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The World Bank
Asia Sustainable and
Alternative Energy Program
VietnamExpanding Opportunities or
Energy Efciency
March 2010
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2010 The International Bank or Reconstruction and Development / The World Bank
1818 H Street NW
Washington DC 20433
Telephone: (202) 473-1000
Internet: www.worldbank.org
E-mail: [email protected]
All rights reserved
This volume is a product o the sta o the International Bank or Reconstruction and Development / The World Bank.
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or the endorsement or acceptance o such boundaries.
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Photo copyrights: ASTAE
let inside ront cover and let inside back cover: iStock photos
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iv
Acknowledgments
The preparation o the report was carried out under the technical assistance project o the World Bank, P105834
Technical Assistance or Vietnam Demand-Side Management and Energy Eciency Program. The nancial and techni-
cal support o the Energy Sector Management Assistance Program (ESMAP) and the Asia Sustainable and Alternative
Energy Program (ASTAE) is grateully acknowledged.
The report was prepared by a task team that included Robert P. Taylor (Senior Energy Adviser and lead author), Jas
Singh (Senior Energy Specialist, ETWES), and Alberto U. Ang Co (Senior Energy Specialist, EASIN). Special appreciation
and gratitude go to the World Bank team in Hanoi, Vietnam, comprising Richard Spencer (Country Sector Coordinator,
EASVS) and Ky Hong Tran (Energy Specialist, EASVS) or providing local support, guidance, and technical assistance.
The report beneted rom the suggestions and comments rom the ollowing peer reviewers: Gailius J. Draugelis
(Senior Energy Specialist and Acting Country Sector Coordinator, China Energy, EASCS), Feng Liu (Senior Energy
Specialist, ETWS), Peter Johansen (Senior Energy Specialist, ECSS2), and Lisa Da Silva (IFC Consultant, CESFS).
The team is particularly grateul or the support o the Vietnam Ministry o Industry and Trade (MOIT), as an active and
enthusiastic counterpart or this study, the Institute o Energy, and other members o the donor community who are
involved in energy-eciency projects in Vietnam.
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vv
Acronyms and Abbreviations
ADB Asian Development Bank
AFD Agence Franaise de Dveloppement
CEEP Commercial Energy Eciency Program
CFL Compact fuorescent lamp
CNG Compressed natural gas
CO2 Carbon dioxide
CPC Clean production center
CP-EE Cleaner production and energy
eciency
DANIDA Danish International Development
Agency
DSM Demand-side management
ECC Energy conservation centers
ECCJ Energy Conservation Center, Japan
EE Energy eciency
EE&C Energy eciency and conservation
EE&CP Energy Eciency and Conservation
ProgramEECO MOITs Energy Eciency and
Conservation Oce
EMS Energy Management System
EPC Energy perormance contracting
ERAV Electricity Regulatory Authority o
Vietnam
ESCO Energy service company
ESF Vietnam Energy Savings Fund
EU European Union
EVN Electricity o Vietnam
FTL Fluorescent tube lamp
GDP Gross domestic product
GEF Global Environment Facility
GOV Government o Vietnam
GWh Gigawatt-hours
IEA International Energy Agency
IFC International Finance Corporation
IMS Vietnam Institute o Material Science
ISO International Organization or
Standardization
JICA Japan International Cooperation Agency
kcal Kilo-calories
kgoe Kilogram o oil equivalent
kWh Kilowatt-hour
LPG Liqueed petroleum gas
METI Japan Ministry o Economy, Trade and
Industry
MOC Vietnam Ministry o Construction
MOIT Vietnam Ministry o Industry and Trade
MOST Vietnam Ministry o Science and
Technology
MW Megawatt
NCST Vietnam National Center or NaturalScience and Technology
PC Power distribution company
PECSME Promoting Energy Conservation in
Small and Medium Enterprises
PROPARCO Promotion et Participation pour la
Coopration Economique
Sacombank Saigon Thuong Tin Commercial Joint
Stock Bank
SDC Swiss Development Cooperation
SECO Swiss State Secretariat or EconomicAairs
SIDA Swedish International Development
Agency
SME Small and medium enterprise
T&D Transmission and distribution
TA Technical assistance
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2 Vietnam: Expanding Opportunities or Energy Efciency
electricity use (15 percent). Energy use in all our o
these target areas has been growing aster than the
gross domestic product (GDP).
However, achievement o meaningul energy savings in
these target areas and other economic sectors will notjust happen by itsel. As is common in other countries,
a host o barriers prevent cost-eective savings rom
being realized, including lack o inormation, lack o read-
ily available expertise, pricing issues, insucient cost-
consciousness in some sectors, assignment o a lower
priority to cost savings compared to expansion in invest-
ment, transaction costs, perceived high investment
risks, and market ailures in some sectors. As in other
countries, specic policies, regulations, promotional pro-
grams, capacity-building eorts, market transormation
initiatives, nancing initiatives, and market construction
activities are needed to achieve large-scale results.
Meeting the Energy-Efciency Challenge
Vietnam initiated its rst-ever comprehensive national
energy-eciency program in 2006, ocusing especially
on capacity building during 200610. A urther rollout o
a wide range o activities has been planned or a sec-
ond, 201115 phase. The drat Law on Energy Conser-
vation and Ecient Use is currently being reviewed by
the National Assembly. A wide range o international
donor activities has been launched to help. The key
or the uture is to construct a strong and sustainable
institutional platorm rom these initiatives that candeliver large and measurable energy savings year ater
year. Backed by concrete policies, an eective platorm
requires institutional clarity as to who is responsible or
what, a major eort to build capacity in the government
and its implementing entities as well as in the market at
large, strategic planning, sucient unding, step-by-step
ollow-through on implementation, and ocus on achiev-
ing measurable energy savings results.
All countries with mixed or ully market economies that
have had success in promoting energy eciency use a
mix o government regulation combined with policies
and programs to encourage energy-eciency invest-ment through the market. Vietnam will need to promote
new administrative and regulatory measures and, espe-
cially, to ensure that they are implemented eectively.
Vietnam will also need to develop and implement a vari-
ety o market-based programs to spur investment and
behavioral change.
Devepin and Impementin Ener-Efcienc Reuatins.
Enactment o the proposed Law on Energy Conserva-
tion and Ecient Use will be essential to provide the
necessary oundation or instituting and enorcing regu-
lations, providing legitimacy to organizations and their
work, and assigning responsibilities and associated und-
ing. Enactment o the law can send a clear message to
society and the market on national intentions. I enacted,
the real challenge o developing and implementing eec-tive regulations will then begin. This will be a huge task,
and establishing priorities and ensuring implementation
o the strategically most important measures will be very
important during the next several years. Similar to the
laws enacted in China, Japan, Thailand, and other coun-
tries, recent drats o Vietnams law include introduction
o a new mandatory system or energy management in
large energy-consuming industries and buildings. The
system would require large consumers to report on
energy consumption and plans to improve eciency, and
to designate internal energy managers responsible or
energy-eciency work. Meeting the training, monitor-
ing and reporting, and supervision requirements o such
a system would be a large and important undertaking.
Experience (in Japan and China in particular) shows that
maximum government support is critical to make such a
system productive both or enterprises and the countrys
long-term interest.
Uneashin Maret Frces. For Vietnam, review and adjust-
ment o consumer energy prices to best refect true costs,
as well as continued state-owned enterprise reorm, can
help bring market orces to bear, especially in the industrial
sector. However, eort is also needed to oster develop-
ment o eective delivery systems or investment proj-ects. Experience elsewhere shows that eective delivery
systems or energy-eciency investment projects are not
likely to develop without some orms o initial public sec-
tor encouragement, but once they are operational, invest-
ment can continue sustainably with more limited public
involvement. Examples o delivery systems or consider-
ation include development o energy service companies
(ESCOs), utility-executed demand-side management
(DSM), commercial energy-eciency loan programs, and
special public resource unds.
Some suggestions on putting regulatory and market-
based program concepts together in the key energy con-servation target subsectors are summarized in the next
our sections.
