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Chairman’s Insights – May 8th 2017

Can Vietnam achieve a green growth strategy and 100% renewable energy

For sure there has been a lot of talk of late about alternative energy and in particular Solar and Wind generated energy but the big impasse has often been the negotiations on feed in tariffs (“FIT’s”).

The Ministry of Industry and Trade of Vietnam (“MOIT”) has just released a draft circular following Decision 11 on mechanisms for encouraging the development of solar power in Vietnam (“Decision 11”) which was issued by the Prime Minister last month.[1]

The most important aspect of the Draft Circular is the proposed template power purchase agreement for solar energy projects (“Draft Solar PPA”) which is being introduced by the Vietnamese government to bolster domestic renewable power generation and successfully compete regionally for investment in the renewables sector.  Once finalized, solar power investors will have to use the Draft Solar PPA in order to sell their electricity generated in Vietnam, with only minor changes expected to be permitted during contract negotiations. [2]

The Draft Solar PPA specifies a feed-in-tariff rate (“FIT”) of VND 2,086/kWh (excluding value added tax; equivalent to 9.35 US cents/kWh) as previously specified in Decision 11 for (i) grid connected solar power projects; and (ii) any residual power generated as compared with consumer power by rooftop solar projects (power price to be adjusted by exchange rate fluctuations to the US dollar at the time of payment).[3]

The current FIT for wind power on the other hand is 7.8 US cents/KWh.

A Mekong Economics authored study of alternative energy sources showed that over a period to 2050 Vietnam could transition to 100% renewable energy with a rapid expansion of solar, wind and biomass based power.

To date the State owned EVN and other energy producers Petro Vietnam and Vinacomin have mostly plants in Dong Nai and Binh Thuan with a third project due to start in Ninh Thuan.[4].EVN also has plans to develop further plants in the Central Highlands and the southern regions.

US Companies are also making a big push in the renewables sector. US companies have been involved in quality control engineering of wind turbine construction in the central coast and highlands with 16 of 27 turbines. Over 35 community based solar projects using US design and technology have taken place in the Mekong delta.[5]

Other projects include a 300 MW solar power plant in Ninh Tuan invested from Singapore, together with a possible 1GW project in the same province, a 150 MW solar plant invested from Canada.[6]

So maybe there is a real ray of sunshine and the hope that we can avoid major pollution which seems hard to escape at the moment.

Kenneth M Atkinson
Executive Chairman of Grant Thornton Vietnam

 

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