to analyze the existing institutional framework of wind power development, identify potential gaps and recommends measures to address these issues. 2. to analyze the existing policy and regulatory frameworks supporting renewable energy in general and wind energy in particular, 3. to estimate the market potential of wind energy in electricity markets. 4. to identify policy gaps and recommend alternative policy strategies to promote investments on wind power projects.
Feasibility Assessment and Capacity Building for Wind Energy Development in Cambodia, the Philippines and Vietnam Wind Power Development in Vietnam Institution, Policy and Market study
TABLE OF CONTENTS 1. Review of the current institutional framework 3 1.1. Power sector organizational structure 3 1.2. Power sector regulations 4 2. Review of policy and regulatory framework for wind power development 8 2.1. Regulations governing domestic investment for electricity infrastructure 8 2.2. Regulation for foreign investment in power sector 9 2.3. Appraisal procedure for investment from private funds: 9 2.4. Existing regulatory process for investors 10 2.5. Regulations on environmental protection and compensation for damage 11 2.6. Regulations on tax and financial incentives 12 3. Review of the power market and power development strategies. 14 3.1. Power market 14 3.2. Power development strategies 16 4. Review of wind power market 18 4.1. Review of wind energy resource potential from wind resource assessment studies available. 18 4.2. R&D strategies and priorities 22 4.3. Existing sites and locality 23 4.4. Proposed projects for wind power development 25 5. Issues facing wind power development in Vietnam 25 5.1. The role of wind power in Vietnam power development strategies 25 5.2. Barriers issues facing wind energy development in Vietnam 26 5.3. Recommendations (measures to overcome barriers to grid-connected and off-grid renewable electricity 28 6. Annex 29 A1. Investment classification: 29 A.2. Procedure for foreign investment in Vietnam 30
Innovation Energie Dveloppement IED
1. Review of the current institutional framework

