What's new in this issue? At the moment, RE is still at an early stage. The total output from RE amounts to about 5% of the total country's supply. The policy framework has only been constructed since 2011 and has recently included solar power. However, Vietnam has high ambitions with RE, as shown in the Revised National Power Master Plan VII, released in March 2016. The Plan stipulated that 21% of the total energy supply comes from RE sources. As plans for a nuclear power plant was already rejected by the National Assembly, the country is pushing for more alternatives to its energy hunger. Foreign investors are especially welcome, where there is no Foreign Ownership Limit and many attractive tax incentives.
RE, by nature, is dependent on the available resources and potential. As a agricultural, near-the-equator, long-coastline country, Vietnam does not lack biomass feedstocks, solar radiation nor wind power density. The question turns to whether the country is able to take advantage of what nature has given, and turn the theoretical and technical potential to commercial potential.
The development of RE in Vietnam, although highly encouraged by the government, faces financing obstacles as well as counter-party risks given the existing policy framework. Some of these will be highlighted in the upcoming pages, as well as examples of mitigation measures and specific case studies, learned via our in-depth interviews with developers and policy makers.
Renewable energy in Vietnam is in its early stage, with plenty of potential for development especially in the wind and solar segments
Vietnam has traditionally relied on hydropower and then coal fired power and gas fired power as the major suppliers of electricity. Yet to go on becoming an industrialized country, it increasingly demands more energy and electricity to support its key, energy-intensive sectors
- Hydropower is not expected to continue expanding, having nearly reached its full potential and faces environmental damages.
- Nuclear power, although accounted for in the Power Master Plan 7, has been rejected by the National Assembly by end of 2017.
- In the medium term, coal fired power was slated to be the main energy supplier as renewables are still in the nascent stage.
- However, in the long term, renewables such as wind, solar, and biomass, are expected to account for one fifth of all electricity supply.
- To fully realize its RE potential, Vietnam's government has been completing the regulatory and policy frameworks for each type of RE as well as development strategies until 2050.
The majority of renewable energy projects in Vietnam are stuck at the pre-investment stage, and it takes long months and multiple agreements to go through each stage
- From our database, except for Small Hydropower plants, only a small percentage of RE projects are actually in operations. 13% of the projects are in operations, 23.5% are under construction while 63.5% are still stuck at either the preparation stage or facing delays.
The PPA is virtually un-bankable as it poses serious legal and commercial risks to both lenders and developers, who have to seek other ways to back up loans
- Our report details the implications and examples of how projects have been able to mitigate this financing risk. Furthermore, project developers are advised to get the projects running as soon as possible and to choose a trustworthy local partner to prevent possible complications, and operational risks could be mitigated by investments in quality equipment and an energy storage system for output moderation.
The selection process of a local counterparty should include careful examinations of relationship, management team, financial health and RE know-how/expertise
- Meanwhile, significant hands-on assistance from foreign partner is required to complement the local developers' weaknesses in terms of technical know-how and limited financing.
Table of Contents
1. Overview of Vietnam Power Sector
- 1.1. Vietnam's Electricity Sector
- 1.2. Power Market Structure
2. Analysis of Renewable Energy Industry
- 2.1. Renewable Energy Overview
- 2.2. Wind
- 2.3. Solar
- 2.4. Biomass
- 2.5. Small Hydropower
3. Review of Regulatory Framework
- 3.1. Master Power Plan VII Revised
- 3.2. Investment Incentives
- 3.3. Feed-in Tariff & Power Purchase Agreement
- 3.4. Building a Competitive Power Market
4. Risk Assessment
5. Investment Opportunity Analysis
- 5.1. Key Investment Considerations
- 5.2. Opportunities for Financial Investors
- 5.3. Opportunities for Foreign Developers
- A1. Typical wind projects by local developers
- A2. Typical solar projects by local developers
- A3. Recent renewable energy deals in Vietnam