Vietnam’s renewable energy policies have evolved considerably, driven by the need for energy security, environmental sustainability, and economic growth. The country has made bold commitments and strategic plans, but it also faces challenges in fully realizing its renewable energy potential.

Introduction and Revision of Feed-in-Tariffs (FITs)

Vietnam’s introduction and revision of Feed-in Tariffs (FiTs) for solar and wind power projects have played a crucial role in the country’s transition to renewable energy. A feed-in tariff is a policy mechanism designed to accelerate investment in renewable energy technologies by offering long-term contracts to renewable energy producers. Typically, FITs award different prices to different sources of renewable energy to encourage the development of one technology over another.

• Introduction of FiTs: Vietnam’s journey with renewable energy FiTs began in 2011 with Decision 37/2011/QD-TTg, which laid the groundwork for the country’s shift towards renewable energy. This decision offered wind power projects a tariff of 7.8 US cents/kWh. The tariffs were then increased in 2018 through Decision 39/2018/QD-TTg, dividing wind power projects into two categories: inland wind power projects at 8.5 US cents/kWh and offshore wind power projects at 9.8 US cents/kWh, with an operational deadline of November 1, 2021.
• Solar Power FiTs: For solar power, the government introduced FiTs in 2017 under Decision No.11/2017/QD-TTg. This policy aimed to promote the deployment of solar energy, especially in regions with high solar potential.
• Revisions and Challenges: Despite the success of FiTs in boosting renewable energy, the mechanism faced challenges. There were issues related to the sustainability of the FiT mechanism, regional disparities in solar power deployment, and grid capacity constraints. The Vietnamese government planned to transition from FiTs to a competitive bidding mechanism to address these challenges. Moreover, grid congestion issues led to scenarios where state-owned Vietnam Electricity (EVN) could refuse to buy power, adding risks for developers.
• Recent Developments: The Ministry of Industry and Trade finalized the FiTs for solar and wind projects that came online after December 31, 2020, and November 1, 2021, respectively. These revisions aimed to provide a framework for power purchase agreements and end a period of uncertainty for some renewable energy projects. The new tariffs for ground solar plants, floating solar plants, inland wind power plants, and sea-based wind power plants were set at lower rates compared to previous FiTs.
• Future of FiTs: The Vietnamese government’s plans suggest a move away from FiTs towards more market-based mechanisms like competitive bidding. This shift aims to address the challenges posed by the earlier FiT policies and promote a more balanced and sustainable development of renewable energy across the country.

These developments in FiTs reflect Vietnam’s commitment to renewable energy and its efforts to address the challenges in its energy transition journey.

The National Power Development Plan VIII (PDP8) 

PDP8 of Vietnam is a comprehensive and ambitious plan that outlines the country’s energy development trajectory until 2030, with a vision extending to 2050. PDP8 marks a significant shift in Vietnam’s energy policy, emphasizing a move away from coal and towards renewable energy sources, aligning with the country’s commitment to reach NetZero by 2050. Key aspects of PDP8 include:

• Electricity Demand and GDP Growth: PDP8 is based on projections that Vietnam’s GDP will grow at an average rate of around 7% per year from 2021 to 2030, and between 6.5 to 7.5% per year from 2031 to 2050. Correspondingly, commercial electricity consumption is expected to reach approximately 335 billion kWh by 2025 and about 505.2 billion kWh by 2030. By 2050, this figure may increase to between 1,224 billion kWh and 1,378 billion kWh.
• Renewable Energy Targets: The plan sets ambitious targets for renewable energy sources. By 2030, Vietnam aims to develop onshore wind power to a capacity of 21,880 Megawatts (MW) and offshore wind power to 6,000 MW. The capacity for offshore wind power could further increase to between 70,000 to 91,500 MW by 2050, subject to technological capabilities and cost feasibility. Solar power capacity is also expected to increase, with a focus on rooftop solar power production. Biomass and waste-to-energy sources are projected to reach a combined capacity of 2,270 MW by 2030, with further development planned for 2050.
• Hydropower and Stored Power: Hydropower continues to be a significant part of Vietnam’s energy mix, with a potential capacity to produce up to 40,000 MW of electricity. The total capacity, including small hydroelectricity plants, is expected to reach 29,346 MW by 2030. Additionally, there are plans to develop stored hydropower with a capacity of approximately 2,400 MW and 300 MW of battery storage by 2030.
• Reduction in Coal Usage: PDP8 envisions a gradual reduction in coal dependency, with an operational capacity of approximately 30,127 MW by 2030. The plan includes converting older coal plants to alternative fuels, decommissioning those that cannot be converted, and phasing out the use of coal for power generation by 2050.
• LNG and Hydrogen Power: Gas, both domestic and imported LNG, will account for 24.8% of Vietnam’s energy mix by 2030. There are plans for several LNG to power projects expected to come online by 2030. Additionally, there is a roadmap to transition these gas plants to hydrogen power by 2050.
• Investment and Infrastructure: Nearly 700 billion USD in investment will be required over the next three decades in new and retrofitted generation, as well as in grid infrastructure to achieve these ambitious targets. The plan underscores the importance of upgrading Vietnam’s aging grid network to support large-scale renewable energy resources and to build a reliable transmission grid.
• International Collaboration and Regional Connectivity: The plan also focuses on electricity imports from the ASEAN and Greater Mekong Subregion, with commitments to import significant capacities from Laos by 2030 and potentially increase by 2050.

