German businesses 'very interested' in Vietnam energy transition: diplomat

Santiago Alonso, development counselor at the German embassy in Hanoi, talks to The Investor on the interest of foreign investors, including German ones, in capitalizing on Vietnam's green energy market, and the cooperation between the two governments in creating green jobs in the Southeast Asian country.

How can Germany support Vietnam in the latter’s energy transition, especially regarding technical assistance and financing?

We have a very long-standing reliable partnership with Vietnam in the energy sector. The first German-Vietnamese project started in 2009 and we have now a portfolio of over EUR1 billion in the energy sector.

We have done a lot together, promoting innovation, technology transfer, and necessary knowhow. We have also offered quite good credit and financing for investment programs. For example, we are preparing a very important joint program in the modernization of hydropower.

We have huge cooperation from the Ministry of Industry and Trade, Ministry of Planning and Investment, Ministry of Natural Resources and Environment, and Ministry of Labor, Invalids and Social Affairs (MoLISA) in this field.

Our cooperation stretches in many important areas and we are glad that we agreed recently to have a comprehensive energy partnership between Germany and Vietnam.

How interested are German companies in investing in Vietnam’s energy transition?

They are very interested. There's really a huge demand for green energy. For many German companies, it’s a very clear goal to be clean and green to support the international climate agenda. The demand is huge from the private sector, not only German enterprises, but also other international enterprises.

There’s certainly still a lot to do to increase renewable energy. Vietnam is a front runner, but the demand is even bigger. I think it would be in the interests of the Vietnamese government to foster the expansion of wind, solar and hydropower.

A lot foreign companies in Vietnam like Lego and Nike demand green energy. How do you see this trend in Vietnam and what effects does it have on the green energy market?

From our perspective, there is still a need to expand renewables such as hydropower, solar, offshore and onshore wind. The demand is there and the private sector is demanding green electricity. It's about Vietnam’s economic competitiveness. Vietnam needs to ensure that the country’s green growth agenda fits with the companies’ own green goals so that they can ensure green supply chains which are becoming more and more important.

The future for the Vietnamese economy is to go green in production and consumption. I think the Vietnamese government has a very ambitious agenda which now has to be realized.

What kind of barriers do German companies face when they seek to invest in the energy sector?

It's always crucial to have reliable regulatory frameworks and incentives, which are what the private sector demands to have reliable, long-term conditions for investments.

What do you think of feed-in-tariffs (FiTs) for renewables in Vietnam which have decreased in recent years? Are they still attractive to foreign investors, including German companies?

The question of financial incentives needs to be discussed very carefully and it is not only one way. FiTs can be very attractive, but so can auctions. A careful decision is needed for the best financial incentives, for which aim, and for which sector. FiTs in Germany are really good at attracting new technology in a wide range of areas.

If you talk about offshore wind in Germany, we went with FiTs in tandem with auctions. For sure, there have to be attractive financial incentives for investors. I'm quite optimistic, because what we see is that investment costs for solar, for example, have been reduced over the last few years. Renewables (solar, wind) in Germany have become the cheapest source we have.

The framework conditions for investments in Vietnam are good and the interest is strong. Reliability is very important for the private sector.

What challenges is Vietnam facing in the ongoing energy transition?

To organize and manage energy transition is of course a very complex and demanding process. We experienced this for many decades in Germany. It needs a lot to really have a successful process of energy transition.

There are many challenges. But maybe just to mention one major aspect with regard to energy transition. You need public and private investments in the modernization of the grid. For Vietnam, it’s a very important issue because a modern grid is the backbone for further expanding renewables.

Despite a lot of challenges, I would like to stress that there are many opportunities for the benefit of the people. And today’s conference is about one big opportunity to create new green jobs.

In terms of strategic planning, what does the Vietnamese government need to do to attract the best projects?

Vietnam is in a very favorable situation because there are many investors worldwide who would like to invest or expand their investments in Vietnam. The German private sector has huge interest in investing more in Vietnam. Vietnam is in an excellent situation with a strong private sector. That's an opportunity to attract these investments by providing a reliable framework to supply green energy. We hear from German enterprises that they want to use green electricity.

Maybe one big issue for the Vietnamese government to really expand renewables is to meet the needs of the private sector towards green growth and a green economy.

How do you value the workforce in Vietnam’s energy sector?

Vietnam is a front runner in renewables on a regional level with a share of about 25% in solar and wind energy, and there have already been changes in the Vietnamese labor market.

According to numbers from the World Bank and the General Statistics Office, 4% of all Vietnamese employees are already in green jobs and the potential is huge. Up to 40% of all Vietnamese occupations and jobs have high potential to become green. There are good conditions to create new and attractive jobs in the future.

I would like to take this opportunity to congratulate the Vietnamese government for its great efforts and commitment to improve technical vocational education and training.

How is cooperation going between Vietnam and Germany in developing green jobs?

As I mentioned before, Vietnam has 40 occupations which involve green skills and these occupations are actually in technical areas. We will need highly qualified technicians in the future to really implement energy transition.

An example of really outstanding cooperation we have had for many years is with the labor ministry MoLISA. We've developed new green occupations like mechatronics, mechanics, and electricians, and these new occupations are in line with international and German standards, as well as Vietnamese regulations.

We are currently supporting 35,000 trainees per year in these new occupations. We are really happy that almost 90% of trainees find jobs within six months according to their skills. This is a foundation and maybe a very important part of this conference is that going green is not just about new occupations; it's also about upskilling existing jobs. It's more about upgrading occupations which are already there.