Investors expect involvement in offshore wind energy

I believe that with the strong determination of the government, some necessary regulatory decisions and approvals can be achieved in the next 3-6 months. These may include a revised energy law, a pilot mechanism for the development of OSW, a national maritime spatial planning implementation plan with clearer details for the development of OSW, and policies and procedures to enable the launch of offshore research activities.

Stuart Livesey, Chief Representative of Copenhagen Infrastructure Partners in Vietnam

In addition, according to the Electricity Law and the pilot mechanism, the government should be able to assign developers (SOEs such as PetroVietnam and Vietnam Electricity) to implement the first offshore projects. Based on these proposals, there is a need to mandate SOEs to select and use competent international partners who have the experience and adequate funds to implement OSW projects.

As the legal framework progresses, it is expected that the first OSW projects in Vietnam, including the pilot project and the export project, could be launched and register concrete progress within the next year, and top-down decisions and concrete pilot mechanisms need to be aimed at enabling this goal.

As is the case in other countries that have begun implementing OSW, there is no need to introduce a fully detailed and rigorous regulatory framework.

Pilot projects based on the basic provisions can serve as a learning mechanism for developing more detailed regulatory procedures and may also aim to encourage the use of competitive auction approaches in the second and third rounds of offshore programmes.

In terms of the local supply chain, some suppliers are planning to invest in new factories in Vietnam to produce important components for OSW construction, such as wind turbine towers and monopiles. We have seen strong signals from those supplying offshore infrastructure to other markets, and there is additional potential to be tapped or Vietnam’s offshore ventures in a competitive cost market. This is a positive sign, showing that local suppliers are prepared for future OSW projects in Vietnam.

First, priority should be given to passing the amended Electricity Act with the consent of the National Assembly at its October session, which will establish a unique format for the pilot projects while also developing a more detailed and well-considered regulatory framework for the second and third rounds of projects, potentially to be implemented in the mid-2030s.

Second, we expect a pilot mechanism to be released in late 2024, allowing SOEs to work with foreign investors to develop the first OSW initiatives in Vietnam. We should not expect a complete legal system for OSW from the outset – many other markets have initiated a special mechanism to enable new energy industries to start operating.

Vietnam would benefit initially from a flexible regulatory system that could evolve as it progresses and pilot projects are implemented, much as was the case with Vietnam’s oil and gas industry in its early stages.

Third, appropriate offtake mechanisms with a rate of return based on a fixed feed-in tariff or an agreed internal rate of return would enable investors to get involved at the beginning of the industry, when risks and uncertainties are high – these can then be assessed against the revenues that will be generated from the sale of electricity.

Foreign investors expect Vietnam to soon develop incentive mechanisms to encourage investment in the OSW industry. Specific electricity prices should be set before financial close, after investors finalize the total investment and have time to contact suppliers to obtain final infrastructure and logistics costs, to encourage developers to complete projects on schedule to benefit from price incentives.

It is important to recognise the benefits such schemes will provide in terms of economic incentives for the supply chain and labour in Vietnam. Tier 1 suppliers of foundations, offshore substations, wind turbine towers and others can benefit directly, while Tier 2-3 suppliers will also see an increase.

Actions for offshore wind energy must be taken quickly Vietnam’s ambition to achieve 6GW of offshore wind capacity by 2030 is looking increasingly unrealistic, with insufficient action being taken on legal issues and developer support.

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Progress needed in offshore wind energy The Ministry of Industry and Trade has proposed selecting two state-owned energy companies or military units to develop offshore wind projects, even though the sector still faces complex processes.

Norwegian company Equinor withdraws from Vietnamese offshore wind market Norwegian state-owned energy giant Equinor ASA has pulled out of Vietnam’s offshore wind sector and closed its office in Hanoi.

Obstacles to offshore gas and wind will be removed The Government Chancellery has just issued a statement on the removal of difficulties for natural gas and offshore wind energy projects.