‘Government fossil fuel subsidies holding back Vietnam solar’

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Solar project developers should be flocking to the large land are and natural solar resources of Vietnam, but government diesel prices are barring the way, the CEO of a developer operating in the country has claimed.

Paul Puthenpurekal, president and CEO of renewable energy developer, Solutions Using Renewable Energy (SURE) told PV Tech that developing solar in Vietnam “should not be a problem, but the government has its own constraints and markets, which is why it doesn’t want diesel to go away”.

Speaking at Solar Energy South East Asia 2014 held in Bangkok last week, Puthenpurekal said SURE is seeking to develop a 20MW hybrid off-grid solar project, to complement SURE’s existing biogas plant in Vietnam. “We are just waiting for the government to give some degree of indication of if it will accept such a solar proposal.” The use of hybrid and off-grid technology will increase the plant’s flexibility and decrease the need for added infrastructure, Puthenpurekal said.

However at current tariff prices, solar development “is not possible” – diesel-generated power is now US$0.06 per kWh in Vietnam, “too low” for solar to compete, said Puthenpurekal.

To break even, Puthenpurekal said US$0.10 per kWh is required and about US$0.12 per kWh is needed to make projects profitable.

This pricing should still make solar completely viable and economical in Vietnam, as currently the price of electricity in Vietnam is far beyond US$0.10-12, “but the government is suppressing the prices based on subsidies [for diesel].”

Puthenpurekal said without subsidies, diesel fuel costs close to US$0.30 per kWh – three times the break-even cost of solar energy.

The majority of Vietnam’s electricity generation comes from small diesel generators “with wires hooked up everywhere, to a big diesel generator that sometimes doesn’t run – that is how the system is today”, said Puthenpurekal.

Puthenpurekal said the government is reluctant to change “anything running economically today, no one wants to take [subsidies] away”.

“It is hard for a market to jump from US$0.06 per kWh [for subsidised diesel] to US$0.10 or US$0.12 per kWh, especially in a socialist political setting,” said Puthenpurekal.

Instead Puthenpurekal suggests the government should allow solar development and for energy prices to double, with a five-year price freeze. “Something like that could happen, but, people cannot afford it, especially because of politics,” he said.

Puthenpurekal said not only are government diesel subsidies preventing solar energy generation, but a lack of consistency in government policy is also deterring development. “The government might change its mind tomorrow and say: well for now this is the new law!”

“It is a very regulated,” said Puthenpurekal, however, there is still hope for solar if it can be seen as fulfilling a basic need. “If you are providing basic amenities to people, I doubt government will change its way, all the more as it is a socialist government.”

Currently the government “is always very aware of solar” with a “clamour” to bring in a feed-in tariff, as there is already for other renewable energy generation projects, but “solar is still a challenge, [government] have not come up with the specifics”, said Puthenpurekal.

Vietnam has 3 million people without electricity access, but with more people living in “urban clusters” than other Southeast Asian, rural island systems, “it is hard for a grid to reach [islands], Vietnam is easy because it is one contiguous land”.

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