Due to its extensive coastline and wind resources, Vietnam has great potential for constructing offshore wind energy projects. Offshore wind may cover 5-12 per cent of the country’s energy supply demands by 2035, with 11-25 GW installed capacity, according to a recent estimate by the World Bank. To satisfy its rapidly rising power demand, Vietnam might construct 10 GW of offshore wind by 2030. In Vietnam, offshore wind policy is still being developed, with the majority of current development focusing on intertidal and nearshore projects. REGlobal provides a brief extract of Global Wind Energy Council’s (GWEC) report titled, “Vietnam’s Future Transition to Offshore Wind Auctions: International Best Practices and Lessons Learned”. The article reviews auction in 6 offshore wind markets, best practices for offshore wind growth in Vietnam, recommendations for policy support and auction design…

Review of auction design: six active offshore wind markets

  1. The UK: In 2014, the UK switched from its renewables obligation credit-based programme to contract for difference auctions, allowing for a grace period and an initial auction round focusing on technical and competence requirements to retain an active pipeline of projects.
  1. Germany: Germany hosted its first offshore wind auctions in 2017, after introducing a feed-in-tariff system for a wide range of renewable energy technologies in 2000. To ensure a seamless transition between the two systems, a transition phase permitted projects due to be commissioned by 2021 to use the feed-in-tariff (FiT) programme.
  1. Denmark: Denmark was an early supporter of offshore wind auctions, launching them in 2004 when the offshore wind sector was still in its beginnings. This resulted in significant delays and an initial lack of interest in some of the auctions, which has now been rectified with a much more explicit consultation procedure.
  1. France: The country is still a developing offshore wind industry, and it has used competitive auctions from the start. Even ten years after its inaugural ‘Round 1′ auction, it still does not have a commercial-scale project in the works. There are numerous issues contributing to the delays, but one is the lack of a solid support mechanism to grow the sector prior to the auction mechanism’s introduction.
  1. Taiwan: Prior to the competitive auction rounds for offshore wind in Taiwan, over 3.8 GW of projects obtained entry to the FiT programme. The first round was finished in 2018, and subsequent rounds are scheduled for 2022 and 2024.
  1. The Netherlands: Following a first feed-in-premium system for offshore wind, the Netherlands started auctions in 2011. Auctions in the Netherlands have been usually successful due to the country’s long-term strategic plan and track record of achieving auction goal dates.
Source: GWEC

Best practices for offshore wind growth in Vietnam

Stakeholders pointed out that, in comparison to other nations, Vietnam’s near shore project pipeline is larger, and Vietnam’s environmental regulations are lower than in other offshore wind countries. In order to be eligible for foreign financing, projects must usually fulfill international environmental and social performance requirements.

Stakeholders think that consultation is an important part of developing offshore wind policies and that its success is dependent on it. Nearshore and offshore wind are likely to disrupt the local supply chain and fishing communities. The need to find a solution for fishing villages to profit from offshore wind development while having as little effect as possible is important. 

Offshore wind policy, according to the stakeholders, should be clear, transparent, and long-term in nature. The speed with which stakeholders transitioned from a FiT process to auctions was a major concern, and stakeholders agreed that a transition time should be introduced. Stakeholders would appreciate a thorough investigation and a well-designed auction during this period of overlap. Alternatively, if there is no overlap, stakeholders feel that this should be communicated early and that a succession plan with long-term and consistent goals should be in place.

Recommendations: Policy support and Process

  1. Allow enough time for the auction policy to be prepared: Any substantial change in strategy should be given at least two years’ notice to industry and relevant stakeholders.
    • An auction with defined timing and execution instructions would also provide Vietnam Electricity enough time to prepare the grid for increasing levels of connections and incentivize improvements in the most critical areas of the energy system.
    • Time must also be set aside to engage with other relevant stakeholders. These include understanding the policy’s high-level social and environmental consequences.
  1. When developing future offshore wind policies, the Vietnamese government should include a rigorous and transparent consultation procedure.
    • Developers should be kept aware about any changes to auction design or support schemes under consideration, and invited to provide comments, as part of an open conversation.
    • A lack of open discussion and engagement raises the cost of capital for investors and developers, resulting in lower auction participation and the offshore wind market.
    • Vietnam Electricity, local and foreign investors, project developers, players in the international and local supply chain, and local impacted industry groups such as the fishing community, shipping, and offshore oil and gas should all be included in a broader stakeholder consultation.
  1. Throughout the creation of offshore wind policy, there should be total transparency, including the publication of targets and proposed rules and processes for public feedback.
    • Government policy choices should be made public and conveyed effectively to all relevant parties.
    • The government and stakeholders should make important planning data, such as the locations of environmentally sensitive regions and other restricted parts of the sea, available to parties interested in developing offshore wind farms.
    • During consultation, planned projects should also give project information to important stakeholders to keep them informed.

Recommendations: Auction Design

  1. When it is released, the auction should be large enough, around 2-3 GW to meet the high interest in Vietnam’s offshore wind industry.
    • If supply and demand can be balanced, this will also foster competition.
    • In addition, a clear roadmap to future auction rounds (beyond 2030) should be provided to indicate a longer-term vision and the development of a sustainable sector, in keeping with PDP8 and Vietnam’s objective of fostering a “blue economy.”
  2. The auction design should distinguish between more developed and less mature forms of technology.
    • This should take into account how offshore and nearshore auctions could interact in the future, as well as how floating wind might be included.
    • Due to various phases of development in Vietnam, different technologies of the same renewable energy source will require differing amounts of assistance.
  1. For projects to be completed on schedule, an effective and simplified permitting procedure will be necessary. The government should prepare for offshore wind procurement by establishing either a “single window” organisation responsible for permitting coordination or a clearer separation of permitting responsibilities among government agencies.
    • While offshore wind projects are enormous in scope and need collaboration with several government departments and authorities, this coordination should be the job of a high-level central office, such as one under the Prime Minister’s Office.
    • This predictability is required for the sector to supply a predetermined amount of electricity at the appropriate month/year and fulfil the country’s energy needs.

The full report can be read by clicking here