THE SITUATION OF SOLAR INVESTMENT IN VIETNAM IN 2021

Solar power investment has always been a “touch and burns” field in recent years because of the benefits it brings. However, besides the economic value, investing in solar power also has inadequacies that cause headaches for businesses.

1. Find out the status of investment in solar power

Solar power appeared in series

The benefits that rooftop solar power projects bring are enormous. Therefore, investors are rushing to pour money and build their systems, thereby bringing rapid growth to this category in the power system in Vietnam, causing an imbalance in the structure of the national power source.

As of December 31, 2020, the total installed capacity of solar power nationwide reached about 19,400 MWp, equivalent to about 16,500 MW, accounting for about 25% of the total installed capacity of the national power system. Nearly 9,300 MWp of rooftop solar power with more than 100,000 works have been connected to the power system.

The lack of synchronization between the development power source and the national grid makes the exploitation of solar power inefficient, unsafe for the energy security system.

Specific data have demonstrated this: In 2020, the untapped output of solar power will be about 364 million kWh. In 2021, the untapped electricity output of the aforementioned renewable energy sources will increase, reaching about 1.68 billion kWh, of which about 1.25 billion kWh of solar PV. (Information provided by Vietnam Electricity ( EVN ) )

Lack of synchronization in infrastructure development and related laws

According to the Ministry of Industry and Trade and the Electricity of Vietnam (EVN), the rate of implementing the development of the collective labor system according to the Power Plan VI is only nearly 60%. The main reason is the lack of investment capital and problems in site clearance, which has led to the grid’s inability to keep up with the power source, causing the current TTD system to be always overloaded, especially the transmission system. North-South electricity, leading to increased power loss and potential hazards on the power grid system.

In addition, the infrastructure has not met the capacity of solar power projects, and electricity cannot be connected to the grid, leading to many power plants being unable to operate or not mobilized to generate electricity.

Limitations in investment and exploitation of solar power today

Vietnam does not yet have a fixed and dedicated price for the purchase and sale of solar power after Decision No. 13/2020/QD – TTG of the Prime Minister issued on April 6, 2020, on the mechanism to encourage the development of solar power in Vietnam expired.

This leads to the trouble investors face in the first 6 months of 2021, which is the inability to recover capital because the electricity’s price cannot determine. Therefore, investors are currently very confused and worried, not sure what the policy will be in the coming time, what the selling price will be, etc., to be able to decide to invest.

2. What causes the above situation of solar power?

Rushing to invest massively because of the attractive benefits from investing in solar power

Before the Prime Minister’s Decision No. 13/2020/QD-TTG dated April 6, 2020, the Government had many policies to encourage investment in grid-connected solar power. The investor only needed about 5-7 years to complete the project.

Above all, the installation of grid-tied solar power systems helps businesses save up to 100% of electricity consumed in production, and at the same time, brings a source of revenue for companies/individuals to use. If the investment is suitable, businesses/individuals investing in grid-tied solar power will have a new, long-term and stable source of income.

The legal corridor on solar power in Vietnam

Decision No. 13/2020/QD-TTG dated April 6, 2020, of the Prime Minister on the mechanism to encourage the development of solar power stipulates: Solar power projects connected to the grid and rooftop solar power meet conditions, will be applied a support tariff, also known as a FIT price, when it is put into commercial operation until December 31, 2020.

The Ministry of Industry and Trade has not yet thoroughly studied the bidding mechanism for power projects applied from 2021. Therefore, from the beginning of 2021 until now, solar power projects cannot use the FIT tariff. The mechanism Bidding has not yet been issued and confuses investors.

Draft on December 31, 2020, the purchase price of roof voltage from the current 8.38 cents/kWh is reduced to about 5.3 – 5.8 cents/kWh (depending on the capacity of each project), i.e., from a price of more than 1,900 VND.

This makes the primary purpose of the current investment in solar power investment for use, not creating excitement for other investors.

Financial problems for solar power projects

The first difficulty is that solar power projects require very high initial investment capital.

However, access to domestic credit sources is not feasible. Because most banks consider solar power projects to be high-risk projects, they require a high capital ratio from the investor (from 30-40%) and a high loan interest rate (more than 10%)).

Therefore, it has caused a lot of difficulties for businesses when arranging the finance and investing in solar power.

System quality and safety issues

The rapid development of rooftop solar power has led to increased demand for supply.

This leads to the uncontrollable development of equipment and material suppliers for this type and makes it difficult to control quality, technical standards, etc. Risks such as fire, Explosions, construction errors, damage, etc., due to unqualified products, not meeting technical requirements also make investors hesitate when making decisions.

Impact of the epidemic

The epidemic’s impact caused the economy to slow down, and the global economy suffered a severe recession. Many manufacturers have had to suspend operations, while others face labor shortages and limited production capacity.

This is also one of the reasons why investment in solar power has slowed down, affecting businesses that have been investing in this model.

The above is the current situation of solar power investment in Vietnam in the first 6 months of 2021. In general, it is necessary to have an overall policy based on the orientation of Resolution 55 and legal documents in the immediate future instead of operating it, lack of synchronization, avoiding the waste of social resources.

 

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