Vietnam’s trade ministry asks gov't to pay more for wind power

Vietnam’s Ministry of Industry and Trade has asked the government to raise the buying price for wind power in an effort to help investors cover high input costs.

The ministry suggested that the price should be lifted to 8.7 cents per kilowatt-hour (kWh) for wind energy projects on land and 9.95 cents per kWh for offshore plants.

Since 2011, the buying price for wind energy has stood at 7.8 cents for all land-based projects in Vietnam, with 6.8 cents paid by State-run power monopoly Vietnam Electricity (EVN), and the rest coming from the country's Environment Protection Fund.

For the country's only offshore plant in the southern province of Bac Lieu, the current price is 9.8 cents per kWh.

The trade ministry has calculated that this price adjustment would raise EVN's production costs just slightly by VND0.08 per kWh this year and VND0.23 per kWh in 2019 (VND1= 0.004 cents).

With the current buying price at 7.8 cents per kWh, most wind power projects are experiencing difficulties, the ministry said.

Meanwhile, the buying price for wind power is 20 cents in Thailand, 29 cents in the Philippines and 30 cents in Japan.T

ran Vinh Thong, an official from Thuan Binh Wind Power Joint Stock Company that operates the Phu Lac wind power plant, said the first phase of the project had cost VND1.1 trillion, while the plant makes just VND100 billion in revenue each year.

Given interest payments at VND70-80 billion per year, Thuan Binh has just 20-30 billion to cover production costs and makes a small profit from running the project in the south-central province of Binh Thuan.

“The biggest problem about investing in wind farms is the low buying prices and the time it takes to recover the investment,” Thong said.

At the current rate, it will take the company 14 years to recoup its investment, while the life span of a wind farm is only 20 years, he added.

The total wind power capacity in Vietnam is predicted to reach 206MW this year, 456MW next year and 800MW in 2020.

The southern provinces of Ben Tre, Bac Lieu, Tra Vinh and Soc Trang have been eyed as potential destinations for the development of offshore wind farms.

Vietnam is trying to generate enough energy to sustain the country's growth and to connect the millions of people who still do not have access power, while gradually shifting towards clean and low-carbon energy.

Last year, the government revised down its output target for coal-fired power plants to 53.2 percent of the country's total power generation by 2030 from the 56.4 percent previously projected.

Vietnam is aiming to produce 10.7 percent of its total electricity through renewable energy by 2030, mainly through solar and wind energy, up from 6 percent as previously planned.

Nguyen Anh Tuan, a senior energy official at the industry and trade ministry, told VnExpress in June that the government had raised the buying price for solar power from 7.8 cents to 9.35 cents per kWh, offered investors tax incentives and cut land use fees.

He said investors in wind power projects will likely have the same incentives in the near future.