1.1. Power sector organizational structure Since the new economic policy innovation in 1990s, the situation in the power sector in Vietnam has substantially changed: The dissolution of Ministry of Energy and the establishment of Electricity of Vietnam (EVN) as a State owned Electricity Company in 1995 under the policy and oversight of the Ministry of Industry (MOI). By this decision, the Government aimed to separate state policy and management from business undertakings. The emergence of IPPs and other BOT projects, especially in generation. Government policy in encouraging foreign investment in BOT form, and in providing incentives for domestic investment, including private participation in power sector. The key organizations in the power sector are MOI and EVN and newly established Electricity Regulatory Authority of Vietnam (ERAV)1. MOI is responsible for overall energy planning and policy, but not for day-to-day management. EVN is a state owned and monopole utility responsible for whole chain of electricity production- transportation-distribution. ERAV is responsible for regulating power market such as drafting and issuing market rules as well as for monitoring/inspecting the implementation of these rules in the power market. Ministry of Industry is responsible for regulatory functions of power activities. The functions include: (i) Issue of licenses; (ii) Review of tariff proposals and make recommendations to the government for approval; (iii) Reviewing investment proposals before submitting to the Government for approval (iv) Issue of regulations for DSM activities; (v) advising Government on standard procedures, criteria for appraising investment proposals and issue of standard sample contracts for power activities; (v) Settlement of disputes, complains regarding electricity activities; (vi) Control, supervision, audit of power activities. Although the law mentions about a regulatory body under MOI, different provisions throughout the Law imply that MOI would use its functional departments to execute the functions of regulation, in addition to its existing policy and planning functions. It should be noted that there is no clear cut between state management functions and regulatory functions of MOI despite the fact that it was one of the objectives of the restructuring process in power sector.
EVN was established in January 1995 under the Governmental Decree. At present, EVN is a state-owned body responsible for the whole chains of power system: production transmission distribution. EVN is a state owned business entity comprising of many
1
Established by Prime Minister Decision 258/2005/QD-TTg, 19 October 2005.
member enterprises and member units, operating in the entire country, specializing in electricity business (including R&D, survey, design, installation and construction, production, transmission, distribution; production of electric equipment and spare parts, export and import, customer services) and a number of other areas of production and services related to electricity. EVN is responsible for developing power industry through investment, production, transmission, distribution and supply of electricity to the economy and population in the accordance with the requirements of the national development strategies and with the tasks assigned by the Prime Minister for each determined period, usually five-year period. To manage rural electrification activities and renewable energy development, there are Business and Rural electrification department in EVN Headquarter and in all power companies. The functions of this department include : (i) studying and proposing policies and mechanism for constructing and managing electricity supply for rural areas; developing investment criteria, technical standards and standardized design for rural network; developing management models for rural networks (ii) providing guidance to prepare rural electrification programs or plans, including development plans for renewable energy for areas outside the national grid; appraising these plans and investment projects to rural areas; (iii) supervising and control the implementation of investment projects in rural areas; (iv) supervising and control the management of rural network, including rural electricity tariff; and (v) guiding, supervising the transfer of rural MV network from local government and other organizations to EVN and the rehabilitation of these networks. ERAV, newly established department under MOI is responsible for: Establish the national generation master planning in long term and power sector restructuring plan Elaborate retail tariff for review and approval by MOI and Prime Minister office Prepare and issue the regulation rules and codes such as power pool rules, transmission network rules, market procedures and bidding in power market Grant licenses for power production Regulate power market (fee, dispute, ...)
1.2. Power sector regulations Existing regulations Up to date, activities in the power sector in Vietnam are officially regulated by Government Decree No.80-HDBT- Regulations on Electricity Supply and Usage (Degree 80), which was first introduced in 1983. To date, the situation in the power sector has substantially changed compared with the time the decree was issued by major reforms. In replacing the old
fashioned degree, there are two activities are underway: (i) Preparation of Electricity Law and its associated secondary decrees and (ii) Decree No 45. This Decree has been revised in order to provide regulations for the sector until the Electricity Law approved.
Vietnam has introduced institutional reforms in energy sector in mid-1990s based on the Law of state enterprise and the Law of Governance Corporation. In 1996, MOI has setup a program and plan for preparing the Electricity Law of Vietnam, which is under revision and adoption by National Assembly. The objectives of the Electricity Law and related decrees are :
Establish a regulatory framework for the power sector, that would create legal environment for commercial activities, ensure self financing ability of power utilities and providing a safe, reliable power supply at a reasonable costs
Promote decentralized rural electrification for socio-economic development Ensure effective use of electricity, promote energy saving and environment protection Identify rights and obligations of electricity enterprises and consumers Distinction of government policy functions, regulatory function and corporation management for electricity activities;
Under new law, the government encourages competition in generation and set a long-term target of 20 percent share from private generation. EVN however remains the key buyer of power generation in the short and medium terms. Non-utility investors interested in grid based generation need to secure long term contract and power purchase agreements PPA with EVN.
Electricity Law In 1996, under decision of the Government, MOI has set up a program and plan for preparing the first Electricity Law of Vietnam. After three years of working, the 11th draft of Electricity Law has been completed and has been adopted by National Assembly into law in July 2005.
The objective of Electricity Law is to (i) attract domestic and foreign investors to invest in the sector; (ii) ensure the equality, fairness and anti-monopoly competition in power production and trading; (iii) protect legal rights and benefits of consumers; The Electricity Law and its associated decrees are designed to: Establishing a regulatory framework for the power sector, that would create legal environment for (i)commercial activities, ensure self financing ability of power
utilities;(ii) providing a safe, reliable power supply at a reasonable costs and attraction of investment in a timely manner for power development Specify rights and obligations of electricity enterprises and consumers Promote rural electrification for social economic development Ensure effective use of electricity, promote energy saving and conservation and protect environment Clear definition of State Management functions, regulatory function and management for electricity activities;
Following are important provisions of the Law: All power enterprises are grouped into 6 categories: generation, transmission, distribution, wholesaler retailer and National Load Dispatching Center. Various forms of investment and ownership are allowed in all power activities. National power development plan is to be prepared by MOI and approved by government. Provincial power development plans are to be prepared by PPC and approved by MOI. Investment to the power sector needs to be in the accordance with national power development plan. For doing business in the sector, a power activity license is required. Licenses may be granted for organizations or individuals in generation, transmission, distribution, wholesale and retailing. All power utilities are allowed to compete legally in a fair, equality manner. To prevent monopoly, each power enterprise is not allowed to generate or manage more than 15% of the total load capacity of the country. Tariff would include full efficient costs and allow power utilities to get return from investment and have profits. Tariff would, on the other hand, takes into account the government policy of subsidization for social purposes and for rural electrification. Government will retain its final decision on any tariff proposals. Government Investor secures the right of land use for power project. Investor needs to establish resettlement and compensation plan approved by authorized level. PPC is to implement the plan. Regarding rural electrification, the government will specify targets of rural electrification in each period based on the sector development plan and national social economic development plan. Provincial rural electrification plans are prepared by provincial government and to be approved by MOI. Government will have preferential policies on investment, management of rural electricity supply for rural, remote and mountainous areas, including investment support and tariff subsidies. Renewable energy for rural electrification will be encouraged. It should be noted that
there might be an overlapping between a provincial power development and a provincial rural electrification plan.
New decree 45 on power activity and usage To fill up the vacuum of sector regulations before the Law to be passed, MOI is revising Decree 80 on Electricity Operation and Usage. The new decree is approved in 2000 under Decree 45/2001/NG-CP published on 02/8/2001 (Decree 45). The new feature in the Decree 45 is the introduction of license requirement, which requests all organizations to get an electricity activity licence for doing business in the power sector. Other provisions of the Decree 45 legalize the current practices for power sector such as: Investment from different sources including private is allowed only for electricity generation except for isolated power network. Electricity of Vietnam is responsible for the whole national electricity system including generation, transmission, and distribution network. A PPA with EVN is a must for all power plants or isolated networks to connect to the grid. Electricity tariff for all organizations connecting to the national grid is decided by Government. Electricity tariff for isolated electricity network is decided by provincial people committee. Regarding rural electrification, there is clear distinction between grid extension and isolated network. For grid extension, EVN will be responsible for construction of MV transmission lines, substation, using government budget and construction of LV distribution network will be funded by diversified local sources. For remote areas, Government will support and provide incentives to construction of isolated networks. Government will specify the tariff ceiling for rural customers.
For rural remote areas, a special inter-ministerial circular (IMC) on Guidelines on Investment and Construction Management of Power Projects in Rural, Mountainous and Island Areas has been drafted. The draft IMC circulated amongst various government agencies for comments and is expected to issue on 2000. Some provisions are provided for development of renewable energy and involvement of private sector to rural networks: For areas that cannot economically connect to the grid, private and other sources of investment are encouraged. Electricity tariff is to be decided by Provincial People Committees and should cover costs and reasonable profits for developers. Investors of power projects in areas included in the list B and C specified in Domestic Investment Incentive Law are eligible to concessional borrowing from Government Fund for Investment Development Support.
Decision on investment on Renewable energy resources is proposed to be simplified and decentralized to provincial authority. All projects less than 5000 kW are proposed to be decided by either by PPC or even lower levels, depending on scale of investment. If project is to connect to the national grid, a PPA with EVN is also required.
Regulation framework for power sector is in the forming stage. The laws and decrees and its associated circulars laid important principles for renewable energy development and encourage RE development to supply electricity for remote and mountainous areas. The responsibility of provincial government toward rural electrification has increased significantly. Concurrently, the responsibility of MOI has also increased. MOI is responsible for state management not only over EVN network but also over the distribution systems for rural areas, which belong to local government, households and other parties.
2. Review of policy and regulatory framework for wind power development

