Solar panels at BIM 1 Solar power Plant in Phuoc Minh Commune, Thuan Nam District in the central province of Ninh Thuan (Source: VNA)
HCM City (VNA) – Challenges to renewable energy development inVietnam and solutions to them were highlighted at a seminar held in Ho Chi MinhCity on August 23.
Theevent, entitled “Vietnam Renewable Energy: Challenges and Practical Solutions”,was co-organised by the StoxPlus Corporation and the European Chamber of Commerce (EuroCham) in Vietnam.
Experts said renewableenergy development projects are facing challenges in licensing, financingoptions, and agreements with local project owners.
Nguyen Quang Thuan, CEO of StoxPlus Corporation, said “We would like to sharenot only market insights and lessons learned from project implementationexperience, but also key issues and risks about project development, financing,merger and acquisitions, and equity investment.”
According to Stefano Pellegrino, General Secretary of EuroCham Vietnam, renewableenergy development “is more and more important, and EuroCham would like topromote clean and sustainable energy in Vietnam”.
Le Xuan Dong, chief financial officer and director of Business InformationServices for StoxPlus, said Prime Minister Nguyen Xuan Phuc issued a decisionlast year to encourage the development of solar power, and five months later,the Ministry of Industry and Trade issued a circular on the issue, includingthe feed-in tariff (FiT) rate of 9.35 cents per kWh.
“Foreign and local investors are excited about renewable energy in Vietnam,which is expected to grow at 23.2 percent annually during the 2020-30 period,”he said.
“Despite the rush, out of 24 GW of renewable energy’s registered capacity, only19 percent have made it to the construction stage, while 8 per cent are inoperations. Most projects are still in the preparation stage,” Dong added.
By the end of July, projects with around 12,622MW solar energy capacity werestill in the pre-investment stage; 1,432MW in the design and feasibility studystage; 1,002MW (equivalent with 7 percent) in the construction stage; and only8MW (0.1 percent) in the operating stage.
Wind power projects have become even more difficult to implement than solarenergy because of the current low FiT.
“Only 5,700MW of wind power projects are in the stages of pre-investment,design and feasibility studies, construction, or operational stage, much lowerthan the total MW of solar energy,” he said.
"Biomass uses cheap feedstocks available in the delta regions of thecountry, including biogases and other agricultural by-products. Hence, thereare more biomass projects in construction and in operation,” he said, adding biomassprojects are expected to generate about 900MW.
“Because renewable energy is in the nascent stage, developers are encounteringchallenges from many sides,” Dong said.
He said that the main legal risk comes from the Power Purchase Agreement (PPA),which foreign lenders have deemed unbankable due to its non-negotiability anddifficulty in enforcement.
“Even if the PPA is signed, the fixed low FiT could have an impact onprofitability and the payback period of the project,” he added. “Localdevelopers also face operational risks such as project delays, overloadedtransmission lines in rural areas, and procurement of low quality equipment.”
Current undercapitalisation and low long-term sources of funding make itdifficult to borrow from domestic lenders over the long term, he said.-VNA
