News, Insights and Market Developments from Renewable Việt Nam!
Over the last 30 years, Viet Nam has managed a remarkable development of its agricultural sector and its energy sector. Recently, a new challenge has arisen at the nexus of both sectors, involving land-use conflicts caused by the increasing influx of wind and solar energy investments in particular. Viet Nam’s renewable energy resourcesare vast and largely untapped.
With the new support schemes for wind and solar energy, around 300 renewable energy projects are currently under development; among them 285 solar projects representing 23,000 MWp of capacity. The large and still growing number of new solar PV investment projects has raised concerns particularly in the Vietnamese “food basket“ provinces in the South with regard to potential land-use conflicts.
Solar PV dual-use or agrivoltaic concepts can resolve land-use conflicts between energy and agriculture production, by combining both on the same site. Developed in the early 1980’s in Germany, the concept has been implemented in a number of countries with hundreds of (mainly small scale) projects and applications.
Solar dual-use provides multiple socio-economic benefits that are mainly based on the key concept of the increased land productivity of the combined system, compared to the single-use of the same area of land. The increase of this Land Equivalent Ratio (LER) through dual-use applications has been proven by pilot projects in different countries.
This new study commissioned by GreenID Viet Nam analyses international experience with dual-use approaches and assesses potentials of this innovative approach for Vietnam. With the help of a case study in one of the Mekong Delta provinces and based on real agricultural production data from this province, the report assesses a realistic and short-term potential for the application of this innovative approach in Viet Nam.
On September 12, 2017 the Vietnamese Ministry of Industry and Trade (MoIT) released the long awaited Circular 16/2017/TT-BCT “Regulating Solar Power Project Development and Standardized Power Purchase Agreement for Solar Power Projects“ (please find all relevant documents for download at the end of this post).
This final version of the Circular that had been publicly drafted in late April follows the Prime Minister Decision 11/2017/QD-TTg, issued April 11, 2017 and regulates in more detail the implementation of the new Feed-in-Tariff (FIT) and net metering support scheme for solar PV projects in Vietnam.
With this Circular potential PV project developers and investors find the binding Standard Power Purchase Agreement (SPPA) that needs to be signed with state owned monopoly utility Electricity of Vietnam (EVN) as well as procedures and templates for the net metering credit calculation and reimbursement for residential and commercial power consumers that install rooftop PV systems.
The April draft of the SPPA had drawn harsh critique particularly from international investors but also from domestic market stakeholders due to asymmetries in risk sharing to the disadvantage of the power seller, i.e. the PV investor and system operator. Basically, the international private sector community, organised in organisations such as EuroCham or the Vietnamese Business Forum (VBF), had earmarked the draft as “non-bankable”.
The expectations regarding improvements in the final version of the SPPA were not overoptimistically high and – to cut it short – those still existing hopes did not come true. The final SPPA shows only minor changes compared to the draft, some clarifications here and there but the key critical points have not been addressed.
To start with, here is an overview of the new regulation that covers Decision 11/2017 as well as Circular 16 with the key FIT and net metering regulation:
General requirements for project approval:
Special requirements for rooftop systems depending on system capacity:
So what are the main critical aspects of the SPPA in particular in the final version of Circular 16 from the perspective of project developers and investors? The following list highlights the most prominent aspects that have been addressed by market stakeholders and experts from the bilateral development cooperation:
Comment: This requirement creates substantial additional time pressure on project development and represents a major challenge for all projects that have not reached an advanced development stage by now. The regulation remains unclear regarding the COD reached for “parts of the PV plant”.
Comment: The lack of a compensation rule for power curtailments in case of grid maintenance or problems in the distribution or transmission grid creates financial risks that are difficult to calculate and therefore put another burden on bankability.
Comment: The SPPA does not provide for offshore arbitration which has been criticised especially by international investors and financing institutions.
Comment: Although the force majeure provisions have been adjusted the SPPA does not adequately address risks of political change of law and regulations. Considering that the Circular retroactively forces projects that had already negotiated a PPA with EVN before the FIT regulation came into force to obey to the new legislation and renegotiate their PPA according to the new regulation, there remains a risk of political change for any new project implemented on the grounds of this regulation.
Comment: The SPPA provides no termination payment or compensation for the seller’s outstanding debts or expected return on equity capital in case of purchaser’s default.
Amendments to the agreement:
Comment: The provision seems not to leave much room for amending the SPPA. However, the formulation is anything but clear and MoIT officials have already publicly stated that “case by case amendments” could be possible (in this case the official referred to the 1.2ha/MW requirement for ground-mounted PV power plants).
Comment: Acknowledging that a government guarantee for large solar PV projects would have a beneficial effect on the bankability of the projects it has also to be accepted that not many governments in similar market settings are willing to grant a government guarantee for (still rather small) green power development projects. Further than that, Vietnam has reached its limits of state debts and has not much room for additional debts left.
