The Vietnamese government will provide subsidies to wind power projects and make purchases at fixed prices as it strives to develop the renewable energy industry.
A decision approved by the Prime Minister on June 29 requires the country's power monopoly Electricity of Vietnam (EVN) to buy all the power output of wind power projects at VND1,614 (US7.8 cents) per kilowatthour. EVN will receive a subsidy of VND207 (around US1 cent) for every kWh of wind power it buys via Vietnam Environment Protection Fund.
Under the decision, the wind power bought by EVN would remain VND388 (US1.5 cents) per kilowatthour more expensive than the current market price for electricity, according to a report carried Saturday by the Lao Dong newspaper.
Wind power projects in Vietnam so far have been hindered by the wide gap between wind power costs (US12.5 cents/kWh) and the market power price which is around 5.9 cents/kWh, according to estimates by the Ministry of Industry and Trade.
EVN has so far bought wind power at US6cents/kWh from Vietnam's first and only wind power plant in the south central province of Binh Thuan, invested by Vietnam Renewable Energy JSC, says a Saigon Times news website report.
As of February this year, the plant, which joined the national power network last year, had put 12 wind turbines into operation, generating around 19 megawatts.
According to experts, no business in Vietnam would be able to afford investments in wind power without government subsidies.
Experts have estimated that a wind power plant of 100 megawatt capacity in Vietnam would need around US$9.7 million of subsidies every year, the Lao Dong report said.
Wind power generated using European or Chinese knowhow would cost $2,250 or $1,700 per kilowatt respectively, which means wind power prices of between US8.6 and US10.68 cents per kWh.
The new decision, which takes effect August 20, also allows wind power projects to benefit from low interest rates, free tariffs on equipment and material imports, and a reduction on corporate tax.
However, prospective investors have said that the price gap left under the decision still poses risks and makes them hesitant.
More than 30 wind power projects by local and foreign investors with output exceeding 3,000MW are set to be launched in Vietnam. Some of them have received investment permits.