Vietnam’s efforts to drive its renewable energy development are gaining momentum but big challenges are along the way, requiring better collaboration between key players, according to a new report by YCP Solidiance.
Renewable energy is a crucial focus for Vietnam, as the country balances rapid economic growth with reducing its environmental impact, and is seeking to reach carbon neutrality by 2050.
Therefore, the Vietnamese government’s energy policy is at the center of the industry, and major corporations have also incorporated climate change and sustainability into their operations.
The fast-expanding road to net-zero carbon emissions by 2050 is still long and full of challenges, Asia-focused advisory and management consulting firm YCP Solidiance said in its “The Current Energy Transition in Vietnam” 2023 report.
With challenges in the market, the collaboration between key players – both from the government and private sector levels – will be key. “Developers and investors must collaborate closely with central and provincial agencies. And the government must ensure that innovative systems and regulations are geared at stimulating and advancing the growth of sustainable energy sources,” the study said.
Currently, coal power represents approximately half of all electricity generation in Vietnam, with renewable sources only at 5%. While coal will continue its growth in the near future, all recent drafts of the Power Development Plan 8 (PDP VIII) aim to reduce its percentage share in the energy mix through the growth of renewable sources such as wind and solar, according to the consultancy.
In the draft plan, the use of coal will drop to around 24% in 2030. Notably, YCP Solidiance researchers predicted that wind power will see the largest jump in market share, from hardly non-existent today to 15% by 2030. Meanwhile, solar energy will see its cut drop from 24% to around 10%.
Gas
The consultants also zoomed in on three specific segments of the energy mix: liquefied natural gas, or LNG, wind power, and energy storage, such as pumped hydro and battery storage.
LNG generating capacity is forecasted to reach 39 gigawatts by 2030 and 46 GW by 2045. Wind will by then have hit a generating capacity of 120 GW.
For LNG, Vietnam enjoys a strategic geographical location and a convenient transportation route, with many deep-water ports and existing gas infrastructure systems available for use. Therefore, YCP Solidiance described the rapid short-term growth of LNG as understandable and feasible.
Several LNG power projects are in the advanced stages of development. However, the reliance on imported LNG, and its volatility in price, poses a risk to energy security and project viability, the report said.
American energy corporation AES officially received in-principle approval for its 2.25 GW Son My 2 combined cycle gas turbine power plant in the south-central province of Binh Thuan on February 5, with an investment of $1.8 billion.
Wind
YCP Solidiance said that Vietnam, with a long coastline stretching over 3,200 kilometers and a large range in geography, has the potential for wind generation up to 512 GW – Southeast Asia’s highest.
Vietnam has to date no offshore wind installations operating, but it is planned that about 30% of all wind installations will be offshore by 2035 and 54% by 2045.
The report wrote, “Despite higher initial capital requirements, investment costs, and technical complexity, offshore wind offers an opportunity to add large amounts of capacity with a higher level of reliability and stability to the grid compared to solar and onshore wind.”
The provinces of Binh Thuan, Ninh Thuan, Khanh Hoa, Phu Yen, and Binh Dinh on the central coast are forecasted to have the highest offshore wind potential nationwide. Danish fund management company Copenhagen Infrastructure Partners (CIP) and its arm Copenhagen Offshore Partners (COP) are currently investing up to $10.5 billion in developing the 3.5 GW La Gan offshore wind project in Binh Thuan. The project is seen as Vietnam’s largest offshore wind farm.
Earlier this March, the Asian Development Bank and Monsoon Wind Power Company Ltd. signed a $692.55 million non-recourse project financing package to build a 600 MG wind power plant in the Lao provinces of Sekong and Attapeu to export electricity to neighboring Vietnam. Comprising 133 wind turbines, the project will be the largest wind power plant in Southeast Asia and the first in Laos.
Energy storage
Energy storage In Vietnam, pumped hydro and battery technologies are currently the most feasible solutions, the report said. Pumped hydro can connect to solar and wind installations to generate electricity for later use, while battery storage is limited to small-scale or distributed generation settings.
The two sources are forecast to account for around 11% of total renewable energy output in 2045, with energy storage rising more than 5%, said the study. The YCP Solidiance researchers warned that the road to successful energy storage is long. “There are barriers in technology, financial feasibility, procedures for registration, and policy regulation and guidance.”
“There is currently no official regulatory mechanism on energy storage technology. Moreover, the current high investment in energy storage makes it financially infeasible to integrate it into the existing renewable energy projects.”
In the country, VinES Energy Solutions of Vietnam’s largest conglomerate Vingroup and China-based global battery maker Gotion High-Tech started construction of their $275 million battery factory in the central province of Ha Tinh’s Vung Ang Economic Zone last November. The factory is designed to annually produce 30 million lithium iron phosphate (LFP) battery cells, which will be used for EVs and energy storage systems.
VinES in December 2021 started constructing a battery manufacturing and packaging plant also in Vung Ang like the new VinES-Gotion plant. The facility, of VinES’s own, is making lithium batteries for VinFast’s electric cars and buses.