Ausbau der Windenergie in Vietnam Up-Scaling of Wind Power in Vietnam

Ausbau der Windenergie in Vietnam Up-Scaling of Wind Power in Vietnam Peter Cattelaens, Technical Advisor GIZ Energy Support Programme Vietnam

Agenda Vietnam Energy Market Overview Development & Outlook Policy and Regulative Framework Consumer prices Wind Energy in Vietnam Wind potential Status quo & outlook Remuneration scheme Project development process Opportunities and barriers GIZ Support on Wind Energy in Vietnam Peter Cattelaens Ausbau der Windenergie in Vietnam 30.06.2015 Page 2

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) 1975 1986 2007 Since 2009 Reunification Đổi Mới Joining the WTO Lower-middle-income country Source: Wikipedia Source: IMF (2014), Auswärtiges Amt (2015) Peter Cattelaens Ausbau der Windenergie in Vietnam 30.06.2015 Page 4

Energy Production (TWh) Electricity Production Development and Outlook 140 120 100 Generation according draft revised PDP VII 80 60 2020: 258.8-278.9 TWh 40 20-1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 Electricity production from oil sources Electricity production from natural gas sources Electricity production from coal sources Electricity production from hydroelectric sources Electricity production from renewable sources, excluding hydroelectric 2030: 515.7-632.1 TWh Source: WB (2015); IEA (2015); GDE (2015) Peter Cattelaens Ausbau der Windenergie in Vietnam 30.06.2015 Page 7

Electricity Production and Generation Capacity 2014 Small Hydro; 3,40% Wind Power; 0,04% Other; 0,49% Import; 1,59% Oil; 2,68% Diesel; 0,21% Small Hydro; 5,63% Wind Power; 0,15% Bio-Energy; 0,45% CCGT; 30,89% Hydropower ; 37.62% Gas; 21,89% Hydropower; 40.04% Open Gas; 0,04% Diesel; 0,07% Coal fired; 25,86% Coal fired; 28,94% 2014: 145.5 TWh 2014: 34 GW Source: EVN (2015); IoE (2015) Peter Cattelaens Ausbau der Windenergie in Vietnam 30.06.2015 Page 8

Power Development Plan Draft Revised PDP VII RE*; 5,0% Gas/Oil ; 24,5% Import; 2,1% Hydro** ; 39,9% Gas/Oil; 14,8% RE*; 6,5% Import; 2,4% Hydro**; 29,1% Nuclear; RE*; 3,0% 10,2% Gas/Oil; 17,1% Import; 1,3% Hydro**; 17,9% Coal thermal ; 28,5% Coal thermal; 47,3% Coal thermal; 50,4% Installed Capacity 2014: 34 GW 2020: 61 GW 2030: 116 GW * including SHP **including storage hydropower Source: GDE (2015) Peter Cattelaens Ausbau der Windenergie in Vietnam 30.06.2015 Page 9

Electricity Consumer Prices Current average consumer price: 7.5 USCents/kWh 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 Source: GIZ Vietnam Peter Cattelaens Ausbau der Windenergie in Vietnam 30.06.2015 Page 11

Agenda Vietnam Energy Market Overview Development & Outlook Policy and Regulative Framework Consumer prices Wind Energy in Vietnam Wind potential Status quo & outlook Remuneration scheme Project development process Opportunities and challenges GIZ Support on Wind Energy in Vietnam Peter Cattelaens Ausbau der Windenergie in Vietnam 30.06.2015 Page 14

Wind Energy Potential in Vietnam 3,500 km long coastal line Latest wind atlas from 2011 AWS Truepower (2011) Best conditions in the centre and the south Wind speed > 6 m/s: 2,681 km 2 land Estimated potential: 24 GW Political targets (PDP VII) 2020: 1 GW 2030: 6.2 GW Source: AWS Truepower (2011) Peter Cattelaens Ausbau der Windenergie in Vietnam 30.06.2015 Page 15

Wind Energy Status Quo 52 MW in operation Tuy Phong/Binh Thuan wind farm 30 MW (20 x 1.5 MW Fuhrlaender) Bac Lieu wind farm 16 MW (10 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 Source: GIZ Vietnam Peter Cattelaens Ausbau der Windenergie in Vietnam 30.06.2015 Page 16