2.1. Regulations governing domestic investment for electricity infrastructure
Following are brief description of the important regulatory framework for domestic investors stipulated in the Decree No.52: Regulation on the Management of Investment and Construction.
On July 1999 the Decree 52 was issued replacing two existed Decree 42-CP and Decree 92CP on Regulations for Management. The decree describes general principles of investment and construction management by the state, specifies procedures required for investment preparation, implementation, commissioning and other issues related to project management. The regulations are applicable for all kind of domestic investments. It should be noted that the Decree, from beginning of it issuance has caused a lot of controversies among business communities. Subsequently, the decree 12/2000/ND-CP, amending and supplementing a number of articles of the decree 52 was issued on 5 May 2000.
Important messages for developers are that the level of state management and appraisal procedures over investment depends on: (i) Ownership of funding such as government versus private resources and (ii) scale of project costs.
Investment projects are grouped into 3 categories according to project cost level. Procedure and the level of authorization for project approval are different for different categories. The classification is summarized in the table of the annex 1.
2.2. Regulation for foreign investment in power sector In summary, the guidelines for the potential foreign investors are as follows: Foreign investors are allowed to invest in Vietnam in 3 forms: business cooperation contract, joint venture and 100% foreign investment businesses. In power sector, foreign investment is not included in government preferential list except in the form of build-operate-transfer (BOT) basis. Investment projects to specific sectors and specific areas indicated in the preferential list under the Law will enjoy incentives and special treatments in terms of tax reduction and holidays export duty exemptions, land rent reduction and other privileges. Although power projects in BOT basis are in the preferential sectors, all other activities in power sectors by foreign investors, including renewable energy technology development and dissemination is not included in the specific sectors for preferential treatment. Preferential areas enjoying investment incentives include mountainous, remote areas and areas so called with social economic difficulties. More incentives are given to mountainous and remote areas. To implement investments, potential investors have to go through investment appraisal procedure. The procedure can be broken down into 3 steps: Investment licence, Construction permit and the follow up steps. The procedure in general is described in the annex.
Existing legal framework was designed to accommodate large power projects but not smallscale projects like renewable energy schemes. This observation is explained by provisions such as: Investment projects in power sectors in other than BOT form are not encouraged, because it is considered that power sector investment is under monopole of EVN. Too complex appraisal procedure requesting involvement of many ministries and government agencies at different levels Power projects of any size must be approved by Prime Minister or MPI.
2.3. Appraisal procedure for investment from private funds:
There are 3 steps procedure for investment from private funds, more or less following the same procedure for foreign investment:
Step 1: Establishment licence: To be specified by the Company Law or Cooperative Law accordingly. Step 2: Construction permits: To obtain a construction permit issued by PPC, a private developer needs to include the following documents in the application to Department og Construction (DOC) for appraisal: Business registration (by DPI or MPI, depending on project cost level) Land use or lease licence (by PPC) Project Design
DOC will appraises the application in 4 issues: (i) Accordance of the project with investment decision in terms of scale, technology, capacity, technical economic indicators, planning, architecture planning etc. This provision is very confusing for private investors who do not need to get investment decision by government; (ii) Environment protection, safety measures; (iii) Rationale of technical design; and (iv) Legitimacy of designed entities Step 3: Follow up: Before a construction start, a certificate for completion of land resettlement and compensation by PPC or authorized authority need to be obtained. Though it is not specify in the Decree, in practice, there are a number of other licence and registration to be obtained from government and local authorities.
Appraisal procedure for public entities or for investment by government resources or credit: For public enterprises and especially for projects funded by government resources such as budgets, credits or guarantee, investment and construction appraisal procedures are quite complex and requirements for projects, supported by and for public enterprises, which are quite complex and differentiated on the scale of investment and type of funding.
2.4. Existing regulatory process for investors The regulatory framework in the electricity sector is relatively complex and possibly acts as a disincentive for potential investors. The following summarizes the process developers of private power projects have to follow in order to get approval to proceed: Intending small IPPs must carry out detailed investigations and establish a business entity under which they can apply for investment approval followed by a construction permit. The following is an outline of the approval process as currently practiced. The processes for foreign and domestic investors are shown in figures below. While the process used to be even more complex for domestic investors with the new Enterprise Law, the two charts look very similar.
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Existing Approval Process for IPPs - Domestic Investors

MOI, MPI Peoples Committee PM, MPI, PC Ministry in Charge(MiC)
A E
Pre-Investment Study (PFS)
Investment Approval Feasibility Study
Evaluation Committee
Construction
Investor C
Business Registration
Approval to Construct
Appropriate Ministries Depts Sign PPA EVN
Peoples Committee Ministry in Charge
Existing Approval Process For IPPs - Foreign Investors

MOI, MPI Peoples Committee PM, MPI Peoples Committee
A E
Pre-Investment Study (PFS)
Investment Approval Feasibility Study
Evaluation Committee
Construction
Investor C
Investment License
Approval to Construct
Appropriate Ministries Depts Sign PPA EVN
MPI Peoples Committee
Source : WB, 2002 2.5. Regulations on environmental protection and compensation for damage The government has enacted the following law and decrees protecting the natural environment and compensation for damage to land and property caused by construction or other works : Law on Environmental Protection dated 27 December 1993. Decree No.175-CP of 18 October 1994 : Guiding the Implementation of the Law on Environmental Protection.
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Circular No.1100/TT-MTg of the Ministry of Science, Technology and Environment Guiding the Drawing and Evaluation of Reports on the Assessment of Environmental Impact of Investment Projects.
Decree N.22/1988/ND-CP of 24 April 1998 : Compensations for Damage When the State Recovers Land for Use in Purposes of National Defence, Security, national Interests and Public Interests.
In addition to the above there are specific laws relating to the use of a natural resource, such as water for generation of electricity, in the form of : Order No.4-L/CTN of 28 April 1998 : Ordinance on Natural Resource Tax. Law No.8/1998/QH10 of 20 May 1998 : Law on Water Resource.
The law acknowledges that the people of Vietnam own all natural resources. Furthermore, the law provides for the management, protection, exploitation and use of the water resources in an economical, rational and effective manner, as well as the environmental protection of the resources and ensures the source of revenue for the State Budget. Natural resource tax applies to the use of water for generation of electricity with the one exception that electricity not transmitted into the national grid is tax exempt. On-grid IPP and SPP are required to submit an EIA which is reviewed by the MONRE and the DONRE at the provincial level. Appraising Council of experts is established and gives their opinions about a hydropower proposal. The Minister of MONRE or the Provincial Peoples Committee (PPC) makes the ultimate decision, after the appraisal, to approve or reject the proposal. Off-grid projects are under category 2, for which DONRE approval is required. The degree of assessment prior to consideration for approval is at the discretion of the PPC. 2.6. Regulations on tax and financial incentives Company Tax All business entities in power sector have to pays the following taxes: Professional income taxes: 20 32% with some exception for first few years depending on investment category (see the table in the annex). For the projects under the category A, it could obtain 4 year tax exception from the moment with operating profit, and 50% on the income rate 20% for next 8 years. For the project under the category B, 2-year tax exception is possible from the moment with operating profit, and 50% on the income tax rate 20% for next 8 year. VAT : 10% for power industry Import duties: see the next.
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Land use taxes: varies depending on local authority policy. Natural resource tax (For hydro power facilities, natural resource tax is imposed at 2% of revenue).
Profits Remittance Tax : The new remittance tax rate are as follows : 3% tax rate imposed on profits remitted abroad in respect of foreign investors whose contribution to the prescribed capital of a foreign invested enterprise or a BCC is at least US$10 million. 5% tax rate imposed on profits remitted abroad in respect of foreign investors whose contribution to the prescribed capital of a foreign invested enterprise or to a BCC is from US$5 million to US$10 million. 7% tax rate imposed on profits remitted abroad in respect of foreign investors whose contribution to the prescribed capital of a foreign invested enterprise or to a BCC is less than US$5 million.
Equipment tax There are 2 kinds of taxes for equipment: import duties and VAT. Import duties for equipment, machinery as fix assets and for transportation means, which are not manufactured in Vietnam, are exempted for projects, businesses under preferential lists. VAT is in the level of 10%. For import duties, some RE equipment are not included in the list and custom officers can apply whatever they believe appropriate. Investment projects and projects implemented in areas of especially difficult socioeconomic conditions will be exempted from import duties on raw materials, materials and components imported for production purposes, for a period of five years after the commencement of production. Framework for IPP buying tariff The decision of Minister of Industry on Temporary Guidelines on Contents of Financial and Economic Analysis for Investment and Tariff Framework for Electricity Purchased From Power Plants issued on 13 April 2004, instructs contents of financial and economic analysis of investment and framework of electricity tariff applied for power plant projects in order to unite methodology and ensure selecting high effective investment projects as a base for negotiation of power purchase agreement between Electricity of Vietnam and project investors. IPP buying tariff include the following provisions: a choice of year-round, seasonally-differentiated wet and dry season prices, or timeof-day pricing schemes;
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all contracts are energy-only and level for the entire contract term; A term of 25 years.
Contracts are individually negotiated with each project developer, with a major determinant of price level offered by EVN being the project specifics and depending on following criteria : 1. Benefit/Cost ratio (Bk/Ck) 2. Economic Internal Rate of Return (EIRR, %) 3. Net Present Value (NPVk) 4. Time of recuperation on investment (B/I)
As the rules, EVN made the choice of applicable tariff. The PPA typically signed by projects uses a simplified tariff structure pays based on the KWh taken by EVN multiplied by the fixed tariff, plus a VAT component. There is no foreign exchange component or index in the typical hydro project tariff. However, tariffs for some hydro projects are denominated in U.S. dollar terms, which implicitly accounts for foreign exchange risk. Some thermal projects have monthly fuel price adjustments and are indexed for foreign exchange fluctuations. Projects can be taxed on income, value added at sale, import, profit repatriation, and dividends, as well as be subject to land use fees.
3. Review of the power market and power development strategies.

