Energy Tracker Asia’s 2021 Vietnam Country Outlook
The Next Renewable Energy
Powerhouse Of Asia
The profound success of renewables in Vietnam
and the opportunities ahead September 2021
© Energy Tracker Asia, 2021
Energy Tracker Asia’s 2021 Vietnam Country Outlook
The Next Renewable Energy
Powerhouse Of Asia
The profound success of renewables in Vietnam
and the opportunities ahead
Energy Tracker Asia’s 2021 Vietnam Country Outlook
is developed by Energy Tracker Asia. Energy Tracker Asia commits to
publishing high-value content, with the aim of showcasing the
inevitable rise of clean energy in Southeast and East Asia by creating
compelling stories and getting our stories to the people
who need it most.
The Energy Tracker Asia website is operated by Cuttlefish Digital.
Through our commitment to accelerate energy transition in this region,
we are allowing free sharing and/or copying of this content, provided
ETA is acknowledged as the author.
Writer: Michiel Vriens
Michiel is a research analyst at the European Climate Foundation (ECF),
focusing on energy finance and transport. His work relates to the
on-going clean energy transition and the uptake of renewables around
theworld. Though he analyses global trends, his main geographic area
of interest is Southeast Asia. He joined in June 2020 and is based in
Brussels. Before joining the ECF, Michiel worked as an energy finance
analyst for the Institute for Energy Economics and Financial Analysis
(IEEFA), a financial think-tank, in Hong Kong; and as a government
affairs consultant in Singapore and Jakarta. He holds a masters degree
in clean energy policy and economics from the Johns Hopkins School of
Advanced International Studies.
Senior Editor, ETA: Eileen Lui
Design and layout: Rudraya Gupta
Cover photo: Nguyen Quang Ngoc Tonkin | Shutterstock
© Energy Tracker Asia, 2021
Foreward
Vietnam’s power sector remains dominated by fossil fuels, with close
to 56% of current installed capacity being coal, gas, or oil-based. Coal
accounts for around 46% of Vietnam’s electricity mix, making it the
largest generation source. Hydropower represents the second-largest
share of installed capacity. It amounts to over 30% of the country’s
electricity mix in 2019. Meanwhile, just under 19% of capacity is based
on gas. Though the country has tried to attract renewable energy
developers since 2011, Vietnam’s renewable energy market only took
off in 2018. Today, wind and solar are the principal drivers of growth
in the country’s power sector. According to IRENA, between 2017 and
2019, Vietnam deployed over 5.5 GW of solar, amounting to over 10%
of the power mix. By the end of 2020, the country’s solar capacity
reached 16.5 GW. Additionally, the government of Vietnam is looking
to install 12 GW worth of onshore and offshore wind by 2025.
This report brings you a deeper dive into Vietnam’s success story in
renewable energy and the opportunities that lie ahead to
further accelerate this energy transition in the country. We hope
this report will spur other countries in this region to rapidly expand
their renewable energy sectors and leapfrog from polluting to
clean energy. Vietnam’s renewables development, as a case study,
reflects how responsive the market can be towards conducive
policies and how quickly developers can deliver.
© Energy Tracker Asia, 2021
Keypoints
• Domestic players have almost entirely driven Vietnam’s
renewables success. Local developers seized the initiative with the
required appetite for market risk and partnering with domestic banks
and Chinese equipment suppliers to deliver extraordinary levels of
capacity growth.
• The growth story of the country’s renewables has primarily
revolved around solar. Explosive expansion in solar saw Vietnam add
16.5 GW of installations between 2017 and 2020. Installed wind
capacity is still below 700 MW.
• Nevertheless, wind promises to be the next source of
renewables growth. While solar has been deprioritised, Vietnam now
targets up to 12 GW of wind installations by 2025 and close to 20 GW
by 2030. Most of this will come from onshore wind, but the country
holds impressive potential for offshore wind.
