Vietnam poised for investment boost in clean energy sector

May 18, 2015 | 09:27
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Vietnam’s green prospects look set to grow as investment in renewable energy is on the rise. However, the country needs to overcome a slew of hurdles to reach its full potential.  

As Vietnam’s energy demand rises parallel to its development, promoting green energy has become an urgent issue

This was the general concensus among experts and investors from Vietnam and the US during a clean energy conference themed “Smart Solutions for Vietnam”, held on May 14 in Ho Chi Minh City.

The conference, part of the continuing celebration for the 20-year anniversary of the normalisation of Vietnam – US bilateral relations, was co-organised by the US Consulate General in Ho Chi Minh City and VIR and sponsored by General Electric.

“The focus of this conference is the discussion of challenges for clean energy development in Vietnam, as well as opportunities for investors in this area. These are hot issues in the context that the energy demand is growing rapidly to meet Vietnam’s rapid socio-economic development,” said Dr. Nguyen Anh Tuan, editor-in-chief of VIR.

The conference drew the attendance of over 200 participants from various governmental agencies, financial organisations and investors from both countries. The attendees actively joined the discussion and shared ideas on policy changes, technologies, and project financing schemes in Vietnam to promote fresh investment and trade in the clean energy sector.

At the conference, Deputy Minister of Planning and Investment Nguyen The Phuong said: “Searching for smart solutions to promote green energy sustainability is a key content of Vietnam’s National Green Growth Strategy, which was issued three years ago.”

“Lessons, experiences, suggestions and recommendations at the conference will be useful for the government to construct and improve policies that promote the development of renewable energy,” he added.

Indeed, attendees noted that Vietnam was well-endowed with excellent renewable energy resources. For instance, the 3,400 kilometres of coastline provides abundant wind energy at 500-1,000kWh/m2 per year. Solar energy is also plentiful with an average solar radiation at 5kWh/m2 per day across Vietnam. The potential of small hydropower (which is less than 30 megawatts) is larger than 4,000MW in total.

However, despite these ample resources, Vietnam has yet to fully develop its clean energy potential. The majority of wind and solar projects are small-scale, while biomass and waste-to-energy power sources are overlooked. According to Nguyen Hoang Dung from Power Engineering Constructing JSC, there are various reasons for this shortage of green energy projects in Vietnam.

“The capital needed for setting up renewable energy sources is huge, yet they haven’t proven to be highly profitable. The wind power price in Vietnam is based on obsolete rates for coal power. Moreover, the price for biomass energy isn’t high enough to attract investors, and official rates for solar energy haven’t been set up,” Dung said.

Secondly, there have been no detailed regulations for renewable energy. There are little support and a few tax incentives for firms using solar power and no policy on connecting small-scale renewable energy to the national power grid. Thirdly, Vietnamese firms still lack skilled staff, investment capital, highly-developed technologies and supporting industries to adopt clean energy.

However, some firms in Vietnam have managed to overcome these challenges. One notable example is Cong Ly Co.,Ltd, a private firm that pioneered wind energy projects in the Mekong Delta province of Bac Lieu. Being the first to implement this programme in the province, Cong Ly faced initial challenges on human resources, experience, capital and technology.

“After a period of struggle, we were lucky to receive assistance from the Vietnamese government, the People’s Committee of Bac Lieu, the US Trade and Development Agency and the US – Vietnam Trade Commercials,” said To Hoai Dan, director of Cong Ly.

Then in 2011, Cong Ly was among companies to benefit from a credit package of $1 billion signed by the Vietnam Development Bank and the US Eximbank for Vietnam’s green power development. In March 2015, the firm was granted another $1 million by the US Trade and Development Agency for a feasibility study of the third phase of its project.

“So far, we’ve effectively operated 10 wind turbines supplied by General Electric (GE), at the capacity of 16MW. These grants have motivated American investors and consultants to collaborate with Cong Ly, and hopefully in the future, clean energy projects like ours will attract more overseas collaboration,” Dan said.

GE, which is an example of a highly-committed foreign investor in assisting the Vietnamese clean energy sector, has provided in total 62 wind turbines for two phases of the Bac Lieu wind farm project and was recently chosen as the provider of 14 turbines in the first phase of the Tay Nguyen wind farm project in the Central Highlands’ province of Daklak.

CEO of GE Vietnam & Cambodia Nguyen My Lan said: “ GE is well-positioned to play a supporting role with the increasing demand for sustainable and cost-effective energy solutions in Vietnam. We can bring our global experience, our resources, research and development, and through developing stronger partnerships with local customers, bring more benefits to the country in a sustainable way.”

US supports clean energy development in Vietnam US supports clean energy development in Vietnam

The US – Vietnam Clean Energy Conference opened this morning in Ho Chi Minh City to promote green energy sustainability in Vietnam.

Director general of the New and Renewable Energy Office, General Department of Energy

Clean energy development is the most feasible solution to meet Vietnam’s increasing energy demand, which is among the highest in ASEAN.

It will also provide national energy security, reduce dependence on non-renewable sources and protect the environment.

Vietnam enjoys an extensive potential for various sources of clean energy. However, there are many challenges that the country faces, including high investment costs, shortage of financial resources and technologies, as well as a lack of an overall strategy on the national scale.

Thus, I hope that the conference will raise foreign investors’ awareness about this sector and encourage them to invest in Vietnam’s green energy projects. More tax and tariff exemptions should also be introduced to entice potential investors.

Regional manager for Asia, US Trade and Development Agency (USTDA)

The USTDA assists infrastructure projects in terms of technology and finance. Vietnam is our priority market and we actively cover both the public and private sectors.

For instance, we’ve funded a project that integrated wind power up to 6,000MW into the national grid by the Electricity Regulatory Authority of Vietnam in 2013. We’ve also sponsored Cong Ly Co.,Ltd, a private firm, for its wind energy plans.

I anticipate that five years from now, the US – Vietnam cooperation will grow stronger with more US companies becoming interested in the Vietnamese clean energy sector.

The USTDA will always be closely involved in this growing collaboration, as projects in Vietnam are important components of the USTDA’s renewable energy portfolio and demonstrate the agency’s commitment to the US – Asia Pacific Comprehensive Energy Partnership.

Director of Clean Development, Dragon Capital

There’s a waterfall of capital from overseas investors that is ready to pour into Vietnam’s energy projects. However, Vietnam is only receiving a ripple of that investment money because the private sector is virtually absent from the clean energy scene.

As a result, I think it’s crucial that the country encourages private investment in renewable energy projects, and we’re happy to offer assistance. The ultimate aim is that 70 per cent of green energy projects in Vietnam will be implemented by private firms in the future.

I believe there are many ways to do this. Some recommendations include more activities, like the Smart Solutions conference, that engage potential investors and the market. There should also be a transparent electricity road map so that foreign investors can prepare their investment budget in advance.

Consultant, International Finance Corporation

To promote renewable energy, Vietnam should have a fund dedicated to clean power development. This fund can be sourced from environment protection fees on coal products.

Specifically, based on each sale of an oil-related product, the government can set aside a few VND per litre for the fund. The money should go directly into the fund, rather than via the state budget.

By this way, the fund can swell to $200 million a year. This capital can be used for investing in renewable energy projects in Vietnam.

Moreover, the fund can act as a lender for commercial banks, with an interest rate of zero per cent. This can reduce lending rates and encourage clean energy firms to borrow from banks, thus increasing their budget for future projects.

By By Nam Phuong

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