A rooftop solar power project in Dong Nai Province. (Photo: SGGP)
Although established for a long time, thanks to the Government's encouragement policies, wind power, and solar power projects have mushroomed nationwide in the past three years. This is the right trend, in line with Vietnam's commitment at the United Nations Climate Change Summit (COP26). However, renewable energy development is facing many challenges in reality.
Bankrupt for being unable to sell electricity
For nearly a year, Mr. Nguyen The Vinh, Director of Minh Phat Investment Services Company, had to drop the rooftop solar power installation business because the electricity industry announced to stop buying rooftop solar power. The latest construction contract that Minh Phat Company constructed is a townhouse in Van Phuc No.1 residential area in No.3 Street in Hiep Binh Phuoc Ward in Thu Duc City. The owner asked the company to install 10kWp, equivalent to an electric output of about 1,000kWh per month, with an investment of VND150 million. However, after the installation was completed, Minh Phat Company contacted the electricity industry and received a written request to stop connecting to the power grid to wait for instructions.
“Because the two-way electric meter cannot be installed, the electricity industry cannot record the electricity output connected to the grid, the homeowner still has to pay the monthly electric bill instead of being deducted, and we have to pay maintenance and care fees,” said Mr. Nguyen The Vinh. After the electricity industry issued an announcement to stop the connection of rooftop solar power, projects of Minh Phat Company have been stagnant. In order to have money to pay salaries and operating costs, the company had to sell materials at a loss. Most recently, it had to sell a batch of imported power cables with an import price of VND2 billion for only VND1 billion.
It costs about VND15 million to invest in 1kWh of rooftop solar power. Many businesses said they had to borrow capital from credit institutions with interest rates ranging from 9.5 percent to 12 percent per annum - accounting for 70 percent-80 percent of the total investment - when investing in building a rooftop solar power plant.
“Our project costs VND15 billion, of which VND12 billion is borrowed from the bank. Every month, we have to pay interest and principal of VND300 million, not to mention the monthly operating costs of several tens of millions of Vietnamese dong and equipment depreciation. But until now, after many months of waiting for guidance, new policies have not been issued. The longer this situation persists, the more debt our company owes," said Mr. N.V.D., Director of T.T Manufacturing, Trading, and Service Company.
Projects enjoying incentives also struggle
Many rooftop solar power projects completed in time to enjoy the FIT price have also encountered difficulties because the electricity industry continuously reduces capacity. Ms. Dang Thi My Loi, Director of C.H.K Technology Construction Joint Stock Company in Hoa Thuan Tay Ward, Hai Chau District in Da Nang City, said that her company has been selling the rooftop solar power project that it invested at Thai Tuan Brick Factory in Bich Bac Village in Dien Hoa Commune in Dien Ban District in Quang Nam Province, with an area of nearly 10,000 square meters, but no one has bought it yet. Banks have tightened lending, so the company could not get an amount of more than VND10 billion for maturity. Meanwhile, the amount of electricity sold is decreasing. In the beginning, it was over VND300 million each month, but a few months later, it dropped to just above VND200 million. In the last two months, the amount of electricity has decreased by more than half compared to the beginning, so revenue is not enough to pay the bank interest.
Bankrupt for being unable to sell electricity
For nearly a year, Mr. Nguyen The Vinh, Director of Minh Phat Investment Services Company, had to drop the rooftop solar power installation business because the electricity industry announced to stop buying rooftop solar power. The latest construction contract that Minh Phat Company constructed is a townhouse in Van Phuc No.1 residential area in No.3 Street in Hiep Binh Phuoc Ward in Thu Duc City. The owner asked the company to install 10kWp, equivalent to an electric output of about 1,000kWh per month, with an investment of VND150 million. However, after the installation was completed, Minh Phat Company contacted the electricity industry and received a written request to stop connecting to the power grid to wait for instructions.
“Because the two-way electric meter cannot be installed, the electricity industry cannot record the electricity output connected to the grid, the homeowner still has to pay the monthly electric bill instead of being deducted, and we have to pay maintenance and care fees,” said Mr. Nguyen The Vinh. After the electricity industry issued an announcement to stop the connection of rooftop solar power, projects of Minh Phat Company have been stagnant. In order to have money to pay salaries and operating costs, the company had to sell materials at a loss. Most recently, it had to sell a batch of imported power cables with an import price of VND2 billion for only VND1 billion.
It costs about VND15 million to invest in 1kWh of rooftop solar power. Many businesses said they had to borrow capital from credit institutions with interest rates ranging from 9.5 percent to 12 percent per annum - accounting for 70 percent-80 percent of the total investment - when investing in building a rooftop solar power plant.
