regulatory frameworks, market cultivation and outlook …€¦ · regulatory frameworks, market...
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Facilitator
Regulatory Frameworks, Market Cultivation
and Outlook for Wind Energy in Vietnam
Long Thang Nguyen,
Consultant
Up-Scaling of Wind Power in Vietnam
GIZ Energy Support Programme Vietnam
Facilitator
Long Nguyen | Renewable Energy Week 2015 | 15.10.2015 | Page 2
Content
GIZ activities in Vietnam
Current status and future prospects
Policy framework for wind energy market
Facilitator
Long Nguyen | Renewable Energy Week 2015 | 15.10.2015 | Page 3
GIZ activities in Vietnam Portfolio
DOING MORE in LESS
AREAS: Selectivity: 3 priority areas
Selected alignment to Viet Nam‘s
development priorities and goals
Central framework of reference is the
National Green Growth Strategy of
Viet Nam
Concentration on 1-2 strategic
regions in each sector
Strengthening of the policy dialogue
Embassy/VNM-Government
Integrated programs instead of
projects: Technical and financial
cooperation under one program
concept and set of goals
Integration of matters of social
inclusion, (political) participation and
partnership with private sectors into
the priority areas
GREEN GROWTH AS THE OVERARCHING FRAMEWORK GREEN GROWTH AS THE OVERARCHING FRAMEWORK
PRIORITY AREA Environmental Policy and
sustainable Use of
Natural Resources
PRIORITY AREA Environmental Policy and
sustainable Use of
Natural Resources
Biodiversity and Forest Biodiversity and Forest
Climate Change &
Coastal Ecosystemns
Climate Change &
Coastal Ecosystemns
Outside Priority Areas
The Macroeconomic Reforms/Green Growth programme
and other supplementary activities form a substantive and
structural bracket over the entire portfolio, generate
synergies, pursue common goals
Outside Priority Areas
The Macroeconomic Reforms/Green Growth programme
and other supplementary activities form a substantive and
structural bracket over the entire portfolio, generate
synergies, pursue common goals
PRIORITY AREA Energy
PRIORITY AREA Energy
Renewable Energy
Support Project
Renewable Energy
Support Project
Upscaling Wind
Energy in Viet Nam
Upscaling Wind
Energy in Viet Nam
Renewable Energy
and Energy Efficiency
Renewable Energy
and Energy Efficiency
PRIORITY AREA Vocational Training
PRIORITY AREA Vocational Training
Reform of
Technical and
Vocational
Education and
Training
Reform of
Technical and
Vocational
Education and
Training
Hai Phong
Polytechnic College
Bach Nghe
Hai Phong
Polytechnic College
Bach Nghe
Vocational training
for subway
operation staff
Vocational training
for subway
operation staff
Centre of
Excellence for
Green TVET
Centre of
Excellence for
Green TVET
Facilitator
Long Nguyen | Renewable Energy Week 2015 | 15.10.2015 | Page 4
Extension
GIZ activities in Vietnam Energy Projects
Ren
ewa
ble
En
erg
y
En
erg
y
Eff
icie
ncy
Smart Grids (BMZ/DKTI)
RE+EE (BMZ)
2009 2010 2016 2017 2018 2011 2012 2013 2014 2015
Wind I (BMUB)
Bioenergy I (BMUB/IKI) - RESP
Wind II (BMZ/DKTI)
Legend:
PDP (BMWi) business partnerships btw
German and Vietnamese companies
Preparation Project Idea Implementation
G 2 G
Negotiations
Facilitator
Long Nguyen | Renewable Energy Week 2015 | 15.10.2015 | Page 5
GIZ activities in Vietnam Support on Wind Power: Action Areas
Action Area 1:
Legal and Regulatory Frameworks
Policy advice
Feed-in tariff
Regulation, licensing
Strategic advice (local value creation)
Systems analysis
Technical standards, guidelines, e.g. ESIAs
Update wind data quality
…
Action Area 2:
Capacity Development
Capacity Needs Assessment
Support to local banks
Support to local project developers
Support to wind power association
Vocational training for wind
Short-term training courses
…
Action Area 3:
Technology Cooperation
Market information
Investment Guidelines
