SUPPORTING PROGRAM FOR WIND POWER DEVELOPMENT IN VIET NAM. Facilitating Implementation and Readiness for Mitigation (FIRM) PROJECT VIETNAM VIETNAM

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1 VIETNAM Institute of Energy, Ministry of Industry and Trade Institute of Meteorology Hydrology and Climate Change, Ministry of Natural Resources and Environment VIETNAM NAMA PROPOSAL SUPPORTING PROGRAM FOR WIND POWER DEVELOPMENT IN VIET NAM Facilitating Implementation and Readiness for Mitigation (FIRM) PROJECT VIETNAM

2 COPYRIGHT, 2016 This publication may be reproduced in whole or in part and in any form for educational or non-profit purposes without special permission from the copyright holder, provided acknowledgement of the source is made. UNEP DTU Partnership would appreciate receiving a copy of any publication that uses this publication as a source. No use of this publication may be made for resale or for any other commercial purpose whatsoever without prior permission in writing from the UNEP DTU Partnership. DISCLAIMER This publication is an output of the Facilitating Implementation and Readiness for Mitigation project (FIRM), funded by DANIDA of the Ministry of Foreign Affairs of Denmark and implemented by the United Nations Environment Programme (UNEP) and the UNEP DTU Partnership (UDP). The views epressed in this publication are those of the authors and do not necessarily reflect the views of UNEP DTU Partnership or UNEP. This publication may be reproduced in whole or in part and in any form for educational or non-profit services without special permission from the copyright holder, provided acknowledgement of the source is made. No use of this publication may be made for resale or any other commercial purpose whatsoever without prior permission in writing from the UNEP DTU Partnership. NATIONAL COORDINATION Vietnam Institute of Energy, Ministry of Industry and Trade Institute of Meteorology Hydrology and Climate Change, Ministry of Natural Resources and Environment Ha Noi October 2015 ACKNOWLEDGEMENTS The project Facilitating Implementation and Readiness for Mitigation (FIRM) has been implemented with the support of a grant from the Danish International Development Agency (DANIDA) of the Ministry of Foreign Affairs of Denmark. Graphic design : Fabrice Belaire Infographie For any inquiries or questions please contact: UNEP DTU PARTNERSHIP UN City, Copenhagen Marmorvej 51, 2100 Copenhagen Ø Denmark Web: LinkedIn: UNEPDTU

3 1. Basic information Overview of NAMA Objectives of the proposed NAMA and implementation measures National sustainable development strategies and contribution of the NAMA Eisting mitigation initiatives and their synergies with the program Introduction Identification of barriers and implementation options Estimation of National Sustainable Development Benefits and GHG impacts The NAMA Action Plan Monitoring, Reporting and Verification Non-financial needs Financial sources Full cost of implementing the NAMA Funding from domestic sources (Public, private, investments) Financial support from international funding Arrangements to finance the implementation of the NAMA, including domestic finances and international funding...46 REFERENCES...50 ANNEX...52

4 Table 1. Wind power potential in Viet Nam... 5 Table 2. Measures covered by the proposed NAMA... 6 Table 3. Analysis of transformational changes... 9 Table 4. GHG emissions reduction targets in Green Growth Strategy...12 Table 5. GHG emissions reduction target by sectors in Decision Table 6. Barriers for the development of wind power in Viet Nam...16 Table 7. Barriers addressed under the NAMA proposal...20 Table 8: NAMA vs. BAU: Cumulative CO 2.e reduction by fuels up to Table 9: Overview of NAMA activities...27 Table 10. Work plan...32 Table 11: Progress indicators to evaluate the progress of the NAMA implementation...35 Table 12: Impact indicators to evaluate the impacts of the NAMA implementation...36 Table 13. Monitoring and reporting plan at NAMA activity and project levels...39 Table 14. Detail NAMA financing...44 Table 15. Potential budgets from domestic finance sources...46 Table 16. Potential budgets from international finance sources...46 Figure 1: NAMA vs. BAU: Cumulative CO 2.e reduction by fuels up to Figure 2: Institutional arrangement for program implementation...29 Figure 3: Boundary and scale of wind NAMA...34 Figure 4. Financing structure for the supporting program for wind power development in Viet Nam...44 Figure 5. Capital plan for the wind power NAMA...48

5 BAU: Business As Usual BUR: Biennial Updated Report CDM: Clean Development Mechanism CER: Certificate on Emission Reduction DMHCC: Department of Meteorology, Hydrology and Climate Change EVN: Electricity of Viet Nam ERAV: Electricity Regulatory Authority of Viet Nam FiT: Feed in Tariff GHG: Greenhouse Gas GDOE: General Department of Energy IPCC: International Panel on Climate Change ISTEA: Industrial Safety Techniques and Environment Agency LEAP: Long-Range Energy Alternative Planning MOF: Ministry of Finance MOT: Ministry of Transport MOC: Ministry of Construction MARD: Ministry of Agriculture and Rural Development MONRE: Ministry of Natural Resources and Environment MPI: Ministry of Planning and Investment MRV: Measuring, Reporting and Verifying MOIT: Ministry of Industry and Trade NAMAs: Nationally Appropriate Mitigation Actions PDP 7: Power Development Plan 7 PVN: Petro of Viet Nam REDF: Renewable Energy Development Facility REVN: Renewable Energy of Viet Nam RECTERE: Renewable Energy Centre and Thermal Equipment SHP: Small Hydropower Plan SBV: State Bank of Viet Nam VEPF: Viet Nam Environmental Protection Fund VDB: Viet Nam Development Bank UNFCCC: United Nations Framework Convention on Climate Change VINACOMIN: Viet Nam National Coal and Mineral Industries Group

6 Title of NAMA : Country: Supporting Program for Wind Power Development in Viet Nam Viet Nam NAMA implementation coordinating entity: Industrial Safety Techniques and Environment Agency, Ministry of Industry and Trade (MOIT)/Institute of Energy National NAMA approver: Department of Meteorology, Hydrology and Climate Change, Ministry of Natural Resources and Environment (MONRE) Name of person(s)/organisation responsible for developing the NAMA proposal: Viet Nam Institute of Meteorology Hydrology and Climate Change, MONRE, Institute of Energy, MOIT-Viet Nam Sector/Subsector: Greenhouse Gas covered by the Action (marked ): Energy Industry/Renewable Energy CO2 CH4 X N2O HFCs PFCs SF6 NF3 Status of endorsement by appropriate national authority: Wind power development in Viet Nam In Viet Nam, wind power is considered a relatively abundant renewable energy resource with a potential capacity of over 24,000 megawatts (MW) specifically, 24,351 MW wind power potential at wind speeds of 6-7 meters per second (m/s) 1. But the installed capacity of wind power in Viet Nam by the end of 2014 was around 135 MW 2. This number accounts for a small percentage of the target on renewable energy development mentioned in PDP7 (2,000 MW in 2020 and 6,200 MW in 2030). It is believed that the development of wind power in Viet Nam faces a number of barriers such as incentive mechanism, lack of capacity and awareness or difficulty to access financial sources 3. 1 Viet Nam Ministry of Industry and Trade (2010) Wind resource atlas of Viet Nam. Sponsored by World Bank. Prepared by AWS Truepower. 463 New Karner Road, Albany, New York Synthesizing by IMHEN 3 GIZ/MOIT (2012) Status of wind power development financing of these projects in Viet Nam

7 Table 1. Wind power potential in Viet Nam Average wind speed (m/s) < > 9 Area (km 2 ) 95,916 70,868 40,743 2, Area percentage (%) < 0.01 Potential 956, , ,732 24,351 2, Source: GIZ/MOIT (2012) Status of wind power development financing of these projects in Viet Nam Supporting mechanisms for the development of wind power in Viet Nam For this reason, Viet Nam decided to launch A supporting mechanism for the development of wind power in Viet Nam according to Decision 37/2011/QD-TTg. The aim of the policy is to narrow gaps and to create a favorable environment to facilitate the implementation of wind power by providing FIT and other incentives to wind power investors. It will also contribute to the process of changing the structure of energy production with a growing proportion of clean energy and renewable energy and reducing greenhouse gas emissions and pollution from power generation. Support for the implementation of Decision 37/2011/QD-TTg through NAMAs The mechanism encouraging wind power development will provide an opportunity to reduce greenhouse gas emissions while contributing to Viet Nam s sustainable development. It can therefore aspire to receive international support through the NAMA instrument. The purpose of the proposed NAMA (Supporting Programme for Wind Power Development in Viet Nam) is to encourage the implementation of Decision 37/2011/QD-TTg while epanding its scope, which involves:

8 Policy Capacity Finance Table 2. Measures covered by the proposed NAMA Major barriers Direct and indirect subsidies to conventional power generation through fossil fuel subsidies Lack of financing mechanism to secure the availability of funding for the FiT Lack of available human and institutional capacity for opening up a market for wind power in Viet Nam Lack of financial strength of EVN to secure the obligation to connect the wind power plants to the system Lack of financing support to encourage the implementation of wind power Actions Creating regular inter-ministerial dialogue around research based on eisting analyses as well as more analysis work, to clarify the overall economic, social and environmental impacts of the current fossil fuel subsidy (FFS) system as well as possibilities for ceasing these (MOIT,MONRE, MPI, MOF, MOT, MOC, MARD,SBV) Setting up inter-ministerial dialogue on the future funding of the FiT, for eample through a certain carbon ta, a PSO or by other mechanisms (MOF; MOIT, MPI, SBV); Creating a sustainable price-based support for wind power projects Creating a support service centre for wind power development Developing mechanisms as part of reforming the power sector, which will ensure that the costs of grid epansion and re-enforcement be recovered through the electricity sales revenue or other means (MOIT, MOF) Providing financial and technical supports for feasibility studies of registered wind power projects Developing a capital channel for the deployment of wind power The proposed NAMA aims to promote the implementation of a wind power project by developing incentive mechanisms and providing support to 48 registered projects and new projects in the future to achieve the target in PDP 7. The supporting mechanism will indirectly reduce a cumulative amount of 5.2 and 66.6 million tons of carbon dioide compared with the BAU scenario by developing wind farms with total capacity of 1,000 MW in 2020 and 6,200 MW in 2030, respectively. A number of technical and economic studies supporting the NAMA design and quantification of the support requested have been completed. Some studies can be named: the Wind Energy Resource Atlas of South East Asia (World Bank, 2001); Wind Energy in Viet Nam: Resource assessment, development status and future implications (Khanh Q. Nguyen, 2006); Wind Resource Assessment for Power ggeneration (EVN, 2007); Wind Resource Assessment in Selected Sites in Viet Nam (World Bank and MOIT, 2010); Information on Wind Energy in Viet Nam (GIZ, 2011); and Status of Wind Power Development and Financing of These Projects in Viet Nam (GIZ, 2012). The FiT for wind power projects will come from the Viet Nam Environmental Protection Fund and grants for feasibility studies. Policy development will come from international donors, and loans for project implementation will come from Viet Nam Development Bank (VDB). The financial and supporting mechanisms will facilitate an enabling environment for the deployment of wind power projects and contribute to the transformation of the energy sector. This NAMA is a combination of policy and support for development of wind power in Viet Nam. This is because the legal framework and incentives for renewable or wind power development are insufficient to attract investors and to make wind power projects cost-effective. Therefore, the first and foremost task of this NAMA will focus on completing legal framework and supporting mechanisms ( ) to

