Low electricity prices cannot attract investments in Vietnam’s recycled energy

Located in the tropics, Vietnam still cannot take full advantage of its sun and wind resources to generate electricity. This has been attributed to the unreasonable mechanism which is unattractive to investors.

Under the Decision No. 37 dated June 29, 2011, the Electricity of Vietnam (EVN) is the electricity buyer who takes the responsibility of purchasing the whole electricity output from wind power projects.

Regarding the wind power price, the legal framework stipulates that the price is 1614 dong per kWh, or 7.8 US cents and can be adjusted in accordance with the dong/dollar exchange rate fluctuations.

The decision also said that the State props up 207 dong (one US cent) per kWh for the purchases of electricity from wind power plants, with the disbursement to come from the Vietnam Environment Fund.

Meanwhile, according to Diep Bao Canh, director of the Mat Troi Do Company, there has been no regulation on solar energy plant, because no project in this field has been registered.

At present, there are only small scaled projects invested by the State itself which aims to provide electricity directly to households (for lighting, watching TV).

Also according to Canh, after considering the investment rate, a lot of enterprises have suggested raising the solar power price to 20 US cent per kWh, but it is highly possible that the suggested price would not be accepted.

Meanwhile, the governments of other regional countries accept to buy electricity from recycled energy plants at 27-32 US cent per kWh.

EVN pays low, delays in making payment

The current laws set up the recycled power prices at the levels lower than that in other regional countries. However, in fact, power plants receive much lower than the stipulated levels.

A source said that EVN, the only electricity wholesale buyer, only pays 6.8 US cent per kWh to the Tuy Phong wind energy plant in Binh Thuan province.

When the power plant asked why the actual purchase price was lower than the price level stipulated by the government, an executive of EVN said that the power group still has to wait for the disbursement from the environment protection fund and EVN would make payment when it receives money from the fund.

To date, Tuy Phong has provided 1.5 million kWh of power to the national grid, while EVN still owes money to the power generator.

A senior executive of Tuy Phong said though the sum of unpaid money is small, this showed the “power of monopoly” now enjoyed by EVN.

Thirty seven wind power projects are being implemented in Vietnam which is expected to provide 3800 MW of electricity. Ten investors have asked for the permission to carry out the field works to carry out 12 wind power projects in Binh Thuan province. Meanwhile, Ninh Thuan province has nine investors and 13 projects. Binh Dinh province has Phuong Mai wind power project kicked off in 2012.

Meanwhile, Ba Ria – Vung Tau is moving ahead with the wind power plant with the designed capacity of 7.5MW. Bac Lieu has a wind power project developed by the US GE Group.

How to turn wind into power?

Dr Tran Van Binh, a Viet Kieu (overseas Vietnamese) in Germany, a recycled energy specialist, said that wind power needs to be priced at 10.5 US cent per kWh at least to allow power generators to make profits.

Of the sum, 7.8 US cent would be paid by EVN, while the remaining would come from the environment protection fund and users.

“The electricity price stipulated in the Decision No. 37 is overly low,” Dr Binh commented.

“It’s necessary to consider the bank loan interest rates and allow businesses to make the profit of five percent at minimum, so as to have reasonable electricity prices,” he added.

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