SOLAIRE POWER played almost no role in Vietnam’s energy mix in 2017. To accelerate the adoption of the technology, the government proposed that year to pay suppliers a generous sum of $ 0.09 for each kilowatt hour produced by large solar farms, but only if they started operating in the following two years. He was expecting some 850MW of capacity to install. Instead, at the end of 2019, the country stood at 5 gigawatts, more than Australia, with an economy almost six times larger.
The increase is all the more surprising given the conditions proposed by Vietnam Electricity (EVN), the cash-strapped public enterprise that manages the national network. Although the government’s “feed-in tariff” is tempting given that costs generally amount to $ 0.05-0.07 per kilowatt hour, EVN only promised to pay for the electricity he needed on a given day. The developers feared that potential investors would balk at this. In the end, they jumped at the opportunity to take advantage of Vietnam’s thirst for power.
The Vietnamese economy has grown by 5 to 7% per year over the past two decades. The government plans to double electricity production by 2030, but estimates that supply could run out next year. He must find new sources of energy as soon as possible.
Coal is the cornerstone of Vietnam’s energy supply. According to current plans, the fleet of coal-fired power plants will soon triple. But construction has been hampered by regulatory delays, local opposition and declining investor interest. It takes around a decade to build a new factory. Solar farms, on the other hand, generate much less opposition and take around two years to build.
The solar boom was not without problems. Almost all new installations are located in the sunny south-east, where they overwhelm the local network and sometimes force EVN to refuse to buy the energy they generate, feared the developers of exact scenarios. In addition, the feed-in tariff is expensive. The government is adapting, however. He started improving the grid and in November he decreed that in the future he would not offer a feed-in tariff, but would auction off the right to sell solar power to the grid, the winner being the company that offers to do it at the lowest price.
Environmentalists hope the success of solar power will persuade the government to reduce its ambitions for coal-fired power plants. Later this year, it is expected to release new production capacity targets in 2030. Wind and solar have almost already reached their current target of providing 10% of electricity, ten years earlier than planned. They could easily absorb the 43% share currently allocated to coal. Analysts assume, after all, that prices should continue to move in favor of renewable energy. Wood Mackenzie, a consulting firm, believes that the electricity produced by large solar farms in Southeast Asia will be at least as cheap as that of almost all coal-fired plants in five years. Since coal-fired power plants have a life span measured in decades, Vietnam and other countries risk blocking unduly expensive generation capacity.
In Malaysia, a recent auction to build 500MW of solar capacity made 13 offers. In Cambodia, the bidder selected to build a 60MW The plant said it would provide electricity at less than $ 0.04 per kilowatt hour, a record level for the region. Although the pipeline of proposed coal-fired power plants in Southeast Asia remains huge, at around 100 gigawatts, the International Energy Agency, a think tank, has noticed a gradual change over the past five years. Approvals for new coal-fired plants have slowed; additions to solar capacity have surged.
Vietnam’s experience suggests that not all planned coal-fired power plants will be built. Even if that turns out to be correct, Southeast Asia will still have far more coal-fired power plants than environmental activists would like. But the sudden spark of solar energy in Vietnam should at least change the authorities’ view of what is possible. ■
Subscribe to our bi-monthly newsletter on climate change here
This article appeared in the Asia section of the print edition under the title “Sunny spell”
