Ep 5 Wind energy development in Asia and Vietnam offshore wind with Liming Qiao

Yiou: Welcome to sustainable energy Asia. A Podcast

Ben: hi everyone. It's Ben today. I'm joined by Lehman Cho head of Asia at the global wind energy consult. The wind energy traders, Haitian. We will be talking about wind energy development in Asia and about Vietnam or short wind. It was a pleasure to receive the mean on the show. And my main takes from our discussion as solo first limine started her career as a climate activist, and it's pretty striking to see how over the past two decades. Climate has moved from the very marginal issues to the top of the political agenda. Say Gunn. Asia is the biggest wind market in the world with about 60% of the global capacity added in the region with China and India being the main two markets. So fit into with ease and input and make a decision to kick start an industry. Uh, is. Allows developers to discover the cost of the routine, new Eric twisty. Generation project in the country. Starting directly with an ocean system leads January to grant projects, to very aggressive developers enabled to delivers those projects. If you let the show please leave a comment. And the rating on the show on your protest provider. It allows listeners to discover the show thank you

Hi limine. Welcome to the show you're heading, uh, back at the global wind energy console. Could you present the global wind energy console and introduce your institution's goal and what have been the recent initiatives that you've been working on in the region.

Liming: It's my pleasure to be here. Global winner is council is the wind energy trade association being a trade association means that our major aim is to make wind energy penetrate to a wider geographic coverage. And by doing that, we need to ensure that energy transition is really happening everywhere with the right policy framework to support that. So our main goal is actually to do the policy advocacy to make sure the right policy is there for the wind energy. And at the same time, we also represent the wind energy at different international policy forums including IEA, IRENA you have triple C. Where we act as the voice and representation, not only for wind energy, but also for when you want to the industry as a whole. And regarding our activities in the region, our regional office in Singapore started actually in the middle of 2019, which is half a year before the pandemic. And our focus is on Southeastern. To ensure that energy transition happens in this region and also east Asia including Taiwan, Japan, Korea we're not covering China and India because we have two separate office covering these two major, major renewable energy market in Asia. A little bit on the Southeast Asia region. That we have been very much focusing on Southeast Asia when we started and back at a time, about three years ago, Southeast Asia. If you talk about energy transition, it haven't really happen there. But the past three years we've seen major major transformation of this topic being embraced by a number of national governments in the region some of the examples are like Vietnam. So announcement of net zero by the middle of the century last year in Glasgow at cop 26 and also a major major embracement of Similar kind of commitment in the Philippines, in Indonesia and the other places. That means that we do see lots of changes on renewable energy development in the region. And I believe we also played a major role, especially in Vietnam, in the past year we've been advocating for higher offer wind target in the PDP eight, which is still being finalized as of today, but we've seen really good and ambitious targets being introduced in the PDP eight which we're hope when we finalize this only a few weeks.

Ben: It seems that you are doing a lot and there is still plenty to do in the region. Could you tell a bit more about your carrier and how you have started to work in the wind industry

Liming: yeah. I actually started my career as a climate activist, working with WWF on climate and energy issue back in 2003 And 2003, I was quite lucky to join my first conference of the party of us to policy, which is cop nine. And if you compare now we're talking about cop 26. So that really is like a long time ago. Yeah. so by saying that it's a long time ago, it really means that back in that time in the early 2000, the issue of climate change. Really, a marginal issue even in the sustainability world. And this past almost two decades is also the time that. We see this issue. Climate change transformed from a pretty marginal issue into one of the most important global issues. And the real change actually happened between 2007 and 2010 that we see this issue to start to top the global political agenda, and then just gradually become the most important topic right now in international politics. And so that exposure to the international climate negotiation process at a very early stage gave me the opportunity to form that dependent standing of international politics on climate change, and also to observe the development and the formation of the Cabo market. And that's also how I came into renewable energy industry in 2008. So since 2008, I started to work with the wind industry. And then the past 10 years, more than 10 years what's the time that we saw the principal creation of the renewable energy industry or the wind industry that we saw it from a marginal energy sources into our mainstream energy sources even in Asia, in some of the developing countries.

Ben: And you're covering the APAC region at the global wind energy console. Could you give us an overview of the developments of wind energy in the region, whether it's on shore off shore maybe just highlights the most dynamic country in this region at the moment.

