Renewable energy projects face policy woes: securities broker

By Huong Dung, Nhat Huynh
Tue, April 18, 2023 | 7:00 am GMT+7

Renewable energy projects in Vietnam that missed the government's preferential feed-in-tariffs (FiTs) scheme will not enjoy profitability under the new price frame set by the Ministry of Industry and Trade, VNDirect Securities said in a recent report.

These projects are often referred to as "transitional" renewable energy projects. Under the new price bracket, issued under Decision 21 dated January 7, 2023, the maximum purchase price for transitional solar power projects is VND1,185-1,508 (5.0-6.4 U.S. cents) per kWh, depending on the type and excluding VAT. Meanwhile, the ceiling price for transitional wind power projects is VND1,587-1,816 per kWh (6.8-7.7 U.S. cents).

The VNDirect analysts argued that the new price frame is the first sign of rescue for transitional renewables developers as their projects have yet to be utilized since the FiT mechanism expired in November 2021.

"We have conducted an assessment of the internal rate of return (IRR), using standard assumptions for renewable energy plants at the new prices. Its results show that the IRR of transitional projects will decrease significantly.

"For example, the IRR of solar energy farms is only 5.1%, while the figure for onshore and nearshore wind power farms drops to 8% and 7.9% respectively from 12% under FiT prices," the top broker wrote.

A complex that produces clean salt and clean energy, invested by BIM Group, in Ninh Thuan province, south-central Vietnam.

A complex that produces clean salt and clean energy, invested by BIM Group, in Ninh Thuan province, south-central Vietnam.

In order to optimize profitability, investors of transitional renewable energy projects need to cut loan interest, operating and investment costs. Therefore, they are not too keen on such low purchase prices.

As of the end of March 23, only four applications have been sent to state utility Vietnam Electricity (EVN) for negotiation of electricity prices in power purchase agreements.

Currently, there are still many disagreements on terms related to electricity purchase currency, contract duration and prices between the buyer - EVN, and the seller - the developer. Therefore, although the new price range was released in January, the dates for transitional projects to come into operation have been unknown.

VNDirect believed that the transitional renewable energy price bracket will be the basis for the Ministry of Industry and Trade to make further decisions, especially the issuance of the official pricing mechanism for newly developed renewable energy projects.

Notably, Vietnam is actively piloting and perfecting the direct power purchase agreement policy, which is likely to be the direction of the upcoming development phase of the renewables market.

With Vietnam's strong commitment at the 26th UN Climate Change Conference of the Parties in the U.K. in late 2021 as well as ambitious adjustments in the latest draft Power Development Plan VIII (PDP VIII) to increase renewable energy capacity, VNDirect analysts said they expect an attractive pricing mechanism that will facilitate healthier competition, in order to encourage capable investors to participate in this market.

According to the report, in the first two months of 2023, renewable energy electricity output decreased slightly to 6.45 billion kWh mainly because solar power plants cut capacity. Meanwhile, wind power recorded a 9% year-on-year increase in output thanks to higher wind speeds than last year.

VNDirect said that thanks to the FiT policy, the renewable energy proportion in total power capacity increased from 9% in 2019 to 27% in 2022. However, the next development phase of this energy is facing many challenges. With the FiT expiration, investors have not been able to develop new projects, mainly due to delays in PDP VIII issuance as well as no clear signal of a new pricing policy for renewable energy.

Speaking at the Vietnam Business Forum (VBF) on March 19, Gabor Fluit, newly-elected chairman of EuroCham Vietnam, said: "Transitional projects that are already built may have no choice but to accept these tariffs or face bankruptcy (the only alternative for them is zero revenue)."

Transitional wind projects not already built will not be able to raise finances at these tariff rates, as they are now facing world market turbine pricing more than 30% higher than at the time of previous the FiT expiry, as well as higher loan interest and insurance rates, he said.

Fluit added that price appraisal for future projects should take into account existing macroeconomic conditions (higher capex, higher interestrates, supply chain bottlenecks) which many of the transitional projects that are already built did not fully face.

"MoIT should consult with independent experts to verify the assumptions and methodologies taken, before finalizing the price bracket," he said.

The 20-year preferential FiTs are 9.35 U.S. cents per kWh (Decision 11/2017) and 7.09-8.38 U.S. cents per kWh (Decision 13/2020) for solar power projects that became operational by December 31, 2020; and 8.35-9.8 U.S. cents per kWh for wind power projects that became operational by November 1, 2021.

Comments (0)
  • Read More
Indonesia to end incentives for imported CBU BEVs in 2026

Indonesia to end incentives for imported CBU BEVs in 2026

The Indonesian government has confirmed that it will stop providing incentives for imported completely built-up (CBU) battery electric vehicles (BEVs) from 2026.

Southeast Asia - Tue, September 16, 2025 | 9:44 pm GMT+7

Aquatic sector advised to navigate challenges, secure exports to EU, US

Aquatic sector advised to navigate challenges, secure exports to EU, US

Despite positive production signals with growth in 2025 projected at 4.25%, Vietnam's aquatic sector is facing mounting export pressures, particularly strict technical barriers in major markets such as the EU and the U.S.

Companies - Tue, September 16, 2025 | 9:41 pm GMT+7

Vietnam pledges favorable conditions for UK businesses

Vietnam pledges favorable conditions for UK businesses

Finance Minister Nguyen Van Thang has affirmed Vietnam’s commitment to improving its investment environment and creating favourable conditions for foreign enterprises, including those from the UK.

