Vietnam’s Renewable Energy Boom – part 1

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Vietnam is a socialist one-party republic that is set to be one of the fastest-growing economies in South East Asia. Bordered by China to the north, Cambodia, Laos to the west and the South China Sea to the east, the country’s fundamental economic strength is supported by its strong local demand and export-oriented manufacturing sector in its current transition to market-based economy [1]. The strong economic outlook, increasing population, and the country’s commitment to global climate change and mitigation efforts triggered its strong promotion and implementation of renewable energy sources.

Energy Supply Mix

Renewable energy has been part of Vietnam’s power system with its high hydropower potential. Vietnam has 2,400 river systems that are greater than 10km in length, resulting in the government’s assessed hydropower potential of 31GW. As of 2018, 20.43 GW or 42% of installed capacity is derived from hydropower. However, back in the 1990s, hydropower accounted for almost 75% of the total electricity generation in Vietnam and saw a steady decline while coal-fired power generation emerged. Currently, coal-fired power generation at 18.45GW, and gas-fired power generation is at 7.18GW. Oil-based generation accounts for only 1.51GW, while photovoltaic, wind, and biomass are only 0.52GW by end of 2018. Unlike other ASEAN nations like the Philippines and Indonesia, Vietnam has no geothermal power generation. The tidal and ocean power technologies are at a very early stage and are not yet contributing to the supply mix. Figure 1 below shows the growth in energy supply from various sources from 2000 to 2018 [2].

Figure 1: Energy supply growth from various technology in Vietnam from 2000 to 2018 [2]

The year 2019 saw a massive boom in photovoltaic solar installations due to the Feed-in Tariff round 1 with a deadline set in June 2019. According to Vietnam Electricity (EVN), as of June 30, 2019, a staggering 4,460MW aggregate capacity of solar power projects have been connected to the national grid [3]. This translates to solar PV’s growth from 0.3% to 8.3% of the total installed capacity of Vietnam in less than a year.

Current Power Demand and Projected Growth

A study conducted by the Vietnamese Government and Danish Energy Agency in 2017 predicted an average annual electricity demand growth of 8% until 2035 at business as usual scenario pegged at baseline economic growth [4]. This translates to a total consumption of 662,689 GWh in 2035 from the 216,666 GWh in 2018. Bullish economy backed by a strong industrial and service sector, increased urbanization, and population growth with a better quality of life contribute to the expected continuous electricity demand growth for the next 15 years. 

Electricity Market Structure

Vietnam is in the period of transition to a market-based economy. As a socialist republic, the country started with a monopolistic scheme, even in the power sector. In 1995, the state-owned vertically-integrated monopoly in the power sector, Electricity Vietnam (EVN), was established. Starting 2003, Vietnam restructured its electricity market to allow for more capital infusion and partial equitization from the private sector to address the looming concern on energy security brought about by unprecedented growth in economy and energy demand.

In 2005, Vietnam passed its Electricity Law, which provided the target phased transition of the electricity market from monopolistic to a competitive one. The Law limits the absolute control of the government to transmission, system operation and load dispatch, and basic generation facilities. This provides the distribution network and other generation facilities open to private entities. With the inflow of private investment and market competition, the Electricity Regulatory Authority of Vietnam was also established [5]. This move resulted in growth in power generation, as seen in Figure 1, where supply started its significant upward trend from 2006 to present.

Figure 2 below summarized the current market structure in Vietnam. EVN still retains its primary control in the generation, system operations, transmission, and even the distribution segment. The increase in independent power producers (IPP) was seen this year through the various solar developers entering the market to avail the FiT rate.

Figure 2: Vietnam Electricity Market Structure (BNEF [2])

Electricity Rates in Vietnam

As published on the EVN website, the current retail electricity rate in Vietnam is at 7.3 US c/kWh for the manufacturing sector at standard hours, 12 US c/kWh for the commercial sector at standard hours, and 9 US c/kWh for a medium-sized household. Table 1 below shows the comparison of the latest electricity tariff of Vietnam against other ASEAN countries.

Table 1: 2019 Electricity rates of Vietnam, Philippines, and Indonesia, on-grid, non-subsidized customers at standard hours [sources: EVN, MERALCO, and PLN]

Table 1: 2019 Electricity rates of Vietnam, Philippines, and Indonesia, on-grid, non-subsidized customers at standard hours [sources: EVN, MERALCO, and PLN]

Author’s Info:

Claris Canta

  • Six years of working for a renewable energy developer in the Philippines
  • Received a Master’s degree in Energy Systems from the University of Melbourne, 2018

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