Solar Power Surges In Vietnam, Dimming Prospects For New Coal Plants

February 11th, 2020 by Steve Hanley

Economics is a strict mistress. As China and the US wrestle over which country will dominate the world, Vietnam is the beneficiary. Chinese workers have rising expectations which lead to higher wages. Manufacturers are anxious to insulate their supply chains from the effects of trade and tariff wars. Vietnam can often offer lower wages than its giant neighbor to the north, which has led to a surge in manufacturing there.

But industry is a voracious consumer of electricity, something Vietnam will need lots of to meet the demand for consumer goods. Until a few years ago, it expected to meet that demand by dotting its countryside with new coal-fired generating stations. But a funny thing happened on the way to becoming a new economic powerhouse. Prices for renewable energy plummeted over the past several years, making wind and solar more competitive with conventional thermal sources of electricity.

In 2017, the government of Vietnam decided to offer solar energy developers an incentive to build more solar power plants. Vietnam Electricity (EVN) agreed to pay 9 cents per kilowatt-hour of renewable energy. The hitch was, it would only pay for electricity when it needed it. It expected to get about 850 MW but the offer was so attractive to developers, by the end of 2019 it had a whopping 5 gigawatts (GW), which is more than Australia has with an economy 6 times larger that Vietnam’s, according to The Economist.

EVN has since adjusted its feed in tariff downward to about 7 cents per kwh, but the surge in solar power has caused it to rethink its coal generation plans. It still needs lots of new electricity — Fitch Solutions projects its economy is on pace go grow by nearly 7% a year for the foreseeable future — but more of it will come from solar and less of it from coal. It’s a “half a loaf is better than none” situation but still good news. The country expects to add another 4 GW of solar power by 2025 and a total of 12 GW by 2030. By the end of this decade, solar may have largely supplanted coal as the primary source of the country’s electricity as the cost of renewable energy continues to decline.









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