Vietnam’s southern province of Ninh Thuan continues to see growth in its renewable energy resources, with Spain’s Siemens Gamesa Renewable Energy (SGRE) winning in its bid for the second phase of the existing 39MW Dam Nai wind farm.

According to the plan, the company will supply 12 turbines by October this year. SGRE will also handle the management and maintenance of the facility over the course of the next ten years for Dam Nai’s operator, independent power producer Blue Circle.

The first phase of the Dam Nai wind farm kicked off in April last year, with total investment capital of US$15 million. During the first phase SGRE installed three turbines, which are already operational. Siemens Gamesa has said it expects “significant growth” in Vietnam over the coming years as the country “begins to utilise some of the best wind resources in Southeast Asia.”

As of April 2018, the country had 197MW of installed wind power capacity, split between 98MW onshore and 99MW offshore.

On top of turbines, the province of Ninh Thuan has also been targeted by firms for solar power development, thanks to its status as one of the driest areas of the country. A number of companies have already signed up to develop projects in the province. However, despite excellent solar conditions, a growing economy and a strong manufacturing base, Vietnam’s solar ambitions have been relatively modest compared to its near-neighbors in the region.

Not all blue skies

Vietnam is among the most promising renewable energy markets in Southeast Asia, offering significant opportunities for investment in clean energy, especially wind and solar power. With a population touching 92 million and energy demand forecast to grow by 13 percent annually over the next four years, the country is eyeing an energy policy that includes a substantial mix of renewables.

According to the government’s revised Power Development Master Plan VII, Vietnam needs investment in the power sector amounting to US$150 billion for the period up to 2030 in order to keep pace with the nation’s projected annual growth of 10-12 percent. The renewable energy sector is considered a priority for investment with contributions set at 7 percent by 2020 and 10 percent by 2030.

A large number of firms have already been lured to take advantage of the market’s huge potential. A recent report by USAID (United States Agency for International Development) found that in the solar power sector, as of 2017, more than 100 new projects had been planned, including 70 in the province of Binh Thuan.

There are, however, issues hindering the sustainable development of the sector. These include poor administration and low transparency, leading to corruption among investors and officials. The major risks are related to programming and licensing of investors and access to land. The rosy picture of deals hides a more problematic truth.

Many investors registering projects don’t intend to join the market immediately, but instead are snapping up advantageous plots of land. For wind and solar power projects in particular, location is everything. Areas with strong and consistent natural wind or intense sunshine will inevitably bring better returns for firms who set up shop with their panels or turbines.

One expert said that nearly all land plots in advantageous positions are now occupied, though the renewable power plants remain on paper, and may never be developed. This speculation over land poses a risk of harming the market, and slowing the much-needed transformation of Vietnam’s energy sector.

As the top spots get booked up, real investors will have to stump up a premium for their projects, or shell out fees for intermediaries. Transparency in development programming, licensing procedures and project execution supervision is a must for the market to run effectively.

Coupled with relatively low feed-in tariffs (FiT) and arduous legislative hurdles to overcome, the added headache of a premium on land may cause investors to look elsewhere when considering locations for their renewable power projects.

A recent StoxPlus report has identified 245 renewable energy projects currently in Vietnam, including wind and solar power as well as biomass, which are being deployed at different stages. Obviously, if all planned projects begin operation the country’s targets would be met overnight. However, of the total projects, only 19 percent have reached the construction phase and 8 percent have begun operation. Most projects are still in the preparatory stages.

Investors are also struggling with a lack of clear information about the market. Even though information about renewable energy projects in Vietnam has been floating around, there is no clear details on the number of projects or their development status, creating confusion and uncertainty among developers and other stakeholders.

Joint ventures between foreign and domestic enterprises may help to address some of these bottlenecks – with local firms providing some much-needed information and international players adding the technical know-how that is lacking from the domestic market. This is, unfortunately, only a partial solution. In the long term, a stronger legislative framework will be needed to support to sustainable development of the renewable power sector in Vietnam, and help the country to meet its targets and support its booming energy needs.