Support to private sector partnerships
Vietnamese German research cooperation
…
Facilitator
Long Nguyen | Renewable Energy Week 2015 | 15.10.2015 | Page 6
https://www.google.com/maps/d/u/0/viewer?mid=zKJFPJnc-KLQ.khKu-oq60D0w
GIZ activities in Vietnam GIZ/MOIT Wind Measurement Campaign
Project from 2012-2015
10 sites in 8 provinces
80 m mast
High quality sensors (IEC standards; 5 equipped with GSM connection)
•Windspeed (80m/60m/40m) [m/s]
•Weibull A-Parameter (80m/60m/40m)
•Weigbull k-Parameter (80m/60m/40m)
•Turbulence intensity (80m/60m/40m)
Climatological site characteristics:
•Temperature (14m) [°C]
•Air pressure (6m) [hPa]
•Relative humidity (14m) [%]
DATA published on World Bank Open Energy Data Platform
Facilitator
Long Nguyen | Renewable Energy Week 2015 | 15.10.2015 | Page 7
Policy framework for wind energy market
Socialist Republic of Vietnam: Country Overview
Population 2014: 92 million
GDP 2014: 184 billion USD (+5,98%)
Nominal income per capita 2014: 4,012 USD (PPP)
Source: IMF (2014), Auswärtiges Amt (2015)
Reunification 1975
Reformation (Đổi Mới) 1986
Joining the WTO 2007
Lower-middle-income country Since 2009
Source: Wikipedia
Facilitator
Long Nguyen | Renewable Energy Week 2015 | 15.10.2015 | Page 8
Policy framework for wind energy market
Electricity Production: Development and Outlook
-
20
40
60
80
100
120
140
1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011
En
erg
y P
rod
uct
ion
(T
Wh
)
Electricity production from oil sourcesElectricity production from natural gas sourcesElectricity production from coal sourcesElectricity production from hydroelectric sourcesElectricity production from renewable sources, excluding hydroelectric
Generation according draft revised PDP VII
2020: 258.8-278.9 TWh
2030: 515.7-632.1 TWh
Source: WB (2015); IEA (2015); GDE (2015)
Facilitator
Long Nguyen | Renewable Energy Week 2015 | 15.10.2015 | Page 9
Policy framework for wind energy market
Electricity Production and Generation Capacity 2014
2014: 145.5 TWh 2014: 34 GW
Source: EVN (2015); IoE (2015)
Facilitator
Long Nguyen | Renewable Energy Week 2015 | 15.10.2015 | Page 10
Policy framework for wind energy market
Power Development Plan: Draft Revised PDP VII
Source: GDE (2015)
* including SHP
**including storage hydropower
2020: 61 GW
2030: 116 GW
Installed Capacity
2014: 34 GW
Facilitator
Long Nguyen | Renewable Energy Week 2015 | 15.10.2015 | Page 11
Policy framework for wind energy market
Energy Policy and Regulatory Environment
MOIT Ministry of Industry and Trade
MOF Ministry of Finance
MPI Ministry of Planning and Investment
GDE General Directorate of Energy
ERAV Energy Regulatory Authority of Vietnam
EVN Electricity of Vietnam
G EVN owned Generation Companies
G – e Equitized Generation Companies (i.e. privatized or partly privatized)
IPP Independent Power Producer
NLDC National Load Dispatch Center
NPT National Power Transmission Corporation
DC Distribution Companies
C Consumer
State Management
Electric Flows
Power System Operation Interface
Gen
era
tio
n
DC
G G - e
IPP
MOIT
MOF
MPI
Other Ministries
GDE ERAV
C
Tra
nsp
ort
Sy
stem
Op
era
tio
n
Prime Minister
Facilitator
Long Nguyen | Renewable Energy Week 2015 | 15.10.2015 | Page 12
Policy framework for wind energy market
Electricity Consumer Prices
Average consumer price 2004-2015
No transparent reflection of the actual costs of the energy system EVN under financial pressure
Non-transparent decision processes
Even though prices almost doubled in the last 10 years:
Price increases are not substantial enough and reflect mostly inflationary adjustments
Realisation/implementation of a fully competitive electricity sector until 2025 unclear
Current average consumer price: 7.5 USCents/kWh
Facilitator
Long Nguyen | Renewable Energy Week 2015 | 15.10.2015 | Page 13
