VIETNAM NATIONAL POWER DEVELOPMENT PLAN 2021-2030 TOWARD 2050 | $14 billion annual investment for the clean and sustainable energy transition

Vietnam is working actively to become a new manufacturing hub of global production networks. The country’s power production and supply is therefore the fastest-growing economic segment. The power generation in Vietnam is still relying heavily on fossil fuels (coal) and hydro sources. During COP26, the Government of Vietnam has committed to net zero emissions by 2050. To meet the set objective, according to a study by the World Bank, Vietnam would need to mobilize an average annual investment of US$14 billion for the energy transition.

The country’s growth target of 7% in the next decade and 6.5% in the following period, the commitment to sustainable development and transition to clean energy implied challenges and opened great opportunities for advanced technology, innovation, and exclusive practical experience. This country’s outlook is a snapshot of the power development sector in Vietnam prompting business opportunities in different areas such as renewable energy, energy storage, fossil fuel phase-out solutions, smart grid, and efficient network management tools in the context of recently approved Vietnam Power Development Plan period 2021-2030 with the vision to 2050 (PDP 8).

The country’s power consumption and development target

Vietnam is among the ASEAN countries having major power generation capacity. The country’s total installed capacity by the end of 2021 is 76.9 GW of which 25.9 GW is from coal, 7.4 GW from natural gas, 22 GW from hydro, and 20.7 GW from renewable energy (8.9 GW solar/4.1 GW wind/7.7 GW rooftop solar). In 2021, Vietnam consumed 256 GWh of electricity (254 GWh generated domestically and 2 GWh imported from China and Laos).

After extensive consultation and adjustment, on May 15^th, 2023, the Government of Vietnam approved the “National Power Development Plan for the period 2021 - 2030, with the vision towards 2050” (PDP 8). The PDP 8 envisages 150 GW of installed power by 2030 consisting of 30 GW (20%) from coal, 37.3 GW (24.8%) from NLG/Gaz, 29.3 GW (19.5%) from hydro, 42,9 GW (29.3%) from renewable energy (12 GW solar/28 GW wind), and the remaining from the hydro pump, energy storage, flexible energy plus 3.3% of electricity imported from neighboring countries.

According to the PDP 8, an investment of $ 119.8 billion and $ 14.9 billion is foreseen in power generation and grid network respectively for the period 2021-2030. The total investment in electricity in Vietnam would increase to $399,2 - $523,1 billion for the period 2031-2050 to meet the country’s energy demand.

To have a total capacity of 490 GW with 67% of renewable energy and 0% of coal power by 2050, Vietnam has laid out the country’s energy development structure in the approved PDP 8 document. From now to 2030, the country will make more consistent efforts in building a grid network matching renewable energy development. The efforts are not only on sufficient reliable transmission lines and stations but also on, particularly, energy storage, flexible power, and smart network management solutions. PDP 8 highlights the importance of allocating evenly the power sources across the country among concentrated economic hubs to optimize investment in the energy transmission system.

The PDP 8 serves as a key reference for investors and government agencies in planning investments in the energy sector in Vietnam.

Renewable energy development

Vietnam is one of the countries most affected by climate change. One of the apparent impacts is the rising sea levels threatening the global rice production hub of Vietnam in the Mekong Delta. In 2017, the government of Vietnam issued incentive policies for RE development, notably the favorable fit-in-tariffs (9.35 UScent/kWh for solar and 8.5 UScent/kWh for onshore wind, 9.8 UScent/kWh for offshore wind) that led to rapid investment in solar and wind farms in South Central Vietnam between 2018 and 2020.

According to a study by the World Bank, Vietnam is in the top 10 countries globally with the highest installed capacity of solar power in 2020. The Vietnam potential RE map of the report indicates that Vietnam has significant potential for solar and wind energy production. The PDP 8 highlighted the country’s potential of 963 GW and 821 GW from solar energy and wind energy respectively.

