Why does the Ministry of Industry and Trade supplementsolar power capacity that is ten times higher than the plan?

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By the end of June, there are 89 solar power plants in operation with a total capacity of nearly 4,500MW. Photo: Nguyen Thanh

The addition is ten times higher than the plan

Recently, the Government Office issued the Prime Minister's Conclusion at the Government's Permanent Meeting on the draft incentive mechanism for solar power development applied from July 1, 2019.

It states thatthe implementation of the national solar power development planning is slow, indecisive, and does not meet the general operating requirements for solar power development. Another weakness is in the management of solar power development planning of the Ministry of Industry and Trade, lacking science and practice.

Regarding this issue, according to the Ministry of Industry and Trade, the reason why the scale of supplemented solar power capacity is much larger than expected in the Revised Power Development Master Plan II is because the Revised Power Development Master Plan II sets the solar power development target at 850 MW by 2020, 4,000 MW in 2025 and 12,000 MW in 2030.

At the time of preparation and approval of the Revised Power Development Master Plan II (in 2016), it did not consider the solar power development in the period to 2020 due to the incentive mechanism for solar power developmentissued in April, 2017.

Mr. Do Duc Quan, Deputy Director of the Department of Electricity and Renewable Energy (Ministry of Industry and Trade) said that the Government's mechanism to encourage solar power development has created a strong motivation to attract many investors to propose more solar power projects to supplement the plan.

By the end of 2018, the Ministry of Industry and Trade has received suggestions for a supplement plan of the provincial People's Committees. A total of 360 solar power projects have proposed a supplement plan with a total capacity of 24,000 MW and approved supplement plans of 135 projects with a total capacity of about 10,400 MW.

What will the bidding mechanism be?

Regarding the development of solar power in the near future, the Prime Minister requests to comply with the principle of centralization for places with potential and advantages, with good development conditions; need to calculate the structure of power sources scientifically, switch to implementing the bidding mechanism and focus on handling projects that have been and are about to be completed but could not be put into operation before July 1, 2019.

According to Mr. Do Duc Quan, the bidding mechanism for renewable energy projects (wind power, solar power) has been assigned to the Ministry of Industry and Trade to study, propose and soon report to the Prime Minister. Currently, the World Bank (WB) and the Asian Development Bank (ADB) are assisting the Ministry of Industry and Trade in studying the bidding mechanism for solar power projects.

Through preliminary research of consultants, many countries also apply the mechanism to encourage fixed electricity price in the first period, then gradually switch to bidding. International consultant of the World Bank, Baker Mackenzi and PwC, has completed two reports on bidding implementation roadmap and bidding mechanisms.

The WB's studies have been consulted and presented at many seminars to collect comments from experts, investors and localities for further improvement. Regarding the bidding mechanism report, the WB proposed two forms of implementation. The successful method in Cambodia corresponds to the second form proposed by the World Bank and similar to the one proposed by ADB.

According to experts' recommendations, in order to have a low electricity price, the State needs to share risks with investors on clean infrastructure, power purchase contracts with government guarantee on underwriting, converting foreign currencies.

"The Ministry of Industry and Trade is studying whether these proposals are in compliance with the current regulations of Vietnam, whether there is a need to adjust or issue additional legal provisions, the ability to apply them in practice in Vietnam to report to the Prime Minister as soon as possible,”said Mr. Do Duc Quan.