Vietnam likely to offer minimum 80% output purchase guarantee for offshore wind power projects

Vietnam’s Ministry of Industry and Trade is drafting a decree on incentives for offshore wind power, including exemption and reduction of some fees and a commitment to minimum purchase of energy output.

The draft decree stipulates that projects are exempted from paying sea-using fees during construction, and the fees are halved for 12 years from the operational date.

Land use and land lease fees are also exempt during construction. The fees are reduced or exempt for the next phases in line with other regulations.

According to the draft decree, under the long-term power purchase agreement, at least 80% of the energy output will be purchased during the project’s loan repayment duration, but not over 12 years for projects selling electricity to the national grid, except for cases of power buyers and project investors having other agreements.

In order to qualify for such incentives, projects must receive in-principle investment approvals by January 1, 2031 and comply with Term 6, Article 20 and Term 3, Article 26 of the Electricity Law 2024.

Besides, wholly state-owned enterprises conducting offshore wind power projects are exempted from making guarantees for the implementation of projects per the Investment Law. They are also subject to the Prime Minister’s consideration of credit supply beyond the limit set by the Law on Credit Institutions.

The Global Wind Energy Council (GWEC) says in its August 2024 report that Vietnam has not initiated any true offshore wind projects and has only developed intertidal wind projects; thus the target of installing 6 GW of offshore wind capacity by 2030 under its latest power development plan (PDP VIII) presents considerable challenges.

Considering that the regulatory framework to support offshore wind development under PDP VIII is still underdeveloped, as well as the project development lead time of six-eight years, the GWEC believes that no real offshore wind development will take place until route-to-market policies and potentially new law(s) are in place. GWEC expects Vietnam to miss its 2030 offshore wind target.