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Challenges of energy transition in Vietnam

Converting traditional energy to green, cleaner renewable energy is an inevitable trend to help ensure the development of a sustainable economy. To realize this process, deploying reasonable and stable investment attraction policies is one of the important solutions in the coming time.

Mr. Nguyen Tai Anh, Deputy General Director of Electricity of Vietnam (EVN) said that the view on energy conversion and national energy planning is appropriate to Resolution No.55-NQ/TW of the Politburo on orientations of Vietnam’s national energy development strategy to 2030, with a vision to 2045, and Prime Minister Pham Minh Chinh’s commitment at the COP26 on Vietnam will achieve net zero emissions by 2050. “Vietnam can absolutely do it”, Mr. Tai Anh said.

Particularly for EVN, in addition to converting the energy of existing plants using coal, EVN also has the important task of preparing the system to absorb other primary sources and renewable energy sources. However, the rapid growth has posed many challenges for the current power system.

In-depth analysis on the challenges of the electricity market before the development of renewable energy, Mr. Nguyen Duc Ninh, Director of the National Load Dispatch Center said that besides the problem of overload of transmission lines (overloaded with 220 kV, 110 kV lines in the Central region and congestion in the North-South transmission lines), currently there are more than 200 renewable energy power plants that have not been fully deployed due to congestion transmission lines.

“Due to the relatively high penetration rate of renewable energy in the central and southern regions, there will be an excess of load demand, causing overload for the 500 kV line in the afternoons. Challenges in the operation of the power system have affected the electricity market planning as it is difficult to forecast the possibility of renewable energy in the long-term planning”, Mr. Ninh said.

According to Mr. Hoang Tien Dung, Director of the Department of Electricity and Renewable Energy, in the process of energy transition, besides the favorable factors, Vietnam must also implement solutions to solve the difficulties and challenges in ensuring energy security in the context of minimizing environmental impacts of power generation activities. “The high-speed growth of the load puts pressure on the energy industry’s infrastructure, requiring large investment capital and complex technical solutions,” Dung said.

Similarly, a representative of the Institute of Energy analyzed that Vietnam’s energy transition is facing many opportunities and challenges. Energy resources in the country are quite diverse and abundant, especially renewable energy. Vietnam is also located in an area with favorable energy exchange potential in the region and in the world. However, the weakness of the industry is the limited capacity and technology level of Vietnam, lack of technical infrastructure and support services for repair, maintenance and replacement of equipment. In addition, the legal framework to create momentum for efficient use of energy, new and renewable energy lacks synchronization and needs to be completed. Along with that, the localization rate of technology in the energy industry is low, there is a lack of mechanisms to support and promote technology localization; The new competitive energy market is at an early stage, not yet synchronized.

Mr. Sean M. Lawlor, an energy expert of US Embassy in Vietnam said that the US started the transformation more than a decade ago, so far it has cut coal power in half, and gas power development has reached 38% of the total energy mix, while promoting clean energy solutions. The Biden administration will continue this effort with a goal of installing 30 GW of offshore wind by 2030 and increasing the share of solar power to 40% of the energy mix by 2035.

“As a long-term partner, we are encouraging the Government of Vietnam to implement innovative policy solutions to attract foreign investment, promote energy transition, and aim to fulfill the commitments set forth by the Prime Minister Pham Minh Chinh set out at COP26. Policies include direct power purchasing mechanism, auctions, loan standards and approvals for power transmission projects and investments. The US is ready to share technology, capital, policy and technical expertise to accompany Vietnam on this journey,” he said.

From a business perspective, Mr. Nguyen Thai Ha, General Director of Energy JSC of T&T Group said that the group has been involved in the energy transition for a long time. Seeing the opportunity in investment, the enterprise actively coordinated with major foreign partners (Denmark, France) and invited them to participate in the Group’s next projects through capital mobilization.

“Over the past three years, the Group has implemented a series of onshore wind and solar power projects. Renewable energy is expected to boom after the Government’s commitment at COP26. Opportunities open up, but how they are realized depends on the policies and guidelines of the state. Therefore, to attract investment in the energy sector, businesses need to have a guarantee of a continuous, long-term policy and a stable commitment in the coming time. The policies need to be more specific in mobilizing capital from foreign organizations, for example the power purchase agreement. We urgently need master plans on marine space, detailed instructions on installation, survey, wind measurement … to set a plan to attract investment in the future,” said Mr. Nguyen Thai Ha.

According to Mr. Nguyen Duc Ninh, in the coming time, it is necessary to promote the development of supporting services; developing mechanism of battery energy storage system (BESS). The BESS mechanism can act as an integrated source to provide a reserve source when there is a gap between supply and demand in the power system (unit failure, sudden decrease in renewable energy generation…); at the same time can participate directly in the electricity market or supporting service market… The leader of the National Load Dispatch Center also said that it is necessary to promote the implementation of commercial power load adjustment programs to improve the capacity of load response based on the market; at the same time, creating a new derivative financial market for electricity such as contract auction, futures market, and futures market. “Especially, it is necessary to improve and upgrade the information technology infrastructure and train and raise human resources to meet the new requirements of electricity system operation and market,” said Mr. Ninh.

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