Low prices pull the plug on renewable power goal

Government incentives and policy reform are required to spark investor interest in Vietnam’s renewable energy sector

Chairman of the Vietnam Energy Association Tran Viet Ngai told VIR that if the government failed to change its energy policy and enact suitable measures to develop the sector, its ambitions for renewable energy development would be out of reach.

Under the country’s latest revised power master plan, released two months ago, Vietnam’s total wind power capacity would increase from the current 140 megawatts to 800MW by 2020, 2,000MW by 2025, and 6,000MW by 2030.

A major obstacle for investors in building wind power plants is the low selling price of electricity. Under Decision No.37/2011/QD-TTg released in 2011, the price of power generated by wind was fixed at 7.8 US cents per kWh. However, private investors claim that this figure is too low to make wind power projects commercially viable.

As a result, during the five years since Decision 37 came into force, only three wind power projects have been connected to the national grid including Binh Thuan 1 and Bac Lieu phase 1. The investors behind these two projects have been persistent in their petition for price hikes, while about 40 other investors are holding back on projects and waiting for a change in the government policy.

For instance, the south-central province of Ninh Thuan has 12 wind power projects in its master plan, but all of them are behind schedule. These projects include the Phuoc Nam – Enfinity renewable power project funded by Belgian company Enfinity, the Mui Dinh wind power project, South Korean LandVille Energy’s wind power project, and Malaysian wind power company Timur’s project.

According to the US Trade and Development Agency, many US firms are seeking to expand investments in the energy sector in Vietnam. However, a lack of supporting policies, difficult capital mobilisation, and unattractive electricity prices for green energy are major concerns.

Vice Chairman of the Ninh Thuan People’s Committee Pham Van Hau told VIR that the province would thoroughly review delayed wind power projects, and draft incentives such as land rent and site clearance policies to create the best conditions for investors to implement their projects.

A recent Ministry of Industry and Trade (MoIT) report cited an international consultant as saying that the price for renewable electricity should be 10.2 – 12 US cents per kWh.

The international consultant said the tariff should be 10.2 – 12 US cents for the country to achieve 1,000MW of wind power by 2020, as outlined in the previous power master plan.. The current 7.8 cents per kWh (for a 20-year purchase contract) is not reasonable and does not encourage wind power projects in Vietnam.

Solar power projects are in the same boat. Over the past few years, several foreign and local investors have proposed building solar energy projects in Vietnam, but a number of projects have failed to be realised due to a lack of support mechanisms. Thus far, only domestic private Thien Tan Group’s solar power plant in the south-central province of Quang Ngai has begun construction.

The feed-in-tariff (TIF) for renewable power generated from solar plants has not yet been released. To date, there is no mechanism to support the development of solar power projects in Vietnam, although the country has created policies to support other types of renewable energy, such as wind and waste-to-power projects.

Earlier this month Canada’s CMX Renewable Power Group expressed a desire to invest in a $150-million solar power project on 250 hectares in Ninh Thuan. Other potential solar projects include a $55.8 million South Korean project in the southern city of Can Tho, and a $240-million project backed by a consortium between South Korea’s Woojin and Kunhwa in the south-central province of Quang Nam.

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