In Viet Nam, a workshop heard recently in HCM City, there is great potential for the energy service companies market. Power demand is expected to grow sharply in the coming years and is propelled by rapid socio-economic growth, although supply is insufficient.

Markus Bissel, Head of the Energy Conservation, Green Energy and Energy Efficiency Part Programme, EU-Vietnam Energy Facility, GIZ Vietnam, said: With one of Southeast Asia's highest energy intensities, the Vietnamese Government is facing several challenges to boost energy efficiency, particularly in the commercial and industrial sectors. While the Vietnamese Government has successfully adopted Vietnam Energy Efficiency Program 1 and 2 and is currently introducing No. 3 with very ambitious goals, it is predictable that satisfying the rising demand for energy is becoming more and more challenging. Hiệp said ESCO would provide a comprehensive energy services package including energy efficiency consulting, planning, construction, installation, operation, maintenance, optimisation, and financial contribution, and apprise customers about investment costs, energy saving results and investment risks. 

By applying the ESCO model, organizations can gain access to innovation in green solutions, facilities and technology and attain investment efficiency. It also allows organizations to engage in national and international schemes and initiatives aimed at the economic and productive use of resources, leading to the conservation of the atmosphere and combating climate change. Statistics reveal that there are more than 200 providers of energy management services and consultancy companies for energy efficiency, but the number adopting the ESCO model is poor. Speakers at the workshop acknowledged that the model in Viet Nam is still new and faces challenges due to the lack of legal support, processes and financial support for energy efficient project execution and the lack of manpower. In addition, the mistrust of consumers, risks in energy conservation programs and the greater concentration of companies on improving revenue than cost reduction by energy savings are other barriers to ESCO operations, they added. The workshop talked about lessons learned from international experts and members of local firms in other ESCO markets, such as the US and China, and the perspectives of Viet Nam. Hiệp said to boost ESCO activities to improve the institution and legal framework for it, developing a sustainable financial mechanism, and creating linkages between ESCO enterprises and credit institutions are imperative. Toby Couture, director of E3 Analytics, said in-depth skill training is critical.

The government was willing to lead by example and invest in ESCO and energy efficiency utilities, but it was necessary to ensure compliance problems in energy output contracts. He added which financial assistance, including loan incentives and favourable tax treatment, could be a driver for business development.

Organised by the EU-Việt Nam Energy Facility project and the Ministry of Industry and Trade, the workshop titled ESCO, a future business model for Việt Nam sought to share experiences in developing the ESCO model in Việt Nam and raise awareness of government management agencies so that an appropriate policy framework could be adopted in future

1. Barriers to renewable energy development

1.1. Institutional barriers 

Renewable energy will not be able to compete on a level playing field with conventional electricity sources until new policies are in place to fully calculate the costs of fossil fuel sources under the market mechanism.

1.2. Legal barriers

Firstly, there is a lack of a system of technical standards and regulations to meet practical requirements in the process of designing, investing in construction, and managing and operating RE projects.

Second, the standard of the connection. There is a lack of unified connection standards for renewable energy sources. Responsibilities of electricity units and renewable power source investors for works connected to the power system are not clearly defined. This creates a significant barrier to projects. Third, strict electrical licensing requirements can also pose a barrier. Fourth, the disadvantage due to unfair competition.

1.3. Technical barriers 

According to a report by Vietnam Electricity, developing renewable energy hot, especially solar power is creating a number of challenges in the operation of the power system. 

In terms of solar power, there are no national technical standards and regulations on rooftop solar power systems, or regulations on licensing electricity activities for third parties to participate in the installation. Lack of capacity to manage, operate, and maintain and repair wind power projects creates technical problems during operation. There is a lack of adequate assessment information about the renewable energy potential, as well as the ability to grid projects after completion. Moreover, the equipment of wind power plants is super-long and super-weight, while the road and port infrastructure is still rudimentary, leading to high risks and unsafe conditions. Consulting and technical services for biomass power technologies are limited, especially maintenance and repair services after installation. Vocational training and curriculum development on new IR development are in its infancy, heavily dependent on foreign experts.

1.4. Economic and financial barriers 

The biggest challenge for renewable energy development lies in the investment capital and the ability of the investor to arrange capital. Development of renewable energy in Vietnam is currently limited by both of these barriers.