Challenges hinder development of renewable energy

Renewable energy has emerged as one of the most preferred sectors for investment in Vietnam, according to a survey by international consulting firm Grant Thornton, but the development of such projects has been hampered by a number of challenges.

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Illustrative image (Source: VNA)

The renewable energy sector jumped from the 10th spot in the same survey in 2018 to the third last year, after fintech and education.

Vietnam’s rising demand for power is drawing more foreign investors into the green energy industry. Singapore-based Enterprize Energy has been developing a 3,400MW Ke Ga offshore wind power farm on an area of about 2,000 sq.km, 20 km offshore Ke Ga Cape in the south central province of Binh Thuan. The project is estimated to cost roughly 10 billion USD.

Enterprize Energy founder and chairman Ian Hatton said the project’s main challenge will be the selling price of the wind power.

In September 2018, Vietnam introduced a 20-year feed-in-tariff (FIT) for offshore wind projects, standing at around 0.098 USD per kWh. The rate is only applicable for projects that enters commercial operation before November 2021.

Though the firm is working around the clock to complete the project, its first phase is not likely to be operational before 2022.

Last month, the Asian Development Bank (ADB) has signed a 37.8 million-USD loan deal with TTC Energy Development Investment JSC (TTC Energy) to provide long-term financing to develop and operate a 50-MW photovoltaic solar power plant in the southwestern province of Tay Ninh.

The International Finance Corporation (IFC) and Armstrong Clean Energy Fund had invested to develop 35MW TTC Phong Dien solar power plant, the first grid-connected solar farm in the country. Inaugurated in 2018, the plant generates about 60 million kWh, enough to power about 35,000 homes a year.

Despite huge potential, the development of renewable energy projects in Vietnam have faced multiple challenges, such as high costs, poor grid infrastructure alongside complicated credit conditions and procedures, said Nguyen Van Vy, Vice Chairman of the Vietnam Energy Association.

It was estimated that over 90 percent of solar power projects under construction in Vietnam are using loans from domestic banks, noted a representative from Dragon Capital, saying limited credit access is making these projects less attractive to investors.

Interest rates were relatively high, at 9.5 – 11 percent a year, he added.

Dragon Capital recommended the government to provide the investors with easier access to lower-cost loans from foreign banks in order to help them cut costs and gain greater margins.

Vietnam has set lofty goals for renewable energy, targeting raising total production from 58 billion kWh in 2015 to 101 billion kWh in 2020, 186 billion kWh in 2030 and 452 billion kWh in 2050.

Under the country's renewable energy development strategy, which was approved by the Government in 2015, Vietnam is aiming to increase the ratio of electricity from renewable sources from 35 percent of total output in 2015 to 38 percent in 2020 and 43 percent in 2050.

VNA