return icon Vietnamnet.vn

Offshore wind power: unpredictable 'waves' as investors wait for decision on tariff

Many offshore wind power investors are holding their breath waiting for the next move of the Ministry of Industry and Trade and the Government.

Nearly three years have passed since the Prime Minister's Decision 39 dated September 10, 2018 on wind power prices was issued, with the offshore wind power price over VND2,223/kWh (US$9.8 cent/kWh), but no offshore wind power project has kicked off yet.

Ra Biển Đông đón nguồn điện vô tận: Sóng gió khó lường
 

 

Many foreign and domestic investors have surveyed and conducted research on offshore wind power in Vietnam. They have said the price of over VND2,200/kWh is “acceptable”. However, three years is still a short time for these projects to be implemented in reality, while this incentive price will end in two months.

Many offshore wind power investors are holding their breath waiting for the next move of the Ministry of Industry and Trade and the Government. Will the feed-in tariff (FIT) for offshore wind power continue to be applied, or immediately move to the bidding phase as planned?

Representing investors, Liming Qiao, Asia Regional Director of the Global Wind Energy Council (GWEC), expects that the Ministry of Industry and Trade and the Government of Vietnam will allow offshore wind power projects with a capacity of 4,000- 5,000 MW to he supported through the FIT, instead of projects with a capacity of 2,000-3,000 MW by 2030, as in the draft power plan 8.

GWEC's research shows that it is the choice of each country to apply FIT or instant bidding. Taiwan and the Netherlands also applied bidding after the period of using FIT for offshore wind power. Meanwhile, France, the new market for offshore wind power development, adopted competitive bidding from the start.

In Vietnam, the FIT mechanism is also applied to offshore wind power projects, but three years is not enough for projects of this kind. According to experts, an offshore wind power project is only economical if the scale reaches 4,000-5,000 MW/project, with an investment capital of $800 million - $1 billion USD or more. The time of implementation takes about five to seven years.

Foreign investors worry that if the bidding mechanism is implemented right away Vietnam may face obstacles as France experienced. Offshore wind power is a very new industry in Vietnam, and the domestic supply chain is also extremely limited.

Unforeseen challenges

Ra Biển Đông đón nguồn điện vô tận: Sóng gió khó lường
 

 

At this time, the application of FIT or bidding is still unclear. A "clear policy" is what many investors are waiting for. Mainstream representative said that they are ready to start phase 1 of the 1,400MW Phu Cuong wind power project in the southern province of Soc Trang when there is a clear policy from the Government.

Investors believe that, after the end of the Feed in Tariff mechanism in November 2021, Vietnam needs a new momentum. The country should continue to apply the FIT mechanism for the first 4,000-5,000 GW projects to ensure the stability of the market during the transition to the bidding mechanism. Because the first projects are very risky, they need policy support.

However, whether bidding or FIT are applied, offshore wind power development will face many challenges. In particular, capital mobilization is a problem because these projects need huge capital. Therefore, having access to international capital is very important, which requires clear, stable and predictable policies.

In addition, will foreign investors accept to cut output when there is a local oversupply of electricity at some periods of time, as it is happening for onshore wind and solar power projects?

According to Bernard Casey, Development Director of Mainstream Vietnam, cutting output will make it difficult for investors raising capital, because it creates an unpredictable element in terms of revenue. Most offshore wind power projects have to mobilize capital, so it must go through a rigorous appraisal process by banks and insurance companies before signing a contract.

He said that capacity reduction can only be accepted in a short period of time and with a clear commitment.

Sean Huang, Development Director of Copenhagen Offshore Partner (COP), which invests in La Gan offshore wind power project, said that when signing a power purchase agreement (PPA), capacity cutting must be defined, including estimated output cut for force majeure. But the rate is usually small, and otherwise, measures to protect investors should be taken into account, such as compensation. In Taiwan, if the output cut is high, they will extend the term of the power purchase agreement to make up for the output cut.

Luong Bang

Wind power project developers want FIT extension

Wind power project developers want FIT extension

Since many wind power projects may not be put into commercial operation prior to October 31, the Prime Minister and Ministry of Investment and Trade have been asked to extend the feed in tariff (FIT) application.

 

Pandemic challenges wind power projects in Mekong Delta

Pandemic challenges wind power projects in Mekong Delta

Several wind power projects currently under development in the Mekong River Delta area are rushing to complete and start operating on a commercial basis before the November deadline,

MORE NEWS

French Development Agency pledges more support for projects in Vietnam

The French Development Agency (AFD) will increase its support and donations for projects funded by French non-governmental organisations and associations in Vietnam.

Vietnam seeks stronger education partnership with US

Minister of Education Nguyen Kim Son on September 25 concluded his US working trip that aimed to strengthen education partnership between the two countries.

VIETNAM NEWS HEADLINES SEPTEMBER 25

Central localities likely to be hit by typhoon Noru

AI integration the inevitable path ahead

Big Data and AI will be the optimal tools to run factories in the future and digital transition will help firms optimise costs and cut emissions.

Ministry to scrutinise VietGap certifications after fake labels found on vegetables

The Ministry of Agriculture and Rural Development is investigating reports of vegetables sold in supermarkets being marked with fake Vietnamese Good Agricultural Practices (VietGap) labels.

E-commerce sector in dire need of qualified candidates

The tight supply of qualified candidates in the labour market is a glaring issue facing e-commerce firms, according to insiders.

Unique green moss-covered homes of the Tay Con Linh mountain range

It is an ideal environment for plants to flourish and thrive, including thick green moss, which ethnic people use to cover the palm-leaf roofs of their homes.

Farmers save wild birds and the environment

Farmers in different provinces throughout Việt Nam have for years spent time and effort to save wild birds, giving them a home to nest and lay eggs.

Deputy PM highlights significance of int'l solidarity, cooperation at UN session

The strengthening of international solidarity and cooperation is key to addressing interlocking global challenges, affirmed Permanent Deputy PM Pham Binh Minh while addressing the general debate of the 77th Session of the UN General Assembly.

Huge potential for luxury real estate in Vietnam

The branded residence market is gaining a stronger foothold in the Vietnamese market with potential to further develop, shaping the lifestyle of the country’s elite, according to experts.

VIETNAM BUSINESS NEWS SEPTEMBER 25

Action plan to promote green growth in agriculture

Vietnam’s economic growth counts on high-tech FDI

Vietnam’s economic growth has been accelerating in 2022, with experts considering high-tech foreign investments as a driver.

The “seven-star” islands in Quang Ninh

Along with crystal blue sea and beaches, the 7 Sao (seven star) islands also have caves and primeval forests.

Customs you only see in Vietnam

The travel site Culture Trip has listed a number of Vietnamese customs that often surprise foreign tourists:

Investors and buyers play waiting game in credit switch

The State Bank of Vietnam finally created extra credit room for some banks on September 7. However, the extension is deemed low and may not help real estate businesses and homebuyers access feasible capital sources for their projects.
back_to_top