Support Mechanism for Solar Energy in Vietnam officially issued

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:

  • With this decision Vietnam introduces – for the first time – a feed-in tariff for grid-connected PV power plants of 2,086 VND, equalling 9.35UScents/kWh (20 year PPA). The tariff will be adjusted regularly to changing VND-USD exchange rates.
  • The government will issue a Standard PPA that all power sales have to comply with.
  • The electricity buyer (single-buyer is Electricity of Vietnam, EVN)  has to purchase the entire solar power generated from the PV system with priority given to deploy the full generating capacity of the system.
  • PV systems are eligible for the support if and when solar cell efficiency is >16% and module efficiency is >15%.

Rooftop systems:

  • Rooftop PV systems will be eligible for a net metering support scheme (using a bi-directional meter).
  • Excess energy within a billing period (not yet clarified) shall be transferred to the following billing period. Excess balances will be remunerated either after one year or when the PPA is terminated with the same tariff as ground-mounted systems (9.35USct/kWh). This tariff will be adjusted annually according to fluctuations in VND-USD exchange rates.
  • Implementing regulations with more detailed provisions for the net metering design will have to follow
  • The long discussed system capacity cap for rooftop systems is no longer to be found in the final law.

Further provisions:

  • Solar PV investors will be granted various land use fees as well as import duty and tax exemptions.
  • The Ministry of Finance (MoF) is asked to research on and develop additional tax exemptions and other supportive regulations for smaller rooftop systems <50kWp.
  • The regulation will enter into force with June 1st, 2017 and is initially limited until June 30, 2019. Until then, the Ministry of Industry and Trade (MoIT) will assess the law and suggest adjustments for a follow up regulation.
  • PV projects that have signed any PPAs before this decision entered into force are responsible to renegotiate and amend those agreements in accordance to the new legislation.

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).

Find here an unofficial english translation of the law for reference (provided by GIZ Energy Support Programme Vietnam).

 

 

First ‘Renewable Energy Week Vietnam 2016’ in Can Tho and Hanoi

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_Publications

The Renewable Energy Week Vietnam 2016 was supported by GreenID Vietnam, a Vietnamese non-profit organization established under the Vietnam Union of Science and Technology Associations (VUSTA).

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.

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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.

VuPhong_standA 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.

If you are interested in the work of GreenID please see their GreenID Annual Report as well as their latest Report on Air Quality in Vietnam.

German-Vietnamese City Partnership – A Solar PV System for Hoi An

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.

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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.

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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).

New Study: Commercial PV Rooftop Investment Opportunities in Vietnam

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. solar_map_vnCurrent 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.

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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 pre-feasibility studies for the six commercial and industrial cases that have been developed in the course of this study show that there are attractive investment opportunities for rooftop solar PV in the Vietnamese industry sector. However, they also show that the current low level of electricity tariffs in Vietnam is a big challenge and the assumption of a future increase in retail power tariffs is a critical factor for investment calculations.
  • For the whole examined company sample, equity IRRs (before tax) range from 5% to almost 18% in conservative base scenarios and from 8% to 21% in the more optimistic scenarios with lower investment costs assumed. Equity payback times range from 9 to almost 18 years in the base scenarios and from roughly 7.5 to 14 years in the more optimistic scenarios and can even get below 7 years when low investment costs and a higher increase of power tariffs are assumed.
  • The results show that there is a divide in results between business sectors that pay the ‘business’ and the ‘manufacturing’ electricity tariffs of EVN. Equity IRRs (before tax) reach double-digit values even in base case scenarios, in those cases that are either paying the EVN-Business tariff or the EVN-Manufacturing tariff but are able to benefit from the net metering support mechanism. In those cases, equity payback times are below or close to 10 years in the base cases.
  • The results also show that the a net metering support scheme as foreseen in the first draft legislation from 2015/2016 would have the potential to improve investment cases substantially for those PV system designs that allow for excess energy generation. This, however, will apply only to a very small number of cases, and hence shows that the legal framework for rooftop applications as proposed would have had only limited impact on the rapid development of this market segment. In the short- and medium-term the key driver for PV investments will thus remain self-consumption and the benefits of power purchase savings.
  • The analysis also revealed that despite the general expectation of investors to reach short equity payback times, there also is an added-value perception of solar PV investments that make longer payback times feasible for many investors. These added values range from benefits for green building certification to contributions to corporate programs, greening products or services in the eyes of customer target groups or the increase of energy supply security.

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 study is available for download at the website of the German Ministry for Economics and Energy. Or you can download it directly here.

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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

German Solar Industry Conference in Vietnam – New Investment Opportunities

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.

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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.

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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.”

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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).