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Experts attending a recent conference on wind power development said that weak policies are holding back wind power development.
Investors need billions of dollars to develop wind power projects and face high risks.
“The contracts are the biggest obstacle,” said Bui Vinh Thang from Mainstream.
According to Thang, power generators now only have one choice – sell electricity to Electricity of Vietnam (EVN).
However, provisions in the contracts signed with EVN pose high risks for investors.
First, power generators sign contracts to sell electricity to EVN for 20 years. However, EVN can break the contract at any time, while investors will receive money equal to 1-year electricity value as compensation. Second, disputes will be settled at Vietnamese court.
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Power generators sign contracts to sell electricity to EVN for 20 years. However, EVN can break the contract at any time, while investors will receive money equal to 1-year electricity value as compensation. |
Thang believes that international laws should be the rule for foreign invested projects, suggesting that the laws of the UK and Singapore would be accepted by investors.
Under contracts signed with EVN, EVN has the right to temporarily stop using electricity from certain plants to serve network maintenance. This means that during the time when the plants don’t generate electricity or sell electricity to EVN, they do not have income.
The high risks for power investors make it difficult for them to borrow money from international finance institutions.
Wind power generators can borrow from foreign financial institutions if they are guaranteed by domestic commercial banks. However, in this case, the banks will charge a 1.5-2 percent fee.
The low selling electricity price also discourages investors. EVN only accepts to buy wind power at 7.8 cent per kwh, or VND1,770, lower than the prices in other countries.
“With the current price, we won’t make a profit in the next two years,” Thinh said. It is estimated that Phu Lac project will recover investment capital after 14 years.
Vietnam is considered a country with great potential for wind power. At least 8.6 percent of mainland area can be used to install large wind turbines. To date, seven wind power projects have been put into operation, and more wind power projects have been registered.
Under the electricity development plan, renewable power would account for 6.5 percent of total power generation sources by 2020 and 6.9 percent by 2030. Vietnam would need to have 800 MW of wind power by 2020 and 6,000 MW by 2030.
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