3.1. Power market In order to meet the electricity demand of the national economy in the forth coming time, Electricity of Vietnam plans to: (I) invest in development of economic generation resources such as hydropower; associated, natural gas, at site exploited coal; (II) rationally develop renewable energy to supply electricity to areas without access to the national grid; and (III) upgrade and rehabilitate existing power plants, renovate management, adopt state-of-the-art technology to enhance to enhance the efficiency and operation stability of power plants. Power plant capacity and production A breakdown of power plant capacity and electricity production figures (2002-2003) in Vietnam is given below.
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Power plant capacity (2002-2003) Large hydro Coal-fired Oil-fired Gas turbines (gas+oil) Diesel IPPs TOTAL Electricity production (2002-2003) Hydro power Coal-fired thermal power Oil fired thermal power (FO) Gas Turbines (oil + gas) Diesel IPPs TOTAL
2002 Capacity % (MW) 4187 1245 198 2322 296 612 8860 2002 Million kWh 18198 4881 1019 9502 92 2109 35801 50.8 13.6 2.9 26.5 0.3 5.9 100 % 48 14 2 26 3 7 100
2003 Capacity (MW) 4154 1245 198 2489 288 1521 9895 2003 Million kWh 18971 7223 891 12131 45 1564 40285 46.5 17.7 2.2 29.7 0.1 3.8 100 % 42 13 2 25 3 15 100 %
Electricity transmission systems At present, the power transmission system of Vietnam consists of three voltage levels: 500kV, 200 kV and 110 kV. EVN divided its transmission system into four geographic areas with four power transmission companies, managing transmission grids in their respective areas The national power system is formed on the basic of the integration of regional power systems with the north-south 500kV transmission line as the backbone. The operation of the national power systems split into a level dispatch hierarchy: National load dispatch; Regional load dispatch (northern, central and southern); Distribution load dispatch.
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Demand forecast Table 1 : Power demand forecast in Vietnam, scenario de base (GWh) Year Electricity sale Electricity production Pmax (MW) Source : Institute of Energy The Master Plan of Power Development for 2005-2010 identifies around 500 communes that can be provided with electricity services through grid extension, and among these communes, around 400 remote communes, which cannot be physically or economically connected to the grid, to be provided with services through renewable energy technologies such as microhydro, solar and wind power. Off-grid renewable energy development is identified for northern mountainous provinces and central highlands. Other off-grid market opportunities for renewable electricity generation are households in electrified communes that cannot be economically connected to the grid. 9,512 14,414 22,07 32,999 49,279 53,467 83,048 130,278 199,458 297,862 2005 45,682 2010 71,596 2015 114,254 2020 177,119 2025 267,480
Table 2 : Rural electrification targets for 2010 Total households in 2010 (million) 15.19 Households with electricity in 2010 (million) 13.73 90 Ratio (% ) Additional households with connection 2000 2010 (millions) 4.78
3.2. Power development strategies According to the draft of National Energy Policy for 2005-2020 period under preparation by Institute of Energy and to be submitted to MOI, the main policy objectives and principles of renewable energy development are : Rationally and effectively exploit and use the domestic energy resources; Provide sufficient energy with better quality at the reasonable price for the socioeconomic development; Ensure the nations energy security;
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Diversify the investment and business modes in the energy field, gradually forming and developing a competitive energy market; Encourage development of various forms of new and renewable energy; Develop an effective energy sector in parallel with environmental protection. Renewable electricity will be supplied on a commercial basis, by all types of businesses Communities, individual consumers and investors will actively contribute to and participate in the Program ; Renewable electricity will be used when it is least cost and economically viable Government will act as a market enabler. The continuous extension of the national power grid to rural areas, particularly Northern mountainous provinces, Highlands and Mekong delta to raise the rural electrification ratio.
This national energy policy gives priority for development of new and renewable energy. It put the following targets to increase the share of RE generation from current insignificant value to : 2% of total primary commercial energy (equivalent to 0.9 M TOE) in 2010. 3% (3 M TOE) in 2020. 6% (18 M TOE) in 2050
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4. Review of wind power market

