Enabling Private Capital to Unlock Vietnam’s Small Hydropower Potential

Results

Between 2009 and 2018, the Vietnam Renewable Energy Development Project helped lay the foundations for the successful deployment of small-scale hydropower in Vietnam.

• Hydro boom: Some 1,850MW of new capacity from small hydropower was built of which 350MW was developed with credits the project provided, the rest by private developers driven by a new enabling environment for which the project helped create. In total, these hydropower plants supplied 11,200 kilowatt-hours (kWh) to the national electricity grid on an annual basis. In 2018, small hydropower accounted for 5.9 percent of the energy mix, up from virtually zero in 2008.
• Strong private sector mobilization: One US$ of IDA investment in this project leveraged US$1.13 dollar from the private sector. In addition, it was estimated that during this period private investment into small-hydro development reached US$2 billion, mainly financed by local banks.
• Improved social and environmental sustainability: 100 percent of small hydro plants financed under the project followed international environment and social best practices.

Bank Group Contribution

The project was financed with US$202 million from the International Development Association (IDA).

Partners

The project received a grant of US$2.429 million from Swiss State Secretariat for Economic Affairs (SECO).

The project benefited from strong cooperative partnership among key development partners in Vietnam's energy sector. The Vietnam Energy Partnership Group (VEPG) is a platform for coordination of development partner programs. In addition, the team worked closely with private sector associations such as the Vietnam Business Forum to gather stakeholder feedback during the design and implementation of the project. The review meetings frequently organized among the Ministry of Industry and Trade and the donors (WB, SECO) helped coordinate and strengthen the investment and capacity building work.

Moving Forward

By removing market barriers and building requisite capacity and incentives among all market players, the Vietnam Renewable Energy Development Project created an enabling environment for the renewable energy industry to take roots. Some of the consequential legislations supported by the project included the Law on Energy Conservation and Renewable Energy Development Strategy. The knowledge and expertise in developing, financing, and operating small hydro projects was readily transferable to other renewable technologies such as wind and solar. Renewable energy initiatives-including small hydropower projects-have significantly expanded. In addition, lessons from the development of the small hydropower industry, such as mobilizing private financing and incorporating variable energy in the power generation mix also supported expansion of other renewable energy resources such as solar and wind power. Renewable energy now accounts for nearly 10 percent of Vietnam's power generation capacity.

Beneficiaries

'Life in the old days had been tough because we did not have electricity. But it got much better when electricity reached our village. They [the project] also made a new road for us. And last year they provided us with new corn varieties. Our income has improved since. Now I can buy textbooks for my kids.' (Lo Lo May, Resident, Tong Sanh Commune, Lao Cai Province)

'Financing energy projects, particularly hydropower, wind and solar, is new in Vietnam. As before, the developers of such projects were mainly State-owned enterprises. Now, with new Government policies and financial support from the banking sector, private companies are able to join. We learnt a lot through financing some of the hydropower plants under this project. The energy sector holds great potential for commercial banks to get involved.' (Ngo Thu Ha, Deputy General Director, Hanoi Commercial Joint Stock Bank)

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