Imprvin Ener Efcienc in Existin Industria Pants. Two
key challenges are the development and implementation
o new energy use and conservation reporting, planning,
and management systems or large energy-consuming
industries (i the law is enacted), and the development
and implementation o new nancing programs or retro-
tting industrial energy conservation projects.
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3Executive Summary
Eective implementation o the new designated industry
programs will require a huge eort by the Ministry o
Industry and Trade (MOIT) and its provincial aliates to
provide specic guidance on energy-use and energy con-
servation planning requirements, to construct an eec-
tive data management system, to dene requirementsor energy managers and supervision o compliance, to
launch a wide range o energy auditing eorts and, espe-
cially, to plan and deliver a variety o large-scale training
programs. The human resource requirements within gov-
ernment agencies to deliver this eort eectively should
not be underestimated. Intensive review o experiences
gained with such systems in other Asian countries is also
recommended.
Several international donors are working with the govern-
ment to prepare new nancing programs or industrial
retrot projects. Such programs can be quite construc-
tive. One suggestion is to try to ocus on projects with
strong nancial viability, with an aim to create project
development and investment mechanisms that are inher-
ently protable and hence have strong potential or being
sustained ater donor involvement is concluded. Another
suggestion is to ensure that technical assistance or
project identication and development are blended well
together with nancing programs.
Encurain Mre Ener Efcienc in Ne Industria Pants.
A continued industrial growth rate o 10 percent per year
as in the past would mean that the new industrial capac-
ity built over the next seven years will produce morethan all o Vietnams industry today. The energy-using
characteristics o new industrial plants will be a critical
determinant o Vietnams uture energy demand and
import needs. In 1998, industry accounted or one-third
o nal energy use. In 2007, it accounted or 46 percent,
and in the uture it is likely to grow yet urther. The key
questions are (a) what type o industrial capacity will be
developed and (b) how energy-ecient will the adopted
technologies be?
Government planners and policy makers need to weigh
more systematically the energy demand and cost impli-
cations o developing new energy-intensive industrialcapacity. As reliance on energy rom outside and energy
costs increase, what types and scale o new energy-
intensive plants are in Vietnams long-term comparative
advantage? In addition, the government should consider
review o the energy-eciency aspects o key processes
and certain key types o industrial equipment as part o
the permitting process or new industrial production proj-
ects. Adoption o wasteul, backward, and highly pollut-
ing technology can and should be blocked.
Improving access to nancing or more energy-ecient
and environmentally riendly new industrial processes,
production lines, and equipment is another important
means to impact positively new industrial development.
Adoption o new, more ecient, and less resource-
intensive technology can yield substantial operating costsavings over the long term. However, upront invest-
ment in capital and in learning something new is usu-
ally required. The government can help by working with
banks to develop new programs to help bank clients
adopt greener technology or operating-cost savings.
Increasin Ener Efcienc in Transprtatin. Use o petro-
leum products in motorized transportation will continue
to be the main driver o Vietnams uture oil import levels.
Broad transportation policies and long-term development
plans can have a key impact on overall energy use in
transportation, especially where policies and plans aect
(a) the role o automobiles versus motorbikes, buses,
and light rail transport or urban and suburban passenger
movement; (b) trucks versus coastal and inland waterway
reight movement; and (c) automobiles versus buses,
boats, and airplanes or intercity passenger movement.
Fuel pricing policies also have a particularly strong impact
on consumer choices and behavior in this sector.
One specic measure that has yielded energy savings
in other countries is increasing uel-eciency standards
or motor vehicles, and strict enorcement o these
standards. Another set o measures includes vehicle
inspection and maintenance programs (serving multipleobjectives) and programs to promote earlier retirement
o old, particularly inecient vehicles. Promotion o
vehicles using alternatives to liquid petroleum uels (or
example, hybrid electric vehicles, compressed natural
gas, and biouels) also have produced noticeable results
in some countries, including programs to convert publicly
owned or captive high-use feets, such as taxis, or pro-
grams to provide nancial incentives.
Transrmin Marets r Husehd Eectrica Appi-
ances. Electricity use by household electrical appli-
ances accounted or 39 percent o total electricity use
in Vietnam in 2007. This includes lights, air conditioners,rerigerators, water heaters, washing machines, dri-
ers, televisions, ans, and so orth. The sector involves
millions o consumers. Successul eorts to improve
energy eciency in this sector have involved concerted
eorts to transorm marketsguiding increased pen-
etration o more energy-ecient appliances into specic
appliance markets through regulation and selective pub-
lic intervention, but still relying on market orces or e-
cient and sustainable market operation. This involves (a)
programs to provide customers with commonly available,
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4 Vietnam: Expanding Opportunities or Energy Efciency
credible, and correct but simple inormation about the
eciency characteristics o the choices in ront o them;
(b) government initiatives to work with suppliers to
encourage expanded marketing o reputable and more
ecient products, and to discourage particularly waste-
ul or raudulent market oerings; and (c) programs tohelp customers cope with initial higher costs in some
cases until market transormation can take hold.
Vietnam has launched a number o initiatives relating to
market transormation, but these eorts need to be con-
solidated and more strategically designed to achieve a
sustainable impact over the medium term. Energy-e-
ciency labels need to be visible, understood, and cred-
ible or consumers at large. Systematic surveys need to
be completed to understand all aspects o the markets
targeted or transormation, initiatives need to be devel-
oped to work in concert to meet specic medium-term
objectives, and subsidy programs need to be designed
so that they can catalyze sustainable change and be
withdrawn in due course.
Recommendations or Follow-Up
The necessary major strengthening o the institutional
platorm or promoting energy eciency in Vietnam will
require good planning, upront public investment, dedica-
tion, and time. Planning needs to consider realistic assign-
ment o priorities or the near termthere is insucient
human capacity now to try to achieve everything at once.
Responsibilities among dierent organizations, as wellas leadership and coordination mechanisms, need to be
clear. It is also very important to systematically monitor
and evaluate the actual energy savings achieved by di-
erent programs that compete or management time,
expertise, and money. Even training results can be sys-
tematically evaluated.
The Bank study team recommends consideration o a
number o new or scaled-up initiatives, which are out-
lined below and described urther in chapter 3. Many o
these can be or already are being discussed as areas o
uture World Bank Group support.
Ecnmic Studies. At least three strategic areas appear to
warrant more extensive review and analysis:
Review o the energy implications o industrial devel-
opment policy
Review o consumer energy pricing
Review o the energy implications o alternative
transportation development scenarios.
Devepment an Ener-Efcienc Prmtin Sstem.
Three areas where well-targeted advisory assistance to
the government may be especially useul include assis-
tance on the ollowing:
Development o Vietnams new industrial energy-
use supervision system
Policy development to encourage energy eciency
in new industrial plants
Review o scal incentive options to promote energy
eciency.
Ener-Efcienc Investment Prrams. New energy-e-
ciency investment programs that the government may
wish to consider include the ollowing:
A clean production and energy-eciency nancing
program or new industrial capacity
Expanded commercial nancing or energy-e-
ciency retrot projects
Expanded development o the third-party energy-
eciency service sector
Consolidation and rollout o appliance market trans-
ormation eorts.
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55
The objectives o this report are to (a) provide a general
overview o energy demand trends in Vietnam and needs
to urther promote energy eciency, (b) summarize the
main current government and international donor eorts
in the area o energy eciency in Vietnam, and (c) pro-
vide the government with suggestions and recommen-
dations on how to expand energy-eciency results in
the uture. Analysis was completed in a short timerame
by relying on readily available materials. Many topics or
types o analytical work could not be conducted because
systematic inormation is not yet readily availableor
example, on the technical energy savings potential in key
industrial or other economic subsectors. Where urtheranalytical work was considered especially important, rec-
ommendations or undertaking it are included.
