More than 10,000 farming households in the south-central province of Phu Yen are enjoying higher incomes supplying sugarcane to a local biomass power plant than selling the product to agriculture traders.
KCP Vietnam Industries Limited Company, a sugar producer that owns a biomass power plant in Phu Yen, is buying sugarcane from local farmers at higher prices than the rates offered by traders, to ensure raw material supply for its electricity production.
Biomass power is carbon neutral electricity generated from renewable organic waste that would otherwise be dumped in landfills, such as scrap lumber, forest debris, and crop residues.
Besides its main production of sugar and molasses, KCP Vietnam Industries also runs a 30MW biomass power plant just behind its main factory.
The facility has been buying bagasse, the dry pulpy fibrous residue that remains after sugarcane stalks are crushed to extract their juice, from local farmers to generate electricity over the last three years.
The plant consumes around 300,000 metric tons of bagasse every crop, generating power to the national grid.
The company often buys sugarcane from local farmers for VND820,000-860,000 (US$35-37) per metric ton, about VND100,000 ($4) higher than prices asked by dealers.
KCP Vietnam Industries signs contracts with farmers, promising to buy all of their crop yields as well as supplying them with fertilizers and seeds in unlimited amounts, according to Dang Van Sam, a sugarcane grower.
This is why farmers in Phu Yen still stick with sugarcane, at a time when their peers in neighboring provinces have switched to growing cassava as sugar producers have offered to buy their products at low prices, according to Tran Huu The, deputy chairman of Phu Yen.
KCP Vietnam Industries’ biomass power plant was built in 2016 at a cost of $23 million. It produced 49 million kWh for Vietnam’s national power system in 2017, and 108 million kWh last year.
On average, the facility contributes more than ten percent of the total electricity output of Phu Yen, according to Thai Minh Chau, director of the Phu Yen Power Company.
KCP Vietnam Industries general director K.V.S.R. Subbaiah said that the company also shares revenue generated from selling its self-generated power to Electricity of Vietnam (EVN), the country’s power utility.
Biomass power generation is not new in Vietnam, but not many investors are interested as the selling prices to EVN are unattractive.
EVN currently pays the Phu Yen-based company only 5.8 U.S. cents per kWh, much lower than the price of 13 cents per kWh in Thailand.
“We have repeatedly called on the government to increase the purchasing price of biomass electricity to encourage businesses to invest in biomass power plants,” Subbaiah said.
“This would also help the domestic sugar industry.”