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Vietnam provided one of many vibrant spots of what was broadly seen as a disappointing COP26 local weather summit when it signed as much as a pact to part coal out of its vitality combine, sending a sign to the world that it was prepared to depart behind the world’s dirtiest gas and embrace renewables.
As a nation recurrently branded as one among Asia’s most wedded to coal energy, the transfer to halt investments in new vegetation, together with a wider pledge to hunt internet zero by 2050, was hailed as a shock step ahead by Vietnam, which stated it desires to have 31-38GW of wind and photo voltaic in place by the top of the last decade to assist make the shift.
However behind the COP headlines, some concerned in Vietnam’s renewable vitality sector concern that coverage missteps are placing in danger the momentum behind what has to date been amongst Asia’s brightest prospects for wind and photo voltaic.
From an put in base of about 500MW, 2021 was for Vietnam’s onshore wind sector on account of be a breakout 12 months of multi-gigawatt enlargement that laid the bottom for regular progress within the years forward.
However Vietnamese onshore now has a “main downside”, in accordance with Patrick Architta, Asia-Pacific president for renewables consultancy K2 Administration.
“Vietnam is a superb nation – you’ve got the precise wind, you’ve got the precise solar, you’ve got the precise progress – all the weather are there.
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“They’ve a whole lot of ambition – however the implementation is inflicting issues,” Architta advised Recharge.
The basis of the problem was the deadline on 1 November for Vietnam’s $0.085/kWh feed-in tariff (FIT) for onshore wind, which during the last 18 months has fuelled a frenzied development growth by builders that ran smack into the unexpected challenges of the Covid pandemic.
With international provide chains all of a sudden seizing up and employees quarantined, what was already a tricky construct schedule all of a sudden turned not possible for a big chunk of the gigawatts of onshore capability racing to fulfill it.
Architta offers the instance of workers simply 5km from a venture website however unable to maneuver from their lodges for months on account of quarantine restrictions.
The trade, led by the World Wind Power Council (GWEC), pleaded with the federal government for an extension, even when only for a number of months, however to no avail. “We gave the instance of many different international locations that had an extension of time…however the authorities ignored it,” Architta stated.
As an alternative, any generators that missed the 1 November cut-off must enter negotiations with the Vietnamese state offtaker EVN over what stage of remuneration they’ll take pleasure in – a nerve-racking scenario for tasks whose viability was based mostly on grabbing the complete 20-year FIT.
GWEC advised Recharge its knowledge suggests 3.3GW throughout 69 tasks hit the 1 November deadline however nearly 2.4GW missed it and can now have to attend to see what emerges from the negotiations.
To date so dangerous. However Architta claims the issue has been compounded by a regulatory limbo that now leaves Vietnam’s onshore wind sector going through the identical destiny as its large-scale PV installations, which have plunged dramatically since its personal FIT expired a 12 months earlier following an set up growth that helped push the nation to 16.5GW of photo voltaic by the top of 2020. “We put in 3GW [of PV] in a single 12 months. However the 12 months after, no FIT – all of a sudden no exercise,” stated Architta
To date, no substitute FIT has been put in place for both wind or photo voltaic, nor has any clear sign been given over a shift from tariffs to auctions, which is broadly anticipated to occur sooner moderately than later as Vietnam seeks to observe different markets in ramping down subsidies.
“The tip of the feed-in tariff with out having a future FIT – it’s a significant downside, Covid or no Covid,” stated Architta, who warned that when the present development backlog unwinds, Vietnamese wind faces precisely the type of boom-and-bust cycle disliked by builders the world over.
Builders don’t wish to make investments till they’re sure. There will likely be a drop-off of exercise then we must ramp up once more.
He offers the instance of cranes shipped in from Australia and personnel educated up that now face a expensive void in exercise as buyers anticipate the coverage certainty wanted to advance their tasks.
“Builders don’t wish to make investments till they’re sure. There will likely be a drop-off of exercise then we must ramp up once more.”
The trade might stay with a sign that auctions are coming, and even with a decrease FIT than the outdated one – “we’d simply must be extra environment friendly” – however not with a void meaning multi-gigawatts constructed one 12 months then none the following.
“For the great of Vietnam – not for the great of our enterprise – on this transition till the public sale is prepared, they need to put in place a feed-in tariff,” he stated, warning that finally Vietnamese energy patrons would be the losers if prices go up due to a scarcity of continuity.
Architta added that such a transitional FIT could possibly be graded to the specifics of the Vietnamese wind market, which unusually spans three sectors – onshore, nearshore ‘intertidal’ tasks and offshore.
Offshore extra complicated
Matt Lorimer, a accomplice at legislation agency Watson Farley & Williams (WFW) based mostly in Hanoi, advised Recharge: “For onshore wind (and close to offshore) it now appears inevitable that we are going to transfer to an auction-based system, however there are restricted particulars on how this works.
“Because of the excessive uptake of the FIT (particularly for photo voltaic), EVN doesn’t at the moment have a scarcity of electrical energy and there seems to be no hurry to announce how the public sale course of will work. The FIT for photo voltaic ended final 12 months and there have been no particulars of the substitute public sale system.”
“An announcement on how the public sale system will work is key for onshore wind,” Lorimer added.
For Vietnam’s offshore wind sector – recurrently cited as one of the vital promising globally and the goal of exercise by the likes of Orsted, CIP and Enterprize Power – the WFW lawyer stated the scenario is extra complicated.
It was lengthy since clear that the huge tasks off its shores would come nowhere close to the 1 November FIT, however builders’ ongoing challenges embody resolving particular components of the facility buy settlement (PPA) on supply from EVN which whereas workable for onshore tasks, Lorimer stated don’t mirror the added scale and complexity of tasks at sea.
Flawed grasp plan?
Lorimer factors out that additionally key to offshore wind’s prospects is its place in Vietnam’s Energy Improvement Grasp Plan 8 (PDP8), which units the nationwide high-level coverage agenda for the sector and is eagerly watched for indicators of what vitality sources are favoured by state planners.
The most recent draft of PDP8 appeared simply earlier than COP26 and – to the consternation of many – signalled a transfer again to coal and a relegation of offshore wind.
Assume-tank the Institute for Power Economics and Monetary Evaluation (IFEEFA) in September stated the draft “in a stunning shift, proposed to boost the put in capability goal for coal-fired energy by 3GW to 40GW by 2030, with a further (and closing) 10GW to be deployed by 2035”.
The IFEEFA added: “To make room for this pivot again to coal, the planners sacrificed 6GW of wind energy anticipated to come back on-line by 2030. Offshore wind was eliminated totally from PDP8’s base case situation.”
Hardly the sign to the worldwide funding neighborhood of a nation dedicated to the vitality transition, stated the IFEEFA, declaring that the coal energy sector additionally had a dismal observe file of failing to ship the capability it promised Vietnam beneath earlier PDPs.
However that was in September, earlier than the local weather summit, and becoming a member of the COP26 coal pact could sign new realities in play – not least the choice by China to cease financing new worldwide coal-fired plants.
Thu Vu, who compiled the September evaluation for the IEEEFA advised Recharge: “We perceive that one other spherical of revision on the draft PDP8 is underway, to mirror the latest bulletins made by Vietnam at COP26.”
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