• The key to optimising Vietnam’s renewable resources will be an
upgraded grid. Together with establishing smooth operation of a
grid with more renewables, the state utility EVN needs more
infrastructure to transmit electricity across the country. Growing
power demand is also likely to put more pressure on the country’s
underdeveloped electricity infrastructure.
© Energy Tracker Asia, 2021
Local developers and domestic banks drive Vietnam’s
solar growth
Coal fails to deliver in meeting Vietnam’s surging demand
for electricity
For the better part of the past decade, demand for power in Vietnam
grew at an average rate of 10% per year on the back of impressive
economic growth 1,2. The country needed more power, and it needed it
fast, leading the government to turn to coal. In the 2011 Power
Development Master Plan 7 (PDP 7), the government planned to
install 47 GW of coal-fired capacity by 2030, the fourth-largest
pipeline in the world 3. Despite expanding its coal capacity by 75%
between 2012 and 2017, however, many of the coal projects were
beset by delays and cost overruns, and power demand growth
outpaced construction.4,5
Communities also grew more vocal in their opposition to new
coal-fired projects, mainly due to mounting concerns of air pollution.
Quang Ninh province, the beating heart of Vietnam’s coal industry,
eventually stated in 2020 that it would no longer approve any new
coal-fired power plants 6. The failure to scale coal in step with growing
power demand pushed the government to consider
renewable energy.
Generous feed-in tariffs catalyse the growth in Vietnam’s
solar industry
The government moved quickly to craft favourable policies for both
the solar and wind industry. On 11 April 2017, the Prime Minister of
Vietnam promulgated Decision 11/2017/QD-TTg (Decision 11), which
introduced a new feed-in tariff (FiT) for all solar energy projects 7. The
tariff was set at USD 93.5 per MWh for a duration of 20 years, and
1. Vietnam’s renewable energy future, McKinsey Sustainability
2. What’s Driving Vietnam’s Renewable Energy Boom?, The Diplomat
3. Stuck in the pipeline: Vietnam’s coal projects stall while renewables surge, Market Forces
4. In Vietnam’s booming energy sector coal reigns, but renewables play catch-up, Reuters
5. As Banks Shun Coal, Vietnam Emerges an Unlikely Solar Champion, Bloomberg Green
6. Vietnam Energy Update Report 2020, MDI
7. Prime Minister’s Decision No. 11/2017/QD-TTg of 2017 on the Mechanism for Encouragement of the Development of Solar Power Projects
in Vietnam, Asia-Pacific Energy Portal
© Energy Tracker Asia, 2021
all projects completed by 30 June 2019 would qualify 8. This marked
the start of the country’s exciting journey to become Southeast Asia’s
most thrilling renewable energy market.
The FiT was but one of a raft of policy incentives. The government also
implemented a four-year tax exemption on investments in solar, and
a 50% reduction on the income tax of each project for the first nine
years of operation, dropping to a 10% reduction between the tenth
and 15th year. Additionally, most utility-scale solar projects were not
required to pay a lease on the project’s land for 14 years, and some
would not have to pay at all 9.
The results were spectacular. By mid-2019, it became apparent that
developers had installed 4.46 GW of solar from a base
of virtually zero 10.
Figure 1: Installed renewable energy capacity (2016-2020) 11
40
30 Decicion 11 issued
20
10
0 2017 2018 2019 2020
Renewable municipal waste Offshore wind Bioenergy Onshore wind
Solar PV Renewable hydro power
8. Vietnam’s Solar Power Boom: Policy Implications for Other ASEAN Member States, ISEAS
9. Vietnam’s Solar Power Boom: Policy Implications for Other ASEAN Member States, ISEAS
10. Vietnam’s solar drive, Power Technology
11. Figure 1: Installed renewable energy capacity in Vietnam, IRENA statistics
© Energy Tracker Asia, 2021
Vietnamese developers lead the charge
Most with experience in the industry and real estate, local Vietnamese
players saw an impressive market opportunity 12. On the other hand,
international actors considered the power purchase agreement (PPA)
– the contract into which any independent power producer had to
enter with the state utility, EVN – to be “unbankable.” They pointed to
several clauses, such as the less than generous curtailment policy and
exchange rate risk, as evidence that building new projects in Vietnam
was too risky.13,14
Knowing that international lenders were reluctant to deploy their
capital, entrepreneurial Vietnamese developers eschewed a
well-established project finance model 15. Instead, they turned to
domestic banks, with little experience financing renewable energy
projects and partnered with Chinese suppliers for cheap
solar equipment.
