Biomass energy attracts only small investments despite high potential

Investment in biomass energy remains modest despite Vietnam’s high potential, particularly in agricultural hubs like the Mekong Delta, which can provide millions of tons of farm byproducts like straw, husks, and bagasse as materials.

Per the amended Power Development Plan VII (PDP VII), the output of biomass energy is set at 3,000 megawatts in 2030. Meanwhile, the Ministry of Agriculture and Rural Development said biomass resources in Vietnam are varied and the annual output can reach 160 million tons of rice husks, rice straw, bagasse, livestock waste, and others.

However, currently, only bagasse of sugar factories and livestock waste of major farms are put into power and gas production. As the technology remains relatively new in Vietnam, the number of waste-to-power plants is still limited.

Since 2009, the German Development Cooperation Agency (GIZ) has helped five sugar factories of Lasuco, Nasuco, Dak Lak, Vi Thanh, and Phung Hiep develop pre-feasibility studies for biomass power plants and train staff for such an operation.

However, GIZ analyzed that due to high loan interest rates and low power sale prices, until 2020, only three less-than-200-MW factories could sell their electricity, while others could only produce electricity for themselves.

Under the Prime Minister’s Decision 08/2020/QD-TTg, biomass power plants can sell their electricity at 7.03 U.S. cents per kWh, up from the previous 5.8 U.S. cents.

However, since 2020, Vietnam’s sugar sector has experienced fierce competition from ASEAN nations due to the implementation of the ASEAN Trade in Goods Agreement (ATIGA). Such competition led to a lower number of sugar factories and output in Vietnam, negatively affecting the development of biomass power plants, a GIZ representative said.

According to Mai Duy Thien, chairman of the Vietnam Clean Energy Association (VCEA), the current biomass power capacity in Vietnam is 378 MW, mainly from bagasse, far below the potential of 5,000-6,000 MW. Besides, 100 MW of husk-to-power and 70 MW of wood-to-power are being prepared for investment.

GIZ attributed the low investment to problems in policies, including the unavailability of medium-term and long-term credit for investors. In addition, the improved feed-in-tariff of 7.03 U.S. cents per kWh is still lower than those in Thailand at between 11 and 13 U.S. cents.

Vice chairman of Vietnam Energy Association Nguyen Van Vy suggested a rate of 8.47 U.S. cents per kWh for all biomass power plants, which would prompt factories to find materials for whole-year operation, instead of seasonal production per sugarcane production of only three-six months a year.

Biomass power is the fourth largest source of power in the world, accounting for 14-15% of the total, according to the Ministry of Industry and Trade. The U.S. is the biggest biomass power producer with 350 factories and an output of 7,500 MW per year. China currently runs 80 plants with an annual capacity of 4,000 MW. South Korea eyes to raise biomass power to 7.12% of its total production in 2030.