Much to ponder for Vietnam’s energy efficiency ambitions

Much to ponder for Vietnam’s energy efficiency ambitions

International partners are playing an important role in implementing the goals of the National Programme on Economical and Efficient Use of Energy for the 2019-2030 period (VNEEP3).

Markus Bissel, director of the Smart Grids for Renewable Energy and Energy Efficiency project under the German Development Cooperation Agency (GIZ), last week took the time to attend the Energy Efficiency Awards for industry and construction, looking for the most energy-efficient enterprises in Vietnam.

The EU and GIZ continue to support the Ministry of Industry and Trade (MoIT) to implement the VNEEP3. Bissel said that more than 350 solutions for energy saving, efficient resource management, and eco-friendly models have, since 2017, become good examples for many companies.

“Vietnam is aiming to achieve energy savings of 8-10 per cent by 2030,” said Bissel. “This goal seems feasible, as the industrial sector could save anything from 20-30 per cent of its currently used energy, possibly even up to 40 per cent in some areas.”

Energy consumption in the industrial sector accounts for more than 47 per cent of total national energy consumption, according to a report by the MoIT.

In Vietnam, the demand for electricity for production and living remains high. The country’s electricity demand rose by 10.6 per cent on average per year during the last four years, and is forecast to continue to rise by 8.5 per cent a year by 2025 and 7.5 per cent annually by 2030. According to calculations by the MoIT, with an average GDP growth scenario of 7 per cent per annum, the energy demand for 2025 could reach 352 billion kWh and 506 billion kWh by 2035. Vietnam could need about 130,000MW of power generation capacity by 2030, a huge challenge for the developing country.

Currently, Vietnam’s economy remains inefficient in energy usage compared to other economies in the region. World Bank data showed that the nation’s energy intensity level of primary energy index for 2019 was about 5.94, lower than that of China but much higher than other countries in the ASEAN region, such as Malaysia, Indonesia, the Philippines and even India. The index defines the energy supplied to the economy per unit value of economic output.

Dr. Do Huu Hao, chairman of the Vietnam Energy Conservation and Energy Efficiency Association, found that the energy-saving efficiency in Vietnam is far below its potential. According to Hao, the first reason for this is the lack of awareness of electricity consumers, most likely because electricity prices are not high. Moreover, Vietnamese enterprises are mainly small- and medium-sized with limited financial capacity, and thus have not paid much attention to investing in modern, high-productivity, and energy-saving systems.

Support from overseas

Using energy economically and efficiently is one of the goals that Vietnam is promoting to reduce pressure on climate change. At the World Climate Summit in April, Vietnam pledged to reduce its total greenhouse gas emissions by 9 per cent by 2030 with domestic resources, and by up to 27 per cent with global support.

Further, the nation promised to rapidly increase the share of renewable energy to 20 per cent of the total supply by 2030, and to 30 per cent by 2045, while also decreasing other emissions caused by production such as agriculture.

The VNEEP1 and VNEEP2, which were implemented from 2006 to 2015, have led to a reduction in energy consumption by around 3.4 and 5.65 per cent, respectively, saving over nine billion kWh. The VNEEP3 is chaired by the MoIT, which is now working with international partners to materialise its goals.

Laura Lindoro, sustainable energy advisor at the Delegation of the European Union to Vietnam last week said, “We are busy working with the MoIT to complete a new programme worth €142 million ($167 million) to support the government’s VNEEP3 and further deploy renewables.”

Since 2018, the EU has provided official development aid worth €108 million ($127 million) to enhance access to sustainable energy in rural, mountainous, sea, and island areas in Vietnam.

According to Lindoro, the programme will continue to provide technical support to the government and the private sector, strengthening energy efficiency and the renewable energy sector, as well as data interpretation and digitalisation. The EU also support policy dialogues in the energy sector through the Vietnam Energy Partnership Group with the MoIT, development partners, the private sector, academia, and others.

Long-term goals

The Asian Development Bank is continuing to carry out activities to promote the VNEEP3 and related activities, especially those in localities and businesses across Vietnam. In 2020, the bank completed a number of activities related to smart lighting and economical and efficient use of energy to assist Vietnam in ensuring national energy security.

Phuong Hoang Kim, director of the Energy Efficiency and Sustainable Development Department under the MoIT, realised that energy saving and efficient activities in Vietnam should continue to be implemented with a long-term strategy with a clear direction, to remove barriers and control risks.

“The VNEEP3 is trying to solve the problem of energy efficiency, but it is necessary to solve the five core problems which are to reduce the investment pressure in new power sources, the conservation of national energy resources, the reduction of national energy intensity, the protection of the environment, and the reduction of greenhouse gas emissions – all of which need to happen while enabling socioeconomic benefits and building a safe and modern living environment for people, businesses, and communities,” Kim said.

Kim cited that the energy efficiency of coal- and oil-fired power plants across Vietnam stands only at around 28-36 per cent, about 10 per cent lower than found in developed countries.

Many studies showed that, from an economic perspective, an effective investment in economical and efficient use of energy brings benefits equivalent to investing four times as much capital in supply development. Although Vietnam is a country with diverse energy resources, in terms of energy resource conservation, it has had to transition from being a net energy exporter to an import one since 2015.