Nation’s net-zero aim given strategic boost

Energy supply:

- Continuing to develop small hydropower plants that meet environmental protection standards, and expand the number of medium and large hydropower plants. Increasing the capacity of concentrated solar power plants, rooftop solar power, onshore and offshore wind power, biomass power, and developing technologies for hydrogen, ammonia, and tidal and wave energy.

- By 2030, the ratio of renewable energy sources including hydropower, wind power, solar power, and biomass will account for at least 33 per cent of the country’s total electricity output, and by 2050 the ratio will increase to at least 55 per cent.

- Gradually shifting from coal power to cleaner energy; reducing the proportion of fossil fuels, not developing new coal-fired thermal power projects after 2030, gradually reducing the scale of coal power after 2035; considering developing nuclear power plants after 2035 when conditions on advanced technology and safety are met.

Energy use:

- Using energy efficiently, such as increasing the penetration rate of high-performance equipment in industrial, residential, and commercial sectors; improving efficiency of boilers, electric motors, and electrical equipment; using hydrogen to replace coal.

- Carrying out agricultural electrification and energy-efficient equipment in post-harvest agricultural production chains, logistics, including storage.

- Developing anti-heat buildings and houses; applying energy efficiency standards and regulations for buildings; promoting solutions and innovative business models for cooling and air-conditioning equipment, and smart lighting systems.

- Developing industries using clean energy, such as producing and operating vehicles, trains, and ships using electricity, gas, and hydrogen; producing new generation batteries; and developing smart infrastructure and logistics. Source: National Climate Change Strategy to 2050.

We welcome the visionary commitments that the government has made to aim for net-zero emissions by 2050 and to phase out coal-based power by the 2040s. This sets clear endpoints for the energy sector. Now, defining and implementing feasible pathways for achieving these goals should be the priority. The energy sector is well positioned to lead the green growth ambitions of the country - it can catalyse new investments, create new jobs, and improve the competitiveness of the economy.

There are some key issues for the government to consider. Firstly, barriers to renewable energy deployment should be eliminated. We have witnessed the excellent success of the solar and wind industries under the feed-in tariff regulations, but it has also created challenges related to uncontrolled expansion and has created unwanted curtailment and system instability. It is time now to accelerate the design and launch of competitive bidding programmes. An organised and coordinated auction-based scheme can propel the industry forward, particularly offshore wind, a domestic clean energy resource which can be immensely beneficial for Vietnam.

Secondly, the power grid needs to be modernised to keep pace with the growth of new clean energy technologies. In addition to power transfer capacity, the grid also needs to improve its flexibility with batteries and energy storage systems. Alleviating the grid bottlenecks is also an opportunity for mainstream automation and digitalisation.

In addition, consumer-side energy efficiency and demand moderation measures are immediate low-hanging fruits. These interventions not only reduce the need for vast supply-side expansion but are also highly cost-effective. Greater use of distributed renewable energy resources can complement what a centralised power system can deliver.

Next, a systematic approach to mobilising the large amounts of financing needed for the energy transition, which in our estimation will be about $12-14 billion annually, is necessary.

At the same time, enacting regulations that support public sector financing, including channelling official development assistance and climate funds where it complements and leverages the private sector – such as for power grid development and public-private partnership projects – is essential.

Electricity demand in Vietnam is expected to grow at 8 per cent annually through to 2030. Meeting this demand will require increasing power generation capacity and developing more renewable sources of energy. Large financing amounts and strong collaboration are needed to develop power infrastructure to generate and transmit the extra energy capacity. In Vietnam, and many other developing economies in Asia and the Pacific, most investment in energy sector has been made by the public sector. But it cannot meet the total cost. So private sector engagement is essential to fill the financing gap. As Asia and the Pacific’s climate bank, the Asian Development Bank (ADB) will continue to encourage lenders, development partners, and the private sector to promote renewable energy solutions to fuel the region’s green growth.

In Vietnam, the ADB stands ready to support the country’s energy transition to help achieve its zero-carbon emissions commitment by 2050. The ADB has been an active lender to renewable energy projects in the nation, including hydro, solar and wind powered generation. It has also worked with the government and Electricity of Vietnam on studying the feasibility of battery storage investments to help stabilise the grid, and can help the country access highly concessional climate finance to help bring down the borrowing costs for energy transition investments.

