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Vietnam is located on the Indochina peninsula in Southeast Asia. The country’s total length is 1,650 kilometres from the northernmost point to the southernmost point. Vietnam has a diverse topography consisting of hills, mountains, deltas, coastline, and continental shelf. The topography is lower from the Northwest to the Southeast. There are two major deltas with fertile arable land in Vietnam; the 16,700 sq km Red River Delta, locally known as the Northern Delta, and the 40,000 sq km Mekong River Delta, or the Southern Delta. The country has a long coastline of 3,260 km, running from Mong Cai in the North to Ha Tien in the Southwest.
Located on the Indochina peninsula in Southeast Asia, Vietnam is maybe not the first country you think of when talking about renewable energy and cleantech development. However, Vietnam is privileged regarding its unexplored potential for diverse renewable energy sources. Up until now, only 189.2 MW of wind and close to 0 MW of solar are installed in the country and there was hardly any progress visible in the last years. Besides large hydropower, which because of its negative impact on the environment such as flooding and deforestation is not counted as a renewable energy source on a national level, Vietnam is powering its economic growth almost entirely on fossil fuels (coal and gas). The national power development planning is forecasting a huge increase in coal capacity leading up to 2030.
Despite all of this, there seems to be hope and a change in the narrative and argumentation of key decision makers towards a future powered by more renewables. Looking at the successes of the past and the challenges of the future in Vietnam’s booming and vital economy and energy market, it is vital to understand how political will can slow down or accelerate renewable energy development in Vietnam. After years of coal extension, it looks like 2020 will be an important milestone for phasing into renewables and a green growth path while reducing the country’s dependency on imported coal.
Vietnam’s success story powered by hydro and coal
Vietnam’s economic transition has led to a high economic growth rate and remarkable poverty reduction in recent decades. Accelerated by economic and political reforms under Đổi Mới in 1986, Vietnam underwent a transformation from one of the world’s poorest nations to a lower middle-income country. On its path towards becoming an industrialised country, Vietnam has made significant improvements regarding poverty and social welfare. With an average increase of 6.4% per year in the 2000s, Vietnam’s gross domestic product (GDP) per capita growth has been among the fastest growing in the world since 1990. In 1976, the first year after the reunification, only 2.5% of the rural population had access to electricity. Today, almost the entire Vietnamese population has access to electricity with an electrification rate of 99%, with a governmental plan to reach 100% electrification by 2020. The noticeable speed of Vietnam’s economic transition was accompanied by growing electricity needs at approximately 12% per year for the past decade.
Vietnam has achieved a number of Millennium Development goals and targets such as eradicating extreme poverty and hunger, providing universal primary education, and promoting gender equality in education. Regulations on environmental sustainability have been integrated into national development policies and the forest coverage rate has increased.
Vietnam’s human development index (HDI) value for 2015 is 0.683, which places the country in the medium human development category, with a rank of 115 out of 188 countries and territories, and an increase of 43.2% since 1990. The average unemployment rate between 1998 and 2016 was 2.3% which is very low compared to European standards.
In 1993, more than half of the country’s population lived on less than 1.90 USD per day. Today, the rate of such extreme poverty has fallen to 3%. More than 40 million people escaped poverty over the course of two decades.
Will the future growth be renewable and efficient?
These achievements are based on economic growth caused by catching up effects, public spending, and a growing middle class. The contribution of productivity growth, the main driver of the increase in GDP in the 1990s, has declined over the last ten years and is still quite low compared to other countries in the region. Poverty gains are fragile and a significant portion of the population is at risk of falling back into poverty when economic growth is slows down. The agriculture sector will remain an important driver of economic growth and poverty reduction in Vietnam for years to come.
After exploiting most of its hydropower potential, the Vietnamese government turned its attention to coal power to meet future energy needs. So far, the potential of renewable energy has not been explored, and the political will to make use of this domestic asset is underdeveloped. A transition away from fossil fuel towards renewable energy is also not reflected in Vietnam’s current power development plans (Power Development Plan VII). It is planned to cover the future electricity demand by investing in fossil fuel sources. Vietnam’s Power Development Plan VII Revised planned 42 GW of new coal capacity which would have resulted in an increasing share of coal in the power generation mix from 34% in 2015 to 42.6% in 2030. If all of these coal-fired power plants were built, Vietnam would grow to have the fourth largest number of coal-fired power plants in the world directly behind China, the United States and India.
Vietnam has a large potential for renewable energy. However, due to the national electricity companies’ preference for continued investment in well-known technologies and its reluctance to invest in renewables and a business-as-usual emphasis on entrenched technologies such as coal, large hydropower and nuclear energy, very little of this potential has been exploited. Because the utility is a state-owned monopoly, political will is required for a change in policy toward a sustainable business model based on a much larger share of generation from renewable energy sources.
Renewable energy solutions (excluding large hydro) will provide only a minor share of up to 10% of the installed capacity in 2030. Coming from a low level of greenhouse gas (GHG) emissions, Vietnam has in theory a great window of opportunity to leapfrog fossil fuel investment and experience a relatively painless transition. To avoid the path of locking the country in a fossil fuel structure, with an increasing stranded assets as well as higher energy dependency, political will is needed. A fair competition for fossil fuel and renewable energy generation needs to be developed in order to accelerate the potential of renewable energy and starting a social and just energy transition focusing on the co-benefits of renewable energy.