“Our project costs VND15 billion, of which VND12 billion is borrowed from the bank. Every month, we have to pay interest and principal of VND300 million, not to mention the monthly operating costs of several tens of millions of Vietnamese dong and equipment depreciation. But until now, after many months of waiting for guidance, new policies have not been issued. The longer this situation persists, the more debt our company owes," said Mr. N.V.D., Director of T.T Manufacturing, Trading, and Service Company.
Projects enjoying incentives also struggle
Many rooftop solar power projects completed in time to enjoy the FIT price have also encountered difficulties because the electricity industry continuously reduces capacity. Ms. Dang Thi My Loi, Director of C.H.K Technology Construction Joint Stock Company in Hoa Thuan Tay Ward, Hai Chau District in Da Nang City, said that her company has been selling the rooftop solar power project that it invested at Thai Tuan Brick Factory in Bich Bac Village in Dien Hoa Commune in Dien Ban District in Quang Nam Province, with an area of nearly 10,000 square meters, but no one has bought it yet. Banks have tightened lending, so the company could not get an amount of more than VND10 billion for maturity. Meanwhile, the amount of electricity sold is decreasing. In the beginning, it was over VND300 million each month, but a few months later, it dropped to just above VND200 million. In the last two months, the amount of electricity has decreased by more than half compared to the beginning, so revenue is not enough to pay the bank interest.
The rooftop solar power project at Thai Tuan Brick Factory in Quang Nam Province. (Photo: SGGP)
Mr. Dao Van Cuong, the representative of Quang Phat Dong Nai Electromechanical Company, said his company spent more than VND11 billion to invest in a rooftop solar power project with a capacity of nearly 1MWp. Of which, bank loans accounted for 70 percent, requiring to pay interest and principal of VND120 million every month. From November 2021 to now, the electricity industry has continuously announced capacity cuts, causing a loss of about VND40 million per month in revenue, making it difficult for his company to arrange capital for loan repayment and project operating costs. According to statistics of Dong Nai Power One Member Company, by August 14, more than 2,100 customers investing in rooftop solar power had not been paid by the electricity industry. "From March 2022 to now, many rooftop solar power investors have called for help due to temporary suspension of payment for electricity purchase and sale," a representative of Dong Nai Power One Member Company confirmed. In Binh Duong Province, 28 rooftop solar power investors have submitted a petition to the Ministry of Industry and Trade and the authorities to remove difficulties for not being paid from March 31, 2022. Recently, the investors received a notice from the electricity industry about the payment suspension because the rooftop solar power systems have not supplemented the missing documents, including construction safety and explosion-proof safety. “This will lead to serious consequences because enterprises made big loans when constructing these projects. They will bear high-interest expenses due to the overdue penalty interest rate equal to 150 percent of the lending interest rate for the project, causing businesses to suffer heavy losses, increasing overdue debts and bad debts for the banking system, and wasting huge resources of society that have invested in the field of solar power," businesses expressed. Similarly, recently, nearly 30 rooftop solar power investment companies in Kon Tum Province sent an application to the power industry to show their disagreement against being forced to reduce and cut electricity output. In fact, several enterprises investing in rooftop solar power projects in many provinces and cities, especially in the Central region and the Central Highlands, are facing difficulties because they are forced to reduce capacity and cut electricity output. Representatives of enterprises said they did not violate the law. From 2020 backward, investors based on the Government's development encouragement policy according to Decision No.11/2017/QD-TTg dated April 11, 2017, and Decision No.13/2020/QD-TTg dated April 6, 2020, on the mechanism to encourage the development of solar power in Vietnam for investment without receiving any guidance, warning, and prevention from the competent authority. Meanwhile, according to the Department of Industry and Trade of Quang Nam Province, rooftop solar power projects must follow the procedures for construction investment, verification, appraisal, and approval of the project, construction permit, and quality management following the law. At present, only a few enterprises carry out the procedures but it is still incomplete; most of the factories have been licensed to build, but when the factory owner leased the roof to other units or invested in the rooftop solar power system himself, he did not apply for a construction permit for the rooftop solar power category. In addition, the installation of solar power systems on the roofs of factories has also significantly affected the existing load-bearing structures. However, most of them have not yet assessed and re-tested the load-bearing safety of factories. Only a few businesses hire independent consultants to re-examine but have not been appraised by State management agencies.Projects must comply with regulations Mr. Ho Quang Buu, Vice Chairman of the People's Committee of Quang Nam Province, said that he ordered the People's Committees of districts, towns, and cities to coordinate with the construction department and the provincial police to strengthen inspection, guidance, and supervision of the construction investment following regulations, construction works quality control, works safety management, labor safety, and fire safety for rooftop solar power projects. The Department of Industry and Trade must lead and coordinate with relevant agencies, units, and localities in researching and advising on promulgating regulations and guidelines on investment procedures for rooftop solar power projects in the province to ensure compliance in accordance with the provisions of current law.