More than 450 groups representing $130 trillion of the world’s financial assets reached an agreement that they will align operational and attributable emissions from their lending and investment portfolios with pathways to net-zero by 2050 or sooner.

Green lending and investment will increase sharply, and so will the mobilisation of green capital from bonds and credit lines as debt instruments. This means the green finance need is huge. About 450 major banks and financial institutions have participated in the Glasgow Financial Alliance for Net Zero, with most of whom being commercially present in Vietnam, so sources of green finance for Vietnam as an emerging market will be huge.

Vietnam has many opportunities to receive green finance flows for sustainable development. The country has already used official development assistance and its own financial resources for investing in infrastructure to tackle climate change, while also offering some incentives for renewable energy development, such as preferential import tax on renewable energy equipment, feed-in tariffs, and corporate income tax.

Some commercial banks and businesses have also temporarily issued green bonds.

In the process of new energy development, policy and finance pose the greatest obstacles.

The first difficulty associated with legal and policy corridors is how to mobilise financial resources within the current legal and policy frameworks.

The second difficulty lacks a specific pricing mechanism. In addition to using our own equity, we must collaborate with international financial institutions and utilise domestic capital.

The Securities Commission, the State Bank of Vietnam, the Ministry of Industry and Trade, and the Vietnamese government have implemented numerous policy changes, such as the requirement to cut electricity output from renewable power projects. Is it fair for project developers?

The power purchase agreement contains no protections for project developers. I would like to be able to collaborate more closely with state management agencies to develop proposals for implementation. We would also like to refinance these projects.

We hope that the Vietnamese government, the Ministry of Industry and Trade, and state management agencies will assist us in laying a solid foundation for the development of these projects.

Since the government issued a net-zero target at COP26, the business community in Vietnam, especially multinational groups and businesses in the renewable energy sector, are making efforts to gather their net-zero target in their long-term development strategy.

Besides that, ministries and agencies are proposing policies for greenhouse gas (GHG) emissions for sectors, which opens opportunities for establishing a credit carbon trade exchange.

Establishing a particular credit carbon trade exchange for Vietnam is necessary in the context this trade around the globe is lively. For example, Hong Kong Exchanges and Clearing has launched the Hong Kong International Market Council, which seeks to lay the foundation for Hong Kong’s growth as a premier carbon hub in Asia and beyond while contributing to global efforts to reach a low-carbon economy.

While waiting for the official policy for implementing a credit trading exchange, it would be better to establish a pilot credit trading exchange as soon as possible because Vietnam is starting to implement a commitment to reduce GHG emissions. The pilot exchange creates a foundation for establishing an official trade exchange. Delay in operating this will make enterprises miss opportunities to enjoy the benefits.

Vietnam is a key strategic market for SP Group, and we are committed to support the country’s net-zero ambitions for the long-term.

As a long-term investor in Vietnam, we are committed to investing $540 million in Vietnam. Our ambition is to develop a renewable energy portfolio in Vietnam of 1,000 MW by 2025 to green the energy mix, and build greener buildings and townships through the adoption of district cooling solutions and delivering microgrid solutions.

The Vietnam government has announced a bold commitment to decarbonise and has followed up with clear objectives, policies, and roadmaps to achieve the net-zero goals by 2050. We are excited to be contributing to a greener future for Vietnam and are encouraged by the public-private partnerships as well as corporate collaborations to accelerate the energy transition.

With supply of renewable energy increasing, it is also equally important to encourage the utilisation and demand for renewable energy. Encouraging mindset shifts in energy generation and consumption for individuals, households and businesses will be key.

Vietnam is witnessing rapid urbanisation in recent years. It leads to significant demand for district cooling for districts, cities, and customers for corporate and individual sectors. However, there is no clear policy for district cooling deployment up to now in Vietnam. The first deployment of district cooling projects will require the strong support of government agencies.

We are keen to introduce district cooling and our suite of sustainable energy solutions local customers to enable their green transition. We aim to be a long-term sustainable energy player in Vietnam and look forward to more discussions, collaborations and opportunities to collaborate with the government agencies and authorities, districts and stakeholders.