Power Engineering Consulting Joint Stock Company 3 - The best solution for the best choice
Tuesday, 17/08/2021

Danish experiences in offshore wind auctions

The webinar series “International Experiences in Renewable Energy Auction” (IEREA2021) was successfully launched on August 17th, 2021 at 3 p.m. by PECC3 with the support of the Center For Procurement Support (CPS), Public Procurement Agency – Ministry of Planning and Investment.

IEREA-2021-1708-20

Mr. Tran Quoc Dien – Deputy General Director of PECC3 – delivered an welcoming remark, expressing his thankfulness to the Danish Embassy and Danish experts, as well as the representatives from ministries, agencies, associations and Vietnamese enterprises, for their participation.

IEREA-2021-1708-21

After Mr. Dien, Dr. Ta Dinh Thi – Director General of Vietnam Administration of Seas and Islands, Ministry of Natural Resources and Environment of Vietnam – delivered an opening speech, regarding the great national benefits from the well-developed offshore wind power, drawing huge attention from the government and stakeholders.

IEREA-2021-1708-22

Mr. Malte Möller-Christensen – Deputy Head of Mission, the Embassy of Denmark in Hanoi – briefly shared on Danish offshore wind power well-development and the importance of open dialogue with all stakeholders.

IEREA 2021-1708-25

After the opening remark are the presentations of the speakers.

Ms. Camilla Holbech – Energy Counsellor Offshore Wind, the Embassy of Denmark in Hanoi – gave a detailed presentation on the Danish auction design. She emphasized on de-risking strategy for the development of offshore wind projects. Denmark welcomed all the bidders and spent time on understanding them. Basically, Denmark has built a 5-step auction process with specific pre-qualifications, including technical and financial capacity. Preliminary studies on location, geology, environment, etc. are challenging for bidders. Besides, she expressed Denmark’s interest in sustainable development and risk allocation for stakeholders being affected by Covid-19 in the Vietnamese market. With 25 years of experience, Denmark has completed a clear and sustainable auction framework (to be clarified in the presentations).

IEREA-2021-1708-23

IEREA-2021-1708-06

In the next presentation, Mr. Michael Stephenson – Associate Director at The Renewables Consulting Group, shared his experience in international renewable energy consulting and overview of future offshore wind projects in Vietnam.

He introduced two types of auctions (one-stage or two-stage auctions for exclusivity or offtake) and three types of transition studies, as well as showed the difference between the old and new auction mechanisms. He also pointed out their lessons learned, especially how to leverage CfD auctions to categorize projects through a case study – 2GW project, in the UK. Moreover, he showed how Germany underwent a transition from a scheme where FiT was applied for the 5GW, without having to take on an overlap approach like that in the UK. Meanwhile, the Danish government benefited from the early adoption of the auction scheme without being affected by overlapping mechanisms. In Taiwan, while implementing a stepping stone transition, the government not only focused on price, but also on the feasibility of the project, technical and financial capability of investors.

IEREA-2021-1708-07

In the Netherland’s case, the FiT was utilised prior to stepping stone, then competitive auctions were gradually rolled out with some successful commercial strategies. In the last case study, France transitioned to auction without any prior support mechanism such as FiT, which posed a high risk for bidders. This was viewed as one of the reasons for stagnation of this mechanism in France. In summary, the key takeaway for Vietnam is to consider carrying out a sustainable transition as performed in Denmark, to avoid delays and arising problems. Otherwise, it would take plenty of time to complete the framework. Plus, he recommended Vietnam should only apply the stepping stone transition for 4-5GW.

IEREA-2021-1708-08

Following up, Mr. Sebastian Hald Buhl – Country Manager, Orsted Vietnam, introduced Orsted as a Danish majority-state owned energy utility, which has developed various large-scale projects in Denmark and the UK. Currently, 25% of global offshore wind is built by Orsted, including North America and Asia.

