Offshore Wind Roadmap For Vietnam - WordPress

Client discretionOffshore wind roadmap for VietnamInterim report for consultationSubtitleWorld Bank GroupJuly 2020

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Offshore wind roadmap for Vietnam: Interim consultation reportBVG AssociatesBVG Associates is an independent renewable energy consultancy focusing on wind, wave and tidal, and energy systems. Ourclients choose us when they want to do new things, think in new ways and solve tough problems. Our expertise covers thebusiness, economics and technology of renewable energy generation systems. We are dedicated to helping our clientsestablish renewable energy generation as a major, responsible and cost-effective part of a sustainable global energy mix. Ourknowledge, hands-on experience and industry understanding enables us to deliver you excellence in guiding your business andtechnologies to meet market needs. BVG Associates was formed in 2006 at the start of the offshore wind industry. We have a global client base, including customers of all sizes in Europe, North America, South America, Asia and Australia. Our highly experienced team has an average of over 10 years’ experience in renewable energy. Most of our work is advising private clients investing in manufacturing, technology and renewable energy projects. We have also published many landmark reports on the future of the industry, cost of energy and supply chain.Disclaimer This document is intended for the sole use of the Client who has entered into a written agreement with BVG Associates Ltdor BVG Associates LLP (jointly referred to as “BVGA”). To the extent permitted by law, BVGA assumes no responsibilitywhether in contract, tort including without limitation negligence, or otherwise howsoever, to third parties (being personsother than the Client), and BVGA shall not be liable for any loss or damage whatsoever suffered by virtue of any act,omission or default (whether arising by negligence or otherwise) by BVGA or any of its employees, subcontractors oragents. A Circulation Classification permitting the Client to redistribute this document shall not thereby imply that BVGA hasany liability to any recipient other than the Client. This document is protected by copyright and may only be reproduced and circulated in accordance with the CirculationClassification and associated conditions stipulated in this document and/or in BVGA’s written agreement with the Client. Nopart of this document may be disclosed in any public offering memorandum, prospectus or stock exchange listing, circularor announcement without the express and prior written consent of BVGA. Except to the extent that checking or verification of information or data is expressly agreed within the written scope of itsservices, BVGA shall not be responsible in any way in connection with erroneous information or data provided to it by theClient or any third party, or for the effects of any such erroneous information or data whether or not contained or referred toin this document.The views expressed in this report are those of BVG Associates. The content of this report does not necessarily reflect theviews of The World Bank Group or the Government of Vietnam.Front cover image BVG Associates3

Executive SummaryAbout this roadmapThe report then provides a roadmap that outlines the broadrange of enabling actions that will need to be taken byGovernment to achieve either outcome.This report provides a vision for development of offshorewind in Vietnam, looking at both opportunities andchallenges under different growth scenarios.These recommendations are based on experience in othermarkets, engagement in Vietnam and on projections forregional developments in Asia's expanding offshore windsector.It was initiated under the WBG's Offshore WindDevelopment Program which aims to accelerate offshorewind development in emerging markets.The remainder of the report then provides the supportinganalysis and evidence behind each of the recommendedactions.The report is based on two potential scenarios for offshorewind development:At this interim stage, results are preliminary and areintended to form the basis of a consultation withgovernment, industry and other stakeholders. Low growth, with moderate expansion of offshore windwhere offshore wind supplies 5% of Vietnam'selectricity needs by 2035 High growth, with significant expansion of offshorewind where offshore wind supplies 12% of Vietnam'selectricity needs by 2035The report starts by describing a vision of the Vietnameseoffshore wind sector in 2035 under both scenarios: Where the projects are located What the cost and economic impact on consumers is Where the supply chain has developed as well asassociated infrastructure What the environmental and social impacts are, and How these projects are procured and financed.4

