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Vietnam’s Wind Power Sector Update
~ 189.2 MW installed
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GIZ ESP to Wind Power Promotion in Vietnam
Expected outcomes
Approach Overview of auctions’ benefits
International and risks on the Wind power
Mission expertise sector development
Assist the Vietnamese (international Consideration on suitable
Partners Government in consultants +
application of Auction
Lead: MOIT – EREA promoting the lesson learnt)
deployment of RE mechanism to Vietnamese
Local
Implement: generally and of Wind wind power context
participatory
MOIT/GIZ Support Energy particularly assessment Requirements and proposed
to the Up-Scaling of through an assessment of (interviews +
the potential of roadmap for a successful
Wind Power Project consultation
auctioning as an support implementation of an auction
workshop)
policy for Vietnamese mechanism for Wind power in
wind power projects Vietnam
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Objectives of the Consultation Workshop
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Thank you!
Tobias Cossen
Head of “Support to the Up-
Scaling of Wind Power” Project
MOIT/GIZ Energy Support Programme
tobias.cossen@giz.de
Projects proposals are ordered according the price offered until the
auctioned volume is reached
6. Actor diversity
1. Control of RE deployment Better control under auction Controlling the deployment of wind
and planning energy is currently not a primary
objective in Vietnam.
2. Low cost procurement of Lower cost under auctions Excessively high feed-in tariffs do not
electricity exist in the case of wind energy in
Vietnam.
3. Low risk for investors Lower risk under FITs Risk reduction is crucial in emerging
markets like Vietnam (FIT as
appropriate mechanism).
4. Low administrative Lower complexity under FITs Higher administrative complexity and
complexity and costs costs need preparation (training of
staff and employment of new staff).
6. Actor diversity More diversity under FITs Not a primary policy objective in
Vietnam and therefore less relevant.
Motivation:
Many countries around the world have implemented auction in the recent
years
Objective:
Assist the Vietnamese Government in promoting wind power deployment,
assessing the implementation of auctions in the Vietnamese context
Local
Regulator Project
Developers
INPUT TO
REPORT
World
EVN
Bank
Provincial
Local Bank
Authorities
Fast deployment: Large number of project Higher risk for project developer (especially
developers in less mature markets)
Lower auction results since costs are partially High burden for administration (staff and budget
covered during site-preparation process required to pre-develop sites)
Advantageous in case that land is already owned Already privately developed sites can no longer
by the State be used
A high level of competition Due to several reasons, the wind power market in Vietnam is still dominated by a limited
number of actors. There is still limited interest from international investors, partially
because of the limited creditworthiness of EVN and the difficulty to make projects
bankable. A higher level of competition in Vietnam would lead to lower prices in
future auction rounds.
A mature market and In Vietnam, several wind project developers have stated that there are still no
policy framework standardised and streamlined processes when it comes to wind power development. It is
therefore highly recommended to streamline all administrative process (including
clear grid connection procedures) in Vietnam before the introduction of an auction-
based mechanism.
Clarity about long-term Vietnam has taken a first important step by defining wind energy deployment targets
market development until the year 2030. However, longer term targets up to 2050 would give an even
clearer sign to the international wind energy community and might also enable
Vietnam to harness socio-economic benefits
Grid planning Close collaboration of MOIT and the grid operators for the introduction of an
auction system and the required grid capacity
Virtual saturation Application of a milestone approach to identify genuine projects and adapt grid
planning to real conditions
of power
development plan
MoIT/GIZ Energy Support Programme 55
Central Action Complexes for Reducing the Cost of Wind
Power in Vietnam
(a) including short term measures such as Escrow account arrangements to cover
payment risk, more transparency in EVNs accounting, etc.
Evaluation is state warranty for the EVN PPA could be provided or alternatively
guarantees from international donors
Adjustment of PPA Indexing PPA payments to future inflation, e.g. consumer price index or CPI
Preparation period
Steps Estimated implementing time
Streamlining of administrative This is a longer-term process (approximately 3 years) and
procedures should be started as soon as possible. It can run in parallel to
addition steps of the preparation phase.
Establishment of auction At least 1 year is required to first identify and establish the
agency and training of authorized agency then train its personnel.
personnel
Transition period
Steps Estimated implementing time
Adjustment of FIT policy It is applied for projects approved to be developed in the end
of the existing FITs but need time to develop/ construct before
the auctions applied.
Transition period
Steps Estimated implementing time
Adjustment of FIT policy It is applied for projects approved to be developed in the end
of the existing FITs but need time to develop/ construct before
the auctions applied.
Grid extension to the Grid expansion can take place in parallel to on-site wind
measurements and might take 1 year or longer.
selected plot of land
Transition period
Steps Estimated implementing time
Preparation of detailed Determination of all design features
auction design (including Publication of White Paper and consultation with Industry.
Preparing the detailed auction design and reaching agreement
white paper) between all involved agencies and ministries can take 1 year.
The transition should reflect the time period required for project
development (avoid stranded costs for project developers that have
already started to develop a wind project )
during the transition period, the old FIT program will no longer be
available for “new” projects
Pricing Methodology
Pay-as-Bid:
bidders obtain their actual bidding price
Minimize costs
Take resource variations into account
Uniform pricing:
price of the last bid accepted that was set
out by the auction agency so as to reach
the targeted capacity – called the
‘’clearing price’’ – defined the price for all
winning bidders
Avoid “winner’s curse”
Auction format
Sealed Bid
Simple design – ceiling price?
Each bidder writes down a single bid which is not disclosed to other
bidders and the most competitive bidders win (“pay as bid”).
Descending Clock
Multi-round bid
Auctioner starts with a high price and then calls out successively lower
prices until quantity offered and quantity required match!
First round
Bidder 1
Second round
Bidder 2
Bidder 3
Third round
GWh
0 2 4 6 8 10 12
MoIT/GIZ Energy Support Programme 73
Core Auction Design Features
Auction Product
Pre-qualifications
Permits
Price only
Lowest bids/prices
Primary objective of auctions
Multi-criteria
Additional selection criteria usually reflect additional policy objectives:
Job creation
Local content
Locational incentives
Etc.
Evaluation Process