IEREA-2021-1708-09

The site selection will directly affect the cost for some following reasons: wind resources, seabed, water depth, project size and operation. Therefore, he recommended that the developers should still exercise significant influence over the final site selection. He also shared other information such as: Vietnam seabed lease fees (especially after Decree 11 dated February 10, 2021), which are very high while there is no such fee in Germany, Denmark and Japan and a case study of MSP in the North Sea, where there is a high density of overlapping shipping lanes. Here are some of Orsted’s recommendations for Vietnam: Immediate implementation, government’s role enhancement, suitable site selection, investors’ influence over project site, harmonious coexistence between wind projects and other economic activities. (Clarified in the presentation).

IEREA-2021-1708-10

Dr. Dinh Van Nguyen – Director of Industry Projects, MaREI National Centre for Energy, Climate and Marine; UCC, Ireland moderated the Panel discussion with interesting and practical questions.

IEREA-2021-1708-11

What is the prerequisite for designing the offshore wind auction mechanism in Denmark?

Ms. Camilla Holbech – Energy Counsellor Offshore Wind, the Embassy of Denmark in Hanoi: The secured involvement of the government in a long-term development strategy is very important, in which they have to thoroughly prepare the auction framework before adoption.

From the perspective of the National Border Committee, can you share your viewpoint on offshore wind development in Vietnam?

Mr. Nguyen Manh Dong – Vice Chairman, National Boundaries Commission, Ministry of Foreign Affairs of Vietnam: As a state agency, our main concern is the national border and sovereignty over the sea and islands.

Today’s session will contribute a lot of useful information for the ongoing process of building legal frameworks and relevant policies in this sector. Offshore wind sector in Vietnam, with the participation of foreign investors, will certainly serve the economy well. Vietnam has issued decrees on sustainable development with a vision to 2045. The Resolution 56 specifies that marine economic development should be accompanied by green and sustainable development. Offshore wind power is an industry that is following the direction of the country, as well as receiving a lot of attention from wind investors in Vietnam. Therefore, we also welcome the participation of foreign investors. According to our current calculations, the exploitation area is currently quite close to the coast, so we hope to have initiatives to push the exploitation of offshore wind power.

IEREA-2021-1708-12

How can the MSP process be developed in 1 year and implemented in line with international standards in 2-3 years?

Dr. Ta Dinh Thi – Director General of Vietnam Administration of Seas and Islands (VASI), Ministry of Natural Resources and Environment of Vietnam: Currently, the VASI is coordinating with other agencies to submit the National marine spatial planning and sustainable marine development plan to the government in 2021.

What is the legal basis for marine spatial planning? How can we accelerate this process through an interdisciplinary approach?

Ms. Lai Thi Van Anh – Deputy Director General of Department of International Law, Ministry of Justice: As Mr. Sebastian recommended, an integrated and cross-sector approach will be our priority. Legally, it is not difficult. However, when it comes to implementation, we may face some obstacles such as how to create a cooperation framework for relevant units and local authorities, as well as tourism, fishing and seafood industries. This would take a huge amount of time and require the assistance from experts, scientists, economists. Plus, it also necessitates government’s guidance, led by the Prime Minister, to create a coherent and unified process from the central to local levels.

IEREA-2021-1708-24

How can Denmark help Vietnam develop a marine spatial planning that meets international standards?

Ms. Camilla Holbech – Energy Counsellor Offshore Wind, the Embassy of Denmark in Hanoi: To answer this question, we need to know the Vietnam government’s priorities. We also suggest that Vietnam should establish a Steering Committee led by the Prime Minister. In general, it is important to set out a strategy that can gain support from the community. Plus, since Vietnam and Denmark share similarities in this sector, we can help.

Is there any local content requirement on installed capacity in Denmark? Normally, when should an auction start?

Mr. Michael Stephenson – Associate Director at The Renewables Consulting Group: I don’t have a specific number yet, but from my experience, the FiT scheme can be a bit higher. Taiwan has also utilised the FiT scheme to enhance localization, but it is not always the other way around as the most competitive bid wins. In Taiwan, their auction qualifications include other technical requirements than just price. Regarding local content, it depends on a specific region. For example, in a developed market such as Europe, the rate is much lower. On the other hand, due to the aim of local supply chain and ancilleries industry in Asia, the regulation of local content shouldn’t be too specific. A general number for the overall development is enough, I think.

