Instead of investing a large amount of money in energy systems, businesses can make a deal with energy service companies to reduce their power consumption. This is a new type of energy efficiency services first appearing in Vietnam since February, 2012. Up to now, it has successfully accomplished 3 projects. At present, it is implementing 6 projects at five-star hotels in Hanoi and Ho Chi Minh City.
Long time of persuasion
Because ESCO was a new type of energy efficiency services, Viet ESCO’s Board of Directors spent much time persuading Legend Hotel’s Board of Directors that its operation was not interrupted during the construction. After receiving the agreement of the Board of Directors, technical experts from Viet ESCO conducted research on the hotel’s energy systems and analyzed the historical data. The next stage was to promote the technical models as well as released the figures basing on the theories of energy efficiency of the project, the payback period and the share profits.
After evaluating the project, Legend Hotel’s Board of Directors agreed with the ESCO model implementation with different criteria such as heat pumps, steamers, water saving douches, fan belts and energy administration solutions. The ESCO project at Legend Hotel (HCMC) was completed at the end of 2012. According to Ms. Nguyen Thi Ngoc Tho, Viet ESCO’s technical manager, ESCO model managed to save 25 % of electricity after going into operation.
Mr. Huynh Kim Tuoc, Viet ESCO’s Chairman, said: “Since it’s a new service, it takes time to persuade companies and businesses to apply. There will be no difference between the commitment and construction so that we can keep our prestige”. Viet ESCO will start the construction of the energy system as soon as both sides reach agreement in new investment categories, time to invest, the profit rate.
Mr. Tran Hieu Trung, Viet ESCO’s Investment Manager, analyzed three benefits the company will get on applying this model: saving the initial energy infrastructure, sharing the profits from energy conservation and owning the whole system when the investment period ends. That means businesses can minimize risks in infrastructure investment. Particularly, assuming that the costs of businesses’ energy systems is VND 1 million per month, after installing ESCO model, businesses have to pay only VND750,000 to VND800,000 per month. After that, Viet ESCO and businesses share the profit, which comes from the saved amount following their common rule.
Lots of difficulties
According to Mr. Tuoc, the difficult of this model is its capital. “Viet ESCO is coping with difficulties of capital. We’ll have more projects if we get $ 50 million” he said. Despite a strong relationship with Vietinbank, BIDV, etc, Viet ESCO hasn’t successfully utilized the energy saving projects of banks because the particular solutions and policies for the energy service models like Viet ESCO haven’t been built yet.
Not only facing the problem of capital, Viet ESCO is also dealing with the payback period, the analysis methods of the project’s saving rate, the historical energy data which will be used to calculate the profitability ratio… “There are many businesses enrolling to take part in ESCO model (50 businesses) but it’s very difficult for both sides to come to an agreement”, said Mr. Trung. When choosing a partner to invest, it’s necessary for Viet ESCO to define the important aspects of their future partners such as their prestige brands, strong financial sources and long-term working commitments. With these criteria, it’s difficult for small and medium businesses to corporate with Viet ESCO.
“Although the ESCO models are very attractive in Vietnam, it’s not easy to become a true ESCO company”, said Mr. Tuoc.