Liming: Well, we can start with an overview Asia Pacific actually. Probably the most important market for the wind and for the whole renewable industry, because it represent more than half of the global market. Just to give you a couple of stats by end of 2021 if you look at the annual wound new installation, Asia Pacific had about 55 gigawatt of new installation. And what does that mean? That represent about 59% of the global new capacity. So that's more than half of the global market in one year. And if we look at the cumulative market, Asia Pacific represent about 400 gigawatt of the total global cumulative wind installation, which represent about 48 of the global cumulative market. So basically this market is about half of the global market so that's a overview of where Asia Pacific is in the global picture. But if we look into the details, we can divide the market of Asia Pacific into tiers, tier one China and India. These are the global players in the renewable energy. So they are not only like tier one for Asia Pacific, that basically belongs to the tier one in the global. We knew what energy market and these market mainly started at an onshore market about a decade ago. And now. All moved into kind of different stage of off-roading market. China is again leading the global offer market because of the size, the resources, and lots of reasons. India is starting its awful journey. But we believe it's soon can be a major offer player in the. And the second tier in Asia, you can look at east Asia like Japan, Korea, Taiwan. These countries. End of 2020 or join that whole club of net zero by middle of the century. And we believe that for this market, or for wind will play a major, major role in their journey of fulfilling or meeting their net zero target by mid of the century. And these market is free market. Also traditionally has been onshore market, but due to the land size and resources limitation. It doesn't really have too much of a future for onshore, but offshore potential is really big and huge. And the third year if we look in Southeast Asia that is led by Vietnam, Philippines, which are mainly onshore and offshore market, huge potential for both technologies and Thailand and Indonesia to follow. In the near term was to continue to be on shore market, but maybe in 10 years time we will move into their offers.

Ben: That's interesting and a good transition towards the subject of today, which is Nemo showing. Essentially in Vietnam you had feeding Terry for both solar and onshore wind, which both of them have achieves a deadline. And now everyone as you said, is expecting for the PDPA and investor are waiting to know what's going to happen next. On the other hand The government has been quite keen to key start the offshore wind industry. And you've been, discussing with the governments to set up the framework to. Market studies industry. Just as an introduction, you will be quite interesting. If you could explain what are the key differences between onshore and offshore wind. And what are the key challenges and advantages of developing wind project of shore

Liming: yeah. So on is technology that applied to the onshore on the land and a really awful. Those who are basically standing in the oceans. There is maybe one category that is a little bit confusing. It's the intertidal products into title means that products are basically in the intertidal area where one, the tide is low, then the land is exposed. A lot of the cases, I'll her title products. They are still applying the onshore turbine, onshore technology, ultra foundation. Lots of things are not different from the onshore technology. The real difference between the onshore and offshore lies into the turbine technology. The turbine is not being applied, that design of that, and also the foundation of the offshore turbine, the installation design. All this are kind of designed just for the offshore or the Marine environment. You have to consider a lots of challenges that among Marine and engineering related, such as foundation design, foundation installation, whether you apply different ONM strategies for like Marine erosion that really differentiate the onshore and offshore technology, and because of all these challenges for Marine related kind of in, and other concerns that give offer wind products are much higher risk profile and also a much higher cost to start with. So if we look at the off-road technology and I don't want each off of that, comparing where to onshore it mainly lays into a, it yields or gives you much more higher energy output, all the risks that you're going to take for putting it off role is in exchange of it's higher and more stable and then the output, it has a much higher capacity factor, which means that offshore wind. It's such a kind of energy sources that gives you a stable output, which is comparable to that of the usual base load that we always talk about. So that is the major, major difference kind of separated from all other renewable technology that it has a much lower variability issue than the other renewable technology. The other one is the cost. Usually we would say cost for offshore wind is very, very high, which is true because before the technical challenges and risks we just mentioned, but the other thing that people always don't look at is that there is also huge cost reduction. Potential for offshore wind technology. The past 10 years, we've already seen 70% of cost reduction at global level. Another 30% is likely to happen in the next five years. That is the global level. And if we look at different market or national level of market development, we also find a trend that every four to five gigawatt of installation, you can see. Significant cost reduction in one market and this significant cost reduction can range from like 50% to 60 or even 70% in some of the market. And the reason is that every four to five gigawatt of installation, you generate a Randolf, majority of the solution. And off lots of like ports and infrastructure issues and buy iron out all of that in that four to five gigawatt of installation, you automatically bring down the. in this pocket and that is something that quite significant, but not usually talked about when we talk about the cost. And that's also one of the key messages that we keep descending to new markets, to the government that you just support the first of four to five gigawatt then this industry where you do a much, much more competitive. And are resources that you can use. The other benefits are like you basically are providing another resource that is like, depending on local resources, that you are, you're shooting your energy market from the volatility of the international fuel market, which you've seen, especially to, uh, given the war and the volatility in the global energy market.

Ben: That's interesting. And going back to Vietnam, could you introduce yet Nam situation? We Regard to each offshore, wind. Asset and its offshore wind resources?

Liming: Yeah. In terms of wind resources. Probably one of the best in Southeast Asia region, it has 160 gigawatts of offshore utilizable technical potential and 475 of technical potential. So maybe after 10 years we will find other technology or more other ones technology that thinks for the explore that 475. And also comparing for example, with the Philippines which is mainly a floating offshore market vietnam have huge potential for fixed bottom, which is much more cost competitive and also much more easy to integrate. So that's the wind resources side. If we look at the wind asset or the readiness of the supply chain relatively in the region, Vietnam possess already existing oil and gas industry, which is relatively ready or relatively easy to transform into offshore wind which is another advantage comparing with other markets in the way. So with all this, I think it's, it's quite already kind of offer when market.

