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Renewable energy development has experienced rapidly growth in the world energy market. Apart from wind, bio, solar and geo-thermal energy development, the most traditional hydro power is still the most predominant forms of new developments. This could be because of both the economical and geographical factors. One of such typical countries is Vietnam who has 40 percent electricity generated by hydro power plant. Because of the huge shortage in Vietnam power supply, which is 600 million kwh for 2007 as a result of fast economic growth, Vietnam has also undergo a fast development of hydro power plant. Another driving force is the added incentive from the carbon financing to these developments. However, a key evaluation leading to successful approval of financing is the estimation of Economic Internal Rate of Return (EIRR). Although Asian Development Bank (ADB) has given guidelines in evaluating process, there are still large amount of works have to be carried out in estimating the economic, financial, social and environmental benefits in the host country and to quantify these benefits. This paper will present a case study of a recent development of 28MWH hydro power plant with carbon finance option in central Vietnam. The estimation of respective factors in EIRR, such as willingness to pay (WTP), shadow price etc, will be addressed with the adjustment to Vietnam local provincial factors. The significance of carbon finance will also be addressed.
INTRODUCTION
Energy is critical for economy growth of Vietnam, one of the fastest growing economies in Asia. Vietnam average GDP growth in the past decades is on an average annual rate of 7.5 percent and the expected GDP annual growth is at around 8 percent till 2010. This rapidly growing economy primarily fuels the robust domestic demand of power. And apparently, shortfall in power supply is also prominent. In 2007, the total power shortage is estimated between 600 million kWh to 800 million kWh. Although this shortage only accounts for about 1.5 percent of the yearly power demand, this problem always occurs in March, April and May.
Vietnam then announced in 2006 its "General Electricity Development Plan 2006-2010," in addition to its power development master plan blueprinted in 2000. In order to maintain the sustainable economic growth, it is projected that the load...