4.1. Review of wind energy resource potential from wind resource assessment studies available. Thanks to its geography with more than 3000 km long coastal strip and its location in the monsoon climate zone, Vietnam can draw on large wind power resources, although so far these have been hardly exploited at all. The North of Vietnam is characterized by the Red River delta and mainly flat low-lying land that is densely cultivated to produce rice. The delta of the Mekong River covers much of the extreme south of the country and is also low-lying. Mountainous regions, which promote higher wind speeds, are found between the two deltas, and separate Vietnam from its immediate neighbors Laos and Cambodia. Mountainous regions are also found in the North of the country, where Vietnam borders China. As with many other developing countries the assessment of wind energy potential in Vietnam has not been studied to any significant extent. The available wind speed estimates are generally based on data derived from hydrographic gauging stations. Typically, annual mean wind speeds are low, in the range of 2 to 3 m/s on the inland plains. The countrys 3,000 km coastline experiences slightly higher mean wind speed, of around 4 to 6 m/s and exhibits marked diurnal variation, which gives rise to strong winds at certain times of the day. During the monsoon season Vietnam is prone to typhoons. On almost islands the wind speeds are very high, they range from 5-8 m/s. Thus are very good conditions for wind power generation. The study Investigation Studies on Renewable Energy Resources in Asia: Wind Energy resources around Asia Continental, published in the journal Nature and Societies, 1996, was relying principally on surface wind measurements, the authors of one report found that some coastal areas of Vietnam experience mean annual wind speeds of up to 8-10 m/s. However, the surface wind observations can be unreliable or inconsistent over long periods, and which are not necessarily representative of areas that have not been monitored. The mountains, in particular, have been almost entirely neglected as most meteorological stations are located in valleys or plains or along coasts. The placement of many meteorological stations in towns and cities can also introduce a low bias in measurements because of interference by buildings. The first attempt to provide a global picture of wind potential in the Vietnam is given by the Wind Energy Resource Atlas of South Asia, published by ASTEA (Asia Alternative Energy
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Program), The World Bank in 2001. This study, based on meteorological data in conjunction with a simulation model MesoMap, provides rough estimation on wind energy potential in Vietnam. The meteorological data, including the wind measurements, is provides by the Vietnam National Institute for Hydrology and Meteorology, and US National Oceanic and Atmospheric Administration (NOOA). Since 1994 NOOA has been operating 24 weather stations in Vietnam, providing hourly records. Wind data from Vietnam meteorological stations, although long time series since 20-25 year, is of limited values, due to frequently uncalibrated or low positioned measuring devices (10 m). As most surface wind measurements have been taken at a height of 10 m or less above ground level, the extrapolation of mean wind speeds to heights of interest for wind energy (25 to 70 m) can introduce substantial uncertainties. This study shows suitable windy regions at 65 m height primarily in the central mountainous terrain on the border with Laos and in the coastal provinces Quang Ngai, Binh Dinh, Phu Yen, Ninh Thuan (north of Ha Chi Minh city). The results from this simulation shows that about 30% of the surface area in Vietnam has sufficient wind energy potential with 6-7 m/s mean wind velocity at a height of 65 m, and for another 8.6% of the area is rated as good and very good wind potential with over 7 m/s of mean velocity.
Table 3 Wind Energy Potential of Vietnam at 65 m* Characteristic Poor < 6 m/s Land Area Km % of Total Land Area MW Potential Proportion of rural population in each small wind turbine resource class **
*For large wind turbines only. Potential MW assumes an average wind turbine density of 4 MW per square kilometer and no exclusions for parks, urban, or inaccessible areas. Wind speeds are for 65 m height in the predominant land cover with no obstructions. ** Proportion of rural population is estimated from the number of villages and towns in each wind resource class from the US National Imagery and Mapping Agency Vector Map (VMAP) database. Wind speeds are for 30 m height in cleared or open land with no obstructions.
Fair (6-7 m/s) 100361 30.8% 401 444 31%
Good (7-8 m/s) 25679 7.9% 102 716 34%
Very Good (8-9 m/s) 2187 0.7% 8 748 6%
Excellent (> 9 m/s) 113 0.0% 452 1%
197342 60.6% NA 29%
19
Source: ASTEA.
Map 1: Wind resource in Vietnam at 65 m, Source: ASTEA.
20
Table 4 : Average wind speeds in some localities (unit: m/s) Location Mong cai Lo Cai Ly Son C T Van Ly I 5.7 5.4 6.5 4.5 5.7 II 6.3 6.7 6.4 4.3 5.7 7.7 3.6 4.9 3.5 5.4 6.7 3.2 5.6 6.0 4.6 3.1 4.0 III 6.3 5.9 5.3 3.8 5.5 5.5 4.4 4.2 3.2 4.0 5.3 2.8 4.4 4.5 4.7 3.0 4.3 IV 6.1 5.1 5.5 3.2 5.8 5.9 4.7 4.2 2.6 4.6 3.7 2.2 3.2 5.3 3.8 3.3 4.2 V 6.0 3.8 5.4 3.5 6.2 6.5 5.6 4.1 2.7 4.3 3.4 2.1 2.1 5.1 2.7 2.5 4.5 VI 5.7 3.9 4.4 3.5 6.1 6.8 5.7 4.3 3.1 3.8 5.7 3.1 1.9 6.7 3.2 2.7 4.4 VII 5.9 3.3 4.1 4.7 6.4 7.7 6.0 4.2 3.7 4.0 5.8 2.9 1.7 7.2 2.8 VIII 5.5 2.8 4.8 3.7 5.3 5.9 4.7 4.5 3.2 3.9 7.4 3.5 1.8 8.9 2.9 IX 5.8 2.9 6.8 4.3 5.0 6.6 4.6 4.0 1.8 4.0 5.4 1.9 1.5 5.3 2.3 X 5.9 3.3 6.8 4.9 5.7 7.7 5.0 4.6 2.6 4.7 4.9 2.1 2.5 6.3 2.0 2.2 4.6 XI 5.7 3.1 6.9 5.0 6.6 8.2 4.9 4.4 3.6 4.8 6.1 3.2 3.9 6.4 2.4 2.2 4.2 XII 5.5 4.5 7.0 4.8 5.6 7.8 4.7 4.3 3.4 5.1 8.3 3.4 5.4 8.8 2.1 2.0 4.4 Year 5.7 4.2 5.8 4.3 5.6 7.1 5.0 4.3 3.0 4.5 5.9 2.8 3.3 6.8 3.1 2.8 4.4
Bach Long Vi 8.0 Hon Dau Hon Ngu Khe Sanh Hon Tre Truong Sa 1 Playcu 4.8 4.0 3.4 5.5 8.3 3.1
Ban Me Thuat 5.6 Phu Quy Vung Tau TP HCM Con co 8.6 3.2 2.3 4.4
" 2.9 93.8 2.7 5.6 5.9 4.4
Note: it is not clear what kind of measurement was taken to deliver this data. Original source of the data is not clear. Source: Institute of Energy.
21
