Positive signs in attracting power industry investment

13:00 | 13/08/2020 Industry

(VEN) - Director of the Electricity and Renewable Energy Authority under the Ministry of Industry and Trade (MoIT) Hoang Tien Dung told Vietnam Economic News’ Lan Anh & Ba Cuong that the willingness of domestic and foreign private investors to develop power projects without government guarantees is a plus in attracting power industry investment.

positive signs in attracting power industry investment

Many solar power projects were initially assigned to domestic investors, but then transferred to foreign investors. How does the MoIT view this?

We currently have 62 commercially operated solar power projects and 10 wind power projects with a total capacity of around 6000 MW, some partly or entirely transferred to foreign investors from Thailand, the Philippines, Singapore, and China.

These transfers are a normal business activity according market trends. The Investment Law allows such transfers if foreign investors fully meet requirements, criteria and regulations. According to current regulations, the project transfer, and shareholder change are handled by the Department of Planning and Investment or the Ministry of Planning and Investment, depending on project capacity.

Normally, power source projects invested in the form of BOT (Build - Operate - Transfer), or power sources using liquefied gas require government guarantees. However, wind and solar power projects have been implemented completely without government guarantees and this is a positive signal in attracting investment in the power industry. In addition, foreign investors have more experience in securing capital, in technology and in operational management.

positive signs in attracting power industry investment

Many foreign investors do not directly participate in solar power projects but often buy them back from domestic investors. What are your opinions on this issue?

I think that the scale and capacity of domestic investors are different in terms of capital arrangements and implementation of large projects. If domestic investors have financial capacity and experience in operational management, we do not need to cooperate with foreign investors. In the meantime, small-scale investors with limited resources can participate in early stages or in preparation steps of the projects. Consequently, the combined advantages of both domestic and foreign investors will help increase investment efficiency.

The MoIT said that recent encouraging mechanisms for developing solar power capacity have promoted the development of energy sources, supplementing capacity to meet socio-economic development demand in Vietnam. They also open up opportunities for better growth of domestic companies and investors of different scale.

positive signs in attracting power industry investment

It is said that the feed-in tariffs (FIT) prices in renewable energy projects have encouraged the “ask and give mechanism”. To limit this, the MoIT is launching a bidding mechanism. Could you elaborate on this?

Previously, when the renewable energy market in Vietnam was undeveloped, electricity prices from renewable energy sources were high and could not compete with traditional energy sources. In order to encourage the development of renewable energy market, we adopted the FIT mechanism which is popular in many countries. This mechanism has provided us with a quite large renewable energy source with a capacity of 6,000 MW, contributing to developing the energy system in a sustainable way, and reducing greenhouse gas emissions. However, the FIT prices also revealed some limitations. Project clusters resulted in grid overloads in some areas, or fierce competition over land, and FIT prices did not reflect the effects of technological changes on market prices.

Earlier this year, the government set new feed-in tariff (FIT) rates for utility-scale, rooftop and floating solar installations. Accordingly, since April 2020, the FIT price of 9.35 US cents per kWh was reduced to 7.09 US cents per kWh, applied to solar power projects on land. The Prime Minister has also directed the MoIT to launch a bidding mechanism for renewable energy development to replace the FIT mechanism.