STRATEGIES FOR PROMOTION OF ENERGY EFFICIENT AND CLEANER TECHNOLOGIES IN THE POWER SECTOR Synthesis Report Issue 1: Implications of Carbon & Energy Taxes as Instruments for GHG Reduction in the Power Sector Issue 2: Identification of Barriers and Policy and Measures (PAMs) for the Adoption of Clean and Energy Efficient Technologies (CEETs) The Case of Vietnam Institute of Energy July 2005

Issue 1 Issue 1: Implications of Carbon & Energy Taxes as Instruments for GHG Reduction in the Power Sector

Overview of the Power Sector of Vietnam Capacity and Generation Mixes Total Installed power generation capacity (MW) (2003) Total Electricity generation (GWh) (2003) Weighted Av. efficiency of thermal generation (%) (2000) Average annual growth rate (%) Total electricity generation ( ) Thermal electricity generation ( ) 9,14640, Table 1a: Overview of the power sector in Vietnam. The power sectors in Vietnam demonstrated diverse characteristics in terms of electricity generation technologies, fuel use, total electricity generation capacity, load growth & load characteristics of power system. Table 2a: Generation and capacity mix of selected countries in 2003, (%). Installed CapacityGeneration HydroCoalOilGasOtherHydroCoalOilGasOther Source: Institute of Energy (2004) Issue 1

Overview of the Power Sector of Vietnam Environmental Emissions & Status of Renewable Energy Technologies for electricity generation in Power Sector Table 3a: Overview of environmental emission in Vietnam. + Coal based electricity generation accounts for the highest share of CO2 emission from the power sector in Vietnam. + Vietnam has power generation potential from all RE sources. Successful in promotion of small hydropower generation. Source: Institute of Energy (2004) CountryTotal CO 2 emission (Million tons)Share of power sector (%) % increase during Vietnam *26.8*10.3 Renewable optionsPotential (MW) Installed Capacity (MW) gridOff-grid Biomass Wind Solar (kWh/m2/day) Small hydro Geothermal Total 4,750 9, ,400-1, Table 4a: Status of Renewable Energy Technology in electricity generation in Vietnam. Issue 1

Implications of Carbon & Energy Taxes Candidate Supply Side Options Source: Institute of Energy (2004) + Candidate supply side options: 1. Hydro plants 2. Coal & Oil fired power plants 3. High efficient technologies: - Gas turbine combined cycle plants - Pressurized fluidized-bed combustion plants (PFBC) - Integrated gasification combined cycle plants (IGCC) - Supercritical plants 4. Renewable technologies: - Geothermal, Small and mini hydro, - Wind & Solar - Biomass (wood residue, rice husk, bagasse) Issue 1 + No DSM + Carbon tax rates: (5$tC,10$tC, 25$tC,50$tC,100$tC and 200$tC) + Energy tax rates: (0.5$Mbtu, 1$Mbtu,2$Mbtu,5$Mbtu and 10$Mbtu) + Planning horizon: All prices in the study are based on price of Price Elasticity of demand estimated with - 0.3

Key Findings Utility & Environmental Implications Power Generation Capacity Mix at year 2025 (MW) Carbon tax rate ($/tC) Hydro Coal FO+DO Gas Import3000 RETs Total capacity Shares in Power Generation Capacity at year 2025 (%) Carbon tax rate ($/tC) Hydro Coal FO+DO Gas Import RETs Table 5a: Generation capacity mix at selected carbon tax rates in year 2025 Issue 1 Carbon Tax

Key Findings Utility & Environmental Implications Table 6a: Electricity generation mix at selected carbon tax rates during Issue 1 Carbon Tax Electricity Generation (GWh) Carbon tax rate Hydro Coal FO+DO Gas Import RETs Total generation Shares in Electricity Generation (%) Carbon tax rate Hydro Coal FO+DO Gas Import RETs

Key Findings Utility & Environmental Implications Fig1a: Installed generation capacity by fuel types at selected carbon tax rates in 2025 Fig2a:Electricity generation by fuel types during at selected carbon tax rates Issue 1 Carbon Tax

Key Findings Fig3a: Total electricity generation by hydro during at selected carbon tax rates Fig4a:Electricity generation by coal during at selected carbon tax rates Issue 1 Carbon Tax

Key Findings Fig5a: Total electricity generation by gas during at selected carbon tax rates Fig6a: Change in consumption by fossil fuels during at selected carbon tax rates Issue 1 Carbon Tax

Key Findings Fig7a: Effects of carbon tax on power generation technology mix during Fig8a: Generation mix during the planning period at different carbon tax rates Issue 1 Carbon Tax

Key Findings Reduction in Total Capacity Addition due to Carbon Tax (%) Tax ($/tc) Reductions in Total Generation due to Carbon tax (%) Fig9a: Reduction in total capacity addition due to Carbon tax Fig10a: Reduction in total generation due to Carbon tax Issue 1 Carbon Tax

Key Findings Table 7a: Weighted average thermal generation efficiency during the planning horizon at selected carbon tax rates, % Carbon tax rate (US$/tC) Weighted average thermal generation efficiency (%) Energy tax rate (US$/Mbtu) Weighted average LOLP (%) EENS GWh%#%# E Table 8a: Weighted average loss of load probability and cumulative expected energy not served during at various energy tax rates Issue 1 Carbon Tax

Key Findings Table 9a: CO2 and local emissions mitigation potential at different carbon tax rates during the whole planning period Carbon tax rates (US$/tC) Total CO2 emitted (thousand tons) Total CO2 reduction (thousand tons) % reduction Total SO2 emitted (tons) Total SO2 reduction (tons) % reduction Total NOx emitted (tons) Total NOx reduction (tons) % reduction Fig10a: Cumulative CO2 emission reduction (%) during the planning horizon at different selected carbon tax rates Issue 1 Carbon Tax

Key Findings Fig11a: Cumulative SO2 emission emitted during the planning horizon at different selected carbon tax rates Fig12a: Cumulative NOx emission emitted during the planning horizon at different selected carbon tax rates Issue 1 Carbon Tax

Key Findings Fig13a: CO2 emission intensity in term of per unit of electricity generation at different selected carbon tax rates Fig14a: Cumulative CO2 emission reduction (%) during the planning horizon tax at various selected carbon tax rates Issue 1 Carbon Tax

Key Findings Table 11a: The share of supply side effect and demand side effect to the total CO2 mitigation during the planning horizon at selected carbon tax rates, % Carbon tax (US$/tC)Vietnam SSEDSE Note: SSE = CO 2 mitigation due to supply side effect DSE = CO 2 mitigation due to demand side effect Carbon tax range (US$/tC)Carbon elasticity (%) – Table 10a: Carbon tax elasticity of CO2 emission at selected carbon tax rates, % Issue 1 Carbon Tax

Key Findings Cost Implication Table 12a: Average incremental cost (AIC) during at carbon tax rates (US¢/kWh) Issue 1 Carbon Tax Carbon tax (US$/tC) Vietnam Fig15a: Change in discounted expansion cost components for electricity generation expansion during at different selected carbon tax rates, (%)