Amid soaring energy demand, Vietnam eyes transition to renewables

Power outages are leaving Vietnamese homes and businesses without power for hours at a time, as a prolonged drought and high temperatures strain the fast-growing economy’s capacity to keep up.

A long-anticipated plan meant to fix the energy crunch and help achieve ambitious climate change goals will offer some relief but may not go far enough in weaning the country off of fossil fuels, experts say.

The need for progress is evident.

Streetlights have been turned off in some major cities and businesses have been told to cut energy use. Amid severe drought, two out of the three largest hydroelectric reservoirs in Vietnam have almost completely stopped operating.

“It is a big headache for us,” said Nguyen Thanh Tam, deputy director of Hoa Long printing company in Hanoi. “We need power to operate the machines.”

The national energy plan, called Power Development Plan 8, or PDP8, aims to more than double the maximum power Vietnam can generate to 150 gigawatts by 2030. That’s more than the capacity of developed countries like France and Italy, though well below Japan’s 290 GW.

It calls for a drastic shift away from heavily-polluting coal, expanding the use of domestic gas, and imported liquefied natural gas or LNG, which will account for about 25% of total generating capacity, while hydropower, wind, solar, and other renewable sources will account for nearly 50% by 2030.

“This plan showcases Vietnam’s macroeconomic growth ambitions – with robust plans to expand its generation capacity and the associated power sector infrastructure required to cater to the country’s growing energy demand,” said Kanika Chawla chief of staff at Sustainable Energy for All, the United Nations’ sustainable energy unit.

While Vietnam’s new energy plan mandates that no new coal-fired power plants will be built after 2030 as the country transitions to cleaner fuels, total generation capacity from coal power will still rise by 2030, contributing some 20% of total energy production – down from the current 30.8%.

By 2050, Vietnam will stop using coal for power generation, switching all coal plants to using biomass and ammonia, according to the plan.

The continued reliance on fossil fuels and burning biomass such as rice husk and residue from sugar cane farms, as well as the switch to building new infrastructure for gas-powered plants, has experts worried.

In July 2022, Vietnam enshrined in law a pledge to reach net-zero emissions by 2050. Late last year the Group of Seven advanced economies promised to provide $15.5 billion to help it end its reliance on coal-fired power plants as a part of a Just Energy Transition Partnership, or JETP. Such projects have offered similar incentives to South Africa and Indonesia. Vietnam pledged to phase out coal power by 2040 at the United Nations climate change conference in Glasgow in 2021

“While coal remains part of the energy mix, it is a marked shift from the coal dependence that Vietnam sees today,” said Ms. Chawla. “A definite phase down in share of energy mix and future emissions, in line with the JETP, even as absolute quantities of thermal power are largely unchanged.”

Vietnam has also drawn criticism for cracking down on environmental campaigns. The German government has warned that the recent detention of prominent environmental campaigner Hoang Thi Minh Hong, the fifth activist to be arrested in the past two years, could endanger a recent multi-billion-dollar deal to help the country phase out coal use.

The gradual shift away from coal won’t wean Vietnam from fossil fuels, given its goal of expanding the use of LNG – cooled natural gas that is made predominantly of methane whose production and transportation leaks contribute to global warming.

Demand for LNG – itself viewed as a legacy industry to be phased out – has soared with disruptions to natural gas supplies from Russia due to the war in Ukraine. That means higher prices and less secure supplies.

“If implemented, it would make it one of the largest gas users in the region,” said Aditya Lolla, Asia program lead at independent energy think tank Ember. “Any disruption to gas supply, even if they emanate due to reasons outside of Vietnam’s control, may potentially push the country back to coal if alternate renewable energy capacity is not ramped up soon.”

Financing is another challenge since the plan calls for spending nearly $135 billion on new power plants and electricity grids from now until 2030.

Investors favor renewable energy sources, said Trang Nyguyen, leader of Climateworks Centre’s Southeast Asia team.

“It’s good that the plan gives clarity for investors. However, a big risk is that LNG assets will become stranded, as it is happening now with coal. How to mobilize enough investments in something that may not be viable in the next decade or so is a challenge that I see,” she said.

Vietnam, which has rapidly industrialized and made electricity available to nearly its entire population, has made huge strides in expanding the use of renewable energy. It fueled half of the country’s electricity output in 2022, up from just a quarter a decade earlier. But upgrades to the power grid haven’t kept up.

What’s needed is a revamp of the entire power system, “with a plan to develop and integrate renewables into the power system holistically,” Mr. Lolla said, noting the plan will likely result in short-term electricity rate hikes, even though it will stabilize prices and the power supply in the longer term.

“PDP8’s emphasis on expansion and modernization of the grid also helps as it means fewer outages, enhanced grid stability, and overall improved energy reliability for households and businesses,” he said. “First and foremost, it means increased access to clean energy and reduction in emissions for the consumers.”

This story was reported by The Associated Press. AP video journalist Hau Dinh contributed from Hanoi, Vietnam.