One of the biggest challenges that solar power companies are currently facing is the delay in implementing the solar power connection mechanism (a mechanism that allows solar power companies to connect to the national grid and sell electricity directly to EVN - Vietnam Electricity Group at a price determined by the government). In recent times, the implementation of this mechanism has faced many difficulties, causing companies to be anxiously waiting...
In recent years, Vietnam has achieved significant accomplishments in the field of solar energy thanks to the support of the government and the contribution of energy companies. The period from 2019-2020 witnessed a "boom" in solar power both in terms of project quantity and installation capacity. New projects that have come into operation have contributed to a substantial increase in the total amount of renewable energy deployed in 2021 compared to the previous year (+173% YoY). However, in 2021, there are still many solar power projects that are not fully utilized or have reduced output (due to some shortcomings in the power grid, load demand, and supply-demand imbalances) in some areas that experienced a "hot development" of solar power in the 2019-2020 period.
According to the Electricity Industry Report 2022 & Outlook 2023 by Vietdata, "As of the end of 2022, the total installed power capacity of Vietnam reached 77.8 thousand MW, an increase of 1,180 MW compared to 2021 and ranked first in the ASEAN region in terms of scale. Of which, the total capacity of renewable energy (RE) power sources stagnated after two years of previous hot growth and reached 20,165 MW, accounting for nearly 26%. Although the installed capacity is large, the generated output from these power sources has not been fully exploited because many Solar power projects put into operation after December 31, 2020, still "wait" for the pricing mechanism throughout 2022 (specifically, the output of renewable energy mobilization only accounts for 11.9% of the total mobilized output of the whole system in 2022). This not only causes social investment waste but also seriously affects the investment efficiency of projects and many investors encounter difficulties in cash flow".
Source: Electricity Industry Report 2022 & Outlook 2023 by Vietdata
Currently, one of the biggest challenges that solar power companies are currently facing is the delay in implementing the solar power connection mechanism (a mechanism that allows solar power companies to connect to the national grid and sell electricity directly to EVN - Vietnam Electricity Group at a price determined by the government). In recent times, the implementation of this mechanism has faced many difficulties, causing companies to be anxiously waiting.
Specifically, according to Decision No. 13/2020/QD-TTg by the Prime Minister on the mechanism to encourage the development of electricity from renewable energy sources, the Vietnam Electricity Group (EVN) is responsible for signing power purchase agreements with power plants from renewable energy sources that are connected to the national grid. However, this decision only applies to projects approved for inclusion in the electricity development plan and completed before December 31, 2020. After this deadline, EVN announced a temporary suspension of new rooftop solar power systems due to the lack of a new pricing mechanism.
The Vietnamese Ministry of Industry and Trade has stated that the current Feed-in Tariff (FIT) pricing mechanism for solar power is not suitable for the current market and investment conditions. The FIT mechanism, which was introduced to encourage investment in solar power projects, has led to uncertainty about future electricity prices and financial difficulties for solar power companies. Many solar power projects with an installed capacity in the thousands of MWs are waiting for new electricity prices to be determined as they have not met the conditions for operation before the end of 2020. The delay in the issuance of the 8th Electricity Development Plan has also affected the operations of renewable energy power plants and related industries such as biomass fuel production.
In this article, Vietdata will mention some large-scale solar power plant clusters that have recently gained attention.
Phu My 1-2-3
On May 29, 2020, the Phu My solar power plant was inaugurated by the Clean Energy Vision Development Joint Stock Company (NLS) under BCG Energy. The plant is located in My An and My Thang communes, Phu My district, Binh Dinh province. The initial plan was for the plant to be built on a 380-hectare area, but during the approval and land allocation process, the project was given a smaller area of 323.5 hectares.
The total capacity of the project is 330MW, divided into 2 stages, including 3 power plants with capacities of 120 MW, 110 MW, and 100 MW, respectively. Just 7 months after construction began, on December 31, 2020, the main plant was officially connected to the national power grid and began commercial operations with a capacity of 216MW out of a total of 330MW. The remaining 114MW of the second stage was completed and connected to the grid before February 28, 2021.
In its first year of operation in 2021, the Phu My solar power plant achieved positive business results with a revenue of nearly VND 450 billion and a profit of nearly VND 180 billion. Also this year, the total electricity output of the plant that was delivered to the national grid was 272,430 MWh, reaching 80% of the plan set forth. By 2022, the electricity output that the plant delivered to the grid increased to 316,248 MWh, reaching 93.3% of the plan.
