Vietnam: Clean energy - much potential, but lack pricing mechanism

Vietnam: 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.

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Link to Original Article:
http://english.vietnamnet.vn/fms/business/175680/clean-energy---much-potenti
al--but-lack-pricing-mechanism.html

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John Diecker
APT Consulting Group Co., Ltd.

www.aptthailand.com