When Heat Becomes a Resource!

1:56:02 PM | 15/6/2020

Renewable energy investment is increasingly becoming “HOT” as its name suggests when fossil resources, water resources (coal, oil, gas) are inversely proportional to population growth and energy demand in the world in general and in Vietnam in particular. Heat has become an endless treasure that makes both domestic and foreign investors eager to find ways to exploit this potential.

The heat attracts investors

Vietnam is a monsoon tropical country, located entirely within the tropical belt of the northern hemisphere, in favor of the tropics than the equator. The location has created a high temperature base for Vietnam, from 22ºC to 27ºC. And inevitably every year, there are about 100 rainy days with an average rainfall from 1,500 to 2,000mm. The humidity is about 80%. The number of sunny hours is about 1,500 -2,000 hours, the average annual radiant heat is 100kcal/cm².

Abundant light sources, attractive prices together with investment incentive policies are becoming attractive to foreign investors. In the past two years, the market has witnessed the wave of solar projects in Vietnam. According to data of the Department of Electricity and Renewable Energy (Ministry of Industry and Trade), as of mid-2018, there were 100 solar power projects added to the provincial/national electricity planning with the total registered capacity of 4.7 GW in 2020 and 1,770GW in the following years. And the rooftop solar power projects also had 748 projects with a total capacity of 11.55MW.

However, not all foreign investors are patient enough to carry out procedures to apply for permission to invest in solar power, and for a variety of reasons, most of them receive transfers from domestic investors after operation.

According to the Ministry of Industry and Trade, the Investment Law currently allows the transfer of projects to foreign investors when they meet the conditions to transfer projects of conditional business sectors. On the other hand, solar energy projects still attract foreign investors because of feed-in tariff (FIT) price policy, although the price has decreased to 7.09 cents per kWh compared to 9.35 cents per kWh previously.

Through the form of joint venture, transfer of shares with Vietnamese enterprises, foreign corporations have owned dozens of solar and wind power projects and enjoyed preferential prices of about VND2,000 per kWh for 20 years.

In energy projects (coal, gas) in the form of BOT, usually investment documents require a guarantee of the Government in project implementation, but with renewable energy projects (wind power, solar power), there is absolutely no Government guarantee. "And this is the attraction to invest in the power industry," said Mr. Hoang Tien Dung, Director of the Department of Electricity & Renewable Energy. He analyzed that large energy corporations in the world rarely went directly to develop projects to reduce risks, time and costs at the beginning phase such as site clearance compensation, approval from all levels of government.

Transforming investment

By mid-May, a total of 92 projects or part of solar power projects and 10 wind power projects, with a total capacity of nearly 6,000 MW, were commercially operated.

An executive representative of a large corporation in the West shared that, despite being a partner company, the major shareholders are from countries that crave territorial expansion. Perhaps the shareholders are doing their national duty under the direction of their government. Most solar power projects have a strategic military position, which implies national security.

In the leaked State policy, leading to group interests, there are many businesses investing “by the seat of their pants”, run projects without policies, until there are policies, other enterprises cannot keep up with the competition and real enterprises are eliminated. For example, there are currently many projects but little managed by domestic investors. After the procedure is completed, all businesses sell their projects to foreign investors, benefiting from project service fees. True investors have to struggle with administrative procedures and capital.

According to National Assembly delegate Truong Trong Nghia, the situation of foreigners buying land in sensitive areas has been questioned to the Minister of Natural Resources and Environment. “Many foreign investors say not to invest directly, especially in land. They let Vietnamese companies ask first and then jump in to buy their capital. Thus, if they buy controlling capital, they can become owners and control projects and businesses in very difficult areas just by buying capital. Therefore, the State must have a mechanism to protect real domestic investors, helping them develop to maintain land holdings," Mr. Nghia added.

Source: Vietnam Business Forum