In 2022, the Phu My solar power plant (phase 2) with a capacity of 114MWp completed its construction and is also among the projects awaiting electricity price approval to be put into operation. According to the People's Committee of Binh Dinh province, due to difficulties in land clearance, the project was unable to be completed before December 31, 2020, to enjoy the electricity price support policy as stipulated in Decision 13/2020/QD-TTg of the Prime Minister.
Hong Phong 1A-1B
The Hong Phong 1A and 1B solar power plants were respectively initiated by Hong Phong 1 Energy Joint Stock Company and Hong Phong 2 Energy Joint Stock Company, both members of the Construction and Trading Joint Stock Company (Vietracimex). The two solar power projects with a total investment capital of nearly VND 7,000 billion were officially connected to the national grid in June 2019, taking advantage of the Government's incentives under the November 2017 Decision of the Prime Minister.
Located in Hong Phong commune, Bac Binh district, Binh Thuan province, the Hong Phong 1A (150MW) and Hong Phong 1B (100MW) solar power plants share a 220kV transformer substation and interconnecting transmission lines.
During the period from 2019 to 2021, the business operations of the Hong Phong solar power plant cluster experienced fluctuations. Specifically, the cluster generated revenue of nearly VND 660 billion since it began operating in the second half of 2019. The revenue figure nearly doubled to approximately VND 1,190 billion in 2020. However, the revenue of both power plants decreased in 2021, recording a total of nearly VND 1,150 billion.
The decrease in revenue was explained by the impact of the Covid-19 pandemic, the reduction in electricity consumption in areas with many industrial parks, economic zones, and export processing zones towards the end of 2020, lasting until 2021. Meanwhile, the power supply was greater than the load, so it was necessary to cut back on the power supply. This was also one of the reasons why EVN required solar power project owners to reduce their capacity from 50-70% in the last months of 2020. This caused significant damage to businesses as there was no revenue to repay capital and interest to banks.
The after-tax profit of Hong Phong 1A and 1B solar power plants also fluctuated during the period of 2019-2021. In 2020, the two plants recorded a profit decline of over 4% compared to 2019, with a profit of over VND 250 billion. In 2021, there was a recovery as Hong Phong reported a profit of nearly VND 290 billion, an increase of over 7% compared to 2019.
The BIM 1-2-3 solar power plant cluster with a total installed capacity of 330 MWp was started in Phuoc Ninh commune, Thuan Nam district, Ninh Thuan province in 2018. The owner of the power plant cluster is the BIM Group, in a joint venture with AC Energy (a subsidiary of Ayala Corporation, Philippines) with a total investment capital of over VND 7,000 billion. On April 27, 2019, the BIM 1-2-3 cluster was officially inaugurated and put into commercial operation.
The BIM power plant cluster has a total capacity of 330 MW, equivalent to the capacity of the Phu My solar power plant. Specifically, the capacity of the BIM 1, 2, and 3 plants are 30 MW, 250 MW, and 50 MW respectively.
During the 2019-2021 period, the BIM power plant cluster had a fairly positive business performance. BIM's revenue and profit growth were the most stable among the mentioned power plant clusters. In 2019, BIM's net revenue reached over VND 700 billion. By 2020 and 2021, the plant's revenue reached over VND 1,000 billion and nearly VND 1,170 billion respectively, corresponding to an increase of nearly 50% and almost 66% compared to 2019.
The BIM solar power plant cluster is one of the plants that started operation early (since the end of 2018) and received preferential electricity prices when signing a power purchase agreement with EVN. This contributed to the rapid increase in after-tax profits of the power plant cluster from 2019 to 2021. In 2020 and 2021, the BIM plant recorded a profit of over VND 500 billion and nearly VND 560 billion respectively, corresponding to an increase of 47% and nearly 63% compared to 2019."
Dau Tieng 1-2-3
The Dau Tieng 1,2 solar power plant cluster is one of the largest projects in the country with a total capacity of 420MW and a total investment of over VND 9,100 billion. The project is a joint venture between Xuan Cau Group (Vietnam) and B. Grimm Power Public Group (Thailand) and is built on the floodplain of Dau Tieng Lake, Tay Ninh Province. After nearly a year of construction starting in late June 2018, the two plants were officially put into commercial operation and connected to the national grid in June 2019. The Dau Tieng 3 solar power plant is also part of the Dau Tieng solar power plant project, invested by Xuan Cau with a total capacity of 180MW and planned on an area of 216 hectares.
