Covid-19 has extended its tendrils into every aspect of our lives.
One major effect on wind has been the impact on live events. If you haven’t yet booked to be at our virtual Financing Wind North America, do it now!
And the pandemic has also de-railed news ‘silly season’.
August is traditionally when the industry goes on holiday, press releases slow to a crawl, and journalists are forced to get creative. We haven’t seen that in 2020 because fewer people can go away, more journalists are furloughed, and the media is rightly focused on a global health crisis.
One of the biggest trends we've seen has been Vietnamese offshore wind.
Short answer: loads.
Copenhagen Infrastructure Partners last month announced it has agreed to develop the 3.5GW La Gan project off Binh Thuan province with Asiapetro and Novasia. CIP is investing in the project via its CI New Markets Fund I, which achieved a $1bn final close in late 2019, and is focused on unlocking deals in emerging markets.
Shortly after, Enterprize Energy revealed it has brought in Vietsovpetro and PVC MS to support development of the 3.4GW Thang Long offshore project, which is also set to be built off Binh Thuan.
Turbine makers have had a productive few weeks in Vietnam too.
Yesterday, Vestas revealed it has won an additional 50MW order from Phuong Anh Group at the second phase of the Hoa Binh 1 project.
This follows two announcements from Siemens Gamesa last month. EcoTech Tra Vinh Renewables JSC picked the Spanish-headquartered manufacturer to supply turbines for the 78MW Hiep Thanh nearshore wind project; and Power Engineering Consulting Joint Stock Company 2 selected it for the 75MW Tan Thuan nearshore project.
These deals show that momentum is picking up in the Vietnamese offshore wind sector, and Asia-Pacific more widely.
The Global Wind Energy Council this month reported that exponential growth in the region would help global offshore wind to surge from 29.1GW installed capacity at the end of 2019 to over 234GW by 2030; and said Vietnam was on the cusp of exponential growth.
It has the natural ingredients: good wind resources, favourable sea conditions, and a 3,260km coastline that means offshore wind would be near load centres.
When you add supportive government policies, strong growth in GDP, and growing power demand among its nearly-100million population then it’s no great surprise to see European players getting involved.
But success isn’t a foregone conclusion.
Big club mentality
One obstacle for attracting the capital needed to establish offshore wind in Vietnam may be its proximity to other emerging Asian offshore markets.
On one hand this builds the strength of the region.
The risk, though, is that Vietnam is seen as a side dish in these companies’ investment strategies rather than a main course. The GWEC analysis shows that most of the growth in offshore wind in Asia between 2020 and 2024 is due to come in China (19GW of projects set to complete) and Taiwan (3.6GW). Around 1.1GW is due in Vietnam over the same period.
Elise Do, director at Augusta & Co., tells us that investors see Vietnam as an opportunistic market, and the country will only attract the capital to realise its potential if investors see it as a core market in their growth plans.
She adds that Vietnam’s offshore wind industry is increasingly attracting overseas investors, who are looking to form partnerships with both local and international developers already operating in Vietnam.
There's a lot to interest newcomers.
In May, the Danish Energy Agency and Vietnamese Electricity & Renewable Energy Authority reported that the southeast Asian country has potential for up to 160GW of offshore wind. That will get firms to take notice.
And next month, the pair are due to make recommendations on how the government can remove permitting obstacles. That report is due to come out on 9th September. This will focus on regulatory obstacles, which include the fact that national utility Vietnam Electricity has a monopoly over the country's grid; that there are questions about the utility's creditworthiness; and that the feed-in tariff appears too restrictive.
This document from Linklaters contains some useful insights.
But these kinds of obstacles are a common feature of emerging offshore wind markets. Investors know that. Interest is already strong, and any solutions that can be found will add further impetus.