By June 2020, Vietnamese banks had bankrolled Vietnamese Dong
(VND) 84,000 billion (USD 3.6 billion) in loans to the country’s
burgeoning renewables industry.16,17 A model started to emerge
where Vietnamese local developers would enter into an agreement
with state-backed Chinese equipment manufacturers that were willing
to provide highly favourable financing terms.18,19
In some instances, developers would only need to make an upfront
payment of 10% of the total cost of equipment and begin repaying
the equipment suppliers in installments after a project had been
completed 20. This enabled developers to build a project and then
farm down the asset once it had a proven revenue stream to a buyer
12. New foreign entrants give tailwinds to Vietnam’s offshore wind industry, Asian Power
13. Renewables are booming in Vietnam. Will the upswing last?, Eco-Business
14. Exploring an alternative pathway for Vietnam’s energy future, McKinsey & Company
15. Vietnam’s solar success story and why its solar M&A landscape is about to heat up, Apricum
16. Ngân hàng đã rót khoảng 84.000 tỷ đồng vào năng lượng tái tạo, Tạp chí Thị trường, tài chính - tiền tệ
17. Vietnam’s extraordinary rooftop solar success deals another blow to the remaining coal pipeline, IEEFA
18. Vietnam’s Solar FiT Program Delivers, IEEFA
19. Thai industrial group powers up 2 huge Vietnam solar farms, Nikkei Asian Review
20. Vietnam’s Solar FiT Program Delivers, IEEFA
© Energy Tracker Asia, 2021
willing to pay a premium. They would thus be able to repay the
equipment suppliers and make a handsome return.
All told, the value of Chinese solar equipment exports to Vietnam rose
by over 4,200%, from about USD 68 million (2017) to just under USD 3
billion (2020), according to BloombergNEF data 21.
Figure 2: Chinese solar exports to Vietnam increased dramatically (2017-2020) 22
3000
2000
Value (USD M)
1000
0 2017 2018 2019 2020
Some international players, notably large Thai conglomerates, saw
the nascent Vietnamese market as a way to increase yields following
the stagnation of Thailand’s renewables market. They decided to take
the risk and adopted a similar strategy to local developers. Preeyanart
Soontornwata, the CEO of B Grimm Power, stressed, “if we had to wait
for project finance, we would die 23.” B Grimm Power, Super Energy
Corporation and Gulf Energy are among several Thai conglomerates
that have invested billions in Vietnam’s market 24.
