Energy Development Strategy: Renewable Energy in Focus

10:40:35 AM | 26/2/2020

“After the fixed feed-in-tariffs (FIT) for power was adopted in September 2016, the private sector has installed approximately 5.2 GW of solar energy and this number will continue to increase when switching to use gas as a base load to support dozens of proposed renewable energy projects.”

Mr. John Rockhold, Head of Power & Energy Working Group made this comment in the Vietnam Business Forum - VBF. According to VBF, the energy production plan in Vietnam (Edition 2.0) provides an energy development strategy based on energy sources in Vietnam with a focus on renewable energy.

The Made in Vietnam Energy Plan (MVEP edition 2.0) updated the previous report and was built during a period of rapid transition of global and Vietnam energy markets. Sustainable energy production technologies for the future, such as solar, wind and li-ion batteries, once thought to be economically viable only in the late 2020s or 2030s, are witnessing a sharp drop in their costs, as it has become popular.

Today in the world, these energy technologies often overwhelm other technologies that produce electricity using fossil fuels without subsidies. Coal-fired power plants, that were once considered the lowest-cost solution and to have the potential to borrow from banks in fast-growing economies, now have difficulty finding funding because investors have realized concerns about environmental degradation, the impact on human health, the trend of reducing the load factors and the premature shutdown of these plants. As the financing sources for coal in Vietnam have decreased, more reliable, renewable and highly efficient sources of energy have continued to increase. The accurate evaluation of costs, selling prices, taxes and prices can create a legal environment to mobilize the private sector to meet Vietnam's energy goals in order to reduce energy intensity and increase production of clean energy.
According to data from the Ministry of Industry and Trade, Vietnam has more than 330 solar projects with a total registered capacity of 26,000 MW that are undergoing many steps in the approval process to supplement the Power Development Plan. Among them, 121 projects with a total generating capacity of 6,100 MW have been approved and added to national and local power development plans. A large private investment project in Ninh Thuan province with a cluster of three plants with a capacity of 330 MW has joined the national grid since April 2019. This is the largest solar power plant in Southeast Asia with a total of more than one million panels, and a total investment of more than VND7 trillion, equivalent to US$300 million at present. This project contributes to reducing CO2 emissions into the environment by nearly 304,400 tons each year.

The level of interest in the renewable energy sector shows that Vietnam has the potential to rapidly develop this sector under current market conditions if there are effective policies. However, the ambition to further expand renewable energy production will still be constrained by the barriers that consumers are interested in buying clean energy and production units accessing to funding are facing.

The first edition of the "Made in Vietnam Energy Plan (MVEP) 1.0" was completed in 2016-2017. However, in the context of rapidly growing renewable energy in Vietnam and the possibility of increasing gas use in electricity production, the VBF's Power & Energy Working Group updated and revised its report with six key recommendations. Accordingly, Vietnam needs to encourage energy experts in the private sector to participate in supporting the establishment of the Power Development Plan VIII, with a particular priority given to the development of renewable energy, gas, storage batteries and efficient use of energy. Except for the storage batteries, which have recently become an affordable solution, this recommendation reflects the goals stated in the previous report - Edition 1.0.

At the same time, laws and incentives should be implemented to encourage private investors to develop large and small renewable energy projects, such as rooftop solar PV, storage batteries, solar farm, floating solar power, offshore and onshore wind power, biomass power; it is necessary to simplify the project approval process while maintaining safe electrical systems. Besides, direct power purchase agreement (DPPA) and power purchase agreement (PPA) should be standardized into contracts which are capable of being accepted for international funding, used globally as well as in ASEAN countries.

In particular, it is essential to publish the roadmap of electricity retail price until 2025, which should reflect the shift in the direction of market price, adjust the number of hours for applying peak electricity prices and consider applying other retail price tables for different areas and poor households.

In addition, it is important to assess the urgent need for the development of transmission grid systems and how to develop grid infrastructure with the lowest costs to support the increase of renewable energy and transmission power sources; evaluate the causes and solutions for very high and increasing energy intensity compared to regional neighbors with equivalent/higher GDP per capita and prepare public awareness campaign about avoiding energy waste at residential, office and factory level.

By Quynh Anh, Vietnam Business Forum