A thesis submitted in partial fulfillment of the requirements for the degree of Master of Engineering, School of Environmental, Resources and Development

Thesis (M.Eng.) - Asian Institute of Technology, 1998

In this study, the externalities of electricity production from fossil fuel were estimated using the damage cost approach. Valuations of damage from emissions to air were based on generic data from other studies. The average private costs for fossil fuel based power generation are projected to be in the range of 2.8 US cent/kWh to 3.1 US cent/kWh. If the quantified external damages are included, the social cost range is 3.1 US cent /kWh to 5. 6 US cent/kWh for fossil fuel. The related damage costs appear to be low but should be considered as preliminary estimates only. The results serve as a first indication, but the outcomes plead for the support of taxation of fossil fuel based power generation rather than installation of control equipment. A technique that model energy efficiency option, i.e. DSM and loss reduction as fiction assigned generating units was also applied. The alternatives for incorporation of environmental externality costs and the effects of externalities and energy efficiency options on electric utility planning, and resource selection procedures were analyzed with the help of a decision tree m.odel. This pioneering study concludes that the requirement to inc01porate externalities in the resource planning process had negligible impacts on the planned resource mix of the power utility in Vietnam. This finding is not swprising due to the current low natural gas prices result in natural gas being the fuel of choice to meet the future demand for electricity, with or without the consideration of environmental externalities and the limited renewable resources in Vietnam. The study identified that the energy efficiency program and the reasonable environmental tax rates are economically and environmentally sound solutions for Vietnamese power development in the next decade.