Stable Power Supply Required to Attract Foreign Investors

The issue of power outages poses a challenge to the enhancement of manufacturing competitiveness among Vietnamese enterprises and the attraction of foreign investment. The Government of Vietnam is actively engaged in the development of solutions to address this issue. However, the complexity of the situation requires a long-term perspective for effective resolution.

As reported by the Korean Chamber of Business in Vietnam (Korcham), a series of power shortages occurred in various regions of northern Vietnam, including Bac Ninh, Hai Duong, Ha Nam, Phu Tho, and Vinh Phuc, from June to July 2023. These shortages resulted in intermittent power outages, with industrial zones in these areas implementing scheduled power cuts approximately one to two times per week.

South Korean companies, particularly those operating in high-tech sectors such as semiconductor manufacturing, view these power shortages as a significant impediment to their investment plans in the Vietnamese market. This perspective is echoed by other international firms in advanced industries, which the Vietnamese government is actively seeking to attract. South Korean companies have expressed a strong interest in environmentally aligned, technology-intensive industries, such as rooftop solar power projects. However, the combination of an unstable power supply and ambiguous regulatory guidelines has led to a reluctance to invest in these sectors.

Before this reality, Korcham requested the Government to adopt effective measures for stable power supply within industrial zones to assure foreign-invested companies, including those from Korea, to engage in stable manufacturing.

According to the American Chamber of Commerce in Vietnam (Amcham), the one thing that ties all businesses and any future investors together is the need for energy reliability and immediate access to renewable energy. Keeping energy systems working is an essential goal of good energy governance and granting investors access to renewable energy is a competitive advantage for the country. According to Amcham, a collaborative approach between the public and private sectors is essential to develop affordable, reliable, and sustainable electricity. Vietnam can attract global financing with an effective energy regulatory system.

Amcham suggested that Vietnam continue dialogues between the Ministry of Industry and Trade, the Electricity Group of Vietnam (EVN) and private sector stakeholders to explore viable short-term and long-term solutions for Vietnam to meet its energy security needs, including advancing approval of large liquified natural gas (LNG) projects. Energy infrastructure does not happen overnight and planning for Vietnam’s sustainable growth needs to be done now. Besides, it is necessary to eliminate regulatory uncertainties and place a renewed focus on approving projects in the short term that are realistic and bankable to ensure power supply meets the growing demand in Vietnam.

In addition, Amcham recommended the Government to consider aligning power purchase agreements (PPA) to international standards to enable multilateral institutions and development finance institutions to lend to large projects for energy transition and the renewable energy sector.

“Investors need more streamlined regulations to provide access to renewable energy, with emphasis placed on the implementation of the national power development plan, the development of the decree on rooftop solar development, access for renewable energy in industrial zones, and the guidance on the direct power purchase agreement (DPPA) mechanism,” said Amcham.

The Japanese Chamber of Commerce and Industry in Vietnam (JCCI) believed that to further enhance the goal of achieving a sustainable economy, the early development of the legal framework and implementation guidelines are necessary for the facilitation of power development projects. These include laws related to the use of sea area for large scale offshore power plant projects, relaxing eligibility conditions for DPPA for renewable energy projects, and reviewing the existing pricing mechanism for biomass/waste power generation. In addition, it is necessary to ensure progress in implementing the Power Development Plan 8 (PDP8).

“In offshore wind, it will be beneficial to improve the legal systems related to the use of sea area and formulate a development roadmap, including methods for selecting business operators. This is expected to attract the participation of foreign companies and financial institutions with expertise in large-scale renewable energy projects, leading to its early implementation,” JCCI analyzed.

According to JCCI, Vietnam needs to ensure baseload sources to support the transition to renewable energy. Currently, gas/LNG thermal power is a transitional energy source for Vietnam to gradually achieve both power generation capacity expansion and decarbonization. It can also play an essential role in stabilizing grid operation to further expand renewable energy capacity and reduce carbon emissions. Besides, this power source can also play an essential role in stabilizing grid operations to further expand renewable energy capacity.

However, gas/LNG thermal power is beyond the scope of JETP under the concept of AZEC, which aims to provide cooperation tailored to Vietnam's circumstances. Hence, Japan hoped to expand its assistance and contribute to the realization of gas and LNG thermal power in line with the PDP8 of the Vietnamese government.

By Anh Mai, Vietnam Business Forum