Energy-Use Trends in Vietnam
The Increasing Energy Intensity o
Vietnams Economy
Vietnams energy economy has changed radically over
the last several decades with the transormation rom an
agricultural society relying primarily on traditional biomass
uels to a modern mixed economy. As shown in gure
1, commercial energy consumptionincluding hydro-
power, natural gas, coal, and oilhas increased eight-
old rom an extremely low base in 1980. This increase
has been driven by the increasing popularity o modern
commercial uel and electricity or household use, the
development o motorized transport, and the steady and
rapid growth o industry to become a key pillar in the
economy. Figure 2 shows country comparisons o total
primary energy supply.
Commercial energy use1 has grown much aster than the
countrys economy overall. During the nine-year period
rom 1998 to 2007, commercial energy use grew at an
average rate o 12.1 percent per year, while Vietnams
GDP grew by 7.3 percent per year. The commercial
energy-use/GDP growth elasticity registered was a very
high 1.7. The energy intensity o Vietnams economy
grew rom 387 kilograms o oil equivalent (kgoe) per
US$1,000 o GDP in 1998 to 573 kgoe per US$1,000 in
2007, in constant 2000 prices.
1. The term commercial energyin this report reers to coal, petro-
leum products, natural gas, and electricity. Traditional biomass uelsare excluded, since data on their use, and especially use trends over
time, are scarce and unreliable.
Needs and Directions or ImprovingEnergy Efciency in Vietnam
1
FIgURE 1: VIETNAM PRIMARy ENERgy CoNSUMPTIoN,
1980 AND 2007
Sources: Asia-Pacic Energy Research Centre, APEC Energy
Supply and Demand Outlook, 2006; International Energy Agency,
Energy Balances o Non-OECD Countries (2009 edition).
Biomass
Hydro
Gas
CoalOil
50
40
30
20
10
0
Milliontoe
1980 2007Year
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8 Vietnam: Expanding Opportunities or Energy Efciency
is now about the same as in China (282 kWh/capita), a bit
higher than in the Philippines (186 kWh/capita), but still
signicantly less than in Thailand (440 kWh/capita).
Expanded motorized transportation also occurred during
this period. While the choppiness in the annual statistics
suggests some accounting problems with the annual
statistics on petroleum product use by sector, it is clear
that use o uel in transportation has also grown aster
than GDP (gure 6). Use o transport uel grew rom 3.6
million toe in 1998 to 7.9 million toe in 2007. A little over
hal o uel use was diesel oil, while gasoline accountedor about 39 percent, and jet uel and uel oil combined
accounted or about 7 percent.
Total reight service volumes, measured in ton-kilome-
ters, increased at an average rate o about 12 percent
per year rom 1999 to 2005, while passenger transport
volumes, measured in passenger-kilometers, increased
at about 10 percent per year. In 2005, some 65 percent
o the total reight tonnage moved was by road, but
coastal water transport continued to account or by ar
the greatest reight service volume, with 76 percent o
total ton-kilometers in 2005. Passenger road transporta-
tion increased to 34 billion passenger-kilometers in 2005,
accounting or about 65 percent o total passenger ser-
vice volume.
FIgURE 5: VIETNAM RESIDENTIAl FINAl ENERgy USE, 19982007
Source: IEA, Energy Statistics o Non-OECD Countries(2009).
Electricity
Gas
Petroleum products
Coal and peat
GDP, constant Y2000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
Finalenergy
use
(thousan
d
toe)
Year
GDP,
constantY2000
($
bill
ion)
60
50
40
30
20
10
01998 20001999 200620052004200320022001 2007
FIgURE 6: VIETNAM TRANSPoRT FINAl ENERgy USE, 19982007
Source: IEA, Energy Statistics o Non-OECD Countries(2009).
Petroleum products
GDP, constant Y2000
9,000
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
Milliontoe
Year
1998 1999 2000 200620052004200320022001 2007
60
50
40
30
20
10
0
GDP,constan
tY2000($billion)
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10 Vietnam: Expanding Opportunities or Energy Efciency
The tripling in energy consumption during the previous
decade o 199720074 was achieved with a net reliance
on Vietnams own energy resources during a period o
relatively low energy costs. Beginning rom a airly low
level o 10.8 million toe in 1998, the development o sup-
ply capacity and logistics, while challenging, was man-ageable. A urther tripling over the next decade, however,
would be another matter. Vietnam does not have easily
developed domestic resources that can sustain this mag-
nitude o growth in energy demand, and the country will
have to rely increasingly on imports, including imports o
steam coal and net oil imports. Such an increasing reli-
ance will come at a time o growing global competition
or energy supply, and virtually certain large increases in
costs. Potential environmental consequences o such
absolute increases in energy supply and use may also be
at levels never witnessed in Vietnam beore.
As discussed in the paragraphs below, more aggressive
eorts to improve energy eciency are key to address
these anticipated energy supply security, cost, and envi-
ronmental concerns. However, as demonstrated in many
examples rom other countries around the globe, energy-
eciency improvements will not develop suciently
through market orces alone, and require eective public
sector intervention. These issues, and how they may be
overcome in Vietnam, are urther discussed in chapter 3.
Resource Constraints and Energy Security
Vietnam has enjoyed a position as a net energy exporter,with domestic resources more than meeting its over-
all needs. Although petroleum products have all been
imported until substantial renery capacity came on
stream in 2009, crude oil exports have steadily surpassed
imports in both volume and value. Total coal production
also has exceeded domestic use severalold. Domestic
hydro and natural gas resources, combined with some
local coal, have been the backbone uels or electricity
production.
Vietnams oil production, however, ell steadily during
200508, while oil demand grew rapidly. As a conse-
quence, Vietnam is expected to become a net oil importervery soon. On the coal side, Vietnam is also beginning
large-scale steam coal importation or new coal-red
power plants. Domestic production is dominated by
4. Primary and nal commercial energy consumption grew by about
2.8 times during the nine-year period rom 1998 to 2007. IEA data or
1997 are not available, but i it is assumed that energy consumption
grew by at least 7 percent rom 1997 to 1998, primary and nal com-
mercial energy use at least tripled during the decade o 19972007.
anthracite coals in the north, which provides or a mix
o high-value metallurgical coal exports and lower-value
coal or relatively inconvenient combustion. Domestic,
economically exploitable coal resources are also limited.
As a result, internationally priced and sourced coal or
combustion will become a larger and larger componento Vietnams energy balance.
In conclusion, Vietnam is expected to need to rely
increasingly on energy sources rom abroad over the
next decade, raising issues o energy supply security and
vulnerability to international energy price fuctuations. As
in other countries acing such issues, meeting demand
by improving energy eciency and utilizing energy that
is currently wasted is perhaps the best single option or
reducing any potential vulnerability.
Energy Costs
The cost o energy to Vietnams consumers currently
amounts to some US$1415 billion per year (at interna-
tional petroleum product prices roughly associated with
US$65/barrel o crude oil). Introduction o large-scale coal
imports and expected increases in international oil prices
will only make this cost rise.
Capturing the wide variety o most nancially attractive
energy-eciency gains is unquestionably the least-cost
way to meet energy demand. Costs or standard, yet
unimplemented, renovations and equipment improve-
ments typically run at one-quarter o the cost o commer-cial energy supply, at todays prices. Improving energy
eciency increases industrial competitiveness by lower-
ing production costs, eases pressure on household bud-
gets, and reduces government energy bills, which can
ree up government resources or investment in other
socioeconomic areas.
Environmental Concerns
Energy-eciency improvements are an ideal way to
reduce pollution emissions, since they reduce the extent
o uel combustion to begin with. Environmental concerns
relating to increasing uel use in power plants, industry,
and vehicles will certainly increase in Vietnam as demands
continue to rise. Air pollution rom energy use carries a
range o socioeconomic costs, including public health
concerns that can maniest themselves as respiratory ill-
nesses and premature death. Energy-eciency improve-
ments are one o the main mitigation tools. In addition,
shits o technology that provide energy-eciency gains
oten also provide other environmental cobenets,
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12 Vietnam: Expanding Opportunities or Energy Efciency
o energy use per unit o industrial value added. Figure
8 shows how the structure o industry has been evolv-
ing in Vietnam since 1998.5 Figure 9 plots the growth in
production o several key energy-intensive commodities.