9 encourage and facilitate the deployment of wind power from During these two phases, an amount of $34 million from international donors will be covered under this NAMA as a grant. a) National sustainable development contet In 2012, the Government of Viet Nam presented The National Green Growth Strategy for the period with a vision toward 2050, which also targets towards a low-carbon economy and reduces GHG emissions. In it, the energy emissions reduction targets for 2030 compared with the base year 2010 ranges from 20 per cent to 30 per cent (equivalent to million tons of CO2). In the same year, the prime m inister also approved Decision No. 1775/QD-TTg approving GHG emission management and management of carbon credit trading activities to the world market. The general objective of this project is to manage GHG emissions in order to implement the United Nations Framework Convention on Climate Change (UNFCCC) and other international agreements to which Viet Nam is a party. At the same time, the project would like to take advantage of the opportunity to develop a low-carbon economy and green growth and to reduce GHG emissions together with the international community. All of these efforts will, contribute to the implementation of the country s sustainable development goal. The project set a target of reducing emissions by 8 per cent in the energy and transportation sectors by 2020, compared to 2005 levels (around 10 million tons of CO2 equivalent). b) The contribution of the NAMA to reach the national sustainable development objectives and sectorial mitigation goals The NAMA will address the power generation sector by considering the participation of wind energy with capacity of 1,000 MW in 2020 and 6,200 MW in Actually, this is the goal in Power Development Plan for the period (also known as PDP 7). But eperts believe that this goal might not be feasible without further support. The Government and Ministry of Industry and Trade also recognise this issue. The contribution of an additional capacity of wind generation will contribute to the significant reduction of GHG emissions because it will replace imported coal power generation. It is assumed that if 1,000 MW and 6,200 MW of wind power are installed by 2020 and 2030, around 1.48 and 10.1 million tonnes of carbon dioide will be reduced over those years. These amounts would contribute to 14.8 per cent of Decision 1775 s target and 6.8 per cent-10.2 per cent of GGS s target, respectively. Implementing the UNFCCC commitments for the parties not included in Anne I, Viet Nam has carried out significant mitigation initiatives against global warming. By September 2013, Viet Nam had 246 CDM projects registered by EB with a total reduction of around 132 million tonnes of CO2.e. Of those, 41 CDM projects were certified and issued Certified Emission Reductions (CER) by EB with around 8,6 million tonnes CO2.e a year 4. About 85 per cent of the CDM projects certified by the EB involve hydropower plants. Moreover, potential CDM projects are seen in renewable energies, particularly wind power and biomass projects. By 2015, there were five wind power projects registered under CDM, including Bac Lieu, Binh Thuan, Phu Quy, Phuong Mai and Thuan Nhien Phong. 4 Department of Meteorology, Hydrology and Climate Change-MONRE

10 Recently, a number of NAMA readiness activities have been implemented in Viet Nam, such as institutional capacity building and technical assistance for construction of baseline and NAMA scenarios. In addition, several international supports are focused eclusively on the development of NAMA proposals for potential sectors. So far, there has been no NAMA project in an implementation stage. In 2014, MOIT developed a NAMA proposal named Renewable Energy Development Facility (REDF) GET FiT Viet Nam. As part of it, REDF would have hosted and managed an innovative and efficient financial support mechanism that would upgrade the eisting national feed-in tariff (FiT) and/or similar incentive mechanisms for RE and make RE investments economically viable on a systematic longterm basis (detailed list of NAMA readiness in Anne 2). Unfortunately, the NAMA Facility 5 failed to approve this proposal. In the same year, the prime minister approved the project Wind Power Planning in Viet Nam. The main activities and results of the project consist of three components: 1. Anemometer and wind potential assessments based on measured wind data; 2. Support to develop a feasibility report on developing a wind power project; 3. Support for the creation and completion of wind power development planning and national development planning at all levels of wind power. The project is to be implemented over four years ( ) with a total investment of 3.7 million euros: 3.6 million in non-refundable aid from the German government (through the German Bank for Reconstruction, KfW) and 100,000 from the Ministry of Industry and Trade s annual budget. The project mainly focuses on developing a master plan for wind power in Viet Nam and the installation of wind measurement towers. This NAMA proposal is focused more on the installation of wind farms, which means it could therefore be a supplement for the wind power project MOIT. Additionally, this NAMA proposal is developed by MONRE, but comments from MOIT are received and followed, and MOIT may submit it to UNFCCC. 2.1 Transformational and sustainable impacts of the program Transformational impacts This NAMA will contribute to restructuring the energy sector, from relying primarily on fossil fuels to produce electricity to increasing the share of renewable energy sources. Firstly, by setting a regular dialogue between relevant stakeholders, the NAMA will raise awareness among line ministries about the development of wind power. This is a good practice, which was applied successfully in Denmark, which boasts among the highest shares of wind power in the world. This is the first step in engaging relevant ministries to phase out poor policies and institutional barriers and to develop efficient incentives for instituting wind power. In addition, supporting feasibility studies of registered wind power projects will attract both local and international investors. This is crucial for encouraging investment in wind power at the province level, and also represents the first step for wind power s long-term development. This also could reduce the risk and initial costs for investors when deciding to help finance wind projects. All of these activities are preparing the groundwork for a paradigm shift in Viet Nam s energy sector toward renewable energy. This NAMA for wind power will contribute to the development of other NAMAs in Viet Nam. A successful implementation of this NAMA would represent good practice for other NAMAs in the renewable energy sector. For instance, the success of CDM projects such as the Binh Thuan wind farm has led to four more CDM projects in the wind power sector. The transformational impacts of wind power NAMA are analysed in the following table: 5 Department of Meteorology, Hydrology and Climate Change-MONRE

11 Table 3. Analysis of transformational changes Dimensions Operational definition of transformational change (TC) for development of wind power 2.2 Fact ors Goal(s) of TC 2.4 Process of change Indicators - based on questions to the cases What are the goal(s) and key indicator(s) of transformational change? Goal of transformation: Wind power becomes cost effective, widely accepted and applied in Viet Nam. The share of wind power in electricity production may reach 0.7% in 2020 and 2.4% in Indicators of transformational change: Reduction in fossil fuel subsidises Applying environmental fees to fossil fuels Increase in wind power price Wind power proportion in total electricity production What intervention(s) trigger the change process? Providing to policy makers adequate information and research on phasing out fossil fuel subsidies Establishing information channels and research programs on fossil fuel subsidies and environmental fees (e.g. economic impact) to prepare for the transformation Providing assistance and support to encourage the transformation s initial project activities Who are the key actors? MOC, MPI, MOIT, MONRE How will the intervention lead to systemic change? Phasing out fossil fuel subsidies is one of the macroeconomic policies related to various ministries. It will not only lead to an economic restructuring but also to a change in the energy sector. This is one of the policies needed to encourage economic green growth. Eliminating fossil fuel subsidies will render energy efficiency and renewable energy projects more economically viable. If the costs of fossil fuels increase, the energy sector will have to actively implement energy saving and renewable energy measures. Developing mechanisms and policies on environmental costs for fossil fuels represents a macro solution with positive impacts on the development of renewable energy. These policies will also limit fossil fuel use and encourage renewable energy. But the application of these mechanisms and policies requires careful evaluation by the ministries/agencies because it may have significant economic

12 impacts. Providing financial support during the initial phase of the transformational process is indeed essential. The success of initial projects will be models and good practices for projects in the replication and development processes. Wind power lock-in 2.6 Which barriers are to be overcome? Barrier on fossil fuel subsidies: Direct and indirect subsidies to conventional power generation through fossil fuel subsidies Barrier on environment fee for fossil fuels: Eternal costs of fossil fuel-based power generation are not known and not included Barrier on FiT for wind power: Lack of financing mechanism to secure the availability of funding for the FiT Barrier on investment capital How will the development of wind power be sustained? Phasing out fossil fuel subsidies and applying appropriate environmental fees for fossil fuels will increase the economic efficiency of wind power projects in the long term. If wind power projects become cost effective, they will attract financial resources from the private sector to be replicated and developed. Conversely, when wind power projects have yet to become cost effective, the application of FiT or emission-trading schemes are only temporary solutions in the take-off phase. Sustainability By addressing major barriers to wind power development in Viet Nam, this NAMA will help create a sustainable wind energy market. Activities described in the program will contribute to building a favorable environment for investment and sustainable development of wind energy and enhance operational skills and technique of wind power technology. Another important element of the sustainability of this NAMA are the solutions under the program. They include the efficiency increases in wind energy investment patterns, information development on wind power and monitoring and measuring systems for wind potential. A support service centre established under this NAMA will continue to support investors during the second phase ( ) and beyond. This ensures that future wind power projects will continue to be supported by this NAMA. The sustainability of this NAMA is also reflected in greenhouse gas reductions as well as in environmental, economic and social benefits. Electricity production emits a significant amount of carbon dioide into the atmosphere. Carbon dioide generated from the energy sector accounted for 81.4 million tons of CO2eq in 2005, approimately 40 per cent of total greenhouse gas emissions in Viet Nam that year. The development of wind energy has the potential to contribute considerably to emission reductions from the energy industry. The environmental benefits include lower air pollution levels locally. Economic benefits include the attraction of both domestic and international investments in

13 renewable energy. Social benefits include the ability to create new jobs and grow community awareness of renewable energy. An eample of this is the Bac Lieu wind farm, located in a province that has high wind potential but requires significant investments of time to achieve community consensus on wind power development. When the wind farm was in development, local infrastructure was improved and local people were also employed. Every year, this wind farm will contribute $25 million to $35 million to Bac Lieu s budget, which is approimately half of the province s income. This is considered one of the key environmental and economic development projects in Bac Lieu. More details about environmental, social and economic benefits will be presented in Section General contet of the country Viet Nam is relatively rich in renewable energy (RE) resources. Those suitable for electricity generation include small hydro, solar, wind and biomass (including biogas). The potential for small hydropower resources (with a capacity of less than 30 MW per site) is estimated to be about 7000 MW, and power from biomass at over 2000 MW 6. Wind is relatively abundant, with a potential capacity of over 24,000 MW (at speeds over 6 m/s). Viet Nam s final energy consumption increased at 4.9 per cent per year or 2.6 times from 16.0 Mtoe (megatonne of oil equivalent) in 1990 to 41.8 Mtoe in Between 1990 and 2010, electricity consumption grew rapidly, at an annual growth rate of 14.1 per cent, followed by coal (10.6 per cent) and oil products (9.8 per cent). To meet such rapidly increasing demand, the Government of Viet Nam has decided to promote the use of renewable energy sources through the National Energy Development Strategy up to 2020 with an outlook to 2050, which the Prime Minister approved in December It has set national targets for renewable energy development by achieving an RE share of of 3 per cent in the total primary commercial energy supply in 2010, 5 per cent in 2020, 8 per cent in 2025 and 11 per cent in In July 2011, the prime minister issued Decision 1208/2011/QD-TTg 8 to approve the National Power Development Plan (PDP) VII, which set the goal of increasing the share of renewable energy power to 4.5 per cent of total power generation by 2020 and to 6 per cent by Beyond an energy development program, environmental and climate change are also issues about which the Viet Nam Government is concerned. Viet Nam ratified the United Nations Framework Convention on Climate Change (UNFCCC) in 1994 and the Kyoto Protocol in Although Viet Nam is not obligated to reduce greenhouse gase (GHG) emissions for the UNFCCC, it has issued a number of directives and decisions for mitigation actions. In 2003, the Government adopted the National Environmental Protection Strategy (until 2010) and Orientation (until 2020) to promote clean technologies, cleaner production processes, pollution reduction,, environmentally friendly fuels and materials. 6 IE (2011) Power Development Plan for the Period with Perspective to Prime Minister s Decision No. 1855/QD-TTg on approving a national energy development strategy 2020 with an outlook to Decision No. 1208/2011/QD-TTg issued on July 21, 2011, to approve the National Power Development Plan for the period with a vision to 2030 (in Viet Namese)

