Renewable Energy in Vietnam and Opportunities for Implementation
Vietnam, a booming economy with approximately 100 million residents, is currently embracing renewable energy, especially solar and wind, as part of its industrialization process due to its abundant natural resources. The United Nations defines renewable energy as "energy derived from natural sources that are replenished at a higher rate that they are consumed", and currently, 29% of global electricity is derived from renewable sources.
Initiatives
Vietnam has been demonstrating massive efforts and success in switching to renewable energy. The country is set to meet its goal of net zero emissions by 2050. In 2017, the government approved Decision 11, which is the country’s “first legal instrument governing the development of solar power” (Tsafos, p.15). This framework created a substantial “feed-in-tariff” (FiT) for new solar farms starting operations. A feed-in tariff is a long-term contract guaranteeing an above market price for renewable energy producers. This FiT creates incentives for renewable energy suppliers, and encourages the development of renewable technologies. By December 2016, Vietnam had 135 solar power projects, and by mid-2020, “5,000MW had achieved commercial operation” (Tsafos, p.15) just to put this into perspective, 50MW can power up to 9,000 homes”(Clarke) .
In addition to the FiT, the government is also open to enabling opportunities for private electricity transactions. There are a multitude of technical assistance programs that have helped the government innovate and unlock private clean energy investment. For example, the Power Purchase Agreement (DDPA) drafted in May 2022 will “enable renewable energy generators to sell clean electricity to private off-takers via a power purchase agreement (PPA) arrangement (Thompson, et al).” A PPA is essentially a “long-term agreement to purchase clean energy from a specific asset at a predetermined price between a renewable developer and a consumer” (What is a PPA, and what are the main benefits?). Under this PPA scheme, the Vietnam Electricity (EVN) will purchase physical electricity from the generator at the wholesale spot price. The offtaker will then buy electricity from EVN at the retail spot price and enter into a PPA with the generator to agree on a predetermined purchase price, known as a strike price. If the strike price is higher than the spot price, the offtaker will pay the difference to the generator, and vice versa. This arrangement allows both the offtaker and the generator to have some predictability in the price of clean energy.
Currently, the most comprehensive guidance in altering the energy field is the Politburo Resolution 55 established in 2020. In summary, the resolution establishes the following objectives: to maintain national energy security, develop a competitive and transparent energy market and diversify ownership especially to the private sectors and eliminate monopolies, diversify energy forms, accelerate digital transformation and R&D, and emphasize energy efficiency and environmental protection (Nguyen). The resolution would help stabilize energy, reserve and stock to ensure the implementation and oil stoking obligations, as well as optimally allocate the supply of all sources based on each region’s and province’s comparative advantages.
In the next 10 to 25 years, the government “aims to increase new and renewable energy up to 30% of total primary supply (Nguyen).” There is also the establishment of the National Power Development Plan 8 (PDP98), the National Energy Master Plan for the 2021-2030 period, and the Vision 2060. These highlights how there are various opportunities for the private sector. Resolution 55 paves the way for the private sector to participate in the electricity market. As mentioned, the implementation of the FiT should encourage domestic and foreign investors to participate in energy development. Additionally, the Ministry of Industry and Trade should also enable more transparent approval procedures to forbid project cancellations along with unregulated purchases (Nguyen).
Energy storage could be a longer-term solution, as it pursues a higher share of renewable energy. As of now, hydrogen and carbon capture and storage are still quite expensive, there are alternatives such as pumped storage hydropower, given that Vietnam is a coastal country. The government should aim to support policies that encourage investments in energy storage and flexible battery storage. The ideal priority is for the government to issue a PPA that will attract international investments, as this could play a key role in decarbonizing Vietnam’s industrial sector.
Challenges
A common concern is where to source the immense funds required for renewable energy. Currently, most renewable energy projects are developed by domestic companies, so the government should encourage more development in energy in the private sector as well as encourage more international investment to help alleviate the costs. As mentioned, Vietnam has offered a competitive FiT for the solar energy projects. However, the Electricity Vietnam (EVN) can curtail purchases at any moment for an indefinite period of time. This means there is a lack of purchase guarantee for international investors. Although the FiT had provided a guaranteed price for projects, this FiT was adjusted numerous times, giving producers/developers minimal time to adjust to the new FiT. Additionally, the process to register a new project involves complex departments, from initial project approval to integrating the idea into provincial-level plans, which can be difficult for international investors to navigate without proper understanding or local connections.
Aside from financial challenges, a major challenge is that the government must try to ramp up enough power generation through renewable energy to meet demand and responsive transmission lines in a short time with a limited budget. However, oversupply also poses a threat as many solar projects will be forced into wasteful curtailment. In addition, the Covid-19 lockdown has also had ramifications as it disrupted supply chains and limited the availability of wind power equipment, hence affecting the progress of projects.
There are various efforts being made in Vietnam to strive towards increased usage of renewable energy. Despite being a developing country, Vietnam’s share of electricity generated by solar increased from 0% to 11% in 4 years, an expansive rate of increase more than France or Japan have managed (Vietnam is leading the transition to clean energy in south-East Asia).
This is not to say the country still has a long way to go. However, with the proposals of new projects and legislation, Vietnam has massive potential to pursue the path of utilizing green and renewable energy.
Works Cited
Clarke, C. (2012, July 4). Explainer: 'enough to power X thousand homes'. KCET. Retrieved November 12, 2022, from
https://www.kcet.org/redefine/explainer-enough-to-power-x-thousand-homes
Corporativa, I. (n.d.). What is a PPA, and what are the main benefits? Iberdrola. Retrieved November 12, 2022, from
https://www.iberdrola.com/about-us/contracts-ppa-energy#:~:text=WHAT%20IS%20A% 20PPA%3F,who%20then%20resells%20the%20energy
The Economist Newspaper. (2022, June 2). Vietnam is leading the transition to clean energy in south-East Asia. The Economist. Retrieved November 12, 2022, from
https://www.economist.com/asia/2022/06/02/vietnam-is-leading-the-transition-to-clean-e nergy-in-south-east-asia#:~:text=In%20the%20four%20years%20to,France%20or%20Ja pan%20have%20managed
Nguyen, L. D. (2022, May 19). Vietnam's renewable energy policies and opportunities for the private sector. The National Bureau of Asian Research (NBR). Retrieved November 12, 2022, from
https://www.nbr.org/publication/vietnams-renewable-energy-policies-and-opportunities-f or-the-private-sector/
Thompson, B., Harrison, D., & Chow, M. B. (2022, June 23). Vietnam's direct PPA Pilot Scheme: Energy Market Update – june 2022: Perspectives & Events: Mayer Brown. Perspectives & Events | Mayer Brown. Retrieved November 13, 2022, from https://www.mayerbrown.com/en/perspectives-events/publications/2022/06/vietnams-direc t-ppa-pilot-scheme-energy-market-update-june-2022
Tsafos, Nikos, and Lachlan Carey. “Success Story #4: Encouraging Renewable Energy Investment.” Energy Transition Strategies: Vietnam’s Low Carbon Development Pathway, Center for Strategic and International Studies (CSIS), 2020, pp. 15–16. JSTOR, http://www.jstor.org/stable/resrep26069.8. Accessed 13 Nov. 2022.
Weatherby, Courtney, et al. “UNLOCKING RENEWABLE ENERGY IN VIETNAM.” DELIVERING ON VIETNAM’S COP26 COMMITMENTS: Regional Leadership on Renewable Energy and River Conservation, Stimson Center, 2022, pp. 4–6. JSTOR, http://www.jstor.org/stable/resrep43738.5. Accessed 13 Nov. 2022.
