Vietnam Becomes Vibrant Renewable Energy Market in Southeast Asia

10:44:48 AM | 11/13/2020

“Resolution 55 of the Politburo not only charts a path for the renewable energy industry in Vietnam, but also captures development trends of the region’s energy demand. If it follows a right track, there will be a potential advent of big renewable energy investors. This will be a real driving force for Vietnam's economic development,” said Dr. Vu Tien Loc, President of the Vietnam Chamber of Commerce and Industry (VCCI), at the Forum on “Resolution 55-NQ/TW and solutions for renewable energy development in Vietnam.”

The forum was recently organized by the Business Forum Magazine in cooperation with the Advisory Council for Science, Education and Environment (affiliated to the Central Committee of the Vietnam Fatherland Front) in Hanoi.

A sharp rise in size and scale

Energy is an important and complicated problem that all countries face in social and economic development. This is even more accurate and practically meaningful for developing countries. In Vietnam, a fast-growing economy demands much energy. This poses great challenges to the country when primary energy sources such as coal, oil and gas are exhausted and insufficient for domestic demand.

Data show that the country may face severe power shortage in 2021 - 2025, which may amount 13 billion kWh of electricity by 2023 while oil-fueled power generation accounts for nearly 11 billion kWh. By the end of 2023, Vietnam will fall short of 12,690 MW. Power shortages will be improved in 2024 and 2025 as some thermal power plants start commissioning. The shortfall is forecast at 7,250 MW in 2025.

To deal with this nuisance, according to Dr. Loc, the Politburo issued Resolution 55-NQ/TW dated February 11, 2020 on Vietnam's national energy development strategy to 2030, with a vision to 2045.

The resolution emphasizes and prioritizes the construction of breakthrough mechanisms and policies to encourage and promote the strong development of renewable energy sources in order to completely replace fossil energy sources, quickly build a synchronous, competitive and transparent energy market, and diversify ownership forms and business modes. Market pricing will be applied to all types of energy.

All economic sectors, particularly the private sector, are encouraged and facilitated to take part in development, resolutely eliminate all manifestations of subsidy, monopoly, unfair competition and lack transparency in the energy industry.

According to Mr. Nguyen Van Vy, Vice Chairman of the Vietnam Energy Association, as the economy continues to expand, Vietnam’s demand for primary energy sources is expected to increase by 4.6% a year on average, from 105 MTOE (million tons of oil equivalent) in 2020 to 321 MTOE by 2045. The main sources will be coal and gas used for power generation and transportation.

Given Government-backed incentive policies for renewable energy source development, many investors have actively conducted research and investment in renewable energy power projects. As of the end of August 2020, the total capacity of wind and solar power sources approved is nearly 23,000 MW, including 11,200 MW of solar power capacity and 11,800 MW of wind power capacity.

According to the Electricity and Renewable Energy Department under the Ministry of Industry and Trade, over the past two years, Vietnam has made strong strides in renewable energy projects. Up to now, the country has 102 solar power projects in operation with a total installed capacity of 5,245 MW.

In the second quarter of 2019 alone, nearly 90 solar power projects with a total capacity of about 4,000 MWp were put into operation. This was a record workload in Vietnam’s electricity development and a record number of plants put into operation.

With a record installed capacity of new solar farms brought into operation, Vietnam has become one of the most vibrant and attractive renewable energy markets in Southeast Asia.

Challenges for synchronous development

VCCI President Loc said, this speedy development pace is posing new challenges to synchronous development of the grid system, land use, electricity pricing, technology, human resources/employment and finance.

Dr. Loc said, there are still many bottlenecks that slow down project progress; some even lose their direction and risk cancellation. The management and coordination of central and local agencies on policy enforcement in some cases is not clear or tight. Supply and demand planning and forecast remains weak.

The Organizing Committee awarded the title “Vietnam Renewable Energy Project” to 11 projects which are beneficial to the community and the economy and have qualified for strict selection criteria concerning environment, design and engineering.