14 In 2004, the Government passed the Viet Nam Sustainable Development Orientation (Viet Nam s Agenda 21), which identifies priorities in social and economic sectors, natural resource uses, environmental protection and pollution control for national sustainable development. In 2008, the Government of Viet Nam approved the National Target Program to Respond to Climate Change. The goal is to develop feasible action plans to effectively respond to climate change, in the short and long term, to ensure the country s sustainable development and make use of low-carbon economic growth opportunities. In 2011, the prime minister signed Decision 2139/QD-TTg 9 to approve the National Climate Change Strategy. Its objectives are to carry out measures on adaptation and GHG emissions reduction, to safeguard people s life and properties, to ensure sustainable development goals and to join forces with the international community to protect the global climate system. In 2012, the prime minister signed Decision 1775/QD-TTg 10 to approve a project of greenhouse gas emissions management and management of carbon credit business activities to the world market. This project set concrete actions on GHG mitigation with the target of reducing GHG energy emissions by 8 per cent in 2020 compared to Table 4. GHG emission reduction targets in Green Growth Strategy Phase Emissions reduction targets Period Reduce the intensity of GHG emissions by 8-10% as compared to the 2010 level Reduce GHG emissions from energy activities by 10% to 20% from the status quo (10% voluntary reduction and 10% reduction with additional international support) Orientation towards 2030 Reduce annual GHG emissions by at least 1.5-2% Reduce GHG emissions in energy activities by 20% to 30% compared to the status quo (20% voluntary reduction and 10% reduction with additional international support) Orientation towards 2050 Reduce GHG emissions by 1.5-2% per year In September 2012, the Prime Minister approved the National Green Growth Strategy to ensure fast, efficient and sustainable growth while making a significant contribution to the implementation of the national climate change strategy with the concrete goals of 10 per cent to 20 per cent GHG emissions reduction by 2020 and 20 per cent to 30 per cent GHG emissions reduction by 2030 from energy activities, compared to the status quo 11. Table 5. GHG emission reduction target by sectors in Decision 1775 Sectors GHG emission reduction targets Energy and transportation 8% Agriculture 20% LULUCF 20% Waste 5% 9 Prime Minister s Decision No. 2139/QD-TTg on approving the National Climate Change Strategy 10 Prime Minister s Decision No. 1775/QD-TTg on approving project of greenhouse gas emission management; management of carbon credit business activities to the world market 11 Prime Minister s Decision No. 1393/QD-TTg on approving National Green Growth Strategy

15 3.2 Current situation in the wind power generation sector and relevant eisting legal documents 3.3 Eisting wind farms The total installed capacity of wind power as of February 2011 was approimately 19 MW. But by the end of 2014, up to 135 MW has been installed and connected to the grid with three projects. The first one is the Binh Thuan wind farm financed by Renewable Energy (REVN). It includes 20 turbines connected to the grid with a capacity of 1.5 MW for each turbine and a total capacity of 30 MW. The second one is the Bac Lieu wind farm financed by Cong Ly Ltd. It includes 62 turbines with a total capacity of 99 MW. Bac Lieu wind farm is currently Viet Nam s largest. The third is the Phu Quy wind farm financed by Petro Viet Nam with just three turbines. This wind farm s capacity is 6 MW. In addition, a number of small wind off-grid turbines, such as one with a capacity of 800 kw, was installed on the island of Bach Long Vi. The Government-funded project was commissioned in 2004 but had to cease production due to technical problems. A 30 kw wind turbine at Hai Thinh supported by Japan s New Energy and Industrial Technology Development Organization (NEDO) is also out of order due to high trees and surrounding buildings. (See detailed list of eisting wind projects in Anne 3). Household wind turbines (100W-500W) operate better with regular maintenance. Among the companies producing these type of wind turbines is Renewable Energy Centre and Thermal Equipment (RECTERE) under Ho Chi Minh City University of Technology. To date, RECTERE has built and implemented more than 900 turbines, 100 of which were installed in two villages in Khanh Hoa province and about 50 of which were installed in a village of Can Gio district, Ho Chi Minh City. Energy Institute also manufactures small turbines. It has been assigned by the Ministry of Industry and Trade to research, develop and implement wind turbines with a capacity of 150 W to remote areas. So far, it has manufactured and put into use about 30 wind turbines of this type. I 2002, the Institute built and put into operation wind turbines with capacity of 3.2 kw. Beside the wind power plant in Binh Thuan, there are many other wind power projects being implemented in different stages. In Ninh Thuan, there are currently nine investors, both domestic and foreign, that have registered more than 1,000 MW of wind power. In Binh Thuan, the investment situation is even more eciting, with 10 investors registered for 1,541 MW of wind power (Anne 6). In total, there are 48 wind power projects with a total capacity of 4,876 MW being implemented at various stages. The average size of those projects is 95 MW, 38 per cent of those have capacities within 50 and 100 MW while 26 per cent have capacities over 100 MW. One-third of the projects are being eecuted with the participation of foreign investors, which represents a total installed capacity of 1,366 MW, or 12 of 42 projects. The foreign investors are from Germany, Canada, Switzerland and Argentina. But besides the three projects in Binh Thuan, Bac Lieu and Phu Quy that are already in operation, all the other projects are in the planning stages waiting for specific policy support from the Government. 3.4 Relevant eisting legal, regulatory and institutional framework for implementation of wind farms

16 The Ministry of Industry and Trade (MOIT) was formed after the merger of the Ministry of Industry and the Ministry of Trade. MOIT is in charge of activities related to the energy sector and other industries, in accordance with Decree 189/2007/ND-CP issued by the Prime Minister on 27 December MOIT is responsible for the state management of all energy industries, including electricity, renewable energy, coal, and the oil and gas industry. It is in charge of the formulation of law, policies, development strategies, master plans and annual plans for those sectors, and submits them to the Prime Minister for issue or approval. The ministry is also responsible for directing and supervising the development of the energy sector and reporting its findings to the Prime Minister. Inside MOIT, the General Department of Energy (the new name that was applied to the former Energy Department in December 2011) administers the Viet Nam Electric Power Group (EVN), the Viet Nam National Coal and Mineral Industries Group (Vinacomin) and the Viet Nam Oil and Gas Group (PetroViet Nam, or PVN). The Industrial Safety Techniques and Environment Agency (ISTEA) is responsible for the state management of all programs, plans, projects of the national target program on climate change within the management scope of Ministry of Industry and Trade.. EVN is engaged in the generation, transmission and distribution of electricity for the whole of Viet Nam. EVN is responsible for electricity supply to support economic development and to provide power to meet national consumption needs. EVN also has the key responsibility of ensuring that investments in power generation and network epansion meet the power demand in the economy. Apart from EVN, other companies are also responsible for much of this, supplemented by the Build-Operate-Transfer and independent power producer schemes, run in partnership with private investors. In 2010, over 53 per cent (53,131 GWh) of the power supply system in Viet Nam was owned by companies other than EVN. The Electricity Law outlines the major principles for the establishment of the power market in Viet Nam. The Electricity Regulatory Authority of Viet Nam (ERAV) is to assist the Minister for Industry and Trade in implementing regulatory activities in the electricity sector; to contribute to a market that is safe and stable, and provides a high-quality supply of electricity; to foster the economical and efficient consumption of electricity; and to uphold the equity and transparency of the sector in compliance with the law. 3.5 Apart from that, many other ministries also have responsibilities relating to energy. The Ministry of Planning and Investment sets the Socio-economic Development Strategy and Plan, coordinates the distribution of economy-wide capital investment among projects submitted by ministries and agencies, and distributes foreign direct investment. The Ministry of Finance has jurisdiction over tariffs and taation related to energy activities. The Ministry of National Resources and Environment plays an important role in research and development in energy and environmental protection, including evaluating environmental issues in all kinds of projects at the national level. The Prime Minister approved the National Energy Development Strategy in December The strategy developed the following main targets for achieving a share of renewable energy in the total commercial primary energy supply of 5 per cent in 2025 and 11 per cent in PDP VII, approved in 2011, also set up the goal of renewable energy sources for power generation, with the share of renewable energy power increasing to 4.5 per cent by 2020 and to 6 per cent by Wind energy for power generation was also a prioritized area, with the aim to increase the percentage

17 of output from the currently insignificant level (with capacity of 30MW in 2010) to account for 0.7 per cent of the total power generation output by 2020 and 2.4 per cent by To support renewable energy projects, MOIT issued Decision No.18/2008/QD-BCT 12 in July 2008, regulating the price list of avoided cost tariffs and eamples of power sale contracts applicable to small power plants that use renewable energy. The price list of avoided cost tariffs is set on the basis of the avoidable cost on the national power system when 1 kwh is generated from small power plants to the power distribution grid. The price list of avoided cost tariffs is prepared and publicized every year. In 2011, the avoided cost tariffs averaged 916 VND/ kwh (~ 4.4 cents/ kwh). In 2011, the Prime Minister issued Decision No. 37/2011/QD-TTg 13 on incentives for wind power projects. This makes that EVN shall pay wind power projects 1,614 VND/ kwh (VAT-ecluded, equivalent to 7.8 UScents/ kwh) upon power delivery. This price is subject to change if there is fluctuation in the VND/USD echange rate. The State will provide support of 207 VND/ kwh (equivalent to 1 cent/kwh) to the power price for the power buyer for purchasing all the output from wind power plants through the Viet Nam Environmental Protection Fund. This means the power buyer or in this case, EVN must pay only 6.8 cents/kwh. Moreover, the investors were offered incentives such as preferential treatment in terms of funding, taes and fees. But the supported price of wind power in Viet Nam remains low, and even including incentives does not compensate for the investment and other O&M costs. 3.6 Scope and objectives Objective: The overall objective of this NAMA is to promote wind energy and to contribute to the reduction of GHG emissions in Viet Nam by removing policy, capacity and technology barriers. The specific objectives: Scope To enhance the collaboration and the engagement of relevant ministries to develop wind power To improve the support for investment progress of wind projects The scope of the Program is national. The time frame of the first phase is four years (2016 to 2020,) and the second phase is nine years (2021 to 2030). 4.1 Analysis of barriers There are some barriers to implement the Wind NAMA in Viet Nam. They were identified through domestic research on wind energy, consulting workshops, via interviews with potential investors and, most importantly, through the implementation eperience of eisting wind farms (Binh Thuan, Phu Quy and Bac Lieu). The common barriers are presented in the following table: 12 Decision No. 18/2008/QD-BCT on the price list of avoidable costs and eamples of power sale contracts applicable to small power plants using renewable energy (in Viet Namese) 13 Decision No. 37/2011/QD-TTg on incentives for the development of wind power projects in Viet Nam (in Viet Namese)

18 Table 6. Barriers for the development of wind power in Viet Nam Financial barriers Regulatory, legal and institutional barriers Less cost effective High incremental costs of wind power compared with other traditional investments Longer pay back period (8 to 12 years) and lower rates of return Low FiT (1 cent/kwh). High subsidies for fossil fuels High initial investment cost It is estimated that investment cost for a wind power project ranges between $1,700-$2,000/kW, depending on the technology (China s is cheapest). On average, the investment cost of a wind farm with capacity from 50 to 100 MW would be around $85 million to $170 million. Prices of wind turbines price are affected by the world market and have increased in recent years. Difficult access to financial resources Limited financing is available from international financial institutions and grants depending on the project s feasibility. Local commercial banks are quite small, and a single bank is not able to supply sufficient financing for a wind power project. Most domestic banks lack eperience in assessing and appraising wind power projects. Wind projects are still less cost effective, therefore unattractive to financial institutions. Lack of regulation and clear procedures for planning, installing, connecting and operating wind power generation The wind power project requires a relatively large area for installation, and some land sites planned for wind power development overlap or conflict with land areas reserved for other purposes. Renewable energies involve many authorities, leading to difficulty in coordination. There are insufficient legal and technical documents available to calculate electricity production costs. National and provincial plans, investment procedures, contracts for sale and purchase of electricity have not been completely issued. Inadequate policies and mechanisms to support wind energy Lack of effectively supporting policies and mechanisms Eisting support mechanisms for selling wind power to the public grid does not enable wind energy projects to be developed without additional subsidies.

