Renewable Energy & Cleantech

Hundreds of multinational companies have made public commitments to renewable energy and carbon reduction. From the RE100 to the Science-Based Targets initiative, the number of corporations around the world committing to driving renewable energy generation grows every day. It should come as no surprise that demand for renewable energy is emerging in essentially every country around the world. Vietnam has joined the growing group of countries seeking to both serve the needs of its corporate stakeholders and accelerate renewable energy adoption in the market.

In 2017, Vietnam announced the development of a new pilot program that would allow commercial and industrial organizations to access renewable energy in the form of a direct power purchase agreement (PPA). This summer, Prime Minister Nguyen Xuan Phuc reportedly asked for draft rules for implementation of this long-awaited PPA program. The renewable energy market is eagerly awaiting the pilot, which does not have an official target start date but will require companies to act quickly.

To better understand the market opportunity, the risks and benefits at stake and to guide interested companies as they explore this market, we spoke with Schneider Electric experts, Megan Jones, Senior Market Analyst, and Valerie Choy, East Asia Solutions Manager.

Megan Jones specializes in emerging markets around the world, primarily focused on Asia Pacific, Africa and Central America. She has performed market assessments on the behalf of Fortune 500 companies in over twenty different countries. Megan has a master’s degree in Business Administration from Bellarmine University and a bachelor’s degree in Economics as well as Foreign Languages/International Studies from Bellarmine.

Valerie Choy leads business development efforts for Schneider Electric’s Supply, Sustainability and Cleantech services in Southeast Asia. She is well-versed in PPA best practice requirements, having reviewed numerous PPAs for projects in Singapore, Malaysia and China. Valerie has a master’s degree in Business Administration from INSEAD and a bachelor’s degree in Chemical Engineering from the National University of Singapore.

What are the benefits of the Vietnam PPA program for corporates with load in the country?

The pilot program is a first-of-its-kind in Vietnam, which would expand the options for companies who are looking to procure renewable power to reach their goals in the country. Until now, purchasing energy attribute certificates (EACs), installing onsite solar and direct project investment were the only avenues to green power procurement in Vietnam. The new PPA model would, in theory, be a win-win for companies and the country.

For companies, it will increase competition in the wholesale energy market and be a direct avenue to satisfying renewable procurement targets in a historically restricted market. The PPA pilot would also allow companies with electricity load in Vietnam to procure renewable energy at scale directly from generators of wind and solar power and could potentially lend the traditional benefits of a PPA, but the risks of the program warrant discussion. For the Vietnamese government, it will be an additional avenue to increase their share of renewable generation and address a near-term supply shortage.

Organizations that participate in the pilot program will benefit from staking claim as market leaders and establishing this nascent PPA market. We recommend interested companies act quickly to secure the limited capacity being offered.

How did this opportunity come about?

Multinational organizations put pressure on the Vietnamese government and demanded more renewable energy options. Like in other newly emerging PPA markets, the influx of companies and their local suppliers seeking renewable options is transforming Vietnam’s energy mix. Although energy market deregulation in Vietnam was already underway, this corporate pressure is directly shaping the programs that become available. We’ve seen a similar trend of corporates successfully driving the development of renewable PPA programs in other markets, such as Australia, USA and Spain. However, the resulting PPA pilot in Vietnam is not without its risks.

You mentioned risks. Tell us more.

The biggest risk to date with the PPA opportunity in Vietnam is the risk of the unknown. With so many rules and terms of the program still undefined, companies will inherently be going into the pilot with one eye blind. For example, because there is no precedent in Vietnam for wholesale energy buying by private users and the market is still under development, future spot prices are extremely difficult to estimate. Performance of PPAs will heavily depend on how the market evolves and the possibility of incentives and regulations changing throughout the program. Another question mark, which is especially pertinent for multinationals with publicly-announced renewable energy goals, is how to handle environmental attribute certificates (EACs) generated by these PPAs for RE100 reporting purposes. This question, and many others, are unlikely to be fully resolved by the time the pilot becomes available.

To add to the complexity, the program has an aggressive time frame for rollout. It’s especially ambitious considering the many new forms, changes to contracts, billing, regulations and laws that must be completed. The program outlines a timeline of approximately 90 days from launch to selecting a vendor/project and finalizing the pilot agreement. Considering that PPAs in well-developed markets typically take between 7-18 months, this timeline is extremely accelerated even compared to normal standards—leaving corporates potentially subject to feeling rushed in their risk-vetting process.

What companies are eligible to participate in this program?

The program has been designed with large multinationals (and their local suppliers) in mind. The target program-wide capacity is 1 GW, but individual projects must be larger than 30MW. Interested companies should have a relatively large electricity load in Vietnam and would ideally be familiar with the PPA process. Having a standing relationship with suppliers, local utilities and legal support to coordinate will help. Because of the risks, combined with the quick turnaround time, solicitations made by experienced buyers armed with insights from global market experts will be the most likely to succeed.

This opportunity is limited and time-sensitive!

How is Schneider Electric helping its clients navigate this new market?

Any company looking into this pilot is well advised to proceed with caution—and that’s advice we give to our own clients, as well. Even with local market expertise, the PPA opportunity in Vietnam is uncharted territory. But to the Schneider Electric cleantech advisory team, navigating uncharted territory is our specialty. On behalf of our clients, we’ve worked to open doors to new markets around the world.  For example, we helped our client, Signify, sign a first-of-its-kind virtual PPA in Poland. This was important at a time in the market where developers were facing significant political challenges and headwinds both to new development and ongoing operation of existing assets. Signify took a leadership position in support of the renewables sector in a market new to corporate PPAs.

We’ve played a key role in introducing the virtual PPA to Europe more broadly, in particular the concept of using it for cross-border transactions, and for years we’ve helped our customers in Mexico navigate the volatile and constantly-changing regulations around renewable energy. Having advised on more PPAs, in both mature and emerging markets, than any other advisor means we are prepared to pivot and are well-positioned to take on this new market alongside pioneering commercial and industrial organizations.

What are your parting recommendations for companies interested in this opportunity?

• Find an experienced advisor with global expertise and a track record of success in emerging markets
• Engage with local institutions and government agencies on the particulars of the Vietnam PPA program
• Advocate for greater clarity of the program rules to continue to mitigate risks
• Build a backup plan.  When opportunities are as leading-edge as this one, it could pay to simultaneously investigate alternative mechanisms for renewable energy in Vietnam, such as direct investment in renewable energy projects. Scenario-planning is even more critical if your company has near-term procurement goals riding on load in Vietnam going renewable.

Ready to get to work? We invite you to drop us a line if you have any questions about this specific market opportunity or to explore other ways our team can help your company reach its renewable energy ambitions. Get in touch with an expert today.