Study on Private-Initiative Infrastructure Projects

in Developing Countries in FY2010

Study on the Smart Grid Project in Ho Chi Minh City,

the Socialist Republic of Vietnam

SUMMARY

March 2011

第1章 第2章 The Ministry of Economy, Trade and Industry

Prepared by:

Ernst & Young ShinNihon LLC Japan External Trade Organization (JETRO) Tokyo Electric Power Services Co., Ltd. OPMAC Corporation

1 Background of Project and Necessity GDP in Vietnam is anticipated that the growth rate from 7% to 8% will continue up to 2020 and the growth of consumption is around 8 to 15%. According to Institute of Energy (IE) report based on the GDP, the growth rate of power consumption is anticipated to continue the growth rate of 12.7% for every year up to 2030. Besides, the power generator had been constructed with growth rate of 13.7% for every year up to 2009. The power in Vietnam has been lacked under the maintenance and trouble even though the generators have been constructed. Therefore, Vietnam will promote plans to increase the power from 20 GW in 2010 to 52 GW in 2020. As for solution for the shortage of power, the constructions of power generators will be planned but there are the following problems. 1) The construction plans of hydraulic power generators which have 35% in existing supply capacity, have

not been advanced smoothly due to problems such as habitant movement etc, so that the hydraulic generator can not be expected to cover the future consumption with high growth.

2) Peak consumption in 2020 will be increased and be reached to around 52 GW, so that new power plants

of 35 GW are needed up to 2020. As for Coal fired thermal power plants, the development with 35,000 MW needs to provide 100 million tons per year while the output of maximum coal mining reached about 70 million tons per year.

3) As for gas and oil fired thermal power plants, the construction is normally slow and the energy source in thermal power projects causes green house gas problem.

4) As for nuclear power plant, the signing for the construction had been implemented by Russia and Japan. If nuclear power plant meets the schedule of the 6th Power Development Plan (PDP), the first plant will be commissioned after 2020.

As mentioned above, the shortage of power in Vietnam is serious up to 2020 especially and the constructions of current and fossil power plants can not be expected to solve the problems. Therefore, it is necessary to accelerate the installation of renewable energy and connection to distribution network and advance the energy efficiency in parallel.

Government of Vietnam (GOV) has also promoted the energy efficiency in parallel and the new energy efficiency law including acceleration of the energy efficiency and support for the development of renewable energy will be established on 1st of January in 2011. Regarding renewable energy, wind power / biomass / geothermal / small hydropower / Solar are considered as the renewable energy in Vietnam and the potential reported by IE is as follows.

Wind Power: 1,800 MW Biomass energy: more than 150 MW Geothermal energy: 340 MW Small hydropower: 4,000 MW Solar energy: 4～5 KWh/m2

Small hydropower has occurred damages by flood during typhoon etc, so that the additional construction will be difficult by objections of inhabitants. The capacity of Biomass and Geo thermal energy is not so large. Therefore, Wind and Solar power will be expected to cover the increasing consumption in Vietnam. Especially in case of Solar energy, the generation capacity is around 3,300GW under assumption of utilizing 1/10 land in Vietnam. However, the Wind and Solar power are unstable due to the influence of weather condition, so that the rising of end voltage and the fluctuation of frequency are occurred. This smart grid project with Energy Management System (EMS) can solve the problems. In addition, the energy efficiency such as peak-cut and reduction of distribution loss can also contribute to solve the shortage of power. So, it is necessary to advance the peak-cut and the reduction of distribution loss by this smart grid project with Demand Response (DR) / Automated Meter Reading (AMR) and Advanced Distribution Automation System (DAS). It is important to improve the reliability of distribution network as policy of power sector. This smart grid project using Advanced DAS can also improve the reliability of distribution network due to reduction of outage duration.

2 Fundamental policy of this project 2.1 Fundamental policy This project will be recommended to implement based on the following fundamental policy.

