Brit blueprint carves open power potential

October 28, 2021 | 00:24
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The wind farms of the United Kingdom are providing around 10 per cent of the country’s power supply – a respectable figure that Vietnam could also achieve on the back of its natural advantages.
Vietnam is in the process of drafting its next national power development plan, Photo: Shutterstock
Vietnam is in the process of drafting its next national power development plan, Photo: Shutterstock

However, while the natural prerequisites are a given, several administrative issues need to be urgently resolved.

Reaching a higher share of renewables and particularly wind power requires a balance of interests between the power sector and various other stakeholders, such as organisations and government, argued Huub den Rooijen in February at a bilateral energy dialogue. Rooijen is the director of Energy, Minerals, and Facilities at Crown Estate – the real estate company that manages most of the seabed around the UK nations of England, Wales, and Northern Ireland. “The dialogue between the market players and the government, and the transparency of the power sector, are essential elements,” added Rooijen.

More UK investors are expressing active interest in cooperation and investment in renewable energy projects in Vietnam with great expectations for simple and long-term support mechanisms that simplify the licensing and approval process from the government. Particularly, Vietnam has great potential for offshore wind power due its vast coastline, which is receiving the attention of British investors.

Ian Hatton, president of Enterprize Energy Group, also realised that Vietnam needs its own support mechanism for offshore wind power development. He said that offshore wind power projects are large in scale, and the transmission points reduce the pressure on the grid, which would enable to control the system more easily.

In the draft Power Development Plan VIII (PDP8), offshore wind power is now included with about 2GW by 2030, which will increase to a higher level after that year.

According to the Electricity and Renewable Energy Authority (EREA) under the Ministry of Industry and Trade, there are already 157 offshore wind power projects with a capacity of more than 61,000MW proposed that could be added to the PDP8. Particularly in the south-central province of Binh Thuan, offshore wind power projects require additional planning, but could offer up to 22,000MW.

The Vietnamese government continues to prioritise the development of renewable energy projects with policies such as direct electricity purchase and competitive bidding mechanisms. Hoang Tien Dung, director of the EREA, hopes that the authority will continue to receive support from the British government, especially with regards to offshore wind power – an area in which the UK has had a lot of experience. He added that Vietnam learnt from many countries to develop renewable energies, such as by applying a fixed price model.

“Wind and solar power have developed too quickly in a short time, concentrated in the central and southern regions, making it impossible to build the power grid to release capacity. The high proportion of wind and solar power sources has caused many difficulties in the operation and economic regulation of the power system,” said Dung.

The EREA as of 2020 had 148 projects with a total capacity of 8,600MW. Meanwhile, rooftop solar has more than 105,000 installations, with a total installed capacity of over 9,730MWp. Although the policy has been in place since 2011, and was revised in 2019, there are only 11 wind power projects so far, with an installed capacity of only 511MW.

The UK is currently the world leader in renewable energy, especially wind power and biomass energy. About 30 years ago, the coal industry created a large number of jobs, but now the number of jobs in the renewable energy industry has surpassed that. The UK government has created an attractive environment for the development and trading of renewable energy sources, and continues to encourage further investment in this sector. In 2002, the UK introduced the renewables obligation (RO) mechanism, which requires electricity suppliers to contribute a mandatory percentage of renewable energy in total commercial electricity generation.

Developers that achieve this rate will be granted a certificate. If they do not, they have to pay a buy-out penalty of nearly $50 for every MWh short. This money is put into a buy-out fund and will annually be used to fund certified units.

The formation of an RO market makes renewable energy production more attractive for investment. Producers not only profit from the sale of conventional energy, but are also supported by a buy-out fund and can sell excess certificates. According to the revised white paper on RO published in 2007, the policy will remain in place until 2027.

The UK’s policies on renewable energy development are a valuable experience for countries around the world, especially for those fast industrialisation and high energy demand like Vietnam.

With its current conditions, however, Vietnam is not allowed to use RO mechanisms within its legislation. But in the future, the nation could also apply a similar mechanism to contribute to reducing the budget burden in supporting the development of renewable energy projects.

Meanwhile, Vietnam may also need to increase funding for renewable energy projects. Current funding sources for such projects mainly come from the Asian Development Bank, the World Bank, and the state budget.

By diversifying cooperation with renewable energy development funds, Vietnam could take advantage of capital and investors would need to use this effectively, otherwise it could become a huge debt burden.

The plan to develop the renewable energy sector is an important content in the country’s Resolution No.55-NQ/TW dated 2020 on the orientation of Vietnam’s national energy development strategy till 2030, with a vision towards 2045. The resolution’s overall goal is to ensure an adequate energy supply for socioeconomic development, in parallel with gradually increasing the proportion of clean energy use.

By Van Nguyen

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