19 Human capacity Technical infrastructure Financial barriers: Lack of available human and institutional capacity for opening up a market for wind power in Viet Nam There is no intensive branch of learning (discipline) in wind power in universities, colleges and vocational schools. There are some consulting organizations on wind power development, but their capabilities are limited to conducting wind resource assessments and preparing investment reports. PECC3 is a leading consultant in Viet Nam for wind energy development, but only in the operation of wind projects and the development of investment reports. There is a lack of specialized consultants and installers of wind power plants because the market is still small and new. There is a lack of post-installation maintenance and repair services. Lack of reliable information about promising regions and sites for wind power plants Wind measurements have been made for about 20 sites, but it is difficult to guarantee the quality of this data. Data from meteorological stations and the World Bank s wind atlas are not reliable enough. MOIT compiled some of the wind measurement data with the assistance of international donors such as the World Bank, but it is difficult to access to detailed data. No domestic technologies Wind turbines and other related equipment are not available and must be imported. Some have started to manufacture wind towers in Viet Nam, but they are 100% foreign-owned enterprises whose products are for eport. Underdeveloped infrastructure Infrastructure at wind farm locations are backward and limited. A typical eample is the REVN wind power project in Binh Thuan, where it took two months to transport just five wind turbines from the sea port at Phu My to the project location 300 kilometres away. There is a lack of facilities for the transportation and installation of wind turbines. For eample, REVN must hire cranes from Singapore to meet this task. The investment cost of wind power projects has grown in recent years. This is because of the fluctuations of raw material prices that consequently lead to a rise in production costs of wind power equipment (cost of wind turbines represents up to 70% to 80 % of total investment cost). This means that investment rates also increase. Estimated investment cost for a wind power project ranges between $1,700 and $2,000/kW, depending on the technology (again, China s is the cheapest). Currently, the high investment cost of wind power projects and the low price of wind power (1,614 VND/kWh, or approimately 7.8 cents/kwh) make them less attractive for domestic and international wind power investors. Although there are a number of current loans from international financial institutions, they are limited and granted on the basis of the feasibility of wind power projects. Normally, a single large loan must be guaranteed by the Government. Commercial banks in the country are limited in financial capacity, and loans from a single bank may not provide sufficient financing for wind power projects. Moreover, the

20 majority of domestic banks lack eperience in the assessment and evaluation of renewable energy projects. Because there have been no suitable feed-in-tariffs for wind power, it is difficult for investors to assess financial resources from commercial banks. But even if wind power projects are financially feasible, commercial banks in Viet Nam do not have ability to provide sufficient loans for the projects. If capacity of a typical wind power plant is approimately MW, loans will range between $80-$160 million equal to the charter capital of the commercial banks. Therefore, financing might come from international financial institutions like the World Bank (WB), Asian Development Bank (ADB), Bank of Japan International Cooperation (JBIC), the Bank German Reconstruction (KfW) and other international banks. Often, those banks only provide financing to project developers such as EVN and state companies, but in some cases they also provide loans to the private sector. For eample, a current World Bank project to develop renewable energy projects is worth $318 million. A component of this project provides financial support through domestic commercial banks to renewable energy projects with a capacity not eceeding 30 MW. The financing support began in Regulatory, legal and institutional barriers: The policies and mechanisms supporting wind energy are not effective enough. Compared to feed-intariffs for wind power of some countries in the region and around the world, the price of wind power in Viet Nam is still very low, 7.8 cents/kwh compared to 9-20 cents/kwk. The Ministry of Industry and Trade s Decision No 18/2008/QD-BCT issued the avoided cost and the template for power purchase agreement of renewable energy projects with an installed capacity of less than 30 MW, but that doesn t make wind energy projects feasible without additional support. In addition, the Circular No. 58/2008/TTLT-BTC-BTN&MT and the Circular No. 204/2010/TTLT-BTC- BTN&MT, modifying some contents of the Circular No. 58, issued a supporting mechanism but isn t feasible, either in terms of enforcement mechanisms or fund sources for its support. For projects larger than 30 MW, the negotiation of power purchase agreements and electricity prices between project owners and EVN are comple and prolonged. The negotiations between the two sides are also disproportionate because of EVN s monopoly, another obstacle to this process. For eample, the REVN wind power project connected to national grid from September 2009 to January 2011, but it has yet to reach an agreement with EVN on electricity prices. The Ministry of Industry and Trade recently decided to purchase electricity priced at 6 cents/kwh for REVN, and EVN is responsible for the payment. Planning is considered one of the major barriers to the development of the wind power in Viet Nam. National and provincial planning, investment procedures and power-purchase contracts still have not been fully enacted. Cooperation between the competent authorities in the field of wind power is very loose and lacks consistency. According to the Electricity Law, the Ministry of Industry and Trade is responsible for approving national planning on wind power development. Committees of provinces and cities are responsible for local planning on wind power development, which are then submitted for review prior to the approval of the Ministry of Industry and Trade. But national planning for wind power development has not been eecuted so far. Studies of EVN are based on wind data measured at 12 locations over a year-long period, therefore the scale and quality of data aren t suitable for national wind power planning. A typical eample is that a number of wind power projects in Ninh Thuan and Binh Thuan provinces conflict with the planning of mineral resources (titanium). According to Ministry of Natural Resources and Environment regulations, mining of mineral resources is a national priority. Therefore, the regional

21 projects in this area can only be implemented after the etraction of titanium (about years). Awaiting survey results from the Ministry of Natural Resources and Environment might lead to delays in the approval of wind power projects. Because of lack of wind power planning, there is a preference for granting projects to those who first epress interest first come, first served, in other words. Therefore, investors tend to register to hold first, but then tend to delay project implemention. So though the number of projects is increasing, most of them are suspended and were only launched to hold land. Human capacity: The first barrier in terms of human resources is the lack of consultants and epertise in the wind energy sector. An eample of this is the wind turbine in Bach Long Vi Island: Developed by local consultants, it has stopped operation due to lack of skilled personnel, spare parts and maintenance. PECC3 is a leading consultant in Viet Nam for wind energy development but only in the operation of wind projects and the development of investment reports. Technical infrastructure: Infrastructure such as roads, bridges, electrical systems, equipment and transportation in areas with high wind potential is often underdeveloped. Therefore, the transportation of wind energy equipment faces many difficulties. A typical eample is the REVN wind power project in Binh Thuan. It took two months to transport just five wind turbines from the sea port at Phu My to the project location 300 kilometres away. In addition, because there are no suitable cranes to erect wind turbines, the company must hire cranes from Singapore to meet this task. Access to many areas with high wind potential is difficult because of poor infrastructure (roads that are too small, the need to cross residential areas, lack of bridges, to name a few), which makes development of wind projects nearly impossible. Alternatively, investors must undertake etra costs for reinforcing the infrastructure, which leads to a significant increase in overall investment costs. In addition, most wind power equipment must be produced outside Viet Nam. Although there have been a number of international manufacturers located in Viet Nam, such as GE U.S. and South Korea CS Wind Tower, all of their products are eported to the world market. The lack of service providers in equipment replacement, repair, operation and maintenance (O&M) is also an inflationary cost factor in wind project investment. The dependency on foreign eperts means projects take longer and that there are fewer of them to begin with. In general, it is impossible to address all barriers to the development of wind power. Therefore, this NAMA only aims to address the most important ones, related to policy transformation and financial mechanisms. Those barriers are prioritised based on epert judgments and a study by Ventas (2013) called Preparation phase study on new wind power development in Viet Nam, and are shown in the following table:

22 Table 7. Barriers addressed under the NAMA proposal Policy Capacity Finance Major barriers Direct and indirect subsidies to conventional power generation through fossil fuel subsidies Lack of financing mechanisms to secure the availability of funding for the FiT Lack of available human and institutional capacities for opening up a market for wind power in Viet Nam Lack of financial strength of EVN to secure the obligation to connect the wind power plants to the system Lack of financing support to encourage the implementation of wind power 4.2 Proposed measures to be implemented through the program Phase 1 ( ): Setting inter-ministerial dialogue around research based on new and eisting analyses to clarify the overall economic, social and environmental impacts of the current fossil fuel subsidies (FFS) system as well as possibilities for giving these up (MOIT, MONRE, MPI, MOF, MOT, MOC, MARD, SBV); and on the future funding of FiT for eample, through a certain carbon ta, a PSO or by other mechanisms (MOF,MOIT, MPI, SBV) Developing a sustainable price-based support for wind power projects Creating a support service centre for wind power development Providing financial and technical supports for feasibility studies of 48 registered wind power projects Developing a loan system for the deployment of wind power in Viet Nam Phase 2 ( ): Implement new price-based support for wind power projects (new FiT) Operate a support service centre for wind power development Continuously provide financial and technical supports for feasibility studies of new registered wind power projects Operate a loan system for the deployment of wind power in Viet Nam 4.3 Detailed analysis of barriers to inform the design of measures Setting up an inter-ministerial dialogue on the development of wind power: Lessons learned and eperience from developed countries indicate that political will and awareness are initial key requirements to transform a sector. This measure was applied successfully to transform the energy sector in Denmark. An inter-ministerial climate change mitigation commission was established, including ministerial representatives and key eperts. The commission managed a budget for research, and they commissioned a number of studies, all with the purpose to clarify the future challenges, opportunities, possible policy measures and related costs. In the case of Viet Nam, the inter-ministerial dialogue on the development of wind power could be established under the National Committee on Climate Change. The Prime Minister chairs the committee, whose members include representatives from different

23 ministries. Therefore, it can mobilise and engage policy makers and eperts from relevant ministries toward wind power development dialogue. This will improve inter-ministerial collaboration and consensus around research based on new and eisting analyses to clarify the overall economic, social and environmental impacts of the current FFS system as well as possibilities for ending these (MOIT, MONRE, MPI, MOF, SBV). This dialogue may also focus on analysing the eternal costs in a Vietnamese contet, based on actual emissions, impacts and impact costs. This information should feed into the inter-ministerial dialogue (MONRE, MOIT, MOF, MPI), and should contribute to the consideration of future FiT funding for eample, through a certain carbon ta, a Protocol Supporting Organisation (PSO) or by other mechanisms (MOF, MOIT, MPI, SBV). As mentioned above, the eisting policies on investment incentives and price-based support mechanisms are inadequate and ineffective in support of wind power development. This is a primary obstacle to development of wind power in Viet Nam. Setting up a sustainable price-based support mechanism (fit-in-tariff) for investment incentives: A Study of GIZ/MOIT Wind Energy Project, implemented by the Viet Nam Institute of Energy, calculates investment cost options for a wind power project basing on a hypothesis of input parameters (such as assuming a 30 MW project size, average wind speed of 7 m/s, 30 percent equity and 70 per cnet loan with 10 per cent interest rates, the price for CO2 emissions of 1 cents/kwh, etc.) and technology from a number of countries. The results showed that for U.S and European technologies meeting IEC standards (International Electrotechnical Commission), investment costs are estimated at $2,250/kW with levelized costs of about cents/kwh. Meanwhile, with Chinese technology, the investment rate is $1,700/kW with levelized costs of about 8.6 cents/kwh. The project payback period is assumed to be approimately 20 years, and the amortization period is 12 years. So if the emission price is 1 cent/kwh in addition to the price of 7.8 cents/kwh, total wind power cost would be 8.8 cents/kwh. Compared to the levelized cost based on the cheapest wind power technology (8.6 cents/kwh), wind power prices in Viet Nam (8.8 cents/kwh) still pose a feasibility question for wind projects. In terms of the investment rate for wind power projects, the cost of turbines account for about 70 per cent to 80 per cent with the rest of epenses set aside for building foundations, maintaining road, transporting, building turbine towers, setting internal power systems and electrical connection, hiring consultants and a number of other ancillary costs (EWEA, 2009). High investment cost and difficult access to financial resources are also major obstacles. Investment capital for a wind power project is significant (with the capacity of MW, a wind power project needs credit of $80 million to $160 million), so even international financial organizations limit their lending based on project feasibility (a project needs to prove its capital-return capacity) and need for Government guarantees. For domestic commercial banks, these loans aren t feasible because of their low charter capital. Only the state bank is able to provide credit for wind power projects. GIZ/MOIT Wind Energy Project builds options for calculating the cost of wind power distributed to the national grid. Basing on this, the prime minister issued Decision No. 37/2011/QD-TTg on wind power supporting mechanisms. Accordingly, the buyer (EVN) has the responsibility to purchase the entire power production from wind power projects at a price of 1,614 VND/kWh (ecluding VAT, equivalent to 7.8 cents/kwh). Power purchase price will be adjusted according to fluctuations in the echange rate between the dollar and VND. In particular, the Government supports the buyer (EVN) with an amount of 207 VND/kWh (equivalent to 1 cents/kwh) through the Viet Nam Environment Protection Fund. This means EVN only has to pay 6.8 cents/kwh. But when compared with wind power tariffs in other countries, the feed-in-tariff of wind power in Viet Nam is still very low (See Anne 4).

