A wind farm in Vietnam's Ben Tre province, consisting of seven wind turbine towers, has remained inactive for several months, symbolizing the bureaucratic red tape that’s hindering the development of green energy in the country.
The stalled project in the Mekong Delta region is one of around 60 delayed projects in Vietnam.
There are around 3.5 GW of turbines, with some of which built or sitting idle, and some are still under construction. That capacity is enough to power 4.4 million households in Vietnam, a rapidly developing economy that has become a manufacturing hub for companies such as Apple Inc. and Samsung Electronics Co.
Vietnam has the best wind resource in Southeast Asia, and its long coastline along the South China Sea provides significant potential for renewable energy investment. The country's surging energy consumption and the desire of multinationals with factories there to decarbonize make it an ideal location for renewable energy investment.
However, despite the potential, a government-led effort to build more wind farms has been hindered by the pandemic and an anti-corruption crackdown, which has led to a slowdown in decision-making and the completion of long-term power development plans. The lack of progress in the development of green energy has been a major disappointment for Vietnam's renewable energy industry.
“It’s a very confusing time for renewable energy development now,” said Hoang Giang, president of Pacifico Energy Vietnam, which invested $65 million in the Ben Tre wind farm. “All the wind projects like us are losing money and we are facing bankruptcy.”
At stake is not only Vietnam’s ability to attract investment into its energy sector and reach its goal of getting to net zero by 2050, but also whether it can maintain its standing as a good place for multinationals to set up factories.
“The risk from renewables is whether supply will be strong enough to support the expansion ambitions of foreign manufacturers,” said David Thoo, a power & renewables analyst at Fitch Solutions.
Vietnam's wind issue traces back to 2018, when the sector attracted massive interest as the government introduced a feed-in tariff system that agreed to buy power at high rates. However, developers had to complete their projects commercially before Nov. 1, 2021 to lock in those prices and sell power to the grid.
The resulting wave of investment delivered record wind turbine additions in 2021. But due to virus-driven supply-chain delays roughly the same amount of projects didn’t make the cut-off. The developers are now trying to negotiate pricing plans with state-owned Vietnam Electricity, but the rates being offered aren’t as good and it’s unclear how long discussions will take.
These delays have been further compounded by an anti-corruption crackdown that has made bureaucrats hesitant to make decisions that could implicate them.
Meanwhile, renewables companies are unable to get any investment certainty until Vietnam releases its long-awaited energy strategy through 2030, known as Power Development Plan 8. It isn’t expected to be approved this year and that could stall projects even further, according to Caroline Chua, an analyst at BloombergNEF.
The government is also dragging its feet on rules to allow companies to sign so-called direct power purchase agreements, which allow them to buy long-term supplies directly from a green energy project.
While the problems for renewables developers in Vietnam have a distinctly local flavor, they’re also part of bigger issues threatening to slow the energy transition around the world. Bottlenecks and red-tape are delaying wind and solar projects, while grids also need massive investment to cope with new and intermittent sources of energy that are often distant from demand centers.
“The problem right now is it’s almost impossible to get anything approved,” said John Rockhold, president of Pacific Rim Investment and Management, which develops energy projects in Vietnam. “Everyone is extremely cautious.”