Wind Energy Current Remuneration Scheme (I) Feed-in-tariff Decision 37/2011/QD-TTg (29.06.2011) Feed-in-Tariff for Wind Power: Tariff: 7,8 USCents/kWh Duration of PPA: 20 Years 6.8 USCents/kWh power purchase EVN 1.0 USCents/kWh Vietnam Environmental Protection Fund Currently under revision Peter Cattelaens Ausbau der Windenergie in Vietnam 30.06.2015 Page 19

Wind energy Current Remuneration Scheme (II) Additional Incentive Mechanisms for RE Project development Operation and electricity production 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) Peter Cattelaens Ausbau der Windenergie in Vietnam 30.06.2015 Page 20

Process for Wind Power Project Development* A pre-feasibility study, permission for wind measurements * This figure only gives a general overview about the project development process. In practice this process can vary amongst provinces! Site not included in power plan Site included in power plan B Site approval, land use rights (pre-)agreement on power purchase (pre-)agreement on grid connection C D Site registration, wind measurements Feasibility study, Investment license Approval from Prime Minister necessary for projects > 30 MW or > 1,500 bn. VND E Land clearance, site preparation F Investment report G Power purchase agreement (SPPA) I Construction license, ownership certificate H Contract on grid connection J Electricity production license Electricity production Peter Cattelaens Ausbau der Windenergie in Vietnam 30.06.2015 Page 21

GIZ in Vietnam Portfolio PRIORITY AREA Vocational Training Reform of Technical and Vocational Education and Training Hai Phong Polytechnic College Bach Nghe Vocational training for subway operation staff Centre of Excellence for Green TVET GREEN GROWTH AS THE OVERARCHING FRAMEWORK PRIORITY AREA Environmental Policy and sustainable Use of Natural Resources Biodiversity and Forest Climate Change & Coastal Ecosystemns Outside Priority Areas PRIORITY AREA Energy Renewable Energy Support Project Upscaling Wind Energy in Viet Nam Renewable Energy and Energy Efficiency 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 Source: GIZ Vietnam 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 programmes instead of projects: Technical and financial cooperation under one programme concept and set of goals Integration of matters of social inclusion, (political) participation and partnership with private sectors into the priority areas Peter Cattelaens Ausbau der Windenergie in Vietnam 30.06.2015 Page 37

Renewable Energy Energy Efficiency GIZ in Vietnam Energy Projects G 2 G Negotiations Smart Grids (BMZ/DKTI) RE+EE (BMZ) Wind II (BMZ/DKTI) Wind I (BMUB) Bioenergy I (BMUB/IKI) - RESP PDP (BMWi) business partnerships btw German and Vietnamese companies Legend: 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Preparation Implementation Extension Project Idea Source: GIZ Vietnam Peter Cattelaens Ausbau der Windenergie in Vietnam 30.06.2015 Page 38

GIZ Support on Wind Power Action Areas Action Area 1: Legal and Regulatory Frameworks Action Area 2: Capacity Development Action Area 3: Technology Cooperation Policy advice Feed-in tariff Regulation, licensing Strategic advice (local value creation) Systems analysis Technical standards, guidelines, e.g. ESIAs Update wind data quality 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 Market information Investment Guidelines Support to private sector partnerships Vietnamese German research cooperation Peter Cattelaens Ausbau der Windenergie in Vietnam 30.06.2015 Page 39

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 https://www.google.com/maps/d/u/0/viewer?mid=zkjfpjnc-klq.khku-oq60d0w Peter Cattelaens Ausbau der Windenergie in Vietnam 30.06.2015 Page 40

Methodology Basis for analysis Required investment and assumed investor structure GIZ Support on Wind Power Adjustment FIT GIZ Wind FIT Study (2014) FIT calculation Result: Qualitative: Interviews Questionnaires Assessment of existing Framework Quantitative: Wind data Pre-/feasibility studies International comparison PDP Targets: 1 GW Wind Power by 2020 Assumptions based on P/FS questionnaires and international experience for: CapEx OpEx Capacity Factor 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: Highlysubsidized Strategic Fully commercial 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. 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) Peter Cattelaens Ausbau der Windenergie in Vietnam 30.06.2015 Page 41

Wrap-up: Vietnam a dynamic, challenging, yet promising market! 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 Peter Cattelaens Ausbau der Windenergie in Vietnam 30.06.2015 Page 42

Thank you for your attention Peter Cattelaens Technical Advisor GIZ Energy Support Programme Viet Nam peter.cattelaens@giz.de Source: GIZ Vietnam Peter Cattelaens Ausbau der Windenergie in Vietnam 30.06.2015 Page 43