Policy framework for wind energy market
Wind Energy: Current Remuneration Scheme (I)
Duration of PPA: 20 Years
Feed-in-tariff
Decision 37/2011/QD-TTg (29.06.2011)
Feed-in-Tariff for Wind Power:
Tariff: 7,8 USCents/kWh
Currently under revision
6.8 USCents/kWh power purchase EVN
1.0 USCents/kWh Vietnam Environmental
Protection Fund
Facilitator
Long Nguyen | Renewable Energy Week 2015 | 15.10.2015 | Page 14
Policy framework for wind energy market Wind energy: Current Remuneration Scheme (II)
Additional Incentive Mechanisms for RE
Import tax
• Varying levels of import tax, depending on type of imported goods
• Exemption on goods forming fixed assets, which cannot be produced locally
Waiving of land use/lease fees
• Land is provided for free or lease fee is reduced as part of the licensing agreement
Corporate income Tax
• Years 1-4: tax exemption
• Years 5-13: 50% tax reduction
Higher depreciation rate
• For equipment of renewable energy power plants a 1.5 higher depreciation rate can be applied
Improved conditions for Public private partnership (PPP)
Project development
Operation and electricity production
Facilitator
Long Nguyen | Renewable Energy Week 2015 | 15.10.2015 | Page 15
Policy framework for wind energy market
FIT adjustment proposal
GIZ Wind FIT Study (2014)
Met
ho
do
log
y
Qualitative:
• Interviews
• Questionnaires
• Assessment of existing Framework
Quantitative:
• Wind data
• Pre-/feasibility studies
• International comparison
Req
uir
ed i
nv
estm
ent
and
ass
um
ed
inv
esto
r st
ruct
ure
1 GW by 2020:
• Ca. US$ 2.1 billion over next 5 years
At average debt level of 70%
• US$ 630m equity
• US$ 1.47b debt
Assumed investor types:
• Highly-subsidized
• Strategic
• Fully commercial
Bas
is f
or
anal
ysi
s
PDP Targets:
• 1 GW Wind Power by 2020
Assumptions based on P/FS questionnaires and international experience for:
• CapEx
• OpEx
• Capacity Factor
FIT calculation
All investor types must be targeted with one FIT
Assumed IRR:
• 10% (internat. experience)
Basis for calculations:
• LEC (levelized costs of electricity)
• Additional incentives like tax breaks etc.
Result:
10.4 US¢/kWh (o-s)
Tariff-funded
levy on the electricity
price for 1GW by 2020
less than 5VND/kWh
General recommendations:
•FIT payment system should be one-stop-shop (not FiT + VNEPF)
•Government guarantee for payments
•Better wind measurements and improved standards
•Enforce standard agreements (network connection and PPA)
Facilitator
Long Nguyen | Renewable Energy Week 2015 | 15.10.2015 | Page 16
Current status and future prospects
Wind Energy Potential in Vietnam
3,500 km long coastal line
Latest wind atlas from 2011 AWS Truepower (2011)
Source: AWS Truepower (2011)
Political targets (PDP VII)
• 2020: 1 GW 2030: 6.2 GW
• No offshore wind power has been studied/planned
Facilitator
Long Nguyen | Renewable Energy Week 2015 | 15.10.2015 | Page 17
Current status and future prospects
Draft revised PDP VII – planned RE extension
-
500
1.000
1.500
2.000
2.500
3.000
3.500
4.000
4.500
5.000
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
MW
Small hydropower
Wind
Solar
Biomass and others
Source: MOIT (2015)
Facilitator
Long Nguyen | Renewable Energy Week 2015| 15.10.2015 | Page 18
Current status and future prospects
Wind Energy Status Quo
87 MW in operation
• Tuy Phong/Binh Thuan wind farm 30 MW (20 x 1.5 MW Fuhrlaender)
• Bac Lieu wind farm 51.2 MW (32 x 1.6 MW GE)
• Phu Quy wind/diesel hybrid system 6 MW (3 x 2 MW Vestas)
In planning No reliable information
IoE (2014):
• 52 projects in planning
• cumulated rated power of 4,252 MW
• Feasibility questionable
Facilitator
Long Nguyen | Renewable Energy Week 2015 | 15.10.2015 | Page 19
Province Number of projects Capacity (MW)
