Wind Power Potential for Vietnam

by Trần Đình Hoành, JD, Esq.

Bạc Liêu windpower farm

– Basically, the wind power sector is almost empty in Vietnam now, with only several wind farms of capacity of 30MW, 50MW…

However, the government has plan to add a total installed capacity of 2.613 MW in 2020 and 15.717 MW in 2030.

– In order to stimulate renewable energy production, a Feed-in Tariff (FiT) was introduced in Vietnam in 2011. The current FiT for wind energy in Vietnam amounts 7,8 US$c/ kWh with a Power Purchase Agreement (PPA) duration of 20 years. The talk is that in the near future the FiT will be increased to 8.77 US$cent/kWh for onshore wind projects and to 9.97 US$cent/kWh for offshore wind projects.

– A key regulatory instrument for wind power in Vietnam is the Provincial Wind Power Development Plans (PWPDPs). These plans define priority areas for wind power development, for which wind measurement has already been conducted. Specific onshore and nearshore sites are selected, based on windspeed, topography, connection and accessibility to the energy grid, land use and buffer zones between potential areas.

– Vietnam’s economy has been doing very in the last several decades. Right now, VN is the star in Asia Pacific. In 2018 its GDP growth is 7.1%, top in that part of the world. This year 2019, it may be a little lower, but still somewhere in that range. World Bank projects GDP growth around 6.5% in 2020 and 2021.

– VN has 96 million people, and will hit 100 probably in a year or so. The literate rate is very high. 70% of the population is under 35.

– Coverage and learning outcomes are high and equitably achieved in primary schools — evidenced by remarkably high scores in the Program for International Student Assessment (PISA) in 2012 and 2015, where the performance of Vietnamese students exceeds that of many OECD countries.

– VN ranks high on the human capital index (HCI), second in ASEAN behind Singapore.

– Vietnam has forecast power generation will need to rise from about 47,000 megawatts (MW) currently to 60,000 MW by 2020 and 129,500 MW by 2030. To meet these targets the country will need to add more than neighbor Thailand’s total installed capacity by 2025 and its electricity sector will likely be bigger than Britain’s by the mid-2020s.

– VN relies heavily on coal for energy. But a change of emphasis that began in 2016 has started to embrace cheaper renewable energy. According to a draft law planned for June 2019, state-owned utility Vietnam Electricity (EVN), which distributes all of the country’s power, will pay solar projects between 6.67 and 10.87 cents per kilowatt-hour (kWh).

– There was also “growing interest in wind power thanks to attractive feed-in tariffs” of 8.5 cents per kWh for onshore and 9.8 cents per kWh for offshore facilities.

Info form Wind Energy Potential – Vietnam, by The Netherlands Enterprise Agency (2018)

– Wind energy and the energy market

Renewable energy targets and wind energy

Vietnam is a country with a rapidly growing economy together with an increasing energy and electricity demand. To sustain the growing electricity demand, new power plants are being built, especially coal-fired power plants. Besides fossil fuels, hydro power is also an important part of the electricity supply in Vietnam, accounting for 37,3 percent of the total installed capacity. EVN is the single buyer of electricity and holds a monopoly on transmission and distribution.

Renewable energy sources are still a very small share in the total electricity production, but ambitious targets have been set by the government.

Feed-in Tariff (FiT)

In order to stimulate renewable energy production, a Feed-in Tariff (FiT) was introduced in Vietnam in 2011. The current FiT for wind energy in Vietnam amounts 7,8 US$c/ kWh with a Power Purchase Agreement (PPA) duration of 20 years. In the near future the FiT will be increased to 8.77 US$cent/kWh for onshore wind projects and to 9.97 US$cent/kWh for offshore wind projects.

Wind energy potential and development

Wind resources

In Vietnam, several wind measurement studies are conducted. Vietnam is considered to have the best wind resources in Southeast Asia, especially in the nearshore/offshore and onshore coastal regions in the south of Vietnam. In these areas yearly average windspeeds of 9 to 10 meters per second are measured. Generally, windspeeds are declining further inland.

Noteworthy is that Vietnam is vulnerable to extreme weather events like storms and typhoons, especially in July, August, September and October.

Windfarm development onshore and nearshore

A key regulatory instrument for wind power in Vietnam are the Provincial Wind Power Development Plans (PWPDPs). These plans define priority areas for wind power development, for which wind measurement has already been conducted. Specific onshore and nearshore sites are selected, based on windspeed, topography, connection and accessibility to the energy grid, land use and buffer zones between potential areas. A total installed capacity of 2.613 MW in 2020 and 15.717 MW in 2030 are allocated in the PWPDPs. The status of these designated areas are diverse: some are under development, under construction or unknown. Currently, the total installed wind power capacity is 186 MW, which is divided over four grid-connected windfarms with capacities ranging between 6 MW and 100 MW.

Windfarm development offshore

Offshore wind energy development – further off-coast than nearshore wind energy – is not yet occurring in Vietnam. Especially the coastline to the northeast of Ho Chi Minh City is very promising, due to the shallow water (ranging between 1 and 25 meters) within 50 kilometres from the shore and the highest offshore wind speeds of Vietnam.

