Global Wind Energy Council calls on Vietnam to extend wind tariff and clean energy lead

18:24 | 24/09/2020
An industry alliance led by the Global Wind Energy Council (GWEC) has called on the Vietnamese Government to urgently extend the wind energy Feed-in Tariff (FiT) scheme.
global wind energy council calls on vietnam to extend wind tariff and clean energy lead

Vietnam is the fastest-growing wind energy market in Southeast Asia, with 500MW of onshore and offshore installed capacity and an additional 4GW due to be connected by 2025

Vietnam’s wind industry is already facing a slowing of investment in 2020 because of the uncertainty around the investment framework and further delays to the FiT extension will hinder supply chain development and cost reduction in the emerging wind market, and ultimately undermine Vietnam’s goal of affordable, reliable, and clean electricity.

Vietnam is the fastest-growing wind market in the region, with 500MW of onshore and offshore capacity currently installed and at least 4GW forecast to be commissioned by 2025. However, investor interest in wind project development in Vietnam has slowed significantly in 2020 as onshore wind projects typically require two years for development but the current FiT only applies to projects completed by November 2021. Without clarity on the FiT scheme from 2022 onward, investors are facing too much uncertainty to commit to new wind projects, jeopardising the future pipeline and leading to job cuts in the sector.

“Vietnam has been widely recognised for quickly becoming a regional leader of clean energy in Southeast Asia and attracting investment commitments from a number of world-class companies in the sector,” said Ben Backwell, GWEC’s CEO.

“The government must now avoid slowing down badly-needed investment in wind energy by extending the FiT scheme, thereby ensuring that long-term investments can materialise to create tens of thousands of skilled jobs and provide clean, competitive power for Vietnam’s economy,” he added

The Government Office and the Ministry of Industry and Trade have already recognised the substantial potential of wind energy to generate clean power and green growth. In this June, the prime minister approved an additional 7GW of new wind projects to be added to Vietnam’s master plan for the power sector (PDP 7). However, the reality is that the vast majority of the 7GW may not materialise, due to the lack of certainty on the FiT extension.

“Vietnam is on the cusp of achieving economies of scale and cost reduction in the wind industry, and this momentum must be maintained if it is to avoid a boom-bust cycle of development,” said Mark Hutchinson, chair of GWEC’s Southeast Asia Taskforce. “Due to project timescales, a delayed FiT extension risks a 'bust' period for the wind sector, wherein very few projects will be connected to the grid in 2022-2023. In the long run, this will jeopardise the cost reduction made possible by consistent, large-scale supply chain development and ultimately result in less renewable energy at higher prices for Vietnam.”

At least 1.65GW of wind projects are forecast to be installed before the current FiT expires in November 2021. Wind energy, as a clean, indigenous energy source, plays an important role in bolstering Vietnam’s energy security and meeting its soaring electricity demand. Moreover, the growing renewables sector could generate billions of dollars in investment capital and hundreds of thousands of jobs in the long term.

The GWEC understands that the Vietnamese government is currently considering the FiT extension and the introduction of a new FiT scheme. The situation for the wind sector has now become critical, as the slowdown in investor interest in 2020 has been compounded by disruptions from the COVID-19 pandemic. Due to component bottlenecks in the global wind supply chain and less favourable capital expenditure (CAPEX) rates at future sites for new wind projects, particularly around the Mekong Delta, the investment case for wind projects in Vietnam will be significantly challenged without a transparent and reasonable FiT scheme announced as soon as possible.

To date, Vietnam’s wind market has benefited from increasingly strong flows of foreign and domestic capital. The 4GW due to be installed by 2025 could generate up to 65,000 jobs and about $4 billion in investment. To realise this potential, the government must act now to extend the wind energy FiT scheme and avoid a prolonged slowdown of clean energy investment and installation in the years ahead.

By Nguyen Thu

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