RBF closure sory 3

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Transforming waste into energy


Biodigesters produce renewable energy for Vietnam’s farming communities

 

GIZ Huyen Vietnam biogas digester.jpg
Thirty kilometers outside the centre of Hanoi lies Soc Son. Most households in this district of the Vietnamese capital grow rice and raise livestock, providing the city’s residents with food. With little space between the household farms, the people live alongside their animals, and the smell of pig manure hangs in the air. Hoang Van Khang’s biodigesters are a welcome innovation: biodigesters convert organic waste into biogas, which can be used for cooking, while the slurry – or fermented manure – serves as an organic fertilizer to increase crop yields. This reduces farmyard odours and saves money that would otherwise be spent on cooking fuel and chemical fertilizer. Furthermore, it reduces soil and water pollution, deforestation and greenhouse gas emissions. With 15 years’ experience in the biogas sector, Khang knows this technology inside and out. He has built and sold several thousand biodigesters since 2004. A single biodigester can run for decades with minimal repair and maintenance. For the first 10 years, Khang didn’t make much headway in the biogas market. That changed in 2013, when EnDev launched its results-based financing (RBF) project in Vietnam. RBF helps businesses develop by providing performance-based incentives. Enterprises receive payments after pre-agreed results have been achieved and independently verified, rather than being given funding upfront for their activities. This shifts the focus from inputs and activities towards results. For Khang’s company Biogas Enterprise, RBF was the extra push it needed: with additional money coming in, Khang was able to grow his business from three to 30 staff members and expand into markets beyond his hometown. Khang sold more than 1,000 digesters between 2016 and 2018 alone. He is proud of his impact on the community, which can now generate its own renewable energy, contributing to a greener lifestyle and lower pollution.

 

GIZ Huyen Vietnam biogas cooking .JPG
“The biodigester has helped me and my family a lot. Now I use biogas energy for daily cooking instead of liquid petroleum gas. It saves me around VND 100,000 (3.75 euro) per month. I also share the surplus biogas with our neighbours to make full use of our biodigester. I’m very satisfied with it.”

Nguyen Thi Que, 63, biogas user in Soc Son district, Hanoi







Towards a commercial biogas sector in Vietnam

Hoang Van Khang is a particularly successful entrepreneur in the biogas sector, but he isn’t the only one. Almost 200 companies benefitted from the RBF project across more than half of Vietnam’s provinces. While companies bore the initial investment and performance risks, the financial incentives allowed them to be flexible and innovative in business planning, marketing, and sales. Sales increased as a result. In the past, the Ministry of Agriculture and Rural Development was responsible for customer selection and biodigester user training. By shifting responsibility to the private sector, companies now work more independently. Thanks to their enhanced capacities, they spearhead the development of the biogas market with considerably less outside support.
The RBF initiative also encourages households with biodigesters to share surplus biogas with those who don’t have one. This means that digester owners are able to make full use of their biogas by sharing with the villagers nearby, reducing their communities’ greenhouse gas emissions and protecting the environment. It also contributes to the socio-economic development of Vietnam’s rural areas. Hoang Van Khang has become involved in this modality, too. He now sells combined biogas appliances for multiple households, developing a model for biogas sharing among neighbours. He’s also pursuing new ventures: between 2017 and 2018, Khang built ten biodigester treatment plants for large pig farms. These biodigesters are ten times larger than the normal household-scale biodigesters with a volume of 200 cubic metres. A development in the Vietnamese livestock sector with the capacity to scale up intensive farming systems offers enormous potential.

 

“I installed a biodigester for my pig farm last year. We couldn’t even use the full amount of biogas that it produced. We had to burn gas every day, which is wasteful. Now, thanks to the new biogas minigrid, we can share the surplus biogas through pipes with our three neighbours. 'That feels great.”

Nguyen Van Bien, Dong Lac village, Tien Duoc commune, Soc Son district, Hanoi


Results in a nutshell

Running from July 2013 to June 2018, the RBF initiative saw 42,210 brick and composite biodigesters sold. 1.7 million euros were invested in the form of results-based financing cash incentives. A little over half of this went to households purchasing digesters and the rest was used for company incentives, with 40 euros dispersed for each biodigester. This enabled firms to make a greater margin on sales and use this extra income to expand their operations. Farmers needed to invest an average of 400 euros per composite biodigester and 800 euros for a brick digester, bringing the level of private investment leveraged to an impressive 31 million euros. The RBF mechanism was successfully introduced in 37 of Vietnam’s 63 provinces, where 342 companies received training. 192 of them successfully claimed RBF incentives, exceeding the initial target of 160 enterprises. One digester saves around six tonnes of carbon dioxide equivalents per year – about the same level of emissions as would be produced by one person flying from Germany to Vietnam and back again, or driving a car for 20,000 km. The RBF project successfully converted these reduced emissions into 2.3 million carbon credits, making it the largest Gold Standard carbon project in the world. The credits were sold to those that wish to offset their emissions. The revenues from credit sales were used to cover some of the project costs.


Lessons learned and ways to improve

 

RBF proved to be a powerful tool for steering and stimulating market development, unlocking the growth potential of the many micro enterprises active in the sector. In Vietnam, the participating enterprises responded strongly albeit with varying levels of entrepreneurship. The design and implementation of the RBF project generated valuable lessons. For projects or organisations active in the same field, read here about our experiences and conclusions:


1. RBF – a catalyst for market development

Many services in the Vietnamese biogas sector, such as customer selection and user training, used to be the responsibility of the Ministry of Agriculture. Shifting responsibility from the public to the private sector proved feasible and turned a government-led programme into an increasingly commercial market with companies working more independently and requiring less outside support.

  • In Vietnam, RBF clearly meant much more than just a money transfer – it was instrumental in achieving a mind shift that inspired and empowered micro enterprises to become more confident and independent in their commercial activities. In the words of a biogas entrepreneur: “I became more grown up”.

 

2. RBF – a cost-effective development approach

Transferring responsibility to private firms reduced their dependency on public services and increased the efficiency of the government-led biogas programme, cutting programme management costs and donor funding by 30 percent. The RBF approach has proven to be more cost-effective in comparison to previous technical assistance programmes and end-user subsidy schemes provided to the Vietnamese biogas sector.

  • The RBF mechanism contributed to the commercialisation of biogas enterprises and serves as a convincing case of how collaboration with the private sector can reach similar or even stronger achievements with less public investment.

 

3. Mobile technology for efficient verification

The project introduced an innovative mobile app that allowed biogas enterprises to self-report their results. This simplified reporting and subsequent independent verification – especially in a large-scale project with over 200 enterprises in a country as large as Vietnam. While the younger technophile entrepreneurs got the hang of the tool easily, some of the older entrepreneurs had to invest in and learn to use a smartphone first, which they did with a bit of extra training from the project.

  • Modern technologies and digital tools that are widely available and low-cost may be a worthwhile investment for RBF projects to make verification processes lean and cost-effective. With the digital tool requiring the RBF participants to submit both photographs and GPS coordinates of their installed biodigesters, the tool also prevented the possibility of most forms of fraud since this data cannot be manipulated, as opposed to traditional paper-based monitoring systems.