24 A recent study suggests that the Government should still support wind power through the Environmental Protection Fund of Viet Nam. Instead of relying on the state budget, the feed-in-tariff would be charged directly from customer electricity bills (this measure is widely used in a number of countries). This study states that if the level of state subsidies is from 1-4 cents/kwh, households will pay an addition amount of 1,666-6,666 VND/month on their monthly electricity bills. This calculation is based on the total wind power capacity set out in Electricity Planning VII as 1,000 MW in 2020 (Thuy TK, 2011). Setting up a support service centre for wind power development: A lack of consultants, eperts and technical documents also constrains the development of wind power. PECC3 is a leading consultant in Viet Nam for wind energy development, but only in the operation of wind projects and the development of investment reports. Wind power projects in Viet Nam depend primarily on international consultants. In addition, the lack of services providing replacement equipment, repair, operation and maintenance (O&M) for the system necessitates greater investment ependitures for these projects. An eample of this is the wind turbine in Bach Long Vi Island, which was developed by local consultants but stopped operation for lack of skilled personnel, spare parts and maintenance. Therefore, a support service centre for the development of wind power is crucial for both investment and operation progress. This centre acts as a consulting agency to assist investors in developing and submitting project documents, connecting investors with donors and relevant stakeholders, and consulting investors about incentive instruments. Financial subsidies for feasibility studies: Currently, one of the common barriers is a lack of knowledge about wind power technology, their potential benefits and the feasibility of their implementation. Business owners are reluctant to take a first step to evaluate the installation sites and assess the feasibility of projects. To address this at the pre-investment stage, the NAMA will provide grants to undertake feasibility assessments for wind power projects registering under this NAMA. The pre-investment grant would be made available at the very beginning of the programme to help build a pipeline of quality projects for implementation funding. It is epected that the majority of the funds available for the grant would be disbursed in the first three years of operations. Creating a loan system for the deployment of wind power in Viet Nam: the deployment of wind power projects requires a huge amount of capital. It is roughly estimated that the investment cost for 2,000 MW in 2020 and 6,200 MW in 2030 would be around $3.5 billion and $10.5 billion, respectively. During the period from 2011 to 2015, the only commitment to provide credit for wind power projects came from the Eport-Import Bank of the United States (EXIM Bank) and VDB, for a total of $1 billion. For the net periods (from and ), there should be a loan system to channel capital for the development of wind power.

25 5.1 Baseline scenario 5.2 The baseline scenario or Business As Usual Scenario (BAU) was developed for outlining future sectoral energy consumption and GHG emissions, and it assumes that there is no change to government policies as well as absence of NAMA project. The energy demand in BAU for the net 20 years was estimated using bottom-up approach methods with the historical energy data taken from the Energy Balances for Non-OECD Countries compiled by the International Energy Agency (IEA). The socio-economic data such as GDP and industrial GDP used in the modeling work were taken from the World Development Indicators published by the World Bank. Other data such as population and population growth rates were obtained from national sources. The model work involved the estimation of final energy consumption and primary energy requirements. Final energy consumption forecasting was estimated for each sector such as industry, transport and other sectors, including agriculture, residential and commercial. Estimation of the primary energy requirements made use of an accounting model on which the future choice for technology and fuels were based on the programs of the country and the most likely available supply in the future. The following are the basic assumptions for BAU: Socio-economic indicators Growth in energy consumption and GHG emissions is driven by a variety of socio-economic factors, such as population and GDP, that derive from the General Statistics Office (GSO). Crude oil price Future changes in crude oil prices remain highly uncertain. In this study, the crude oil price, as measured by Japan s average import price (current US$), is based on the results forecasted up to 2030 by Japan s Institute of Energy Economics. Changes in technology The thermal efficiency of electricity generation reflects the amount of fuel required to generate a unit of electricity. Thermal efficiency was an eogenous assumption used in this study. Base year 2010 thermal efficiencies by fuel type (coal, gas and oil) were derived from International Energy Agency data. Thermal efficiencies by fuel (coal, gas and oil) in Viet Nam were projected based on forecasting future power plant technologies in USDOE s 2008 Annual Energy Outlook. Thermal efficiency is epected to improve considerably over time in the BAU scenario as more advanced-generation technologies, such as natural gas combined cycle and supercritical coal plants, become available. Electricity generation fuel mi The share of electricity generated at coal-fired power plants is projected to increase considerably, at the epense of other energy types (thermal and hydro). Viet Nam is epected to increase its imports of coal for power generation and electricity, in particular from Lao PDR and China. The use of nuclear energy is assumed to start in 2020 in line with Viet Nam s nuclear power development plan.

26 Renewable energy technologies Currently, Viet Nam still has inadequate policies and mechanisms to support RE technologies. This is the biggest obstacle to development in this field in Viet Nam. Government documents in this area include the Decision by the Minister of Industry and Trade on Regulation on avoided cost electricity tariff and power purchase agreement applied for small hydropower (SHP) plants, and the Decision by the prime minister on Mechanism for supporting wind power development 14. For SHP, almost all the feasible sites for which investors could receive benefits were constructed. Without ajustments, the eisting regulation on avoided cost for SHP is likely not attractive to the investors. The mechanism for supporting wind power regulated that the EVN pay wind power projects 7.8 cents/kwh upon power delivery. But if compared to countries in the region and the world, the supported price of wind power in Viet Nam is still low and not attractive to investors. For the reasons above, the installed electricity generating capacity from renewable energy is assumed to reach 4,300 MW in 2030 with small hydro contributing 4,000 MW, wind 200 MW, and biomass 100 MW. Especially, it was assumed that the installed capacity of wind power plants would increase from 30 MW in 2011 to 100 MW in 2020 and 200 MW in 2030 if the purchased price from wind power was not changed. Other RE technologies such as bio-fuels for transport, biogas and solar energy for residential sector are also considered with penetrative rates based on the past trends. 5.3 Wind NAMA scenario 5.4 Electricity demand in Viet Nam in recent years has increased with at a rate of 14.5 per cent, causing difficulties in development of power generator sources. This trend is forecasted to continue in coming years. Because of high increases in electricity needs, Viet Nam would become an importer of coal for power generation in With more than 3,000 kilometres of coastline and plenty of islands, the total potential of wind energy in Viet Nam is estimated to be as high as 26,700 MW 15 (at speeds of over 6 m/s). This is equal to the total of capacity of thermal power plants using imported coal, which Viet Nam is planning to import. Therefore, the wind NAMA project proposed for replacement of imported coal power is one of the effective solutions aiming to meet the electricity demand while reducing the dependence on energy imports and contributing to the significant reduction of GHG emissions. However, at present installed capacity of wind power is around 135 MW. In the BAU scenario, it is assumed that the installed capacity would increase from 135 MW in 2014 to 200 MW in 2020 and 300 MW in 2030 if the purchased price from wind power was unchanged. For the NAMA scenario, it is planned that the total installed capacity will increase to 1,000 MW in 2020 and 6,200 MW in 2030 as planned in PDP VII, when the NAMA measures outlined in section 4.2 are implemented. All the additional power capacity of wind power plants in the NAMA scenario will substitute imported coal to power thermal power plants. 14 Prime Minister of Viet Nam, Decision 37/2011/QD-TTG on approval of Mechanism for supporting wind power development. 15 Ministry of Industry and Trade 2010, Wind resource atlas of Viet Nam. Sponsored by World Bank. Prepared by AWS Truepower. 463 New Karner Road, Albany, New York

27 5.5 Impacts in terms of sustainable development (social, economic and environmental) Wind power, as an alternative to fossil fuels, is being widely distributed without greenhouse gas emissions during operation. Promotion of wind power plants would allow positive and negative impacts on social, economic and environmental aspects. Social impacts: Wind energy benefits society. It is a new source of power to serve societal and economic needs, especially in areas that are far away from the grids such as isolated islands. Moreover, as a clean energy source, wind energy reduces costs associated with air pollution such as health care and environmental costs. In addition, the NAMA can create a new opportunity for job and income improvement. During project implementation, a new market on wind power development would be built up, and a group of technicians and eperts of wind power technology would be also organized and trained, creating new job opportunities and income improvement. Moreover, local infrastructure such as roads and service systems to support the project will also be enhanced, contributing to improvements in the living conditions, jobs and income for local people. Economic impacts: Wind projects keep more economic benefits by creating more jobs and enhancing quality of life in the communities where projects are located. Wind projects also pay significant property taes and state taes each year. Unlike oil, wind energy is local, which is not affected by international conflicts such as supply problems or price shocks. Using wind power generation will reduce fossil fuel use, reducing dependence on international markets and ensuring energy security. The annual amount of primary energy requirement under the NAMA scenario is less than under the BAU pathway. In addition, the NAMA will also reduce annual amount of energy import. The results of calculation showed that the NAMA scenario can reduce thousand tonnes of equivalent (TOE) of imported coal by 2020 and 2,011.4 thousand TOE of imported coal by Therefore, the eploitation and use of wind power plants will reduce dependence on imported coal as well as the effects of price and supply volatility from outside. Environmental impacts: The major environmental benefits of wind energy result from displacing electricity generation from coal thermal power plants, as the operation of wind turbines does not directly emit GHGs or other air pollutants. Similarly, unlike some other generation sources, wind energy requires insignificant amounts of water, produces little waste and requires no mining or drilling to obtain its fuel supply. Unlike electricity derived from fossil fuel, wind power is clean technology and emits no air pollution. It has the potential to make a significant contribution to climate change mitigation. Coal thermal power plants are the largest stationary source of air pollution in Viet Nam, emitting millions of tonnes of nitrous oides, carbon dioide and sulphur dioide each year. These pollutants are considered to be the causes of global warming. By implementing the wind NAMA project through replacing generation from coal thermal power plants, wind energy can prevent the total emissions of roughly 5.2 million tonnes of CO2 by 2020 and contribute further to the reduction of 66.6 million tonnes of CO2 by Moreover, wind NAMA will generate benefits not only via reductions in GHG emissions but also via reductions in local air pollution. 16 Calculation result from LEAP model.

