Vietnam's renewable energy market is increasingly attractive to foreign investors following the commitment of the Vietnamese Government at COP26 on the net zero emissions target by 2050 and the capacity allocation in the draft Power Master Plan VIII. However, obstacles in legal framework, financial capacity and operating capacity can become challenges for many organisations and businesses interested in this field.
It is estimated that by the end of December 2022, the electricity generation output of renewable energy (RE) is expected to reach 130 billion kWh, accounting for nearly 48% of the electricity generation output of the Vietnamese power system, of which 35% is hydroelectricity and 13% is wind, solar and biomass. The share of renewable energy generation is constantly increasing at a very fast rate in the power generation structure of Vietnam's power system in the period 2010 - 2022, from 27% in 2010 to more than 48% in 2022, especially with huge contribution from wind and solar power in the years 2019 - 2022.
However, the growth of electricity production in 2022 compared to 2021 mainly comes from the increase in the output of hydroelectricity due to favourable hydro-meteorological conditions (83% of the increase in renewable energy output compared to 2021 is from hydroelectricity). Wind power had a relative contribution to the increase in electricity generation, estimated at 8.8 billion kWh in 2022 compared to 3.3 billion kWh in 2021 for wind power.
In fact, wind power in Vietnam has a slow start and lacks vitality despite its great potential. Data in the survey of the Energy Assessment Program for Asia of the World Bank (WB) show that Vietnam has the largest wind potential in Southeast Asia with a total wind power potential estimated at 599 GW. Specifically, after 9 years of Decision 37/2011/QD-TTg on priority policies for wind power development, by the end of 2020, less than 500 MW of wind power was connected to the grid and the pioneer project has been set as bank mortgage. By the end of August 2022, the authorities had also received 55 proposals to survey offshore wind power, with a total capacity of over 100,000 MW, 6 proposals from foreign investors, 13 proposals from economic organisations with foreign investment capital and 36 proposals from domestic investors. In addition, there are currently 40 offshore wind power survey proposals from domestic investors that have been sent to the People's Committees of coastal localities.
Vietnam is also considered to be in an area with abundant solar energy resources. It is estimated that the area between the East Sea and the South Central Coast has a large amount of direct and radiant energy with a total energy of about 3,000 to 5,000Wh/m2/day. However, investors are being discouraged from investing in more projects related to solar energy. A reason is that as the whole country shares the same time zone, solar power plants will go up and down at the same time with the capacity accounting for a large proportion in the system. As there is no battery storage system, the participation of solar power is mainly dependent on the weather, making the power system face a great challenge when it wants to meet the goal of maximising renewable energy at the same time. Additionally, many solar power projects do not have the required documents at the time of sale of electricity for payment is also discouraging renewable energy investments.
Currently, the renewable energy market for the new period does not have a pillow policy to replace the expired incentive mechanism (FIT price). 62 wind power with a total capacity of 3,479MW, which have signed power purchase and sale contracts with EVN but not able to start commercial operation before November 1, 2021 are still waiting for a new electricity price. Solar power projects with 452.62MW of installed capacity are also waiting to determine a new electricity price. With rooftop solar power, after nearly 2 years, there is not yet a specific policy for investors to implement despite increasing demands from the global markets to use clean energy.
However, 2022 is a great year for waste-to-energy electricity plants, with 60 MW (11/2022) compared to 7.5 MW (2021). New waste-to-energy plants in operation are solving both the problems of increasing waste at big cities and new electricity source. For example, the Seraphin Waste Power Plant project started on March 30, 2022, at Xuan Son Solid Waste Treatment Area, Son Tay, Hanoi as the second waste electricity treatment project in Hanoi, and also the first project to use the technology of a mechanical burner that both burns waste and generates electricity, invested by a Vietnamese enterprise. The 37 MW Seraphin Waste Power Plant is one of the important projects of Hanoi, with a capacity of 1,500 tons of dry waste per day, an investment of 3,500 billion VND, aiming to reduce the capital's landfill rate from 100% to 3%. Additionally, Soc Son garbage power plant, with a capacity of handling 4,000 tons of dry waste per day, with a total capacity of 75 MW, started operating unit 1 with a capacity of 15 MW on July 25, 2022, after many delays.
In addition, biomass power will also be promoted in 2022, including projects that have been started and completed investment procedures in the year, including Hau Giang biomass power 20 MW, Tra Vinh biomass power 25 MW, together with a series of other biomass power projects proposed to be built in Quang Binh, Yen Bai, Dak Lak, Thanh Hoa.
Challenges and opportunities
A number of wind power projects completed in 2022 were not allowed to connect to sell electricity to the EVN system due to the expiration of the effective period of Decision 39/2018 and Circular 02 on wind power project development. According to preliminary estimates of experts, about 10 billion kWh annually can be produced to supply demand from these wind power projects that have not been recognised for commercial operation (COD) and connected to the national grid, causing significant damages to investors and the whole economy in general.
According to Mr. Nguyen Van Vy, Vice Chairman of Vietnam Energy Association, the renewable energy development in Vietnam is facing three major bottlenecks. Firstly, the mechanisms to support the development of renewable energy have not provided a long-term orientation. Secondly, technical difficulties and obstacles such as the lack of synchronous development between renewable energy projects and the transmission grid, wind and solar power projects with variable capacity depending on natural conditions, partly affecting the operation of the power system. Finally, renewable energy projects have large capital requirements but high risks because capacity and output are dependent on the weather, which can lead to long payback periods. Meanwhile, financial institutions and commercial banks are not ready to lend or have loans with high interest rates.
A highlight for investors of transitional renewable energy projects is the Electricity Generating Price Framework for Renewable Energy according to Circular 15/2022/TT-BCT issued by the Ministry of Industry and Trade in October 2022 - Methods for determining electricity generation price range of solar power plants and wind power plants. However, as the Electricity Regulatory Authority (ERAV) is still in the process to collect data, calculate and evaluate preliminary results to finalise the ceiling prices, this remains as a major challenge for renewable energy investors because the negotiation process for this electricity price can be lengthy.
The Ministry of Industry and Trade is also studying and proposing to legalise the development of renewable energy, creating a favourable legal pathway to promote attracting domestic and foreign private sector investors to invest in renewable energy development in Vietnam. In addition, Vietnam is promoting activities and implementing many solutions to raise awareness and responsibility, and encourage improvement of behaviours and habits of efficient use of electricity, while striving for the ratio of energy saving to total final energy consumption to reach about 7% by 2030 and 14% by 2045.
It is expected that by 2030, the proportion of renewable energy sources including hydroelectricity, wind power, solar power, and biomass will account for at least 33% of total electricity generation and by 2050, renewable energy will account for at least 55% of total electricity generation. To meet the urgent needs of the energy industry, Vietnam will need to strongly promote solutions for the development of a sustainable energy system, along with economical and efficient use of energy and breakthrough technological solutions to ensure energy security.
Source: the Internet