The business picture of Dau Tieng solar power plants in the period of 2019 - 2021 has the opposite color with bright growth in the first two years and a dark trend in the last year. Specifically, the gross revenue of the power plant complex in 2020 reached nearly VND 1,650 billion, nearly 1.8 times higher than in 2019. Of which, Dau Tieng 1 and Dau Tieng 2 contributed more than VND 1,400 billion, and Dau Tieng 3, which had just completed stage 1, contributed nearly VND 250 billion.
However, in 2021, the power plant cluster recorded only over VND 1,460 billion in revenue, a decrease of over 11% compared to the previous year. The reason for this is that in 2021, while Dau Tieng 3 continued to complete stage 2 and increase its revenue by nearly VND 200 billion, Dau Tieng 1 and Dau Tieng 2 saw a decrease of nearly VND 400 billion.
In 2021, B.Grimm Power Group of Thailand and Xuan Cau Group of Vietnam split the Dau Tieng 1,2 solar power plant cluster through a change in the ownership structure of the investor company. Initially, the total capacity of the Dau Tieng 1,2 solar power plant complex was 420MW, including Dau Tieng 1 (180 MW) and Dau Tieng 2 (240 MW). After the split, B.Grimm Power now holds 96.25% of the shares in Dau Tieng 2, and the remaining shares and the Dau Tieng 1 project belong to Xuan Cau Group.
In 2020, the after-tax profit of the Dau Tieng solar power plant complex reached over VND 710 billion, an increase of over 28% compared to 2019. In 2021, the profit of the power plant complex evaporated quickly and was only about VND 460 billion, an even more than 17% decrease compared to 2019. The only bright spot is that Dau Tieng 3 solar power plant still has signs of prosperity when its after-tax profit reaches nearly VND 165 billion in 2021, an increase of more than 67% compared to 2019.
Xuan Thien - Ea Sup phase 1
The Xuan Thien - Ea Sup solar power plant cluster is evaluated as the largest solar power plant cluster in Southeast Asia and a significant step in Vietnam's solar power industry. The project has a total investment of over VND 50 trillion, with phase 1 having a capacity of 831 MWp, and phase 2 consisting of 10 plants with a total capacity of 1,400 MW/1,936 MWp.
In particular, the Xuan Thien - Ea Sup solar power plant cluster phase 1 is built on an area of about 4,180 hectares in Ia Lop commune, Ea Sup district, Dak Lak province. The cluster was started in June 2019 and completed urgently in November 2020 - just over a year. Phase 1 of Xuan Thien - Ea Sup consists of 5 plants with a total capacity of 830 MWp, capable of producing about 1,500 million kWh/year - equivalent to the electricity demand of about 600,000 households.
In 2021, the cluster's net revenue reached nearly VND 1,680 billion, contributing to making the cluster among the top solar power projects with the highest revenue. Among them, the Xuan Thien - Ea Sup 5 solar power plant had the highest revenue, with over VND 500 billion. This plant has a capacity of 150 MW and a total investment of VND 3,848 billion.
In contrast to the bright signal from revenue, due to being newly put into operation and affected by the Covid pandemic, Xuan Thien - Ea Sup cluster's post-tax profit is quite thin, with a profit of only over VND 125 billion, which is relatively low compared to other solar power plants. The profit from the plants in the cluster is not significantly different, with the highest being the Xuan Thien - Ea Sup 5 plant, with a profit of nearly VND 34 billion.
Trung Nam Thuan Nam
The Trung Nam Thuan Nam solar power project was inaugurated on October 12, 2020, in Phuoc Minh commune, Thuan Nam district, Ninh Thuan province. The project was added to the power development plan by the Prime Minister at the beginning of 2020 and has a total investment capital of up to VND 12,000 billion. This is a project invested by Trung Nam Investment and Construction Joint Stock Company (Trung Nam Group). The project stands out with features such as being one of the large solar power projects in Vietnam with a total capacity of 450 MW and planned on an area of 557.09 hectares.
Although joining the race in late 2020, Trung Nam Thuan Nam still achieved promising revenue results by bringing in over VND 337 billion in 2020 and rapidly increasing to more than VND 1,820 billion in 2021 - outstanding revenue only after the Lộc Ninh solar power cluster. The after-tax profit of the plant also rapidly increased from over VND 90 billion in 2020 to over VND 400 billion in 2021.
