Wind Power Plants
Wind Power Plants
Business Model Description
Investment in wind power projects onshore, nearshore, or offshore, in the form of greenfield and/or joint ventures to construct new power plants or acquire existing plants, and improve capacity and/or operational efficiency. This IOA is a B2B model serving wholesale buyers in the national grid system. Examples of companies active in this space are:
Trung Nam Group's onshore wind power project in Ninh Thuan started in 2016 and closed in 2020. It comprises 3 complexes with a total capacity of 152MW. The exploitation time was 2,785 hours/year (capacity factor 32%), with an output of 423,000,000 kWh/year, and total investment capital of USD 174 million, equivalent to the investment rate of 1,144 USD/kW (22).
Hitachi Sustainable Energy Ltd. acquired a 35.1% stake in a 152-MW wind park in Ninh Thuan province, Vietnam, from Trung Nam Construction Investment Joint Stock Company on May 14, 2021 (37)
Bac Lieu Wind Power Plant has a capacity of 99.2MW on a coastal area of about 500ha. The total investment is 226 million USD, equivalent to 2,279 USD/kW. Power output 326,543MWh/year (38% efficiency). With a production cost of 7.47 US cents/kWh and the electricity selling price of 9.89 USD cents/kWh, the payback period is 19 years. (21)
Expected Impact
Wind power projects provide jobs and contribute to securing electricity whilst reducing greenhouse gas emissions.
How is this information gathered?
Investment opportunities with potential to contribute to sustainable development are based on country-level SDG Investor Maps.
Disclaimer
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Country & Regions
- Vietnam: Countrywide
Sector Classification
Renewable Resources and Alternative Energy
A high volume of investment amounting to ~USD 14 billion/year is needed for the power grid and the power sources. (1) The share of renewable power is set to increase significantly to 42% by 2045 (7) to contribute to addressing the increasing trend of carbon emission per capita, from 1.75 tons in 2010 to 2.81 tons in 2018. (2)
At the COP26 conference, the GoV committed to achieving net-zero carbon emissions by 2050. Vietnam National Power Plan No.8 (being finalized) states that by 2045, total renewable energy sources, including small hydroelectricity, wind power, solar power, and biomass power, will account for 43%. Coal-fired power will reduce from 29% in 2020 to about 13% in 2045. (8)
The energy sector is traditionally dominated by men, mostly engineers; top posts are usually occupied by men (11). Energy planning continues to be supply-side-driven, focusing more on technology requirements and maintaining prices, rather than demand-driven with a focus on end-users, specifically women and men’s specific energy needs in communities, focusing on energy poverty and access issues.
Investment opportunities introduction
the annual growth rates of national electricity demand are to be 8.5% and 7.5% in the period 2021 – 2025, and 2026 – 2030 respectively; to meet this demand, 130,000 MW is needed by 2030 (4) Expansion of transmission lines, energy-efficient equipment, and electric vehicles, including charging stations, are all also needed.
Key bottlenecks introduction
Regulatory framework is not yet fully developed, limited capacity of the national power grid, logistics support for renewable energy is underdeveloped
Alternative Energy
Development need
Estimated additional 20 GW of renewable energy is to be installed to deliver the target 25% share of renewable energy by 2030 (10). Capacity constraints hinder the supply from the national grid. The efficiency level of energy consumption is high at 380 koE/1000 USD GDP (2017), i.e. 30% and 40% more than that in Malaysia and Thailand. (2,8)
Policy priority
Resolution 55-NQ/TW of the PolitBureau considers renewable energy a mitigation measure for greenhouse gas (GHG) emissions. Priority is on the development of the renewable energy technology market, providing renewable energy services in the country, and strengthening the potential for research, development, transfer, and application of new forms of renewable energy. (6)
Gender inequalities and marginalization issues
renewable energy resources are not exploited at various locations to benefit local communities that may include ethnic minorities, low-income groups, and women. Limited information and access to energy-efficient home appliances.
Investment opportunities introduction
the total potential size of large-scale solar power is about 386 GW (3); only 16 GW has been installed (5). The total potential of wind power is more than 130 GW (3), but only 5,7 GW has been installed (5). Vietnam's solar PV equipment market is USD 9,209 million in 2020, with a forecasted CAGR of 12.09% in 2021-2025 (9)
Key bottlenecks introduction
incomplete legal framework for renewable energy development, lack of a database for project development, underdeveloped management capacity and infrastructure (e.g. for super-load transportation).
