Industry ministry keen to move away from incentive tariffs for renewable power

The Ministry of Industry and Trade has recommended that national utility Vietnam Electricity (EVN) should start inviting bids for new renewable projects this year with the electricity purchase price (known as feed-in tariff) to be applicable until 2025.

The government will then invite bids again to determine the tariffs, and incentive feed-in tariffs for wind and solar power projects will become a thing of the past.

A bidding model has not been determined, but EVN has earlier proposed several models, including the “solar park competitive bidding” in which the government identifies the site and conduct land clearance for the power plant and the winning developer will construct and operate the project.

Another proposed bidding model is “substation-based competitive bidding”, in which the government identifies substations with available megawatt capacity and certain capacity at each station is opened for bidding.

Solar power plants that went on stream by December 31, 2020, are eligible for a feed-in tariff of 7.09 U.S. cents per kilowatt hour.

Onshore wind power plants build before October 31 last year get a rate of 8.5 cents.

Many projects under construction missed the deadlines, and their investors sought extensions.

Wind power developer BB Group said its wind turbines and other equipment were stranded at a port in HCMC for three months last year when the city imposed social distancing, which caused it to miss the deadline.

Other investors suggested that projects which went on stream late should be given a lower incentive rate, such as 6.8-6.9 cents for 10 years, instead of being excluded altogether from the incentive list.

The ministry said however the renewable energy market is competitive and globally prices are declining, and so a competitive mechanism is necessary.

The cost of renewable power production has decreased from four or five years ago when the incentive feed-in tariff was announced, and investors have growing experience in such projects and so productivity has improved, it added.

The national plan includes 15,400 megawatts of solar power, with 8,853 MW (from 148 plants) being eligible for the incentive feed-in tariffs.

The corresponding numbers for wind power are 11,921 MW and 3,980 MW (84 plants).

In 2020 Vietnam surpassed Thailand as the country with the highest solar power capacity in Southeast Asia with 16,500 MW, up from 86 MW in 2018.

This rapid addition placed a strain on the national grid, and forced EVN to cut solar output, causing losses to developers who have loans to pay for their investment.

The government plans to have renewables plants accounting for 75 percent of capacity and 70 percent of actual production by 2045 under its commitments at the United Nations Climate Change Conference in 2021.

It has also promised net zero emissions by 2050.

Now nearly half of Vietnam’s power is generated by coal-fired plants.