Rice husk is a residue from rice, which is grown in large quantities in Vietnam. By using rice husk as a fuel for heat and power production, dual environmental benefits can be achieved. Since it is a carbon neutral fuel, it can be a way of offsetting carbon dioxide emissions from energy supply systems. The use of rice husk for energy purposes can also help solve disposal problems at locations where husk is dumped in rivers or burnt in open piles. The aim of this study is to investigate whether rice husk can be used in an economical way to meet the energy demand within the rice milling industry, mainly electricity, and/or to produce electricity for sales to the national grid. Different energy conversion technologies are considered for three sizes of power plants, suitable to meet different demand categories, and their respective lifetime costs of generation are calculated. The impacts on project economy of the Clean Development Mechanism, rice husk ash sales and cogeneration of heat are also investigated. The lifetime costs of generation of the different power plants are compared with the electricity price in Vietnam. The results show that the profitability is influenced by whether the electricity is sold directly to rice mills or to the national grid. For large plants., economic viability can be reached without revenues from ash sales or the CDM. For smaller plants either or them is required. Copyright (C) 2008 John Wiley & Sons, Ltd.