Capital conundrum in energy
A clear power policy and early publication of new power planning are urgently needed for Vietnam to attract private capital in infrastructure energy.
South Korean companies have been expressing interest in liquefied natural gas (LNG) power generation projects. In one instance, the Korea Gas Corporation, South Power, and Hanwha Energy are participating in the Hai Lang phase 1 initiative in the central province of Quang Tri, which is expected to start commercial exploitation in 2026-2027.
However, the progress that was approved in the previous Power Development Plan (PDP) has now been converted to the draft PDP8, which states that it will not come online until after 2040. The switch could cause serious problems for investors as well as provincial authorities.
Kim Han-Yong, chairman of the Korea Chamber of Commerce in Vietnam (KoCham) said at last week's Vietnam Business Forum (VBF), “If the plan is rolled back beyond 2030, project development may become practically impossible. It will be difficult to coordinate with finance, construction, and equipment companies that are intending to participate. We hope that the government will pay attention and create conditions for the project to be implemented as originally planned.”
KoCham insisted that Hai Lang phase 1 has points that are suitable for Vietnam's development interests because the project has an optimal location and sufficient investor capacity. In addition, the project does not require expansion of the existing 500kV line.
Members of various business groups at the VBF encouraged the government to continue promoting renewable energy, energy efficiency, battery energy storage, and more.
Vice president of the Singapore Business Group Seck Yee Chung said, "The clarity on the tariff mechanism for under-construction wind farms, which were not able to manage to achieve the recent feed-in tariff (FiT) commercial operations date deadline, should be one of the prioritised considerations.”
Clear roadmap desire
According to a representative of the American Chamber of Commerce in Vietnam (AmCham), energy policy needs to be looked at from many angles, including access to finance, tax policy, public education, carbon emissions, transmission, and storage. Any plan must be open to innovations, and Vietnam’s geographical location and climate will continue to offer it comparative advantages for solar and wind energy development.
“Following on the successes already achieved with solar and wind power, we recommend that Vietnam explore diversified energy sources going forward, including geothermal, hydrogen, and biomass resources, which are given only very small consideration in the current PDP8 draft,” the representative said.
AmCham supports the planned increase of offshore wind in PDP8 to bring economically feasible large-scale offshore wind farms to support the development of Vietnam’s private sector, international standards, and bankable purchase power agreements attracting private investments.
These offshore wind farms should be developed with green storage units to support transitioning to a zero-carbon future.
Onshore wind has had success with more than 4GW constructed just within the past year thanks to FiT policies. AmCham is encouraging the government to enact policies that continue supporting the sector, including both support for projects that face construction delays and the development of a new auction mechanism that enables further growth.
Offshore wind provides great potential with estimates of both fixed bottom and floating capacity at around 600GW.
“Our Energy Committee has worked with the government on various ways other countries have built transmission systems to move clean energy to markets successfully," the AmCham spokesperson added. "Gas can serve as an important transition fuel, and help Vietnam get away as fast as possible from coal and be a bridge to clean energy.”
Alain Cany, chairman of the European Chamber of Commerce (EuroCham) pointed out that in addition, "The PDP8 indicates a rapid and exceptionally high importation of fossil fuels, such as coal and LNG. Importing fuel creates potentially price inflationary risks that are unwelcome to consumers and which can no longer be insured against by government measures to mitigate cost inflation."
Cany says this undermines Electricity of Vietnam’s efforts to continue supplying low-cost, reliable electricity in increasing volumes. The draft PDP8 indicates only 5GW for new offshore wind before 2030 and 40GW before 2045.
“This lack of ambition may result in unnecessarily high power production costs. Therefore, the Ministry of Industry and Trade should consider facilitating the development of offshore wind power by creating an internationally bankable power purchase agreement,” said Cany.
Deputy Minister of Industry and Trade Nguyen Sinh Nhat Tan pointed out that the government has given a clear green strategy and that the ministry has been given the mission to complete the PDP8 as soon as possible, which will set an energy development roadmap with priority given to renewable energy considering Vietnam’s COP26 commitments.
AmCham stressed in a VBF document that the success of any energy generation project requires access to the market. "Transmission cannot be overlooked – curtailment of energy is a wasted investment. Transmission and grid build-out should be open to private investment, and can be done without sacrificing national security," the document said.
Gas can serve as an important transition fuel, and help Vietnam get away as fast as possible from coal and be a bridge to clean energy, the document continued. The transition to clean energy will take time and in the nearer term, the development of offshore gas-to-power projects and others have the potential to provide both economic and environmental benefits.
Worldwide, energy storage is considered a force multiplier for renewable energy, as it allows for the integration of solar, wind, LNG to hydrogen, and distributed energy resources while increasing grid stability.
AmCham strongly believes that energy storage could address the current challenges with renewable integration in Vietnam such as grid curtailment and intermittency.
A variety of energy storage mechanisms, including pumped hydro, saltwater iron, and offshore wind/hydrogen, offer great opportunity and Vietnam should seek to accelerate the deployment of new battery technologies.
In addition, AmCham said, equipped with the right mechanism, battery storage will be a critical enabler for a high renewable energy future of Vietnam, which is not only self-sufficient and sustainable but also secure, reliable, and stable.
Michael R. DiGregorio, head of VBF’s Environment Working Group, said that all major institutions with a stake in energy have agreed that the negative environmental impacts of coal thermal power far outweigh short-term economic gains. To attract the funding necessary to move away from coal, Vietnam would need bankable, economically feasible, and lower-emission energy projects. However, to maintain grid stability and expansion, Vietnam should also secure a baseload sufficient to replace coal.
“This means the transition toward renewables, including hydro, wind, and solar, will require a pathway that includes energy storage and flexible gas or LNG power. These projects can be designed now for the introduction of hydrogen as a renewable, clean fuel source for baseload in the near future. It is reported that most global oil and gas majors are investing heavily in hydrogen in the expectation that the transition will begin in transportation and rapidly accelerate in the 2030s,” said DiGregorio.
Foreign investors are about to transfer two power plants built under the BOT mode when the 20-year contract terminates. State-owned corporations are outdoing one another to take over the plants.
South Korea is showing desire to work with the Vietnamese government to develop nuclear power production.
A leader of Japan’s power producer EREX said the corporation is seeking to invest in biomass power in Vietnam, which holds great potential for biomass power development.