21. BNEF proprietary data. Accessed on 28 May 2021, via the Bloomberg Network.
22. Figure 2: Installed renewable energy capacity in Vietnam, IRENA statistics
23. Thai industrial group powers up 2 huge Vietnam solar farms, Nikkei Asian Review
24. Thai firms expand in booming Vietnam renewables sector, The Asset
© Energy Tracker Asia, 2021
Vietnam’s energy landscape has changed irreversibly
The unprecedented success of the original FiT scheme led the
government to slash tariffs and implement technology-differentiated
rates (see Table 1) 25. Yet, the growth in solar climbed inexorably
upwards. 2020 shaped up to be another record year with developers
installing 9 GW of rooftop solar and 1.55 GW of utility-scale solar,
making Vietnam the third-largest solar market globally. 26,27 Following
this explosive growth, the government is looking to push the brakes
on more solar deployment, if the PDP 8 is to be taken at face value –
it only calls for an additional 2 GW of solar capacity by 2030. 28
Table 1: Solar FiTs have been reduced 29
Revised Feed-in Tariff
Solar Technology
(per MWh)
Rooftop solar USD 8.4
Floating solar USD 7.7
Ground-mounted solar USD 7.1
25. Vietnam’s extraordinary rooftop solar success deals another blow to the remaining coal pipeline, IEEFA
26. Scaling up Rooftop Solar in Vietnam – More than 9GW installed in 2020, PV Magazine
27. Vietnam Was Likely the Third-Largest Solar Market in 2020, BNEF
28. BNEF, “Vietnam Focuses on Gas and Wind in Latest Power Plan”, 17 March 2021. Accessed via the Bloomberg Network.
29. Table 1: Decision No. 13/2020/QD-TTg of 2020 on Mechanisms to Promote the Development of Solar Power Projects in Viet Nam, Asia
Pacific Energy Portal
© Energy Tracker Asia, 2021
According to IRENA statistics, the PDP 8 would bring total solar
capacity to 16.5 GW, representing close to a quarter of Vietnam’s total
69 GW of generation capacity 30. The country has been catapulted into
one of the world’s leading renewable energy markets. About USD 7.4
billion was invested into its renewable energy market in 2020, making
it the eighth-largest market by investment globally, ahead of France
and Germany 31.
Today, renewables are already starting to leave their mark on
Vietnam’s generation mix. Although solar and wind contributed 5% to
power production in 2020, in the first five months of 2021, solar alone
generated 8.73 TWh, roughly 11% of total electricity generation 32,33,34.
Meanwhile, thermal power production declined for the first time on
record 35. Coal power output slipped 8.7% to 41.5 TWh, and gas
turbines only supplied 10.55 TWh, a 16.4% year-on-year reduction.
30. Installed renewable energy capacity in Vietnam, IRENA statistics
31. BNEF, “Vietnam Challenging Germany, France in Renewables Outlays”, February 2021. Accessed via the Bloomberg Network.
32. Data Explorer: Vietnam, Ember
33. Tình hình hoạt động tháng 5 năm 2021 và mục tiêu, nhiệm vụ công tác tháng 6 năm 2021, EVN
34. Tình hình hoạt động tháng 04 năm 2021 và mục tiêu, nhiệm vụ công tác tháng 05/2021, EVN
35. Renewable energy output up nearly 160 percent during Jan-Apr, Vietnam Investment Review
© Energy Tracker Asia, 2021
The continued growth of the power sector will open
more doors for renewables
The power sector will continue to grow robustly over the
next decade
Power demand will grow at an average annual rate of 6.6% over the
next 15 years and will more than double from 217 TWh (2020) to 491
TWh by the end of the decade 36. This will require the capacity to grow
from 69 GW in 2020 to 138 GW in 2030 37. In this context, Vietnam will
rely heavily on renewable development. Wind and solar could supply
close to 30% of the country’s electricity by 2030 38. Though solar
energy appears to be deprioritised for the coming years, the journey
for wind is only about to begin.
Onshore wind will be the next driver of Vietnam’s renewable
energy market
Following the success of solar, wind is now set for its own explosive
growth. At the end of 2020, Vietnam had 630 MW of wind capacity. By
2025, developers could deploy 12 GW of wind. Almost all of this will be
onshore 39. This could rise to 19 GW of cumulative capacity by the end
of the decade 40. The underlying momentum is building – investment
in wind reached USD 2.8 billion in 2020, a 43% year-on-year increase 41.
