On 11 September 2018, the prime minister of Vietnam approved a draft decision on new feed-in tariffs for onshore and offshore wind power projects in the country.
As highlighted earlier by OWJ, the authorities in Vietnam have been considering new, higher tariffs for onshore and offshore wind projects in order to make them more attractive to developers and make it easier for developers to secure finance.
The decision (known as Decision 39) will become effective 1 November 2018 and will amend and revise articles in the prime minister’s decision No. 37/2011/QD-TTg on mechanisms supporting the development of wind power projects in Vietnam.
For onshore projects, the FIT will be increased from its current level of 7.8 US cents/kWhr to 8.5 cents/kWhr. The tariff for offshore wind projects will be 9.8 cents/kWhr.
The level at which tariffs had been set was insufficient to ensure interest from developers and was said to be hindering their ability to obtain commercial loans for projects.
Discussing the decision, and definitions of what actual constitute onshore and onshore projects, Duane Morris Vietnam general director Dr Oliver Massmann said he believed that Vietnam’s ministry of industry and trade (MOIT) needed to provide further guidelines and a better definition of ‘onshore’ and ‘offshore’ wind power projects.
Another law firm following the development of the new FITs, agreed. Representatives of Baker McKenzie explained that, “Decision No. 39 defines onshore wind power projects as grid-connected wind power projects that have wind turbines constructed and operated onshore and on coastal land areas having the outer border being the average lowest sea edge over several years; and offshore wind power projects as grid-connected wind power projects that have wind turbines constructed and operated outside the average lowest sea edge over several years off the coast.”
"As many potential wind power projects in Vietnam are nearshore projects with wind turbines constructed on coastal areas (on land), developers should take this technical classification into account, noting that onshore projects cover coastal land areas under the above definitions," the law firm said.
The new FITs apply to a part or the whole of a wind power project that achieves a commercial operation date (COD) before 1 November 2021 and will apply for 20 years from the COD.
For wind power projects that achieve COD prior to the effective date of the prime minister’s decision, that is 1 November 2018, the new FITs apply for the remaining term of the power purchase agreement.
Dr Massman said it is not clear yet if the new FITs will automatically apply to the existing wind power projects or whether existing deals would need to be re-negotiated, although doing so could be very challenging.
Baker McKenzie said the prime minister had instructed the MOIT to propose a mechanism to encouragement the development and manufacturing of domestic wind power equipment and increase the local content of wind power projects in Vietnam.
As also previously highlighted by OWJ, Vietnam has significant nearshore and offshore wind potential but needs to reform its energy sector and develop a competition-based generation and a wholesale and resale market to attract the foreign investment it needs to develop wind energy and solar projects. It also faces challenges such as developing windfarms in typhoon-prone areas, local supply chain limits and sometimes challenging seabed conditions offshore.
The country needs to focus on wind and solar energy because of growing energy demands. Most hydropower potential in the country has already been exploited, it has begun importing more coal, does not have access to sufficient natural gas for electricity generation and has pulled back from nuclear power.