It should be noted that actually EVN finances 06 wind measurement projects which are under implementation and theirs results should be know by the end of 2006. 4.2. R&D strategies and priorities The development of wind energy is currently only at the experimental stage. Research and small scale demonstration of wind pumps and small wind turbines has taken place to a limited extent. At the present, there are no policy priority and measures for wind power development at medium and large scale. The research on wind turbine and its application for power generation has been conducting since early 80s in Vietnam, within the national research and development program on new and renewable energies. Several institutions and organizations participates in the R&D program : Institute of Energy, Institute of transport (Ministry of transport), Mechanical Institute (Ministry of Defense), Research centers on renewable energies within University of technology in Hanoi & Ho Chi Minh city, The Research Centre for Thermal Equipment and Renewable Energy (RECTERE, Ho Chi Minh city). These research centers mostly do the research on small wind turbines between 150 W up to 3 kW. The development of wind energy is currently only at the experimental stage. Research and small scale demonstration of wind pumps and small wind turbines has taken place to a limited extent. The institute of Energy has developed and tested IE-1700 wind turbines with capacity of 150 W. A number of 150 W battery charging wind turbines have been installed at households in coastal areas of Quang Ninh and Hai Phong2. These wind turbines are sold at price around 400 US$ to the private customers. The University of Technology in Hanoi have elaborated and disseminated some type of wind turbine. The most successful are 150 W and 500 W turbines. Actually the institute has installed 25 turbine of 150 W and 5 turbines of 500 W. In the southern region, Research center for thermal equipment and renewable energy has developed and manufactures a large quantity of wind turbine. The center has installed 100 turbines of 200 W in two villages in Khanh Hoa province, and 50 turbines of 300 W in Can Gio village. At the end of 2003, around 900 wind turbines has been installed by the center (200 W-300 W battery charging wind turbines) Recently in 2002, the Institute of Energy has developed, produced and installed one wind turbine with capacity of 3.2 kW at the R&D center of the institute.
It is estimated that actually about 30 IE-1700 wind turbines are under exploitation.
22
4.3. Existing sites and locality Recently, the renewable energy department within Institute of Energy has conducted a preliminary assessment of all sites with wind power potential in Vietnam. The study identifies several promising sites with potential installed capacity. The data in the table 2 shows that site measurements were taken in the course of project planning on the south-eastern coast and at several islands, are undertaking at other sites under project planning consideration.
Table 5 : Wind power potential at some specific locations in Vietnam Locality Wind speed3 Power potential Hai Phong city : - Bach Long Vi island - Do Son beach region Cn, Ninh Phuoc district, Ninh Thuan province Peninsula Phuong Mai, Binh Dinh 5.5 m/s province Tay Trang, Lai Chau province Peninsula Vn Phong, Tu Bong, Khanh Hoa Province Ph Yn 45 MW Measurement by Vinaconex is completed. One project of 15 MW is under consideration Binh Thuan province : - Island Phu Qui - Mui Ne Qung Ngai province 6.8 m/s 5.6 m/s 5.5 m/s 3 MW 50 MW 10 MW No activity Measurement underway 6.5 m/s 5.3 m/s 3 MW 100 MW 100 MW 3 FS, under negotiation of PPA with EVN No activity yet Measurement is underway 7.2 m/s 4.5 m/s 5.7 m/s 25 MW 5 MW under exploitation Under consideration Measurement is underway Remarks
Wind speed is taken from meteorological measurements at height of 10 m
23
Quang Tri province Quang Binh province Hai Hau, Nam Dinh province Quang Ninh province : Island Ct Mong cai region Source: Institute of Energy, 2005. 4.5 m/s 5.2 m/s 4.8 m/s
50 MW 5 MW 40 MW
Measurement is underway Estimation Measurement is underway
5 MW 10 MW
Measurement is underway Measurement is underway
In 1999, a wind turbine with capacity of 30 kW was installed at Hai Thinh village (Hai Hau district, Nam Dinh province) with financial assistance from Japanese government. This was the first medium-scale wind turbine installed in Vietnam (the biggest at this time). However, the turbine was not able function due to poor technical and FS study the low height of 12 m is not sufficient for this capacity and the surroundings obstacles are much higher. The second medium scale, and one of the rare successful wind energy project, of 2 kW was installed at Dac Ha disctrict, Kon Tum province. This site is operating with good indicator. A hybrid system on solar PV generation and wind power generation having capacity of 15kW (10 kW from PV and 5 kW form Wind Power) supplies electricity for one minorities village (40 households). The project has been granted by TOHOKU Company - Japan and implemented by IoE. A first hybrid Wind-PV genset is commissioning (December 2006) at Cu Lao Cham (Hoi an, Quang Nam) with capacity 1500 W. The Mechanical Institute (National Scientific Research Center) did FS study and technical design. Wind-diesel power project in Bach Long Vi Island is one of the most successful wind energy project in Vietnam with the capacity of wind generator of 800 kW. The capital of the project is financed by VN Government. TUCME Technology S.A (Spain ) is the supplier for wind turbine. IoE is technical consulting organization for the project. The project has been implemented completely at Nov. 2004 and is running well now. According to IoE, the provincial administration of Hai Phong has commissioned the construction of a wind power installation at an estimated cost of VND 20 billion (1.13 million ) at the end of 2003.
24
4.4. Proposed projects for wind power development Grid connected wind power systems have not been installed so far for lack of technical know-how and the requisite regulatory framework. Actually there are several wind power projects under preparation which are: Erection of the first large scale wind farm with a capacity of 15 MW on the Phuong Mai peninsula, Binh Dinh province was begun in the 2004. The project costs 14 millions US$ and was expected to go on line at the end of 2004 and to sell all its electricity to EVN. But due long procedures of tariff negotiations with EVN, it is expected to be commissioned at the end of 2006. Further extension steps to up to 100 MW output are already planned. Two other wind farm projects at the same province are under FS preparation with installed capacities of 51 MW and 84 MW. The main difficulty is PPA which fixes selling price to EVN network. One pilot wind farm project at Ninh Phuoc district, Ninh Thuan province with installed capacity of 0.625 MW has been proposed in the framework of cooperation with Indian government. The India will finances 55% and the Vietnam (EVN) will finances 45%. This experimental pilot project has completed its pre-feasibility study. A study by Institute of Energy has identified a list of 9 islands which could not connected to national network and are actually supplied by diesel gensets, with wind speeds of 4.1 to 7.1 m/s at a height of 10 m. Base on pre-feasibility studies, three of them has been proposed to install wind power plant: Ly Son, Phu Qui and Phu Quoc islands. The wind project with installation capacity of 2 MW in Ly son Island has its feasibility study completed (FS) by Institute of Energy. For the Phu Quoc island, a FS with a proposal to install 2.5 MW wind power plant has been completed recently. The wind project with installation capacity of 2.5 MW in Co Dao Island is proposed by a FS from Institute of Energy. One project to install a wind farm with 20 MW at Pha Rung (Hai Phong city) is under consideration by the Vietnam wind power joint stock company.
5. Issues facing wind power development in Vietnam

