January 18, 2020 21:33

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Single solar power price: Concerns about less competition, grid overload

09:21 | 09/10/2019

VCN- Recently, the Ministry of Industry and Trade officially proposed the Prime Minister consider the option of a single solar power price applied nationwide. This new plan makes many investors concerned about falling profits, being less competitive, and continuing the difficult problem of grid overload.

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Massive development of solar power in a number of localities will make grid overloading more serious. Photo: Nguyen Thanh

Still attracting investors

In the latest Decision of the Prime Minister on the incentive mechanism for solar power development in Vietnam, the Ministry of Industry and Trade proposes the Prime Minister consider and approve the decision of a single price forthe whole country instead of dividing into two price regions or four price regions (according to radiation intensity). Specifically, ground-mounted solar energy project is at VND1,620 per kWh, equivalent to US7.09 cents per kWh; the floating solar energy project is VND1,758 per kWh, equivalent to US7.69 cents per kWh; the rooftop solar power project is VND2,156 per kWh, equivalent to US9.3 cents perkWh.

Agreeing with the plan of a single solar power price proposed by the Ministry of Industry and Trade, Mr. Phan Ngoc Anh, Director of Alena Energy Technology Co., Ltd.said: “If the electricity price drops as in the draft, it still ensuresinvestors' profits. For the South, which produces better solar power, we must encourage this area to develop well. In the North, if raising prices to encourage investment, it will cause inefficiency and waste of investment.”

As waiting for the new price of solar power to apply after June 30, 2019 (when Decision 11/2017/QD-TTg on the mechanism to encourage the development of solar power projects expires), Vincent Chan, Sales Director of Clenergy Technology Company said: “Previously, the price of solar electricity at US9.35 cents/kWh was quite competitive. After June 30, 2019, although the new FIT price for solar power is slightly lower, it is very attractive to investors.”

Concerns about grid overload

In contrast to the above opinion, paying more attention to solar power projects, Mr. Le Anh Tung, Chairman of Ecotech Vietnam Joint Stock Company,said: “According to the draft, the price for floating solar energy project is only US7.09 cents per kWh, which means a reduction of about 32% compared to the old price (as stipulated in the Decision 11/2017/QD-TTg). This means that the profits of investors are also reduced. Meanwhile, borrowing for energy projects is increasingly difficult with tighter conditions. With such a low price, if there is an overload of the grid and a reduction of capacity, investors may fall into bankruptcy.”

“With the plan of a single electricity price, investors will choose the best areas to invest. That means that investment in solar power will focus on the Central Highlands provinces that are currently overloaded with electricity grids, which is not encouraging investment in the Northern or Central provinces. Thus, the grid overload will continue to take place,”Mr. Tung stressed.

Regarding solar power development, the Vietnam Energy Association (VEA) has recently issued Document 48/ HHNL-VP to the Prime Minister with many suggestions and recommendations on mechanisms to encourage the development of solar power projects in Vietnam. The text stated: Vietnam's radiation intensity varies greatly by region. The Northern provinces have the lowest radiation, averaging about 3.7 kWh/m2/day, while the southern provinces, the South Central and Central Highlands regions have average radiation of 4.8-5.1 kWh/m2/day (nearly 1.4 times higher). This shows thatgrid-connected solar power projects concentrate in some localities with high radiation intensity, causing local overloads, affecting the safety of electricity supply of the system. In order to overcome this problem, the association proposed to apply prices of grid-connected solar power projects byregions (2-4 regions) instead of the current national electricity buying price.

"The purchase price of solar power by regions has been applied in many countries. This will bring some efficiency as facilitating regulators and operators. The power system has many options in integrating solar power sources with other types of power plants in the region to bring the highest efficiency,”said Mr. Tran Viet Ngai, Chairman of Vietnam Energy Association.

According to the Ministry of Industry and Trade: the plan for a single national electricity price has the great advantage of a simple FIT price policy because there is only one price and no higher support is needed in areas with low radiation potential.

However, this option also has two major disadvantages. First, the incentive is lower for projects in the North and Central regions to contribute to addressing the risk of power shortage in the period until 2023 in the South. The planned solar power projects in regions 1 and 2 in the previous draft are more difficult to implement. Projects in region 4 in the previous draft will get higher prices than the 4-region plan.

Secondly, due to the concentration of many solar power projects in areas with good radiation potential, there is a risk of overloading the transmission grid. Because solar power projects are concentrated in only one region, the ability to operate the transmission systems, compensation and site clearance is also increasingly difficult

By Thanh Nguyen/ KieuOanh