RE-Talk ASEAN: C&I Rooftop Solar Future in Vietnam

HOST SPONSOR

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PRESENTER

José Antonio Millán Ruano

Chief Global Development Officer

Univergy Solar

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Rohan Singh

Managing Partner, Asia

Finergreen

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Wilson Cheng

Business Development Manager

Trina Solar

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Chuan Zhen Ko

CEO

Plus Solar

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HOST

Mabel Gu

Senior Project Producer

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Why Do We Choose Vietnam?​

- Basic Reasons:

  • Large Electricity Demand: EVN aims to increase capacity of 6-7 GW per year to match demand, and plans to increase renewables energy mix to 21% by 2030. In addition, Vietnam is expected to exceed its 1GW rooftop target by 2025 comfortably.

  • Under the COVID-19 Situation, Vietnam is one of the countries in Southeast Asia which the power of demand grows. Other three countries with positive power demand growth are Myanmar, Indonesia and Philippines.

  • Still heavily rely on fossil fuel: 38% of total installed capacity are coal-fired power plants in North and Central as of 2018, and 18% of total installed capacity are gas-fired plants in the South.

 

- Political and financial Reasons:

  • The new FIT is 8.38 US cents/kWh, a bit lower than the previous one, which is 9.35 US cents/kWh. It’s only available for projects commission due 31 December 2020. The tariff will last 20 years since commissioning. Even if with reduction of tariffs, solar power projects are still financially viable.

  • The rooftop and ground mounted market in Vietnam is foreseeable since the schedule on regulation modification has been mapped out .

  • The returns for C&I market in Vietnam are higher than other markets and PIRR can be from 9% to 13%.

 

 

The Requirements for Rooftop PV in Vietnam

 

  • For PV rooftop system≥ 1MWp, the project are required to be added into the master plan, prepare specialized reports and obtain EVN operation licenses.

  • For PV rooftop system ≤ 1MWp, developers need to work with provincial EVN to register the capacity of the plant, kinds of modules, inverters that complies with EVN grid codes.

  • For PV rooftop system > 3kWp, it must be connected to 3-phase grids.

 

     Responsibility of EVN:

 

  • Supply and install for 2-way meters.

  • Calculate for production at the end of the period.

  • Instruct registration; collect the requested dossiers for PV rooftop project; provide the procedures of testing; sign PPA.

  • Yearly payment

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     Responsibility of Investor:

 

  • Prepare requested dossiers.

  • Comply with EVN grid codes.

  • Together with EVN check energy production periodically in every level of low-mid-high electricity time.

 

Typical C&I Financing Strategy

  • The first 5-10 MW of projects are usually financed full equity. 

  • Once the company has demonstrated sufficient track record and scalability, debt providers can be involved to finance a larger pipeline: typically, minimum USD 15-20 million worth of debt.

  • Once the first 15 MW are built, we can start contemplating refinancing the operating portfolio with better terms

​Therefore, the optimal financing models for renewable energy projects in Vietnam is to finance with equity, and to refinance with debt.

- Fund Providers

Family offices: They invest in different countries with different currencies, and different contracts from PPA or lease agreement, which is a really good way to minimum risk and maximize return.

COVID-19 impacts:

 

  • Delays in power & utility projects;

  • Supply chain disruptions – most components are from China

  • Unavailability of manpower

  • Project financing uncertainties Impact on projects COD by Dec 2020 to meet FiT requirements

  • Availability of the financing locally would be a major hurdle that private sectors invest into a rooftop solar market in Vietnam.

Important Things that You Need to Concern

  • For C&I curtailment is less of concern but more importantly the credit rating of the offtakes and if there is a robust pipeline/portfolio, we can think of the best financing solutions that can be applied. (Rohan Singh)

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  • There is still a future for leasing as these contracts tend to be shorter than PPA in terms of duration hence these projects are delivering high cash flows and can match more easily the servicing of the debt. (Rohan Singh)

  

  • For the ground-mounted projects, local banks already reached their sector limits. But overall, the question is how the Covid-19 will impact banks’ balance sheets. Besides, we used to see different “pockets” of funds for C&I rooftop (vs utility scale type of projects). (Rohan Singh)

  

  • For currency mismatch issue: there is always different ways to mitigate currency risks (swaps, portfolio effect is the platform is focused on other markets hence other currencies). Finergreen raise project finance non-recourse financing for C&I portfolio. (Rohan Singh)

 

  • The critical success factors for entering the rooftop solar market in Vietnam: There is currently a race to “back” some developers/IPPs. To our point of view at Finergreen, investors are always quite careful on the management team, their track record and of course ability to reach scale with a minimum IRR. (Rohan Singh)

 

  • PPA apply for households: However, given its small size, the amount of resources/efforts that is required to acquire projects and also for asset management, it does not have the scale of economy as compared to the solar PV system in the C&I and utility segment, so I would expect the return to be lower. (Joon Huei Chong)

 

  • Can we use the Building Energy Management solution for utility scale solar plants?

  • Typically, utility scale solar plants require integration with the grid operator at a MV/HV level, which a building energy management solution may not cater for, Ultimately, it depends on what are the criteria/requirements. But it is quite unlikely that a utility plant’s monitoring requirement are similar to that of a building. (Wilson Cheng)

 

  • Key drivers in other leading countries in ASEAN to motivate rooftop solar development:

  • Tariff is the incentive to make sure the investment that is workable and bankable. Price of solar systems is also important because energy saving will be crucial which result of the whole mechanism. (KO Chuan Zhen)

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