5.1. The role of wind power in Vietnam power development strategies It is estimated that at the end of 2004, about 200 kW of wind power has been installed and is under exploitation which serve for more than 2000 households. However the wind development trend is moves fast, as the analysis in the section 1 showed.
25
Following the analysis of the power development strategies in Vietnam, the wind power development can play certain roles in the future to: Diversify the supply source of electricity. As we have seen, there are some big gridconnected wind farm projects under consideration. However, this role will have a limit impact on global power supply balance, given small percentage of potential wind projects in total power capacity in Vietnam. Furthermore, due to lack of technology, finances and experience, large-scale wind farm and grand-scale development will not be in foreseeable future. Supply electricity to the mountainous and rural area where the electricity network is difficult to reach. This would be one of the most promising development trend and role of wind power in Vietnam. The most promising wind sites are in remote, mountainous regions, or in isolated islands. The Vietnamese has acquired certain experience in O&M of small wind turbines and they will probably capable to do engineering works for these small-scales projects. However, to be really successful, there are some barriers which are presented in the next section. One of the strategies promulgated in the electricity law is to encourage clean energy development with minimizing pollutant emissions and encouraging investment in new technologies which save energy. With big potential for development, the wind power can have non negligible role to implement this strategy. For some coastline provinces in the center, there are big potential for wind power development and integrated into national network. The main obstacles for the development are the PPA with EVN. With an encouraging pricing and investment policy for RE energy, this potential can be implemented rapidly. 5.2. Barriers issues facing wind energy development in Vietnam Limited access to financial sources for investment: domestic financial sources are limited and they do not have experiences in dealing with renewable energy financing. The investors in RE are not willing to approach to foreign financial sources due to high risk in exchange rate, without solid guarantee from government. An absence of concrete government policy on renewable energy in general and on wind power development in particularly (see the chapter 2). No indigenous technologies almost all equipments must be imported which is expensive. In facts, Vietnam manufacture wind tower and auxiliaries equipment to export to Australia and Philippines but this equipment is in order from other companies in project basis. The market for private users in off-grid development is limited due to the low income of the villagers and the absence of any subsidy or institutional financing.
26
The situation might change if eventually EVN comes with the expected new Electricity Law which should leave a room for renewable energy, particularly for off grid wind power farm in isolated islands where diesel genset has very running cost.
Specific barriers in renewable energy: The large majority of the governmental institutions and non-profit organizations are interacting sometimes between each other in making demonstrations and projects in the absence of any clear policy for sustainable schemes. Lack of reliable data on renewable energy technology. EVN, the only company that could change the situation does not have a clear program and has not included a share and a budget for renewable energy, even if it can be in some cases the least cost option. EVN appears focused on its first priority: rural electrification by grid extension. The possible emergence of new entrepreneurs is difficult because most of the companies have a very limited possibility of investment. Lack of the dissemination and advertisement on renewable energy technologies for customers. Support from the Government for off-grid community power projects seems to be limited in comparison with grid-based rural electrification. Specific barriers for wind energy Lack of necessary and reliable data of wind speeds for the study to develop wind power generation in different areas of the country. Lacking experience and technology. Grid-connected wind power systems have not been installed so far. The long and difficult negotiation for the first grid-connected wind power system in Binh Dinh province shows that there is lack of specific technical know-how and the requisite regulatory framework. No management and business model for O&M of wind power farm. Wind potential in Vietnam is at average level, with mean velocity, except the coastline and islands. PPA with EVN is one of biggest obstacle for grid wind power development, as stressed by the national experts. Actually, EVN will not buy electricity above 4 US cent/kWh. It is estimated that the buying tariff between 4.5 5 US cents/kWh can give a big push in the grid connected wind farm. The tariff issues for off-grid wind farms are in less extent since they mainly substitute for diesel gensets with much higher
27
production cost. However, In the near future, when it come to do a competition with network extension, the issue would be important to be addressed.
5.3. Recommendations (measures to overcome barriers to grid-connected and off-grid renewable electricity Recommendations for off-grid and small scale wind power Off-grid wind power development can contribute to reduce the poverty and to supply electricity in remote area. However, its most potential development is in islands where grid extension can not constructed and there are no other options of power supply apart expensive genset. The government should elaborate a specific policy and regulation for those areas: subsidy and tax exemption, no duty for wind equipment imported. Wind measurements which is costly for small off-grid, should be subsidy and technical assistance must come from the government. Recommendations for grid-connected and large scale wind power development Identify the support mechanism that could be used. Standardize PPA to lower transaction cost must be implemented. Without preferential and incentive policy, it is difficult for wind power development to take-off. Clear objectives for power development must be set with incentive tools (financial, regulatory, fiscal). Select a supporting scheme that stimulates the development. Under actual conditions (no local references, high uncertainties and risk, tariff on LRMC is not yet established), elaborate regulation modes which are most suitable for wind power development is very important. It should differentiate the supporting model used. Fully transparency and true prices are important Make detail analyses estimating the true (national) value of wind power in the power system.
28
6. Annex
A1. Investment classification:
Table 6 : Classification of Investment projects Type of investment project Category A Category B Category C Protection of national security and defence. Important Unlimited socio-political importance, New industrial park infrastructure, Production of noxious substances and explosives Power industry, oil and gas exploitation and processing; Chemicals, fertilizers, machine building (including ship purchase and building, automobile assembly), cement, metallurgy, mineral exploitation and processing, transport projects : bridges, seaports, river ports, airports, railways, national highway. Irrigation, transport (other than those mentioned above), water supply and drainage, technical infrastructure, electric techniques, production of information, electronic, informatics, chemicopharmaceutical and medical equipment, other mechanical engineering projects, production of materials, post and telecommunications, domestic BOT, construction of living quarters, intra-city roads in urban areas with detailed planning already approved. Technical infrastructure of new urban areas, projects on light industry, chinaware, porcelain, glassware, printing, national gardens, natural conservation zones, agricultural and forestry production, aquaculture, agricultural and forestry products processing Health care, culture, education, radio and television physical training and sports, scientific research and other projects Source : Government decree 12/2000/ND-CD, 5 May 2000. Over 200 7 200 Under 7 Over 300 billion VND 15 300 Under 15 Over 400 billion VND 20 400 Under 20 Over 600 billion VND 30 600 Under 30 -
billion VND billion VND
broadcasting, civil construction, warehouses, tourism, billion VND
29
A.2. Procedure for foreign investment in Vietnam Step 1: Investment Licence To get an investment licence, the project will have to be appraised by different authority level. Application for an investment licence includes inter alia the feasibility study of the project, technology transfer documentation (if it is a technology transfer project, environment impact assessment report, land lease agreement, construction planning certificate). For BOT projects, a pre-feasibility study must be carried out if the project is not in the Governments list of preferred projects for investment licence. All BOT projects and power projects with development costs higher than $40 million (A group projects) are under decision of the Prime Minister. MPI decides on the remaining projects. Some projects of small scale except in power sector and some other fields may be decided by PPC under special authorization of PM. Before submission to the authority for decision, each application for investment in power sector is to be appraised in terms of various issues, such as: Accordance of the project with construction and architecture planning by MOC and PPC; Accordance of the proposed project with long-term plan of the power sector by MOI; Appropriateness of technology and Environment Impacts by MOSTE (now is MONRE) Land use/lease agreement by PPC
After investment decision is made, investment licences for projects in power sector are issued by MPI. Step 2: Construction Permit After investment licence is obtained, construction permit is required before construction can be start. To get construction permit, technical design of the project needs to be appraised by MOC or PPC. Compensation for site clearance and resettlement needs to be settled and approved by PPC before hand.
Step 3: Follow-up step After construction permit, other licences or registration are required for implementing construction and start business, such as : Provincial Department of Labour for registration of staff Department of tax for issuing a tax code Ministry of Trade and General Department of Customs for issuing an import licence for plants and equipment
30
Ministry of Finance for registration of accounting methods. Vietnamese accounting is applied for all foreign invested companies in Vietnam
State Bank of Vietnam for registration if the company is eligible for the Governments foreign exchange balancing guarantee.
Other licences.
31
Table 7 A - INVESTIGATIONS FOR INVESTMENT APPLICATION The IPP must submit plans of its proposed development for review and approval by relevant government authorities. This involves the following steps : (i) (ii) (iii) Preparation of a pre-feasibility study. Signing of a Memorandum of Understanding on the terms and conditions of a PPA. Preparation of a feasibility study and environmental and social impact assessment for approval by the Evaluation Committee. B - INVESTMENT APPROVAL The small power projects included under the Rural Energy Program will come under categories B and C and investment approval will be decided by either the Minister of the Ministry in charge or the Chairman of the Peoples Committee. The need for a particular development to comply with specific regulations may be different for each category. If the proposed development is approved by the Evaluation Committee, the Peoples Committee or the Minister in Charge will issue a development license. C - ESTABLISH A BUSINESS ACTIVITY Domestic Investors : Domestic enterprises must establish a business entity in the form of a limited liability company or shareholding, the procedure for which is as follows : (i) Obtain a Decision of Entity Establishment (operation license) from the Chairman of the Peoples Committee for private groups or from the Prime Minister or other relevant Minister. (ii) Register the Business Activity with MPI or the Provincial Department of Planning and Investment. Foreign Investors : Foreign entities are required to get Prime Ministers Approval and an Investment License issued by the Ministry of Planning and Investment. A Power Purchase Agreement can be signed with EVN at any time after completion of this step. D - APPROVAL TO CONSTRUCT The final stage in the development approval process is issue of the construction permit. This involves submitting applications to the following government agencies for approval : Department of Construction for Approval to Construct. Department of Lands and the Peoples Committee for approval of land use, clearance and compensation. Department of Trade and Department of Customs for issue an import license for imported plant and equipment.
32
Power Companies for interconnection to the grid. Department of Labour for registration of staff. Department of Tax for issue of a tax code for VAT.
In addition foreign investors must apply to : Ministry of Finance for approval of its accounting methods. State Bank of Vietnam for registration if the company is eligible for the Governments foreign exchange balancing guarantee.
33

