Complexity and lack of clarity impeding Vietnam’s offshore wind potential

The Danish Energy Agency and the Vietnamese Electricity and Renewable Energy Authority, who are preparing a ‘roadmap report’ for offshore wind development in Vietnam, say the country has potential for 160 GW of offshore wind.

But the market in Vietnam is known for its technical and legal complexity, and lawyers at Baker McKenzie argue that the government needs to take further steps to make the development of large-scale offshore wind projects possible. They say steps are needed to enhance clarity and reduce complexity.

Vietnamese electricity consumption has been increasing by around 10% a year over the last decade but the country remains heavily dependent on imported fossil fuels. New sources of clean power generation are being sought in the country’s upcoming 10-year power development plan (PDP8).

With more than 3,000 km of coastline and some of the best offshore wind conditions in southeast Asia, Vietnam has huge potential as an offshore wind province.

Proposals have been submitted to the government by the provinces of Binh Thuan, Ba Ria - Vung Tau and Ben Tre that add three large-scale offshore wind projects with a total capacity of 4.9 GW to those already in PDP8. Several other provinces have permitted investors to carry out site surveys and studies for potential developments of around 18 GW.

In a brief on legal considerations for developing large-scale offshore wind power projects in Vietnam, Baker McKenzie highlighted that offshore wind is a ‘prioritised sector’ in the government’s plans to develop a blue economy and implement national energy strategies to address energy security issues.

It noted that, to create a clearer mechanism for large-scale offshore wind projects, the Ministry of Industry and Trade of Vietnam (MOIT) recently proposed to the Prime Minister that he extend the country’s feed-in tariff (FiT) mechanism until the end of 2023, before moving to implement auctions.

“MOIT acknowledges there are issues in implementing offshore wind projects in Vietnam, including the lack of a tariff support mechanism for large-scale offshore wind projects that are not able to achieve a commercial operations date by the current wind FiT tariff deadline of 31 October 2021,” the law firm said.

Separately, the government is amending the draft of a new decree following a proposal by the Ministry of Natural Resource and Environment of Vietnam (MONRE) to update seabed lease and licensing requirements for large-scale offshore windfarms. On 14 April 2020, the Office of Government requested the MONRE to continue updating the draft decree and report to the government.

“While there have been efforts by the government to improve policy, including the proposed extension of the FiT regime, it is critical to supplement the current framework,” said Baker McKenzie.

The law firm argues that in addition to the steps the government has already taken, it is necessary to significantly improve the current wind power purchase agreement (PPA) template Vietnam uses, or introduce a new international-standard form of wind PPA for large-scale offshore projects.

Baker McKenzie says further government action is also needed in other areas. The law firm said compared to onshore and near-shore projects in the country, the development process for large-scale offshore wind has "local legal and technical complexities" the government needs to address.

It argues that the process of obtaining seabed leases and approval for the use of sea areas for offshore wind projects is "too complex."

It says there are unhelpful complexities in regulations for determining sea areas suitable for offshore wind and in licensing regulations. The law firm said regulations used to determine fees for seabed leases are also unclear and how and by whom leases are approved is unclear: currently, leases are subject to approval by the Prime Minister, MONRE or the relevant People’s Provincial Committee, on a project-by-project basis.

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