Application of renewable energy such as Solar Power → Solution for shortage of power Application of EMS to control switch of Solar power and Battery → Solution for connecting to

distribution network Peak-cut by DR → Energy saving and efficiency Reduction of distribution loss by DAS and AMR → Energy saving and efficiency Improvement of reliability (reduction of outage duration) by DAS → High reliability for power

supply 2.2 Problems and the solution As for promoting this project, the problems on Peak-cut by DR and Cost of solar power will be considered and the following solutions will be proposed. 1) Peak-cut by DR

Peak-cut by DR are proposed as follows. Large customer: Unimportant loads such as Air Conditioner (A/C) are switched off by DR. Normal customer: All of loads are switched off by DR.

Based upon customer survey, large customers may well accept the outage of unimportant load for short duration (example: 30 minutes) due to no outage of important load. Normal (Small) customers are under outage for short duration, so that the dissatisfactions in the customers are concerned in spite of short outage. As for the solution, the customers can switch on by manual operation while the outage by DR happens. However, if most of customers will switch on, the effect of peak-cut decrease, so that incentive is needed to advance the effect. The following incentives are considered as ideas. If manual operation will be implemented in the state of peak-cut, the tariff becomes much higher. The cooperated customers can receive the privilege such as preferential tax or tariff. The cooperated customers can receive the citation as the cooperation.

There are the following benefits as customers of Peak-cut by DR. Residential customer under the planned outage for Peak-cut can not recover the outage so far but

this proposed system can recover the power by the manual operation on condition that the customer pays higher tariff.

Large customer stopped all of power under the planned outage so far but the outage by this proposed system can be limited to unnecessary load such as A/C etc. Therefore, the important load such as product facilities can keep the power even though the planned outage for Peak-cut will be

implemented. Regarding the peak-cut by DR, it is necessary to consider whether there are some problems for law in Vietnam or not. According to Ministry of Industry and Trade (MOIT), there are no problems on law for the peak-cut but take care to cut off frequently because the National Diet will be possible to discuss due to a lot of complaints of customers. Vietnam Electricity (EVN) has already cut off the customers on each substation, so that we think this better outage procedure for each customer will be acceptable. Regarding the peak-cut by DR, there are no problems on law in Vietnam but the incentive shall be considered in order to accelerate the energy efficiency.

2) Renewable energy such as Solar Cell According to the International Forum on Wind Energy Development of Vietnam on 5/11/2009, Solar Energy in Vietnam is 4～5 kWh / m2 , so that the conversion to kW is around 0.1 kW / m2 . The area of Vietnam land is around 330,363 k m2 and the capability of power can be calculated as follows. Assumption: 1/10 in land is available for installation of Solar Power. kW x 330,000 x 106 x 1/10 = 3,300 GW

The capability of solar power is huge and the solar is effective for solution on increasing peak load. However, batteries shall be equipped in order to solve unstable generation problems influenced by weather condition etc, so that the cost becomes more expensive. In case of Japan, the following support system on law has been carried out, so that the Solar Power could be expanded up to 1.4GW in 2005 and will be anticipated to reach to 14～28 GW in 2020. Government support a part of the installation cost. Power companies have purchased with higher tariff (48 yen /kWh) for the Solar Power since

November in 2009. However, the increased expenses on power companies can add to the normal tariff as green cost.

In case of Vietnam, the supporting money for renewable energy will be considered on new law of energy efficiency which will be set up on 1st of January in 2011. However, the supporting money is small and is limited, so that the solar power will not expand widely. In order to accelerate the installation of solar power, not only is the cost decreased, but also the additional supporting money or other regulation is needed. When a lot of renewable plants will be connected to the distribution network in EVN, problems such as voltage-drop / safety etc occur. The following solutions against the problems will be considered in this

project and will be confirmed. Solar cell with battery will be installed to 2 locations. The reversed power and battery are monitored and controlled by EMS. EMS also monitors and controls the switch for the solar.

