PV Analysis of the Belt and Road Initiative

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PV Demand Analysis of the Belt and Road Initiative: Vietnam of Southeast Asia

Vietnam Country Profile

Vietnam is at the stage of economic take-off. Vietnam’s GDP growth rate reached 6.8% last year. The two credit rating agencies, Fitch and Moody, successively increased Vietnam’s credit rating in May and August 2018, respectively. They both hold optimistic attitudes toward the potential of economic growth in Vietnam. However, the higher debt year by year can be a worry for Vietnam’s economic development. 

Vietnam’s average solar radiation per day reached 4.6kWh per square meter. In other words, there are about 2,000-2,600 hours of sunshine in Vietnam every year. The Vietnamese government unveiled policies last year to drive the nation’s PV growth. They hope to install 12GW of PV capacity by 2030 with the launch of new policies. 

Renewable Energy Development

Vietnam announced a Power Development Master Plan #428/QD-TTg in March 2016. The plan aims to source 9.9% and 21% of its electricity from renewable energies in 2020 and 2030, respectively. 

Percentage of Renewable Energy in Total Installed Capacity

Vietnam’s development plan covers a variety of renewable energy projects, including four major areas: PV, wind, hydro, and biomass. The Vietnamese government has also set its goal for hydro, PV, and wind. PV, especially, becomes the second largest renewable energy project in Vietnam.

Installation Target

Vietnam Electricity, PetroVietnam, and Vinacomin, are the three major state-owned enterprises in Vietnam. These three companies are mainly in charge of Vietnam’s energy development. Their energy development are conducted through BOT or attracting other investors. Among the three, the market share of Vietnam Electricity is the highest, reaching 60%. 

PV Policies in Vietnam

The Vietnamese government introduced PV development policy #11/2017/QD-TTg in April 2017, focusing on FiT and Net-Metering. The period of PPA is 20 years. Projects that can receive subsidies are grid-connected project (projects  not belong to roof-top are this type) and roof-mounted project. In addition, the relevant regulations of tax credits are written in the policy as well. The policy will be effective from June 1st 2017 to June 30th 2019.

Feed-in Tariff (FiT)

Grid-connected project is subsidized at VND 2,086/kWh (approximately US$ 9.35 cents/kWh). This price is only applicable to projects with cell and module efficiencies over 16% and 15%, respectively.

Net-Metering

By using a two-way electric meter, project owners can calculate the electricity consumption and self-generated electricity till the end of year or when PPA ends. The excess electricity can be sold to the purchaser at VND 2,086/kWh (About US$ 9.35 cents/kWh)

Subsidy Type

Tax Credit

Corporate Income Tax (CIT) will be waived or lowered for the imported goods and PV projects that count as PV fixed assets. Meanwhile, fees will be exempted or reduced for the land uses for transmitting electricity and building substations to connect to the grid.

PV Development

Vietnam has the advantages of third-party manufacturing and low labor/electricity costs. Therefore, Vietnam is positioned as an OEM role. Currently, many PV companies have built factories in Vietnam and export PV products from there. The purpose is to enjoy low manufacturing costs and avoid tariff threats.

Comparison of Daily Minimum Wages

*Using Vietnam, Thailand, Malaysia, and the Philippines as examples.

Source: Minimum Wage Levels Across ASEAN, ASEAN BRIEFING

For Vietnam’s PV market, the cumulative installation only reached 8MW in 2017. In order to pursue the extension of PV development, the Vietnamese government plans to achieve 850MW, 4,000MW, and 12,000MW in 2020, 2025, and 2030, respectively. After setting a challenging PV target and coming up with a FiT in April 2017, it stirred up a discussion in the market. 

Vietnam’s Cumulative Grid-Connected Installation

Source: IRENA_RE_Capacity_Statistics_2018

Looking ahead to the future, Vietnam will either maintain the FiT or replace FiT by the auction. In 2018, although Vietnam witnesses higher credit rating, the debt problem is worrisome. Under such circumstances, if Vietnam wants to keep promoting PV development, the financial burden will be heavier with FiT than auction. In addition, cost reduction and efficiency increase have become global PV trends; it’s easier for governments to get high-quality products with low costs through auction. As a consequence, Vietnam is more likely to go with the bidding mechanism in the future.

Import Volume Analysis

Take Chinese module export to Vietnam as an example, ever since Vietnam introduced the FiT Policy in April 2017, China’s module export to Vietnam has increased significantly. From April to August 2018, China witnessed much higher growth in module export to Vietnam compared to the same period last year. This is because starting from 2018, the amount of PV installation and projects announced by Vietnam have outnumbered the total amount in 2017. Many utility-scale PV projects are currently in construction and are expecting to complete grid-connection before 2Q19. 

Chinese Module Export Volume to Vietnam

On the other hand, comparing the type of modules exported from China to Vietnam, Vietnam has high demand for conventional multi modules, which shows that product that is applicable to Vietnam’s FiT is lower than the market standard. 

2017 Export Types of Mono & Multi Module

2018 Export Types of Mono & Multi Module

Vietnam’s PV development is just at the initial stage. As the nation starts to make adjustment to its policies and the PV market becomes more mature, Vietnam will follow the global mainstream trend. Power efficiency of power station projects will ultimately scale up too.

 Conclusion

Although Vietnam hasn’t announced new policies yet, China’s module export to Vietnam is expecting to increase in the future until the FiT policy turns ineffective. It’s projected that there will be an installation boom before the FiT policy comes to an end. For future power station development, driven by a more mature PV market and technology improvement, Vietnam’s PV quality will follow the market trend, leading to higher power efficiency.

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