The low selling prices that the government set for wind power cannot encourage the investment in the renewable power sector.

Investors give up wind energy projects in Vietnam

Wind power price in Vietnam now is the lowest in the world.

Of the many wind power projects licensed by the province of Ninh Thuan since 2005, only one has actually progressed to the construction phase, according to the vice chairman of the provincial people’s committee Do Huu Nghi.

Other projects have been delayed for years and the provincial authorities now plan to pull investment licenses from projects that have dragged on for too long.
According to Le Tuan Phong, vice head of the Energy Department of the Ministry of Industry and Trade, 48 wind power projects have been registered for investment nationwide.
However, only 3 (with a combined production capacity of 52MW) have come into operation.
Tran Viet Ngai, chairman of the Vietnam Energy Association, said there are many reasons for the lack of successful wind power development in Vietnam, but the most critical is the low price of energy.
The government has determined that state utility Electricity of Vietnam must buy all wind power at the regulated price of 7.8 cents per kWh. In addition, the Vietnam Environment Protection Fund has pledged EVN a subsidy of VND207, or around 1 US cent, for every kWh of wind power it buys.
Even so, wind power bought by EVN remains VND388 (US1.5 cents) per kWh more expensive than the current market price for electricity.
“If projects are located in areas with strong wind speed, the price can ensure a profit. In areas where wind is weak, the price isn’t enough [to ensure a profit],” said an official from the company Vietnam Renewable Energy, which has invested in a 30-megawatt wind power plant that began operating in 2012.
Vietnam’s wind power prices remain the lowest in the world.
To attract investment in the field, the minimum price should be 10 cents per kWh, the official said asking not to be named. At the moment that price is 29 cents in Japan, 22-24 cents in the Philippines, and 14-15 cents in Europe.
Meanwhile, wind power projects require major investment, about $1.8-2.2 million per MW or about twice as much as required by hydro or thermal electricity projects. Maintenance of those projects is estimated to cost $35,000 per MW each year, according to the Energy Department.
Ngai said investors rushed toward wind power projects in Vietnam years ago without really understanding the field and spurred by overzealous assessments.
After discovering the actual wind potential at the proposed project sites, he said, most walked away.
According to To Hoai Dan, general director of the wind power investor, Cong Ly Company, the World Bank conducted a detailed survey of wind energy in Southeast Asia in 2001, which claimed that Vietnam’s wind potential far exceeded its neighbors’.
Up to 8.6 percent of Vietnam’s territory was rated “good” or “very good” for building large wind turbines, compared to 0.2 percent in Cambodia, 2.9 percent in Laos and 0.2 percent in Thailand.
Vietnam’s total wind potential was estimated at 513,360 MW, over 200 times more than the Son La Hydropower Plant’s current capacity.
The report claimed that 41 percent of rural Vietnam was considered favorable for small wind turbines compared to only 6 percent of Cambodia, 13 percent of Laos and 9 percent of Thailand.
An updated assessment prepared by the Ministry of Industry and Trade and the World Bank in 2010 put Vietnam’s wind potential at 10,637 MW, or two percent of the figure reported in the 2001 survey.
Long-term strategy
The government hopes to produce 1,000 MW of wind electricity (0.7 percent of the nation’s power output by 2020) and about 6,200 MW, or 2.4 percent by 2030.
To develop the industry, the German Agency for International Cooperation (GIZ) recently proposed that the government increase wind power prices to 10.4 cents per kWh.
GIZ also said that Vietnam hasn’t given due consideration to the construction of offshore wind power plants because their construction costs far exceed those based on land.
The government should provide free land for wind power investors and support them in accessing bank loans, it said.
Ngai from the Vietnam Energy Association said the wind power market faces many difficulties because Vietnam hasn’t established a proper legal framework and an overall development plan for the industry.
The government should build a long-term strategy which encourages both local and foreign investors to get into the field and establish a wind power steering committee with representatives from the ministries of science and technology; and industry and trade, and the energy association.
“We should consider the long-term benefits of wind power development,” Ngai said. “If we only consider short-term gains, nobody will want to invest in wind power projects.”