2.3 Advantages There are mainly five economical benefits as follows. A) Reduction of outage duration by DAS B) Effective construction of Substations by DAS C) Reduction for technical loss of MV line with improvement of load unbalance by DAS

Non-technical loss reduction by AMR including smart meter D) Solution of power shortage by Solar power E) Effective construction of Power Generators by DR

before the project (a)

after the project (b)

(a)-(b)

A) Decrease of Power Failure 373 min. 77 min. -296min. （ 4.93 h）

B) Improve of maximum average capacity rate of the substation

75% 83% ＋8%

C) Decrease of loss (technical loss of MV line) (non-technical loss)

(1.72%） (2.43%)

(1.16%） （ 1.3%）

（ -0.56%） （ -1.13%）

D) Solar Power Generation － 57,200 kWh/y ＋57,200 kWh/y

E) Demand Control by cutting demand caused by air-conditioners

－ 255MW＊2 h ＊40 days/y

255MW＊2 h ＊40 days/y

3 Overview of this project 3.1 Fundamental idea of Project The details of this project based on the fundamental policy are as follows. 1) Smart meter will be installed to all of customers in Phu Tho Power Company, so that AMR and DR can

be implemented.

2) DR can control the following load.

Residential customer: All of loads are switched off during short duration (ex: 30 minutes). Large customer: Unnecessary load except product line etc can be switched off.

3) Solar power system with battery as asset of EVN will be installed to 2 areas as pilot project and be

connected to MV distribution feeder directly. EMS in control center can monitor and control the reverse current and the battery.

4) Servers and operator consoles for Advanced DAS with EMS are installed in Dispatch Center for existing

Supervisory Control and Data Acquisition (SCADA) and monitor / control 110kV primary substations and distribution network in Phu Tho Power Company. Other servers for AMR, DR and EMS etc are installed in Control Center of Phu Tho Power Company and are connected to the advanced DAS through LAN and Fiber Optic communication network.

5) Automatic Load Break Switch (ALBS) for Over Head (OH) will be applied as new equipment.

Automatic Ring Main Unit (RMU) for Under Ground (UG) will be also installed as new facilities in existing room. The existing RMU of manual type will be removed to other suitable feeder as manual type.

6) Fiber Optic will be applied as backbone network of communication and ZigBee will be applied for last

one mile communication between Remote Terminal Unit (RTU) and customers for at least 10 years.

3.2 Configuration of Project The basic system configuration including all of projects is shown in the following figure.

Control Center

110kV/15kVSubstation

Distributiion feeder(Overhead)

Distributiion feeder(Underground)

FCB

LBS

TRD

VS

VCB　Road

Solar Power

RTU

Advanced DAS Server

Smart Meter

Switch

WHM

Comunication

AMR Server

Console

FCB

VSRMU

Battery

PCSPCS

RTU

Concentrator

Concentrator

M-RTU

FEP

Optical fiberNetwork

3.3 Project cost The total amount of the project is around 42 MUS$ and the detail is explained as follows.

Scope Quantity

Cost

Remarks Foreign

MUS$

Local

MUS$

1. Advanced DAS / SCADA with EMS EVN HCMC Control Center

1 system

6.5

0.7

1. Advanced DAS with SCADA is installed in existing SCADA center and can implement energy management of distribution feeder.(Solar Power)

2. AMR/DR is installed in Pho Tho Power

Company and is connected to Advanced DAS by data link of Fiber Optic

2. AMR / DR Phu Tho Power Company

1 system

3. Substation facilities 4 SS 1.2 0.2 0.3 MUS$ x 4 = 1.2 MUS$ 1st stage: 4 substations (110kV) 2nd stage: expand to 34 substations

