Vietnam's wind power target blown off course by low profitability

  Vietnam is lagging behind its targets to install 800MW of wind power by 2020. Photo by Reuters

Cheap electricity prices have literally taken the wind out of the sails of potential investors.

High installation costs and relatively low power prices are making investors think twice about diving into Vietnam's wind energy market.

The country has set a target of producing around 6,000 MW of wind power by 2030, equivalent to 2.1 percent of total electricity generation.

Deputy Trade Minister Hoang Quoc Vuong said Vietnam currently has four wind farms with a combined capacity of just 160 MW, implying that there is much more room for wind power in the country’s energy mix, the Saigon Times reported.

Power prices in Vietnam are relatively low and not an attractive proposition for investors in the wind energy market.

Investors have been asking for government support and a guarantee that it will buy electricity at higher prices so that they can make recoup from costly wind energy projects.

“At first, [the government] said it would set a new buying price in December last year, but it has failed to keep its promise again,” said Bui Van Thinh, chairman of the Binh Thuan Wind Power Association, adding that local wind power investors have proposed a price of 9.5 U.S. cent per kWh.

“According to the latest information, the government plans to set a new buying price for wind power in the first quarter of this year,” Thinh said.

Other projects have been delayed as investors claim that the current buying price of 7.8 U.S. cents/ kWh, compared to 20 cents in Thailand, 29 cents in the Philippines and 30 cents in Japan, would significantly cut into their profits.

Installing wind turbines is challenging in Vietnam and the country relies heavily on imported equipment.

“When a wind turbine breaks down, we have no choice but to order a new part from Denmark,” said Pham Van Tin, a deputy executive at Thuan Binh Wind Power Company.

It is obvious that costs are a major deterrent to wind energy projects.

Despite existing difficulties, there is still huge potential for wind power in Vietnam.

According to the Ministry of Industry and Trade, under the country’s latest revised power development master plan, Vietnam’s total wind power capacity would increase to 800MW by 2020, 2,000MW by 2025 and 6,000MW by 2030.

Vietnam has significantly more potential for wind energy than neighboring countries in Southeast Asia, according to the World Bank. A study by the bank showed that 8.6 percent of the country's total land mass could be used effectively to develop large wind farms, while the figures for Cambodia, Laos and Thailand stood at 0.2, 2.9 and 0.2 percent, respectively.

The country had previously set a target of developing 1,000 MW of wind farms, later revised down to 800 MW, by 2020. The push to boost electricity production from wind turbines has been driven by its rapidly expanding demand for electricity.

The country’s electricity demand is expected to grow 13 percent annually in the next four years due to its fast-expanding economy, which has grown by more than 5 percent on average per year since 1999 and is forecast to reach 6.5-7 percent in the next four years.

Vietnam also plans to increase the amount that renewable energy contributes to national power consumption to at least 7 percent by 2020, up from the previous target of 4.5 percent.

By Vien Thong / VnExpress