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ASEAN Wind 2005

Wind Power Development in Vietnam Institutional, Policy and Market study

Project reference: EuropeAid/119920/C/SV Document reference: Task3 Version: Nov06/IED/Tuan(Final)

ASEAN Wind 2005 - Fact Sheet

Start: Total effort: Contracting Authority: Budget / Support:

Pham Khanh Toan Sovanna Toch

Wind Power Development in Vietnam Institution, Policy and Market study

Innovation Energie Dveloppement IED

1. Review of the current institutional framework

Established by Prime Minister Decision 258/2005/QD-TTg, 19 October 2005.

Innovation Energie Dveloppement IED

Innovation Energie Dveloppement IED

Innovation Energie Dveloppement IED

Innovation Energie Dveloppement IED

Innovation Energie Dveloppement IED

2. Review of policy and regulatory framework for wind power development

Innovation Energie Dveloppement IED

2.3. Appraisal procedure for investment from private funds:

Innovation Energie Dveloppement IED

Innovation Energie Dveloppement IED

Existing Approval Process for IPPs - Domestic Investors

Pre-Investment Study (PFS)

Investment Approval Feasibility Study

Appropriate Ministries Depts Sign PPA EVN

Peoples Committee Ministry in Charge

Existing Approval Process For IPPs - Foreign Investors

Pre-Investment Study (PFS)

Investment Approval Feasibility Study

Appropriate Ministries Depts Sign PPA EVN

MPI Peoples Committee

Innovation Energie Dveloppement IED

Innovation Energie Dveloppement IED

Innovation Energie Dveloppement IED

3. Review of the power market and power development strategies.

Innovation Energie Dveloppement IED

Innovation Energie Dveloppement IED

Innovation Energie Dveloppement IED

Innovation Energie Dveloppement IED

4. Review of wind power market

Innovation Energie Dveloppement IED

Fair (6-7 m/s) 100361 30.8% 401 444 31%

Good (7-8 m/s) 25679 7.9% 102 716 34%

Very Good (8-9 m/s) 2187 0.7% 8 748 6%

Excellent (> 9 m/s) 113 0.0% 452 1%

197342 60.6% NA 29%

Innovation Energie Dveloppement IED

Map 1: Wind resource in Vietnam at 65 m, Source: ASTEA.

Innovation Energie Dveloppement IED

" 2.9 93.8 2.7 5.6 5.9 4.4

Innovation Energie Dveloppement IED

Innovation Energie Dveloppement IED

Wind speed is taken from meteorological measurements at height of 10 m

Innovation Energie Dveloppement IED

Measurement is underway Estimation Measurement is underway

Measurement is underway Measurement is underway

Innovation Energie Dveloppement IED

5. Issues facing wind power development in Vietnam

Innovation Energie Dveloppement IED

Innovation Energie Dveloppement IED

Innovation Energie Dveloppement IED

Innovation Energie Dveloppement IED

billion VND billion VND

billion VND billion VND