Cruel winds blow hard
Published: 02/07/2011 05:00
The long-awaited wind power project price incentives appear to be a load of hot air. As approved in-principle by the prime minister, for 2011 the purchase price of electricity for wind power plants in Vietnam will be VND1,630 (US7.8 cents) per kilowatt-hour (kWh). Of which, VND209/kWh or 1 cent/kWh is the government’s subsidy which will come from the Vietnam Environment Protection Fund. The remaining VND1,421 per kWh or 6.8 cents will be paid by the Electricity of Vietnam (EVN), the country’s sole electricity distributor. The average electricity purchase price currently applied to power plants in Vietnam is VND1,242 per KWh. Pham Manh Thang, director general of the Ministry of Industry and Trade’s (MoIT) Energy Department, said the MoIT would propose pricing adjustments to the government each year. Generating renewable energy, investors can sell emission reduction credits (ERC) at the price of 15 cents per tonne of CO2 or gain an additional 0.906 cents per kWh. This means investors can receive 8.706 cents per kWh in total, given the approved purchase electricity price at 7.8 cents/kWh. However, according to calculations of the MoIT’s Institute of Energy, 30MW wind power projects using American or European technology would be feasible only if investors can receive 10.68 cents per kWh. For those using Chinese technology, the tally must be 8.6 cents. The time for return on investment is around 20 years, while that for depreciation of equipment is 12 years. The above calculations indicate investors are set to shy away from developing wind power projects in Vietnam due to the meager profits on offer, even losses. Duong Manh Thao, former chairman of Vietnam Wind-Power Joint Stock Company which is investing in four wind power farms in Vietnam, said investors could only survive at an electricity purchase price of 8 cents. Bui Quang Ngan, deputy director of Central Wind Power Joint Stock Company said that the purchase price at 7.8 cents/kWh for 2011 was still too low to attract investors despite the 1 cent support from Vietnam Environment Protection Fund, exemption of enviroment protection fee and land free, and emission reduction credit. Ngan claimed that given the soaring borrowing and input costs, wind power investors could only survive at 9-10 cents and maket a profit at 11-12 cents. A consultant for a wind power project in Binh Thuan argued that the 7.8 cents/kWh was the price for 2011, thus investors would feel uncertain about future purchase prices which will be determined by the government on a yearly basis. “The investors risk fall into uncertainty,” he said. Of the 42 wind project investment proposals in Vietnam, 27 have investment reports submitted to authorities while two projects are technical design stage. Only one wind power project is operating in Binh Thuan province. Foreign investors are engaged in one-third of the projects with total installed capacity of 1,366MW. They come from Germany, Canada, Switzerland and Argentina. The highest purchase price that the investors proposed to the government is 13 cents/kWh. The proposed lowest price is 8.08 cents/kWh, not including carbon emission credit of 0.906 cents/kWh. Source: VIR |
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