4. New RMU 25 units 1.2 0.1 45 kUS$ x 25 = 1,125 kUS$ → 1.2 MUS$

5.New OH DAS equipment

86 units 1.3 0.1 15 kUS$ x 86 = 1,290 kUS$ → 1.3 MUS$

6. Smart Meter, Single-phase,

Three phase Concentrator

90,000 units 8,000 units

196 units

17.0 1.0 120US$ x 90,000 = 10.8 MUS$ 700US$ x 8,000 = 5.6MUS$ 3,000US$×196=0.6MUS$

7. Solar Power 2 units 0.3 0.1 20kW: 0.15 MUS$ 0.15 x 2 = 0.3 MUS$

8. Fiber Optic 0 0 0 Use existing Fiber Optic

9.Engineering Service 1 2.5 0.7 Including Training in Japan

Sub Total - (30.0) (2.9)

10.TAX 1 6.6

0.3

Sub Total x 20% x 10%

11.Physical Contingency

1 1.5 0.1 5% x Sub Total

12.Price escalation 1 0.9 0.3 2.4% for Foreign 8.4% for Local

Total 39.0 3.6

Exchange rate: $1 = 19,491VND = 80.89 yen (by Tokyo Mitsubishi UFJ bank 10/29 2010)

3.4 Overview of preliminary economic analysis The economical benefits of the project are summarized as follows.

Economic benefit Financial benefit

1.Decrease of Power Failure 53,512 US$/y 19,563 US$/y 2.Improve of maximum average capacity

rate in the substation 0.939mil.US$/y

（ Total 18.78 MUS$: 20 years)

0.939mil.US$/y （ Total 18.78 MUS $:

20 years) 3.Decrease of loss

(technical loss) (non-technical loss)

532,476 US$/y 1,074,431 US$/y

532,476 US$/y 1,074,431 US$/y

4.Solar Power Generation 5,458 US$/y 5,458 US$/y

5.Peak Demand Control by cutting demand caused by air-conditioners

-711,713 US$/y 6.885 MUS$/y

-711,713 US$/y 2.470 MUS$/y

3.4.1 Financial Analysis The Financial Internal Rate of Return (FIRR) of the project is of 6.90%. FIRR Net Present Value (NPV)

（ Discount rate=6.95%） Base case 6.90% -0.13 MUS$ Initial investment increases by 10% 6.53% -1.28 MUS$ Operation & Maintenance(O&M) cost increases by 10%

6.78% -0.51 MUS$

Unit price of power purchase decreases by 10% 6.51% -1.28 MUS$ 3.4.2 Economic Analysis The Economic Internal Rate of Return (EIRR) of the project is of 22.79%. EIRR NPV

(Discount rate=10.0%) base case 22.79 % +30.35 MUS$

Initial investment increases by 10% 20.69% +27.43 MUS$ O&M cost increases by 10% 22.69% +30.09 MUS$ Construction cost of a new gas turbine power plant decreases by 10%

20.90% +25.49 MUS$

3.5 Environmental and social analysis 3.5.1 Project impact on environmental and social aspects

Based on the JETRO Guidelines for Environmental and Social Consideration as of July 2009, environmental and social assessment items have been examined in this study for the future scoping conducted in feasibility studies and Environmental Impact Assessment (EIA) conducted at the stage of project implementation. When examining project impact on environmental and social aspects, check items in the Screening Format and the Environmental Checklist (6. Power Transmission and Distribution Lines) of “JICA Guidelines for Environmental and Social Consideration” (April 2010) have been referred. The summarized results are as follows.

1) Sensitive Areas

None of the sensitive areas in the following table are found.

2) Sensitive Characteristics

The sensitive characteristics are not applied to the project.

3) Impacts on Environment

Impacts on environment caused by the project implementation have been analyzed, so that there are slight affections but no problems due to the easy countermeasures.

3.5.2 Environmental Legal Framework and Application to the project

The Law on Environmental Protection (No.5212005/OH11) replaced the former law stipulated in 1993 and has been implemented since 2006. This law is the basis of EIA and of environmental protection in Vietnam. Based on the law, this project is estimated as follows.

