Renewable energy will inevitably be the world’s energy of choice as other energy sources are depleting. The energy accounts for slightly more than 1% of all energy consumption in Vietnam and is still in its infancy.
The largest wind turbine in HCM City is being run by Tuan An Group in Binh Tan District that specializes in energy equipment. The VND2-billion turbine, with the daily capacity of 70kWh, or annual capacity of 18,980kWh, is able to meet 30% of the energy needs of the office building of the group. Yet the project seems to be more of a marketing display than for practical purposes.
Another energy equipment supplier, Kim Dinh Company in Hanoi, occasionally receives installation contracts for public lighting using wind and solar power sources, but the company’s main products are still the LED energy-saving bulbs.
Solar energy is also lagging behind in Vietnam. Mat Troi Do Energy Company, a solar battery manufacturer, mainly produces batteries for export. It sometimes receives orders from domestic companies for small-scale projects.
The overall picture of the production, trading and distribution of solar energy products shows that this kind of clean energy has yet to pick up. The high initial investment, which is normally four to five times that of other types of energy, coupled with the slow rate of return on capital, has discouraged consumers.
The largest success so far in developing solar energy are water heaters. This product is being sold at a rate of about 40,000 sets annually, four times that in previous years.
According to Huynh Kim Tuoc, director of the HCM City Energy Saving Center, HCM City alone has 86 companies trading in solar water heaters, accounting for 70% of the whole country. The city aims at becoming a pioneer in the use of renewable energy technology by providing equipment and services. The pioneer products are the solar water heaters and biogas, whose use is shifting from cooking to electricity generation.
Renewable energy equipment production and trading is small and scattered. Businesses operating in this field normally trade in various products as they cannot rely solely on renewable energy for their profit margin. As one producer said, the renewable energy market is not large enough so the producer has to diversify and do consultation, design and installation instead of focusing solely on production, research and development.
What lies beneath wind energy
In September 2010, Bac Lieu Province started construction of a 99-megawatt wind energy facility that covers 500 hectares and costs VND4.5 trillion.
Similarly, a Hanoi-based company is conducting a survey for a 206-million-euro wind farm with a generation capacity of 97.5MW on an area of 1,000 hectares in the southern coastal province of Binh Thuan. The project is expected to increase its capacity to 67.5MW and extend the area by 900 hectares in its second phase. Meanwhile, this company is going to build another 50-megawatt wind farm worth 100 million euros on an area of 650 hectares, also in Binh Thuan Province.
All these projects face the same obstacle – the project site contains titanium ore – so they cannot be carried out yet.
According to the Binh Thuan Wind Power Association, the country currently has about 20 wind energy projects that have been either licensed or in the works. Many companies have set up subsidiaries that specialize in renewable energy projects. Dragon Capital, an investment fund, has also founded a fund to invest in clean energy with the first phase capital of US$45 million.
An expert from Dragon Capital said though the present import tax for wind energy equipment is virtually nothing, most of the equipment is imported from Europe at exorbitant prices. This explains why the power price that the renewable energy companies are proposing is 8-13 cents/kWh compared to the normal rate of 5.3 cents/kWh.
What makes investors commit to proceeding with renewable energy projects despite the intensive capital required and obscure mechanism and benefits? According to a project manager in Hanoi, investors are “doing what they can and hoping to change the mechanism.” Many believe, with wind power projects, they can access foreign capital sources and financial incentives, and can have extra revenue from the sale of emission reduction certificates. But there are arguments that because of the large amount of land needed for wind farms, some wind farm projects may have an alternative agenda.
Wind power projects require high upfront capital and large areas, so investors often combine the project with aquaculture or ecotourism. But the tacit understanding is that behind these official projects runs mineral exploitation that is much more profitable than wind power investment. This could be the main reason why businesses pick up places with big potential in wind energy and mineral resources.
According to an expert, there is a conflict of interest between localities wishing to develop wind power and the Ministry of Natural Resources and Environment that wants to commercialize the sector.
Wind turbine component manufacturing facilities are being built while wind generation facilities under 1kWh are emerging, and the number of companies trading in this field has reached dozens. Nationwide, there are over 100 companies trading in renewable energy equipment. These figures demonstrate a fast pace of development. According to experts, dozens of large foreign firms are prepared to jump into this field as soon as there is a coherent government policy in place.
The Ministry of Industry and Trade is drawing up a draft decree on renewable energy that is expected to be turned into law.
It is expected that the selling price proposal for wind power, after many debates, will be presented to the Government toward the year-end at about 8 cents/kWh.
Nguyen Dinh Hiep, head of the Science and Technology Department, said the Ministry of Industry and Trade is coordinating with other ministries and agencies to seek funding to narrow the price gap for renewable energy development.
