Investment
Red tape hinders growth of Vietnam’s wind power industry
Less than 200 megawatts of offshore wind has been installed in Vietnam, despite the huge unexploited wind power potential in the country.
Vietnam has significant nearshore and offshore wind potential but the renewable energy resource hasn’t been well exploited partly due to cumbersome administrative procedures, experts said.
Vietnam, with its long coastline, is one of the nations in Southeast Asia having the potential to produce large amounts of renewable energy. A renewable energy report from international management consulting firm McKinsey showed that Vietnam has tremendous natural resources: four to five kilowatt-hours per square meter for solar and 3,000 kilometers of coastlines with consistent winds in the range of 5.5 to 7.3 meters per second - creating opportunities for solar and wind generation in the country.
However, Peter Brun, global offshore wind segment leader of risk management and quality assurance services provider DNV GL, said less than 200 megawatts (MW) of offshore wind has been installed in Vietnam, despite the huge unexploited wind power potential in the country.
Vietnam has much more supplier potential for the wind industry than what is already there, and is very well positioned to harvest not only many manufacturing jobs, but jobs in installation and operations and maintenance.
However, Peter said the licensing process in Vietnam is very complex and cumbersome and at least 29 individual permits, agreements or licenses are needed for utility scale wind farms. There are many government agencies involved at state and regional level, he explained – at least 12 different agencies and ministries.
Jérôme Pécresse, president and CEO of France-based GE Renewable Energy, shared the same view, saying it takes much time to complete renewable energy projects, especially in wind power. It remains difficult to receive approval for projects, because there remains a number of administrative requirements which must be fulfilled.
Hoang Phuong from Techcombank’s investment segment division said in fact, there are still some issues that are not well coordinated between the government, Electricity of Vietnam (EVN) – the sole power distributor - and other agencies when attracting private enterprises to invest in wind power projects.
Phuong said to deploy a wind power project, it usually takes 4-5 months to get an investment license. It then needs at least another two years to implement the project.
Need of renewable energy
Another significant barrier facing investors and developers of wind energy projects in Vietnam is the lack of available project finance, experts said. There is a lack of local finance and the Vietnamese power purchasing agreements do not follow international standards in the areas of force majeure, offtake interruptions, dispute resolution, grid connectivity, change in law and tariff escalation.
Besides, there are several other key changes that should be implemented in order to create long-term, sustainable development in the field.
Under the current law, the government strictly regulates the retail price of electricity, pursuant to recommendation by the Ministry of Industry and Trade (MoIT) and approval by the prime minister. However, EVN has absolute discretion to increase or drop the price within a margin of up to 5 percent twice a year without seeking approval from the MoIT or the prime minister when input parameters, such as fuel prices or foreign exchange rates, change significantly.
This creates a great deal of uncertainty for investors in the sector. To encourage foreign funding in the field, more transparency in electricity rate forecasting is required.
According to the Vietnam Energy Association, if the country does not increase the share of renewable energy in the sector, the proportion of energy that the country will need to import by 2030 will rise from 3 percent of primary energy demand to as much as 44 percent, instead of the targeted 24 percent. Renewable energy used in Vietnam currently remains at less than 10 percent.
Vietnam has a huge potential to produce wind energy
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However, Peter Brun, global offshore wind segment leader of risk management and quality assurance services provider DNV GL, said less than 200 megawatts (MW) of offshore wind has been installed in Vietnam, despite the huge unexploited wind power potential in the country.
Vietnam has much more supplier potential for the wind industry than what is already there, and is very well positioned to harvest not only many manufacturing jobs, but jobs in installation and operations and maintenance.
However, Peter said the licensing process in Vietnam is very complex and cumbersome and at least 29 individual permits, agreements or licenses are needed for utility scale wind farms. There are many government agencies involved at state and regional level, he explained – at least 12 different agencies and ministries.
Jérôme Pécresse, president and CEO of France-based GE Renewable Energy, shared the same view, saying it takes much time to complete renewable energy projects, especially in wind power. It remains difficult to receive approval for projects, because there remains a number of administrative requirements which must be fulfilled.
Hoang Phuong from Techcombank’s investment segment division said in fact, there are still some issues that are not well coordinated between the government, Electricity of Vietnam (EVN) – the sole power distributor - and other agencies when attracting private enterprises to invest in wind power projects.
Phuong said to deploy a wind power project, it usually takes 4-5 months to get an investment license. It then needs at least another two years to implement the project.
Need of renewable energy
Another significant barrier facing investors and developers of wind energy projects in Vietnam is the lack of available project finance, experts said. There is a lack of local finance and the Vietnamese power purchasing agreements do not follow international standards in the areas of force majeure, offtake interruptions, dispute resolution, grid connectivity, change in law and tariff escalation.
Besides, there are several other key changes that should be implemented in order to create long-term, sustainable development in the field.
Under the current law, the government strictly regulates the retail price of electricity, pursuant to recommendation by the Ministry of Industry and Trade (MoIT) and approval by the prime minister. However, EVN has absolute discretion to increase or drop the price within a margin of up to 5 percent twice a year without seeking approval from the MoIT or the prime minister when input parameters, such as fuel prices or foreign exchange rates, change significantly.
This creates a great deal of uncertainty for investors in the sector. To encourage foreign funding in the field, more transparency in electricity rate forecasting is required.
According to the Vietnam Energy Association, if the country does not increase the share of renewable energy in the sector, the proportion of energy that the country will need to import by 2030 will rise from 3 percent of primary energy demand to as much as 44 percent, instead of the targeted 24 percent. Renewable energy used in Vietnam currently remains at less than 10 percent.
