Viet Nam: Energy Efficiency in the Industry Project

Sovereign Project | 41436-012 Status: Dropped / Terminated

Summary

The proposed project will refurbish and upgrade the production lines of five cement and two steel plants that were identified as high priority under ADB ADTA 7024 based on energy audit and investment grade audit. It is proposed that this loan be provided to the Ministry of Finance (MOF) which would then on-lend the funds to financial intermediaries (FIs) for lending to the cement and steel plants. It is expected that the FIs may also blend in their own resources with the loan resources to expand the reach of the program. Under a European Investment Bank (EIB) loan, $100 million was made available to the MOF, on-lent it to FIs, which used the funds to support small-scale renewable energy projects (EIB funds could only be used for 50% of project costs). This program initiated in 2009 has already disbursed the entire $100 million by 2011.

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Project Name Energy Efficiency in the Industry Project
Project Number 41436-012
Country Viet Nam
Project Status Dropped / Terminated
Project Type / Modality of Assistance Technical Assistance
Source of Funding / Amount
TA 7942-VIE: Energy Efficiency in the Industry
Technical Assistance Special Fund US$ 800,000.00
Strategic Agendas Inclusive economic growth
Drivers of Change Governance and capacity development
Sector / Subsector

Energy - Energy efficiency and conservation

Gender Equity and Mainstreaming
Description The proposed project will refurbish and upgrade the production lines of five cement and two steel plants that were identified as high priority under ADB ADTA 7024 based on energy audit and investment grade audit. It is proposed that this loan be provided to the Ministry of Finance (MOF) which would then on-lend the funds to financial intermediaries (FIs) for lending to the cement and steel plants. It is expected that the FIs may also blend in their own resources with the loan resources to expand the reach of the program. Under a European Investment Bank (EIB) loan, $100 million was made available to the MOF, on-lent it to FIs, which used the funds to support small-scale renewable energy projects (EIB funds could only be used for 50% of project costs). This program initiated in 2009 has already disbursed the entire $100 million by 2011.
Project Rationale and Linkage to Country/Regional Strategy

The industrial sector in Viet Nam currently accounts for 42% of the total commercial energy use and about 50% of the total electricity use in the country. The energy intensities in various high energy consuming industries such as cement and steel are considered high relative to similar benchmarked economies in the region. For example, a prior ADB TA (ADTA VIE: 7024) estimated that while countries in Europe consume about 3.15 3.65 Giga Joule (GJ) to produce a ton of clinker (constituent of cement), Vietnamese cement companies on average consume between 3.68 7.59 GJ per ton. Currently, it is estimated that the cement sector in Viet Nam emits about 12.4 tons of carbon dioxide emissions equivalent per year (tCO2eq/year) and steel sector emits about 2.81 million tCO2eq/year.

Under a business-as-usual scenario, it is expected that the energy demand in the industrial sector will continue to grow at about 14% per year. In order to meet this demand, the installed generation capacity in the country will have to double by 2015. In addition to the need for large financial resources to support these investments; this increased generation expected to come mostly from fossil energy sources will lead to increased local air pollution and greenhouse gas emissions (GHG). Viet Nam is expected to become a net importer of coal, oil and gas, making it vulnerable to energy price shocks and related impacts on the competitiveness of its heavy industry.

Managing energy demand within the industrial sector and reducing the energy intensity of production in various high energy consuming industrial processes would complement the Government of Viet Nam's (GoV's) effort to increase energy supply. The enabling environment for undertaking energy efficiency (EE) measures in the country in the past has tended to be far from ideal. However energy prices have not kept pace with international prices due to current high domestic inflation and depreciation of local currency. As a result, electricity tariffs are still at about $0.06/kWh, which is lower than the neighboring countries. Given the increasing demand for electricity, GoV aims to increase electricity prices gradually to $0.09/kWh in accordance with the Power Development Master Plan VII.

Since 2006 the GoV has initiated important legal and institutional measures to promote EE. In April 2006 the National Energy Efficiency Program for 2006 2015 and the Electricity Saving Program for 2006 2010 were approved; both lead by the Ministry of Trade and Industry (MOIT); followed by the Energy Efficiency and Conservation Law approved in January 2011. In April 2011, the GoV passed Decision 24 , to put in place a market-based adjustment of electricity retail tariffs ; based on generation prices, transmission and distribution charges, costs of operation, administration and ancillary power system services; and prioritize EE as a national priority. The above regulatory reform elements are expected to lead to a better enabling environment for EE investments in the near term. This enabling environment now needs to be complemented with dedicated financing for EE projects, and operational models for project development, appraisal, financing, and monitoring and evaluation of savings.

Impact tbd

Project Outcome

Description of Outcome tbd
Progress Toward Outcome
Implementation Progress
Description of Project Outputs tbd
Status of Implementation Progress (Outputs, Activities, and Issues)
Geographical Location

Summary of Environmental and Social Aspects

Environmental Aspects
Involuntary Resettlement
Indigenous Peoples
Stakeholder Communication, Participation, and Consultation
During Project Design During project design, consultations will be held with the relevant stakeholders through information sharing e.g., workshops, community mobilization, involvement of non government organizations and community-based organizations, etc.
During Project Implementation During implementation, consultations will be held with the relevant stakeholders through information sharing

Business Opportunities

Consulting Services Subject to signing the TA agreement, ADB will select and engage necessary individual consultants for cement and steel sub-sectors, and industrial energy contracting of EE and EC projects in accordance with ADB's Guidelines on the Use of Consultants (May 2010, amended from time to time). The goods will be procured following ADB's Procurement Guidelines (April 2010, as amended from time to time).

Responsible Staff

Responsible ADB Officer Rehan Kausar
Responsible ADB Department Southeast Asia Department
Responsible ADB Division Energy Division, SERD
Executing Agencies
Ministry of Industry and Trade
54 Hai Ba Trung St.
Hanoi, Viet Nam

Timetable

Concept Clearance -
Fact Finding -
MRM -
Approval 02 Dec 2011
Last Review Mission -
Last PDS Update 18 Mar 2013

TA 7942-VIE

Milestones
Approval Signing Date Effectivity Date Closing
Original Revised Actual
02 Dec 2011 - - 30 Nov 2012 30 Nov 2014 -
Financing Plan/TA Utilization Cumulative Disbursements
ADB Cofinancing Counterpart Total Date Amount
Gov Beneficiaries Project Sponsor Others
800,000.00 0.00 0.00 0.00 0.00 0.00 800,000.00 02 Dec 2011 0.00

Safeguard Documents See also: Safeguards

Safeguard documents provided at the time of project/facility approval may also be found in the list of linked documents provided with the Report and Recommendation of the President.

None currently available.

Evaluation Documents See also: Independent Evaluation

None currently available.

Related Publications

None currently available.


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