Vietnam stands on the verge of becoming a global powerhouse in renewable energy. Its economic growth, combined with an abundance of natural resources ideal for offshore wind and solar power generation, sets the stage for a transformative energy sector. The insightful analysis by McKinsey & Company underscores Vietnam as the Southeast Asian leader poised for significant developments in solar and wind energy. As companies look to reduce their reliance on China, Vietnam presents a compelling choice for foreign direct investment that can catalyze a surge in renewable energy and sustainable manufacturing. Yet, despite these favorable conditions, Vietnam’s energy consumption still heavily depends on fossil fuels.
Moving Away from Coal Dependence
The need to pivot from coal, which currently accounts for a substantial 73% of the country’s energy mix as of 2021, is pressing. Emissions in Vietnam have skyrocketed by 544% since 2000, necessitating urgent action. This recognition has led to progressive policies laid out in Vietnam’s Power Development Plan 8, which includes halting new coal power plants after 2030 and phasing out coal entirely by 2050 for energy production.
Renewable Energy Strides and Pledges
Vietnam’s commitment to a greener future is evidenced by its promise to attain net-zero emissions by 2050. The nation showed its resolve as it ranked third worldwide, following China and the US, by installing an impressive 11.6 GW of new renewable capacity in 2020. The wind energy sector, in particular, witnessed exceptional growth—from a modest 540 MW in 2020 to an astonishing 4,000 MW in 2021. This growth spurt stands as a testament to the potential and vigor of Vietnam’s renewable energy industry.
Direct Power Purchase Agreements: A Step Forward
Direct Power Purchase Agreements (DPPAs) have emerged as a vital component for Vietnam’s clean energy progress. They provide companies direct access to renewable energy from producers, negating the need for public infrastructure upgrades and securing energy off-take. However, Vietnam faces challenges, such as maintaining competitive feed-in tariffs that are essential for attracting private investment and enabling large-scale wind and solar developments. Currently, Vietnam offers some of the lowest feed-in tariffs globally, which could deter private investment in renewable energy initiatives.
Expanding Infrastructure and Government Support
In a conversation with Kishore Ram, a renewable energy expert in Vietnam, the country’s abundant coastline was highlighted as a particularly advantageous factor for offshore wind operations. Despite the higher costs associated with offshore wind ventures, the vast operational spaces and potent wind speeds make it an attractive energy source. Ram accentuated the necessity for sweeping grid expansions to bolster capacity and attract private investment. Additionally, he called for streamlined government support, including cogent implementation plans and simplified processes for external investments, to accelerate the clean energy industry’s growth.
