Vietnam Promoting Sustainable Energy Transition

Over the past decades, the energy sector has always played the role of the fundamental driving force for Vietnam's inclusive economic development. To turn Vietnam into a high-income economy by 2045, especially in the context of a post-pandemic green recovery, the energy sector needs to continue to play an important part in the journey to overcome difficulties and support growth for the next period.

Many advantages in implementing green growth goals

2021 is the first year to implement the Resolution of the 13th Party Congress, and also the first year to implement Resolution 55-NQ/TW dated February 11, 2020 of the Politburo on the orientation of Vietnam's national energy development strategy to 2030, with a vision to 2045. Mr. Dang Hoang An, Deputy Minister of Industry and Trade, said that the Ministry of Industry and Trade has been assigned by the Government to draft the Power Development Plan VIII with contents that closely follow the orientations and principles of Resolution 55, especially focusing on major issues related to the structure of the electricity industry, power sources, and synchronization with the development of the electricity system and infrastructure.

In March 2021, the Ministry of Industry and Trade completed and officially submitted to the Government the Power Development Plan VIII. In that context, Vietnam's energy industry in general and the electricity industry in particular are facing many challenges. The COVID-19 pandemic is forecast to continue to cause difficulties for businesses while unpredictable climate change and more frequent and destructive natural disasters are expected. Meanwhile, Vietnam needs to focus on promoting sustainable energy transition, ensuring energy security, supplying enough electricity, investing and developing towards green growth.

At the COP26 summit, Prime Minister Pham Minh Chinh announced that Vietnam would develop and implement stronger measures to reduce greenhouse gas emissions with its own resources, along with the cooperation and support of the Government and the international community both in terms of finance and technology transfer, including the implementation of mechanisms under the Paris Agreement, to achieve the net-zero target by 2050. Achieving this goal requires cooperation with the energy industry, ensuring a sustainable transition, towards a green, circular, people-centric economy, leaving no one behind.

However, according to Ms. Carolyn Turk, World Bank Country Director for Vietnam, the difficulties and challenges this time will be even more complicated than before.

On the one hand, Vietnam needs to continue to develop the energy sector rapidly to serve the growing demand; the capacity of the whole system needs to double in the next 10 years. In addition, it is necessary to better manage the impact of climate change by significantly cutting carbon emissions in the energy sector, which currently accounts for 65% of Vietnam's emissions. Realizing all of these goals, while also mobilizing the necessary financial resources for the energy transition, while upholding the principles of equity and affordability, requires continued strict reforms.

Besides, challenges in energy conversion also bring new opportunities. The commitments with the long-term vision that the Government made during the COP26 towards the goal of net-zero by 2050 and stopping coal-fired power generation in the period 2030-2040 have set out clear goals for the energy sector. Developing and implementing a feasible roadmap to realize these goals should be a top priority. The energy sector has many advantages to take the lead in realizing the country's green growth goals - through attracting investment, creating jobs and enhancing the economy's competitiveness.

Importance of Power Development Plan VIII in promoting sustainable energy transition

According to Ms. Carolyn Turk, in order to achieve the above goal, the Government should review policies and sector planning, most importantly the Power Development Plan VIII, regarding clean energy transition as a core goal. This means choosing the right energy structure, focusing on phasing out coal-fired power, and managing the impact of this transition on people and businesses operating in the coal industry, considering the appropriate role of converted fuel sources such as natural gas.

In addition, barriers to renewable energy deployment need to be removed. Vietnam has had great success in solar and wind power under the preferential FIT, but this mechanism also creates challenges related to rampant development, leading to undesirable capacity cuts and instability to the system. “It is time to accelerate the design and implementation of the competitive bidding mechanism. A well-organized and synchronous bidding mechanism can promote the outstanding development of the energy industry, especially offshore wind power, a domestic clean energy source with the potential to bring great benefits to Vietnam,” said Carolyn Turk.

In addition, Vietnam urgently needs to expand and modernize its electricity grid to keep pace with the development of new clean energy technologies. In addition to ensuring transmission capacity, the grid also needs to improve flexibility with battery systems and energy storage solutions. Besides, limiting overload and grid congestion is also an opportunity to increase automation and digitization.

Measures to promote energy efficiency and regulate consumer demand will help bring about immediate successes. These interventions not only reduce the need to expand supply, but are also highly cost-effective. Increasing the use of small-capacity renewable energy sources and distributed power generation can play a complementary role in a centralized power system.

Carolyn Turk said that Vietnam will need a systematic approach to mobilize a large amount of finance needed for the energy transition, which is estimated by the World Bank at about US$12-14 billion per year. Timely innovations in the sector-specific investment climate will spur private sector participation, helping to attract the bulk of the required investments. In addition, the Government also needs to issue regulations to facilitate public finance, including allocating ODA and climate funds to the power sector to create a supporting effect and promote the private sector, such as grid development or PPP projects.

A clean energy transition requires a holistic approach to the economy, not just individual solutions. The transformations of the energy sector can then become a powerful force to realize Vietnam's development goals and climate ambitions.

By Anh Mai, Vietnam Business Forum