Vietnam Targets about 70% of Energy from Renewables by 2050

Deputy Prime Minister Tran Hong Ha recently signed Decision 500/QD-TTg dated May 15, 2023 of the Prime Minister to ratify the National Power Development Plan for the 2021-2030 period, with a vision to 2050 (Power Plan VIII). Power Plan VIII aims to firmly ensure national energy security and meet the country's socioeconomic development, industrialization and modernization requirements.

Vietnam has much potential for solar power development 

Ensuring sufficient electricity to fuel an annual GDP growth rate of 7%

Power Plan VIII formulates the development of electricity sources and transmission grids at the voltages of 220 kV or higher, renewable energy and new energy industries and services in Vietnam in the 2021-2030 period, with a vision to 2050, including grid connections with neighboring countries. Besides, it aims to successfully carry out just energy transition partnership (JETP) associated with production modernization, smart grid construction and advanced power system management in line with green transition trends, emission reduction, and scientific and technological development of the world. At the same time, it will form an overall energy industry ecosystem based on renewable energy and new energy.

Particularly, regarding the goals of ensuring national energy security and supplying sufficient electricity for the country's needs, the Plan will meet socioeconomic development goals, with an average annual GDP growth of 7% in 2021-2030 and 6.5-7.5% in 2031-2050. The power supply will be made safe and reliable.

By 2030, the reliability of power supply will be ranked among the Top 4 countries in ASEAN and the electricity access index will be in the Top 3 ASEAN. 50% of office buildings and 50% of residential houses will be powered by rooftop solar power (for their own consumption, not selling electricity to the national electricity system).

With respect to just energy transition, Power Plan VIII aims to strongly develop renewable energy sources for electricity production. By 2050, renewable energy will account for 67.5-71.5% and greenhouse gas emissions from power generation will be controlled at 204-254 million metric tons in 2030 and down to 27-31 million metric tons in 2050. It also aims to keep the peak emissions of no more than 170 million metric tons by 2030 to make sure that JETP commitments are fully and substantively implemented by international partners; a smart grid system will be built, capably integrated and safely operated renewable energy sources on a large scale.

Regarding the development of the renewable energy industry and service ecosystem, it is expected that, by 2030, Vietnam will form two inter-regional renewable energy industry and service centers, including electricity production, transmission and consumption, as well as renewable energy equipment manufacturing, construction, installation industries and related services in potential places like the North, the South-Central Coast and the South when there are favorable conditions.

Besides, Vietnam will develop power sources from renewable energy and produce new energy for export. By 2030, electricity export is estimated to reach 5,000-10,000 MW.

In 2021-2030, a total of US$134.7 billion is estimated to be invested in developing power sources and transmission grids.

To achieve the above objectives, Power Plan VIII also figures out options for power source development, plans for power grid development, plans for power grid connection with other countries in the region, and orientations for rural electricity development, orientations for industrial and service ecosystem development in terms of renewable energy, and investment capital needs.

Accordingly, power source and transmission grid development is estimated to cost a total of US$134.7 billion in 2021-2030 and US$399.2-523.1 billion in 2031-2050, of US$364.4-511.2 billion will be used for power source development and US$34.8-38.6 billion will be arranged for transmission grid development.

Bac Lieu wind farm - the largest wind farm in Vietnam

Improving legal framework to attract private and foreign investment

According to economic experts, the approval of Power Plan VIII is an important step in completing the Government's official framework for reforming the energy system.

Mr. Keiju Mitsuhashi, Deputy Country Director of the Asian Development Bank (ADB), said, regarding urgent grid congestion and high cut-off issues, easing congestion and reducing renewable energy cut risks is very important. ADB is willing to consider government and non-government funding to strengthen the transmission grid system with ancillary services to ensure grid stability with more renewable energy.

Besides, energy transition should be done at the lowest cost for the economy and people, he said. Vietnam's solar and wind pricing policies have encouraged much private investment and facilitated very rapid solar and wind market development but it comes with a high cost.

To address this, ADB appreciated the government's decision to establish a procurement mechanism for next-generation projects. In addition, the challenges of supporting the integration of intermittent renewable energy production in the grid system require considerable flexibility of the power system to adequately balance supply and demand. Vietnam has several new ways to tackle this challenge but it is important to take a pilot project approach through the public sector to first identify areas that need legal and regulatory updates while assessing the economic and financial value of these projects in Vietnam's power system which can be used as a benchmark for developing appropriate legal and regulatory frameworks as well as effective market mechanisms.

“ADB also intends to provide advanced knowledge support, consult PPP transactions and match financing and co-financing from commercial lenders to complement these efforts,” Mr. Keiju Mitsuhashi confirmed.

Mr. John Rockhold, Chairman of AmCham Vietnam, said, Vietnam will need energy projects that are both economically and financially viable. In addition to ensuring stability, strength and growth of the power grid system, Vietnam must ensure enough electricity to run in the background to gradually replace coal. This means that the transition to renewables, hydrogen, wind and solar with storage systems will have to be achieved in combination with flexible gas/LNG power, many of which will be gradually switched to hydrogen as a background source, along with off-grid large-scale renewable energy solutions and the development of energy efficiency programs.

The Government of Vietnam's more active support for foreign financial sources is also necessary to ensure the financial viability of large-scale projects. Improving regulatory and contractual frameworks and risk management, with a focus on predictability, efficiency, certainty and clarity, is essential to continue to attract long-term private investment for the electricity sector in Vietnam. Large-scale onshore and offshore wind power projects to exploit the great potential of Vietnam, integrated with energy storage systems, can create structural stability of the power source and solve current limitations. A great deal of investment funds is being poured into energy and energy storage technology improvements and a lot of it is making progress every day.

Regarding power transmission, according to AmCham Chairman, in response to the Government's strategy, it is necessary to accelerate improvements and reforms of the legal framework in the process of planning implementation to enable more rapid participation of private investors in grid projects. Vietnam needs to make more flexible regulations and develop regulations on revenue models for grid investment projects that can help facilitate grid investment.

By Quynh Chi, Vietnam Business Forum