Regarding utility-scale PV projects developers are facing substantial challenges:
Regarding commercial and industrial rooftop projects I would be more optimistic for mainly two reasons:
Today, April 14, 2017 the long-awaited decision on the “Support Mechanism for the Development of Solar Energy in Viet Nam” was finally published. The Prime Minister of Vietnam officially signed Decision 11/2017/QD-TTg a few days earlier, on April 11.
Ground-mounted PV power plants:
Find here the official Prime Minister Decision 11/2017 on the “Support Mechanism for the Development of Solar Energy in Viet Nam” for download (pdf, in Vietnamese).
From November 15th to November 19th 2016 the Vietnam Sustainable Energy Association (VSEA) organized the first Renewable Energy Week Vietnam 2016 in the two cities of Can Tho in the heart of the Mekong delta and Hanoi.
This event aimed to promote public awareness on renewable energy in Vietnam, at the same time to create a forum for multi-stakeholders to debate, exchange on renewable energy policies, market incentives, best practices and the outlook on sustainable energy application in Vietnam in the forthcoming years. VSEA additionally sponsors a series of presentations as well as further workshops and nation-wide side events.
GreenID’s main objective is to promote sustainable development in Vietnam and the larger Mekong region. Among many other projects and activities GreenID Vietnam is supporting and managing the Vietnam Sustainable Energy Association.
The first half of the event week was focusing on sustainable development in the Mekong region. Consequently, the workshops took place in Can Tho right in the heart of the Vietnamese Mekong delta. The opening workshop focused on National Renewable Energy Strategy and Security and Sustainable Development Strategy in the Mekong Delta with presentations by WWF, the DRAGON Institute, GreenID as well as representatives from Bac Lieu province.
Further workshops explored renewable energy opportunities for off-grid and remote areas in Vietnam. Local expert Dr. Ha Duong Minh from CleanED at the University of Science and Technology Hanoi (USTH) presented renewable micro-grid solutions to supply remote areas and German expert Gerd Ebbinghaus presented a case study and mission report on a renewable energy community project in An Giang province.
Further projects and local renewable energy strategies were presented by official representatives from different provinces such as Can Tho, Long An, An Giang and Ca Mau. One example was the long-running biogas project of SVN Vietnam that has already supported investments in more than 160,000 small-size biogas plants across 53 provinces in Vietnam.
The second day of Can Tho saw further project related presentations on renewable energy and energy efficiency on the national and local level. Mr. Antoine Vander Elst of the Delegation of the European Union presented the EU Support Programme to Sustainable Energy in Vietnam which also includes a project based support for civil society organizations and local authorities.
RB Renewable Energy consulting presented results of the GIZ-PDP PV Rooftop Investment Opportunities in Vietnam study that has been conducted from March to October 2016 and includes six case studies for commercial/industrial PV rooftop investments in Central and South Vietnam.
The study identifies attractive investment opportunities in particular for self-consumption business model PV applications for commercial and industrial operations in Vietnam. Those operations pay above average electricity tariffs with day-time peak tariffs of up to 18USct/kWh. Different investment scenarios show equity payback times of 6-8 years for PV rooftop investments in case of good framework conditions.
A Renewable Energy and Sustainable Development Solutions Expo rounded up the agenda. Various renewable energy companies as well as development organizations presented their technical solutions and projects.
The second half of the Renewable Energy Week Vietnam took place in Hanoi with most of the agenda identical to the one in Can Tho but here attracting a different audience with representatives from the capital’s central government and international cooperation organizations as well as scientific institutions.
Additions to the Hanoi agenda were e.g. the presentation of Koos Nefjes on UNDP Vietnam‘s policy work on Greening the Power Mix or the presentation on Social Benefits of Renewable Energies by Dr. Sebastian Helgenberger of IASS Potsdam.
All presentations of the First Renewable Energy Week Vietnam 2016 can be downloaded here (googledrive):
A short video of the event can be found on YouTube.
In 2013 the two cities of Wernigerode and Hoi An signed a city partnership, comprised in part of shared common climate change efforts. Hoi An participates in the Municipal Climate Partnership project implemented by Engagement Global gGmbH in cooperation with further initiatives and communal associations, funded by the German Ministry for Economic Cooperation and Development (BMZ). The two cities are developing a work agenda for the coming years.
In the context of this partnership, the city of Wernigerode has now acquired funding for a solar PV system to be installed on the roof of the city department for culture and sports, right at the entrance to the UNESCO World Heritage old city center.
From October 19 to 21 a delegation from the city of Wernigerode visited Hoi An and signed the cooperation contract for the PV system. With an estimated capacity of 38 kWp, the system is expected to support the electricity demand of the center of culture and sports as well as power the public lantern and sound system of the historic city center. To guarantee these consumers continued solar energy supply in the evenings, a certain amount of battery storage capacity will be integrated to the system design.
During the visit, a solar installer from Wernigerode, along with representatives from the German city’s communal utility, had the chance to examine the available roof areas, electrical facilities and grid connecting points.
