Vietnam’s wind power tariffs attractive, but grid capacity a major concern

Vietnam’s new feed-in tariffs are attracting great interest in wind power, but investors are concerned about grid connection and purchase agreements.

The new feed-in tariffs (FIT) are expected to be attractive to domestic and foreign investors, Tommaso Rovatti Studihard, South East Asia sales director for wind power developer Vestas Asia Pacific, told VnExpress International.

The government recently approved tariff revisions under Decision 39 on support mechanisms for the development of wind power.

The decision, effective from November 1 this year, raises the tariffs from 7.8 US cents per kWh to 8.5 US cents for onshore and 9.8 US cents for offshore generation respectively.

"Electricity demand will grow at an estimated 8 - 10 percent a year from now to 2030. This represents realistic opportunities for investors," Studihard said.

Conjecturing that the national plan envisages adding 1,000 MW of wind power by 2020 and 6,000 MW by 2030, he said the targets are achievable.

"Vestas is excited about the Vietnamese market, probably this is the most promising market in the Asian region with very good wind resources," he said.

Vestas has so far put three wind power projects into operation in Vietnam and plans to have another project come online by 2019 and "do a lot more in the future."

Studihard noted that over the next three to five years there are huge opportunities in Vietnam to have some gigawatts of wind power, but the bankability of the power purchase agreement (PPA) remains an issue with many investors, especially international investors, and banks finding it a little difficult to be comfortable with.

There are no clear termination and force majeure clauses in the PPA, which hinders the attraction of foreign investment, especially from banks and credit institutions, he explained.

"One more problem is Vietnam’s weak grid capacity, which would become a bottleneck for developing wind and other renewables. The grid needs to be upgraded to tap the great potential Vietnam has for offerable, sustainable and reliable wind power."

Bui Van Thinh, CEO of the Thuan Binh Wind Power JSC (TBW), said having gained success in developing the 24MW Phu Lac wind power project in the central province of Binh Thuan, TBW is completing procedures to start construction of a 30MW wind power project in neighboring Ninh Thuan Province.

But the weak grid capacity is the biggest challenge to expanding renewables like wind and solar power, he said.

The transmission line near Phu Lac site could handle 100MW, compatible with two 50MW wind power projects.

Overload capacity is imminent once a solar power project connects with the transmission line, Thinh noted, citing the concerning fact that there are eight solar power projects in the locality approved to connect with the grid.

"The government should instruct the state-run Electricity of Vietnam (EVN) to install transmission lines to cope with the renewable power projects across the country, especially those in Ninh Thuan and Binh Thuan."

Ninh Thuan and Binh Thuan are central provinces that have the greatest potential for renewable energy in the country.

While 2,000 MW of solar power are proposed to be generated in Ninh Thuan, the local transmission line can only handle a few hundred megawatts. Thus, 110 kV or 220 kV transmission lines need to be installed before pushing the power to the 500kV transmission line and sending it to Ho Chi Minh City or Danang City, Thinh added.

Nguyen Van Thanh, deputy head of the Ministry of Industry and Trade’s Electricity and Renewable Energy Authority, said demand for energy, wind power in particular, has been growing rapidly.

The need for ensuring energy security but also sustainable development has changed Vietnam from an energy seller to buyer, with the country’s dependence on imported energy sources also rising, he said.

Vietnam also faces a shortage of primary energy, with coal imports posing many risks related to supply, price and transportation, he noted.

"Given that, efficient exploitation of new and renewable sources would play a key role in the country’s socio-economic development, energy security and sustainable development.

"The country is working diligently to draft policies for the efficient and economical use of energy, diversification of energy sources and increasing application of new and eco-friendly technologies," Thanh added.

Under the revised Power Development Plan VII, power stations in the country are expected to generate a total of 60,000 MW by 2020. Of these, coal-fired stations would make the largest proportion of 42.7 percent, followed by hydropower (30.1 percent), gas-fired plants (14.9 percent) and renewable energy sources (9.9 percent).

By 2030, the total capacity would soar to 129,500 MW, with coal and gas-fired plants accounting for 42.6 percent and 14.7 percent respectively, similar to the figures set for 2020. But the ratio of renewable energy sources is set to double to 21 percent by then.

Source: evnexpress