There is great potential for the energy service companies market to develop in Vietnam as power consumption is forecast to increase sharply in the coming years, heard a workshop in HCM City on October 22.

Speaker at the workshop on ESCO, a future business model
for Vietnam held in HCM City on October 22

According to Nguyen Dinh Hiep of the Vietnam Association of Science and Technology for Economical and Efficient Use of Energy, in this context, the economical and efficient use of energy has become compulsory.

“Energy service companies (ESCO) are one way to promote economical and efficient energy use,” he said.

ESCO would provide a comprehensive energy services package including energy efficiency consulting, planning, construction, installation, operation, maintenance, optimisation, and financial contribution, and apprise customers about investment costs, energy saving results and investment risks.

“By applying the ESCO model, businesses can gain access to green solutions, equipment and technology innovation and achieve efficiency in investment,” he noted.

It also helps businesses participate in national and international programmes and projects in the economical and efficient use of energy, contributing to environmental protection and coping with climate change, he added.

Public lighting, commercial and service buildings, industrial manufacturing, power distribution, and renewable energy are potential areas for ESCO investment.

Statistics show there are more than 220 energy efficiency service suppliers and energy efficiency consulting firms, but the number following the ESCO model is low.

Hiep said to boost ESCO activities, improving the institution and legal framework for it, developing a sustainable financial mechanism, and creating linkages between ESCO enterprises and credit institutions are imperative.

Markus Bissel, head of the component energy efficiency, renewable energy and energy efficiency project, EU-Vietnam Energy Facility, GIZ Vietnam, said that still one of the highest energy intensities in Southeast Asia, the Vietnamese Government faces many challenges to improve energy efficiency, particularly in the commercial and industrial sectors.

“Even though the Vietnamese Government successfully implemented the Vietnam Energy Efficiency Programme 1 and 2 and is currently implementing No.3 with very ambitious objectives, it is foreseeable that it is getting more and more challenging to meet the increasing energy demand.”

Bissel said ESCO provide services related to energy efficiency and financing of energy efficiency measures.

“The ESCO model world-wide is a driver of investments in energy efficiency measures. And even in Vietnam, in some specific sectors, the ESCO model is successfully applied.”

Speakers at the workshop agreed that the model is still new in Vietnam and faces hurdles due to a lack of legal support, mechanisms and financial support for implementation of energy-efficient projects and unavailability of manpower.

Besides, customers’ distrust, risks in undertaking energy efficiency projects and businesses’ greater focus on boosting sales than reducing costs through energy savings are other obstacles to ESCO activities, they said.

The workshop heard about lessons learnt in other ESCO markets such as the US and China and the experiences in Vietnam from foreign experts and representatives of local companies.

Organised by the EU-Vietnam Energy Facility project and the Ministry of Industry and Trade, the workshop, titled “ESCO, a future business model for Vietnam”, sought to share experiences in developing the model in Vietnam and raise awareness of government management agencies so that an appropriate policy framework could be adopted in the future.