Seite 1 Page Seite 1 Potential for increasing the role of renewables in Mekong power supply (MK14) CPWF Mekong Forum – Session 12, 20 November 2013 Solar PV in Vietnam: Power sector benefits, costs and policy Nguyen Quoc Khanh

Seite 2 Page Seite 2 Content 1.Solar PV for commercial buildings: power sector benefits 2.Potential of solar PV development in commercial buildings 3.Economics of building solar PV and the proposed supporting mechanism 4.Volatility of solar PV 5.Prospect for solar PV applications 6.Summary of policy options for solar PV

Seite 3 Page 3 Solar PV in commercial buildings: Power sector benefits

Seite 4 Page Seite 4 Correlation between solar PV output and building load demand High correlation between solar PV and building load demand which is characterized by cooling demand The difference happens after 5:00 pm when solar PV stops generating power while the building is still in operation → Solar PV could be installed on building rooftop to meet its demand → Highly relevant for the south where solar radiation is quite stable throughout the year

Seite 5 Page Seite 5 Benefits to the power sector Save transmission and distribution cost Reduce transmission and distribution losses Avoid the need for high cost power generation Power can be produced at the users using e.g., solar PV

Seite 6 Page Seite 6 National load curve in Viet Nam National: 2 peaks  Morning peak: 10-11am  Evening peak: pm The South: 2 peaks  Morning peak: 10 am  Afternoon peak: 15 pm The South load curve contributes 50-55% to the national load.

Seite 7 Page 7 Potential of solar PV development in commercial buildings in Viet Nam

Seite 8 Page Seite 8 Potential of solar PV development for hotels in Ho Chi Minh city (demand side) Solar PV potential (demand side): 47 MW Overlay typical solar PV production curve to typical load curve of Hotels Adjust solar PV electrical generation capacity so that the peak load section of the hotel’s load curve is minimised.

Seite 9 Page Seite 9 Potential of solar PV development for office buildings in Ho Chi Minh city (demand side) Overlay typical solar PV production curve to typical load curve of office buildings Adjust solar PV electrical generation capacity so that the peak load section of the office buildings’ load curve is minimised. Solar PV potential (demand side): 66 MW

Seite 10 Page Seite 10 Available rooftop area for installing solar PV system sufficient? Total floor area: 29,000 m2 Roof area: ~ 2000 m2 -> able to accommodate 250 kW p solar PV system Less than “optimal” solar PV capacity: 1.5 MW p Note: Metropolitan building, TP HCM Develop ground mounted solar PV Figure: ground mounted solar PV at Bangchak, Attuthaya, Thailand

Seite 11 Page Seite 11 Potential of ground mounted solar PV Selection criteria Solar radiation: ≥ 5 kWh/m 2 /day Suitable areas: Waste land with flat topography and with road and grid, close to load centers Distance from road: ≤2 km Distance from electrical grid: ≤ 5 km Land slope: ≤ 5 o GIS assisted approach Total suitable area identified: 441 km 2, able to accommodate 22,000 MW p Mainly concentrate in the southern region Ninh Thuan has the greatest potential of approx 4,600 MW p

Seite 12 Page 12 Economics of solar PV and the proposed supporting mechanism

Seite 13 Page Seite 13 Economics of solar PV Economics of solar PV are largely determined by 2 main variables:  Investment cost  Power output

Seite 14 Page Seite 14 Specific investment cost  Specific investment cost: 2,0 $/Wp Solar module: 0,7 $/Wp Inverter: 0,3 $/Wp Others: 1,0 $/Wp Source: market-price-index-solar-pv-modules.html market-price-index-solar-pv-modules.html Source:

Seite 15 Page Seite 15 Power output and the levelized cost  Power output depends on solar radiation, solar PV types and the tilted angle and direction of the solar panel installation Cost: 17,65 $ cent/kWh or đ/kWh Cost: 17,65 $ cent/kWh or đ/kWh Full load hours: 1500 hours/year, or Capacity factor: 17% Reference values