Challenges in the Energy Transition

Vietnam’s shift towards renewable energy hasn’t been without challenges. Issues such as grid underdevelopment, regulation gaps, and financing complexities have impacted the pace and efficiency of this transition.

• Infrastructure and Grid Capacity: One of the primary hurdles is the inadequacy of existing infrastructure and lack of transmission capacity. This limitation constrains the country’s renewable energy ambitions, as the national grid often operates at full capacity and is not equipped to handle the influx of power from renewable sources like solar and wind. This issue is compounded by the need for more stable and flexible power sources such as pumped hydropower storage or storage systems for solar power plants to promote the available capacity of clean power sources​​​​.
• Financial Challenges: The transition requires significant investment, estimated at around $60 billion per year leading up to 2050. While Vietnam has seen a boom in solar power investments, driven initially by fixed feed-in tariffs (FiTs), the rapid pace of technological change and the falling cost of renewable power generation suggest that continuous high tariffs might not be sustainable in the long run. New projects came online so quickly that they outstripped the capacity of the national electricity grid to integrate and distribute the electricity produced, leading to issues in balancing demand and generation capacity​​.
• Policy and Regulatory Challenges: Vietnam’s approach to renewable energy policies, such as not yet allowing direct power purchase agreements (DPPAs) or instituting mechanisms like auction mechanisms, contrasts with regional neighbors. This has resulted in renewable energy projects often being not consistently economical and viewed as unfavorable for developers. The country needs a clear and supportive policy framework to encourage the development of renewable energy​​.
• Managing Transition from Fossil Fuels: The replacement of traditional fuels with electricity poses great pressure on the electricity industry in both operation management and the development of the power system associated with energy efficiency. The uncertain nature of renewable sources like wind and solar power, which rely on weather conditions and specific locations, adds complexity to power system management​.
• Investment in New Technologies: There is a growing focus on developing new generation technologies such as hydrogen. However, the development of such technologies requires a significant shift in investment strategies and poses challenges in terms of regulatory frameworks and supply chains.

Conclusion

Vietnam’s renewable energy landscape is undergoing a significant transformation, shaped by progressive policies and strategic initiatives. The country’s energy policy evolution, marked by the introduction and revision of Feed-in Tariffs (FITs) and the ambitious National Power Development Plan VIII (PDP8), illustrates a clear commitment to renewable energy. However, this transition is not without its challenges.

The introduction and ongoing adjustments to FITs have been pivotal in promoting solar and wind power, contributing substantially to Vietnam’s renewable energy growth. These mechanisms have catalyzed investments and enabled the rapid development of renewable energy projects. The shift in Vietnam’s energy policy, as outlined in PDP8, further reinforces this commitment, aiming for a substantial increase in renewable energy capacity by 2030 and 2050, and a significant reduction in coal dependency.

Despite these efforts, Vietnam faces several challenges. The country’s energy infrastructure, primarily its grid capacity, struggles to keep pace with the rapid development of renewable energy projects. Financial hurdles are also evident, with the transition necessitating substantial investments. Policy and regulatory frameworks need further refinement to foster a more conducive environment for renewable energy development. Managing the shift from fossil fuels to renewables adds another layer of complexity, especially in ensuring the reliability and efficiency of the power system.

As Vietnam navigates these challenges, the pursuit of new technologies like hydrogen power and the strategic use of international collaborations and regional connectivity play a crucial role. This transition is not just about adopting new energy sources; it’s about reshaping the entire energy ecosystem to ensure it is sustainable, efficient, and capable of supporting the country’s growing energy needs.

References

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