The Vietnamese government recently approved an extension of the Feed-in Tariff (FIT) scheme for wind power in the country. However, the proposed dramatic reduction to the FIT risks seriously damaging the growth of Vietnam’s promising wind power sector, slowing down investment and the creation of new jobs and making it harder for Vietnam to meet growing energy demand.
The proposed new FIT rates will be 7.02 US cent/kWh for onshore wind and 8.47 US cent/kWh for intertidal/nearshore wind, and would apply to projects commissioned from November 2021 to December 2023. This represents a tariff decrease of more than 17 percent for onshore wind. Based on market forecasts and experience in other wind markets, a FIT reduction of this size would derail investment in new and planned wind projects in Vietnam. Developers already facing delays due to COVID-19, and the general challenges encountered in an early stage wind market would struggle to close financing, leading to a “bust” period that could reduce new wind installations by up to 80 per cent in 2023, and a further 25 per cent per year thereafter. GWEC estimates that the slowdown would result in around 4GW of total wind power installed capacity in Vietnam by 2025.