Bình Đinh 3 112 Phú Yên 2 50 Ninh Thuan 13 1068 Bình Thuan 15 1182 Gia Lai 1 40.5 Lâm Đong 2 300 Bà Ria-Vũng Tàu 3 118 Tien Giang 1 100 Ben Tre 2 280 Trà Vinh 2 123 Sóc Trăng 5 480 Bac Liêu 1 99 Cà Mau 2 300 Total 52 4252
Current status and future prospects
Registered Wind Energy Projects according to IoE (2014)
Facilitator
Long Nguyen | Renewable Energy Week 2015 | 15.10.2015 | Page 20
Current status and future prospects
Wind Energy Projects according to EVN (2015)
Wind park Province Operator/Owner Turbines Capacity [MW] Output [GWh]
In operation
Tuy Phong Phase 1 Binh Thuan
Vietnam Renewable Energy Joint Stock Company
(REVN)
Fuhrländer 20 x 1,5 MW
Phase 1: 30 MW Phase 2: 120 MW
2012: 54,5 2013: 46,1
Phu Quy Binh Thuan Petro Vietnam Power Corporation
Vestas 3 x 2 MW
6 MW (+ 3 MW Diesel)
2012: 0,9 2013: 2,5
Bac Lieu Phase 1 Bac Lieu Cong Ly Ltd Company GE
10 x 1,6 MW 16 MW
2013: 15,9
Planning/ construction
Phuong Mai 1 Binh Dinh 12 x 2,5 MW 30 MW -
Phuong Mai 3 Binh Dinh 14 x 2,5 MW 35 MW
Bac Lieu Phase 2 Bac Lieu Cong Ly Ltd Company GE
55 x 1,6 MW 88 MW -
Trung Nam Ninh Thuan 14 x 2,5 MW 35 MW -
Facilitator
Long Nguyen | Renewable Energy Week 2015 | 15.10.2015 | Page 21
Current status and future prospects
Process overview for Wind Power Project Development
A pre-feasibility study, permission for wind
measurements
B Site approval, land use rights
C Site registration,
wind measurements
E Land clearance, site preparation
F Investment report
G Power purchase
agreement (SPPA) H Contract on grid
connection I Construction license, ownership certificate
J Electricity operation
license Electricity production
Site included in power plan
Site not included in power plan
D Feasibility study,
Investment license
Approval from Prime Minister necessary for projects
> 30 MW or
> 1,500 bn. VND (pre-)agreement on
grid connection
(pre-)agreement on power purchase
Facilitator
Long Nguyen | Renewable Energy Week 2015 | 15.10.2015 | Page 22
Investor named obstacles in Viet Nam’s wind power development*
Current status and future prospects Obstacles from Investor Perspective
Secrurities and reliability in
measuring the wind, 24%
Mechanisms to support wind power
prices, 20% Slow licensing
procedures, 18%
Overlapping land-use planning, 18%
Limitation of Consulting
capacities, 9%
Difficulties in funding, 7%
Lack of information on wind power planning, 4%
*17 feasibility studies, 10 questionnaires and various interviews
Facilitator
Long Nguyen | Renewable Energy Week 2015 | 15.10.2015 | Page 23
Current status and future prospects Opportunities & Threads for investors
Opportunities
Wind resources and political targets
Ambitious policy targets (PDP VII: 1GW/2020; 6,2 GW 20130)
Sustained significant growth in electricity demand
Private sector required to finance necessary capacity
No developed domestic wind industry
New investment law as of 1 July 2015
Fully competitive electricity market planned until (2025)
Increasing awareness for externalities of conventional power
Challenges
Complex political and regulatory environment
Off-taker risk
Low electricity price, low feed-in tariff
Local capacities in new sector
Complex (unestablished) procedures for investments
Limited capacity of the grid and other infrastructure problems
Access and quality of information and data (e.g. wind measurements)
Facilitator
Long Nguyen | Renewable Energy Week 2015 | 15.10.2015 | Page 24
Vietnam energy sector has and will continue to see rapid development
High technical (and economic!) potential for wind energy
Policy/regulatory framework under revision (FIT to be adjusted)
Conditions for FDI to improve (new investment law)
GIZ (and others) supporting the sector and all stakeholders interested
Wrap-up: Vietnam a dynamic,
challenging, yet promising market!
Facilitator
Long Nguyen | Development of Wind energy in Vietnam | 15.10.2015 | Page 25
Thank you for your attention