Innovative financing plan helps Vietnamese wind farm get off the ground
Looming over Viet Nam’s southeast Binh Thuan province, the Dai Phaong windfarm is a testament to international cooperation. The 10-turbine plant was built by the Singapore-based green energy company The Blue Circle and made possible through funding from the United Nations Environment Programme’s (UNEP) Seed Capital Assessment Facility. The facility helps fund private-sector-led renewable energy projects in frontier markets in Africa and Asia.
According to the International Energy Agency, the world will need to invest trillions of dollars annually in renewable energy to zero out its greenhouse gas emissions by 2050, a step considered crucial to slowing climate change. Given their fiscal limitations, many developing countries need support from the private sector to build wind farms, solar arrays and other clean energy facilities.
The challenge: in countries like Viet Nam, private developers often face challenges securing funding for the initial phases of a project, including research and feasibility studies. This is due to the high risks, long timelines and uncertain returns often associated with fledgling green power projects.
“A major challenge in developing countries is this early-stage financing gap,” says Eric Usher, Head of the United Nations Environment Programme Finance Initiative (UNEP FI) who helped set up the Seed Capital Assistance Facility.
The facility helps tackle this problem by providing developers with early-stage financing. It is managed by the UNEP-Frankfurt School Collaborating Centre with funding from the United Kingdom’s Foreign Commonwealth and Development Office, and Germany’s Ministry for Economic Affairs and Climate Action. In the case of Dai Phaong, the facility provided The Blue Circle with a repayable grant, which was paid back when the project reached financial close.
The wind farm is now connected to Viet Nam’s national grid and provides clean energy to more than 65,000 homes, according to The Blue Circle. Most of these households relied on coal-fired and hydro power plants before the wind farm was opened. Some rural areas also used diesel generators, which are both expensive and polluting.
The project avoids approximately 90,000 tonnes of carbon dioxide emissions annually, based on The Blue Circle estimated. That’s equivalent to taking about 20,000 cars off the road.
The wind farm also generated jobs both during construction and after it opened. Its workforce now includes local technicians, site managers and support personnel, with most of the employees trained from scratch.
For The Blue Circle’s CEO Olivier Duguet, it’s important that local residents are involved in the project. “[They] are the ones who are going to see our turbines every day and live with them for 25 or 30 years,” he says. “So, we have to build these projects with them and for them.”
The Seed Capital Assistance Facility has worked in 19 countries, including frontier markets like Malawi, where it backed a solar power plant, and Zimbabwe, where it supported a hydroelectric facility. To date, it has helped finance 49 projects with 500 megawatts of renewable energy under operation and another 2.6 gigawatts in development.
Distribution channels: Environment
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