36. Việt Nam needs more than $128 billion to develop electricity in the next nine years, Việt Nam News
37. BNEF, “Vietnam Focuses on Gas and Wind in Latest Power Plan”, 17 March 2021. Accessed via the Bloomberg Network.
38. Rystad Energy, “Vanishing coal demand: Vietnam’s focus on renewables and gas”, 11 June 2021. Accessed via the Rystad portal.
39. BNEF, “Vietnam Focuses on Gas and Wind in Latest Power Plan”, 17 March 2021. Accessed via the Bloomberg Network.
40. Renewables are booming in Vietnam. Will the upswing last?, Eco-Business
41. BNEF, “Vietnam Challenging Germany, France in Renewables Outlays”, February 2021. Accessed via the Bloomberg Network.
© Energy Tracker Asia, 2021
Figure 2: Forecast wind capacity in Vietnam 42
3000
2000
1000
2018 2019 2020 2021E 2022E 2023E 2024E
Offshore wind Onshore wind
Currently, developers are rushing to meet an October 2021 deadline
for the first round of FiTs for wind. These were issued on
10 September 2018 under Decision 39/2018/QD-TTg and set new,
more lucrative FiTs for onshore and offshore wind projects
(see Table 2) 43.
The wind sector promises to be both an economic opportunity and a
way to meet growing power demand. Wind turbines are vastly more
complex machines that require 22 major components and up to 5,000
subcomponents, unlike solar panels 44. This means that the wind
industry favours regional supply chains. A major driver for Taiwan’s
offshore wind plans has been the establishment of its supply chain.
Vietnam could follow suit to meet its wind ambitions, both on land
and at sea.
The onset of the COVID-19 pandemic initially challenged the
construction of many projects, and developers worried that the
extenuating circumstances would prevent them from meeting the
October 2021 FiT deadline. On 28 October 2020, the government pro-
42. BNEF proprietary data. Accessed on 30 May 2021, via the Bloomberg Network.
43. Vietnam’s Draft New Circular Provides Detailed Guidelines on Development of Wind Power Projects, Baker McKenzie
44. Chinese Wind Industry Growing Competitive, but Unlikely To Dominate, Marco Polo
© Energy Tracker Asia, 2021
posed extending the FiT window until 2023, though with a cut to the
original tariff after October (see Table 2). The industry poorly
received the tariff cut, with the Global Wind Energy Council warning
that it could result in an 80% drop in installed capacity by 2023 45.
But the situation today is completely different from several months
ago. Developers have successfully pushed to meet the original
October deadline, and more than 4.4 GW of onshore wind is expected
to come online, according to EVN’s latest reports 46. The government
now sees little reason to extend the original FiT officially. EVN has
stressed that it does not want to sign more PPAs for onshore wind
projects until it has greater confidence integrating these resources
into the grid. Offshore wind, however, is another matter entirely.
Table 2: The wind FiT window is extended, but the tariffs are revised downwards 47
Wind Original FiT Proposed Revised Percentage drop
technology (per MWh) FiT (per MWh)
Onshore
USD 85 USD 70.2 17.4%
wind
Onshore
USD 98 USD 84.7 13.6%
wind
45. Proposed Feed-in-Tariff reduction could “seriously damage” growth of wind power in Vietnam, GWEC
46. Nguy cơ điện gió, chưa ra hàng đã đối mặt cảnh báo đáng sợ, Vietnam Net
47. Table 2: Wind FiTs, GWEC
© Energy Tracker Asia, 2021
Offshore wind is the renewable energy with perhaps the
greatest potential
Vietnam is blessed with windy and shallow coasts. In the south of the
country, wind speeds average out to 10 metres/second – Vietnam’s
territorial waters rank in the top 10% of the windiest places on the
planet 48. In 2019, the World Bank estimated that the country could
install 475 GW of bottom-fixed and floating offshore wind 49.
The following year, the Danish Energy Agency’s study arrived at a
smaller, though no less impressive, figure of 160 GW. By 2030, the
country could install up to 10 GW, the report found 50. This could help
it to become one of the top five leading offshore wind markets 51.
