By Michael Tatarski
Up until 2017, Vietnam had a relatively undeveloped renewable energy sector, with the exception of hydropower, which has been a major electricity source for decades.
That year, the Vietnamese government introduced its first feed-in tariff for solar power, which established a set price for produced solar energy – and everything changed.
Investors and developers rushed in to take advantage of the tariff, which was for projects completed by the end of 2019, and within that year, 4.5 gigawatts (GW) of solar capacity were installed, meeting a goal the central government had set for 2025.
Now, the country’s installed solar figure is approaching 17 GW, though it’s key to keep in mind that this much power isn’t always available, given the nature of solar.
“We’re now 10 years ahead of the fiveyear plan, which is not the norm,” said Thomas Jakobsen, managing director of Indochina Energy Partners.
This rush has included both ground based solar farms and rooftop installations on residential, commercial, and industrial buildings, and international corporations with a manufacturing presence in Vietnam have followed this trend – though rooftop panels can only go so far.
“Rooftop solar produces power when the sun is up, it produces seven days a week, and it produces during Tet, regardless of whether workers are in the factory,” Jakobsen explained. “This is good, but it doesn’t bring you even close to 100% of power consumption. I know factories that are able to do less than 1% of their annual consumption through solar, though there are also factories that can do up to 25%.” Business Executive Network 29 This is a problem for major multinationals with commitments to eventually get 100% of their power from renewable sources.
“Rooftop solar doesn’t solve your international commitments if you are a top-tier multinational,” Jakobsen added. “Vietnam is a supply chain country, so Apple, for example, doesn’t own factories, and there’s nothing wrong with that, that’s how supply chains work. But for them to be able to comply with what a top brand wants to promote toward consumers, different mechanisms are needed.”
The mechanism that investors, experts and advocates – including Jakobsen – have been pushing for is called a direct power purchase agreement (DPPA).
“That is one of our absolute main focuses,” Jakobsen said. “The way it works, for example, is that an investor builds 50 MW of solar in a field somewhere. On the other side is the consumer – let’s say an H&M factory. Currently, that factory buys power at a certain price at certain times of day, but under the DPPA we would ask them to buy under a variable pricing scheme that should give them savings because the wholesale market price is in principle always lower than the retail price.
” Once an agreement between a power producer and a consumer is reached, EVN can then remove the factory from their power generation equation, since the facility would buy energy directly from the solar producer.
If successful, the DPPA would give EVN more time to upgrade its national grid, an issue that has received frequent coverage in Vietnamese media recently, as the power grid is currently unable to handle the amount of new renewable energy that has been installed, forcing the power monopoly to cut solar and wind production.
Julian Day, project director at the Tra Vinh Wind Power Company No. 1, shared concerns over the grid as well: “We’re only as strong as our weakest link. The ambition is to build wind farms in intertidal areas or further offshore, but if you connect up all these renewable power-producing projects into the grid, it would just melt. So, it’s the onshore infrastructure which is the key hurdle to overcome.”
Coastal stretches of the Mekong Delta have attracted considerable attention from wind power companies. Bac Lieu is already home to a wind farm with 52 turbines, while Day hopes his project will be completed by the end of this year.
The region’s many waterways, however, make connectivity difficult. “There are geographical challenges and you have to balance the socio-environmental impacts,” Day said. “Overhead transmission lines are the only viable transmission method there, and you don’t want to blight the landscape with huge electrical towers, but we’ve got 71, and it’s not a particularly big wind farm – it’s just the distance to the substation.”
Day added that EVN has announced plans to build more substations to handle the growth in renewable energy, but the timeline for this work is uncertain: “That’s a problem for developers. If they say a substation will be built in five years, well my wind farm will only last 20 years, so if it ends up taking ten years to build the substation, then we only have ten years of business remaining.”
Nonetheless, both Day and Jakobsen expect investment in solar and wind power projects to continue, with the latter noting EVN’s proven track record as a cause for optimism.
“It’s important to understand that EVN has been used since 1975 to secure cohesion of the country, society, and social and economic development, and it has done a brilliant job,” Jakobsen said. “If we look at any neighbouring country, even those that for years have had significantly higher GDP per capita, the availability and quality of electricity in Vietnam is very, very high.” [C]