Countries and companies already active at the Vietnamese wind energy market

Companies from countries that have been active in the Vietnamese wind energy sector for a long period of time such as Germany, Denmark, UK and USA have a better position for involvement in wind energy development than companies from, newcomer, the Netherlands. They can build on existing relationships with governments and relevant parties in the wind sector.

Financial resources and windfarm financing

Local Vietnamese banks appear to lack the financial capital, knowledge and trust to Finance wind energy projects. That means that foreign investors and banks must account for a large part of the required capital investments of wind energy projects to support the desired wind energy development in Vietnam.

WORLD BANK’S REPORT – VIETNAM

Vietnam’s development over the past 30 years has been remarkable. Economic and political reforms under Đổi Mới, launched in 1986, have spurred rapid economic growth, transforming what was then one of the world’s poorest nations into a lower middle-income country. Between 2002 and 2018, more than 45 million people were lifted out of poverty. Poverty rates declined sharply from over 70% to below 6% (US$3.2/day PPP), and GDP per capita increased by 2.5 times, standing over US$2,500 in 2018.

In the medium-term, Vietnam’s economic outlook is positive, despite signs of cyclical moderation in growth. After peaking at 7.1% in 2018, real GDP growth in 2019 is projected to slightly decelerate in 2019, led by weaker external demand and continued tightening of credit and fiscal policies. Real GDP growth is projected to remain robust at around 6.5% in 2020 and 2021. Annual headline inflation has been stable for the seven consecutive years – at single digits, trending towards 4% and below in recent years. The external balance remains under control and should continue to be financed by strong FDI inflows which reached almost US$18 billion in 2018 – accounting for almost 24% of total investment in the economy.

Vietnam is experiencing rapid demographic and social change. Its population reached 97 million in 2018 (up from about 60 million in 1986) and is expected to expand to 120 million before moderating around 2050. Today, 70% of the population is under 35 years of age, with a life expectancy of 76 years, the highest among countries in the region at similar income levels. But the population is rapidly aging. And an emerging middle class, currently accounting for 13% of the population, is expected to reach 26% by 2026.

Vietnam ranks 48 out of 157 countries on the human capital index (HCI), second in ASEAN behind Singapore. A Vietnamese child born today will be 67% as productive when she grows up as she could be if she enjoyed complete education and full health. Vietnam’s HCI is highest among middle-income countries, but there are some disparities within the country, especially for ethnic minorities. There would also be a need to upgrade the skill of the workforce to create productive jobs at a large scale in the future.

Over the last thirty years, the provision of basic services has significantly improved. Access of households to modern infrastructure services has increased dramatically. As of 2016, 99% of the population used electricity as their main source of lighting, up from 14 % in 1993. Access to clean water in rural areas has also improved, up from 17% in 1993 to 70% in 2016, while that figure for urban areas is above 95%.

Vietnam performs well on general education. Coverage and learning outcomes are high and equitably achieved in primary schools — evidenced by remarkably high scores in the Program for International Student Assessment (PISA) in 2012 and 2015, where the performance of Vietnamese students exceeds that of many OECD countries. Health outcomes have improved in tandem with rising living standards. Between 1990 and 2015, the maternal mortality ratio fell from 139 to 54 deaths per 100,000 live births, and infant mortality dropped from 44 deaths per 1,000 live births to 16.7. Vietnam’s universal health coverage index is at 73 – higher than regional and global averages – with 87% of the population covered.

In Vietnam, however, rapid growth and industrialization have not been friendly to the environment and natural assets. Final energy consumption tripled over the past decade, growing faster than output. Energy intensity of GDP has been steadily increasing. Demand for water continues to increase, while water productivity is low, about 12 percent of global benchmarks. Unsustainable exploitation of natural assets such as sand, fisheries and timber could negatively affect potential for future and long-term growth. Compounding the problem is the reality that much of Vietnam’s population and economy is highly vulnerable to climate impacts.

Urbanization and strong economic and population growth are causing rapidly increasing waste management and pollution challenges. Waste generation in Vietnam is expected to double in less than 15 years. Linked to this is the issue of marine plastics. Ninety percent of global marine plastic pollution is estimated to come from just 10 in-land rivers, and the Mekong river is one of them. Vietnam is among the ten countries worldwide that are most affected by air pollution. Water pollution has significant costs on productivity of key sectors and human health.

The Government is aware of the need to lower the environmental footprint of the country’s growth, to effectively mitigate and adapt to climate change, and that addressing these challenges also present opportunities to contribute to growth. Key strategies and plans to stimulate green growth and sustainable use of its natural assets are in place. The Government is also implementing measures to mitigate and adapt to climate change and address extreme weather events and natural disasters by operationalizing its Nationally Determined Contribution. The Government is also seriously assessing how to urgently address water and air pollution, marine plastics and need for solid waste management.

Last Updated: Oct 18, 2019

 

Tran Dinh Hoanh, Esq., LLB, JD
Washington DC
703-969-0080

 

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