Market leaders are already attracted to Vietnam’s offshore wind
possibilities. Enterprise Energy is developing the 3.6 GW Thang Long
offshore wind project and a consortium that included Copenhagen
Infrastructure Partners (CIP) is working on the 3.5 GW La Gan offshore
wind farm. 52,53 Ørsted has just set up an office in Hanoi 54.
Despite this obvious potential, the government is taking a cautious
approach. For one, offshore wind is still comparatively expensive,
though costs are projected to decrease significantly over the next
few years. Based on its experience with solar, the government is also
specifically worried about managing the fluctuation of generation
in substantial renewable energy projects. Dealing with variability in
multi-megawatt plants is one thing. Doing so with multi-gigawatt
projects is something else again.
48. Low-income countries play carbon leapfrog in green energy shift, Financial Times
49. Expanding Offshore Wind to Emerging Markets, World Bank
50. Input to Roadmap for Offshore Wind, Danish Energy Agency
51. Giant offshore wind turbines could help Vietnam tackle immense climate change challenges, Channel News Asia
52. Thang Long Offshore Wind Power Project, Enterprize Energy
53. Denmark, Vietnam Join Forces on La Gan Offshore Wind Farm, Offshore wind biz
54. Ørsted hails ‘optimal conditions’ of Vietnam offshore wind power play, Recharge
© Energy Tracker Asia, 2021
Much focus so far has been on the FiT discussion. Developers
undoubtedly need policy certainty to construct Vietnam’s first
offshore wind projects, given how long it will take to do so – the first
project could take up to seven years to build, according to involved
parties. Some tariffs would be an effective policy instrument to drive
development. But, rather than setting an open deadline, an option
could be for the government to limit the amount of capacity that
qualifies for tariff. This would avoid leaving EVN with the contractual
obligation to pay high rates for large quantities of added capacity, as
happened with solar.
For example, the government could provide the first 2 or 3 GW of
offshore wind that comes online with a FiT so that the industry has
time to find its feet 55. It would also signal that the government
expects these actors to take on market risks sooner rather than later.
There are also other ways to give the industry a leg up, as a recent
World Bank report outlines 56. For instance, facilitating and stream-
lining the leasing and permitting offshore wind projects would make
the situation easier for developers. Growing a vibrant offshore wind
industry will require coordinated and conducive policies that need to
be an expression of a holistic strategy on the government’s part – it is
not only about which tariff the government sets.
Recent drafts of the PDP 8 have shown the government to be more
open to committing to its offshore wind sector. A February draft called
for only 2 to 3 GW by 2030, but a more recent version outlines a target
of 5 GW, with an unlimited cap. The government is slowly warming to
the idea of cultivating a flourishing offshore wind industry, though it
is clear it wants to have a better handle on the pace of growth.
55. BNEF, “Vietnam Focuses on Gas and Wind in Latest Power Plan”, 17 March 2021. Accessed via the Bloomberg Network.
56. Offshore wind roadmap for Vietnam, World Bank
© Energy Tracker Asia, 2021
New investment channels could draw more capital to
Vietnam’s electricity market
Vietnam will need a hefty amount of investment to expand its power
sector. Over the next decade, the country will need USD 128.3 billion,
MOIT predicts 57. Of this, USD 95.4 billion will have to go to
power generation 58.
A changing financial environment will enable market participants to
find new ways to raise capital, moving away from a
project-finance-centred approach. Issuing green bonds, for instance,
has become an increasingly popular method for developers to find
fresh funding for new renewable energy projects 59. This would help
many developers who want to enter the market but have so far been
prevented by the perceived risks of the PPA. In Vietnam, corporate
bond issuance for renewable energy projects has been on the rise
since 2019 60.
Additionally, multilateral finance institutions are channeling the
funding of institutional investors into renewable energy projects in
Vietnam. For example, the International Finance Corporation has
financed two wind projects through its Managed Co-Lending Portfolio
Programme (MCPP) 61.
