Vietnam Offshore Wind Power Sparks Foreign Investment

Japanese and European corporations are making major moves into the offshore wind power in Vietnam, taking advantage of the developing country's renewable power push.

Strong winds off Vietnam's southern coast make it one of the best places in the region to investigate offshore wind power. The country's commitment to fully decarbonize by the middle of the century, combined with an urgent power generation deficit, makes now an appealing time to invest in renewable energy infrastructure.

In September, Sumitomo Corp. of Japan announced the development of an offshore wind power generation project. This was followed by a survey in December to study cable-laying routes. By 2030, the company intends to start operating a wind farm with a capacity of 500 megawatts to 1 gigatonne.

If the initial plans go as planned, the company hopes to develop additional projects, including in the country's north.

Sumitomo has developed offshore wind farms in Europe, including Belgium and the United Kingdom. Based on the investment ratio, the output of the European plants is approximately 310 MW. When future projects are factored in, that figure is expected to rise to around 600 MW.

To advance projects in Vietnam, the company is considering forming alliances with local businesses.

Sumitomo isn't the only Japanese company eyeing the offshore wind power market in Japan.

Renova, a renewable energy company, has established a development base in Vietnam. It signed an agreement in April to develop offshore wind power with PetroVietnam Group, the country's largest state-owned oil company, with plans to build a 2 GW power plant in the future.

The Firm is involved in renewable energy projects in other countries such as South Korea and the Philippines, but it has dedicated the largest number of personnel in Vietnam. Renova has labeled the country as "one of the most important" for renewable energy development, according to Kei Saiki, co-head of the global business division.

Among European companies, Denmark's Orsted, the world's largest offshore wind power company, is leading the way. The company began looking into a project in 2020, signing a memorandum of understanding the next year with Vietnamese conglomerate T&T Group to develop a power plant.

T&T Group has already been expanding into renewable energy, with solar and onshore wind power plants generating 1 GW.

Orsted will incorporate T&T Group's know-how on renewable energy to further develop its projects. The company has already started initiatives such as workshops that bring together parts manufacturers and other local suppliers. It plans to jointly begin operations with T&T at a power plant with a total output of 2 GW in 2030.

Vietnam's favorable winds are a main draw. According to a map published by the World Bank Group and others, there are areas off the southern coast of Vietnam where winds can exceed 10 meters per second.

Offshore wind power is generally considered viable for development at a speed of about 8 meters per second. In Southeast Asia, winds this strong blow in Vietnam and the Philippines, while winds around Malaysia and Indonesia are generally weaker.

Vietnam is seen as "one of the best places in Asia for offshore wind power," according to Sebastian Hald Buhl of Orsted.

With a population of approximately 100 million, Vietnam is experiencing rapid economic growth and an increasing concentration of foreign manufacturers. At the same time, the power generation infrastructure is not keeping up with development, which could lead to chronic power shortages in the near future. During a July heat wave last year, large-scale blackouts occurred in the areas surrounding the capital, Hanoi.

At the COP26 U.N. climate summit in Glasgow in 2021, Vietnamese Prime Minister Pham Minh Chinh announced plans to achieve net zero emissions by 2050. In the medium to long term, it will be necessary to secure energy sources to replace coal, which accounts for about 50% of all power generation in the country.

Against this backdrop, offshore wind is expected to play a major part in the government's power generation plans. Wind power accounts for about 5% of the country's energy on a power generation capacity basis, but the government plans to raise this to about 30% by 2050.

Wind power in Vietnam is currently dominated by onshore plants operated by local companies. Since the expansion of offshore wind power generation requires both technological and financial strength, the Vietnamese government has high hopes for the active participation of foreign companies.

Offshore wind power in Vietnam currently consists of many small-scale power plants in coastal areas. To conduct a full-scale offshore survey, it is necessary to apply for development rights and obtain permission to occupy the sea area. However, the approval of permits is delayed at the moment.

"There is a lot of interest in offshore wind power, but we will carefully consider whether to actually invest in it," said a trading company representative in Vietnam.