Vietnam unlikely to meet target of 5 GW offshore wind power by 2030: S&P Global

Vietnam’s ambitious target of adding 5 GW of offshore wind power to the national capacity by 2030 may fall short, S&P Global Commodity Insight said in a recent commentary.

S&P Global stressed Vietnam has set the most ambitious target for offshore wind power among South and Southeast Asian nations, per the country’s ample resources along its coastline.

According to Vietnam’s power development plan VIII (PDP VIII), the country's offshore capacity target is set at 6 GW by 2030 and 70-91 GW by 2050, from zero now.

About two-thirds of the project pipelines are jointly owned by local and international companies, S&P Global said while highlighting both domestic and international players will involve in the sector.

Regarding challenges, S&P Global pointed out Vietnam's construction and unit costs do not have localization requirements. “Wind equipment will be mostly imported given a lack of local manufacturing capability,” the American analytics giant said.

Thanks to low cost and proximity, Chinese wind turbine manufacturers have the largest market share in Vietnam, now featuring onshore and intertidal wind power projects. About 42% of the wind turbines installed in Vietnam in 2021 were supplied by Chinese makers, S&P Global noted.

Policy could hold back development as tariff mechanisms, grid development, and other policies are still being worked out. For example, projects approved after 2022 may be subject to variable electricity tariffs adjusted every year and across regions in Vietnam, and are still being discussed among authorities, it added.

It is estimated that Vietnam will require five to 10 years of grid construction to absorb the additional electricity generated by offshore wind projects. So, any delays in grid construction might restrain offshore wind development in Vietnam, S&P Global stressed, while pointing out similar issues already happened against some solar power plants.

Given the high project capital needs, government support in policy reforms, robust power purchase agreement (PPA) framework, and strong grid construction remain crucial for investments, S&P Global concluded.

Vietnam currently has no operational offshore wind power projects, although several foreign and domestic groups have shown interest in tapping this huge potential in that country that has more a coastline of 3,260 kilometers in length.

The Ministry of Industry and Trade is drafting a pilot scheme that allows the participation of only state-owned Vietnamese enterprises like Petrovietnam and Vietnam Electricity in offshore wind power development.

Recently, Norway's energy heavyweight Equinor has halted plans to develop offshore wind energy in Vietnam. The decision to not proceed with offshore wind business development activities in Vietnam is driven by its “early-stage project portfolio optimization,” Jacques Etienne Michel, country managing director of Equinor Vietnam, told The Investor.

Previously, in June 2023, Orsted's senior vice president and Asia-Pacific president Per Mejnert Kristensen had stated that this Danish wind power giant "paused market development activities in Vietnam."