Each o these has been growing aster than industrial
output value as a wholeindicating a movement towardmore energy-intensive basic commodity production. Sup-
ply o these basic commodities is key to underpinning
new construction and downstream industrial growth.
However, it is very important or policy makers to con-
sider Vietnams comparative position or rapid develop-
ment o energy-intensive industries versus reliance on
imports rom elsewhere, because o the implications or
Vietnams energy balance and sourcing o uture energy
supply.
Aside rom industrial structure, industrial energy use is
determined by uel and electricity consumption levels
5. Assessment o the impacts o changes in industrial structure,
however, will require subsector energy-use data, which are not cur-
rently available.
per unit o physical output (or example, per ton o steel,
per 1,000 bricks, and so orth). For Vietnam, it is impor-
tant to review how the eciency o existing capacity can
be improved through retrots. It is even more important,
however, to pay attention to the technologies being
deployed in new plant, since this will play the biggest rolein determining uture unit energy consumption levels. A
key task or the government is to assess the nature o
energy-using technologies being deployed by companies
in new acilities, as well as the potential gaps in energy-
eciency characteristics compared to the best available
and potential means to encourage such gaps to close.
Improving the eciency o industrial uel use involves
deployment o ecient boiler technology and its ecient
matching with steam or hot water demands, tightening o
steam use systems, modern kiln development, schemes
to use waste heat and gas, and industrial cogeneration,
as well as specic process technology advancements and
Energy Management System (EMS) standards. Improv-
ing the eciency o electricity use involves technologies
FIgURE 8: gRoSS INDUSTRIAl oUTPUT IN VIETNAMS kEy INDUSTRIES, 19982007
Source: World Bank, Vietnam Development Report 2009.
450,000
400,000
350,000
300,000
250,000
200,000
150,000
50,000
0
VNDb
illionatconstant1994prices
Year
1998 20001999 200620052004200320022001 2007
Oil and gas
Rubber products and plastic
Production and repairing other transport means
Metallic products
Leather tanning and processing
Textile products
Electricity and gas
Chemicals
Nonmetallic products
Food and beverage
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13Needs and Directions or Improving Energy Efciency in Vietnam
such as improved and oten variable-speed motors and
motor drive systems, ecient matching o equipment
capacities, ecient internal electricity distribution, elec-
tric urnace improvements and management, power ac-
tor correction, utilization and careul capacity matching
o cooling equipment, improved lighting technology, and
so orth.
Petroleum Product Use in Transport
Accounting or one-quarter o Vietnams nal commer-
cial energy consumption, gasoline, diesel oil, uel oil, and
jet uel use in transportation will be the main driver o
the countrys uture petroleum import levels. Measured
in terms o energy used per passenger-kilometer or ton-
kilometer o reight, the energy eciency o transpor-
tation is determined in some ways by the specic uel
use o vehicles, but even more so by broad patterns o
transport modal development. Reducing energy costs
is o course only one o many important concerns or
transportation development strategy. For Vietnam, three
broad transportation development trends that have an
especially important bearing on uel eciency include
(a) the role o automobiles versus motorbike, bus, and
light rail transport or urban and suburban passenger
movement; (b) truck versus coastal and inland waterway
reight movement; and (c) automobile versus bus, boat,
and airplane intercity passenger movement. Some o the
narrower, more energy-specic issues include vehicle
uel-use levels (including both vehicle technology and
operating practices) and potential interuel substitution,
such as the use o gaseous uels in buses or high-mileage
automobiles, or the introduction o electric motorbikes.
Residential and Commercial Electricity Use
The residential electricity-use sector accounts or about
39 percent o the countrys electricity use and 21 percent
o total nal commercial energy demand. Involving mil-
lions o individual consumers, this market sector requires
unique approaches to achieve energy-eciency gains. In
Vietnam, where heating is not a critical load, the key issues
concern lighting technology; air conditioning technology;
and the eciency o household appliances such as rerig-
erators, water heaters, washing machines, driers, televi-
sions, ans, and so orth. The basic tracks or promoting
improved energy eciency are the provision o improved
inormation to consumers, the introduction and enorce-
ment o mandatory energy-eciency standards or cer-
tain new appliances, and the introduction o incentives,
such as rebate programs, to encourage appliance market
transormation. Typical o East Asian nations, the urban
areas o Vietnam account or about 70 percent o eco-
nomic growth. The Ministry o Construction (MOC) pre-
dicted an urbanization level o 45 percent by 2020. With
the rapid urbanization accompanied by high economic and
population growth, big cities in Vietnam are subject to cli-
mate change and its associated problems. Adaptation to
climate change and the integration o energy-eciency
measures to urban planning and green building design
are important elements to be developed and integrated
into Vietnamese codes and standards.
FIgURE 9: gRowTH IN PRoDUCTIoN oF SElECTED ENERgy-INTENSIVE INDUSTRIAl CoMMoDITIES, 19992007
Source: World Bank, Vietnam Development Report 2009.
Bricks
Cement
Glass products
Paper and paper products
Steel
Industry Value Added
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0
1999
=1
Year
1999 2000 200620052004200320022001 2007
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17Recent Eorts to Promote Energy Efciency in Vietnam
ocus strictly on maximizing energy savings results and
the capacity enhancements, which are the highest prior-
ity or achieving those results. Strict ocus on monitor-
able energy savings results also can aid the government
in determining appropriate levels o unding or vari-
ous initiatives, allowing or increased competition andaccountability among implementing partners, and pro-
viding clearer roles or private sector participation and
leverage.
Major Energy-Efciency PartnershipPrograms
In addition to the governments VNEEP, a number o par-
allel or supportive eorts have been initiated in direct
cooperation with donor agencies. Some o these pro-
grams predated VNEEP, while others were developedalongside the national program. Support has not only
included nancial packages, but also technical assistance
to local agencies and consultants implementing the proj-
ects. Some o the larger-scale programs that have been
completed or that are currently under implementation in
Vietnam are summarized in table 2.
Current Donor Support and Activities
Because there is a wide variety o donor activities, coor-
dination o donor support in the uture months and years
is important. In October 2008, the MOIT and the World
Bank cochaired an Energy-Eciency Donor Coordina-
tion Meeting, which included presentations rom each
participating donor agency on its programs and planned
activities, as well as a roundtable discussion on ideas or
coordination o eorts and urther sharing o inormation.
The participants agreed that an annual donor meeting
o this kind would be benecial in the uture. The ol-
lowing sections summarize the major donor activities
in the energy-eciency eld in Vietnam, based on the
TAblE 2: MAjoR CoMPlETED AND oNgoINg ENERgy-EFFICIENCy AND CoNSERVATIoN PRogRAMS IN VIETNAM
Prect name years Spnsr Impementin aenc
Energy-Eciency and Conservation Program
or Vietnam (EE&CP)
19952001 GOV and Netherlands,
EU, SIDA, UNDP
MOST
Vietnam Demand-Side Management (DSM)
and Energy EciencyPhases 1 and 2a200010 WB, SIDA and GEF MOIT, EVN
The Pilot Commercial Energy-Eciency
Program (CEEP)
200410 WB and GEF MOIT/ERAV
Compact Fluorescent Lamp (CFL)
Promotion Program
200407 WB and GEF EVN and PCs
Fluorescent Thin Tube Lamp (FTL)
Promotion Campaign
200407 WB and GEF EVN
Swiss Government and UNIDO Activities
Clean Production Center (CPC) 19982008 SDC VNCPC
Energy-Ecient Brick Project 200104 SDC and UNIDO Entec (Swiss consultant)
Green Credit Line 200812 SECO VNCPC and
commercial banks
Promoting Energy Conservation in Small and
Medium Scale Enterprises (PECSME)
200610 UNDP MOST
Vietnam Energy-Ecient Public Lighting 200610 UNDP and GEF NCST, IMS
The Study on Master Plan on Energy
Conservation and Eective Use in Vietnam
200809 JICA J-Power
(Japanese consultant)
Source: Compiled by author.
a. The project also included a number o technical assistance eorts, including building code development (Phase 1); creation o a standards and
labeling regime and development o select standards or electrical appliances (Phase 1); DSM planning, program design, and evaluation (Phases 1
and 2); load research (Phases 1 and 2); analysis o time-o-use (TOU) schemes and other load management eorts (Phases 1 and 2); marketing and
awareness raising (Phases 1 and 2); and solar water heating and appliance labeling pilot programs (Phase 2). EVN implemented an expanded TOU
program with its own nancing in 2001.