28 5.6 Estimation of GHG emissions reduction resulting from implementation of NAMA measures The calculation of potential GHG reduction is based on potential fossil fuel savings from the NAMA scenario compared to the BAU scenario. Methodology: The LEAP model is an accounting system used to develop projections of energy balance tables based on final energy consumption and energy input/output in the transformation sector. Final energy demand forecasting was estimated for each sector such as industry, transport, agriculture, commercial and residential. Final energy demand for the sectors (ecept residential) is forecasted using energy demand equations by energy and sector and future macroeconomic assumptions. To estimate energy demand and the substitution as well as the penetrative levels of renewable energy technologies, the residential energy demand was estimated by using the bottom-up method breaking down energy demand into sub-sector, end uses and technologies. Estimation of the primary energy requirements made use of an accounting model on which the future choice for technology and fuels were based on the programs of the country and the most likely available supply in the future. Based on historical energy data and the above assumptions, final energy demand, input fuel-energy for power generation and primary energy supply for Viet Nam in BAU were developed. GHG emissions in BAU also were considered and calculated for the whole energy system. In addition to the GHG emissions from fuel combustion, this study also looked at the fugitive emissions from energy production activities such as coal mining and oil and natural gas production activities. All the GHG emission calculations were based on the IPCC factors that are available in the LEAP model. GHG emission reductions: Wind power consumes no fuel, so no air pollution is emitted during operation. The substitution of wind power for coal fuel power sources will result in significant GHG emission reductions from coal burning. By development of wind power plants, the NAMA project could reduce yearly GHG emissions of 1,480.6 thousand tonnes in 2020 and contribute further to reduction of 10,125.0 thousand tonnes in 2030 or reduce 5,199.1 thousand tonnes of CO2.e in 2020 and contribute to the reduction of 66,604.7 thousand tonnes of CO2.e in The CO2 emissions reduction most derived from substitution of wind energy for fossil fuels in power generation. Table 8: NAMA vs. BAU: Cumulative CO2.e reduction by fuels up to Natural Gas ,48.8-1, ,358.2 Coal , , ,246.5 Total , , ,604.7

29 Figure 1: NAMA vs. BAU: Cumulative CO2.e reduction by fuels up to Detailed activities to implement the mitigation measures 6.2 As mentioned in Section 4.2 above, the following outputs and activities are selected for the NAMA implementation. Table 9: Overview of NAMA activities Activities Outputs Entity responsible Phase 1 ( ) Setting inter-ministerial dialogue A board or committee on wind power development DMHCC (MONRE) Developing a sustainable price-based support for wind power projects New FiT scheme GDOE, IE (MOIT) Creating a support service centre for wind power development A support service centre for wind power development International donors Providing financial and technical supports for 48 registered wind power projects by International feasibility studies Setting up a loan system for investors Phase 2 ( ) Implement new price-based support for wind power projects (new FiT) Operating a support service centre for wind power development Continuously providing financial and technical supports for feasibility studies of new registered wind power projects 2012 A commitment between VDB and international financial institution on credit for wind power development. Mobilizing and disbursing around $3 billion to meet the target on wind power development by 2020 A support service centre for wind power development New registered wind power projects since 2013 Implementing a loan system Mobilizing and disbursing around $7 billion to meet target on wind power development by 2030 donors MOF, MPI, SBV, VDB VEPF International donors International donors VDB

30 Activities under this NAMA will be implemented in two phases with main content such as setting and implementing inter-ministerial dialogue; developing and implementing a sustainable price-based support for wind power projects; setting up and operating a support service centre for wind power development; providing financial and technical supports for feasibility studies; and creating and implementing a loan system for investors. Phase 1 ( ) is more focused on developing activities that could be fundamental for the wider development of wind power in the net period ( ). In particular, an inter-ministerial dialogue will be established in the first two years ( ) and operated up to Members of this dialogue might include eperts and policy makers from relevant ministries, agencies or include members from the inter-ministerial steering committee. The number of representatives may be around 20 to 30, and they will meet three to four times per year to work and discuss issues such as phasing out fossil fuel subsidises, carbon taes, FiT for renewable energy or the wind energy development plan. This dialogue will conduct annual reports on above-mentioned issues to disseminate the dialogue s results and to trigger the changes in wind energy policy. Another activity to be implemented in this period is the development of a sustainable price-based support for wind power projects. A detailed research and roadmap to apply a new FiT for wind energy will be conducted by an inter-ministerial working group. These activities might take three years. A new FiT is epected to attract more private investors participating in the development of wind energy. A third activity in this first phase is to set up a support service centre for wind power development. This activity will start a little bit later than others ( ). The support centre will function as legal and technical consultants for private investors. It will facilitate the investment in wind energy by providing necessary information (wind potential, suitable locations, opportunity for receiving supports), guidance on legal and institutional issues and also technical consulting services. The net activity is to provide financing support for feasibility studies on wind energy. This is a financing incentive to encourage the investment in the wind energy sector. Financing resources will be channelled through VEPF. Each project may receive $100,000 for its feasibility study. This activity can start immediately from The last activity in this phase is the development of a loan system and budget for wind energy projects. This activity aims to mobilise a fund up to $3 billion from international financing intuitions for the construction of wind farms in the period This fund will be managed and channelled through VDB, which already has eperience in funding wind power projects. Phase 2 ( ) represents the epansion of activities in phase 1. The new FiT for wind energy will continue to be implemented in this phase. Funding for this will be provided by VEPF. The support service centre will be operated starting in During this period, new wind energy projects registered under this NAMA will continue receiving financial support for feasibility studies. Additionally, the loan budget for constructing wind farms in this period could be $7 billion to meet the target on wind energy development by Risk analysis of NAMA action plan The implementation of wind NAMA may face risks that would affect outcomes for sustainable development and GHG emission reductions calculated in the NAMA scenarios. Policy risks: FiT for wind power is 1 cent/kwh and is funded through the environmental protection fund. This is a limited financial resource that is also disbursed for other environmental activities. Because the number of wind power projects may increase in the future, this fund would not have the ability to pay the FiT.

31 If the government continues to indirectly support fossil fuels through concessional loans and ta incentives, the competitiveness of renewable energy will be weaker than that of traditional energy. The government has no policy or specific roadmap to completely eliminate fossil fuel subsidies and to apply environmental costs for fossil fuels. Financial risks: High inflation can increase investment costs and reduce economic efficiency of wind power projects. Rising interest rates can decrease the efficiency of wind power projects. 6.4 Implementation arrangements roles and responsibilities of different entities and stakeholders involved in NAMA implementation Building and strengthening organisational systems for the management of the program; regulations on the functions, tasks, decentralised management, coordination mechanisms and monitoring and evaluation of the program implementation. Conference of donors Steering Committee of the support Program for wind power development in Vietnam National Advisory Board International Advisory Board Eecutive Board The Secretariat Implementing agencies DMHCC (MONRE) ISTEA, IE (MOIT) MOF, MPI, SBV, VDB International donors GDOE(MOIT) VEPF Figure 2: Institutional arrangement for program implementation The diagram in Figure 4 shows the simple structure of the program management framework. The detailed management and coordination among implementing agencies is not shown in this diagram but is described in the guidelines for program implementation management. An operating mechanism will be shown in detail in the Guidelines, which includes management tools, including a Planning and Reporting System, a Management Information System (MIS), a Monitoring Evaluation System (M&E), a Quality Assurance System (QA) and a Financial Management System.

32 - Inter-ministerial Steering Committee: Members of an Inter-ministerial Steering Committee on Support Programs for Wind Power Development in Viet Nam (called the National Steering Committee) include: Vice Prime Minister: Head; Minister of Industry and Trade: Deputy Head; Minister of Natural Resources and Environment: Deputy Head; members are the Minister of Planning and Investment and the Minister of Finance. The steering committee has the following mandates: Proposing changes in policy and wind energy and related legal documents, guiding and directing the implementation of a support program for wind power development in Viet Nam Organizing and directing research and suggestions for the Government on all policies, major projects and issues important to promoting the development of wind energy in Viet Nam Directing the synthesis, analysis and evaluation of the program implementation and indicators according to annual and five-year plans. - Eecutive Board: Minister of Industry and Trade submits proposal on members and operation regulations of Eecutive Board for Prime Minister s approval. Members of the Eecutive Board include Minister of Industry and Trade: Head; Vice Minister of Natural Resources and Environment: Deputy head; Vice Minister of Finance and Vice Minister of Planning and Investment: members. The Eecutive board is a standing body of the Inter-ministerial Steering Committee, with major functions and duties as follows: Organize, guide and direct the implementation of the program Manage and propose the allocation of program funding Organize and coordinate cross-cutting issues related to wind energy development and direct the deployment of inter-ministerial projects Direct the monitoring, supervision and evaluation of program performance Direct education and awareness raising on wind energy. Develop and coordinate the communication channels on wind energy Synthesize periodic reports (quarterly and annual) on the implementation of the program with the relevant authorities - The Secretariat: The functions and duties of the Secretariat Board are assigned by the Minister of Industry and Trade. Staffs of the Secretariat include full-time staff on the payroll of the Ministry of Industry and Trade and part-time officers under agreements. Contract staff are recruited according to task demands. - International Advisory Board: Annual Conference of Donors for Viet Nam Government will act as an advisory body for the Interministerial Steering Committee to mobilise and coordinate international support for activities related to the program.

33 The conference of sponsors appoints an International Advisory Board, which assists the Eecutive Board to manage and direct the implementation of the program. The structure and tasks of the International Advisory Board will be decided by the conference of donors with the consent of Viet Nam. Funding for the operation of the International Advisory Board will be provided by donors. A number of implementing agencies may have consultants under the agreement with Viet Nam. - Implementing agencies The Department of Meteorology, Hydrology and Climate Change (MONRE), which is responsible for the state management of meteorology, hydrology and climate change, will be the domestic registering agency for the wind NAMA program. The NAMA implementation coordinator is the Industrial Safety Techniques and Environment Agency (ISTEA), which is responsible for the state management of all programs, plans and projects of NAMA within the management scope of the Ministry of Industry and Trade. The Institute of Energy and the Ministry of Industry and Trade are the agencies responsible for researching the science-technology and master plan of energy and electricity development. They will be support agencies in the coordination of the NAMA implementation. The General Department of Energy (GDOE), which is responsible for MOIT in the state management of all energy industries, including electricity and renewable energy, is in charge of the formulation of law, policies, development strategies, master plans and annual plans for the energy sector. It will be involved in policy development activities in cooperation with the Ministry of Finance (MOF) and EVN. Viet Nam Environmental Protection Fund is an agency responsible for providing FiT to investors. The Ministry of Industry and Trade, the Ministry of Finance, the Ministry of Planning and Investment, the State Bank of Viet Nam and Viet Nam Development Bank are key stakeholders involved in the development of a new FiT scheme.

34 6.5 Work plan for detailed activities Table 10. Work plan Activities Phase 1 ( ) Setting inter-ministerial dialogue Developing a sustainable pricebased support for wind power projects Setting up a support service centre for wind power development Providing financial and technical supports for feasibility studies Creating a loan system for investors Phase 2 ( ) Implement new price-based support for wind power projects (new FiT) Operate a support service centre for wind power development Continuously provide financial and technical supports for feasibility studies of new registered wind power projects Operate a loan system Coordin ator MOIT (GDOE) MOIT (GDOE) MOIT (ISTEA, IE) Donors VDB VEPF MOIT Donor VDB Phase 1 ( ) Phase 2 ( )

35 Measurement, Reporting and Verification (MRV) is important to ensure transparency of support provided to NAMA activities as well as impacts of the NAMA on GHG mitigation and sustainable development benefits. MRV will be built based on the national inventory system and the eisting MRV of CDM projects in Viet Nam. Measurement enables assessment of the implementation of action plans, the achievement of objectives and the need for corrective steps that may be required. Reporting and verification ensure communication of consistent and reliable information to appropriate authorities in order to facilitate assessment. The subjects to MRV include the implementation progress of the NAMA, the impacts of the NAMA and the support received for the NAMA in Viet Nam. Therefore, a MRV framework should be set up to define indicators to monitor the implementation progress of the mitigation actions, outputs and outcomes and those impacts on GHG mitigation and sustainable development Measurement boundary and scale The measurement boundary contains all activities and outcomes related to wind NAMA, which can be measured, reported and verified, including: Policy support for wind power development Capacity building activities Financial sponsors received for NAMA activities Wind power projects invested in and operated during NAMA s implementation Outputs, outcomes and impacts of the NAMA project MRV will be implemented at three levels: the activity and project level, where all activities and new investments during NAMA project implementation take place; the sector level, where all activity and project data are aggregated for reporting and verifying; the national and international level, where reports on GHG mitigation are compiled and related to donors, etc. The boundary and scale of wind NAMA is illustrated in the following figure:

36 Indicator Indicator Indicator Activities Outputs Outcomes Impacts - Policy supports - Technical supports - Capacity building - Financial sponsors for NAMA s activities Power generation output (kwh) NAMA vs.bau Project boundary GHG reduction Mitigation capacity improvement Sustainable development benefits Domestic mitigation registry UNFCCC registry Reporting to donors/other Activity & project level Sector level National and Int. level 7.2. Indicators Figure 3: Boundary and Scale of Wind NAMA Indicators are quantitative or qualitative variables associated to a target that refers to a qualitative value or quantitative value. Measurement means assessing the value of the indicator after a certain time frame, which thus serves as a standard for measuring, reporting and verifying the attainment of the outcomes. Indicators should be formulated in a SMART manner (Specific, Measurable, Achievable, Relevant and Timely) to ensure their appropriateness in showing whether an outcome has been achieved (De Vit at al., 2012). There are two primary measurement indicators: progress of implementation and results achieved, including estimated GHG impacts Progress indicators Progress indicators will be used to measure the outputs and outcomes of progress of the NAMA implementation related to activities for policy development, technical development and capacity building. The table below provides the progress indicators for evaluating the NAMA implementation:

37 Table 11: Progress indicators to evaluate the progress of the NAMA implementation Activity Phase 1: Setting up inter-ministerial dialogue Developing a sustainable pricebased support for wind power projects Investment incentive through FiT Establishment of a support service centre Providing financial and technical supports for feasibility studies Setting up a loan system for investors Phase 2: Implement new price-based support for wind power projects (new FiT) Operating a support service centre for wind power development Continuously providing financial and technical supports for feasibility studies of new registered wind power projects Operating loan system projects Progress indicators Outputs Outcomes Number of meetings of interministerial board A new FiT scheme Number of projects applying for FiT in the period ( ) The completion of a support service centre with adequate resources for the operation Number of feasibility studies financed Amount of budget disbursed in the period Number of projects applying for FIT in the period ( ) A support service centre with adequate resources for the operation Number of feasibility studies financed Amount of budget disbursed in the period Solutions and consensus on new FiT A new FiT is implemented Reduction in cost of wind power generation The operation of a support service centre Number of studies invested Number of wind projects financed by VDB Reduction in cost of wind power generation Number of wind power projects supported Number of studies invested Number of wind project financed by VDB Data collection Annual data collection through DMHCC report Information provided by GDOE (MOIT) VEPF Information provided by this centre Quarterly data collection through VEPF Annual data collection through VDB VEPF Annual data collection on number of wind power projects supported through this centre Quarterly data collection through VEPF Annual data collection through VDB

38 7.4. Impact indicators at NAMA activity and project levels Implementation of NAMA activities will result in outcomes and impacts on GHG emission reduction and national sustainable development. Therefore, MRV should estimate impacts on GHG emissions, and also monitor those sustainable development indicators. The following table shows the impact indicators, baseline setting and data collection. The impact indicators could be quantitative or qualitative to measure the changes after NAMA implementation compared to the baseline scenario or the absence of wind NAMA. Target values for the indicators will be set in the net section. Table 12: Impact indicators to evaluate the impacts of the NAMA implementation Impact dimension Outcome Indicator Baseline setting Sustainable development goal Data collection GHG emission reduction Reduce 5.2 Mt CO 2e.q by 2020 at reduction cost of $40.1/CO 2e.q * MW wind power capacity installed under NAMA * MWh output from wind power * TCO 2e.q reduced under NAMA * MWh output from wind power in the absence of NAMA * Emission factor per kwh * MWh output from wind power in the eistence of NAMA * Emission factor per kwh Annual data collection at EVN on: * Power production output * Fuel consumption for power generation Sustainable developmen t benefits Reduce air pollution and health care costs * Air pollution at sites of wind power plants and health care costs Pollution emissions concentrated at sites of fossil fuel power plants and health care costs Pollution emissions concentrated at sites of wind power plants and health care costs Data collection on air pollution and health care costs from local management authorities and hospitals Create job and new services Number of new companies and their employees Eisting number of companies and employees Number of new companies and their employees Data collection on number of companies and employees from business register units. Increase the property taes and state taes from wind projects Payment of property taes and state taes Payment of property taes and state taes in the absence of NAMA Payment of property taes and state taes in the eistence of NAMA Data collection on annual payment of property taes and state taes. Ensure energy security Increasing rate of indigenous supply or The share (%) of total energy The share (%) of total energy Annual collection of input energy

39 the share (%) of total energy supply from wind power plants supply from wind power plants in absence of NAMA supply from wind power plants in the eistence of NAMA consumption for power generation from EVN Stakeholder capacity improvement through education and training Number of training programs, workshops, site visits Number of training programs, workshops, site visits in absence of NAMA Number of training programs, workshops, site visits in the eistence of NAMA Data collection from General Department of Energy (GDOE), EVN and Project Owners Technical infrastructure development through NAMA project * Data on wind energy potential * Rate of products domestically Data on wind energy potential and the rate of products domestically in absence of NAMA Data on wind energy potential and the rate of products domestically in the eistence of NAMA Data collection from GDOE, EVN and Project Owners 7.5 Monitoring and reporting plan The monitoring and reporting plan is set up based on the indicators for measuring the outputs and impacts of NAMA implementation. The indicators are quantitative or qualitative variables associated to the targets that were defined by the NAMA proposal. All the indicators will be measured and compared to baseline scenario to define the impacts of NAMA. Baseline scenario In most cases, NAMAs will have impacts beyond emissions reduction. To quantify the impact of the NAMA, a corresponding baseline scenario (or BAU) must be established for all those parameters for which an impact assessment is desired. The BAU scenario is one in which these parameters, including GHG emissions, continue as they would in the absence of the NAMA. In this wind NAMA, electricity demand and GHG emissions modelling are carried out in order to understand, plan and devise strategies based on analyses of wind energy source potential, balancing of energy demand, mapping of alternative energy solutions, etc. Based on the outcome of such an energy model, it is possible to estimate the emission-level trajectories for different development scenarios (BAU and Wind NAMA) at the country level. Firstly, the BAU scenario is projected based on historical energy data and assumptions on GDP and population projections, and trends changing in technology with assumptions that there are no additional policies. As these assumptions change, the BAU should be adjusted accordingly to facilitate more accurate measurements.

40 Following the BAU, the wind NAMA scenario is set up with assumptions that there will be more additional policies. These policies will impact changes such as additional installed capacity (MW), output (MWh) and reduction of GHGs compared to BAU (see Table 14). For the quantitative indicators such as GHG emissions reduction, the NAMA program will provide the method and national power emission factors to calculate the wind power generation output and GHG emissions reduction by each year. Target values The target values were defined by each year based on activities and outputs of the NAMA program for monitoring any annual changes compared to the baseline. The preliminary targets were also estimated for the qualitative indicators, through qualitative values (for eample, the number of new companies and their employees may increase by 10 per cent compared to the eisting number of BAU in the first year). These targets would be adjusted during implementation. Data collection and reporting Data collection and reporting is an important part of MRV and will be governed by the requirements of financiers, domestic policy makers and international reporting requirements. There are three key elements of data collection and reporting: frequency of collection and reporting, data collection instruments and responsibility for data collection. Frequency collection and reporting: Collection and reporting should be implemented regularly as required by the regulations of MRV, which are developed in the initial phase of the NAMA program. Some adjustments could be made during the implementation process to enhance the effectiveness of the NAMA implementation. GDOE will be the collection point for receiving and storing data and preparing the reports by requirement of the financiers, domestic policy makers and international reporting guidelines. IE will be in charge of designing content and format of questionnaires and making reports. Data collection instruments: Data collection instruments could be questionnaires, annual records and statistical data from investors, banks and management units. Responsibility for data collection: GDOE will be responsible for content preparation on gathering data and information and contact with related stakeholders such as EVN and project owners for data provision. IE will be responsible for data collection and processing. The monitoring and reporting plan is summarised in Table 13:

41 Table 13. Monitoring and reporting plan at NAMA activity and project levels Impacts Indicators (GHG reduction) Target Values Baseline YR1 YR2 YR3 YR4 YR5 Frequency and Reports Data Collection and Reporting Data Collection Instruments Responsibility for Data Collection MW wind power capacity installed under NAMA BAU (MW) BAU+150 BAU+300 BAU+450 BAU+600 BAU+750 MWh output from wind power BAU (Mill.kWh) BAU BAU BAU BAU BAU TCO 2e.q reduced under NAMA * Air pollution at sites of wind power plants and healthcare costs Number of new companies and their employees. Payment of property taes and state taes. Increasing rate of indigenous supply BAU (10 3 T. CO2.e) Local air pollution and particulates at sites of fossil fuel power plants and healthcare costs Eisting number of companies and employees. Eisting payment of property taes and state taes. BAU (10 3 TOE) BAU BAU BAU BAU -991 BAU Satisfaction level of local people at sites of wind power plants increasing compared to sites of fossil fuel power plants. BAU+10% BAU+15% BAU+20% BAU+25% BAU+30% BAU+10% BAU+15% BAU+20% BAU+25% BAU+30% BAU BAU+50.6 BAU+76.1 BAU BAU+128 Quarterly reporting Quarterly reporting Reporting regularly Reporting regularly Reporting regularly Reporting regularly Reporting regularly Records Records Records Records on healthcare costs from sites of fossil fuel power plants Records from local authorities Records from Provincial Ta Department Records from wind power production Owners of investment projects GDOE, EVN and Project Owners GDOE, EVN and IE. GDOE and IE GDOE and business register units. GDOE and General Department of Taation GDOE and EVN

42 Number of training programs, workshop, site visits Data on wind energy potential Rate of products domestically Eisting training programs, workshop, site visits (BAU) Eisting data on wind energy potential Eisting rate of products domestically (BAU) BAU+2 BAU+5 BAU+10 BAU+15 BAU+20 The data are annually updated to meet the requirement of investment study reports BAU+2% BAU+5% BAU+10% BAU+15% BAU+20% Reporting regularly Reporting regularly Reporting regularly Records Records Records GDOE GDOE GDOE Progress Indicators Number of feasibility studies financed Number of wind project invested Number of wind project registered for investment Appropriate sites for investment specified and provided to investors BAU (No. Studies) BAU (No. Projects) BAU (No. Projects) BAU (Lack of information system) BAU+5 BAU+10 BAU+15 BAU+20 BAU+25 BAU+2 BAU+4 BAU+6 BAU+8 BAU+10 BAU+10 BAU+15 BAU+20 BAU+30 BAU+40 Information system formed and satisfaction level of investor to the information provision system increasing by each year Reporting regularly Reporting regularly Reporting regularly Annual report Records Records Records Records GDOE GDOE GDOE GDOE

43 7.5. Verification process Verification refers to the process of independently checking the accuracy and reliability of information reported as well as the procedures of data collection and processing. The scope of verification will cover all activities of NAMA, from initial planning to activities implemented, indicators measured, outputs, outcomes and those impacts. The verification process includes the desk review of the reports, site visits for specific wind power projects and interviews with stakeholders involved in the implementation of the NAMA, including the independent research, statistical data, etc. The project management unit is required to provide all necessary conditions to support such as relevant information, eternal data and a list of stakeholders. Moreover, calculation tools and ecel sheets could also be used for checking the accuracy of calculations, especially power generation outputs, GHG emissions factors and GHG emissions reduction. The verification process may consist of internal verification and eternal verification depending on activities and outputs. Internal verification will be implemented by domestic consultant organisations involved in the NAMA project. Internal verification should be carried out regularly to ensure that data collection and NAMA activities are implemented properly. Third-party verification by international consultants may be required for eternal verification on specific activities as required by sponsors. In this case, the details of the verification process are to be agreed with the donors. This ensures the effective use of funds, the transparency of the activities being undertaken as well as their impacts Infrastructure The investment in infrastructure is important for the deployment of wind power projects. Currently, infrastructure (roads, bridges, electrical systems, equipment and transportation) in areas having high wind potential is backward. Transportation therefore faces many difficulties. A typical eample is the REVN wind power project in Binh Thuan, where it took two months to transport just five wind turbines from the Phu My sea port, a distance of 300 kilometres. In addition, the company must hire cranes from Singapore. It took more than 18 months for the Bac Lieu wind power plant to complete the 10 turbines for the first stage. Five months after the completion of installation, the turbines could not operate because they were waiting to be connected to the national grid. According to the investor, it wasn t until April 2013 that those turbines could begin operation. Currently, it would better to design roads to facilitate the transportation of large equipment and cranes (500 tonnes or more). EVN is responsible for the national grid connection and for buying electricity from wind power investors. Particularly, EVN must purchase electricity from wind power investors at the price of 6.8 cents/kwh.