Do you have any recommendations for Vietnam to both speed up the auction preparation process while maintaining the investors’ interest?

Mr. Keld Bennetsen – Vice President, Head of Business Development and New Markets at Copenhagen Offshore Partners (COP): We need to make sure the FiT scheme is attractive enough for investors before moving to the auction scheme. From our perspective, a set GW capacity would be a great start for the new adopters like Vietnam. The RE sector in Europe has been through a 10-year journey with government support, and if the Vietnam central and local government can identify a good project to pilot this scheme and attract investors, it would lay out a firm foundation for upcoming projects.

IEREA-2021-1708-14

How can we categorize RE projects (wind, solar, etc.) to ensure a fair competition?

Mr. Keld Bennetsen – Vice President, Head of Business Development and New Markets at Copenhagen Offshore Partners (COP): We can categorize these projects based on technology to reduce competition. In the UK, investors only participate in the auction if it is a RE project which is deemed to have attractive ROI in the long term with enough potential resources. We should carefully review the risk factors presented by the previous speakers. If Vietnam has a large enough resource and a robust regulatory framework, they will naturally attract investors.

Are the qualifications and requirements based on investor capacity or other criteria? How to ensure the quality of bidders?

Mr. Michael Stephenson – Associate Director at The Renewables Consulting Group: The winner should be the one that creates the most value from the projects. We should neither limit the number of bidders nor make decisions solely based on documents and prices. Of course, investors will participate and compete mainly on price. Therefore, the council needs to design an auction that includes other qualifications such as financial capacity, ability to meet auction targets, reputation, etc.

How to ensure fair competition in the auction? How should inclusive growth factors (small/new contractors, local employment, community benefits, etc.) be integrated in the preparation process of bidding documents?

Ms. Vu Quynh Le – Deputy Director General, Public Procurement Agency, Ministry of Planning and Investment of Vietnam: Actually, I want to hear the experience from the international side first as the MPI and the MOIT are developing the auction framework. The first three presentations, on how the auction preparation process can enhance competition and the capacity of the bidders, and reports that Michael shared can be of great help to us. We are now in the transition stage of FIT and auction.

IEREA-2021-1708-15

Mr. Keld Bennetsen – Vice President, Head of Business Development and New Markets at Copenhagen Offshore Partners (COP): If we attract a large number of domestic and foreign developers to participate in the auction, it will pave the way for more foreign investments, survey and investigations activities, etc.in the market. In addition, it would be a plus for the Vietnamese workforce to learn from international experiences through these projects, not to mention the involvement of universities and stakeholders in operation. In addition, new equipment and technical expertise, among others, are also factored into the development of the market, which, if mature enough, will lay the foundation for quality labors in the offshore wind sector.

How to avoid risks related to delay in commencement, approval, land acquisition, etc.?

Mr. Keld Bennetsen – Vice President, Head of Business Development and New Markets at Copenhagen Offshore Partners (COP): We need to ensure a detailed plan and clear timeline. However, there are things that are more difficult to control such as the seabed, land, etc., which may be delayed by stakeholders. From the experience of Denmark, we prefer the one-stop-shop system, in which the Danish Energy Agency operates as the focal point to ensure transparency and consistency. This approach is also effective in addressing issues derived from force majeure or other unexpected risks.

IEREA-2021-1708-19

Ms. Nguyen Thi Dieu Phuong – Director of the Center For Procurement Support closed the webinar by expressing her appreciation to the Danish Embassy and Danish experts, as well as the representatives from ministries, agencies, associations and Vietnamese businesses, for their participation. Currently, the Danish government and experts are ready to support the Vietnamese government.

To get an overview of other sessions (India, Germany, UK, USA), please find details at the website of Power Engineering Consulting JS. Company 3 (PECC3). We are proud bringing our integrity and trust to our distinguished partners through this webinar series.

https://www.pecc3.com.vn

Page top