As of March 2023, the suspension of the 172.12 MW solar power mobilization of Trung Nam without electricity prices is still a hot issue. This is a dispute between EVN and Trung Nam over the purchase and sale of electricity from the project in Ninh Thuan. EVN has stopped mobilizing the capacity of 172.12 MW of solar power without prices since October 22, 2021, because the Government has not issued new price mechanisms for solar power projects after June 30, 2019. EVN believes that this does not violate the contract and will continue to buy the entire output when there is a decision from the Government. Trung Nam also expressed that this causes significant damage to the company. Trung Nam requested EVN to continue to mobilize this capacity in accordance with relevant legal documents. Currently, Trung Nam - Thuan Nam Company is continuing to complete documents to transfer to the Power Trading Company for contract negotiations. In the future, after this company completes the legal documents, the two sides will proceed to negotiate according to the guidance of the Ministry of Industry and Trade.
Loc Ninh 1-2-3-4-5
The solar power project cluster of Loc Ninh 1-2-3-4-5 is built in Loc Tan commune, Loc Ninh district, Binh Phuoc province (near the Vietnam - Cambodia border). The project consists of 5 factories with a total installed capacity of 800 MWp and an investment cost of over VND 12 trillion. The Loc Ninh 1-2-3 Solar Power Plant Cluster, belonging to Super Energy Group - Thailand, officially commenced commercial operation at the end of December 2020 with a total capacity of 550 MWp. The remaining two plants, Loc Ninh 4 and Loc Ninh 5 have capacities of 200MW and 50MW, respectively.
The revenue and after-tax profit of the Loc Ninh solar power plant cluster in 2021 increased significantly, with figures of over VND 1,850 billion and over VND 490 billion, respectively. The business operation of Loc Ninh is also highly evaluated compared to other solar power plants.
In 2020, the acquisition of the Loc Ninh project drew attention when Super Energy spent a total of $456.7 million, including $76.05 million for share purchase. Specifically, in March 2020, Super Energy Corporation (Super Energy) announced a plan to invest $456.7 million to acquire 4 solar power projects, including Loc Ninh 1 (200 MW), Loc Ninh 2 (200 MW), Loc Ninh 3 (150 MW), and Loc Ninh 4 (200 MW). To acquire Loc Ninh 1, Super Energy participated in the intermediary company SSEVN1 with a 49% stake. The acquisition of the remaining projects was also carried out similarly. Specifically, the company acquired 100% of SSELN2 and SSEBP3 shares to own 100% of Loc Ninh 2 and Loc Ninh 3; acquired 100% of New Hold Co 4 shares (worth VND 50 billion) to own 80% of Loc Ninh 4. In addition, before acquiring the "Loc Ninh" projects, Super Energy owned 6 solar power projects in Vietnam with a total charter capital of 286.72 MWp, equivalent to half of the total capacity of 100 solar power projects that the company owns in Thailand.
Solar power trend in Vietnam
In general, Vietnam is still aiming toward renewable energy sources to reduce dependence on traditional energy sources. At the annual Vietnam Business Forum (VBF) on March 19, 2023, Prime Minister Pham Minh Chinh evaluated green growth as a major and important direction for Vietnam to ensure fast, efficient, and sustainable economic development. At the COP26 conference, Vietnam made strong commitments, including achieving net zero emissions by 2050. Additionally, commitments to sustainable development have also been incorporated into new-generation free trade agreements such as the CPTPP and EVFTA.
In the coming time, solar power in Vietnam will focus on large-scale projects with hundreds of MW, increasing reliability and efficiency in solar power production and distribution. In addition, from now until 2030, priority will mainly be given to approved solar power projects that have already been installed and optimized for their capacity.
According to the report from Vietdata, Decision 21/QD-BCT (Decision on the electricity price framework for solar and wind power projects issued by the Ministry of Industry and Trade on January 7, 2023) will "unlock" the long-awaited transmission solar power projects that have been waiting for a pricing mechanism. These plants are expected to be connected to the grid and mobilized, partly solving the cash flow problem for investors. However, the projects will also have to deal with the problem of reducing the internal rate of return (IIR) and the impact of changes in currency units for the new electricity price framework./
Source: Electricity Industry Report 2022 & Outlook 2023 of Vietdata