Active engagement to face energy issues head-on

What does the worldwide energy crisis actually mean for the globe’s markets?

John Rockhold, chairman of the Vietnam Business Forum’s Power and Energy Working Group

The world has been hit by an energy shortage, restrictions from the Organization of the Petroleum Exporting Countries, lower coal production in China, and interrupted coal outputs from Indonesia, as well as low natural gas reserves and overseas shipment in Europe and a lacklustre output from Europe’s windmills and solar farms.

The crunch in the gas market and lacking outputs from renewables are forcing countries to return to coal. Both China and India cut back on coal to meet emissions targets and are back on the markets as stockpiles run low. China has implemented rationing electricity, while also buying natural gas and coal to stockpile for a predicted cold winter.

What are the long-term options to ensure the nation’s energy security?

While the Politburo’s Resolution No.55-NQ/TW sets the right direction by prioritising renewable and clean energy resources to secure Vietnam’s energy security, the most recent draft of the Power Development Plan for the period 2021-2030 with a vision to 2045 (PDP8) appears to have some gaps regarding such a worldwide energy crisis.

There is an increasing number of bilateral export credits, international financing institutions, and commercial banks that declared their coal exit policies after feeling a backlash for having supported this form of high carbon power projects worldwide.

Although the planned and foreign invested super-critical coal thermal projects for the near term are well financed, other planned coal projects beyond 2022 face extreme difficulty of financing and require direct government investments in construction and imported coal stockpiles.

Given this scenario, and also acknowledging the strategic base load and reserves needed in such a crisis, Vietnam needs to make a realistic assessment for implementing cleaner power generation, resilient long-term operation and fuel reserves for the future.

What are some key recommendations for Vietnam?

It is important to develop existing super-critical coal projects only with the condition that those projects have signed project documents, strategic reserves, and fixed long-term coal contracts, and are provided with sufficient financing.

We support regular reviews of projects based on developer credibility of financial and experience so that they reach the necessary financial bankability of the super-critical coal. Further, the capacity for low carbon energy transitional solutions needs to be expanded to secure the balanced base-load, mainly fuelled with Vietnam offshore gas and imported liquefied natural gas (LNG). It must also be assured that projects have fixed long-term LNG supply contracts with strategic reserves, as the latest PDP8 draft could cause power shortage concerns.

These actions would contribute to a more stable electricity supply and, at the same time, facilitate cleaner energy development and with the needed strategic reserves.

Research on green indigenous hydrogen and iron-saltwater batteries made in Vietnam for future indigenous strategic reserves and transitioning could lead towards zero carbon in 2050.

Vietnam can also promote distributed power solutions such as rooftop solar for direct on-site consumption, without the need of transmission as an efficient solution for energy security, cheaper energy cost, and enhanced competitiveness. Rooftop solar has huge potential and should be clearly differentiated from utility scale solar.

Developing a constructive regulatory and permitting environment that attracts needed Vietnamese and foreign direct investment in cleaner energy generation, grid, and energy efficiency is also crucial.

Moreover, the government policy support is vital to financing and investment related laws to enable more foreign investment inflow into Vietnamese power development.

In the near future, we look forward to seeing the PDP8 completed and put into action to demonstrate a clear signal on Vietnam’s commitment and continued engagement in tackling the global challenge.