Viet Nam: Renewable Energy Development and Network Expansion and Rehabilitation for Remote Communes Sector Project (Formerly Renewable Energy for Remote Commune

Energy / Electricity transmission and distribution - Renewable energy generation - small hydro

The primary objective of the sector Project is to develop rural electrification and renewable energy in Viet Nam to benefit ethnic minority communities inhabiting remote and poorer parts of the country. The Project consists of two investment components: (i) development of mini-hydropower plants in mountain provinces, and (ii) network expansion and rehabilitation of distribution networks serving poor provinces.

Component 1 of the Project will develop about 5-10 grid-connected run-of-river mini-hydropower plants of 7.5 megawatts (MW) or less capacity, totaling 30 MW in several provinces in northern and central Viet Nam. Electricity connections will be provided to about 60-75 villages in poor, remote ethnic minority areas in northern Viet Nam, and minimum 100 gigawatt hours (GWh) of hydropower energy to the national grid.

Component 2 of the Project will support the Government's ongoing special program of supporting rural electrification of poor provinces inhabited by ethnic minorities. The Government requested assistance to extend this program to five provinces: Dien Bien and Lai Chau in Northern region; Tra Vinh and Soc Trang in Mekong Delta; and Quang Tri in central Viet Nam. Approximately 100,000 poor households in about 1,000 villages are expected to receive electricity under this component.

The Project will include an associated technical assistance (TA) grant for capacity building for renewable energy development.

Access to electricity increased rapidly in Viet Nam from 51% of households in 1996 to more than 91% in 2008. In 2007, more than 97% of the country's communes were connected to the national grid. However, 278 communes are not yet connected. The Government's long-term development strategy for rural electrification envisages a combined effort, with EVN taking responsibility for extending the medium voltage network to rural areas, and the provincial and district authorities taking a lead role in investing and operating low voltage distribution systems in remote areas. However, recently the Government decided to transfer the development of low voltage networks to EVN to expedite the electrification of remote parts of the country populated by poor and vulnerable ethnic minorities.

Component 1 of the Project promotes the use of renewable and distributed energy sources to provide electricity to these remote communes. The development of mini-hydropower projects in remote parts of northern Viet Nam will reduce generation at polluting centralized thermal power plants, and reduce transmission and distribution losses. These mini-hydropower plants are expected to be connected to the national grid, thus providing (i) additional clean energy to the national grid, (ii) access to electricity to remote areas and (iii) a sustainable financing source for further rural electrification from revenues generated by selling electricity generated by minihydropower plants to the grid. The Project will contribute to the institutional development of renewable energy and rural electrification.

The rapid roll-out of Viet Nam's rural electrification during 1993-2005 was facilitated by (i) EVN taking responsibility for extending medium voltage lines to commune centers (i.e., a commune is an administrative entity in Viet Nam with 5-6 villages and about 1,000- 2,000 households), and (ii) local residents acting through village organizations (i.e., cooperatives) taking responsibility for the low voltage network. However, this approach has resulted in poorly constructed low voltage networks with poor service quality and high distribution losses. Many villages without electricity are officially classified as electrified when only the commune center is provided with electricity.

Component 2 of the Project is to expand the rural distribution network to connect villages without electricity and to rehabilitate the existing poorly constructed low voltage networks serving poor communes. The use of Asian Development Fund funding and concessionary onlending terms and state budget transfers from the Ministry of Finance (MOF) to regional executing agencies is justified for the Project, based on the low per capita investment and low consumer density in rural areas that result in low financial returns to the utility.

Component 1 - Development of Mini Hydropower Plant (MHPs): 8,792 households (HH) in remote communes have been electrified or improved quality of electricity supply from development of five MHPs with total capacity of 32.5 Megawatts.

Component 2 - Grid Network Expansion and Rehabilitation: Some 308,000 households in 2,997 villages/hamlets in remote and mountainous areas of 13 provinces have been electrified or received improved power supply.

Additional Financing for Loan 2517-VIE: 60,350 households under component 1 and 2 of have been provided subsidized service connections (from the power meter to the house in in-house wiring, socket and bulb), in which 52,973 service connections under component 2 were eligible for grant financing, and the rest was financed from counterpart funds.

1. Installation of 5 to 10 mini-hydropower plants to electrify mountainous communes.

2. Electrification of 1,000 villages through grid expansion.

Component 1: As of September 2018, four with total capacity of 25 MW out of five mini hydro power plants (MHPs) financed under the Project have been completed: one (7.2 MW) in January 2016, one (7.5 MW) in October 2017, one (2.8 MW) in January 2018, and the other one (7.5 MW) in June 2018, the last one (7.5 MW) will be commissioned in Q4/2018.

Component 2: Targeted output overachieved by the loan closing date on 31 December 2017 with extension and rehabilitation of electricity networks to some 308,000 households in 2,997 villages/hamlets in remote and mountainous provinces. 2,144 km of medium voltage line, 6,583 km of low voltage line, and 94.2 MW of substation capacity have been expanded or rehabilitated.

The Project will reduce global greenhouse gas emissions due to replacement of expensive thermal power generation with a renewable and clean source of energy through run-of-river mini hydropower plants.

For the proposed mini-hydropower sybprojects, adverse environmental impacts are not expected to be significant and mitigation measures will be implemented to minimize negative impacts. Although construction of the minihydropower plants and grid extension will entail vegetation loss, adverse impacts on biodiversity aer expected to be minor since the area to be cleared for each subproject is relatively small. Further, the subprojects will not be located in ecologically protected areas. Other potential impacts associated with the construction of mini-hydropower plants incldue siltation due to surface run-off and erosion of exposed areas. Operation impacts may include changes in the stream hydrological regime that could influence the aquatic systems.

Ethnic minorities are the major beneficiaries in the northern mountain project provinces of Dien Bien and Lai Chau where mini-hydropower subprojects are likely to be located. Lai Chau province has 14 ethnic minority groups while Dien Bien province has five ethnical minority groups. The impacts on indigeneous people due to provision of electricity are not significant in the grid extension and rehabilitation component.

An ethnic minority development framework is prepared to ensure that culurally appropriate implementation of the Project and social and economic benefits of electrification accrue to ethnic minorities and potentially adverse impacts are avoided. The EMDF supports promoting productive use of electricity and will focus on providing poor households with extra support to improve the livelihoods through opportunities with electrification. An ethnic minority development plan (EMDP) will be prepared for each mini-hydropower plant subproject. For the grid extension component, an EMDP will be prepared for each province to ensure that project benefits accrue to the ethnic minorities.

The Government will ensure that the resettlement plan and the IEE will be publicly disclosed in places accessible to all affected people prior to submission to ADB for its review and approval, all in accordance with ADB's Public Communication Policy.

The Government will ensure that the gender strategy provided in the EMDP and summary poverty reduction and social strategy to maximize project benefits to women is implemented. It will include the following specific actions: (i) hold separate meetings for planning productive use of electricity component; (ii) provide capacity building training to women on productive electricity use.

The executing agencies will finance the engagement of consultants which will prepare feasibility studies, detailed design documents, and bidding documents; and supervise construction. These consultants will be recruited according to Vietnamese regulations and guidelines.

Consulting services required for technical and safeguard support for subproject preparation, and capacity building will be provided through the associated TA grant (7262-VIE), administered by ADB. These consulting services will be selected and engaged in accordance with ADB's Guidelines on the Use of Consultants (2007, as amended from time to time).