Opportunities for biomass pellets in the Vietnam market

Utilizing biomass pellets is one of the energy transition strategies toward Vietnam's goal of achieving net zero emissions by 2050.

Many nations turn to biomass pellets to satisfy their gas demands while preserving the environment in the face of growing oil, natural gas, and coal prices. Biomass pellets are produced from wood chips and sawdust, are the optimal clean energy for the combustion system, using wood from planned plantations and do not damage natural forests. That is also why this tablet is increasingly popular in countries looking for a solution to reduce dependence on fossil energy and switch to clean and renewable energy.

People harvest acacia in a Mekong Delta province. Photo: GIZ

According to the World Bioenergy Association, the worldwide wood pellets market will increase at a compound annual growth rate of roughly 7.3% between 2021 and 2026, reaching $15.6 billion. The numbers present several options for nations with the potential to produce biomass pellets.

As a country that has committed to achieving net zero emissions by 2050, Vietnam is developing mechanisms and policies to realize targets to reduce greenhouse gas emissions. Biomass pellets will therefore play an important role in Vietnam's Net Zero journey, such as promoting the development of the forest economy.

Mr. Pham Dinh Hoa - Director of Moc Dinh Import-Export Company (specializing in producing biomass pellets), said that biomass pellets promote the greening of abandoned land, improve mangrove areas, and ensure sustainable energy development at the national level. "Thanks to forest areas such as melaleuca, acacia hybrid, and rubber trees stretching from the North to the South, the input materials for the production of tablets are abundant, the output is stable, and it can become a sustainable energy source." Mr. Dinh Hoa said.

The global market is "flowing out" with biomass energy.

Despite producing a lot of biomass pellets, Vietnam mostly sells to other countries. Vietnam shipped about 4.9 million tons of biomass pellets in 2022, gaining more than 39% from 2021, according to the "Research Group of Wood Associations and Forest Trends"' pellet export market bulletin. The largest export market of Vietnam's tablets is Japan and South Korea.

Also read: Renewable energy in Vietnam: Opportunities and Challenges

Production of tablets in 1 province of the Mekong Delta. Photo: GIZ

While many developed countries such as Germany, the US, Japan, and Korea... actively look to biomass energy for Net Zero, even in Vietnam, this product has yet to have a definite place. According to Mr. Christoph Kwintkiewicz, an international consultant for the German International Cooperation Organization GIZ, Vietnam could save about $1 billion a year by replacing 10% of its annual coal imports, or 4 million tons, with domestic biomass energy. This would increase the populace's employment and income while reducing greenhouse gas emissions.

Speaking at a consultation workshop on "Application of co-firing technology in thermal power plants in Vietnam: biomass potential and existing technology" in September 2022 at Ninh Binh, Mr. Christoph Kwintkiewicz and numerous other experts raised many issues for stakeholders regarding how to utilize the potential of biomass in general fully and biomass pellets in particular for Vietnam's Net Zero journey.

Find a place for biomass pellets in the national yard.

The cost of biomass pellets usually declines around the end of 2022. Importers seek out countries with comparable costs but higher standards than Vietnam. That could be an opportunity for domestic enterprises to access biomass energy.

However, according to Mr. Nguyen Duc Minh - Energy Advisor of the Project of Climate Protection through Sustainable Bioenergy Market Development in Vietnam (BEM) - German International Cooperation Organization GIZ, the recent exporting and selling of biomass pellets in the domestic market in the long run, is not suitable because exporting is "bleeding" biomass resources.
According to Mr. Minh, the national energy development policy calls for maximizing the mobilization of energy sources, including renewable energy (including bio-energy), as demand for energy rises.

GIZ representative provides technical advice for a number of initiatives to use biomass energy instead of fossil fuels in industrial boilers. Photo: GIZ

Currently, the BEM project provides technical advice for many initiatives to use biomass energy instead of diesel fuel and coal in industrial boilers of companies such as Sanofi and Decathlon in Vietnam. BEM's efforts promote conditions for general biomass energy, particularly pellets, to be effectively exploited and make practical contributions to Vietnam's Net Zero journey.

Also read: Wood pellet industry needs sustainable raw material areas for export expansion

The Department of Electricity and Renewable Energy (Ministry of Industry and Trade) and GIZ are working together to implement the BEM project, which is supported by the German Ministry of Economy and Climate Protection (BMWK) under the International Climate Initiative (IKI).
Mr. Nguyen Duc Minh emphasized that several necessary and sufficient conditions are needed to develop the source of biomass pellets. First, develop a national biomass development strategy: planning for raw material areas and types of biomass corresponding to energy development planning. Second, there are mechanisms to promote and encourage bioenergy development, such as tax exemptions and incentives to apply.