Low Feed-in-Tariffs Deter Foreign Wind Power Investors in Vietnam

Wind Energy / Economics

Oliver Massmann, general director of Duane Morris Vietnam LLC, reports that Vietnam can be seen as a strong international competitor in wind energy as it has significant potential for wind energy and a continuously increasing electricity demand. However, the World Bank reported that only 8.6% of Vietnam territory has potential for the development of wind energy, in comparison with 2.9% in Laos, and just 0.2% in Cambodia and Thailand. Although Vietnam possesses some potential for wind-power production and an energy sector with strong interests from domestic and foreign investors, the low power purchasing price remains the biggest barrier to wind energy projects, making it difficult for Vietnam to become an international competitor in wind energy, Massmann stressed.

Under the existing regulations, Electricity of Vietnam (EVN), the only off-taker on the market, has the responsibility to buy the whole electric output from wind power projects with a feed-in tariff (FIT) of VND1,614 per kilowatt hour (excluding value added tax, equivalent to 7.8 UScents per kWh). According to the United Nations Development Program (UNDP), this current subsidized tariff is not sufficient for investors to recover their investments. This tariff is also much lower than in Indonesia (11 UScents), Malaysia (14.76 USents), Thailand (19 UScents), the Philippines (34 UScents), China (11 UScents), India (12.5 UScents), and Japan (20-24 UScents).

Vietnamese wind energy producers keep complaining about the very low purchasing price, while the current cost of electricity generated from wind power plants is still quite high due to large technical investment costs, Massmann said. For instance, several Japanese and South Korean investors are asking the Central Highlands province of Dak Lak authorities for high FITs for their major upcoming on-water renewable energy projects worth billions of dollars. According to EuroCham, a FIT of at least 11.5 US cents per kWh is required.

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