The energy fleet in Vietnam is composed primarily of large hydropower (38%), coal (34%) and natural gas (18%). Renewables contribute only a fraction of total installed capacity (43.3GW in 2016), with small hydropower (2.8GW) and other renewables making up 7% of capacity. Revised Power Development Plan aims to increase the share of renewables while simultaneously promoting new coal build and LNG import facilities to support a growing industrial sector. Electricity demand is expected to increase 9% annually from 141TWh in 2015 to 506TWh by 2030.
In March 2016, the Prime Minister approved the revised Power Development Plan VII for the period of 2016-2030, a follow up to the previous 2011 Power Development Plan. The new legislation puts a stronger emphasis on renewable growth, fuel diversification and transmission reliability. Most importantly, it increases the renewable generation target to 6.5% by 2020 (previously 4.5%) and to 10.7% by 2030 (previously 6%). It also adds technology specific targets for biomass and solar, in addition to previously set wind goals. The targets are: 800MW of wind by 2020 and 6GW by 2030; 850MW of PV by 2020 and 12GW by 2030; and 750MW of biomass by 2020 and 3.2GW by 2030. At the same time, the Plan calls for another 43GW of new coal to be built by 2030 and several new LNG import facilities.
Vietnam has a number of existing laws and incentives to support renewables. This includes a Feed-in-Tariff (FiT) of $0.078/kWh for wind, $0.0935/kWh for solar, $0.7/kWh for landfill waste, $0.10/kWh for incineration and $0.06/kWh for CHP biomass. Small hydro power and biomass are given avoided-cost-tariffs (AVCT) which refer to the cost saved by power system while procuring 1kWh of renewable power. These are revised annually based on the production cost of the most expensive power plant in the grid. Renewable projects can claim a preferential corporate income tax rate of 10% for 15 years, compared to 20% for other industries and accelerated depreciation on assets 1.5 – 2.5 times faster than other property.
Nonetheless, existing incentives have failed to boost the industry and development remains stagnant. FiTs for wind and biomass are insufficient to encourage new build. Power Purchase Agreements are not considered bankable by the private sector which poses difficulties in financing. As a result, to date only 160MW of wind have been built, small-hydro resources are becoming scarce and no major utility-scale PV has been commissioned.
Vietnam gained seven places to rank 10th globally on Climatescope 2017. Its score of 1.80 ranked it above all 17 Asian nations, apart from China and India. The country was placed in the top 10 worldwide on three out of the four parameters, with its best performance and biggest improvement being on Clean Energy Investment and Climate Financing Parameter II.
The country’s worst performance was on Enabling Framework Parameter I. It dropped five places to 45th, reflecting its largely unreformed power sector (with its state-owned utilities and only partially unbundled operations) as well as gaps in its clean energy policy framework. On the positive side, it has introduced feed-in tariffs and tax incentives.
In contrast, Vietnam took seventh place worldwide on Parameter II, compared with 20th the previous year. Clean energy investment of $682m in 2016 was an increase of more than 100% on 2016. Additional positive factors include the low average cost of debt (7.12%) and the high level of local investment (more than one-third of the almost $1.5bn invested in the sector since 2012).
On Low-Carbon Business & Clean Energy Value Chains Parameter III, the country was ranked 10th, unchanged from 2016. Its score was supported by the wide variety of manufacturing businesses present in each of the renewable power sectors, apart from geothermal, and the wealth of clean energy service providers, such as bankers, lawyers and insurers.
Vietnam was placed 9th on Greenhouse Gas Management Activities Parameter IV, a gain of five places compared with 2016. This reflects the goals set out in its Nationally Determined Contribution to reduce emissions by 8% compared with ‘business as usual’ by 2030, rising to 25% with the assistance of international aid. The country also has an ambitious domestic climate change policy.