As Access Asia Group noted in a report earlier this year, the Covid-19 pandemic has dampened growth expectations in the renewable energy sector, as it has growth in almost every business sector. But the good news is that while energy demand is down globally – by approximately 5% in 2020, according to the International Renewable Energy Agency (IRENA) – renewable energy rollout will continue to grow this year.
The International Energy Agency (IEA) recently noted in its World Energy Outlook that it is too soon to tell whether the pandemic will be a setback for renewables or a “catalyst that accelerates the pace of change” But the IEA report still found that production of renewable energy increased 18.6% globally in the first half of 2020, as growth in almost every business sector faltered. Moreover, this growth should be considered in the context of an estimated 5% decrease in global energy demand in 2020.
In Southeast and Northeast Asia – specifically Vietnam and Taiwan – wind power is emerging as a gold-rush renewable energy source. To be sure, at present, 90% of the world’s installed offshore wind capacity is in Europe, where government subsidies and feed-in tariffs nurtured renewable energy to maturity – and, as current trends are showing, independence.
Some commentators may still nod to United Nations Sustainable Development Goals (SDGs) and policy commitments to green energy sources. They have indeed been renewable-energy drivers in the rich world. But the current interest in renewables – and in particular offshore wind – is a result of reduced structural costs that are making it possible for zero-subsidy renewable energy infrastructure rollout worldwide.
A report by the Council of European Energy Regulators (CEER) and Bloomberg New Energy Finance notes that the levelized cost of energy (LCOE) is expected to fall from $171/MWh in 2017 to $50/MWh in 2040, while storage costs – in the form of batteries – are expected to drop from $273/kWh in 2017 to $73/kWh in 2030.
In other words, the ongoing energy revolution is as much driven by immediate and long-term costs savings as it is by sustainability and green policies. This phase of renewable energy rollout is likely to be driven more by market forces than it is by policy, and in the case of Vietnam and Taiwan this is already the case for wind power.
The first so-called tipping point – wind and solar becomes cheaper for the installation of new power infrastructure – has already been reached, while the second tipping – renewable energy sources become cheaper as replacements for existing energy sources – is expected to take place in the late 2020s.
To sum up with some business perspective, Bloomberg reported in October this year that
the NextEra Energy Inc., the world’s biggest provider of wind and solar energy, had overtaken oil giant Exxon Mobil Corp in value.
“People believe that renewable energy is a growth story and that oil and gas is a declining story,” said Jigar Shah, co-founder of the green financier Generate told Bloomberg.
Trade winds in Vietnam
Vietnam has some 3,000 kilometers (km) of coastline and the government’s Master Plan VII for power development has a designated target of 800MW of wind power by yearend 2020 and 6GW by 2030. Master Plan VIII, which is under development and will guide Vietnam’s energy policy through 2045, is likely to have a wind energy target of 8GW by 2025.
Vietnam’s total wind energy potential could be as high as 160GW, according to a report in May of this year. At present, most activity in the offshore wind energy sector is concentrated in southern coastal provinces of Vietnam, where meteorological conditions are most favorable (think windy) and where typhoons are relatively infrequent. Binh Thuan Province, for example, is a particular focus with some 10GW of offshore wind in development or deployed, while Ba Ria-Vung Tau Province has some 600MW under development.
In late June this year, the Vietnamese government formally approved 7 gigawatts (GW) worth of new wind projects to be built in the country, according to reports, putting it on track for a total wind power generation capacity of nearly 12 GW by 2025. That makes more than 90 planned onshore and offshore wind projects – most of them in the central and southern regions of Vietnam.
Other provinces that are seeing the arrival of wind power include Tra Vinh Province, south of Ho Chi Minh City, where Siemens Gamesa has a contract to provide wind turbines and operation and maintenance services at the Hiep Thanh wind farm, 3 km off the coast. In Dak Lak Province, German Enercon has a turbine-supply contract with Trungnam Group for the Ea Nam wind farm, which will have 400MW of capacity on completion in 2021.
In terms of Vietnam’s local economy, and in accordance with the government master plans noted above, private business groups that have, in the past, built their businesses on a myriad of diverse trading platforms such as construction materials and motorbikes before branching into real estate and finance, are leveraging their political clout to acquire renewable energy development licenses in the hope of cementing joint ventures with foreign renewable companies – many of them European at this point – so as to be able to implement ambitious projects.
To take one example, the Danish Energy Agency and the World Bank Group’s roadmap for offshore wind in Vietnam reportedly sees GW of offshore wind power could be operational in the country by 2030, calling for “a sound legal framework and a financeable power purchase agreement (PPA) are key to offset new market risks and help open the door to capital investment at the level needed to build a mature industry.”
Danish wind energy player Vestas, which supplies turbines and claims to be involved in around half of Vietnam’s offshore wind projects, notes that “costs for wind and solar dropped below those of coal in 2017, meaning renewables are now the cheapest form of new power generation on an … LCOE basis. While the average LCOE of coal is projected to remain at current levels through 2030, wind and solar LCOE will continue to decline as the technologies mature.”
Due diligence is required before entering into such partnerships, but even if some of them prove to be ill-advised due to associated risk, the push is nevertheless on and offshore wind will be a boom sector in Vietnam for years ahead.
To be sure, wind power projects possibly face a higher feed-in tariff after October 2021, but as Steffen Brauns, regional manager for Asia-Pacific at Enercon Sales International, recently told Recharge, a renewable energy online trade magazine, “Even after the added subsidies for wind energy run out in 2021, the favorable political framework conditions for renewable energy sources in general and for wind energy in particular can still be expected to continue.”
Enercon has received contracts for 90MW of turbines in Vietnam this year.
As the IEA noted in its Offshore Wind Outlook report for 2019, wind power is set to become a $1 trillion business by 2040, and Vietnam – with annualized energy demand growth of some 13% – will take the lead in that uptake in the ASEAN region.