Wind Technology and Project Developers
Pipeline Opportunity
Wind Power Plants
Investment in wind power projects onshore, nearshore, or offshore, in the form of greenfield and/or joint ventures to construct new power plants or acquire existing plants, and improve capacity and/or operational efficiency. This IOA is a B2B model serving wholesale buyers in the national grid system. Examples of companies active in this space are:
Trung Nam Group's onshore wind power project in Ninh Thuan started in 2016 and closed in 2020. It comprises 3 complexes with a total capacity of 152MW. The exploitation time was 2,785 hours/year (capacity factor 32%), with an output of 423,000,000 kWh/year, and total investment capital of USD 174 million, equivalent to the investment rate of 1,144 USD/kW (22).
Hitachi Sustainable Energy Ltd. acquired a 35.1% stake in a 152-MW wind park in Ninh Thuan province, Vietnam, from Trung Nam Construction Investment Joint Stock Company on May 14, 2021 (37)
Bac Lieu Wind Power Plant has a capacity of 99.2MW on a coastal area of about 500ha. The total investment is 226 million USD, equivalent to 2,279 USD/kW. Power output 326,543MWh/year (38% efficiency). With a production cost of 7.47 US cents/kWh and the electricity selling price of 9.89 USD cents/kWh, the payback period is 19 years. (21)
Business Case
Market Size and Environment
> USD 1 billion
Vietnam's economically feasible wind capacity is 134 GW, including onshore and offshore (3)
Assuming a 20-year FIT (Feed-In-Tariff) of 11 US Cents/kWh for onshore and near-shore wind with 35% efficiency and 23 US Cents/kWh for offshore wind with 58% efficiency, the total electricity production is over 10 billion USD by 2030 (24)
It is expected that by 2030, onshore wind power will reach 17GW and offshore wind power will reach 4GW; Offshore wind power is prioritized for development with installed source capacity increasing to 10 GW by 2035, to 23 GW by 2040, and to 36 GW by 2045 (25)
Indicative Return
5% - 10%
Onshore: Investment rate: USD 800-1350/kW in 2030 and USD 650-1000/kW in 2050; Capacity factor 35-55% in 2030 and 35-58% in 2050; Levelized Cost of Energy (LCOE): 5-10 US cents/kWh in 2030 and 4-6 US cents/kWh in 2050 (7)
Offshore: Investment rate USD 3200/kW in 2030 and USD 2800/kW in 2050; Capacity factor 58% by 2030 and 60% by 2050; Levelized Cost of Energy (LCOE): 11-15 US Cents in 2030 and 8-13 US Cents/kWh in 2050 (7)
Investment Timeframe
Long Term (10+ years)
The preferential conditions (in terms of tax, electricity price), operating time, and loan conditions make the project profitable straight away after being put into operation. Existing business cases show an investment timeframe of about 10 years at 80% financial leverage (26)
Ticket Size
> USD 10 million
Market Risks & Scale Obstacles
Business - Supply Chain Constraints
Business - Business Model Unproven
Impact Case
Sustainable Development Need
Wind power development is one of Vietnam's priorities to achieve net-zero emissions by 2050. Vietnam is reviewing its National Power Development Plan to reduce coal and liquified gas power capacity and increase wind capacity (25)
Wind power helps in overcoming power shortages. It is expected that by 2030 wind power will reach 17.0GW and 4.0GW for onshore and offshore respectively; Offshore wind power is prioritized to achieve an installed source capacity of 23GW by 2040, and 36GW by 2045. (25)
Gender & Marginalisation
Wind power potential areas are often located in rural, mountainous, and coastal areas,. Wind power development will benefit local communities, including women and ethnic minorities through economic development.
In Vietnam, in the field of energy in general and wind energy in particular, the proportion of male employees is higher than that of females - both unskilled and skilled workers, as well as in leadership positions. (11)
Expected Development Outcome
Reduce carbon emission: e.g with 4-5 GW of offshore wind power developed by 2030, Vietnam will save about USD 800 million in coal imports per year, contributing to reducing 7.2-9.0 million tons of CO2 emissions (25).
Create employment opportunities for local communities - estimated to be 40,000 local jobs by 2030 (25)
Gender & Marginalisation
Create job opportunities for local female workers, especially unskilled workers.
