Indicator D IV-1: Wind potentials in Viet Nam

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1 CIEMAT, 2015 ADB (2015) CIEMAT 2015 Voivontas et al., 1998 FUAS (n.d.) Average GHI kwh/m² p.a. 1,200-2,000 kwh/m2 5 kwh/m2/day 4 to 5.9 kwh/m 2 /day 2,000-2,500 h/a Sources: CIEMAT (2015), GIZ/MoIT(n.d.), FUAS (n.d.) Indicator D IV-1: Wind potentials in Viet Nam Viet Nam has put up a limited number of wind measurement masts, data collection is not standardized and not easily accessible (GIC/AHK, 2015). Four studies on wind potentials have been conducted (see Table A- 13). Table A- 13: Overview of studies on wind resources conducted in Viet Nam Source: Nguyen (2012) Indicator D IV-1: Biomass potentials in Viet Nam Studied biomass resources include among others rice husk, paddy straw, bagasse (sugar cane, coffee husk, and coconut shell), and wood and plant residue. Estimations of the potential differ between MW (Voivontas et al., 1998), FUAS (n.d.) 73

2 MOIT estimates that biomass from agricultural products and residues is available at equivalent to 10 M t o e/a., Biogas energy potential is approximately 10 bn m 3 /a, which can be collected from landfills, animal excrements and agricultural residues.(giz/moit, n.d.) The RE-DS assumes that it is possible to extent electricity production from biomass to 85 TWh. Indicator D IV-1:Geothermal potentials in Viet Nam Viet Nam has 269 registered hot water springs. The geothermal potential is estimated to range between MW (DLA Piper (2014 in GIC/AHK, 2015). Indicator D IV-4:Grid access for wind and solar energy projects By 2015 there was no official wind grid code for Viet Nam but it was supposed to be finalized by the end of 2015 (ICASEA, 2014) (GIC/AHK, 2015). Since there are very few grid connected renewable energy projects (3 wind farms and less than a dozen solar projects >20 kw) there is little publicly available experience regarding procedural times from successful projects. GIC/AHK (2015) has compiled a process table summarizing the process for a wind project in Viet Nam which is presented in Figure A- 28. Figure A- 28: Process to receive an investment, operation permit and grid access for a wind power project DOC- Department of Construction, DPI- Department of Planning and Investment, DOIT- Department of Industry and Trade, ERAV- Electricity Regulatory Authority of Viet Nam, MOIT- Ministry of Industry and Trade PC-People s Committee, Source: own diagram based on GIC/AHK (2015) 74

3 As shows in Figure A- 28 the process is lengthy and involves repeated contact with at least 7 institutions including the prime minister for installations of >30 MW. It is further on interesting that the process as described by the GIC/AHK (2015) does not involve an analysis of the environmental impact and no form of public participation. Both processes are of particular importants to prevent possible problems with acceptance by the local community. Indicator D IV-5: RE-financial support framework Fiscal incentives for renewable energy projects include the following: - An incentive tax rate of 10 % for 15 years, and tax reduction of 50 % with a tax exemption of 4 years for new power projects; and tax incentives for biofuels. A preferential taxation policy offers an income tax rate of 10 % for 15 years to all renewable energy technologies, compared to the statutory rate of 25 %. Alternatively, project developers can enjoy tax exemption for the first four years and a 50 %reduction in tax payable for nine subsequent years. Depreciation on certain renewable energy assets is allowed 1.5 times faster than other property (Bloomberg NEF, 2015) - Exemption from/rent import tax on equipment and materials (ADB, 2015, Bloomberg NEF, 2015) - Accelerated depreciation rates (ADB, 2015, Bloomberg NEF, 2015) - Land fee exemptions (To Manh Cuong, 2014, ADB, 2015). - Standard-Power-Purchase-Agreements (SPPA) for renewable energy are based on a n Avoided- Cost-Tariff (ACT), which is mainly used by small hydro project. - Additionally the following FiT exist (Bloomberg NEF, 2015): - Since 2011, a FiT of USD 0.087/kWh for wind energy. - Solid waste, a FiT as high as VND 2,114/kWh (USD 0.1/kWh) - Landfill gas power projects. VND 1,532 (USD 0.07)/kWh - Biomass-fueled combined heat and power projects, receive of FiT of VND 1,220/kWh (USD 0.07/kWh). Indicator D IV-5: Small hydropower: LCOE, support mechanisms and projects In 2009 Viet Nam introduced a Standard-Power-Purchase-Agreements (SPPA) for renewable energy based on an ACT. The avoided cost is defined as the production cost per kilowatt-hour of the most expensive power-generating unit in the national power grid, which is generally considered to be natural gas. The tariff is re-calculated on a yearly basis. In 2012, the ACT was about 4 USD ct/kwh (GIC/AHK, 2015) in 2015 it was about 5 USD ct/ kwh (ADB, 2015). Avoided cost tariff encourages daily peaking small hydro projects with a seasonally and time-of-day differentiated tariff (high remuneration for dry season peak energy) (World Bank 2015a). Therefore, the ACT has mainly benefitted small-hydro installations. Almost 2 GW of small hydro are installed by 2015 (Bloomberg NEF, 2015). Indicator D IV-5: Wind power: LCOE, support mechanisms and projects LCOE of wind power According to Bloomberg NEF (2014) average levelized cost of electricity (LCOE)/ MWh for onshore wind in Viet Nam lay between 125 and 270 with USD/MWh an average of 168 USD/MWh (Figure A- 29). Prices are similar to those of other countries in the region like Thailand or Malaysia, but considerably higher than in more developed markets such as China or India. This price difference indicates the potentials for decreasing wind energy costs generated by market development. 75

