Advocacy group GWEC proposes model for Vietnam to meet offshore wind targets

By Quang Minh
Sun, November 10, 2024 | 4:00 pm GMT+7

The Global Wind Energy Council (GWEC), a member-based organization that represents the entire wind energy sector, has proposed a two-stage competitive model for Vietnam to scale investment and achieve its offshore wind development targets.

The model was presented in the GWEC report entitled “Vietnam Offshore Wind Competitive Investor Selection Study,” focusing on the competitive procurement of offshore wind projects in Vietnam, which was handed over to Deputy Minister of Industry and Trade Nguyen Hoang Long earlier this week in Hanoi.

GWEC Asia Policy team presents the competitive investor selection report to Deputy Minister of Industry and Trade Nguyen Hoang Long (fifth, left) in Hanoi, November 7, 2024. Photo courtesy of Tap Chi Cong Thuong (Industry-Trade) magazine.

GWEC Asia Policy team presents the competitive investor selection report to Deputy Minister of Industry and Trade Nguyen Hoang Long (fifth, left) in Hanoi, November 7, 2024. Photo courtesy of Tap Chi Cong Thuong (Industry-Trade) magazine.

The report aims to share the industry's view on a potential comprehensive regulatory framework that could help push offshore wind projects forward. The proposed framework includes exclusive site survey licensing, a bankable power purchase agreement (PPA), and clear permitting processes, among other things, that provide a clear route to market for offshore wind in Vietnam.

According to the GWEC report, Vietnam can procure renewable energy more cost-effectively if it adopts GWEC's proposed two-stage competitive model for offshore wind development in the market.

Stage 1 of the proposed model recommends the award of exclusive survey rights, including allowing offshore wind investors to freely define site boundaries within larger areas outlined in Vietnam’s national marine spatial plan. Large capacity awarded to multiple projects in the first rounds can help create a diverse and competitive pipeline.

With exclusive survey rights granted for at least 10 years, this caters to attrition in project commitments. In addition, the project award criteria would focus on understanding context, project feasibility, risk identification, and the developer’s capability to build the projects instead of merely looking at price assessment. Capped and balanced bid and performance bonds will also be adopted to ensure bid commitments.

Stage 2 involves the award of a PPA with Vietnam Electricity (EVN) and a price-only competitive selection. To ensure competition, each investor would bid their own site on a pay-as-bid basis. A 20-year PPA with EVN would be awarded without any changes in the price and, to enhance bankability, a total or partial indexation to inflation and foreign exchange are recommended if denominated and paid in the Vietnamese dong.

The proposed investor selection model also includes a balanced risk allocation among the Vietnamese government, electricity ratepayers and investors. If implemented, this well-structured, competitive investor selection regime would attract substantial investor interest and accelerate the development of offshore wind projects in Vietnam.

Hywind Tampen. Photo courtesy of Equinor.

Hywind Tampen. Photo courtesy of Equinor.

Vietnam could also take this opportunity to strengthen its supply chain and ensure continuity of offshore wind projects with survey licenses. With a competitive labor market, extensive fabrication capabilities, and a robust local offshore oil and gas sector, stimulating domestic offshore wind demand would enhance export potential, drive economic development, and further reduce costs.

GWEC said the report is a result of a year-long consultation with key offshore wind industry stakeholders and aims to provide the Vietnamese government with a data-driven analysis of competitive offshore wind procurement, drawing on international success stories from emerging and mature offshore wind markets.

It also noted that implementing the proposed model would require legislative and regulatory changes to address the divergences between the model and the situation both under law and in practice in Vietnam.

Mark Hutchinson, director and chair of the Southeast Asia Task Force at GWEC, said: "We believe that a robust competitive procurement process for offshore wind projects in Vietnam will be instrumental in achieving the country's long-term decarbonization and energy security goals.

“Defining a long-term competitive investor selection model for offshore wind projects in Vietnam would provide greater certainty to all stakeholders, allow infrastructure development, and achieve cost reductions in the learning curve.”

According to the World Bank, Vietnam holds significant potential for wind energy as a scalable alternative to thermal power. With a coastline spanning 3,000 kilometers and consistently high average wind speeds, Vietnam’s offshore wind technical potential is estimated at around 600 GW.

While there is a current base of onshore and nearshore wind projects, no offshore projects have been constructed to date.

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