Solar power a victim of its own success

July 17, 2019 | 15:24
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Lured in by the feed-in tariff of 9.35 US cents for solar projects, investors are lining up for approval to generate gigawatts of power in the central provinces of Vietnam where solar irradiation is the strongest. However, the current grid is not ready to handle this incoming onslaught, putting renewable energy projects in risk and serving a valuable lesson for planners and latecomers.
solar power a victim of its own success
The national grid cannot keep up with solar projects popping up to feed growing manufacturing activity Photo: Le Toan

Solar power development in Vietnam is hotter than ever. The boom began when the Vietnamese government released Decree No.11/2017/QD-TTg in April 2017 on mechanisms for encouraging the development of solar power.

Bui Van Thinh, chairman of Thuan Binh Wind Power JSC, told VIR, “The issue about grid connection is just like that of My Dinh National Stadium in Hanoi. While the stadium can accommodate only 40,000 people, the demand for watching football matches is far higher than that. How can we decide who gets inside and who will be left outside the stadium? There is similar pressure on the national power grid.”

Phu Lac wind farm invested by Thuan Binh is one of the renewable power projects in the south-central provinces of Ninh Thuan and Binh Thuan that had to reduce capacity after the grid was recently overloaded.

Excessive capacity

Under Decree 11, the offer of 9.35 US cents per kilowatt-hour (kWh) feed-in tariff (FiT) for solar power in Vietnam ended on June 30 sparking an investment rush. In Ninh Thuan and Binh Thuan, the installed capacity of approved solar projects has reached nearly 2GW and 4GW, respectively, according to a senior official from the Ministry of Industry and Trade (MoIT).

As of June 30 as many as 82 solar power plants with a combined capacity of 4,460MW have been connected to the national grid, according to Electricity of Vietnam (EVN).

The list of solar projects registered by foreign investors and local firms in Vietnam has been growing continuously, including well-known names such as Tata Power Ltd., Sunseap Group, InfraCo Asia Development Pte., Ltd., Gulf Energy Development, and local developers Thanh Thanh Cong Corporation and BIM Group. Their combined capacity exceeds the planned capacity of the adjusted National Power Development Plan VII released in 2016.

Binh Thuan Wind Power Association has petitioned the MoIT and EVN not to cut the capacity of Phu Lac and Binh Thanh 1 wind power projects in the province. According to the association, the power purchase agreement (PPA) of these two wind power projects, unlike solar power projects, contain no provisions to cut their capacity if the grid is overloaded.

Therefore, the association claimed that the reduction in their capacity is unfair and goes against the agreement.

The association blamed the overload on the scores of solar power projects in some provinces – such as Binh Thuan and Ninh Thuan – as well as the lack of synchronisation ¬between the planning and ¬execution stages of power source and grid projects. The association argued that these factors have been severely overloading the local power grid system and caused damage for investors.

Meanwhile, a solar power investor who declined to be name admitted that their 20-year PPA has provisions to cut their capacity if the grid is overloaded and they accepted it in order meet the deadline of reaching the 9.35 US cent FiT.

Nguyen Minh Quang from the National Load Dispatch Centre under the MoIT said that the south-central region is the nation’s treasure trove of renewable energy, but local power grid conditions are not prepared to accommodate the upcoming supply. “It takes three years, on average, to build a power grid project, while a solar power plant needs only one year to put in place. As a result, grid development cannot catch up with the proliferation of solar and wind power projects,” he said.

The lesson is that renewable energy projects need to be integrated into electricity grids that are capable of managing new complexities such as unpredictable and intermittent supply and more distributed power generation. Grid operators will also need to expand and modernise their infrastructure to ensure the reliability, efficiency, and security of electricity supply.

Investor challenges

According to Financial Times, Dang Trung Kien, chairman of industrial developer Truong Thanh Vietnam Group, said his company decided against investing in the two provinces and was currently building three solar projects in other localities in Vietnam

“There is a mismatch between planning for solar power projects and that for transmission infrastructure,” he quoted by Financial Times.

Investors and developers claimed a lack of synchronisation between the planning and execution stages of power source and grid projects that made burden and damage for them.

By the end of June 2019, the whole country had 89 wind and solar power plants with a total installed capacity of 5038 MW, accounting for 9.5 per cent of the total installed capacity of the national power system according to state-run EVN. This number has far exceeded the expectation of the revised Power Plan VII (only 850 MW of solar power in 2020). In which, Ninh Thuan and Binh Thuan provinces alone currently have 38 wind and solar power plants, with a total installed capacity of 2,027 MW.

The MoIT has just proposed a new FiT scheme, effective for solar projects operational from July onwards, where the tariff rate would be highest for projects in the north and decrease steadily travelling south. Under that , the draft decision proposes varying levels of geographical tariffs, which vary in the range from 6.67 to 10.87 US cents per kWh.

With energy demand projected to increase by more than 10 per cent annually in the next five years and required power capacity to double, the government is moving forward to develop renewable energy sources to ensure energy security and address the growing power demand.

Vietnam has high ambitions for renewable energy, as shown in the Revised National Power Development Master Plan VII. The plan stipulates that 21 per cent of the total energy supply should come from renewable sources by 2030. As plans for a nuclear power plant have already been postponed by the National Assembly, the country is pushing for more alternatives to satisfy its energy hunger. Foreign investors are especially welcome, as there is no foreign ownership limit and many attractive tax incentives are offered.

By Phuong Thu

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