Bidding a hindrance to Vietnam offshore wind development: investors

Vietnam’s goal of having 7 gigawatts of offshore wind power by 2030 is seen as a big challenge if developers are selected via bidding alone.

If Vietnam relies only on auctions in selecting developers, it is likely that the first offshore wind farm in the country would not start operation until 2030, Mark Hutchison, a representative from the Global Wind Energy Council (GWEC), an international trade group for the wind power industry, told a sector workshop in Hanoi.

Therefore, it is advisable to select investors via both non-bidding and bidding mechanisms, he suggested.

Like him, Nguyen Thanh Binh, deputy CEO of Vietnamese conglomerate T&T Group, said Vietnamese regulators should work out a transitional period before shifting to merely auctions. Developers in the transition should be allowed to enjoy Vietnam’s feed-in-tariff (FIT) mechanism to be able to reach the 7 GW goal by 2030, she said.

“Offshore wind development is new in Vietnam, and is taking shape. The government may need to introduce a non-bidding scheme to select developers based on clear and detailed criteria like installation capacity, experience, and financial resources so that the first projects could soon be carried out and start operation before 2030," she said.

Binh added if only-bidding is introduced, it is also likely that there would be cases in which investors seek projects, and then quit later.

A recent consulting study funded by the British Embassy in Hanoi listed 19 risks that investors face during the implementation of offshore wind power projects in Vietnam. Meanwhile, lenders bear 14, the country’s state utility Vietnam Electricity (EVN) five, and the government, two.

These risks are grouped according to the implementation process. For example, during the preparation phase, investors bear all project risks like those from licensing (including survey permits) and approval; risks in choosing a site; wind resource risks; engineering risks; and capital funding.

For the investment phase, investors and lenders would share most risks. Investors, lenders and EVN would share the risks of divestment and changes in control. The government would see partial risks of premature contract termination.

In the operational stage, allocation of risks is similar to the construction phase. In addition, EVN would share with investors and lenders the risk of premature termination of contracts; risks of dispute settlement; and risks of force majeure.

In the phase of project closure and site return, although investors are obliged to return the assigned sea area to its pre-project condition, the government bears most of the risks related to site return in case investors do not fulfill their obligation.