Germany’s development agency GIZ has praised the Vietnamese government’s decision to increase the feed-in tariff (FIT) for wind power as the country seeks to tap its huge renewable energy potential to accommodate economic growth. On September 10, Prime Minister Nguyen Xuan Phuc approved the amendment and revision of the wind tariff defined as per Decision No. 37/2011/QD-TTg on the support mechanism for the development of wind power projects in Viet Nam. Under the revision, the FIT will be increased from 7.8 to 8.5 US cents/kWh for onshore and 9.8 US cents/kWh for offshore wind power projects.

GIZ said it and the Ministry of Industry and Trade (MoIT) worked within the Vietnamese-German bilateral cooperation to develop the wind power sector, including the above-mentioned revision of the tariff. GIZ has provided advice to the MoIT on legal and regulatory framework conditions, implemented technical and financial trainings for the public and private sector and supported Vietnamese-German research cooperation on wind energy.

GIZ considers the adjustment a significant and especially important signal for all market actors to further invest into for the wind power market in Vietnam, which currently only accounts for 200 MW of installed capacity (and 100 MW under construction).

‘Due to Vietnam’s constant growing need for energy and its excellent wind power resources, many developers have eyed the market for quite some time. However, the correspondent tariff published in 2011 and further project risks within the development process have slowed down the projects due to the commercial risks perceived by investors and financing entities.

Now, with the clear signal from the Vietnamese Government to increase the tariff, we expect many projects to push through and get actually implemented,” said Tobias Cossen, project director of the ‘Support to the Up-Scaling of Wind Power in Viet Nam’ project under the GIZ Energy Support Program.

Within GIZ’s activities for the development of the legal framework, a re-calculation of the previous tariff was conducted, wind investment guideline and guidelines for environmental and social impact assessments of wind power projects developed, and a review of the national wind power development plan, including long-term wind measurements, was implemented.

“The revised tariff will give investors and financial institutions who are providing the long-term debt capital the security they need. At the same time, the tariff is still lower than in any other Southeast Asian wind market,” said Cossen.

According to a study by the Danish Energy Agency, the technical potential of wind power in Vietnam is huge, about 27 gigawatts, and able to replace a large share of future planned thermal (coal and gas) generation.

Even if renewable energies such as wind but also solar energy are intermittent, Vietnam’s power system is still able to include large shares and – with further expansion, adaptation and upgrading of the grid network towards “smart grids” – integrate even higher shares of renewable energy, in accordance with the political targets of the Power Development Plan (e.g. 6,000 MW wind and 12,000 MW solar by 2030).

The government last year raised its buying price from 7.8 to 9.35 U.S. cents/kWh, while offering investors tax breaks and cutting land use fees.

Vietnam is aiming to produce 10.7% of its total electricity through renewable energy by 2030, mainly through solar and wind energy, up from the 6% as previously planned.