A wind turbine in the central province of Binh Thuan. A 30-megawatt wind power plant in the province, the first for Vietnam, began operations last month.
Vietnam has huge potential for wind power development, but low selling prices are hindering investment in renewable energy, Tran Thanh Phong, deputy general director of Vietnam Renewable Energy JSC, tells Vietweek. A 30-megawatt wind power plant invested in by his company, a first for the country, began operations last month.
Vietweek: Tell us a bit about the nation's first wind power plant. Is it performing to expectations since it began operations last month?
Tran Thanh Phong: After running on a trial basis, the plant has officially begun operating under its initial design. Wind electricity depends on wind speed. If the wind speed is high, the plant's performance will be good. However, the wind speed always changes during a year.
The wind speed now is weak, making the plant's output this month lower than previous months. However, the plant's production still matches its planned capacity. Each month, it will produce some 6-7 million kilowatt-hours of electricity on average.
What are the major difficulties in opening a wind power plant?
There are many difficulties. Equipment we import from Europe is unable to withstand the hot weather conditions in our country, causing troubles in production.
In addition, most of the equipment for a wind power plant is imported from Europe, the US and China at high prices, raising the production cost. Right now, spending on equipment accounts for 70 percent of the production cost.
How is the price of wind power compared to other energy sources like hydro and thermal electricity?
Before June 30, 2011, when we had not yet mapped out specific regulations on the electricity prices, we temporarily asked for 6 US cents for one kWh of wind power. Later, the selling price of wind electricity regulated by the government is 7.8 cents per kWh. The price is 30 percent higher than the average prices of hydro and thermal electricity.
However, it is equal to the price of thermal electricity that uses imported coal for production.
So why should we develop wind electricity if its price is too high?
Wind electricity is environmentally friendly energy, which helps reduce greenhouse emissions. Carbon dioxide emissions would be reduced by 0.6 kilogram per kWh of electricity, if the power is produced by wind.
While we face electricity shortages, and have to consider importing electricity or producing nuclear power, wind electricity is an alternative energy, which is safely, easily and quickly produced.
It takes many years to develop nuclear power, and people are very concerned about its safety. It takes about a year and a half to develop a wind power project, compared to 10 years to develop a nuclear power plant.
Then we should consider the long-term benefits of wind power development. If we consider only short-term interest, nobody will want to invest in wind power projects.
In the future, production costs of wind electricity will reduce due to lower equipment prices. Our country will be able to produce the equipment which now is imported at high prices. Meanwhile, selling prices of all kinds of power will increase, as sources for hydro and thermal electricity development would be exhausted. We would import more coal and the cost of power projects would be very high.
Thus, the investment in wind electricity, in the long term, will be profitable, as the selling price will rise and production costs will plummet.
Then, why is it that wind power attracts few investors despite the big advantages?
Wind electricity investors do not have to worry about finding customers, as the government has regulated that state utility Electricity of Vietnam has to buy all the power output of wind power projects at the regulated price of 7.8 cents per kWh. (EVN will receive a subsidy of VND207, or around 1 US cent, for every kWh of wind power it buys via the Vietnam Environment Protection Fund). The government also offers tax and land incentives to the wind power investors.
However, the biggest difficult is that the selling price is not attractive enough for the investors. Our experience in wind power development is very poor, and we do not have national plan on wind power development yet. Ministries and localities are building the plan, so it will take time to complete the policy framework for the industry.
Is the regulated price not enough to ensure that investors can earn profit?
The government has regulated the ceiling price of wind power at 7.8 cents per kWh. Thus, investors can assess their investment's effectiveness. If their projects are located in areas with strong wind speed, the price is acceptable, ensuring their profit. In areas where the wind is weak, the price is not enough.
Many foreign investors are interested in wind power development in Vietnam, but they are concerned about the low selling price.
Meanwhile, to develop the electricity market, we should call for foreign investors, as they have better experience and more capital.
To encourage investment in the field, the lowest price should be 10 cents per kWh. Now, the price is 18 cents in Thailand, 16-17 cents in the Philippines, and over 20 cents in Europe.
How do you assess Vietnam's potential in wind electricity development?
The potential is very big. Vietnam can produce hundreds of thousands of megawatts of wind power. The central coastal and mountainous provinces of Binh Thuan, Ninh Thuan and Binh Dinh, and southern provinces of Ben Tre and Tra Vinh have conditions suitable to the power development.
We now have a 30-MW wind electricity plant that just come into operation. According to the government's electricity development plan to 2020, renewable energy, including wind electricity and solar power, will account for 6 percent of the nation's power output.
Now, wind electricity accounts for less than 1 percent of the nation's total power output. Meanwhile, many countries like the US, China and some European countries have developed this energy. Wind power has accounted for some 20 percent of their total electricity output.
There is an opinion that it would be difficult for Vietnam to develop wind power because of its low economic benefit. What do you think?
Our wind power market is facing many difficulties because we do not have a proper legal framework and an overall development plan for the industry. To lure investors, we should deal with these issues.
Wind electricity projects require big investments, about $1.8-2.2 million per MW, about 1.5-2 times higher than the investment in hydro or thermal electricity projects. So, this is an obstacle in attracting investors.
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