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19Recent Eorts to Promote Energy Efciency in Vietnam
respective donors public documents, as well as notes
gathered during the donor coordination meeting. Table 3
provides a matrix o donor energy-eciency programs,
both ongoing and planned.
Asian Development Bank
The Asian Development Bank (ADB) is now undertak-
ing a US$1 million technical assistance program entitled
Supporting Implementation o the National Energy-E-
ciency Program, which aims to promote energy conser-
vation in the industrial sector in Vietnam. The technical
assistance includes (a) industrial survey o energy use,
(b) energy manager training, (c) energy audits in select
large actories, (d) training o ESCOs and energy conser-
vation centers, and (e) development o suitable nancing
mechanisms. Based on the ndings rom the technical
assistance, the ADB will consider options to create an
industrial energy-eciency nancing program. The ocus
may be on ve subsectors, such as cement, beverages,
chemicals, plastics, and steel. The ADB also expressed
ideas to support EVN power plant rehabilitation and to
help mobilize carbon nancing or the procurement and
distribution o CFLs, solar water heaters, and more e-
cient lighting or public buildings.
Agence Franaise de Dveloppement
The support o the Agence Franaise de Dveloppement
(AFD) or Vietnams development targets is set out in
the Partnership Framework Document signed betweenFrance and Vietnam in 2006. One o the AFDs support
eorts within the ramework o the 200610 National
Socio-Economic Development Plan is to develop and
modernize nancial, banking, and nonbanking sectors.
The AFD activities support nancial sector reorms
and small and medium enterprise (SME) development.
The AFD also undertakes its operations in Vietnam
through Promotion et Participation pour la Coopration
Economique (PROPARCO), a development nancial insti-
tution or the private sector. Energy and environment,
including climate change, all within the AFDs priori-
ties in Vietnam. The AFD cosponsored a symposium on
energy-eciency policies in Vietnam, which was held in
Ho Chi Minh City in April 2008 as part o French Week
in Vietnam. Other ongoing support rom the AFD to the
energy sector in Vietnam includes hydropower invest-
ments, load management and DSM, CO2 emission miti-
gation eorts, and provision o modern energy access or
all. Early ideas or uture activities include development
o urban energy-eciency strategies and perhaps the
establishment o credit lines to support energy-ecient
construction in the housing sector.
Danish International Development Agency
The Danish International Development Agencys
(DANIDAs) programs in Vietnam are aligned with the gov-
ernments Socio-Economic Development Plan 200610.
The Environment Program is intended to ocus on threethematic areas that include (a) urban and industrial envi-
ronmental management, (b) sustainable energy, and (c)
management o natural resources. Danish programs
generally aim to build capacity and knowledge in Viet-
namese institutions and to target key sectors identied
by the Vietnamese government. DANIDA has recently
approved a multiyear technical assistance program o
about US$15 million to directly support MOITs energy-
eciency program. While some details had yet to be
worked out as o March 2009, the program is expected
to ocus primarily on technical training or energy manag-
ers and auditors or consultants (including a certication
program with local universities), industrial energy audits,and economic incentives or the implementation o audit
recommendations.
Japan International Cooperation Agency
Since October 1, 2008, Japans Ocial Development
Assistance loans provided by the Japan Bank or Interna-
tional Cooperation (JBIC) and the grant aid disbursed by
the Ministry o Foreign Aairs are being overseen by one
agency, the new Japan International Cooperation Agency
(JICA). One development scheme o JICA is the Private
Sector Investment Finance program, which supports
private enterprises with unds provided as either equity
investments or loans. A easibility study on a possible
energy conservation loan under this program is under-
way. This is likely to include nancing or the purchase
o equipment rom a specied eligible high-eciency
equipment list. The design is patterned ater a program
being implemented in Japan in which government unds
are made available to industrial enterprises. Preliminary
plans call or the project to be implemented by the Viet-
nam Development Bank (VDB), which will lend to enter-
prises or their purchase o equipment.
JICA also has undertaken a development study entitled
Study on National Energy Master Plan in Vietnam. The
project aims to (a) help establish the National Energy
Master Plan up to 2025, including energy security, energy
diversity, power import-export, rural electrication, pro-
motion o renewable energy utilization, CO2 emission
issues, energy conservation, investment planning, socio-
environmental impact analysis, and international cooper-
ation; (b) develop a national database or socioeconomic
and energy data covering electric power, coal, oil and gas,
renewable energy, and so orth; and (c) build capacity
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20 Vietnam: Expanding Opportunities or Energy Efciency
o the bodies under MOIT. JICA is currently working to
develop a roadmap or the VNEEP to enhance program
results and help MOIT meet its national targets.
The Energy Conservation Center, Japan (ECCJ), has also
been actively conducting energy conservation trainingprograms or developing countries, mainly in the Asian
region and including Vietnam. EECJ also has provided
expert assistance or the development o energy conser-
vation law, including the transer o inormation on suc-
cessul experiences in Japan. The ECCJ is developing a
database or MOIT to acilitate the reporting and analysis
o annual energy consumption data, which will likely be
required or all large industrial and commercial custom-
ers under the proposed new law.
Swiss Development Cooperation
In the specic area o energy eciency, the Swiss Devel-
opment Cooperation (SDC) has been collaborating with
UNIDO in the establishment o a national ocal point
or the promotion and implementation o eco-ecient
industrial production through the Vietnam Cleaner Pro-
duction Center (VNCPC) under the Hanoi University o
Technology. The ocus during Phase 1 (19982003) was
on training, policy support, and dissemination o inorma-
tion on pilot demonstration projects. Phase 2 (200508)
sought to operationalize VNCPC ully and make it nan-
cially sustainable. SDC has also implemented an energy-
eciency and environmental management project in the
brick-making industry. The SDC assisted in the identi-cation and promotion o economic and environmentally
viable brick production processes within the ramework
o the Nam Dinh Urban Development Project. The proj-
ect included the upgraded design and demonstration o
a local tunnel kiln, which may be urther replicated under
the United Nations Development Programmes (UNDPs)
SME Project.
The Swiss State Secretariat or Economic Aairs (SECO)
established a trust und with the VNCPC that provides
partial credit guarantees and incentive grants or cleaner
production (such as pollution prevention, energy e-
ciency, water and material recycling, and so orth). ThisGreen Credit Line works with three commercial banks
(Techcombank, Asia Commercial Bank, and Vietnam
International Bank). The program targets SMEs (under
US$5 million o registered capital and 500 employees).
VNCPC reviews applications and, i approved, provides
a grant incentive based on the amount o environmental
impact reduction (that is, reduced pollution and resource
use). Applicants can also request up to a 50 percent guar-
antee or associated loans, i needed.
United Nations
The UNDP has been supporting Vietnam since 1977.
Energy and environment is one o the ocal areas or
the UNDPs work in the country. One key initiative is
a UNDP project entitled Vietnam: Promoting EnergyConservation in Small and Medium-Scale Enterprises,
with a program period rom 2005 to 2010 and budget
o US$28.8 million, including US$5.5 million o support
rom the Global Environment Facility (GEF). The project
aims to address barriers blocking widespread adoption o
energy-ecient management practices, operations, and
technologies in SME. The project ocuses on ve SME
production subsectors: bricks, ceramics, textiles, paper,
and ood processing. The project is composed o six
integrated components: (a) policy and institutional sup-
port development; (b) communications and awareness;
(c) technical capacity development; (d) energy-eciency
services provision support; (e) nancing support; and ()demonstrations.