RB – Renewable Energy Consulting advised the two parties regarding feasible system designs, accompanied the delegation on their inspections and mutual exchanges, and presented information on solar energy development and framework conditions in Vietnam and Germany.
The installation of the PV system is planned for mid-2017. For more information see here (in German).
Vietnam has abundant solar resources. The country’s solar irradiation is comparable to most countries in the region, including developed solar markets such as China, Thailand or the Philippines, as well as to international solar markets, such as Spain and Italy. Current scientific estimates state an average of 4-5 kWh/m2/day in most regions of Southern, Central and even some parts of Northern Vietnam (totalling up to 1,460-1,825 kWh/m2/year) and average peak irradiation levels of up to 5.5 kWh/m2/day in some Southern regions (totalling up to 2,000 kWh/m2/year).
Deploying this substantial solar potential at production sites would help manufacturing industries in Vietnam improve power supply reliability and reduce the burden on national power demand. This would also help the industrial sector reduce their significant expenses on electricity consumption due to high tariffs during peak hours and cross-subsidization policy from large consumers to smaller ones.
And looking at it from the perspective of the solar industry: the long-term market potentials for Solar PV investments in the commercial and industrial sector are generally vast. All economic indicators show that the Vietnamese economy will most likely continue to grow at a rate of 5-6% per year and foreign direct investments (FDI) are expected to increase likewise. Vietnam’s high level of regional and international economic integration is widely seen as a guarantor for further economic growth and the development of the Vietnamese commercial and industrial sector in particular.
To make solar PV investment opportunities in the Vietnamese commercial sector tangible, the German-funded Renewable Energy (RE) Project Development Programme (PDP) assigned RB Renewable Energy Consulting to provide an analysis on solar PV investment opportunities in Vietnam, including six detailed investment case studies for commercial and industrial PV rooftop systems.
The main objective of the assessment was to identify the potential for rooftop solar PV applications in companies and factories within industrial zones and recommend business opportunities for German companies. The geographical focus of the study was industrial zones and/or private factories located in Central or South of Vietnam with the highest solar energy potential. The core of the analysis is defined by six case studies, with the character of pre-feasibility studies. In general, two different business models were applied in the calculations of costs and benefits: self-consumption and net-metering, which are both expected to be included in the future solar PV support framework drafted by the Vietnamese Government in 2015/2016.
The case studies indicate that the emerging solar market of Vietnam already offers attractive business opportunities for German and Vietnamese companies. The key results of the assessment can be summarized as following:
The study was released in the context of the one-day conference Photovoltaics in Vietnam: Free-Field and Net Metering before Breakthrough on September 12th 2016, organized and supported by the Energy Solutions – Made in Germany initiative of the German Federal Ministry for Economic Affairs and Energy (BMWi), the Delegate of German Industry and Commerce in Viet Nam (AHK Viet Nam) and the GIZ Energy Support Programme Vietnam. Read more about the conference here.
The Renewable Energy (RE) Project Development Programme (PDP) is implemented by Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH on behalf of the German Federal Ministry for Economic Affairs and Energy (BMWi) in the context of the Energy Solutions – Made in Germany initiative. The target countries in the Southeast Asia (SEA) region are Myanmar, Philippines, Thailand, and Vietnam. PDP SEA aims to develop Southeast Asian renewable energy markets by promoting German- Southeast Asian business partnerships. It supports Germany’s small and medium sized renewable energy business enterprises in their activities in the region
In September 2016, the GIZ Energy Support Programme Vietnam, together with the German Delegate of Industry and Commerce (AHK) organized a business trip for a German solar industry delegation to Ho Chi Minh City to build up German-Vietnamese networks as well as boost investments and project implementation in the sector.
Starting with the one-day Photovoltaics in Vietnam: Free-Field and Net Metering before Breakthrough conference on September 12th, the German solar companies presented their products and services to over 200 participants from industry as well as federal and provincial political administrations. Representatives from local Vietnamese companies (Viet Linh, SolarBK etc.) also shared insights into the local solar sector. Private sector representatives from both countries concluded that the three requirements to foster solar power development in Vietnam are: a suitable FiT and supporting legal-administrational framework, project financing at affordable interest rates, and public acceptance and support.
The conference released a newly conducted assessment of investment opportunities in Vietnam presenting six detailed rooftop solar PV case studies. The results indicate that the emerging solar market of Vietnam offers attractive business opportunities for German solar companies. Peter Cattelaens, Deputy Programme Director of the GIZ Energy Support Programme in Vietnam, summarized: “German companies in the solar PV sector can now seize a number of attractive business opportunities along the value chain. Project developers, sales and operation managers, suppliers, engineers and planning consultants will be required in the very close future to invigorate the growth of the Vietnamese solar PV market.”
A site visit to the DBW Garment Factory, one of the latest commercial PV rooftop projects and a best-practice example of German solar PV technology in Vietnam, rounded up the week.
Read more about the conference and German-Vietnamese investment cooperation in the solar sector in the October edition of Vietnam Investment Review (download pdf) or on Vietnam Economic News (14/09/2016).