Consider the need to reconsider the offshore wind program

According to Vietnam’s energy strategy for 2030, the country’s offshore wind (OWW) capacity to meet the country’s electricity demand will reach about 6,000 MW. However, no offshore wind project in the country has agreed on a policy or been assigned to an investor, making it increasingly difficult to achieve the 2030 target.

Rethink the need to reconsider the offshore wind program, illustrative photo/Source: freepik.com

Last week, Italian wind company Enel, which was supposed to finance wind farms and generate about 6 GW of renewable energy in Vietnam, revealed plans to leave the country, Reuters reported, as part of plans to restructure Enel’s global business operations.

After Danish group Ørsted withdrew from the wind sector in Vietnam at the end of August, Norwegian state energy group Equinor also confirmed the cancellation of OSW plans in Vietnam and closed its office in Hanoi.

“One of the reasons for this decision is that the OSW industry is facing many obstacles,” Equinor spokesman Magnus Frantzen Eidsvold said.

A company representative in Vietnam told local media that if the current sales price mechanism were sufficient to calculate future revenues, the OSW project could take up to ten years to complete.

“In the coming years, the government must ensure that electricity prices grow at least as fast as the inflation rate, so that they are profitable for investors who take out loans from banks under power purchase agreements (PPA),” he said.

Dang Quoc Toan, a board member of the LaGan OSW venture, told VIR that most such ventures have not seen any progress. “Despite long discussions on offshore wind, we have not yet found a clear and unified mechanism for investor selection, pricing policy or PPA, which has discouraged them. More of them will abandon their plans in Vietnam at this rate,” Toan said.

Vietnam has attracted international interest in its renewable energy plans due to strong winds in shallow waters near densely populated coastal areas, but delays in regulatory reforms have recently forced potential financiers to reconsider their plans, according to the World Bank.

In a report on key solutions in the field of socio-economic development for the next 18 months, the Ministry of Planning and Investment pointed to numerous difficulties related to the slow implementation of projects.

There are difficulties in surveying, investigating, exploring, measuring and assigning marine areas. The current regulations do not contain provisions authorizing or approving organizations and individuals to use the sea for the purpose of measuring, monitoring, surveying, exploring and researching the potential of the OSW power. It has also not been determined whether the exploitation of natural resources falls within the scope of the Marine and Insular Environment and Natural Resources Act.

Approval of policies and selection of investors are also hampered as the relevant law does not regulate the authority to approve investment policies for initiatives such as offshore wind energy.

Despite the ambitious goals, the Ministry of Industry and Trade (MoIT) has previously admitted that the field is too new for Vietnam to have practical experience in its implementation, management and operation.

As the situation worsened with major investors pulling out of plans to invest in renewable energy in Vietnam, Toan of the LaGan wind project stressed the need to remove current barriers to the development of OSW systems.

“If there is a clear pricing policy for power sales to calculate efficiency, investors may return to Vietnam,” he said. “The target of reaching 6,000 MW by 2030 is still achievable, despite all the challenges.”

From an investor perspective, Vietnam needs to urgently complete the OSW Power development pilot project and submit it for approval. State-owned groups such as PetroVietnam, Vietnam Electricity or defense units should be assigned to help implement it, Toan said.

Le Manh Cuong, general manager of PetroVietnam Technical Services Corporation, said the prompt removal of obstacles would accelerate the implementation of such projects, contributing to the supply of energy needed for the development of the national economy and integrating Vietnam deeper into OSW energy supply chains.

“To date, we have won bids and implemented more than 10 such projects with a total capacity of about 5.5 GW, with a total contract value of about $1.5 billion, contributing to the reduction of about six million tons of CO2 emissions per year,” Cuong said. “We continue to invest in missing links, such as underground cable production and improving facility financing to complete the OSW energy supply chain.”

MoIT is leading and coordinating the agency’s efforts to develop and complete a pilot for OSW projects. It will report to the government by the end of this month.

On September 12, the Government Office issued a notice to remove difficulties for offshore gas and wind power projects. The Ministry of Industry and Trade must work closely with relevant authorities, especially Vietnam Electricity (EVN) and PetroVietnam, to analyze the legal problems related to the development of power projects and propose solutions to the MoIT to synthesize recommendations in a draft bill amending many laws, including those on investment, tenders, public-private partnership, resources, marine environment and construction. The working group will be established and led by Minister of Industry and Trade Nguyen Hong Dien as the group head, Dang Hoang An, chairman of EVN, and Le Manh Hung, chairman of PetroVietnam, as deputy heads. The group will review all legal issues related to the implementation of energy projects, and then propose amendments and additions to supplement the Electricity Law, which will be completed by September 20 and submitted to the National Assembly for approval at the eighth session. For licensed projects, developers must comply with their obligations unless the competent authority expressly withdraws the license in accordance with the law. The Standing Government Committee has asked Deputy Prime Minister Bui Thanh Son to immediately assign it to relevant units for implementation. To overcome legal problems in OSW projects, such as regulations on output and transfer prices, solutions should be presented and added to the draft laws, the attached notification explained.

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