In 2015, Vietnam’s installed capacity reached 39.35 GW. Coal (3.5%), gas (22.5%) and medium and large-scale hydropower (37.5%) were the three main pillars of electricity production in 2015, whereas renewable energy sources account for just 5.4% including small hydro, biomass, wind and solar.
Vietnam’s GHG emissions are relatively low in a global context. However, between 1994 and 2010, its total GHG emissions increased from 103.8 to 246.8 million tons of carbon dioxide (CO2) equivalent, which means that the emissions more than doubled during this period. Today, Vietnam is already ranked 34th in GHG per capita emissions. Vietnam is emitting much more CO2 emissions per unit of GDP than any comparable neighbouring country in Southeast Asia. Vietnam’s greenhouse gas emissions are expected to increase dramatically in the future to 466.0 million tons of CO2 in 2020 and 760.5 million tons of CO2 in 2030, mainly caused by the emissions from the energy sector. Energy production will be responsible for the principal share of total emissions.
Two years after COP21, Vietnam’s renewables remain low
In 2015, just a couple of days before COP21 began in Paris, Vietnam’s prime minister announced a Renewable Energy Strategy (RES). The targets of the RES were also reflected in the Revised National Master Plan for Power Development (PDPVII revised). In this process the capacity of new coal-fired power plants is at 20 GW, which corresponds to about 17 coal-fired power plants that will not be built, and a substantial increase of RE targets. The reduction in other numbers of coal-fired power plants to be newly built in Vietnam leads to GHG emission reductions equivalent to 32 million less cars on the road every year. The Vietnamese government also reduced its energy demand forecast for 2030 by 18%. According to PDPVII revised, over 10% of Vietnam’s total electricity production is now planned to be from RE in 2030. Later in 2016, Vietnam decided not to phase into nuclear energy and stopped the ongoing preparation for two nuclear power plants with a total installed capacity of 4,000 MW. This capacity gap opens a window of opportunity to add more solar and wind capacity.
With 165 MW of installed wind capacity and just a bit above 5 MW installed solar, Vietnam has a near zero development in the global booming renewable sources. The interest and willingness of companies to invest based on the current support mechanisms, especially for solar, is increasing. Most of the investors are domestic companies that will finance out of their own financial capacity, as international banks do not see bankable conditions for renewables in Vietnam yet. Apart from the interest and official announcement, no new capacity was added in the last years.
To promote renewable energy development and to create a market that has the availability to unlock private investment potential, concrete actions need to follow in the upcoming process. A suitable legal framework followed by bankable conditions and supportive price mechanisms for renewable energy projects are needed to speed up the market establishment and to bring new domestic companies in place. One approach that has been discussed in Vietnam is to implement a portfolio standard which will oblige the existing generation companies to invest in renewable energy.
In late September, at an Investment Promotion Conference in the Mekong Delta, Prime Minister Nguyen Xuan Phuc, emphasised the importance of ’minimising coal-fired thermal power, especially old-fashioned technology.’ He also stated the need to “limit the coal-fired thermal power“ in the Mekong Delta, as it would ’affect the long-term benefits of the locality.’ Green Innovative and Development Centre (GreenID), the leading local NGO on sustainable energy development, is calling on the Vietnamese government to turn words into action by putting a moratorium on new coal-fired power stations in the Mekong Delta by 2020.
“Building new coal-fired power stations in the Mekong Delta would have a devastating impact on one of most spectacular and important eco-systems on the planet,” says Mr Tran Dinh Sinh, GreenID Deputy Director. “Placing an immediate halt on plans for new coal and instead developing clean renewable energy will ensure we have the power we need for our country whilst protecting this precious region for generations to come.”
According to the Revised Power Development Plan VII, 14 coal-fired power stations are planned in Mekong provinces. Even using the latest technology, these coal-fired plants still release high levels of toxic air pollutants, coal ash, and carbon emissions. Furthermore, according to GreenID’s analysis, if all 14 plants are built, around 70 million cubic metres of cooling water (up to 40 degree in temperature) would be poured into the Delta every day creating a major hazard for fisheries and the sensitive aquatic ecosystem.
GreenID fully supports the Prime Minister’s call for development of renewable energy.
“We know that renewable energy has the capacity to power Vietnam and with the right policies in place, it can deliver affordable, safe, and clean power,” says Mr Sinh. “It’s essential for us to focus on developing a clean energy plan for the Mekong Delta, consistent with the new integrated master plan for environment, economy, and society of this region.”
There is a shift in investor’s interest to make use of Vietnam’s domestic various renewable energy potential including wind and solar PV. Over 10,000MW of large scale solar projects are already registered in Vietnam. Additional potential for household photovoltaic (PV) systems is not included in this and will look up further private investments. According to a presentation during the Renewable Energy Week 2017, there is a business case for household solar systems. This will further unlock private investments.
“Constructing new coal-fired power stations today locks us into three decades or more of high-cost pollution. We can avoid this by putting an immediate halt to these plans,” says Mr Sinh. “Vietnam has a major opportunity to stop relying on foreign coal and build our own modern renewable energy system which does not pollute our air, our waterways, and our agricultural land. We should make sure we do not miss this chance.”