Ben: As we discussed earlier. Vietnamese transitioning from solar in onshore, wind from a feeding dairy free gym towards an auction regime. For sure. When we discussing about transition, Debbie and transitioning 18. So, could you present the key characteristic of these two frameworks? Beings. Fat and function regime. And explain why vietnam is considering such transition

Liming: Yeah., we are proposing sucks, transition to be the one to help. Vietnam to develop and we're developing our route to market position, a roadmap for this market. One of the key thing is to propose this transition, to be the choice to be the roadmap, to make it happen. By saying it's a transition we basically are saying. We do need to see the auction happen, but before the auction happened, you need that fit or we currently call a transition tariff to happen before the auction. Why this is so important. And what's the difference between the two is that a transition tariff is a process where you don't introduce a competitive process to determine the tariff itself. but in the auction, you do introduce competitive bidding process to determine the tariff level.

And the difference of these two is mainly because in early markets, especially early new offer wind market, if you include. The competitive process for determining the option, which in the end, usually becoming the determining factor, despite what they will have other non-cost or non tariff kind of criteria always is the most important determining factor. You basically are introducing a process where the bidders or the developers will have to be very, very aggressively on the cost on the other day. And given that this is new market, nobody really understand the cost, the risks it's very, and highly likely that you ended up selecting the most aggressive, but not necessarily the most reliable and sensible developers, which is what we've observed in lots of other market who start and jump into the competitive auction directly on offshore wind including France, China, Turkey, that in the end, all the winners in the first round ended up to be very ambitious, very aggressive developers failed to really deliver what they committed and the real reasonable and reliable developer who usually ended up in the middle of the price range were not selected. And that kind of failure of delivery of the product usually lead to up to 10 years of the lace of the industry development in all these markets that failed and also led to a missed opportunity for developing or supply chain in that 10 years. And also after those kinds of failure, it would take the government lots of energy to bring back the investors, to restart the industry again.

So those are the missed opportunities or opportunity cost to for starting this. And another reason that I want to say that we propose this transition tariff is that if you look at the PDP. target of 2030, we have only like eight years to deliver that and if we put all the product development milestones year by year, and also if you take into consideration that a real option would take more than two years. But in some of the cases, like up to four years to develop plus implement, then you don't have much time unless you have started our transitional fit, which gives you the time to kick start the first batch of project that buys your time for developing or option then you keep the ball rolling at an early stage. That's the only way that you can still meet the target by 2017. And also make the auction happen. That's why it's called a transition terror for tech transition mechanism.

Ben: So it was, that was what you were advising the government to implement in Vietnam. And as you said, it is challenging to manage this transition appropriately. could you talk about example of countries that manage well, this transition.

Liming: One of the major kind of successful case in Asia for starting offshore wind, you know, very short time with lots of success is Taiwan, and Taiwan actually started the offshore wind development first with a fit to cover the first 3.8 GW almost 4 GW and then followed by an auction with another 2 GW And the reason that they did this is basically they studied the European cases And they learned and exactly understand what I just described, why this is needed, why competitive process cannot be used to start a new market. And why in the beginning, you basically need to give that stability to kick it off and they understand it perfectly. That's why and how they made it. And if you look at other countries in Asia, China is almost the same. They started like back in 2010, the first one off offer wind entre, which people almost forgot.

And didn't never talk to her about it's only people who really follow China very closely who remembers that in the early 20 tests, that was the first round of auction for offer when that took place. But that round of auction didn't really ended up with anything because all the developers ended up being selected we're not able to deliver anything, then nothing happened until they introduced the, feeding her back in. 2014 or 16. And then that started the way offer development until they moved from fit to competitive process. And if we look at Japan, it's the same. Most of the other nations in the region in Asia Pacific started with a much more stabilized, a kind of renumeration system

Ben: and moving forward, how do you see the offshore wind industry in Asia developing? What do you think in 10 years, this industry will be looking like.

Liming: One is that it was definitely become a major means for most nations to achieve their net zero and two is that cost competitiveness will be so significant that makes it a natural choice for replacing fossil fuel. It's not because you have to fulfill on that zero goals or climate change. It just it's the natural choice just because of the cost station. And third is that you will see millions of employments jobs being generated in this sector and also contributing to the local economy and last it's the implication Of the power to Axe and also the cost reduction of the storage will enable a wider application of offshore wind and makes it possible.

Electricity generated from offer when that's a clear energy will penetrate into other segments of our economy into heating into transportation that we're able to basically see the electrification of the whole economy.

Ben: That was fascinating. Thank you so much for your time leaving. And it was fantastic to have you on the show.

Liming: It's my pleasure to be here.