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How companies can drive change in Vietnam’s green building industry

Urban planning, land clearances, and construction cranes are pivoting Vietnam’s iconic districts towards an internationally recognisable skyline silhouette, but real estate and construction booms in the country stress and exacerbate existing shortcomings of resources. The country is projected to become energy deficient in the coming decade, and urbanization will put pressure on the underdeveloped city infrastructure.

As such, the government and special interest groups are already pushing for sustainable development through green buildings and by setting the framework for an industry with strong potential. But without support from private sectors, from developers to building materials suppliers, these efforts will not reverse the current unsustainable development.

Recently, a white paper, entitled “Is There a Future for Green Buildings in Vietnam?”published by advisory firm Solidiance together with the Vietnam Green Building Council outlines strategies for construction and building material suppliers to develop and create a strong market presence in the Vietnam’s green building industry. 

Buildings can consume up to 40 per cent of energy, and more sustainable ways to develop and construct buildings should drive future change in Vietnam

Heiko Bugs, Solidiance managing partner

The country’s construction industry is currently booming, growing at 10 per cent annually, and is shifting various market preferences including architectural designs. Where once stood buildings designed with open ventilation, natural lighting, and minimal windows constructed with cement and bricks, buildings now are displaying lobbies with high-rise steel and glass structures. Such ‘international style’ architecture with significantly high solar heat gains require large budgets for air treatment and could potentially worsen Vietnam’s energy situation.

Put into perspective, 30 per cent of Vietnam’s energy consumption is accounted for by buildings. “Buildings can consume up to 40 per cent of energy, and more sustainable ways to develop and construct buildings should drive future change in Vietnam”, said Heiko Bugs, managing partner of Solidiance.

The energy demand of buildings in Vietnam helped increase the national energy consumption, which quadrupled between 1998 and 2008. As a result, energy prices were raised earlier in 2013 by five per cent, and will be increased an additional 40 per cent by 2015, according to plans.

Meanwhile, the energy deficit is expected to be ten per cent by 2015 and 70 per cent by 2025. With this potential to save a huge amount of energy – new buildings can save 30 to 40 per cent in energy efficiency and 15 to 25 per cent for renovated buildings – project developers, architects, consultants, end-users and Vietnam’s government have strong incentives to build with green materials and technology.

Use innovative technology for green buildings

While local suppliers of green building materials abound in manufacturing, their supply are usually of basic materials like cement, steel, concrete blocks, LED, and others. High technology products such as solar panels, windows that darken, and electronic resource metering are not actively manufactured by local players, and will only likely come into demand as the industry develops.

For example, businesses and consumers in Vietnam have shown a growing acceptance of using solar energy. But the current implementation has been limited to passive solar use such as solar water heaters. Currently, there is a growing trend for use of solar water heaters in Vietnam, a country that has about two million electrically run water heaters among households.

Regarding more advanced active solar technology like solar power cells, the country’s current solar power capacity is estimated from 1.6 to 1.8MW, which is relatively small when compared to the 17,000MW installed capacity of global leader Germany.

The installed solar power cells in Vietnam largely consist of households, the telecommunications industry, and the waterway traffic industry, which accounts for about one-third each of the total install base.

With the National Energy Development Strategy passed in December 2007, the target contribution of renewable energy sources from 2010 to 2020 will grow from three to five per cent. Such government plans will boost the demand for solar power technology and likewise, high technology green buildings.

There are also other technologies with the potential to increase the resource efficiency of buildings in Vietnam. Eco-efficient elevators, escalators, and walkways, for example, including regenerative drive technology, efficiency controllers, and automation sensors show promise. 

Commission studies on resource savings potential

For such high technology to influence the way modern Vietnam is designed and built, key decision makers (KDMs) – project owners, architects, consultants, construction companies, and end-users – will need to understand the performance thresholds for each technology. However, the availability of such data, often highly specific to the country and locality of projects, is limited in Vietnam. Companies with innovative green building solutions should lead the pack in commissioning performance studies and making available the results which would allow KDMs to make a business case for investment into sustainable technology.

Disseminate knowledge and information

There should also be training for the community and practitioners, to improve awareness and technical knowledge,since it is is currently lacking in the country. Architects, for example, can be trained in eco-design principles while contractors on implementation. Building management and tenants also will need understanding on resource conservation through building use and maintainenance of sustainable internal environments. Through this training and dissemination of knowledge, suppliers of eco-friendly materials and technology can garner significant changes.

International companies in Vietnam, whether in the construction industry or not, have had success in developing knowledge, gaining influence, and winning market shares by collaborating with government agencies and industry associations. These firms hold training and knowledge-sharing seminars with key opinion leaders. Companies will need to be selective, though, in finding such partners to maximise their return on investment on time and money.

Provide easier access to financing

With more data on resource savings and better knowledge dispersion of related technologies, opportunities for other methods to drive growth come up. Non-traditional financing methods such as performance-based financing is one example. Such method can boost green retrofits for existing buildings by taking saved operating expenditures and applying that to installment payments over the period of the contract. But the potential for performance contracts could be limited by the recent tightening of the domestic credit market and a slowdown in the real estate sector.

Set the agenda for legislation

The Vietnamese government is also helping to promote green buildings in the country, and suppliers for such development can help push the agenda further and faster. Collaborative industry sectors have done just that – the government in 2010 approved a Green Growth Strategy for Vietnam, aiming to reduce greenhouse gas emissions by eight to ten per cent by 2020, also specifying where buildings can offer big potential to reach those goals.

By the end of the year, new regulations, entitled “The Building Using Energy Efficiency”, is expected to be passed by the Ministry of Construction which will outline a legal framework for energy efficiency in building operations.

Vietnam’s green building industry is still nascent, but growing. Key to industry development will be a supportive regulatory information, training and information dissemination through certifications, and market-based pricing of energy.

Peter Hiep Nguyen and Hoang Nguyen are both analysts of Solidiance. Download the full version of the white paper here.

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