According to Mr. Nguyen Van Vy, although the government has also issued policies and mechanisms to promote renewable energy development such as the Renewable Energy Development Strategy, biomass, solar and wind power purchase price support mechanism, increased solar and wind power projects to the electricity development planning; and planned policies on solar and wind power auctioning for the coming time, the renewable energy sector is yet to be developed rapidly and widely in Vietnam because investors are still facing various barriers such as institutional barriers, legal barriers, investment barriers, technical barriers, trade barriers, market entry barriers and barriers to technical human resources.

Therefore, Mr. Vy said that the Ministry of Industry and Trade should soon complete the Action Program for implementation of the Renewable Energy Development Strategy and submit it to the Prime Minister for approval. In this program, it is necessary to include necessary legal documents and regulations.

Mr. Nguyen Quang Huan, Member of the Advisory Council for Science, Education and Environment, Central Committee of the Vietnam Fatherland Front

The waste-to-energy potential has not been property tapped. There are many shortcomings in investment selection. Besides, there is no consistent guideline or policy on investment selection of different technologies, depending on the capacity and potential of each locality. The insufficient understanding of technology across local levels risks investor or technology selection.

Given the current amount of waste, estimated at 46,000 tons a day (according to GIZ), if it is not burned to produce electricity, we are wasting 46,000 * 0.7 = 32,600 MW a day or nearly 1,400MW an hour, equivalent to 20% of the total current capacity of wind and solar power generation, let alone the negative impacts of improper waste treatment on society and the environment.

On future renewable energy development trends, PPP and private investment should be encouraged in renewable energy development.

Mr. Do Duc Quan, Deputy Director of the Department of Electricity and Renewable Energy, Ministry of Industry and Trade

In the coming time, to develop a strong and sustainable renewable energy, it is necessary to focus on main contents: policy, transmission infrastructure and power system operation.

On the policy, large-scale renewable energy projects will shift to bidding. Qualified developers will be the investors that offer the lowest selling price for solar-terrestrial and floating solar power projects. Although it takes more time to enforce this mechanism, it will be fairer and more transparent for investors, and ensure harmony and balance between the development status of renewable energy power projects with transmission grids.

In addition, it is necessary to promote the development of distributed renewable energy systems to serve local consumer needs such as industrial parks, commercial and service consumers and residents by installing rooftop solar power panels to feed their own needs in addition to purchasing electricity from the grid.

Furthermore, it is necessary to build and perfect Vietnamese standards and regulations to ensure the more sustainable development of renewable energy.

Prof. Dr. Dang Thi Kim Chi, Member of Advisory Council for Science, Central Committee of Vietnam Fatherland Front

Each type of renewable energy has its own advantages and disadvantages. For example, to absorb solar energy, we need a large area of ​​land for solar cells. In addition, solar panels are manufactured from silicon and some metals that will result in extracting minerals and other natural resources.

Although wind power development does not occupy as much area, the effect of energy production is also higher than that of solar energy. However, not all places have enough wind for power generation, although it is very safe and environmentally sound.

Each type of potential renewable energy is encouraged for development in Vietnam because it helps to reduce greenhouse gas waste, avoids further climate change effects, and reduces pollutant emissions. Using renewable energy is inevitable in the future. But, we need to take into consideration the terrain and local socioeconomic conditions when we choose a type of renewable energy.

Mr. Nguyen Hoai Bac, Chairman of IQLinks, Director of Sunseap Link Vietnam Solar Power Company

Proposing the Ministry of Industry and Trade to submit the scheme on socialized investment of electricity transmission lines to the Prime Minister, many investors explained that if we allow private investment in power transmission, the state budget burden will be much “eased.”

The biggest benefit of private investment is the common interests of the society, businesses and consumers. When the so-called monopoly does not exist, investors will have to balance their interests and consumers’ needs. At this point, consumers will be respected and encouraged to use different power sources in a more rational and optimal way.

By Lan Anh, Vietnam Business Forum