Offshore wind, among other renewable energy technologies, provides Vietnam with a scalable, domestic, clean, and economical electricity supply. Vietnam currently has 475 GW of fixed and floating offshore wind capacity. The wind market in Vietnam is at a crossroads. The potential ahead is to speed into a phase of rapid expansion in order to fulfil the country’s rising electricity demand, provide energy security, and deliver socio-economic advantages while gradually transitioning to clean sources of energy generation.

Vietnam holds a great potential in terms of offshore wind resource since it is close to demand centres and located in relatively shallow sea. Offshore wind has the potential to produce 12 per cent of the country’s electricity by 2035, allowing it to fulfil the increasing electricity demand in a sustainable manner. By replacing coal-fired and thermal electricity generation, offshore wind can reduce over 200 million metric tonnes of CO2 annually and add at least USD50 billion to its economy by offering an export market for wind energy.

Asian Development Bank evaluates the two possible growth scenarios for Vietnam’s offshore wind industry in their recent report “Offshore wind roadmap for Vietnam”. According to the report, under a high growth scenario, offshore wind generation costs could reach parity with fossil fuel generation costs sooner, have a 60 percent lower cumulative net cost to consumers and provide a net benefit to consumers from 2036—three years earlier than would be achieved under the low growth scenario.

Excerpts …

Vietnam has a globally relevant offshore wind resource located close to their shores and population centers and in relatively shallow water. It has an opportunity to use this resource to generate up to almost 30 percent of its electricity by 2050, with the industry continuing to develop beyond this. This report explores the impact of two different, possible growth scenarios chosen to cover realistic paths for Vietnam in the context of its future electricity needs, as discussed in Section 8. The two offshore wind growth scenarios represent:

  • Low growth: with moderate expansion of offshore wind and limited local industrialization
  • High growth: sufficient to drive realistic levels of competition, local supply chain investment, and market-specific innovation

Figure 2.1 shows the annual and cumulative installations for the two scenarios. Note that, although the scenarios appear to show smooth trends in Figure 2.1, actual annual installation rates can be expected to vary due to specific project sizes and timings. In the low growth scenario, the maximum annual installation rate is reached by 2036. In the high growth scenario, the maximum is reached earlier, in 2033, and is double the size.

 These growth scenarios can be compared with a ‘business-as-usual’ scenario. A business-as-usual scenario is characterized by limited long-term market visibility, lack of transparent and timely leasing and permitting processes, and lack of confidence in robustness of power purchase arrangements, typical of a country at the early stages of offshore wind development. In a business-as-usual scenario, the lack of marine spatial planning also increases the risk of poorly sited projects with high environmental and social impacts, reducing their bankability.

In such an environment, we anticipate that entrepreneurial local and international developers will continue to develop, finance, and construct a small number of conventional fixed offshore and nearshore projects. Development, investment, and power purchase risks will be high, and projects will be expensive. There will not be a visible pipeline of conventional, large offshore projects to support cost of energy reduction or local supply chain investment.

Types of offshore wind projects

In this report, we focus on two types of offshore wind projects:

  • Conventional fixed offshore. Projects typically in water depths of between 10 and 50 meters, using fixed foundations, installation methods, and very large turbines similar to those used in many projects in Europe and elsewhere in Asia. We anticipate that this will make up the bulk of the offshore wind market in Vietnam.
  • Projects in deeper water, typically > 50 meters, using floating foundations. Commercial scale projects are likely only to be installed toward the end of the 2020s, but potentially make up half of the newly installed capacity by 2050.

In addition, we also discuss nearshore wind projects qualitatively. We define nearshore projects as those sited within 5.5 km of the shore, where access may be directly from land. Foundations typically are concrete-capped piles or monopiles, and turbines used are onshore models, with minor changes to make them suited for use in the marine environment. Installation uses simpler barges suited for activities in calm, shallow waters. Such projects are considered as a hybrid between onshore and offshore wind. Vietnam has established an early pipeline of such projects, particularly around the Mekong Delta, south of Ho Chi Minh City. Wind development in these nearshore areas, however, has a high risk of significant adverse environmental and social effects for a number of reasons, including: the presence of globally threatened species in coastal areas; the proximity to protected or sensitive habitats; the potential impact on coastal sediment dynamics; and the potential impact on coastal communities, in particular on livelihoods of artisanal fishers.

Nearshore projects located in Key Biodiversity Areas, critical habitat, and sensitive natural habitats may be unlikely to meet the requirements of international lenders who typically adopt World Bank Group environmental and social (E&S) standards. This report therefore includes recommendations that seek to address risks associated with widespread development of nearshore projects. We anticipate that following completion of the initial pipeline of nearshore projects, most projects will be conventional fixed.

Low growth scenario

 The low growth scenario mostly comprises conventional, fixed offshore wind farms using monopile foundations. Under this scenario, by 2035, there will be 7 GW of conventional fixed projects, mainly using monopile foundations. In addition, there will be 3.3 GW of nearshore projects and 400 MW floating projects. Overall, conventional fixed and floating projects will cover < 3 percent of the potential development areas identified in Figure 3.1

 Electricity mix

 Figure 3.2 shows supply from offshore wind in the context of the demand for electricity in Vietnam over the period 2020–2050. In 2035, offshore wind will provide 5 percent of Vietnam’s electricity supply and projects will have cumulatively generated over 200 TWh of electricity since 2020. By 2050, offshore wind will generate 14 per cent of Vietnam’s electricity.

Levelized cost of energy and net benefit to customers

 The cost of energy of the first offshore wind projects will likely be high but is expected to fall quickly as the market develops, risks reduce, volumes increase, and a higher proportion of goods and services are sourced locally. This has been the experience in other offshore wind markets such as the United Kingdom and Taiwan, where initially high costs reduced as the market evolved. In the analysis for this roadmap, the estimated cost of energy for the first projects was predicted to exceed USD150/MWh. The assumptions behind this are reasonably conservative and include a lower capacity factor, limited use of local suppliers, and small project scale. Vietnam’s first offshore wind projects, however, may not have a cost of energy as high as the estimates presented here, and will depend on numerous influential factors.

Experience from other markets has shown that the cost of energy quickly reduces as more capacity is built out, with risks reducing and local capability increasing. In this scenario, the cost of energy of projects can be expected to reduce to around USD80–90/MWh by 2030 and USD60–70/MWh by 2035.

 The cumulative net cost to consumers by 2035 is USD4.8 billion; however, this is paid off by 2039. From then on, offshore wind provides a rapidly increasing net benefit to Vietnam’s consumers and economy.

The original report can be accessed here