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Renewable Energy Challenge That Vietnam Face

  • Writer: Green Movement
    Green Movement
  • Mar 17, 2021
  • 3 min read

Updated: Mar 24, 2021

Vietnam has been one of the region's and the world's most dynamically developing economies in recent years, with a relatively high growth rate in comparison to other countries in the region and the world. The energy sector is critical to the country's socio-economic growth. However, the energy development process has revealed flaws and deficiencies in energy supply and use, particularly inefficient and wasteful electricity use.



1. Vietnam's current situation


Essentially, electricity production has surged by more than 2.3 times since 2010, rising from 101.4 billion kWh in 2010 to nearly 235 billion kWh in 2019. According to Nguyen Van Vy, Vice President of the Vietnam Energy Association, Vietnam's electricity output is expected to rise at a 5.6 percent annual rate, from 245 billion kWh in 2020 to 950 billion kWh by 2045 (An Nguyen, 2020). Although the use of fossil fuels in electricity generation is expected to decline, fossil fuels (coal and gas) will continue to play a significant role. This will put a strain on already depleted natural resources, and the increased demand for fuel imports for electricity generation will have a significant impact on climate change and energy security.


Additionally, Vietnam is regarded as a country with the potential to produce wind energy, but data on Vietnam's wind energy exploitation potential has yet to be fully quantified due to a lack of inquiry and measurement. Wind power potential estimates range from 1,800MW to over 9,000MW, and even above 100,000MW. According to reports in 2014, Vietnam's wind energy potential is concentrated primarily in the Central Coast, the South, the Central Highlands, and the islands.


Furthermore, Vietnam has solar energy potential that can be utilized for purposes such as electricity generation and heat supply, among others. With over 2,500 hours of direct sunlight per year, the annual average amount of radiation is approximately 230-250 kcal / cm2 in the southward direction. Solar energy in Vietnam is available all year, is relatively stable, and is widely distributed across the country. The average number of sunny days in the central and southern provinces is around 300 per year. As a result, that provides a solid foundation for the advancement of solar technologies.

2. Causes


The cheapest source of raw materials is energy efficiency and savings. On that basis, the National Assembly passed the Law on Economic and Efficient Energy Use, establishing a solid legal foundation for the implementation of energy efficiency activities. Although some progress has been made, the results are still not commensurate with our country's energy system's potential for savings. The main cause of this situation is a lack of community and business awareness. They are not ready to learn about technology and energy-saving solutions. Besides, the recent underdevelopment of renewable energy projects is due to the low electricity purchase prices from these projects, which are unappealing to investors. Many companies thus have encountered numerous challenges and restrictions in obtaining preferential credit loans in order to replace outdated technology with high efficiency, energy-saving technology.


3. Resolve investor challenges


Although foreign and domestic investment in renewable energy is increasing, Vietnam needs to do more to mitigate investor concerns. Because investors face numerous challenges, including a lack of funding; low tax rates coupled with high investment costs in newer technologies; a lack of qualified human resources; an underdeveloped supporting industry; and delays in bigger projects due to complex legal frameworks.


Therefore, from now until 2030, Vietnam will need approximately 10 billion USD per year to keep up with rising demand. With such a high capital requirement, the government has permitted 100% foreign ownership of Vietnamese energy companies. Foreign investors can choose from the following investment structures: companies with 100 percent foreign investment capital, joint ventures, and public-private partnerships (PPP) in the form of a BOT contract.


With low import duties and high production costs, PPP is the most effective risk-mitigation strategy for entering the market. The term of a PPP is 20 years from the date of commercial operation.


To ensure investors' returns, the government has also approved grid-connected renewable electricity prices, as well as standard power purchase agreements (20 years) for each type of renewable electricity. The electricity of Vietnam (EVN), Vietnam's sole electricity purchaser, is also obliged to prioritize the use of renewable energy in grid connection, dispatch, and electricity purchase in accordance with the approved tariff.


Pham Ha Linh

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