Hanoi (VNA) – Renewableenergy has emerged as one of the most preferred sectors for investment inVietnam, according to a survey by international consulting firm Grant Thornton,but the development of such projects has been hampered by a number ofchallenges.

The renewable energy sectorjumped from the 10th spot in the same survey in 2018 to the third last year,after fintech and education.

Vietnam’s rising demand forpower is drawing more foreign investors into the green energy industry. Singapore-basedEnterprize Energy has been developing a 3,400MW Ke Ga offshore wind power farmon an area of about 2,000 sq.km, 20 km offshore KeGa Cape in the south central province of Binh Thuan. The project is estimatedto cost roughly 10 billion USD.

Enterprize Energy founder and chairman Ian Hatton said the project’s main challenge will be the selling price of the windpower.

In September 2018, Vietnam introduced a 20-yearfeed-in-tariff (FIT) for offshore wind projects, standing at around 0.098 USD per kWh. The rate is only applicablefor projects that enters commercial operation before November 2021.

Though the firm is working around the clock to completethe project, its first phase is not likely to be operational before 2022.

Last month, the Asian Development Bank (ADB) has signed a37.8 million-USD loan deal with TTC Energy Development Investment JSC (TTCEnergy) to provide long-term financing to develop and operate a 50-MWphotovoltaic solar power plant in the southwestern province of Tay Ninh.

The International Finance Corporation (IFC) and ArmstrongClean Energy Fund had invested to develop 35MW TTC Phong Dien solar powerplant, the first grid-connected solar farm in the country. Inaugurated in 2018,the plant generates about 60 million kWh, enough to power about 35,000 homes a year.

Despite huge potential, the development of renewableenergy projects in Vietnam have faced multiple challenges, such as high costs, poor grid infrastructure alongsides complicatedcredit conditions and procedures, said Nguyen Van Vy, Vice Chairman of theVietnam Energy Association.

It was estimated that over 90 percent of solar powerprojects under construction in Vietnam are using loans from domestic banks,noted a representative from Dragon Capital, saying limited credit access ismaking these projects less attractive to investors.

Interest rates were relatively high, at 9.5 – 11 percenta year, he added.

Dragon Capital recommended the government to provide theinvestors with easier access to lower-cost loans from foreign banks in order tohelp them cut costs and gaingreater margins.

Vietnam has set lofty goals for renewableenergy, targeting raising total production from 58 billion kWh in2015 to 101 billion kWh in 2020, 186 billion kWh in 2030 and 452 billionkWh in 2050.

Under the country's renewableenergy development strategy, which was approved by the Government in 2015,Vietnamis aiming to increase the ratio of electricity from renewable sourcesfrom 35 percent of total output in 2015 to 38 percent in 2020 and 43 percent in2050./.