25 March 21 Vietnam investment review Source Vietnam, a rising star in Asia in solar power development, is to slash feed-in tariffs for rooftop solar installations this month, hoping to release some of the pressure on the national power grid that was exacerbated by the previous generous tariff that lasted until the end of December, as well as to prevent fraud for solar farming.
Last year witnessed a boom for solar power development as the closing date for the second solar feed-in tariff (FiT) came near. A total of 9.3 gigawatt peak (GWp) of rooftop solar capacity was connected to the national power system, with more than 6.7GW of solar power units installed in December alone, according to Electricity of Vietnam (EVN).
Hoang Tien Dung, director general of the Ministry of Industry and Trade's (MoIT) Electricity and Renewable Energy Authority, stated that tariffs will be cut by 31-38 per cent to 5.2-5.8 US cents per kWh, depending on the system size.
Under the ministry's proposal, the bidding mechanism will be applied for ground-mounted and floating systems, while rooftop solar systems are to receive a fixed mechanism.
Under the previous FiT2, which closed its application period on December 31, Vietnam's rooftop solar installations skyrocketed dramatically. The respective prices of each kilowatt-hour generated from ground-mounted, floating, and rooftop solar initiatives were 7.09, 7.69, and 8.38 US cents that were not only a serious overload of the existing power grid but also saw mischievous transactions between partaking investors.
The new proposed tariffs are set to come into effect from next month and have been designed to address pressures on Vietnam's power grid created by the surge in solar installations last year.
The MoIT confirmed at a meeting this month that it will set up a task group for the nationwide inspection of solar power projects since it suspects that some investors took advantage of the incentives between July 2019 and the end of 2020 offered by the FiT2. As such, the MoIT requested state-run EVN to list all solar power projects entitled to receive the FiT rates as well as all rooftop solar power systems with capacity of 100kWp or more which have been put into operation within the respective timeframe.
The movement is meant to prevent loopholes in future regulations and speculative projects, such as solar farms disguised as rooftop systems.
Following the request, EVN must certify all operating rooftop solar systems which comply with the regulations on development and grid connection. The electricity provider also has to clarify operation dates, power purchase agreements, and other legal regulations in electricity and supply sectors for the list.
Pham Que Phong, chairman of Inter Solar JSC, pointed out that loose management has led to the fact that the majority of solar rooftop projects are now solar farms disguised as rooftop solar units and enjoy the FiT2's rate of 8.38 US cents per kWh instead of 7.09 US cents for solar farms.
Agricultural production combined with the installation of solar power is a cyclic economic model that aims to create a value chain within the solar power system. However, this benefit has been misused with many "fake roofs" appearing on agricultural land aiming to receive the preferential rates, according to EVN.
In the three provinces of Dak Nong, Gia Lai, and Dak Lak, the number of solar power projects has increased five times in the past year, of which over 40 per cent of the connected capacity comes from the agricultural farms.
According to Dak Lak Department of Agriculture and Rural Development, recent inspections showed that many rooftop farming projects were established in the area, but only focus on selling electricity.
The heavy cut in incentives for solar rooftop power could reduce the interest of investors and developers. However, Dung said that the reduction in the purchase price of rooftop solar power still ensures benefits of parties such as EVN, investors, and the state.
The development of rooftop solar power has been incompatible with the demand and the available transmission grid. Last December, the operations of the national grid were hampered when the power demand saw a decline. Total produced and imported power of the national grid stood at about 245.9 billion kWh, up around 2.7 per cent against 2019 but down 15.6 billion kWh compared to the operation plan of the national electricity grid approved by the MoIT.
Solar expert Mai Van Trung pointed out, "The intermittent nature of solar power has recently raised many technical and financial concerns, particularly in the context of the low demand and delays in the grid's frequency regulation projects."
Even wind has become a victim of recent hot developments. Vietnam plans to cut 1.3 billion kWh of renewable energy in 2021 due to the oversupply and overloaded transmission lines, as Nguyen Duc Ninh, director of the National Load Dispatch Center, said at a meeting with EVN on January 13.
Overloads were reported in Ninh Thuan, Binh Thuan, and a few central areas, and the National Load Dispatch Center cut 365 million kWh of solar output last year due to these developments.
Investors and developers blamed the overload on solar power projects in some provinces – such as Binh Thuan and Ninh Thuan – as well as the lack of synchronisation between the planning and execution stages of power source and grid projects. Some argued that these factors have been severely overloading the local power grid and caused damage for investors.
The south-central region is the nation's treasure trove of renewable energy, but local conditions are not ready to accommodate the upcoming supply. It takes three years, on average, to build a power grid project, while a solar power plant needs only one year to put in place. As a result, grid development cannot catch up with the proliferation of solar and wind power projects.
Nguyen Minh Quang from the National Load Dispatch Centre explained in 2019 that renewable energy projects need to be integrated into electricity grids that are capable of managing new complexities such as unpredictable and intermittent supply and more distributed power generation. Grid operators may also need to expand and modernise their infrastructure to ensure reliability, efficiency, and security of electricity supply.
In the latest movement, Trung Nam Group, which has been building energy projects in Ninh Thuan, Tra Vinh, Gia Lai, and Dak Lak, claimed that due to frequent reduction in capacity of solar and wind power projects, the group submitted a proposal to remove difficulties to the Standing Committee of the National Assembly and the government. According to Trung Nam Group, the frequent reduction in capacity reduces electricity generation revenue and disrupts the group's financial plan, and so it faces great pressure in paying off the bank loans due to unsecured revenue from electricity generation. By Phuong Thu