Primary SDGs addressed
7.2.1 Renewable energy share in the total final energy consumption
The renewable energy share in the total final consumption is approximately 12 - 17% (37)
The current total installed wind power capacity is 5GW
The proportion of renewable energy in total final energy consumption by 2030 will reach 32.3% (2)
Wind power installed capacity is 6GW by 2030
Secondary SDGs addressed
Directly impacted stakeholders
People
Gender inequality and/or marginalization
Planet
Corporates
Public sector
Indirectly impacted stakeholders
People
Corporates
Public sector
Outcome Risks
Difficult to secure land for investment, due to which wind power plants occupy relatively large land or sea areas.
Technical issues, for example, a microclimate that reduces wind speed, negatively affect the performance of the turbines.
For this investment opportunity to be profitable, smart grids and energy storage development are required to resolve the intermittency of renewable energy supplies.
Gender inequality and/or marginalization risk: Fragmented access to alternative power sources due to regional disparity as some regions may be more suitable for efficient generation of wind power.
Impact Risks
Actions to minimize the impact on the environment are not followed during the long-term operation
Negative impact on the forest and marine ecosystems, e.g. damage to roads, and environmental pollution., during construction.
Climate change can lead to changes in wind direction and wind speed that reduce wind power generation efficiency, significantly.
Gender inequality and/or marginalization risk: Some remote areas will continue to face electricity shortages, leading to regional disparities.
Impact Classification
What
Meeting energy needs, creating jobs and reducing greenhouse gas emissions
Risk
There may be negative impacts on the environment and ecosystems if construction and operation are not appropriate.
Contribution
As of October 31, 2021, 84 wind power plants with a capacity of ~4,980 MW are currently operating, while 62 projects with a total capacity of over 3,479 MW are under construction. (36)
Impact Thesis
Wind power projects provide jobs and contribute to securing electricity whilst reducing greenhouse gas emissions.
Enabling Environment
Policy Environment
GoV, 55-NQ/TW: provides orientation for the development strategy of Vietnam energy to 2030, vision for 2045; Prioritize the development of renewable energy at reasonable prices and with conditions that the system safety is ensured; Encourages the development of rooftop and on-water solar power (28)
National Power Planning No 8: This is being finalized. It is proposed that renewable energy (including small hydro, wind, solar, and biomass) will account for 25% and 42% of the country's total power capacity by 2030 and 2045 respectively (7, 10)
Green Growth Strategy: covers various strategic points for green growth, including the increasing of renewable energy and efficient use of energy (29)
Financial Environment
GoV, Decision 39/2018/QĐ - TTg: provides regulations on incentive mechanisms for wind power development in Vietnam. The electricity buyer is responsible for purchasing all electricity produced from grid-connected solar power projects. The contract term is 20 years (27)
Vietnam State Bank, Decision: 1552/QĐ-NHNN: Capacity building for banks to carry out green credit, develop solutions to promote banking products for green credit, supporting businesses to implement green growth (35)
Vietnam Environment Protection Fund has a preferential loan program for renewable energy projects with up to 80% of the total investment capital of the project, with an interest rate of 2.6-3.6%/year and a maximum term of 10 years (34)
Regulatory Environment
Law on Environmental Protection 2020: Producers and importers of solar equipment will be responsible for recycling; They will have to either organize the recycling or pay a premium to the Vietnam Environmental Protection Fund. (30)
GoV, Circular 32/2012/TT-BCT: Regulations on the implementation of wind power project development and promulgation of Model Power Purchase Agreement for wind power projects in Vietnam (39)
The private sector is being proposed to invest in transmission lines to connect their plants and other projects in the same area to the main grid (32).
Piloting: Direct power purchase agreement (DPPA) is being proposed to allow energy producers to sell and deliver electricity to corporate consumers instead of going through a state-owned electric utility company. (33)
The MoIT is developing a bidding mechanism to support the development of renewable energy (31)
Marketplace Participants
Private Sector
84 wind power projects are in operation. The large capacity plants include Bac Lieu (99 MW) Bac Lieu Province), Phong Dien Trung Nam (150 MW) (Ning Thuan province), Ea Nam (399 MW) (Dak Lak province), Ia Pet Dak Doa 1 (99 MW) (Gia Lai) (35)
Government
Ministry of Commerce and Trade, Municipal governments, Ministry of Resource and Environment, Ministry of Construction.
Multilaterals
European Union (EU), United Nations Development Programme (UNDP), Asian Development Bank (ADB), World Bank (WB).
Non-Profit
Vietnam Energy Association, Vietnam Wind Power Association (VNWPA), Vietnam Clean Energy Association, Vietnam Environment Industry Association (VEIA), Deutsche Gesellschaft für Internationale Zusammenarbeit GmbH (GIZ)
Target Locations
Vietnam: Countrywide
References
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