Clean energy – much potential, but lack pricing mechanism

Electricity of Vietnam (EVN) has recently proposed putting forth a mechanism for auctions of renewable energy projects from 2020 onwards, to give impetus to the development of this industry.

Nearly 3,000MW of solar power

EVN and its subsidiaries are rising as one big investor in the field of renewable energy. EVN and its affiliates have been implementing the first preparatory steps to invest in 25 solar power projects with a total capacity of 2,846MW.

Among these, parent company EVN will carry out four solar power projects, with a total capacity of 575 MW, including Phuoc Thai (200MW), Song Binh (200MW), Tri An (126MW), and Se San 4 (49MW). Currently, these projects are awaiting approval from the Ministry of Industry and Trade and the Prime Minister to be added to Power Development Plan VII issued on July 21, 2011.

The other five member companies will take charge of the remaining 17 projects and determine the construction location where appropriate. Specifically, Power Generation Corporation No.1 will be responsible for Dong Nai 4 Solar Power Project’s (50MW) lake-based construction. Power Generation Corporation No. 2 has four projects with the total capacity of 309MW.

Power Generation Corporation No.3 has seven projects, with the total capacity of 1,279MW. Southern Power Corporation implements two projects, with the total capacity of approximately 4.2 MW in Phu Quy and Con Dao Island provinces and Central Power Corporation has three projects, with the total capacity of 57.3MW.

Not only solar power, EVN is also operating wind power plants, including the 6MW Phu Quy Wind Farm (formerly invested by Vietnam National Oil and Gas Group aka PetroVietnam), and has stocks in Thuan Binh Wind Power Joint Stock Company, which operates the 24MW Phu Lac Wind Power project.

EVN itself is continuing research to develop four other solar energy projects with a total capacity of 570MW. EVN subsidiaries are also making investments into some wind power projects in the South Central Vietnam and Central Highlands.

Nevertheless, there is no specific date for many of these projects to be connected to the national electricity grid.

Pricing problems

Dr Nguyen Huy Hoach, deputy general secretary and chief of staff of Vietnam Clean Energies Association, said that nationwide there are 30 local and foreign investors developing solar power projects of 20-300 MV capacity. “Though the demand is big, investors are still struggling when investing in solar power due to high investment costs and the lack of a price mechanism for this kind of energy,” said Hoach.

Currently, the price of wind power, according to Decision No.78/2011/QD-TTg, is 7.8 cent per kWh, of which the government subsidises 1 cent per kWh. Up to now, nine projects have signed power purchase agreements with EVN, with a total capacity of 403.9MW, of which Binh Thuan Wind Power Plant No. 1 (30MW), Bac Lieu Offshore Wind Farm (99MW), Phu Quy Wind Farm (6MW), and Phu Lac 1 Wind Power Plant (24MW) have been put into commercial operation.

However, according to Binh Thuan Wind Energy Association, quite a few enterprises have registered to carry out wind power projects in Vietnam, registering a total capacity of 5,700MW. However, due to the low purchasing price of wind power in Vietnam, it is difficult to prove the feasibility of projects for banks to make credit assessments.

There is one exception from the 7.8 cent per kWh pricing: Bac Lieu Offshore Wind Farm, the only sea-based project in Vietnam, sells wind power for 9.8 cent per kWh.

However, this price is still considered low compared to Thailand’s 20 cent per kWh, the Philippines’ 29 cent per kWh, and Japan’s 30 cent per kWh. Despite it being a clean and promising energy alternative and the heavy attention wind power receives from investors, , no investment stimulating mechanism has been promulgated yet.

Source: VIR

About the author  ⁄ AmCham Vietnam

AmCham is an independent association of companies with the objective of promoting trade and investment between Vietnam and the U.S. With two chapters, one in Ho Chi Minh City and one in Hanoi, our membership of 700 companies and 1,500 representatives is unified by a commitment to promote trade and investment between Vietnam and the United States.

No Comments

Leave a Comment