Vietnam is one of the most efficient power markets in Southeast Asia, driven by low-cost resources such as hydro and coal. The country has achieved around 99 percent electrification with relatively low cost in comparison to neighboring countries.
With electricity demand projected to increase by eight percent annually until 2025; the government is moving forward to develop renewable energy sources to ensure energy security and addressing the growing power demand.
Supply and future demand
Power Generation by Fuel Type (Dec 2016)
| Power source | Capacity MW | % share |
|---|---|---|
| Hydropower | 15,857 | 37.6 |
| Coal fired power | 14,448 | 34.3 |
| Oil fired power | 1,370 | 3.3 |
| Gas fired power | 7,502 | 17.8 |
| Diesel, Small Hydropower and Renewables | 2,418 | 5.8 |
| Import | 540 | 1.2 |
| TOTAL | 42,135 | 100 |
Supply
Energy sources are diverse in Vietnam, ranging from coal, oil, natural gas, hydropower, and renewable energy. The total installed capacity as of November 2018 was 47,750MW.
According to the 2017 Vietnam Electricity Annual Report, hydropower and coal-fired power led amongst the power generation sources. Renewable energy, along with diesel and small hydropower accounted for around six percent of the total power generated in the country.
Demand
With growing industrialization and economic modernization, energy demand is predicted to increase by over 10 percent annually during 2016-2020 and by eight percent per annum during 2021-2030.
The demand will increase from 86 Terawatt hours (TWh) in 2010 to 265-278 TWh in 2020 to 572-632 TWh in 2030.
To meet the growing demand, Vietnam needs 60,000MW of electricity by 2020, 96,500MW by 2025, and 129,500MW by 2030. To do so, the country needs to increase its installed capacity by 6,000MW – 7,000MW annually and spend close to US$148 billion by 2030.
As for the renewable energy sector, the funding required would be around US$23.7 billion by 2030. For energy efficiency, a further US$1.5 – US$3.6 billion would be required during the same period, according to a report by the United Nations Development Programme.
Renewable energy – current state and potential
At present, hydropower holds the largest share amongst all renewable energy sources, followed by biomass and wind. Solar energy, biogas, and waste-to-energy technologies are picking up slowly while geothermal energy and tidal energy are at a very early stage.
The government aims to increase the electricity output produced from renewable sources from approximately 58 billion kWh in 2015 to 101 billion kWh by 2020, and 186 billion kWh by 2030.
| Renewable Energy Source | Installed capacity (MW) | Potential (MW) |
|---|---|---|
| Small hydropower | 1,648 | 7,000 (technical) |
| Wind | 189.2 | 26,763 (technical) |
| Biomass | 270 | 318,630 (theoretical) |
| Solar | 8 | 7,140 (commercial) |
| Source: Vietnam Renewable Energy Report 2018 | ||
Government targets 2020-30
In 2016, the government approved the revised National Power Development Master Plan (“PDP VII”) for the 2011- 2020 Period, with a vision for 2030.
The plan aims to increase the share of renewable energy to around seven percent by 2020 and above 10 percent by 2030 and reduce the use of imported coal-fired electricity to ensure energy security, climate change mitigation, environmental protection, and sustainable socio-economic development.
The targets set in PDP VII for renewable energy for 2020, 2025, and 2030 are:
| Type | 2020 | 2025 | 2030 | |
|---|---|---|---|---|
| Wind | Total Capacity (MW) | 800 | 2,000 | 6,000 |
| Electricity prod. (%) | 0.8% | 1% | 2.1% | |
| Hydro Power | Total Capacity (MW) | 21,600 | 24600 | 27,800 |
| Electricity prod. (%) | 29.5% | 20.5% | 15.5% | |
| Biomass | Electricity prod. (%) | 1% | 1.2% | 2.1% |
| Solar | Total Capacity (MW) | 850 | 4,000 | 12,000 |
| Electricity prod. (%) | 0.5% | 1.6% | 3.3% |
Investments
Solar
Major investors in Vietnam in the approval, construction, or completion stage include German ASEAN Power, B.Grimm Power Public Co Ltd, Trina Solar, Schletter Group, JA Solar, Sunseap International, Nippon Sheet Glass, Ecoprogetti, Tata Power, Shapoorji Pallonji Infrastructure Capital, Gulf Energy Development, InfraCo Asia Development, and ACWA Power.
Although there is no foreign ownership restriction in the industry, PPP projects in the form of BOT contracts are usually preferred due to government guarantees and incentives.
Wind
In the wind energy sector, the major investors include GE Renewable Energy, Mainstream Renewable Power, Phu Cuong Group, Blue Circle, Superblock Pcl, Siemens Gamesa, Doosan Heavy, Egeres Enerji, and Tan Hoan Cau Corp.
Challenges
Although foreign and domestic investment is on the rise in the renewable energy sector, much more needs to be done to ease investor concerns.
In spite of the liberalization of the policies in the last few years, investors are facing numerous obstacles such as:
- Lack of capital/funding;
- Low tariffs coupled with high investment costs in newer technologies;
- Lack of qualified human resources;
- Underdeveloped supporting industries;
- Weak grid capacity;
- Un-bankable power purchasing agreements (PPA) terms;
- Delays in larger projects due to the complex regulatory framework; and
- Lack of clarity in future energy prices
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This article is produced by Vietnam Briefing, a premium source of information for investors looking to set up and conduct business in Vietnam. The site is a publishing arm of Dezan Shira & Associates, a leading foreign investment consultancy in Asia with over 27 years of experience assisting businesses with market entry, site selection, legal, tax, accounting, HR and payroll services throughout the region.