Offshore wind roadmap for Vietnam: Interim consultation reportKey findingsOffshore wind offers Vietnam a local, low cost, large scale,clean source of electricity and long-term jobs.Vietnam has a globally relevant offshore wind resource,located close to shore and population centers and inrelatively shallow water.The outcome of the two scenarios is summarized inFigure 1.Figure 1 Impact of offshore wind in Vietnam under low and high growth scenarios, period 2020 to 2035. 1The key difference is that the high growth scenario, doublethe growth results in more cost reduction and almost fourtimes as much local job and gross value added, with lessthan half the net cost to the consumer. This is because: The larger local market, with good visibility, enablesmore local supply chain investment and optimisatizion,leading to exports to the regional and global market. This creates 1.6 times as many local jobs per MWinstalled. With 2.3 times as many MW installed, overall 3.7 timesas many jobs are created and about the sameincrease in local gross value added (GVA). Also, 20% lower levelized cost of energy (LCOE) isachieved due mainly to: Capital expenditure (CAPEX) reduction fromincreased supply chain investment, optimizationand increased competition. Lower weighted average cost of capital (WACC)from the expectation of more foreign investmentand reduced risk.This leads to an earlier break-even with cost of generationfrom traditional technologies, a 60% lower cumulative netcost to consumers up to 2035, and a net benefit toconsumers from 2036, three years earlier than in the lowgrowth scenario.1All figures are cumulative over the period 2020 to 2035, unless stated. The fraction of electricity supply is discussed in Sections 3.2 and 4.2.Offshore wind capacity operating is discussed in Section 0. Electricity produced is discussed in Sections 3.3 and 4.3. Net cost to consumers isdiscussed in Sections 3.3, 4.3 and 7.1. Local jobs and GVA are discussed in Sections 3.4, 4.4 and 11. CO2 avoided is discussed in Section 7.1.5

Developing a high-volume market with good visibility is aneffective way to generate local economic benefit withouthaving to resort to problematic local content requirements.It also reduces the cost to consumers and creates a moresustainable, internationally competitive supply chain.RoadmapIn order to develop a successful offshore wind industry, wehighlight priority themes and a roadmap of recommendedactions for the Government of Vietnam to consider.Priority themes4. Create leasing and permitting authorities, a transparentpermitting process and clear ESIA procedures thatencourage early stakeholder engagement and adequatebaseline data collection5. Determine preferred approach to sea bed leasing andpower purchase6. Transition to a competitive system for offshore windleases and PPAs by 20267. Set out timetable for leasing competitions, and ensurecoordination across Government to deliver8. Revise the terms and conditions of the existing FIT tomake it bankable for offshore wind, offer it to 2025Project finance9. Establish a creditworthy PPA counterparty10. Encourage financial mechanisms to reduce cost ofcapitalTransmission and port infrastructure11. Mandate substantial transmission reinforcements12. Determine preferred approach to transmissioninvestment13. Consider offshore wind in the seaport masterplan andenable investment in port facilitiesSupply chain developmentFigure 2 Priority themes to create a successfuloffshore wind industry.Recommended actionsWe have created a list of 20 recommended actions thattogether address these priority themes.14. Prepare supply chain plan and local content guidance15. Enable education and investment in local supply chainbusinesses16. Undertake skills and training assessment17. Address barriers to inward investmentVision and volume targetsStandards and regulations1. Publish a vision for offshore wind to 205018. Create framework for environmental and social impactassessment for offshore wind2. Set annual offshore wind installation targets to 203019. Create health and safety framework for offshore windLeasing, permitting and power purchase20. Create framework of technical codes and regulation3. Establish development zones through marine spatialplanning

Offshore wind roadmap for Vietnam: Interim consultation reportContentsExecutive Summary . 4About this roadmap . 4Key findings . 5Roadmap . 61Introduction . 14Report structure . 142Two scenarios for offshore wind in Vietnam . 153Low growth scenario . 18Development areas. 18Electricity mix . 18Levelized cost of energy and net benefit to consumers . 18Supply chain and economic impact . 19Infrastructure. 20Environment & social impacts . 20Finance and procurement . 20Actions to deliver the low growth scenario . 21SWOT analysis for Vietnam in the low growth scenario . 214High growth scenario . 22Development areas. 22Electricity mix . 22Levelized cost of energy and net benefit to consumers . 22Supply chain and economic impact . 22Infrastructure. 23Environment & social impacts . 23Finance and procurement . 24Actions to deliver the high growth scenario . 24SWOT analysis for Vietnam in the low growth scenario . 245Roadmap for offshore wind in Vietnam: our recommendations . 26Vision and volume targets . 26Leasing, permitting and power purchase . 26Project finance . 27Transmission and port infrastructure . 27Supply chain development . 27Standards and regulations . 28Supporting information . 316Key ingredients for a successful offshore wind industry . 32Stable policies and pipeline visibility . 327