Vietnam & The Promise Of Clean Power
With a rapidly growing economy, vast coastlines available for offshore wind power, and high solar radiation levels, Vietnam has all of the ingredients to be a world leader in renewable energy. A report by McKinsey & Company found that Vietnam is the country in Southeast Asia best suited for wind and solar developments. The transition to renewable energy in Vietnam could be heavily financed by foreign direct investment, as companies investing in Asia search to diversify investments outside of China. This could lead to both a rapid increase in renewable energy deployment as well as sustainable manufacturing. Despite all of these benefits, however, Vietnam remains heavily reliant on coal, oil, and natural gas.
One major reason for the push to bring renewable energy to Vietnam is the current reliance on coal. While other countries in the region have transitioned to natural gas, coal remains a leading source of power in Vietnam. Coal and oil combined for over 73% of the energy matrix in Vietnam in 2021, while emissions have risen 544% since 2000. New policies found in Vietnam’s Power Development Plan 8 address the use of coal, mandating that no new coal power plants will be built after 2030 and by 2050 coal will not be used for energy generation whatsoever.
Despite the seemingly uphill battle that Vietnam is currently facing, it has pledged to achieve net zero by 2050. The last few years have demonstrated just how serious it is about this transition. In 2020, Vietnam installed 11.6 GW of new renewable capacity, third in the world behind China and the United States. One of the largest success stories has been the wind energy sector, which has been a significant driver of total new installed capacity. A wind installed capacity of only 540 MW in 2020 was transformed into a 4,000 MW capacity in 2021.
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One of the most important additions to the development of clean energy in Vietnam is the implementation of Direct Power Purchase Agreements (DPPAs). These DPPAs allow companies to access renewable energy from producers without the requirement of public infrastructure improvement. They also improve the attractiveness as an investment, as off-take of energy is guaranteed. Unfortunately, the government has not made the switch to renewable energy particularly affordable. Vietnam has some of the lowest feed-in tariffs in the world. This discourages private investment in renewable energy and thus the development of large scale wind and solar farms.
In conversation with Kishore Ram, a renewable energy specialist working in Vietnam, he emphasized Vietnam’s vast renewable energy potential. Part of this is due to the size of Vietnam’s coastline, making offshore wind a viable option in many locations. While the cost of offshore wind energy development is greater, there is more room to operate and higher wind speeds. When asked what needed to be done to further Vietnam’s clean energy industry, Ram was insistent that grid expansion and government support were the biggest areas of concern. In the case of grid expansions this will mean an increase in grid capacity and further private investment. On the government side, this means a clear implementation plan and simplifying the process of outside investment.
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