ESCO proves energy efficiency success story

Posted at: TUEsday - 11/09/2012 10:58 - post name: Nguyễn Mai Nhiệm

(VEN) – Applying energy efficiency solutions through energy service companies (ESCOs) could help a business save hundreds of millions of dong each year without paying any investment capital.

ESCO brings great benefits to businesses

ESCO development difficulties

Energy efficiency is one of the best solutions for businesses to decrease costs. The law on energy efficiency and conservation forces businesses to apply energy efficiency solutions. Statistics show that the energy efficiency potential of Vietnamese business communities is huge. The lack of capital and skills is the key factor in hindering businesses from turning this potential into a reality. Investing in energy efficiency solutions in businesses and creating a profit from saved energy, is something that ESCOs can help come true.

In Thailand, China and Japan, there are different levels of ESCOs. Here in Vietnam, although they first appeared many years ago, ESCOs just provide services such as energy auditing and energy efficiency solutions for steam and heat systems. A number of ESCOs in Vietnam only offer simple services and therefore haven’t satisfied market demand since they remain incapable in terms of finance and technology.

The Ministry of Industry and Trade is actively implementing a Vietnamese ESCO market development project. Phuong Hoang Kim, the head of the Department of Science and Technology of the General Directorate of Energy, the Ministry of Industry and Trade, said that ESCO market construction is one of main targets of energy efficiency and conservation activities in the coming time. Weak finance and lack of capacity in terms of running ESCO projects are the biggest problems facing ESCOs in Vietnam.

Success from Vietnam-Japan cooperation

In 2010, the Japanese government kicked off a project to assist Vietnam to develop its ESCO market. The Ho Chi Minh City Energy Conservation Center (ECC HCMC) was chosen as the Vietnamese representative. Under this project, the Japanese government has sent Japanese companies to Vietnam, which have implemented energy efficiency investment projects together with ECC HCMC; Mitsubishi is in charge of project management, Hibiya takes the responsibility for technology and Veglia provides consultancy and runs ESCO business cooperation; Japanese companies transfer their expertise to ECC HCMC.

The Japanese government also provided finance and recommenced preferential financial sources for energy efficiency projects in Vietnam, and Vietnam was one of the first countries chosen to benefit from the Bilateral Offset Credit Mechanism (BOCM). Shigenori Hara, Director of the Global Environment Partnership and Technologies Office of Japan’s Ministry of Economy, Trade and Industry (METI), said that BOCM can help Vietnamese businesses implement a credit mechanism and assist Japanese businesses to attain their business objectives. In February 2012, the Viet Energy Service and Consulting Joint Stock Company (Viet ESCO) was founded as a member unit of ECC HCMC, with Veglia – the first ESCO in Japan – becoming its strategic shareholder.

Unlike other ESCOs in Vietnam, Viet ESCO is capable of providing packaged energy efficiency solutions (consisting of energy auditing and solution and infrastructure investment) while being able to pay the investment capital needed in advance by an energy efficiency project. Viet ESCO recoups its investment capital and earns a profit based on energy efficiency revenue over a certain period of time. All the money from saved energy and equipment will belong to the businesses after the profit division contract finishes.

Although it was founded more than six months ago, Viet ESCO has been negotiating energy efficiency solutions for many businesses from different sectors, including hotels, public lighting systems, and factories. These solutions can help businesses reduce their energy costs by 15-30 percent; with the related investment capital can be recovered within two to three years. Viet ESCO has succeeded with financial assistance from the International Finance Corporation (IFC), Vietnam Joint Stock Commercial Bank for Industry and Trade (Vietinbank) and the Dragon Capital Group as well as cooperation from many businesses. Running an ESCO project with Viet ESCO, the Legend Hotel can save US$500 per month in the first five years of the project and US$3,000 per month as soon as the contract signed with Viet ESCO ends in the sixth year.

ECC HCMC Director Huynh Kim Tuoc said that Viet ESCO will likely implement 10 ESCO projects nationwide in 2012. The ESCO model will be applied in other fields including hotel, sugarcane and sugar production and processing, metallurgy, cement and lighting./.

Author: Phuong Lan
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