Other ongoing activities or activities under advanced
preparation include a US$3.0 million UNDP-GEF public
lighting eciency project with the National Center or
Natural Science and Technology (NCST) and the Insti-
tute o Material Science (IMS); a US$4.5 million UNIDO
national clean production program or Vietnam with
Hanoi University o Technology (counded with SDC as
noted previously); a proposed US$6.8 million regional
energy-eciency appliance labeling and standards pro-
gram, which includes Vietnam among other countries;
and a proposed US$3.0 million UNEP-GEF incandescentlamp phaseout program. Planned UNDP-UNIDO support
rom 2010 and beyond includes possible initiatives on
energy-eciency building codes, capacity building or
implementation o the energy conservation law, promo-
tion o Energy Management Standards via the proposed
International Organization or Standardization (ISO) 50001
Management Standard, and assistance or the coordina-
tion o climate change adaption and mitigation eorts.
The World Bank Group
The International Development Association (IDA) has
been supporting energy-eciency eorts in Vietnam
since 1997. Its program began with a US$3.6 million
technical assistance grant provided by the Swedish
International Development Agency (SIDA) administered
by IDA, or: (a) DSM planning and pilots with EVN; (b)
initiation o load management and research unctions,
also with EVN; (c) development o initial equipment stan-
dards with MOST; and (d) development o a commercial
building code with the MOC. Based on the results o this
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2323
Options or Further ImprovingEnergy Efciency in Vietnam
Previous chapters reviewed energy demand trends
in Vietnam, discussed the need to expand eorts to
improve energy eciency, and outlined Vietnams cur-
rent eorts to ramp up energy-eciency initiatives.
This chapter briefy discusses the overall challenge o
implementing eective energy-eciency initiatives and
explores options and priorities or the uture to overcome
those barriers. The chapter then describes how a com-
bination o regulation and market-based initiatives might
be applied to realize improved energy eciency in each
o the our strategic sectors in Vietnam identied earlier.
A nal section provides recommendations or action dur-
ing the next three years.
Making Energy-EfciencyImprovements Happen
Achieving greater energy eciency has become a central
tenet in the energy policy o many countries or a good
reason: it helps enhance energy supply security, it is
environmentally riendly, and it is substantially more cost
eective than energy supply. In most cases, it also yields
protable lie-cycle nancial returns to energy users.
However, experience across the globe has shown that
the huge potential or cost-eective, energy-eciency
investment is dicult to capture. Relying on mar-
ket orces alone is insucient. Even where market
economies are very advanced, many energy-eciency
investments with strong lie-cycle returns remain unim-
plemented. Although the use o market orces is impor-
tant and critical or sustained progress on improving
energy eciency, strong government leadership is also
required. Government leadership is needed to put stan-
dards and regulations in place where there are market
ailures, to promote economic policies that encourage
investment in operating cost savings as much as pos-
sible, to help provide inormation and raise awareness, to
nurture the development o a domestic energy-eciency
service industry, to launch and nurture market transor-
mation initiatives or key energy-using equipment or
appliances, and to promote and oster the development
o nancing mechanisms and public-private alliances that
can eectively help deliver increased energy-eciency
investment. The need or strong and sustained govern-
ment leadership is especially evident in Vietnam, espe-cially at the current time.
Barriers to Achieving Energy Efciency
lac Inrmatin. Perhaps the most basic requirement
or achieving greater energy eciency is or energy
users to be aware o potential energy savings and their
nancial benet, and how to attain them. Although a
good start has been made and the VNEEP recognizes its
importance, Vietnam is still a long way rom meeting this
requirement. Many consumers, especially in commercial
or industrial establishments, actually have little concrete
idea o the potential or energy savings in their busi-nesses, and how much money could be saved through
improved management or modest investment. Despite
some progress o late, there remains little reliable and
comparable inormation on the actual energy-use pat-
terns o dierent types o appliances or new equipment
that consumers can readily see and properly consider.
Business enterprises are typically not very knowledge-
able about the types o retrot projects that could save
3
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24 Vietnam: Expanding Opportunities or Energy Efciency
them on energy costs, new and more ecient technolo-
gies, or even where they might nd out more about these
things. As VNEEP progresses in uture years, consumers
will also need more specic inormation on implementa-
tion and nancing options.
Insufcient Readi Avaiae Expertise. A related issue
concerns the availability o expertise. Clients need to
be able to tap appropriate expertise to advise on energy
savings options, complete customized energy-use audits
on site, identiy projects and sources o nancing, and
assist in developing and implementing complex projects.
Such expertise needs to be readily available locally and
easy or clients to contact and engage. Clients also need
some way to gauge whom they can trust. Experts with
established track records in actually implementing proj-
ects are especially valuable or providing advice derived
rom actual experience rather than theoretical calcula-tion. Expanding and improving the qualications o local
expertise is another area where Vietnam needs to make
major improvements i a meaningul share o the poten-
tial or energy eciency is to be captured. Vietnams gov-
ernment has made this a priority, but it takes concerted
eort over a sustained period to achieve real results.
Ener Pricin. In any market economy, higher energy
prices are an exceptionally powerul orce to attract
attention to energy eciency and to increase incentives
or action. In Vietnam, prices paid or energy are low rela-
tive to those in most other countries. The actual level o
electricity taris has allen in real terms over the pastseveral years, despite an increases in January 2007 o
an average o 8 percent to VND 873/kWh and a urther
increase o an average o 9.1 percent to VND 948/kWh in
2009. Domestic coal prices are well below levels in other
countries. Although solid returns on a wide range o
energy-eciency investments still exist, incentives and
investment results could be sharply improved i energy
prices better refected international levels.
Cst-Cnsciusness. Even i price signals are strong, con-
sumers need to be interested in reducing operating costs,
although this is not always the case. Where enterprise
operation culture in a planned economy remains strong,
as in some state-owned enterprises, reducing operating
costs, such as energy or water utility costs, may not be a
priority to managers, even i quite protable. In addition,
when economic growth is robust, commercial and indus-
trial establishments may naturally place greater empha-
sis on the expansion or introduction o new products to
increase market share, and investments or long-term
payo in operating cost savings may be assigned lower
priority or the time being.
linerin generic Prems ith Ener-Efcienc Prects.
Even i consumers are aware o opportunities, expertise
is available, and the economic environment is support-ive, problems inherent in these types o operating cost
saving projects still remain and, unless addressed, con-
tinue to hinder realization o the available potential. Ben-
ets in the orm o calculated cost savings streams, as
opposed to highly visible new production assets, appear
nebulous and inherently risky to many. At micro decision-
making levels, energy costsaving characteristics o new
equipment may be relatively insignicant compared to
other concerns. When purchasing new rerigerators, or
example, buyers are unlikely to push energy-eciency
demands on producers hard enough to cause market
transormation, relative to other demands, such as rerig-erator appearance, convenience items, layout, and so
orththe energy expenditures involved in operating one
rerigerator are just not big enough (although the energy
costs are large in the aggregate or the country). In some
cases, or example, where oce or living space is rented,
one party may be responsible or purchasing equipment
while the party responsible or paying energy bills is di-
erent, causing a problem o split incentives. Then there
is the problem o transaction costs. Unless addressed,
the eorts required by an energy user on his own to nd
good inormation, obtain advice, consider options, design
projects, and then implement the measures may add up
to too much eort and cost or the many small projectstypical o the energy conservation business. I projects
require substantial outside expertise or outside nanc-
ing, the contractual hurdles involved increase transaction
costs and implementation diculties even more. Unless
specic programs and packaging mechanisms are put in
place, beneting rom scale economies in aggregation,
these problems cause potential energy-eciency inves-
tors to require exceptionally high implicit discount rates
or to orgo the potential savings altogether.
behavira Inertia. There are also inherent behavioral
issues associated with the acceptance o change. For
some, there is comort in doing what you know even
i other ways may be better. Others perceive the adop-
tion o new practices as having unoreseen risks. Engi-
neers design in ways in which they are accustomed,
procurement ocers like to work with existing suppli-
ers that understand their needs, and technicians preer
to work with equipment they know how to operate and
maintain.
