Renewable energy faces policy and mechanism barriers

VEPG Technical Working Groups sharing their recommendations to impvove Vietnam's renewable energy policy

This was announced by Bruno Angelet, head of the delegation of the European Union to Vietnam at the second high-level meeting of Vietnam Energy Partnership Group (VEPG) with the theme “Joining hands for a sustainable energy future in Vietnam.”

Notably, the meeting discussed the policy recommendations of the VEPG Technical Working Groups, which aim to promote the development of Vietnam's energy sector in five priority areas including renewable energy, energy efficiency, energy sector reform, energy access, and energy data and statistics. Each Technical Working Group presented and discussed a number of specific policy recommendations, drawn from studies and dialogues among members of the groups during the past year.

Notably, the first technical working group reviewed the current incentive regime for wind and solar energy. At the prime minister’s Decision No.39/2018/QD-TTg on mechanism for provision of assistance in development of wind power projects in Vietnam, the FiT for wind power will be raised to 8.5 cent (onshore) and 9.8 cent (offshore) per kW/h, respectively, for projects implemented before November 1, 2021.

VEPG’s members mostly agreed that the main reason behind the lack of investment is the fact that the standard power purchase agreement (PPA) does not correspond to international standards by putting major financial risks on RE projects, pointing out several issues that should be revised.

In addition, the existing net metering scheme (Decision No.11/2017/QD-TTg and the related circular) has not yet initiated relevant investment mainly due to a lack of implementation and unsolved taxation questions.

Furthermore, the technical working group mentioned challenges to energy efficiency improvements, saying that there is no national energy efficiency programme in place since 2016. It also noted the lack of mechanisms, tools, and policies to enforce compliance with the legal requirements as well as to encourage investment in energy efficiency technology and innovation. The monitoring and inspection of energy efficiency compliance lacks co-ordination among governmental agencies and local departments.

The third technical working group focused on energy sector reform, the main content of which is the development of the Vietnam Wholesale Electricity Market (VWEM). Especially, for the direct power purchase agreement (DPPA) mechanism to be rolled out, it may be necessary to start with existing laws and gradually improve the legal framework based on outcomes from the pilot mechanism.

Besides, the Technical Working Groups mentioned challenges related to administrative procedures governing Public-Private Partnership (PPP) arrangements and pointed out shortcomings that need to be addressed with concrete action, including the fragmented legal framework and lack of an integrated strategy for energy statistics as well as the lack of a comprehensive data quality assurance framework.

“The EU confirms to support Vietnam to transfer to using clean energy with a suitable selling price. During the past year, the VEPG issued proposals and recommendations in order to support the government to build a complete framework of mechanisms to develop the renewable energy sector. We hope that these proposals will be added to the government’s strategic policy and then be implemented,” said Bruno Angelet.

Vietnam received nearly 40 policy recommendations which are the results of the work of VEPG’s five Technical Working Groups. These policy recommendations are valuable and truly relevant to the policy development of the Vietnamese energy sector.

The VEPG was established in June 2017 through an agreement between the Vietnamese government and development partners with the purpose of strengthening mutual partnerships and better aligning and co-ordinating external support to the energy sector in Vietnam.