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5th June 2019

Coal is still king in the buoyant energy industry of Vietnam, but renewables are rising fast

Investors in Vietnam’s energy sector are set to spend $150 billion over the coming decade to meet growing power demands, with coal still likely to be dominant despite governmental efforts to go green.

Vietnam’s population is getting close to 100 million with an annual GDP growth of around 7%, so the forecast is that power will need to grow from about 47,000 megawatts (MW) to 60,000 MW by 2020, and 129,500 MW by 2030. So, the country will have to produce more than their Thai neighbour’s total capacity by 2025, which will make their sector share bigger than Britain’s within 5 years or so.

Vietnam used to rely heavily on hydropower but providing companies such as Samsung Electronics, who have turned to cheaper options like coal to boost electricity generation, has changed things. The country’s coal use grew 75 percent in the last few years, faster than any other country in the world, and their current Power Development Plan (PDP 7) has coal leading the way to meet the requirement. Coal’s share of the energy market should rise from 33 percent to 56 percent.

However, a change of governmental focus began in 2016 which continues to exert its influence. A revised version of the PDP is embracing cheaper renewable energy and analysts expect ‘PDP 8’ to further effect policy later this year. The Ministry of Industry and Trade has started to offer incentives for the use of renewable energy, which to-date only make up a small amount of the output.

According to a draft law planned for June, the Vietnam Electricity (EVN), which is a state-owned entity distributing all of the country’s power, will be paying between 6.67 and 10.87 cents per kilowatt-hour (kWh) for renewables. One of the first developers into Vietnam’s solar sector is Gulf Energy, from Thailand, which has recently entered long-term projects that will benefit from feed-in-tariffs.

The Global Wind Energy Council (GWEC) is holding meetings in June, in Hanoi, to discuss driving growth in the market. Should government policy continue to support renewable energy, and wind and solar become cheaper and better, renewables could even challenge coal as Vietnam’s biggest provider of electricity by 2030.

But whatever the long-term plans under PDP 8, Vietnam still needs quick fixes to meet demand and coal will be at centre stage. Power consumption hit a record 36,000 MW this month, close to the maximum available capacity, according to government data, while the government asked consumers not to set air-conditioners too low to help avoid blackouts.

The World Bank says that Vietnam should invest up to $150 billion by 2030, which is nearly double the $80 billion already spent on power since 2010. In the first four months of this year, the country’s coal imports more than doubled from a year earlier to 13.34 million tonnes, according to Vietnam customs data. Imports are forecast to peak at 80 million to 110 million tonnes between 2030 and 2040, against current demand of 63 million tonnes, and this surge would make Vietnam one of the last boom markets for what many otherwise see as a sunset industry.

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Energy industry of Vietnam