44 Access to many areas with high wind potential is difficult due to poor infrastructure (roads that are too small, crossing residential areas, lack of bridges), which makes the development of wind projects impossible. Alternatively, investor must undertake etra costs for reinforcing the infrastructure, which leads to a significant increase in overall investment costs. To improve this situation, wind power investors are supported with the feed-in-tariff of 1 cent/kwk from the Environmental Protection Fund in Viet Nam. This feed-in-tariff is applied for the project life of 20 years. Furthermore, wind power projects are eempted from land use fees. In addition, wind power equipment is not produced domestically. Although there have been a number of international manufacturers (GE U.S., South Korea CS Wind Tower), all of their products are eported to the world market. The lack of service providers and equipment replacement, repair and operation and maintenance (O&M) systems is also a cause of the increase in investment costs. Being dependent on foreign eperts entails implementation delays, limiting the number of projects. International wind turbine equipment is not suitable for the climate in Viet Nam, is unstable for operation, and time consuming for calibration and replacement. Therefore, there is a need to increase supports for the production of wind power equipment in Viet Nam, thereby reducing the dependence of wind power projects on foreign technology. According to Decision No. 37/2011/QD-TTg of the Prime Minister, wind power projects are eempted from import duties, are ta free in their first four years, and are subject to a 50 per cent ta reduction over the net nine years. Wind projects may borrow from government development funds with preferential interest rates and up to a maimum of 80 per cent of total investment Capacity building The first need for capacity building is to strengthen consultant epertise and human epertise in wind energy. Wind turbines in Bach Long Vi Island were developed with local consultants but have stopped operating due to lack of skilled personnel, spare parts and maintenance. PECC3 is a leading consultant in Viet Nam for wind energy development, but only in operating, assessing wind potential and making investment reports. In Binh Thuan, the most difficult issues for wind power development are in training and education of human resources. Many projects still have to hire foreign eperts. In particular, there have been no training or education programs for technical staff in the wind power sector. On 11 May 2013, the General Electric Group (GE) and Department of Electricity Regulation and Administration (ERAV) and the Ministry of Trade and Industry of Viet Nam signed consulting contracts for a technical assistance project to build wind power connection regulations and research integration of renewable energy in Viet Nam. The project aims to establish wind power as a stable source of energy in the national grid system. The project uses ODA funding from the U.S. Trade and Development Agency (USTDA) under the financial assistance agreement between the U.S. Government and ERAV. Accordingly, GE will provide technical assistance to the Ministry of Industry and Trade, ERAV in particular, including the necessary requirements to develop specific regulations for connection of wind power successfully. This study will make a concrete assessment of the impact on performance of power system stability, as well as evaluate the reliability of the forecasts of longterm wind power supplies. In addition, GE will also organize training seminars in the field of wind power development.

45 Data from the International Committee of Energy (IEA) and the World Bank (WB) demonstrate that Viet Nam is a country with high wind power potential compared with Thailand, Laos and Cambodia. Approimately 8.6 per cent of Viet Nam s territory is considered either good or very good for building large-scale wind power. But the development of wind power in Viet Nam is still not commensurate with its potential. In 2009, to encourage the development of wind power in Viet Nam, the German company Fuhrländer recruited the first group of Vietnamese engineers for basic training in wind energy engineering theory and practice. The German-Vietnamese team installed the first wind power plant in Viet Nam very efficiently, smoothly and on schedule. To ensure continuous safe operation, the Viet Nam wind power eperts will also undertake maintenance, warranty and repair of wind generators in Viet Nam. But the training programs for these activities is inadequate. In Viet Nam universities, colleges and vocational training centres, there have been no education programs to date in renewable energy in general and wind power in particular. Lecturers and resource people for the wind energy sector are still scarce, which creates a major deficit of human resources in this green sector. And that is a hindrance to the development of wind power in Viet Nam. Initially, Viet Nam needs to develop and integrate a specialized training program in the education system to meet the demand for technical manpower. Financing of NAMAs is of key importance in the planning process and should be considered at the earliest stages of NAMA development. NAMAs tend to be revisions of current policies within current budgets, rather than entirely new undertakings. Therefore, familiarity with the national budget is crucial to the way in which NAMA financing comes together. Current financing lines represent essential information, in part because they illustrate the current priorities of sectors and subsectors, and also because they reveal allocations or priorities that are undesirable in terms of emissions reduction. With budget information in hand, financial structuring of a NAMA becomes much more reliable, which in turn makes the evaluation of financing needs from third parties better informed. Figure 4 provides a look at the overall structure of NAMA financing for wind power development in Viet Nam. The approach is to mobilise both domestic and international capital sources to implement the program according to these general principles: Taking advantage of international capital (grants and soft loans) with the state budget, the state capital and credit and thoroughly mobilising private capital Reasonably using the capital structure, in particular state budget supports and other financial sources Encouraging and creating a favourable environment to attract business investment and private industry

46 International Public Financing Domestic Public Financing GCF Multilateral Bilateral Supporting program for the development of wind power in Vietnam Policy development Technical supports Capacity building Investments Loans FDI Private Sector International Finance Inst. Domestic Finance Inst. Figure 4. Financing structure for the supporting program of wind power development in Viet Nam The total financial support for this NAMA would be approimately $34 million. In particular, the budget for phase 1 is estimated at about $14 million, comprising 41.2 per cent of the project. The budget for phase 2 is estimated at around $20 million, accounting for 59.8 per cent of the project. The contribution from the Government of Viet Nam is about $300,000. The total budget will come from a variety of sources, such as international public financing (bilateral or multilateral), the state budget, international finance institutions (under a number of instruments such as grants and domestic contributions). Detailed NAMA financing is illustrated in Table 14 below. Table 14. Detailed NAMA financing Activities Phase 1 ( ) Setting inter-ministerial dialogue Developing a sustainable price-based support for wind power projects Budget (mil $) Financing Instrument Sources 0.1 Contribution State budget 3 Grant Donors 0.1 Contribution State budget Eplanation For the operation of inter-ministerial board For research on fossil fuel subsidies, FiT for wind power, carbon ta For the operation of policy makers and eperts working on new FiT

47 Setting up a support service centre for wind power development 1 Grant Donors Subsidies Environmental protection fund 0.1 Contribution State budget 5 Grant Donors Providing financial and technical supports for feasibility studies Setting up a loan system for investors 3,000 Loan Phase 2 ( ) Implement new pricebased support for wind power projects (new FiT) Operating a support service centre for wind power development Continuously providing financial and technical supports for feasibility studies of new registered wind power projects Operating a loan system 5 Grant Donors Subsidies International banks Environmental protection fund 10 Grant Donors 10 Grant Donors 7,000 Loan International banks For developing and issuing a new FiT regulation For supporting electricity price from wind power For setting up the support centre For operating the support centre over first phase For feasibility studies of 48 registered projects For the construction of wind power projects in the first phase For supporting electricity price from wind power For operating the support centre over second phase For feasibility studies of future registered projects For the construction of wind power projects in the second phase Although renewable energy is one of the priorities for future development, there are a number of other important fields that require more investment such as infrastructure, production, medical, education, etc. Therefore, government supports that focus on policy development and price support are still limited. But the development of wind energy could result in co-benefits for social, infrastructure, economic and environmental issues, as analysed in Section 5.3. This should be considered as a priority for funding and facilitating the development of wind power. Other domestic finance sources should be involved in this sector to create a more dynamic market. Initial activities needed to be done include the readiness of a favourable legal framework for the development of wind energy, such as supporting mechanisms, registering regulations and supporting industries for the wind power sector. Those are requirements to mobilising other domestic finance sources for later activities. The table below illustrates potential budgets from a number of domestic finance sources for each activity.

48 Table 15. Potential budgets from domestic finance sources Activities State budget (mil $) Setting inter-ministerial dialogue 0.1 Developing a sustainable price-based support for wind power projects 0.1 Setting up a support service centre for wind power development 0.1 The government will also contribute a reasonable amount for almost all activities under the program in order to stimulate other financial sources. In addition, the current price-based support (FiT) is still using budgets from the Viet Nam Environmental Protection Fund. International finance sources are crucial for the development of a wind energy market in Viet Nam. Bilateral or multilateral grants will help to complete a favourable legal framework and to partially contribute to technical and capacity-building activities for wind energy development. Soft loans and FDIs are types of investment that bring a win-win benefit. Those two financing instruments not only assist in the implementation of wind projects but also create opportunities for both international public financing and international finance institutions to invest and transfer technologies into a new and potential renewable energy sector in Viet Nam. The following table shows tentative budgets for activities under the program that come from international sources. Table 16. Potential budgets from international finance sources Activities Setting inter-ministerial dialogue Developing a sustainable price-based support for wind power projects Developing a sustainable price-based support for wind power projects Setting up a support service centre for wind power development Operating a support service centre for wind power development Continuously providing financial and technical supports for feasibility studies of new registered wind power projects International Public Financing (Bilateral or Multilateral) ($ mil) 3 (Grants) 1 (Grants) 5 (Grants) 5 (Grants) 10 (Grants) 10 (Grants) Grants from international finance sources represent around $34 million, which is mainly for policy development and capacity building. It is crucial for the completion of a legal framework for the development of wind energy in Viet Nam as well as for the mobilisation of private investment into the wind power sector. a. Raising capital for the program

49 State budget The program s capital budget is determined according to the program s position in the country s socio-economic development strategy. The program s capital budget needs to integrate and coordinate with other renewable energy projects or programs starting with the evaluation and approval processes. Grants This project must fully eplore international funding sources and other support from many organizations such as the United Nations Development Program (UNDP), Asian Development Bank (ADB), World Bank (WB), The Green Climate Fund (GCF) and bilateral funds from developed countries. b. Capital planning for the program All capital plans shall be presented to the Eecutive Board at the beginning of implementation year, with clear allocation and components of capital funding. The Ministry of Industry and Trade (program management agency) is responsible for the planning of tasks, objectives and funding needs and for proposing solutions for program implementation to the Ministry of Planning and Investment. The Ministry of Finance will incorporate them into the plan for socio-economic development to submit to the Government. The Government will then submit to the Committees of the National Assembly before submitting to the Standing Committee of the National Assembly and the National Assembly under the provisions of the Law on the State Budget. The total program cost is informed by competent authorities. The Ministry of Industry and Trade shall coordinate with the Ministry of Planning and Investment and the Ministry of Finance to estimate the plan for allocation of program funding for implementing agencies in accordance with the objectives and tasks assigned. The Ministry of Industry and Trade aggregates allocation results to the Ministry of Finance, and the Ministry of Planning and Investment will incorporate them into the draft budgets of ministries to submit to the Prime Minister. Then, submissions will be made to the National Assembly in accordance with provisions of the Law on the State Budget.

50 c. Disbursement and payment Figure 5. Capital plan for the wind power NAMA Disbursements for the program will be made through three channels: Disbursement of grants is implemented through the banking system, following the Grant Agreement signed between the Government of Viet Nam and donors. The state budget will be disbursed through the State Treasury system. The payment will be controlled and managed according to the guidelines of the State Budget Law. Implementing agencies directly using the program are responsible for accounting under the chapter, for relevant provisions of the State Budget Inde, for program codes and regulations of the State Budget Law, for the Law on Accounting and documents guiding the implementation of the law. Activities of the program that require procurement of equipment, goods and supplies and information technology services shall comply with the law on procurement. For a number of program activities, signed contracts amd documents as basis for payment and settlement shall be filed at implementing agencies in charge of the activities. Those documents include contracts to perform tasks (together with a tentative budget approved by lead implementing agencies), contract payment records, payment authorisations or payment invoices and other relevant documents. The specific invoices shall be stored by implementing agencies according to current regulations. d. Financial Reporting Regime