4 Figure A- 29: LCOE Ranges for onshore wind in Viet Nam and Asia for 2014 (in USD/MWh) As is shown in Figure A- 30 based on Bloomberg NEF (2014) the capital expenditure (CAPEX) for an onshore wind project such as expenditure for turbines in Viet Nam is lower than for other projects in the region and equity outflow is higher. Figure A- 30: Cost factors and average LCOE for onshore wind in Viet Nam and Asia for 2014 (in USD/MWh) Support mechanisms for wind power The wind feed-in-tariff is a combination of a fixed purchase price of USD 0.068/kWh paid by EVN and a VND 207/ USD 0.01/kWh subsidy financed from the state budget through the Environment Protection Fund. The subsidy can be adjusted by a decision of the Prime Minister (ADB, 2015). Wind power bought by EVN remains VND 388 (USD 1.5 ct) per kwh more expensive than the current market price for electricity (Thanhnien News, July 2014). For 2015 a series of improvement of the policy framework for wind energy were planned: the wind tariff was supposed to be reviewed and increased and a monitoring system to review the tariff was supposed to be installed (GIC/AHK, 2015) Since the range of wind power LCOE is estimated to be between 125 and 270 USD/MWh with an average of 168 USD/MWh, whilst the feed-in-tariff is only 78 USD/MWh (Figure A- 31), according to stakeholder the enumeration is far too low to make projects economically viable (Bloomberg NEF, 2014; GIC/AHK, 2015; Bloomberg NEF, 2015). Bloomberg NEF (2015) argues that among others The government s intended revision of the wind FiT has not taken place after several years consideration. 76

5 Tran Viet Ngai, chairman of the Viet Nam Energy Association, states that there are many reasons for the lack of successful wind power development in Viet Nam, but the most critical is the low price of energy. (Thanhnien News, July 2014) Early wind projects in Viet Nam were probably not constructed cost effectively, since the first windfarm built with Fuhrlaender turbines, without a PPA, temporary agreement provided only 4 USD ct/kwh (Meier, P., 2012). Figure A- 31: Wind LCOE versus tariffs in Viet Nam and Asia for 2014 (in USD/MWh) ADB (2015) estimates the LCOE from wind power ranging from USD 0.093/kWh to USD 0.114/kWh. In contrast to Bloomberg though ADB (2015) described the feed-in-tariff of 7.8 USD ct/kwh as highly favorable. And describes the conditions as proving effective with installed wind capacity having increased rapidly, from only 8 MW in 2008 to almost 50 MW in In contrast the World Bank Report by Meier et al. (World Bank 2015a) questions the introduction of a feedin tariff as irrational: Given that wind is very high up on the RE supply curve, and that Viet Nam has significant small hydro and biomass resources that can be exploited at a much lower cost, there is no economically rational reason for Viet Nam to pursue wind power. Only years of relentless donor advocacy have persuaded the government to introduce a wind FIT but one set at such a low level (7.8 ct/kwh) as to have no realistic chance of enabling any wind farms. (World Bank, 2015a) and further on: Pressure from GTZ and US turbine manufacturers led to issuance of a feed-in tariff for wind in June 2011 but set at a low rate of 7.8 USD ct/kwh (only the big Chinese developers say this is reasonable!). (Meier, P., 2012) Wind power projects One of the earliest larger wind project has been the 800 KW turbine installed in Bach Long Vy Island which is in operation since The three wind farms with 20, 10 and 3 turbines each are Tuy Phong, Bac Lieu (to be expanded) and Phu Qui. KFW (2015) states that only one wind farm was connected to the grid. Asia s first offshore wind farm went on grid in Bac Lieu in the in shallow waters of the Mekong Delta in EVN (2015b) lists for 2014 an installed wind capacity of 52 GW at three sites, this is in accordance with other sources that report an installed capacity between MW (Bloomberg NEF, 2015, GIC/AHK, 2015; (Thanhnien News, July 2014). A capacity of 5 GW is estimated to be in the planning process (Bloomberg NEF, 2015). Even though many wind energy projects are said to be planned, this information has in the past proven to be hardly reliable and many projects have been stuck in the planning pipeline for years. 77