Vietnam, gateway for SK Group’s global renewable energy push

TIEN GIANG, VIETNAM – Off the coast of Vietnam’s Tien Giang Province, 36 wind turbines spin steadily with a constant whoosh and swish, generating enough electricity to power around 200,000 households in the Southeast Asian country each year.

Behind this offshore mega-project is SK Innovation E&S Co., the energy solutions arm of South Korea’s SK Innovation Co., one of Asia’s largest energy companies.

The wind farm, operated by the Korean energy company, is located offshore, where the Mekong River meets the South China Sea, about 130 kilometers from Ho Chi Minh City. Known as the Tan Phu Dong (TPD) Offshore Wind Farm, it has an annual power generation capacity of 150 megawatts (MW).

The site is considered optimal for wind energy due to the consistent air currents that flow along the country’s long coastline from north to south throughout the year.

“The Tien Giang region has an average wind speed of six to eight meters per second,” Kwon Ki-hyuk, the head of SK Innovation E&S Vietnam office. “In Korea, we have to go far offshore to find that kind of wind, but here, it’s available right along the coast.”

SK E&S, the former entity of SK Innovation E&S before its merger with parent SK Innovation in 2024, teamed up with Gia Lai Electricity JSC (GEC), a member of Vietnam’s major conglomerate TTC Group, in 2022 to develop the offshore energy project.  

Under a 55-45 ownership structure favoring GEC, the two companies split revenue from electricity sales to the state-run Vietnam Electricity Corp. The wind farm generates about 50 billion won ($36 million) in annual revenue.

STEPPING STONE TO A BIGGER GLOBAL MARKET

The wind farm serves as a cornerstone of SK Innovation E&S's big picture to expand its renewable energy business globally.

From its base in Vietnam, the Korean energy company aims to make inroads into other markets across Southeast Asia, as well as Eastern Europe and North America.

As part of its grand ambition, it plans to scale its global renewable energy capacity to more than 2 gigawatts (GW) by 2030, up from 1 GW today.  

The company began its foray into renewables in Southeast Asia with a 131-MW solar photovoltaic project in heavily forested Ninh Thuận, Vietnam in 2020 and has since continued to explore and invest actively across the region.

In early 2024, it set up a joint venture, Solwind Energy, with GEC, which built a 7-MW rooftop solar system in Tây Ninh Province.

Near the border with Laos, the JV also plans to build a 756-MW onshore wind power plant.

The expansion aligns with Vietnam’s national plan to bolster the share of renewables in its energy mix to 30% by 2030 and 75% by 2050. The state initiative is expected to benefit companies like SK Innovation E&S given their early positioning in the market.

CARBON CREDITS AS A FUTURE REVENUE STREAM

SK Innovation E&S also sees carbon credits as a critical component of its long-term renewable energy strategy.  

Carbon credits, or carbon allowances, are permits enabling the holder to emit a set amount of carbon dioxide or other greenhouse gases. They are increasingly viewed as strategic corporate assets amid global decarbonization efforts.

Under its agreement for the TPD wind farm project, SK Innovation E&S holds exclusive rights to the project’s carbon allowances for 15 years.

The project is expected to generate about 260,000 tons of carbon credits annually.

The company anticipates that monetizing these credits will become a significant revenue stream as global carbon markets mature.  

Write to Sang Hoon Sung at uphoon@hankyung.com

Sookyung Seo edited this article.