GWEC calls on Vietnamese government to extend wind tariff and maintain regional leadership

The Global Wind Energy Council (GWEC) has called on the Government of Vietnam to expand the Feed-in-Tariff (FiT) wind energy scheme with urgency.

Due to uncertainty around the investment system, Vietnam’s wind industry is already facing a slowing of investment in 2020, and further delays in the extension of FiT would impede the growth of the supply chain and cost reduction in the developing wind market, thereby undermining Vietnam’s target of affordable, reliable and clean electricity.

With 500 MW of onshore and offshore power currently installed and at least 4 GW expected to be commissioned by 2025, Vietnam is the region’s fastest-growing wind market. In 2020, however, investor interest in the construction of wind projects in Vietnam has slowed significantly, as onshore wind projects usually take 2 years to construct, but the current FiT only applies to projects completed by November 2021.

Investors face too much uncertainty to commit to new wind projects without clarification on the FiT scheme from 2022 onward, jeopardizing the potential pipeline and contributing to job losses in the field.

“Vietnam has been widely recognized for quickly becoming a regional leader of clean energy in South East Asia and attracting investment commitments from a number of worldclass companies in the sector. 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.”

 Ben Backwell, GWEC’s CEO. 

The Office of the Prime Minister and the Ministry of Industry and Trade have already recognized wind power’s significant potential for clean power generation and green development. The Prime Minister approved an additional 7 GW of new wind projects in June this year to be added to Vietnam’s Power Sector Master Plan (PDP 7). The reality, however, is that, due to a lack of certainty about the FiT extension, the vast majority of the 7 GW will not materialize.

“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. 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 from 2022-2023. In the long run, this will jeopardize the cost reduction made possible by consistent, large-scale supply chain development, and ultimately result in less renewable energy at higher prices for Vietnam.”

Mark Hutchinson, chair of GWEC’s South East Asia Taskforce.

Before the current FiT expires in November 2021, at least 1.65 GW of wind projects are expected to be built. As a renewable, indigenous energy source, wind energy plays an important role in bolstering Vietnam’s energy security and meeting its growing demand for electricity. In addition, the rising sector of renewables could generate billions of dollars of investment capital and hundreds of thousands of long-term jobs.

The Government of Vietnam is currently considering the extension of FiT and the implementation of a new FiT system, this industry alliance understands. As the slowdown in investor interest in 2020 was exacerbated by disturbances from the COVID-19 pandemic, the situation for the wind industry has now become crucial.

Due to component bottlenecks in the global wind supply chain and less favourable CAPEX rates at future sites for new wind projects , especially around the Mekong Delta, the investment case for Vietnam’s wind projects will be challenged substantially without the promptly announced clear and realistic FiT scheme.

To date, the wind sector in Vietnam has profited from increasingly large foreign and domestic capital flows. Up to 65,000 jobs and approximately US$ 4 billion in investment could be generated by the 4 GW due to be built by 2025. To realize this potential, the Government of Vietnam must now act to expand the FiT wind energy scheme and avoid a prolonged slowdown in the years ahead of renewable energy investment and installation.