1) Strategic Environmental Assessment (SEA )

SEA is not applicable to the Project.

2) EIA

EIA will not be applicable to the Project.

3) Environmental Protection Commitment (EPC)

The Project Owners are required to elaborate the EPC when EIA is not required. They are allowed to start their production and business activities after registering the EPC.

4 Implementing schedule The tentative implementing schedules are estimated as shown in the following figure as Japanese ODA

loan based on experiences.

Implementing Schedule on Japanese ODA loan

Item 2011 2012 2013 2014 2015

Preparation

Basic design and EVN HCMC / JICA appraisal

Approval by GOJ / GOV

E/N, L/A

Selection of consultant

Engineering Service

Detailed Design

Tendering Stage

Selection of Contractor

Construction

Design

Manufacturing

Installation and test

Commencement

5 Feasibility study 5.1 Review on Availability of Finance Export credit is considered as one of the finance method but Japanese ODA (Yen loan) is the best solution in the analyzed finance method. 5.2 Feasibility for implementing project The implementation of this project is feasible as follows.

This project corresponds to Vietnam policy to solve the shortage of power and the low reliability. This project also corresponds to the needs of EVN HCMC as implementing organization. According to economical analysis, FIRR is of 6.90% and EIRR is of 22.79%.

(In case of Japanese ODA loan, there is grace period of 10 years and the interest rate is low such as 1.2%.)

5.3 Necessary activities It is necessary to carry out the following activities in Vietnam side in order to advance this project.

Support of Vietnam government to accelerate the application of renewable energy Incentive for customers to allow the outage for peak-cut Request of Japanese government support for technology and finance from Vietnam government

6 Competitive ability of Japanese Company 6.1 DAS Concerning reliability of power supply, higher technology has been already existed in Japan. There is strong position compare with other countries. Distribution network technology in Japan has progressed to solve a lot of subjects since 1960. DAS was also same, it was kept progressing for improvement of supply reliability and efficiently operation of equipment. This DAS is applied voltage type. There is a few countries to apply this type, but this voltage type of DAS should be definitely better technology than the others. The advantages are;

Judge and split for failure section can be applied without Central Processing Unit (CPU) and

communication lines System upgrade can be applied step by step, if necessary. Initial cost should be lower than current type which is introduced in Europe.

As of now, it is still continuing to progress for technical innovation by DAS business in Japan. Combine advanced DAS core technology of Japan and inexpensive distribution network equipment which made in China can create advantage of DAS. 6.2 AMR System It is proud for higher reliability of power distribution monitoring technology which was grown in Japan. Advanced AMR system has been already developed by Japanese companies based on existing higher technology. This advanced AMR system can realize two way communications with customers such as demand response and control internal switch in smart meter as well as measure power consumption at the place from far away. Having proof experiment, corporate with NEDO and the state government of New Mexico, proof experiment has already started that how much effect and influence will be occurred by realize real time pricing and DR which are told difficult in Japan to test. This core technology can be applied in this project as well, so that Japanese company can stand strong position and develop lower cost compare with the other country. 6.3 EMS It is proud for higher reliability of power distribution monitoring technology which was grown in Japan. Advanced EMS has been already developed by Japanese companies based on existing higher technology. This advanced EMS can corporate efficiently between many kind of power supply such as solar power and wind power within smart grid and storage battery. And it is possible to be realized higher supply reliability and distribution network operation. Moreover, Curb on fluctuations equipment with storage battery which is used for to prevent influence from sudden out put fluctuation of Photovoltaic (PV) system, has already developed by Japanese companies. Relating this technology, proof experiment which will be understood effect and influence on distribution network in Miyakojima island by install PV system, has already started by independent type of distribution

