Vietnam’s new price policy to boost wind power investments

Vietnam’s new price policy to boost wind power investments

Vietnam’s new wind power push is forecast to create an investment wave in the industry as seen in the solar power industry previously, dubbing a landmark for the country’s renewable energy outlook.

Prime Minister Nguyen Xuan Phuc has just issued a long-awaited decision approving the mechanism on the development of solar power projects. Under Decision No. 39/2018/QD-TTg, the feed-in tariff (FIT) for wind power of onshore and offshore projects will be adjusted up from 7.8 US cents to VND1,928 (8.5 US cents) and VND2,223 (9.8 US cents) per kWh, respectively. The price is excluding VAT and is adjusted according to the exchange rate between VND and the US dollar.

Under the decision, wind power projects that reach their commercial operation date by November 1, 2021, are entitled to the preferential price for a period of 20 years. For other projects that were put into operation before the issue of this decision will enjoy the new price from November 1, 2018.

The new FIT for offshore wind power projects is higher than for solar power projects priced at 9.35 cents per kWh.

The government decided to make the change as the low FIT regulation was a major cause hindering investors from pouring in the wind power industry. At only 7.8 US cents per kWh, the regulated selling price of wind power in Vietnam is among the lowest in the world. The price is at 20 cents per kWh in Thailand, 29 cents per kWh in the Philippines and 30 cents per kWh in Japan.

Nguyen Van Thanh, deputy head of the Electricity and Renewable Energy Department under the Ministry of Industry and Trade, admitted while the wind power industry has grown strongly in other countries, it remains sluggish in Vietnam, which currently has only seven projects put into operation with a total output of some 190 MW.

Investment boom on the cards

Experts believe that the price hike will draw many foreign and domestic investors to the industry as seen in the solar energy industry. After the government increased the solar energy price to 9.3 US cents per kWh last April, about nine projects on renewable energy generation and distribution were registered by foreign firms each month, according to a report on renewable energy in Vietnam in 2018 by StoxPlus, a financial and economic information service provider in Vietnam.

According to Nguyen The Mich, a wind power expert from German GIZ’s project, Vietnam has some 60-70 wind power projects, but most of them are in the planning phase or in the first phase of construction as investors are still waiting for more suitable policies from the government.

The investment in wind power will boom if the government can build a suitable and effective support mechanism to trigger private investment in the industry, Mich said.

Vietnam currently relies largely on hydropower and thermal power plants for its electricity demands, but these have drawn frequent domestic and international criticism for their social and environmental impacts.

Meanwhile, Vietnam has great potential to develop wind power as the country possesses around 3,000 km of coastline with excellent wind conditions. The highest potential areas are on the south central coast, central highlands and the Mekong Delta region with about 24GW.

The government has targeted to develop wind power so that the country can have an output of 800 MW of wind power by 2020, 2,000 MW by 2025 and 6,000 MW by 2030.

By 2030, the government aims to produce 10.7 percent of its electricity from renewable sources, with wind and solar energy being the main options.

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