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25Options or Further Improving Energy Efciency in Vietnam
Overcoming Barriers to Energy Efciency
All countries with mixed or ully market economies that
have had some success in overcoming barriers to improv-
ing energy eciency use a mix o government regula-
tion combined with policies and programs to encourageimproved uptake o energy-eciency investment through
the market. Some common regulations include require-
ments to provide monitorable inormation on energy
use, requirements or standardized energy consump-
tion labeling on energy-intensive equipment, enactment
o mandatory energy-eciency standards or certain
equipment (such as rerigerators), implementation o
programs or either voluntary or mandatory government-
industry agreements on improving industrial plant energy
eciency, and outlawing o specied particularly energy
inecient equipment models or subscale industrial pro-
cesses. Some common public programs to help spark
greater market investment include public support orpublic-private partnership nancing schemes, provision
o targeted concessional nance or tax breaks, programs
to develop and launch an energy-eciency perormance
contracting industry by ESCOs, and more. In countries
where inormation and expertise are basically available
and economic environments are generally supportive,
orceul and sustained government action on both regu-
lation and promotion o market-based solutions is still
needed to overcome the more generic energy-eciency
investment barriers described above.
Devepin and Impementin Ener-Efcienc Reuatins.
The most important measure that Vietnam can take in
the short term to address current barriers to energy
eciency is enactment o the proposed Law on Energy
Conservation and Ecient Use. The law is especially
important because it can provide the oundation or the
regulations that are needed to address specic problems
undermining Vietnams ability to achieve greater energy
eciency. The law can bring stronger legitimacy to orga-
nizations and their work, and provide or assignment o
responsibilities and associated unding. Enactment o the
law can send a clear message to society and the market
on national intentions. The law can mandate new relation-
ships among the government, industry, and large com-mercial enterprises to encourage more ecient use o
energy, mandate improved systems to provide consum-
ers with objective inormation, and lay a oundation or
developing minimum energy-eciency standards or key
types o equipment. It is important to maintain fexibility
or adjustments based on evolving experience, and hence
leave many specics or associated regulations. Based
on Chinas experience with its rst energy conservation
law in the 1990s; however, it is also useul or the law to
provide clear authority or the enorcement o regulations
and assessment o penalties or noncompliance.
Development and especially implementation o the rst
set o regulations based on the law, i enacted, will bea very large undertaking over the next three years. It is
important or the design o specic regulations and their
rollout to be careully aligned with the governments
capacity to assist in their implementation and to enorce
them. Overambitious, all-encompassing regulations that
cannot be practically implemented with existing sta and
organizational capacity may undermine credibility and be
counterproductive.
Uneashin Maret Frces. While regulation is important
or drawing attention to energy waste, ensuring unbiased
inormation fow, and overcoming certain specic marketailures, the use o market orces is critical or realizing
large-scale, ecient, and sustainable investment in more
ecient energy-use systems. For Vietnam, rom an over-
all policy perspective, the review o consumer energy
prices and adjustment to best refect true costs, as well
as continued state-owned enterprise reorm, can make a
major dierence in helping bring market orces to bear,
especially in the industrial sector. However, eort is also
needed to oster development o eective investment
project delivery systems. Experience elsewhere shows
that eective delivery systems or energy-eciency
investment projects are not likely to develop without ini-
tial government encouragement, but once operational,investment can continue sustainably with more lim-
ited public involvement. Given the scale o investment
needed, reliance on market-based mechanisms is essen-
tial to achieving long-term energy-eciency goals. Some
o the more common energy-eciency investment deliv-
ery systems are outlined below.
Ener Service Cmpanies. For the energy-eciency invest-
ment market to unction, entities that understand the
technology and cost-saving potential are required to help
identiy opportunities, complete good easibility studies,
and assist in project implementation. Such companies or
institutes may be called third-party service providers,
project agents, or other terms. For Vietnam, continued
development o a local industry o these types o compa-
nies will be critical i energy-eciency investment is to
increase sharply.
Many people reserve the term ESCO or energy ser-
vice companies that engage in energy perormance
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27Options or Further Improving Energy Efciency in Vietnam
Specia Puic Resurce Funds. Some governments estab-
lish special-purpose unds, parastatal energy-eciency
investment companies, or other long-term special pro-
grams designed to catalyze energy investment in the
market with the use o public unds. Two examples that
involved the creation o new legal entities include IndiasRenewable Energy Development Agency (a national para-
statal company that also engages in energy-eciency
loans) and the development o Energy-Eciency Utili-
ties by several state governments in the United States.
Objectives best ocus on maximum monitorable results in
increased energy-eciency investment per unit o public
resources. While some programs have clearly been suc-
cessul, there are many inherent challenges, including
maintenance o program stability because o continuing
nancing uncertainties, complex and sometimes uneasy
or unhealthy relations with the banking industry, and pro-
gram management capacity requirements. I Vietnam
chooses to consider such an option, it may be best to
dene upront (a) very clear and narrow objectives, and a
sophisticated system or how results will be measured;
(b) specics o program management and implementa-
tion, including the contracting o capacity rom outside
the government; and (c) medium-term dedicated nanc-
ing sources.
Putting Regulation and Market-BasedPrograms Together in Key Sectors
Improving Energy Efciency in ExistingIndustrial Plants
While many cost-eective energy-ecient technologies
and process improvements are available and appropri-
ate or existing Vietnamese industry, inorming industry
managers, incentivizing owners, packaging projects,
and identiying and implementing them have been more
problematic. On the regulatory side, some important and
useul measures listed in recent drats o the energy
conservation law include new mandatory energy-use
reporting systems, requirements or developing internal
energy management programs in designated enterprises,
requirements or designated enterprises to implementve-year energy-eciency improvement plans agreed
with and monitored by the government, and provisions
allowing the government to ban particularly wasteul
equipment and energy-use practices. The reporting,
energy management, and energy-eciency planning
requirements can provide a critically needed platorm or
increasing inormation on the specic energy-eciency
opportunities, both in industrial enterprises and in govern-
ment entities. They can also provide a powerul impetus
or organizing greater attention in enterprises to poten-
tially protable opportunities or energy-eciency invest-
ments and operational modications, and or instituting
improved energy management practices that can have a
big payo over the medium term. However, implementa-
tion will be a major eort requiring ocused attention atmany levels or quite a ew years. Countries with strong
experience in recent years in these particular regulatory
and monitoring areas include China, Japan, and a num-
ber o European Union countries. China also began to
achieve good results in 200608 in its banning o particu-
larly energy-wasting, subscale industrial technologies,
but its experience has shown that rigorous enorcement
at local levels is critical.
Regulatory measures can attract needed attention within
industrial enterprises, but measures to help make it
easier or them to implement money-making energy-
eciency projects in line with market orces are needed
to then deliver concrete energy savings in existing plants
(provided that the plants continue to operate). This
requires additional inormation programs, steady and
major capacity-building programs or energy managers
and third-party service providers, and eorts to expand
project nancing channels and amounts. Programs to
provide enterprises with inormation on opportunities
or example, through the dissemination o case studies,
technical resources, and analytical tools; delivery o train-
ing courses; and so orthoten get the best results i
the ocus is on how enterprises can save money rom
energy conservation. Training and increasing hands-on experience is needed, especially among third-party
service groups, to help eciently identiy and package
nancially attractive technology choices and renovations.
Financing or energy-eciency projects is typically di-
cult to arrange through standard channels. Although
the business can be protable or banks in due course,
eorts are needed to help jump-start loan programs that
can eciently accommodate good energy conservation
retrot projects.
A number o international donors are working with the
government to prepare new programs or preparing
and/or nancing industrial energy-eciency retrot proj-ects, and such programs can be quite constructive. One
suggestion is to try to ocus exclusively on capturing
a good share o the available nancially attractive proj-
ects, avoiding less economic investments, and aiming
to create and link project development and investment
mechanisms that are inherently protable or the nanc-
ing and host entities and that can be sustained ater
donor nancing is exhausted. Another suggestion is to
ensure that technical assistance or project identication
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29Options or Further Improving Energy Efciency in Vietnam
Electrical Appliances
Electrical appliances in residences used 39 percent o all
electricity consumed in Vietnam in 2007. The IEA esti-
mates that electricity savings o some 2538 percent in
residential appliances could be achieved internationally.
