Vietnamandits renewables solution R


enewable energy is typically touted as the solution to cli- mate change and the world’s

over-reliance on fossil fuels. In Vietnam, renewables are also a solu- tion to a more localised problem: ris- ing energy demand. The country has witnessed steady

economic growth, with of an annual- ised rate of 6.9% over the five years prior to the pandemic, according to

IMF statistics. This has had a clear knock-on- effect in the form of a rising middle class and household energy consumption. And as one of the few countries to have ridden a wave of eco- nomic growth in 2020, it looks ahead to a 6.7% grossdomesticproduct (GDP) expansionin2021. In order to keep up with demand, the

country will need $150bn in capital invest- ments — half of its GDP — for generation and grid upgrades by 2030, according to a McKinsey report. In 2015, the Vietnamese government in

Hanoi issued a renewable energy strategy until 2030, and a vision for 2050, as away of stimulat- ing business and diversifying its energy mix, as well asmitigating the effects of climate change. The government started with setting a high- priced solar feed-in-tariff in 2017 and having generated interest and investment from devel- opers, has broadened its sights to both onshore and offshore wind. Now, Vietnam is aiming to boost wind

power generation capacity to 2000MW by 2025 and 6000MWby 2030 — a significant increase fromits 2020 target of 800MW. In 2020, Copenhagen Investment Partners

(CIP) struck a deal withthe Vietnamese authori- ties to lead the country’s and Asia’s largest off- shore wind project, worth $10bn. Solar feed-in- tariffs are also poised to give way to an auction system in the latest sign that the market is maturing. But in a country where the preroga- tive is the rising energy demand, not the transi- tion from coal, the next phase of Vietnam’s renewable journey remains an open question. Greenfield investment announcement

tracker fDi Markets recorded 11 renewable pro- jects in Vietnamin 2020 with a capital expendi- ture of roughly $1.1bn.

Pivotalmoment For Dave Seibert, deputy head of regional energy, mining and infrastructure at law firm DFDL, the deadline for the first solar feed-in- tariff was the “catalyst” and represented a piv-


otal moment when “Vietnam and the world realised that Vietnamwas serious about deploy- ing renewable energy”. With the feed-in-tariff set at the high price

of 9.35 cents per kilowatthour, the countrywel- comed 4500MW of solar energy onto its elec- tricity grid in 2019. Were it not for this deploy- ment, there would not be such an interest in offshore wind now, Mr Seibert says. International sponsors and lenders had previ- ously criticised Vietnam’s power purchase agreement, he says, as potentially being unbanked andwould therefore not lead to large deployments of solar. “But the facts speak dif- ferently,” he explains. Minh Khoi Le, a research analyst at Rystad

Energy, says the government surpassed its own targets thanks to its high price feed-in-tariffs; the rise of mega-scale photovoltaic (PV) farms, ranging from350MWto 600MW, followed, par- ticularly in the south-east of the country. The Dau Tieng Project, the largest solar plant in south-east Asia with a generating capacity of 600MW, is one such example.

Feed-in-tariffs to auctions He expects the government will switch to an auction system as the solar industry matures. “We won’t see gigawatt-size installations in the PV space in the next year as there will be a tran- sition period where the auction mechanics will need to be worked out,” he says, adding that Vietnam has found itself “leading this energy transition in the region through its market force, withoutmuch of an actual concrete tran- sition push fromits government.” Wind projects, by contrast, are set to con-

tinue with feed-in-tariffs until 2023, but the government has slashed its feed-in-tariff to 7.02 cents per kilowatt hour in what the Global Wind Energy Council (GWEC) calls “one of the most dramatic reductions seen in any wind powermarket globally to date”. Ben Backwell, chief executive ofGWEC, said

in a statement that while Vietnam is set to become the leading wind market in south-east Asia, if the proposed feed-in-tariff (FIT) is imple- mented, it “would jeopardise long-term devel- opment and ultimately result in higher energy prices at a time when the country’s energy demand is soaring”. Alongside CIP’s $10bn project, other

European firms are set to pile into offshore windin Vietnam. Irishwindandsolar developer Mainstream Renewable Power plans to develop a 500MW offshore wind farm off the coast of April/May 2021

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