Seite 16 Page Seite 16 Value of solar PV: power system avoided cost versus user avoided cost Dry seasonWet season Peak hour Norm al hour Off peak Peak hour Nor mal hour Off peak Leftov er power Energy cost (đ/kWh) Northern region Central region Southern region Capacity cost (đ/kWh) 1,805 Source: Decision No.06/QĐ-ĐTĐL dated 19/01/2012 Electricity Regulatory Authority of Vietnam Wet Season: from July 1 st to October 31 st Dry season: from Nov 1 st to June 31 st Avoided cost tariff in 2012 Electrical selling price for commercial customers in 2012 (đ/kWh) + Peak3,715 + Normal2,177 + Off-peak1,343 Average buying price: 928 đ/kWh Average selling price: 2,563 đ/kWh << Levelized cost: 3,795 đ/kWh

Seite 17 Page Seite 17 Supporting mechanism for solar PV Feed-in tariff (FIT) is the most common mechanism Vietnam is applying FIT for renewable energies FIT has been applied for wind power FIT is being developed for biomass power Source: EPIA Supporting mechanism for solar PV in Europe

Seite 18 Page Seite 18 FIT estimate for rooftop solar PV Inputs Generic solar PV system: 20 kWp Specific investment cost: 2 $/Wp O&M cost: 1.5% of total investment Capacity factor: 17% Full load hours: 1500 hours Lifetime: 20 years Financing: 20% equity, 80% loans Loan interest: 6% p.a, Loan term: 15 years Corporation income tax: 10% Depreciation: 20 years Hurdling FIRR: 16% → FIT rate: 19.5 US cent/kWh Equal to 4,193 đ/kWh

Seite 19 Page Seite 19 FIT estimate versus Thailand FIT tariff FIT rate: 19.5 US cent/kWh, equal to 4,193 đ/kWh Duration: 20 years Estimated FIT in Thailand Size FIT rate (Baht/kWh) FIT rate (đ/kWh) Quota 0-10kW6.96 4, MW kW6.55 4, MW 250 kW-1 MW6.16 4,096 Year FIT Rate (Baht/kWh) FIT Rate (đ/kWh) , , ,993 1 MW/1 commune package Source: Rooftop solar PV package Thailand solar PV target 3000 MW by 2025

Seite 20 Page Seite 20 Other incentives Financial incentives Tax: Preferential import tax and corporate income tax exist Investment: has been stated but not really in operation Non-financial incentives Update existing grid code  Circular No.32/2010/TT-BCT dated 30 July 2010 applies all power generation technologies that are connected to power distribution network  It does not consider the presence of renewable energy technologies, especially those with large fluctuation output Develop a solar PV development plan

Seite 21 Page 21 Volatility of solar PV output

Seite 22 Page Seite 22 Volatility of solar PV output The correlation is high between building load demand and solar availability. So PV provides power when needed, thus displacing peak energy and reducing demand The correlation between PV output and load demand is normally high. But localized demand reduction might be hindered by occasional clouds The Solar Load Controller (SLC) reduces the load when needed by acting on end-use setting or scheduling. Because of the naturally high correlation between PV and load, the end- use inconvenience is minimal compared to the demand reduction enhancement  SLC installation is applied only when the incentives such as FIT is established, probably as a condition to receive incentive. Source: Christy Herig, National Renewable Energy Laboratory, Using Photovoltaics to Preserve California's Electricity Capacity Reserves

Seite 23 Page 23 Prospect for solar PV

Seite 24 Page Seite 24 Climate Change increase numbers of hot day

Seite 25 Page Seite 25 Further investment cost improvement Prospect of global Solar PV market Source: Global market outlook for Photovoltaics PV generation cost will approach grid parity once it reaches an investment cost of 1$/Wp Price and cummulative production volume

Seite 26 Page 26 Summary of policy options

Seite 27 Page Seite 27 Summary of policy options Option 1 – Business As Usual  No FIT  Market driven  Support Net Metering Option 2 – Promotion  Price incentive (FIT)  SLC as a condition

Seite 28 Page 28 Mekong Forum | November 2013 Nguyen Quoc Khanh Thank you