Increased M&A activity could also attract more investors to Vietnam’s
power sector, with potentially more interest being shown in acquiring
projects that have already been built and that have a steady stream of
revenue 62. This move has become more attractive since Fitch raised
EVN’s credit rating to BB. Other initiatives, such as the Asian
Utilities Engagement Club and other climate-oriented funds, offer
closer coordination between utilities, developers, and investors, plus
more streamlined access to capital 63.
57. Vietnam’s draft power plan backs coal cancellations, commitments to gas, renewables, IHS Markit
58. Việt Nam needs more than $128 billion to develop electricity in the next nine years, Việt Nam News
59. Vietnam’s PDP8 Pause Is an Opportunity to Improve Market Structures, IEEFA
60. Báo cáo thị trường trái phiếu doanh nghiệp năm 2020 của SSI, VietNam Finance
61. IFC financing two wind power projects in Vietnam, The Asset
62. Vietnam’s solar success story and why its solar M&A landscape is about to heat up, Apricum
63. New investor club pushes Asian electric utilities to slash emissions, Eco-Business
© Energy Tracker Asia, 2021
Continued dependence on fossil fuels and a lack of grid
infrastructure are the two largest obstacles facing
Vietnam’s renewables
PDP 8 draft still places too much emphasis on fossil fuels
Despite showing the potential of leapfrogging to clean energies, 57%
of Vietnam’s power sector pipeline still consists of coal and gas 64. In
total, Vietnam’s power sector planners seek to add 39 GW of thermal
capacity – 17 GW of coal and 22 GW of gas 65. This will exacerbate the
stranded asset risk in Vietnam’s power sector. According to Carbon
Tracker’s earlier modelling, its operational coal fleet alone represents
a USD 6.5 billion stranded asset risk 66. A thermal build-out will also
further entrench Vietnam’s dependence on imported fuel. 86% of new
coal capacity will be fed by imported coal, and the country will have to
turn to imported liquefied natural gas (LNG) as its domestic
gas fields deplete 67.
The price volatility of LNG which was revealed between April 2020 and
January 2021 should also ring alarm bells. Prices shot up 18-fold, from
a low of USD 1.83 per million British thermal units (MMBTu) to USD
32.5/MMbtu 68. In Japan, where gas supplies roughly a third of all
electricity and prices are already notoriously high, electricity prices
rose by almost 650% as a result 69.
It is far from clear how large Vietnam’s LNG market will be 70. So far,
only two LNG import terminals have started construction – the Hai
Linh LNG import terminal and the Thi Vai LNG import terminal – but
no other projects have broken significant ground 71. At the same time,
a handful of integrated LNG-to-power projects have been licensed.
There is a risk that Vietnam will lock in gas capacity with long-term
offtake contracts that could prevent it from leveraging further
technological advancements in renewables.
64. Vietnam’s PDP8 Pause Is an Opportunity to Improve Market Structures, IEEFA
65. Vietnam’s draft power plan backs coal cancellations, commitments to gas, renewables, IHS Markit
66. Here comes the sun (and wind), Carbon Tracker Initiative
67. PDP8 priorities and risks addressed, Vietnam Investment Review
68. JKM spike again shows extent of gas exposure to winter uncertainty, S&P Global
69. Japan’s power prices hit record highs on LNG shortage, Argus Metals
70. Beyond the Noise: Setting the Right Expectations for Vietnam’s LNG Project Pipeline, IEEFA
71. Vietnam Energy Update Report 2020, MDI
© Energy Tracker Asia, 2021
The baseload paradigm underpins much of Vietnam’s power
sector planning
The government sees baseload power as a way of buttressing its
renewable resources. Former Deputy Prime Minister Trinh Dinh Dung,
then a member of the National Power Development Plan Appraisal
Council, insisted that building out coal was necessary to ensure the
security of the whole energy system. He described coal as a source of
backup generation 72. This view also extends to gas-fired generation.
