Difficult problems for offshore wind power investors

Trường Lăng

August 1, 2022


Difficult problems for offshore wind power investors

Trường Lăng

August 1, 2022

Powerful brands in renewable energy such as Copenhagen Infrastructure Partners, Orsted have in turn raised problems and contributed ideas to amend regulations on the order and procedures for assigning sea areas to organizations or individuals conducting wind measurement and surveys for offshore wind power.

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According to Mr. Stuart Livesey, general director of La Gan Wind Power Development Corporation, country director of Copenhagen Offshore Partners (COP) in Vietnam, the first notable issue in offshore wind power survey is limiting overlap.

Specifically, the draft amendment to Decree 11 (on assignment of certain sea areas to organizations and individuals for exploitation and use marine resources, including both domestic and foreign organizations and individuals conducting wind measurement, geological and topographic surveys at sea) is expected to be submitted to the Government in September 2022, potentially allowing multiple project developers to jointly conduct offshore wind power surveys on the same sea area.

The Ministry of Natural Resources and Environment has assigned the Administration of Seas and Islands of Vietnam to handle 35 offshore wind power survey proposals for the preparation of feasibility study reports for offshore wind power projects, of which only 2 proposals have been approved. The Administration has advised the ministry to issue 7 decisions on assigning the sea areas to implement wind power projects, with a total area of more than 3,000 hectares.

Currently, there are many organizations and individuals having an urgent need to measure wind, conduct geological and topographic surveys at sea. Decree 11/2021/ND-CP provides for assignment of certain sea areas to organizations and individuals for exploitation and use marine resources, including both domestic and foreign organizations and individuals conducting wind measurement, geological and topographic surveys at sea.

However, this Decree does not prescribe the order and procedures for implementation. This content will be supplemented in the process of amending and supplementing Decree 40/2016/ND-CP of the Government detailing the implementation of a number of articles of the Law on sea and islands resources and environment; Decree 11/2021/ND-CP (expected to be submitted to the Government in September 2022).

However, according to international experience, most governments that have developed the offshore wind industry will only allow one investor to conduct offshore wind power surveys for a specific period of time. This is to ensure long-term and serious commitments from capable project investors.

The COP representative acknowledged that the official dispatches proposing to include offshore wind power projects in the Power Development Plan 8 (PDP 8) of the Provincial People’s Committee should be considered as a component of the application for approval to conduct offshore wind power surveys. The support from the provincial government shows the ability and commitment of investors.

The concern of La Gan project investors also comes from the possibility that the draft decree may introduce regulations on reporting and sharing survey data. The company from Denmark said that survey data should be treated as a business secret and should only be shared at an appropriate time during project development. Also, survey data needs to be shared with third parties (such as contractors or subcontractors) for processing and analysis for project implementation.

According to Mr. Stuart Livesey, the sharing of survey data with the authorities will take place after the project and the enterprise have been granted investment certificates. From here, the competent authorities have the duty to keep the above survey data confidential. In particular, enterprises believe that the draft should not require approval from the authorities in the case of sharing data with third parties for project implementation and development.

La Gan Wind Power Development Corporation is the developer of La Gan offshore wind farm project with a capacity of 3.5 GW, owned by Copenhagen Infrastructure Partners (CIP), Asiapetro and Novasia. CIP aims to invest US$110 billion in renewable energy by 2030.

La Gan offshore wind power project in Binh Thuan province is one of the first large-scale offshore wind power projects in the country developed by Copenhagen Infrastructure Partners (CIP) and managed by offshore wind specialist Copenhagen Offshore Partners (COP). With a potential capacity of 3.5 GW, the project recorded a total investment of about US$10.5 billion. In addition, CIP aims to invest 4-12GW in other offshore wind power projects in the South Central and North (with a total capital of about US$40 billion).

Concerns and solutions to overcome difficulties in the process of survey licensing, marine area assignment and project approval were also recorded from Orsted Vietnam recently.

According to Mr. Sebastian Hald Buhl, Country Director of Orsted Corporation in Vietnam, avoiding overlapping project survey areas and issuing permits early are essential for Vietnam to achieve offshore wind development targets by 2030.

Specifically, with the current application for development of more than 150 GW of offshore wind power capacity, licensing for exclusive project area surveys plays a very important role to avoid overlapping and give clear signals to investors. At the same time, the large number of projects applying for development helps to ensure competitiveness among different regions.

Orsted’s representative emphasized that the People’s Committees of the provinces should be involved in the approval process. In which, the letter of approval for the investor to develop the project issued by the People’s Committee of the province/city should be a prequalification criterion. The approval of the People’s Committee also follows Vietnam’s current energy project development process. The localities have the role of initial selection and are very effective in avoiding overlapping surveys in the same area.

The timely development of offshore wind power plays a very active role in supporting Vietnam’s energy industry. In which, according to the Ministry of Industry and Trade, offshore wind power in the North needs to be connected to the National grid by 2027 to help reduce the risk of power outages.

Pre-qualification criteria ensure the completion of the project and optimal use of Vietnam’s marine resources. If criteria, such as technical capacity, financial capacity, proven portfolio, are not included in the survey permit allocation process, it can lead to developers snatching the opportunity to resell the assigned sea area at high prices to serious investors, failed projects due to incompetent selected developers, and, finally, increasing costs of offshore wind power in Vietnam as the development of low-cost high-quality sites is hindered.

In addition, in Vietnam, the authorities need to add the criterion that the project has a written approval to make additional documents for the electricity planning.

Sharing with TheLEADER, an offshore wind project development manager said that if Vietnam wants to achieve the target of 7 GW offshore wind power by 2030, the legal framework needed to achieve this goal should be enacted within the next year.

He analyzed that offshore wind farms are large infrastructure projects with a long development time (from 7-10 years). In which, the entire offshore survey period is 3 years. After that, the design, manufacture and installation takes about 4 to 5 years (under the condition of having a stable and clear mechanism). Referring to the above formula, a survey permit is required this year in order for the project to be in time for commercial operation date (COD) in 2029 or 2030.

The cost for preliminary survey or exploratory survey (before conducting detailed technical survey for construction) is about US$10-15 million. Without exclusive assignment and immediate sharing of data, no investor would do the work because it is too risky. International experience is that the survey permit is granted exclusively and separately from the assignment of sea areas for construction.

After being selected as project investors or completing the commercial operation date (COD), enterprises will share the data with the State. Investors should be assured of the sole right to conduct an area survey before deciding to invest a great deal of resources in these activities.

In the context that there is currently an overlap between several investors in the same area, priority should be given to investors who have submitted a report from the Provincial People’s Committee on adding projects to PDP8. This shows the serious and methodical compliance of investors and especially shows the role of province in the preliminary selection and evaluation of investors and project connection infrastructure.

3 principles in sea area assignment have been successfully applied in the world

First, it is necessary to issue a survey permit early. Surveying the project area usually takes up to 3 years, while works such as detailed design and procurement can only be carried out after the survey is completed.

The second is to avoid overlap. The cost of developing a 1 GW offshore wind power project costs about US$150 million. Investors are often hesitant to invest such a large amount of money if they are not given exclusive survey rights to the project area. Allowing multiple parties to jointly conduct surveys in the same area would risk doubling the already expensive cost of surveying.

Third, the survey permit should be separated from the project development approval. Separation will allow investors to learn and perfect their projects in stages and better prepare for future project selection rounds, thereby building a good project portfolio and increasing competitiveness in the market.

Markets that apply this approach include UK, US, Korea, Taiwan.

Souce : The Leader

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