Companies - Tue, September 16, 2025 | 9:29 pm GMT+7

Lotte Shopping plans to open more shopping malls in Vietnam

Lotte Shopping plans to open more shopping malls in Vietnam

South Korean retail giant Lotte Shopping has unveiled plans to open an additional two to three large-scale shopping malls in major Vietnamese cities by 2030, underscoring the country’s growing role in the group’s international expansion strategy.

Companies - Tue, September 16, 2025 | 9:25 pm GMT+7

Vietnam ratifies WTO Agreement on Fisheries Subsidies

Vietnam ratifies WTO Agreement on Fisheries Subsidies

Vietnam officially deposited its instrument of ratification of the Agreement on Fisheries Subsidies at the WTO General Council’s special session in Switzerland on Monday.

Companies - Tue, September 16, 2025 | 9:21 pm GMT+7

What makes NobleGo - Vietnam’s first home-bidding livestream platform - so notable?

What makes NobleGo - Vietnam’s first home-bidding livestream platform - so notable?

NobleGo – Vietnam’s pioneering AI-powered livestream real estate bidding platform developed by Sunshine Group – has completed its first 20 livestream sessions.

Real Estate - Tue, September 16, 2025 | 4:53 pm GMT+7

Japanese retailer Aeon to debut another northern Vietnam shopping mall by end-2026

Japanese retailer Aeon to debut another northern Vietnam shopping mall by end-2026

Japanese-backed Aeonmall Vietnam is ramping up construction on its Aeon Mall Ha Long project in Quang Ninh province, home to Ha Long Bay, with an aim to open it to the public by end-2026.

Industries - Tue, September 16, 2025 | 3:54 pm GMT+7

Hanoi terminates Vinaxuki auto plant project, repurposes land for commercial complex

Hanoi terminates Vinaxuki auto plant project, repurposes land for commercial complex

A long-stalled automotive manufacturing project by Xuan Kien Auto JSC (Vinaxuki) has been officially terminated by Hanoi authorities, and the reclaimed land in Phuc Thinh commune will be repurposed for a new commercial and service complex.

Industries - Tue, September 16, 2025 | 2:44 pm GMT+7

Central Vietnam province reviews investment proposal for thermal power project after Thai EGATi pullout

Central Vietnam province reviews investment proposal for thermal power project after Thai EGATi pullout

Authorities in the central province of Quang Tri are evaluating a proposal from Power Generation JSC 1 (EVNGENCO 1), a subsidiary of state utility Vietnam Electricity (EVN), to take over the Quang Tri thermal power plant project, following the withdrawal of Thai investor EGATi.

Energy - Tue, September 16, 2025 | 1:44 pm GMT+7

Amata to sell stakes worth $46 mln in Vietnam units to Novaland-tied buyers

Amata to sell stakes worth $46 mln in Vietnam units to Novaland-tied buyers

Amata VN, the Vietnam arm of Thailand’s leading industrial park developer Amata, has approved a plan for its subsidiary Amata City Long Thanh Urban JSC (ACLT) to sell its remaining 51% stakes in two entities to local developer Novaland-linked buyers.

Real Estate - Tue, September 16, 2025 | 12:19 pm GMT+7

Vietnam already meets FTSE's criteria for stock market status upgrade: Finance Minister

Vietnam already meets FTSE's criteria for stock market status upgrade: Finance Minister

Vietnam has fulfilled the criteria for a stock market status upgrade by FTSE Russell through reforms aimed at facilitating foreign investment inflows into its market, said Minister of Finance Nguyen Van Thang.

Economy - Tue, September 16, 2025 | 9:36 am GMT+7

Banks should be allowed to distribute, invest in mutual fund certificates: Vietnam's finance ministry

Banks should be allowed to distribute, invest in mutual fund certificates: Vietnam's finance ministry

The Ministry of Finance is proposing a key reform that would allow commercial banks to invest in and distribute mutual fund certificates, as part of a broader plan to restructure the investor base and foster the development of Vietnam’s fund management industry.

Finance - Tue, September 16, 2025 | 8:00 am GMT+7

E-commerce boom a major driver of Vietnam's packaging paper industry growth

E-commerce boom a major driver of Vietnam's packaging paper industry growth

Vietnam's paper packaging industry is entering a period of strong growth, with an average annual growth rate forecasted at 10% until 2030.

Companies - Mon, September 15, 2025 | 10:20 pm GMT+7

Vietnam needs support from UK in developing international financial center: Deputy PM

Vietnam needs support from UK in developing international financial center: Deputy PM

Permanent Deputy Prime Minister Nguyen Hoa Binh has called on the UK and the City of London to continue supporting and accompanying Vietnam in promoting and introducing its international financial center (IFC).

Finance - Mon, September 15, 2025 | 10:12 pm GMT+7

Vietnam enforces 8% capital adequacy ratio for banks from Sept 15

Vietnam enforces 8% capital adequacy ratio for banks from Sept 15

Commercial banks and foreign bank branches in Vietnam must maintain a minimum capital adequacy ratio (CAR) of 8%, including at least 4.5% in Tier 1 core capital and 6% in Tier 1 capital, starting from September 15.

Banking - Mon, September 15, 2025 | 10:04 pm GMT+7

Tool for wood traceability management debuts in Vietnam

Tool for wood traceability management debuts in Vietnam

The Vn-WoodID application has been officially launched in Vietnam, becoming a key tool contributing to wood traceability.

Companies - Mon, September 15, 2025 | 10:00 pm GMT+7