Wednesday, June 5, 2013

Vietnam turns its wind power dream into reality

VietNamNet Bridge – On May 29, the Bac Lieu wind power plant began providing electricity to the national grid from the 10 turbines with the total capacity of 16 MW. The Vietnamese wind power dream has become realistic.
Vietnam, like many other countries in the world, decided that it needs to make heavy investments in developing wind power as the fossil fuel reserves are getting exhausted. The word “wind power” has become popular not only among scientists, but also among popular people.
However, though Vietnam is believed to have great potentials to develop wind power, it would still have to go on a bumpy road to develop more Bac Lieu wind power projects.
Dinh The Phuc, a senior official of the Ministry of Industry and Trade, said that in order to develop wind power to replace the hydro power which has been found as harming the environment, the government needs to offer big preferences to encourage investors to jump into the field.
Awakening the potentials
According to Phuc, scientists have estimated that Vietnam’s wind power potentials could be as high as 513,260 MW, which is 200 times bigger than the Son La hydropower plant, 2,400 MW, a national key power project.
However, to date, very few investors have poured their money into wind power projects because of the high investment rates.
To encourage investors to pour money into wind power projects, the Prime Minister released the Decision No. 37 stipulating the preferential mechanism for the wind power projects in Vietnam.
Under the mechanism, the electricity wholesale buyers, the Electricity of Vietnam or authorized units, have to buy the whole output churned out by wind power projects for 20 years at least, at VND1,614 per kwh, or UScent7.8, not including the VAT. The price is higher than the current average electricity price at VND1,437 per kwh.
The electricity sellers can extend the contracts on electricity sale or sign new contracts with EVN. The State would subsidize the electricity volume EVN has to buy from wind power projects at high prices. Every kwh of electricity to be purchased from the plants would be propped up UScent1 which would be sourced from the Vietnam fund for the environment protection.
However, according to Phuc, reassuring power plant investors that they can sell electricity to EVN at reasonable prices is not enough to encourage investors to build wind power plants.
Phuc believes that it’s necessary to allow wind power projects to enjoy the current preferences in the investment credit applied for some kinds of important projects, and enjoy the tax exemption on the imports used to create fixed assets of the projects.
He has also suggested exempting tax on the imports which are the materials or semi-finished products which serve the projects’ production. The materials still cannot be made domestically.
In general, the highest possible investment incentives, including the land use leasing fee exemption, should be offered to the investors to encourage them to make investments in wind power projects.
Regarding the corporate income tax and VAT, Phuc believes that it’s necessary to offer the highest possible tax incentives to the investors to “awaken the wind power’s potentials.”
If Vietnam applies reasonable policies to encourage wind power, it would be able to increase the productivity from recycle energy resources from 3.5 percent in 2010 to 4.5 percent by 2020 and 6 percent by 2030. Meanwhile, the wind power capacity would increase from zero now to 1,000 MW by 2020 and 6,200 MW by 2030.