Electricity prices may rise if renewables overdeveloped: finance ministry

Renewable power production is booming thanks to a fit-in-tariff (FIT) price of 7.09-9.35 U.S. cents per kilowatt-hour, much higher than prices paid for conventional energy.

As of December 31 last year installed solar power capacity was nearly 18,000 megawatts compared to the government’s target of 4,000 MW by 2025 and 12,000 MW by 2030.

In the first five months, renewable sources generated 16.18 billion kWh, or 15 percent of Vietnam’s total capacity, according to data from Vietnam Electricity (EVN).

But the grid and storage systems have not kept pace, causing risks of overload and wastage.

“Combining hydroelectric, thermal electric and renewable energy will be more complicated and will affect retail tariffs,” the ministry said.

To resolve the mismatch between generation and grid capacity, experts called for the development of a smart grid, which allows exchange of information and energy between providers and consumers.

The FIT mechanism lapsed late last year.

Authorities said an FIT mechanism is no longer suitable, and they are planning a transition to a bidding mechanism.

But experts warned the new pricing method could hurt both investors and the market.