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Environment & Energy Report

Vietnam Offers Higher Solar Power Payments in Cloudy Regions

Feb. 5, 2019, 3:16 PM

Solar investors in Vietnam could be encouraged to eye even the cloudiest corners of the country because of a government plan to base what it pays for solar-generated electricity largely on where the power originates.

A Ministry of Industry and Trade proposal, which is open for public comment until Feb. 20, offers higher feed-in tariffs for those who generate solar power in the north, where the weather fluctuates most, followed by the central region, and then finally the sunny south.

The rates, paid by the state utility Electricity Vietnam (EVN) for those adding solar power to the electricity grid, also would differ depending on the technology. Ranked from the highest fees to the lowest, the technologies are: household solar panels, floating solar power projects, and ground projects with a capacity of more than 1 megawatt-peak.

The tariffs ranging from 6.59 to 9.85 U.S. cents per kilowatt-hour would apply starting July 1. That compares with the current fixed rate of 9.35 cents.

Vietnam’s bid to incentivize a more even distribution of solar investment across the tropical country could make land acquisition easier by pushing companies toward new areas, said environmental economist Le Viet Phu.

“It totally makes sense because the north has much lower radiation, thus requiring a higher feed-in tariff to be commercially profitable,” Phu, of Fulbright University Vietnam in Ho Chi Minh City, told Bloomberg Environment.

“Having solar wherever possible would lower the peak load on the whole system, which is a major technical constraint facing the current power system and a key advantage of having solar photovoltaics to shave the load curve,” he said.

How It Will Work

The draft regulation follows a decision enacted Jan. 8 to get more households to collect energy from the sun. Hundreds of families have been slapping photovoltaics onto their roofs, but haven’t been paid yet by EVN because the utility didn’t have a payment guide.

Under the new rules, households will use net-metering to independently calculate how much power they consume versus how much they generate. The decision lays out a payment plan and invoicing, so that Electricity Vietnam will pay households for their surplus electricity based on exchange rates between the Vietnam dong and U.S. dollar set in the prior year.

But the newer draft from the trade ministry will have broader impacts, as it focuses on solar energy at the business level.

“The new tariff structure will offer a return to investors of about 6 percent to 7 percent,” said Gavin Smith, director of clean development at Dragon Capital, an investment fund, in Ho Chi Minh City.

Phu expects tariffs to continue to fall, as Vietnam moves toward an auction system that has companies compete for solar projects.

Smith added that he would like to see more certainty on grid capacity and licensing, help with land acquisition, and clear rights for businesses to sell solar power to one another.

“Those are practical problems that haven’t been resolved,” he said by phone.

The trade ministry will review the public comments, amend the regulation if warranted, and then submit it to the prime minister for approval.

To contact the reporter on this story: Lien Hoang in Ho Chi Minh City at correspondents@bloomberglaw.com

To contact the editors responsible for this story: Gregory Henderson at ghenderson@bloombergenvironment.com; Jean Fogarty at jfogarty@bloombergenvironment.com