Low carbon development in industry

Benefits for enterprises participating in the Voluntary Agreement Scheme on Energy Efficiency

08:25 - 29/10/2024

In 2023, four enterprises in the steel production, building materials, and wood processing sectors participated in the Voluntary Agreement Scheme on Energy Efficiency in Energy-Intensive Industries (VAS Program), within the framework of the Energy Partnership Program between Vietnam and Denmark 2020-2025 (DEPP3 Program), implemented by the Ministry of Industry and Trade in collaboration with the Embassy of Denmark and the Danish Energy Agency.

Efficient and economical energy use is a key solution to ensure energy security, reduce reliance on imported energy, and enhance economic efficiency. For industrial enterprises, energy efficiency enables them to improve production efficiency, lower costs, meet environmental requirements and reduce greenhouse gas emissions. It helps enterprises enhance their competitiveness amid fuel and natural resources are depleting, and green standards and regulations of international markets become stricter.

To promote the dissemination of new energy efficiency schemes that benefit both the government and businesses, the DEPP3 Program is piloting a Voluntary Agreement Scheme for Energy Efficiency. This Voluntary Agreement Scheme is a collaborative model between the government and enterprises to encourage energy efficiency practices across industrial sectors. Under this model, enterprises that voluntarily commit to implementing energy-efficient solutions receive technical support from the government, including experts’ guidance to identify significant, and feasible energy-efficient opportunities. This support aims to facilitate the transition from idea to project implementation, helping both the enterprises and the nation achieve their energy efficiency goals.

Pilot of New Incentive Mechanism

Mr. Hoang Van Tam– Representative of DEPP3 Program Management Board, Team Leader of Climate Change and Green Growth, Department of Energy Efficiency and Sustainable Development (Ministry of Industry and Trade) said that The Voluntary Agreement Scheme on Energy Efficiency is an initiative of voluntary agreement between the government authorities and businesses, especially designated energy users. Its goal is to support businesses to use energy more efficiently, reduce energy costs, and enhance overall production and business performance.

According to Mr. Hoang Van Tam, this is not a first-of-its-kind voluntary agreement scheme implemented in Vietnam. From 2015-2017, within the Vietnam - Clean Production and Energy Efficiency Project funded by the World Bank, the Ministry of Industry and Trade introduced a pilot voluntary agreement scheme on energy efficiency. However, this VAS Program offers more benefits for enterprises.

“What sets the current program apart is the robust technical support of both local and international experts, particularly Denmark experts who have successfully implemented similar programs for Danish enterprises,” Mr. Tam emphasized.

Regarding the criteria for selecting enterprises to participate in VAS, Mr. Jorgen Hvid, Long-term Advisor of the DEPP3 Program, stated that there are several key criteria, the most important of which is that the enterprises must genuinely be interested in and ready to invest in potential energy efficiency projects. Furthermore, the enterprises must work closely with the program's consultants throughout the collaboration process to ensure the quality and timely completion of studies. In return, enterprises receive numerous practical benefits. "The program helps enterprises select the most optimal solutions, with high potential and feasibility, suitable for the enterprises’ development needs and conditions," Mr. Hvid added.

Practical benefits for enterprises

Through the VAS Program, businesses receive technical support to achieve their energy efficiency goals, specifically through support from DEPP3 Program experts. This includes conducting energy audits following international standards, identifying feasible energy efficiency solutions, and developing pre-feasibility and feasibility studies. These studies can later be submitted to financial institutions to access loans, enabling enterprises to make investment decisions.

With this technical assistance, companies will improve their management and technical capabilities of energy efficiency, and access technical guidelines and best practices for enhancing energy efficiency to proactively implement future energy efficiency solutions. This is also an opportunity to build capacity for energy management staff, laying a foundation for sustainable energy management and usage in enterprises.

Positive signals

Song Da Cao Cuong Joint Stock Company (SCL) is one of the pioneer companies joining the VAS Program in 2023. Mr. Vu Van Chien, General Director of SCL, shared that as a technology enterprise in building materials production, the enterprise's management board is committed to energy efficiency and sustainable production. The "pressure" and satisfaction of the technical team come from the constant search for improvement solutions and new technologies to optimize processes and boost production efficiency at the facility.

With support from the program, the enterprise has identified numerous opportunities and solutions to significantly enhance energy efficiency, such as upgrading the steam system and recovering high-pressure condensate, optimizing boiler combustion processes, and retrofitting waste heat recovery systems.

Based on these findings, the enterprise's management board selected priority solutions and applied for technical support from the DEPP3 Program to conduct a feasibility study, with a readiness to invest in these solutions once the study results are available.

Mr. Vu Van Chien, General Director of Song Da Cao Cuong JSC, considers the VAS Program to be highly effective for manufacturing enterprises in general and particularly for Song Da Cao Cuong.

"We realize that the Voluntary Agreement Scheme on Energy Efficiency, led by the Ministry of Industry and Trade in collaboration with Danish experts, is very beneficial for manufacturing entities in general and specifically for a building material production enterprise like Song Da Cao Cuong JSC. The program not only provides methods for conducting energy audits during implementation but also offers comprehensive solutions for energy efficiency," said Mr. Vu Van Chien, General Director of Song Da Cao Cuong Joint Stock Company.

Similarly, NatSteel Vina Co., Ltd. is one of the four companies participating in the VAS pilot in 2023. Through surveys and evaluations, the enterprise identified several opportunities to improve energy efficiency, with a prioritized recommendation to upgrade the RHF furnace to optimize combustion. This solution not only improves furnace efficiency and reduces emissions but also brings additional benefits, such as minimizing oxide scale formation on steel billets.

According to preliminary calculations, this solution could help the enterprise reduce production costs by about 4 billion VND annually by lowering FO oil consumption and input material wear, as well as reducing approximately 440 tons of CO2 emissions per year. The project’s payback period is expected to be under two years.

Mr. Le Khac Giang, Deputy Head of the Energy Management Unit and Deputy Head of Production at NatSteel Vina Co., Ltd., shared: "Previously, we tried working with several consulting firms to upgrade the furnace control system but it didn’t work. However, after reviewing the pre-feasibility report from the Project, we identified potentials and technologies to improve the furnace efficiency".

From these initial positive outcomes, the VAS Program has demonstrated its effectiveness in supporting businesses to overcome technical barriers, fostering a more comprehensive awareness of energy efficiency potential, and moving towards making energy efficiency investments.

Based on the pilot results of the Program, the Ministry of Industry and Trade will consider proposing to relevant authorities the issuance of policies to adopt and expand this model in the future. The aim is to achieve dual economic and environmental benefits for both the government and businesses, collectively contributing to national energy security, green growth, and greenhouse gas reduction to reach the goal of net-zero emissions by 2050.

The Ministry of Industry and Trade has organized several workshops to introduce the VAS Program to businesses across the country.

The Ministry of Industry and Trade has developed the VAS Program website at https://vas.depp3.vn/ to support businesses in finding official information about projects, assistance, and registration for program participation.

The VAS website serves not only as an information hub but also as a bridge between government authorities and businesses, supporting businesses in their energy-saving initiatives and greenhouse gas emissions reductions towards achieving net-zero emissions by 2050.

DEPP3 Program