Pioneers and the price obstacle

Although there was a good 20 businesses authorized to invest in wind power in Vietnam, only Renewable Energy Joint Stock Company (REVN) has officially generated electricity while Cavico is still implementing the project. However, according to Mr. Mai Dinh Trung, Deputy Head of Renewable Energy Project (Ministry of Industry and Trade), in the next 10 years, wind power output will reach 1.75% of the total national output. The total output from all wind power projects will be 3,500 MWh by 2020, compared with the total national output of 200,000 MWh. This number may seem small at first, but probably not a good “pie” for current investors, since the basic requirements to develop this sector are still rather vague and there still remain many problems.

For the two pioneers, Cavico and REVN, admittedly, there have not been many domestic businesses such as these two to recognize the wind power potential in Vietnam. Cavico spent 60% of their investment fund for renewable energy on wind power, among other energy sources such as solar power, wave power (power generated by the combination of ocean waves and wind turbines). However, REVN is already ahead of Cavico. REVN is the owner of the first wind power project in Vietnam who chooses wind power as the core business.

One could explain REVN and Cavico’s insistence on wind power by noting that Vietnam has a great competitive advantage in this area, thanks to an 8% of land area with wind speed up to 7-8m/s at an altitude of 60 meters, ideal for wind turbines’ operation.

Another reason is government’s subsidy. Cavico and REVN both hope to receive a subsidy of 4 cents/kWh (1 cent is approximately VND19 under the current exchange rate) when they complete their projects and start selling power to “the boss” EVN to connect into the national grid. Cavico expects EVN to purchase their electricity at 10-12 cents/kWh, REVN at 13 cents/kWh. So, with the subsidy 4 cents/kWh from the government, in theory, investors only need to deal with how to sell at 8-9 cents/kWh to be fairly content profit-wise. However, at the moment, how much the subsidy will be is still unknown.

Nonetheless, the above advantages cannot offset the difficulties and potential pressure on these 2 pioneers. One of them is the price conflict.

In fact, EVN claimed that purchasing electricity from REVN at 13 cents/kWh is hardly feasible. As regulated by the Ministry of Industry and Trade, the current electricity price frame is only 5.8 cents/kWh, incurring cost for renewable energy projects is 4 cents/kWh. Therefore, the affordable price could be no higher than 9.8 cents/kWh.

And then there arise problems when REVN’s electricity goes into the grid, but the price is not yet agreed on. One of REVN’s wind power plant in Binh Thuan has a design capacity of 120 MW including four phases, with total investment of around USD77 million, has produced 11 million kWh in the first half of 2010. In April 2010, the Ministry of Industry and Trade has requested that the Energy Association and Energy Institute establish 2 specialized groups to evaluate REVN’s price to come to a suitable solution. However, until now, these 2 groups have not reached any conclusion. REVN’s electricity is already in EVN grid, while EVN does not know how to pay their partner!

Just like REVN, Cavico is still following every move from the government about renewable energy power price. Luckier than their predecessors, not until 2011 will Cavico have to start their project.

By Tran Quy