6
However, capturing the savings potential involves some
dierent challenges rom those in industry or transpor-
tation. In industry, energy-eciency initiatives ocus
especially on helping enterprises identiy and implement
relatively customized solutions. With household electri-
cal appliances, however, a limited number o appliance
types dominate electricity use (or example, lamps,
rerigerators, air conditioners, water heaters, and rice
cookers), but a very dispersed supply and use chain that
involves millions o customers, many retailers, and quite
a ew dierent product suppliers.
Because o the nature o the market, programs to improveeciencies or electrical appliances are usually done on
a national scale and oten by individual appliance. Many
countries aim to transorm existing markets, that is,
to guide the increasing penetration o more energy-e-
cient appliances into specic appliance markets through
regulation and selective public intervention, yet they
still rely on market orces or ecient and sustainable
market operation. This involves (a) programs to provide
customers with commonly available, credible, and cor-
rect but simple inormation about the eciency charac-
teristics o the choices in ront o them; (b) government
initiatives to work with suppliers to encourage expanded
marketing o reputable and more ecient products, anddiscourage particularly wasteul or raudulent market
oerings; and (c) programs to help customers cope with
the initial higher costs o some more ecient appliances
until market transormation can take hold. Good results
require careul planning, a mix o tools, and long-term
dedication.
The main initiatives undertaken in the appliance market
transormation arena in Vietnam so ar are on the dis-
semination o CFLs and some initial activities on market
labeling, establishment o appliance testing protocols,
establishment o a local testing acility, and some devel-
opment o several national standards (see Chapter 2).
EVNs program or bulk purchase and distribution o CFLs
has been quite successul in terms o volumes achieved
and increasing awareness. Now may be the time or the
6 IEA.Experience with Energy Eciency Regulations or Electrical
Equipment IEA inormation paper, OECD/IEA, August 2007.
government to establish promotional programs that can
build on recent gains and be sustained over the long term
through local retail outlets, and or renewed eorts on
FTLs and electronic ballasts. It also is a good time to put
more aggressive and comprehensive programs in place
or larger household appliances. For the uture, Vietnamneeds to develop more consolidated and deliberate pro-
grams ocused on ensuring long-term results.
Good market transormation programs require upront
public investment to gain understanding o the specic
target markets beore attempting to transorm them.
Consumer purchase behaviors and concerns when buy-
ing new appliances, the realities o retail systems and
locations, consumer nancing patterns, supplier chains
and selling strategies, and the characteristics and prices
o the main products currently on the market are all
important to understand beore embarking on major mar-
ket transormation initiatives. Unless built on such spe-
cic understanding, program designs are likely to result
in too much wasted eort.
Expansion and upgrading o programs to provide readily
available and credible inormation to consumers about var-
ious appliance products on the market is especially impor-
tant now. Many poor-quality products are on the market,
and unsubstantiated claims about energy eciency and
critical product characteristics abound. It is dicult or
consumers to know with condence which claims are
correct and which are bogus, and hence when payment
o higher costs upront will pay o. To solve this problem,however, will require greater public investment, planning,
and time to develop and institute testing programs, to
develop well-designed appliance labels and other inorma-
tion, and especially to increase the visibility o such inor-
mation and consumer condence that it is correct.
Development and implementation o either voluntary
or mandatory energy-eciency standards or key appli-
ances has been eective in a number o countries and is
being considered in Vietnam. However, standards must
be strictly enorced or they lose their meaning. I compli-
ance is voluntary, consumers must still have condence
rom the compliance system that products claiming tomeet voluntary standards actually do. Compliance moni-
toring systems also require public investment and time
to develop and implement properly.
Energy-ecient appliances typically cost more than ine-
cient ones, even i they pay o through savings later,
and the issue o higher upront costs needs to be dealt
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30 Vietnam: Expanding Opportunities or Energy Efciency
with as programs are launched. Government-supplier
negotiations can oten help to bring down costs, with
technology transer agreements, and/or bulk procure-
ment or other discount deals in which suppliers oer
lower prices or arrangements resulting in larger-scale
sales. Still, consumer subsidies may be justied to jump-start market transormation to more ecient appliances,
at least until the market penetration begins to see ur-
ther economies o scale and/or consumers more clearly
see the longer-term payos. Common subsidy mecha-
nisms include partial rebates or the purchase o speci-
ed more ecient models, or the provision o low-cost
nancing or large appliances. Such subsidies are best
designed rom the beginning with plans or their gradual
phaseout. Most countries rely on existing appliance retail
systems or distribution, although electricity utilities may
collaborate with the programs (or example, in market-
ing and distribution o rebate coupons and so orth) as
part o DSM program agreements or under specic gov-
ernment contract. Because appliance markets are large
and diuse, government programs must be designed to
minimize unintended distortions in the market, especially
competition with and undermining o existing supply
channels. Waste by providing incentives to those con-
sumers already planning to purchase ecient equipment
on the market also needs to be minimized.
Recommendations orFollow-Up Actions
With the new energy conservation law up or consid-
eration by the National Assembly, growing experience
through the implementation o the VNEEP, and a sup-
portive donor community, the overall environment or
scaling up the governments eorts to promote greater
energy eciency is very good. What is most important at
this point is laying solid oundations or institutional sys-
tems and programs that can make major energy savings
contributions over the long haul, and grow stronger and
stronger over time. However, achievement o real and
sizable energy-eciency gains is not easy. While some
quick gains may occasionally be achieved, the best
and most lasting results usually stem rom programs
that are built with sucient and growing local capacity
or delivery. This requires good planning, upront public
investment, dedication, and time. Some countries have
grabbed onto program ideas introduced rom elsewhere,
which sound simple and easy, and introduced them with
high expectations without sucient groundwork, adap-
tation to local circumstances, consideration o possible
unintended consequences, or consideration o the need
or human resource investment in program delivery.
Results then tend to be poor and zzle out. It is certainly
not the case that all programs must wait or complete,
ull-scale planning beore anything can be started. Small-
scale piloting and trial eorts are excellent ways to test
ideas and begin to adapt them to realities on the ground.It is oten useul, however, or pilots to have a strategic
ocus set in a broader, deliberate plan and, i evaluations
show promise, or scale-up eorts to be designed with
deliberate ocus on long-term sustainable results.
Although donor unds may provide some large nancing
sources or a ew years or some activities, the current
public und budget o US$2 million per year or imple-
mentation o the VNEEP means that the government
must prioritize its activities careully. Increasing leverage
is also criticalor example, to use public unds as seed
money or ideas that can be scaled up by others, espe-
cially the private sector.
In prioritizing among competing program requests or
public unds, the Bank study team strongly recommends
greater attention to evaluation o the actual energy sav-
ings results that may be achieved. The success o the
VNEEP should be assessed with respect to the spe-
cic, quantied role it has played in helping to meet the
governments energy savings goals. It is true that many
public investments in the early years may need to con-
centrate on human resource capacity building, although
assessment o direct energy savings rom capacity build-
ing investment is dicult. However, even in this case,greater rigor is possible. For example, what specic pro-
grams are sta to be trained or and expected to contrib-
ute to, and how much energy savings might evolve rom
a specic program i successul? Ater the training, did
those sta really apply the skills they learned in the spe-
cic program? What other actors must be addressed or
those skills to produce concerted, new energy savings,
and have those actors been addressed?
With the new law moving orward and new implementa-
tion regulations in the preparatory phase, it would also
appear to be a good time to review how government
institutional responsibilities and the coordination between
dierent parties can be urther crated to best serve the
long-term needs. A common observation expressed by
oreigners reviewing Vietnams energy-eciency pro-
gram is that it is too ragmented institutionally, with
overlapping or unclear responsibilities and insucient
coordination and direction. While there are many issues
and actors to consider, the current juncture may provide
a good opportunity or adjustments.
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31Options or Further Improving Energy Efciency