Production Transformation and Clean Energy Adoption Needed

10:00:00 AM | 12/1/2023

In the pursuit of a sustainable and developed future, the imperative to transform energy systems toward cleaner alternatives has become increasingly paramount. However, the transition to clean energy in Vietnam faces considerable challenges. Establishing a clean energy supply system demands substantial investments and advanced technology. Additionally, the production and storage of renewable energy encounter limitations and difficulties in ensuring a stable energy supply. These challenges are further exacerbated by the absence of robust support policies to incentivize businesses and individuals to actively engage in the utilization of clean energy.

Vietnam faces considerable challenges in the transition to clean energy

Energy-intensive yet inefficient

According to Mr. Hoang Viet Dung from the Department of Energy Saving and Sustainable Development of the Ministry of Industry and Trade, domestic energy demand experienced a significant uptick of approximately 10% in the period 2001-2010 and 7% in the subsequent period from 2011-2019. Concurrently, electricity demand surged at a rate of 13% per year in the first decade and approximately 9.71% in the subsequent period from 2011-2021. Alarmingly, greenhouse gas emissions from the energy sector accounted for around 63% of Vietnam's total emissions in 2010, escalating to 67.7% in 2020. Disturbingly, projections indicate an alarming surge to about 73.1% and 79.7% in 2030 and 2050, respectively, following a business-as-usual scenario.

Mr. Dung forecasted that primary energy sources will be insufficient to meet the evolving energy consumption needs of the economy, necessitating Vietnam to import primary energy to support socio-economic development in the future.

Moreover, Mr. Vuong Quoc Thang, a member of the National Assembly's Science, Technology, and Environment Committee, highlighted that Vietnam's economic development is predominantly reliant on energy-intensive industries, yet efficiency gains have not been proportionate. The diminishing reserves and production of coal, oil, and natural gas, along with the full exploitation of large and medium hydropower sources, present a substantial challenge to Vietnam's energy security.

Compounding this is the steep rise in energy demand, placing immense pressure on the energy industry's infrastructure, demanding substantial capital investments. The looming risk of electricity shortages persists without effective and timely solutions. The supply of petroleum remains passive, insufficient, and vulnerable to external adversities. The limited domestic primary energy supply heightens dependence on imported fuel sources, particularly for electricity generation, posing a significant threat to national energy security.

An additional concern arises from the adverse environmental impacts associated with traditional energy sources. In line with its commitment to ensuring energy security and national energy vision, Vietnam has set ambitious goals for green energy development and the reduction of greenhouse gases. The commitment to achieving net-zero emissions by 2050, as declared at COP26, underscores Vietnam's steadfast focus and determination in charting a sustainable development trajectory with the primary objective of bequeathing a clean and safe environment to future generations.

Unlocking renewable energy potential

Vietnam stands prominently among the countries poised for substantial investments in emerging renewable energy sources, encompassing solar power, wind power, biomass power, wave power, and biogas. This is in addition to the existing energy sources such as liquefied natural gas (LNG), hydropower, and coal power.

As outlined in the 8th draft of the electricity planning, the demand for electricity is projected to surge by 9.1% per year in the period 2021-2025, followed by a continued upward trajectory at 8% per year in the subsequent period from 2026-2030. By 2030, the plan envisions renewable energy capacity, including hydropower, to reach 47%, with solar power and wind power collectively contributing over 26%. In 2022, Vietnam's power system boasts a total capacity of approximately 76.3 GW, witnessing a significant boost with the commercial operation of 4 GW of wind power and the installation of 16.5 GW of solar power, including 7.8 GW of rooftop solar power. The total capacity of renewable energy sources, comprising wind and solar power, reached 20,670 MW in 2021, marking a notable increase of 3,420 MW compared to the preceding year and constituting 27% of the total power source capacity within the national system, as reported by the World Bank Group in 2022.

In alignment with its Nationally Determined Contribution (NDC) report, Vietnam is committed to reducing greenhouse gas emissions by 9% from 2021 to 2030 compared to the business-as-usual scenario, with the potential to elevate this reduction to 27% with international support. The National Program on Economical and Efficient Energy Use has set energy-saving targets of 5-7% of total national energy consumption for the period 2019-2025 and aims for an 8-10% reduction in the subsequent period from 2025-2030.

To realize these targets, Mr. Hoang Viet Dung emphasized the critical importance of refining mechanisms, policies, and legal regulations related to energy conservation. Vietnam aspires to reduce power loss to below 6.5% by 2025, ensuring that 70% of industrial parks and 50% of industrial clusters adopt energy-saving solutions, along with the implementation of technology dissemination programs by all key transport enterprises.

Furthermore, Mr. Dung underscored the necessity to review, develop, and enhance mechanisms, policies, and support technically and financially to catalyze investment, production, and business projects aimed at the economical use of energy. Notably, he advocated for the establishment of energy data centers and databases, leveraging information technology to optimize energy utilization and efficiency.

Drawing from global best practices, Mr. Vuong Quoc Thang advocated for streamlining procedures to expedite licensing in renewable energy development. Additionally, in response to short-term energy price fluctuations, he called for special programs and subsidies for consumers, coupled with a classification policy prioritizing energy use in times of crisis. This includes promoting the use of electric vehicles over traditional fuels and utilizing electricity for heating, hot water, and cooling instead of gas, as observed in certain European countries.

Mr. Thang emphasized the urgency for Vietnam to expeditiously, safely, and effectively harness wind and solar energy sources, leveraging all available resources for energy infrastructure development. In the short term, he underscored the need to focus on pivotal energy infrastructure projects to propel the country's socio-economic development. Central to this strategy is the prudent and efficient utilization of energy, emerging as a pivotal requirement in the national energy security framework. Strengthening national energy reserves is imperative, with the state playing a central role in management, administration, and investment guidance, fostering a mechanism for socialization to attract diverse economic sectors to invest in the development and operation of energy storage infrastructure.

By Quynh Chi, Vietnam Business Forum