VIETNAM: Why Wind Energy Dream Remains Hot Air

VIETNAM: Why Wind Energy Dream Remains Hot Air
Photo Credit: Reuters / TPG

What you need to know

Low electricity prices and lofty targets threaten to undermine Vietnam's wind power plans.

A series of infrastructural and legal hurdles continue to threaten Vietnam's ambitious wind energy targets.

Despite significant interest from global investors in harvesting wind energy in Vietnam, the industry lacks necessary facilities and legislative framework to help it meet its goals of producing 800 megawatts of wind power by 2020 and 6,000 megawatts by 2030, as reported by VnExpress.

"We only have 20-30 billion Vietnamese dong (US$882,000-US$1.3 million) left each year to pay our employees' salaries and meet maintenance costs," Tran Vinh Thong, an officer at wind energy firm Thuan Binh (EVN-TBW), told the news source. He also added that low prices for their electricity is another key issue.

"Currently, electricity derived from wind energy costs about 7.8 cents per kilowatt hour [kWh]. At this price, the Phu Lac wind energy project would need 14 years to recover its initial cost, while a typical wind energy project only lasts 20 years before it is replaced as maintenance costs soar," Thong elaborated.

Vietnam's energy prices pale in comparison with other Asian competitors, with an asking price of 20 cents/kWh for Thailand and 30 cents/kWh for Japan. This is a challenge that has been fiercely debated within the renewable energy community for years, with a report dated to 2016 noting wind energy prices identical to that of Thong's exchange with VnExpress.

Another stumbling block lies in the legal framework that comes with EVN's (Electricity Vietnam) monopoly on the market, according to reports by Dan Tri in Vietnamese last year. This means that electricity producers can only sell their voltage to EVN. In further complications, the firm has the ability to cancel a power purchase agreement (PPA) with their partner at any time, regardless of the contract's agreed upon duration.

"The biggest obstacle lies in the contract entered into when exchanging electricity," Bui Vinh Thanh, a business development officer at Irish renewables firm Mainstream told Cafe Finance in Vietnamese. "Investors expect a project to last about 20 years but if after only five-seven years a contract is terminated, the maximum compensation we can get is one year's worth of profits. That represents too great a risk."

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The News Lens has been authorized to republish this article from Saigoneer, an English-language digital platform covering urban development, history, food, culture and the arts in Saigon (Ho Chi Minh City) and throughout Vietnam. The original can be found here.

TNL Editor: David Green