network in Miyakojima of The Okinawa Electric Power Company, Inc. This technology can be applied in this project as well, so that Japanese company can stand strong position and develop lower cost compare with the other country. 6.4 Solar Power Temperature of HCMC is very hot, so that the panel of crystal silicon type with high efficiency can not be applied to HCMC even though Japanese company has excellent competence. The panel of silicon amorphous type is proposed in this report due to high temperature characteristics and low cost but other foreign manufactures can make easily. In order to get higher power in the same space, hybrid type of crystal silicon and silicon amorphous will be recommendable in detail design. In this case, Japanese company can be applied with high competence. As for battery, Lithium Ion battery is recommended in this report and the development has been carried out in many countries. Japan also has developed as Japanese government projects, so that the high capacity type for storage of power will be able to get high competence. Furthermore, Japanese company has high competence for the inverter for solar and battery due to high efficiency, high characteristics and familiarity to DAS. 6.5 Integrated System Under becoming aggressively for activity on smart grid, government of every country and every standard party also aggressively involve to advance standardization of equipments. In Japan, ministry of economy, trade & industry put target to standardize in international and selected “7 Project and 26 items” as important items to keep strong position of Japanese companies. They proposed to IEC etc. and put target to be established within three years. There are 7projects as shown below. 1) Wide-Area Situational Awareness (WASA) 2) Storage battery for distribution network 3) Control of distribution network 4) DR 5) Storage battery for consumer side 6) Electric Vehicle (EV) 7) Advanced Metering Infrastructure (AMI)

There is all necessity technology in these projects as below. 1) DAS 2) DR network 3) Wide access communication for meters 4) Short distance communication for meters 5) Optimized management for storage battery for distribution After fix international standard, Japanese companies can be stronger position for cost competitiveness. In case that this proposed smart grid will be applied to Vietnam, the system and communication network can be applied to future technology such as Home Automation (HA), battery by EV etc, so that Japanese company can keep the high competence as the supplier of the system and communication network.

7 Schedule to realize this project and the objection 7.1 Detail schedule to realize the project It is necessary to implement the following activities up to starting this project by Japanese ODA loan.

Request of this project (from Vietnam to Japanese Government): the first half in 2011 Implementation of Special Assistance for Project Formation (SAPROF) by JICA Grant: in 2011 E/N, L/A between Vietnam and Japanese government: the first half in 2012

After L/A, the project such as selection of consultant etc will be implemented. 7.2 Objection and the solution The priority of Vietnam for the smart grid project is lower than the current investment such as power generation, construction of transmission line / substation and construction of distribution feeder, so that the investment will be limited. In case of EVN HCMC, the income is around 800 MUS$ in 2009. The investment of this project is around 40 MUS$ which is not so large as Japan but the project cost means around 5% of the income as EVN HCMC, so that long term to realize this project will be needed due to other high priority projects. This is normal case for new project because client does not feel the convenience and necessity due to no experience. In order to overcome this blockade, the support of Japanese government such as Demonstration test project

supported by NEDO is needed to apply for the model area as pilot project. After the pilot project, EVN can understand the necessity and feel the benefits, so that the system using Japanese excellent technology can be expanded to other areas of EVN HCMC and other cities. Moreover, this system will be expected to expand to other Asian countries and become de-facto standard. Korea has already applied DAS project in Hai Phong as Grant and AMR project in Hanoi as also Grant. As for Solar system, Energy Assistance France and Schneider have applied the Build, Operate and Transfer (BOT) pilot project to Quang Binh province in central Vietnam. Competition between foreign countries and Japan are very hard but these competitive countries proposed single function as one of smart grid system. Japan can propose all of functions in smart grid project based on a lot of experience and excellent technology, so that the effect for energy efficiency in Vietnam becomes much better. In order to keep the highest position in smart grid system, it is important to obtain the initiative with high speed. Therefore, Japanese support (ex: Demonstration test project supported by NEDO) shall be quickly applied for Vietnam as pilot project.

8 Map of project area in survey country

Project area: Phu Tho Power Company (District10 and 11) of EVN HCMC Scale: 1:42,000

Dist10 and11,Project area in HCM city