A power plant uses bagasse from a sugar factory to produce electricity in Phu Yen Province.
The factory owned by KCP Vietnam Industries Limited (KCP VIL) has bought sugarcane from farmers in the province at a price 100,000 VND (4.3 USD) per tonne higher than the market rate.
Many sugarcane farmers in the country have turned to grow cassava because of the low price of sugarcane.
Gia Lai and Phu Yen provinces are among the localities with the largest areas of sugarcane in the country, with more than 60,000ha.
In mid-March, the market price of raw sugarcane was 720,000 VND to 760,000 VND (31-33 USD) per tonne.
However, sugarcane farmers in Phu Hoa, Son Hoa and Dong Xuan districts in Phu Yen province are selling their product for 820,000-860,000 VND (35.3-37 USD) per tonne.
Ro Cham Y Nem, a sugarcane farmer in Son Hoa district, said that he had sold 40ha of sugarcane to KCP VIL for 840,000 VND (36.2 USD) per tonne.
“Fertiliser is given to sugarcane farming households that have signed supply contracts with the company,” a farmer in the district, Dang Van Sam, said.
The company is also offering 3.5 million VND (150 USD) each to farming households that do not currently grow sugarcane if they switch to the crop.
K.V.S.R. Subbaiah, general director of KCP VIL, told Tuoi Tre newspaper that his company produces both sugar and biomass electricity.
Built in 2016 with a total investment of 23 million USD, the 30MW biomass power plant needs about 300,000 tonnes of bagasse a crop (around four months worth).
In 2017, it supplied more than 49 million Kwh of electricity and reached 108 million Kwh of electricity last year, generating power for the national power grid.
“With revenue from selling electricity to Electricity of Vietnam (EVN), the company shares its profit with farmers to help them plant sugarcane,” he said.
The renewable energy supply from the KCP VIL biomass power plant contributes to 10 per cent of the province’s energy use, according to Thai Minh Chau, director of the provincial power company.
“This power source is very important to ensure energy security, and to meet increased power demand as well as insufficient power in the dry season,” he said.
The sugar factory has been using bagasse for three years, the deputy chairman of provincial People’s Committee, Tran Huu The, said.
“While many sugar producers are facing difficulties with low prices and farmers in other localities have left sugarcane farming to switch to cassava, farmers in Phu Yen province are growing lots of sugarcane thanks to purchasing contracts with KCP VIL,” he said.
The model is expected to help develop the country’s sugarcane industry and compete with rivals such as Thailand, he added.
The province plans to organise a workshop to propose increasing the price of power that uses bagasse to encourage sugar companies to invest in biomass power plants.
Production of power using biomass is not new to Vietnam, but the price is low, so investors are not interested, Subbaiah said.
In Thailand, biomass electricity produced from bagasse at sugar mills sells for around 13 US cents per kWh, while the EVN buys it at 1,220 VND (5.8 US cents) per kWh from KCP VIL, he said.
“We have repeatedly petitioned the Government to increase the purchasing price of biomass electricity to encourage businesses to invest in biomass power plants. This would help the domestic sugar industry.”
Vietnam’s energy demand and biomass electricity prices are expected to increase, so the company plans to build one more biomass power plant with a designed capacity of 30MW.
However, the construction of a new biomass power plant will depend on preferential policies.