In Vietnam, power generation relies mostly on coal burning, which accounted for 53% of electricity generation in 2020. Large-scale hydropower is another major contributor, providing 26% of electricity.
Stripping out hydropower, solar energy had the most installed capacity in 2020, which saw a threefold increase, coming in at 46%. Installed wind energy capacity remained 2% as in 2019, with no additions in the offshore wind sector.
Draft PDP8 yet to finalize, with renewable target going down and up
In February 2021, Vietnam published the eighth draft of Power Development Plan (PDP8), which includes electricity plans from 2021 to 2030 and long-term development until 2045. Originally, the Ministry of Industry and Trade (MOIT) wanted to finalize the draft by June 2021, but relevant processes are still under way. In October, an updated version trimmed down installation target and raise the share of coal-fired electricity, which is expected to reach 40.9 GW of capacity, a 10% increase on that in the February version of the draft. The planned total capacity of renewables decreased by 5 GW, with offshore wind capacity aiming to reach 2 GW by 2030.
At the COP26, Vietnam pledged to gradually phase out coal-fired electricity and achieve net-zero by 2050. In response to COP26, the MOIT amended the PDP draft, aiming at deploying 4 GW of offshore wind capacity by 2030.
Forecast for offshore wind capacity
In 2020, Vietnam built only intertidal wind farms, aggregately cumulating 99.2 MW of installed capacity. FIT for onshore and intertidal wind farms ended in November 2021, with construction of 84 wind farms, totaling 4 GW of capacity, completed as scheduled. In 2021, offshore/intertidal wind farms cumulated nearly 1 GW of installed capacity. InfoLink estimates installed offshore wind capacity from 2021 to 2030 under three scenarios.
In the optimistic scenario, offshore wind capacity (excluding projects in intertidal zones) will exceed 4 GW by 2030. Most projects completing constructions during 2021 and 2023 are in intertidal zones. In the future, the Vietnamese authorities may adopt auction mechanism for renewables. The offshore wind sector is expected to see 500-600 MW of growing momentum every year after 2024, if relevant regulations are efficiently established. The plans in PDP8 are still some way off the country’s net-zero commitment. The Vietnamese government is likely to raise renewable capacity target. By 2030, projects offshore and in intertidal zones may cumulate 7 GW, with the former taking up 4-5 GW.
Not all projects approved by far will complete construction as scheduled, due to barriers to entry, such as progress of electric grid expansion and infrastructure constraints. Projects off the shore and in intertidal zones will cumulate 2 GW of installed capacity by 2023, when FIT dues, with the former accounting for only 0.3 GW. The Vietnamese government has yet to announce tender timelines, slowing down developments. In the pessimistic scenario, the offshore wind sector will see merely 3.5 GW of installed capacity by 2030 (excluding projects in intertidal zones).
Offshore wind policy and development
PDP8 has clearer plans for offshore wind energy. Presently, most wind farms approved or completed construction in Vietnam sat in intertidal zones. In PDP8, authorities define “offshore” as waters deeper than 20m and identified potential wind energy projects which are expected to have 59 GW of total capacity. Among these projects, 23 wind farms sites lie in central and southeastern regions of the country, attributing more than 44 GW of capacity; 12 potential wind farm sites locate off the southwestern coast, aggregating around 15 GW of capacity.
Mega wind farms with more than 3 GW of planned capacities are released lately, with Bình Thuận Province being home to five of them, the most in the country.
FIT scheme for onshore and near-shore wind farms has expired in November 2021. In the meantime, the Vietnamese authorities released the latest FIT rates and extended FIT for offshore wind power until December 2023.
The pilot program for direct power purchase agreement
Electric market in Vietnam is not yet an open market, with state-owned Vietnam Electricity holds monopoly on power generation activities. Vietnam has set to publish a pilot program for direct power purchase agreement (DPPA) in recent terms, under which it will allow businesses and industry groups to acquire renewable energies (wind and solar projects) directly through power purchase agreements. This polit program is pivotal for the promotion of renewables in Vietnam. The MOIT expects to put the program in action during 2021 and 2023, with the following guidelines:
1 GW of total capacity; each project shall be at least 30 MW in size
Only solar and wind projects can apply
Private-owned developers and power generation companies must submit proof of their financial ability, technical resources, and experiences in developing and operating renewable projects
In Vietnam, 70% of investors and developers of projects off the shore and in intertidal zones are local businesses, albeit having completed construction or not. However, potential projects listed in PDP8 are mostly led by foreign enterprises or co-invested by foreign and local companies. Ørsted even announced its project of a 39-GW large-scale wind farm in Vietnam. InfoLink believes foreign developers to take up bigger market shares than their local counterparts, as the Vietnamese offshore wind market gradually matures.
Subject to the Covid-19 pandemic and infrastructure constraints, construction process of wind farms falls short of expectation during 2020 and 2021. Still, as of June 2020, 91 wind farms acquired operation permissions, totaling 7 GW of capacity, suggesting significant growths for Vietnam’s wind energy sector in the coming decade. The country’s commitment to reach net-zero by 2050 also speeds up development of wind energy, making it increasingly important for power generation.