Should business owners invest in rooftop solar themselves or partner with a private investor?
In recent years, Vietnam has received a boom in solar energy development across the country. According to a report by the International Renewable Energy Agency, 11.6 GW of electricity from the solar energy system was fed into the national electricity grid last year as compared to only 5 GW in 2019. As Vietnam is on its way to reach 100% renewable energy used in 2050, according to the WWF (World Wildlife Federation) and VSEA (Vietnam Sustainable Energy Alliance)’s report, this market will grow continuously and become more competitive. This will bring solar energy closer to each individual and help them to save some electricity costs while protecting the environment.
No capital investment but solar energy system still comes to roof?
That is correct! Now, business owners have the option to either invest and operate a rooftop solar system on their factory themselves or select a suitable investor to do it.
Should business owners find a suitable investor to invest and operate the rooftop solar system on their roof, the investor will be responsible for all costs of investment, design, installation, operation and maintenance of the rooftop solar system. In return, the business owners will pay for their consumption of the generated solar energy at a price that is lower than the prevailing electricity tariff.
What are the benefits that a PPA – Power Purchase Agreement brings?
After signing the PPA, the business owner will get a solar energy system installed on his or her factory and warehouse. Some of the benefits are:
- Zero investment cost and operating cost
- Immediate savings on electricity whereas Vietnam’s Electricity (EVN)’s electricity price tends to increase 4-5% per year (Source: VnExpress)
- Limited Risks as the investor will take care of the operation and bear all risks related to the solar energy system
- Carbon dioxide (CO2) emission reduction to the environment which helps to protect the environment and increase the brand of the business owner – This is in line with the megatrend on sustainability and global responsibility in Vietnam as well as globally.
What are the perks of business owners in a PPA?
By choosing the PPA model, business owners will have the empowerment to better control the type of energy to use and the price that comes with it.
The power of selecting electricity price’s forms: Firstly, with a PPA, business owners now have the power to choose the form of electricity price. Business owners will be able to choose green energy by either paying a fixed electricity price or an electricity price that is always a certain percentage lower than EVN’s electricity price during the entire PPA tenure. Depending on their goal of savings, business owners now can have the suitable form to bring the best benefits for themselves.
The power bargaining electricity price: Secondly, business owners will have the purchasing power and the right to negotiate with investors to get the best electricity price. Intuitively, investors will compete to offer their most competitive electricity prices. The lower the investor’s electricity price is compared to the current EVN’s electricity price, the higher the savings these business owners will make once the solar energy system is In a way, business owners become the driven force with the power to shape the solar market, making clean energy use more competitive and affordable to the people in Vietnam.
The power of ownership without a capital investment: Thirdly, business owners will be able to own the solar energy system without any capital investment. They will have the flexibility to decide the ideal PPA tenure such that they can own the solar energy system to reap the full benefits thereafter. Ultimately, with a PPA, it doesn’t get any easier and better for business owners to go green with solar energy use.
Gone were the days whereby business owners in Vietnam were subject to EVN tariffs and unable to negotiate over the rise of their energy cost. Now, they are empowered to get the best deal out of many solar investors to obtain the highest benefits for their business.
If affordable, should business owners invest in solar themselves?
The values and benefits of a solar system are undeniable. In fact, there are many business owners who decide to spend money and invest in the solar energy system for their own business.
For every solar energy system, the investment cost is worth over dozens of billions of Vietnam Dong. In addition, the cost of operation and maintenance amounts up to hundreds of millions per year. For its best performance, this solar energy system must always be cared for, monitored and optimized regularly. Therefore, the cost of labor and management to operate and maintain the system is also considered “luxuriously expensive”.
It will be troublesome to many business owners if they do not foresee the amount of effort that they will have to put in for the solar energy system. Particularly, in the event whereby the solar system has problems like connection malfunction, reduction in electricity generated or hazardous fire, the business owner must bear all the risks and pay the expenses of fixing them.
Should business owners invest in a solar energy system themselves if they have the money? The answer lies in the business owner’s view on the opportunity cost for their own business. Instead of having to spend billions of Vietnam Dong to invest and hundreds of millions to operate it each year, business owners can use this money to serve their business activities, expand the market and perfect their products and services to their customers. With PPA, all costs and risks will be transferred to the investors who will be responsible for ensuring the solar energy system’s performance will be at its best such that benefits will be bought to both the business owners and themselves.
Author: Hai. L – VSSES