Embarrassment in choosing the price
In Decision No. 11/2017/QD-TTg on the incentive mechanism for solar power development issued in April 2017, it is clearly announced that the expiry date of purchase price of solar power at 9.35 UScent/kWh was 30 June 2019. However, up to now, 3 months after its expiration, the Government has not yet made a final decision on the new price for buying solar power for the next period, but foremostly until the end of 2021.
Only in the last 6 months, there have been many drafts on solar power’s prices issued by the Ministry of Industry and Trade following the request by the Government, however, none of them has been chosen yet. Most recently, the Ministry of Industry and Trade has been requested to research on the strategy for application of unique solar power price nationwide.
When bidding for a solar power project was raised, it attracted a great attention for transparency and reducing the high purchase price of solar power as recently. However, as for an enterprise perspective, the interest in solar power has decreased significantly.
Mr. Nguyen Binh, representing for an investment fund on renewable energy with capital from Germany and Australia said: “ Since the beginning of Q2/2019, our representative office have been operating in a moderate manner, listening and waiting for new policies. Many other funds in the field of renewable energy have quietly withdrawn from this field because they do not know about the new policies, let alone the story of adding projects to the plan is still time-consuming”.
Illustration
Burden of loss weighs heavily on the system.
Unlike all types of goods, electric power is characterized by production and consumption at the same time and must have a transmission system, so ideas and plans to develop the power supply must be comprehensive. If not, it can easily lead to a deadlock.
Currently, the average retail price of electricity is VND 1,864.4/kWh, while solar power is bought at 9.35 UScent/kWh (equivalent to VND 2,086/kWh), causing a grid loss of 221.6VND/kWh to the units buying and generating solar power to the grid.
With the output of solar power being generated after 30 June 2019 to date ranging from 17 to 25 million kWh/day, particularly the purchase of solar power at 2,086 VND/kWh and resold at the average price at VND1,864.4, Electricity of Vietnam (EVN) must compensate a loss of VND 4 billion/day.
As the result, the more solar power is purchased, the more negative pressure impacts on financial conditions of EVN who purchase power from solar power plants and then sell to end users. Covering this loss will not be possible in the long term and on a wide scale without financial policies to be issued by the State.
Apart from the above-mentioned things, solar power is only generated from 7 am to 18 pm daily with unstable capacity, so it is still necessary to have another backup power sources to cover the shortage. Therefore, generating cost of the whole system will continue to increase significantly.
“The electricity price does need to be compensated for its loss, then it can be allowed for free development, however, if the State still has to cover the loss eventually, there should be a limit,” said an electrical industry expert.
According to the expert, it is necessary to clearly calculate the annual loss compensation for solar power purchase compared to the current market electricity price, as well as to consider the issues related to transmission grid so as to have appropriate policies on developing solar power in particular and other renewable energy in general since the State cannot constantly compensates for such losses.
Based on the data published by many solar power projects, with a scale of 50MWp, the investment capital will be VND1,200 billion. As such, only considering 4,500MWp of capacity invested, the electricity industry has attracted about a VND100 trillion capital amount (equivalent to USD 4.6 billion) of investment in solar power for just over 1.5 years. It is worth mentioning that all these sources of capital come from private enterprises, investment fund or foreign investors.
If the scale of solar power continues to increase and reach the planned capacity of 13,000MWp, the total investment amount of solar power may reach no less than USD200 trillion, equivalent to USD9 billion.
The recent surge in private capital inflows into solar power has made a major impact from the government - approved purchase price for solar power at 9.35 UScent/kWh and applied over a 20-year period, with the projects operated before 30 June 2019. This price is much higher than that of thermopower, hydropower according to the power generation price frame of year 2019 issued by Ministry of Industry and Trade.
On the other hand, the figures disclosed by World Bank (WB) show that capital demand for electric power development from now to 2030 is USD 150 billion. However, this mobilizing demand is facing big challenges, especially the electricity price is lower than investment costs and EVN does not receive direct subsidies from the Government.
Having comments on this story, Mr. Franz Gerner, senior energy expert, Head of WB’s Energy Group in Vietnam said that electricity price in Vietnam is at the top cheap group, ranked 21/93 surveyed countries, according to the statistics of Global Petrol Prices. With the price at VND1,720/kWh, electricity price in Vietnam is much lower than that of Indonesia, Philippines, Singapore, China, India, Japan, South Korea, Laos, Cambodia, etc.
Electricity price in near future need to fully recover all costs of electricity industry, including operation and maintenance costs, investment costs, dept payment obligations through the revenue from selling electricity and the expected price is at 11-12 UScent/kWh.
Investment flows into solar power projects also show a clear evidence with the fact that if the electricity price is higher and consistent with the market, there will be no shortage of investors in the development of electricity industry.
|
After the issuance of Decision 11/2017/QD-TTg on the incentive mechanism for solar power development, by the end of June 2019, there have been 88 grid-connected solar power projects with a total capacity of nearly 4,500MW and 154.6MW of rooftop solar power put into operation across the country. Additionally, there have been over 200 solar power projects with a total capacity of 17GWp registered for being implemented in the period from now to 2025.
|