What this does not take into account is that baseload is incongruent
with significant volumes of renewable energy. Coal and gas-fired
plants that provide baseload electricity cannot effectively offer
peaking services, which will be increasingly needed as more
renewables are brought online. In this sense, coal and gas baseload is
the antithesis of flexibility.
As shown by the experience of other markets, solar and wind
generation puts pressure on baseload power by reducing the
operational hours of thermal power plants to meet peak
demand 73. This forces these plants to ramp up and down more
frequently, increasing maintenance costs and reduces the amount of
time they operate. Some dated gas-fired power plants in Vietnam had
reported incidents, according to EVN 74.
Rather than calling for more baseload power as a backup to variable
renewables, grid planners should focus on optimising their current
and future renewable resources. The investments with perhaps the
highest returns will be those in the grid.
72. PDP8 priorities and risks addressed, Vietnam Investment Review
73. How PV-Plus Storage Will Compete With Gas Generation in the U.S., BNEF
74. Đề xuất giải pháp vận hành hệ thống điện khi có năng lượng tái tạo cao, EVN
© Energy Tracker Asia, 2021
Vietnam’s grid needs an upgrade
The modernisation of Vietnam’s grid has not kept pace with the
expansion of its generation capacity. As a result, the grid has been
unable to absorb the new level of power supply. EVN plans to curtail
up to 1.74 TWh of renewable generation in the second half of 2021 75.
This obstacle is also an opportunity for Vietnam and EVN. The country
needs to find a way to divert private sector finance to grid investment.
Indeed, the PDP 8 calls for about USD 33 billion in grid investments
over the next decade, an amount that a cash-strapped utility like EVN
would be hard-pressed to provide 76.
A public-private partnership (PPP) framework could meet this
requirement, and steps are already underway to shape it. In February
2020, the Politburo issued Resolution 55 that recommends the
Electricity Law be amended to allow for private investment in the grid.
In March 2020, the Trung Nam Group became the first private
company to be approved to develop transmission lines that connect
directly to its 450 MW solar plant 77. In January 2021, the standardised
PPP law came into effect 78.
For this to work, the government will have to design a framework that
incentivises the deployment of private capital while enabling EVN to
maintain operational control of transmission and distribution assets.
75. Vietnam plans more solar, wind power cuts, VNExpress
76. Việt Nam needs more than $128 billion to develop electricity in the next nine years, Việt Nam News
77. Vietnam Energy Update Report 2020, MDI
78. Renewables are booming in Vietnam. Will the upswing last?, Eco-Business
© Energy Tracker Asia, 2021
Vietnam could show other countries how to leapfrog to
clean energy
Vietnam provides an impressive case study of how countries can
rapidly expand their renewable energy sectors and leapfrog from
polluting to clean energy. It reflects how responsive the market can
be towards conducive policies and how quickly developers can deliver.
Concurrently, Vietnam’s experience also sheds a light on which
aspects a country should pay close attention to when expanding its
power sector. Modernising and expanding transmission and
distribution infrastructure is essential. This enables the grid to take on
the growing number of electrons and transport them to where they
are needed.
It also highlights how essential it is to move beyond a baseload
paradigm that still holds true in most Southeast Asian countries.
Doing so will help power sector planners leverage and take advantage
of the continued innovation in renewable energy.
© Energy Tracker Asia, 2021
Vision : A World Using Renewable Energy
Mission : To inspire our audiences to act and accelerate energy transition in Asia by
amplifying positive development on renewable energy and energy finance.
Energy Tracker Asia is owned by Cuttlefish Digital :
Energy Tracker Asia
The L. Plaza, 367-375 Queens Road Central
Unit 1603, 16th Floor,
Sheung Wan, Hong Kong
© Energy Tracker Asia, 2021
