With sunshine throughout the year and exposure to ocean winds, Vietnam would seem like an obvious candidate for renewable energy projects. Yet it has just three big wind farms and no significant solar investment, putting it far behind neighboring Indonesia, Thailand and others in Asia.
The reason, critics say, is obvious: price controls.
Vietnam keeps a ceiling on electricity prices — on average, about 7 cents per kilowatt hour. Investors say they need a feed-in tariff that’s at least twice as much so they can recover the cost of generating clean energy.
Those who work in the power sector have suggested other ways to promote renewables, including tax incentives and energy-related training and education. But most discussions about electricity in Vietnam often lead to the same complaint.
“There’s nothing that can make up for a feed-in tariff that’s in the single digits,” said Daniel Potash, chief of party at the Private Financing Advisory Network for Asia program, under the U.S. Agency for International Development.
Price hikes politically sensitive
Potash was speaking at the the U.S.-Vietnam Clean Energy Conference in Ho Chi Minh City on Thursday. Most attendees pushed for Vietnam to prioritize alternative energy. But doing so would require state utility Electricity Vietnam (EVN) to raise its fees. That could be politically sensitive and invite a backlash from price-conscious consumers, who already are distrustful of the inefficient state-owned enterprise.
Nguyen Anh Tuan, chief editor of the Vietnam Investment Review, said policymakers are trying to strike a balance so Vietnam can have affordable yet sustainable energy. Based on talks with the Ministry of Planning and Investment, which owns his newspaper, Tuan said price hikes would have to be gradual.
“If we increase the unit price in different areas, it will cause a negative reaction from society,” said Tuan, whose newspaper hosted the conference with the U.S. Commercial Service, promotion arm of the U.S. Department of Commerce’s International Trade Administration. “So that will affect our policy.”
Besides wind and sunlight, Vietnam is hammering out regulations to encourage energy produced from waste, biomass (such as rice and corn husks), and water currents and tides. Officials are weighing the possibility of cutting or eliminating taxes temporarily for energy producers, allowing duty-free imports of machinery, granting favorable land contracts, and promising to buy electricity from companies. It’s all part of an official “Green Growth Strategy” that pairs economic development with low carbon emissions.
Some businesses are installing solar panels for their own use already, and the Vietnam Business Forum said it conducted a survey that found many companies would pay more for renewable energy because it can be clean and reliable. For private individuals who have solar panels, the government is considering ways to let them sell excess electricity to the grid. Fred Burke, managing partner at the Baker & McKenzie Vietnam law firm, called this idea “low-hanging fruit.”
“It does appeal to the entrepreneurial spirit of the Vietnamese people,” he said. “They can each sell to EVN.”
Doubling down on coal
But Vietnam also is doubling down on coal. Its Master Power Plan VII says that by 2030, coal will supply 51.6 percent of the country’s electricity, compared with about 30 percent now. This is despite the country’s fears that it could be hurt by climate change, especially caused by pollution, which in Vietnam comes mainly from energy generation.
Citizens have protested the arrival of coal-fired power plants in their neighborhoods; rallies last month in Binh Thuan province, for instance, forced officials to seek pollution-cutting measures. Nguyen Dang Anh Thi, an International Finance Corporation consultant, said coal is a “time bomb” that also could lead to heavy metal pollution and acid rain.
“It’s very clear that this will be a really serious issue and we need to reconsider Master Plan VII,” Thi said at the conference, adding, “I recommend that we review the renewable energy strategy, which has a very low target.”
Under the strategy, Vietnam would get 4.5 percent of its electricity from renewables by 2020, up from 3.5 percent in 2010.
