Obtain the data you need to make the most informed decisions by accessing our extensive portfolio of information, analytics, and expertise. Sign in to the product or service center of your choice.
The latest draft of Vietnam's 8th Power Development Plan (PDP8)
shows a ramping up of its intentions during the next decade away
from coal-fired power and toward renewables and natural gas, even
as the country seeks to keep up with rapid demand growth.
The Vietnam Ministry of Industry and Trade released the third
revision of PDP8 in February, and it covers the period 2021 through
2030, supplemented with a more general outline of intentions
through 2045. A final draft is expected in the second quarter of
this year.
In contrast with the current PDP7 strategy, PDP8 scales back
coal-fired power significantly — showing Vietnam's intentions
to reduce its GHG emissions as well as to reduce its dependency on
imported fossil fuels.
PDP8 proposes no new coal-fired power plants except those
already under construction or planned for completion by 2025 or
sooner. A total of 13 coal projects on the books for 2026-2035
would be canceled if the plan is adopted.
However, as IHS Markit pointed out in a report, fossil fuels are
a long way from exiting Vietnam's power market. "The draft PDP8
envisions gas-fired power as the backbone of the power system,"
wrote Cecillia Zheng, IHS Markit principal analyst-power, in an
analysis in April. "Thermal capacity addition remains significant
in the plan, with 39 GW of thermal capacity (17 GW coal and 22 GW
gas/LNG) projected to come online in the next decade, as opposed to
an additional 19 GW of solar and wind capacity in the same
period."
Coal and gas will have a combined market share of about 57% in
2030. "The plan clearly prioritizes gas power projects to replace
coal," Zheng wrote.
Currently, Vietnam obtains about 22% of its power from hydro,
but The Borgen Project, an international development organization,
said new projects are limited by geopolitics. "Hydropower in
Vietnam is mostly reliant on the Mekong-Delta, a river that many
countries have access to. As a result, it is vulnerable to how
other nation-states utilize the river with infrastructure projects
that restrict the river's flow and intensity," The Borgen Project
said.
Fast-growing power demand
Any review of Vietnam's energy planning must take into account
that its power demand has grown by about 10% per year for the last
decade, one of the fastest rates in the world. The COVID-19
pandemic slowed this trend slightly, according to the Asian
Development Bank, but power demand nonetheless increased by 7.5% in
2020 to 225 Terawatt-hours (TWh).
Alongside an economic recovery, Vietnam's power demand will
increase by nearly 10% per year to reach 335 TWh and 491 TWh by
2025 and 2030, respectively, according to IHS Markit.
As a result, Zhang explained in her report, even significant
increases in renewable capacity cannot keep pace with power demand,
let alone start to replace fossil fuel-fired power as is being seen
in more mature economies.
For this reason more than any other, Vietnam's announced goals
for reducing GHG emissions in this decade are modest compared with
most countries.
Speaking at the Leaders Summit on Climate last week, Prime Minister President Nguyen
Xuan Phuc said Vietnam is aiming to reduce its GHG emissions by
9% from 2005 levels by 2030, using internally generated investment.
But this goal could be increased to 27% if sufficient international
funding is provided to support more rapid turnover of the power
generation fleet, he said.
PDP8 anticipates investment of about $129 billion during the
2021-2030 period, of which about $95 billion will be for power
generation and about $33 billion will be for the power grid.
Looking at 2031-2045, for which the plans are much less firm, the
government said another $192 billion would be needed, of which $140
billion would be for generation, and $52 billion for the grid.
Investment in the grid will not only expand transmission lines,
but it will also better accommodate renewable power, according to
the ministry. The ministry proposed extensive revisions to the grid
code last year to accommodate non-synchronous generating systems
that are typical of renewable power operations, and they are in the
process of being implemented.
Challenges
IHS Markit said the plan revealed Vietnam's "development
constraints, such as fuel supply, infrastructure development, power
supply reliability, lack of investment support, and the need for
market reform ... [and] does not fully address the key concerns or
provide a practical approach to achieve the long-term targets."
Including added fossil fuel power plants, IHS Markit estimates
that 84% of thermal generation will use imported fuel in 2030,
which Zheng said "rais[es] concerns about energy security."
On the positive side, she observed that Vietnam's grid
investment plan includes goals of having 90% of the thermal power
(coal, gas, oil) transmission grid meet the highest standards of
reliability by 2025, and for 100% to meet it by 2030.
The Institute for Energy Economics and Financial Analysis
(IEEFA), a nonprofit, criticized the planning mindset on which PDP8
was based, saying it ignores improvements in the relative costs and
reliability of renewable generation.
"Traditional power sector planning disciplines [in Vietnam] were
developed during a period when technology was relatively static and
generation-led planning was the norm. That is not the right
approach for an unprecedented period of innovation and cost
reduction we are witnessing now," IEEFA said in a report in
March. "This calls for a fundamental shift away from the
traditional planning approach of assessing technology choices on an
'as is' basis to a pathway development process that sees each
generation technology more holistically."
Most prominently, IEEFA said the cost of renewable power
available to Vietnam's developers has fallen by 90% for solar PV
and 70% for wind from 2009 through 2020. Coal power's price has
been static during that time, but the plan for the next decade does
not reflect the relative shift in costs, nor "designing the system
in a way that can optimize a complementary portfolio of
technologies," IEEFA said.
IEEFA was particularly critical of caps on solar and offshore
wind capacity at 2 GW each in PDP8, which it said are driven by
reports that the intermittency of renewable power could be harmful
to the national grid. But IEEFA said these limitations "could have
severe implications that would reverberate across the wider
economy," in terms of keeping the country dependent on imported
fossil fuels and undermining its environmental goals.