While the South Central of Vietnam provides the most favorable conditions for solar and wind power generation, the economic hubs are located in the North and the South. The high RE development period 2018-2020 has exceeded the national grid capacity to absorb the electricity generated from the solar/wind farms. The situation has impacted the pace of RE development in the PDP8 where more effort is allocated to national grid development including energy storage and flexible energy etc that would then enable renewable energy in the coming decades.

While balancing the RE development with the capacity of the national electricity system, PDP 8 encourages investment in RE used for new energy production (hydrogen, ammoniac) or for self-consumption and no sale of electricity to the grid (behind-the-grid rooftop solar), particularly in areas that experience power shortages. The PDP 8 has set a target of 50% office of buildings and 50% of private houses equipped with rooftop solar panels for self-consumption by 2030.

The bottlenecks of RE development in Vietnam – challenges and opportunities

The Electricity of Vietnam (EVN) is a state-owned monopoly that manages the investment and operation of the national power grid. Many recommendations are now calling for private-sector investments in the country's power transmission system. The Government of Vietnam is revising the country’s electricity law expected to provide more mechanisms for private investment into the country’s energy system. The PDP 8 provides a detailed investment list of the transmission line and transmission stations for the period 2021-2030. Apart from existing traditional technology in the national grid network development, energy storage, flexible power, and smart grid together with system data management are highly sought technological reliable solutions in Vietnam.

Looking for fossil fuel phase-out solutions

The PDP 8 does not plan for new investments in coal-fired power from now until 2030 other than those already in the approved plan or in the process of investment. The PDP 8 targets fully eliminating coal from power generation by 2050. However, the significant portion of coal power in the country's energy mix (20% by 2030) presents a serious challenge. Technology, which improves efficiency and reduces the emission of existing coal-fired power plants, is in growing demand.

Electricity generated from NLG is an emerging source of base load in Vietnam in the wake of coal power reduction. While planning for NLG power development, PDP 8 expressed prudent caution regarding the NLG energy vis-à-vis the potential dependence on the NLG sources and its price volatility.

Biomass – huge potential but limited exploitation

Vietnam is one of the global leaders in rice, coffee, and other agricultural and wood exports. The annual residues from the agricultural and wood industry have a potential biomass resource of about 118 million tons/year, including about 40 million tons of rice straw, 8 million tons of rice husk, 6 million tons of bagasse, and over 50 million tons of coffee husks, shells, and wood waste. However, the electricity generated from biomass in Vietnam is still very limited compared to the potential resource. Only 516 MW was generated in 2021 mainly by large sugar and timber mills. PDP 8 encouraged the electricity generated from biomass and waste. The plan envisages 2.3 GW (1.5% of total energy mix) or more (depending on technology and solution efficiency) from biomass and waste to energy by 2030. The waste-to-energy and co-firing technology for coal thermal power plants, which enables replacing coal with biomass, has not been popular in Vietnam.

The application of waste-to-energy technology solutions is still modest

Despite the country’s large untreated urban solid waste of around 25 million tons/year, the waste-to-energy technology solution is still of very limited use in Vietnam. Thus, most of the waste still ends up in landfills. The new Environment Law (2020) is enforcing a sustainable treatment for solid waste. Waste-to-energy (WtE) technology is considered a key solution in the coming years. The country has currently four major WtE plants of which two are in operation (11 MW plant in Can Tho City and 15 MW phase 1 of a total 73MW planned plant in Hanoi) and two are in construction (35 MW plant in Hanoi and a 10 MW plant in BacNinh province). The WtE plant in BacNinh province applied Finnish technology while the three others applied mass incineration technology.

Hydropower – efficient management tool is in urgent need

Vietnam has exploited most of the country’s major hydropower potential. The new investments are mostly to expand existing hydropower plants and improve hydropower generation efficiency. Vietnam is increasingly looking for investment and expertise in water resource management and efficient hydropower operation for various hydropower cascades across the country to maximize the electricity’s output while meeting the water need for agriculture and mitigating floods at the river basins.

To achieve the objective of net zero emissions by 2050, Vietnam needs not only significant capital but also efficient technology and know-how across the sector’s spectrum, from efficient solutions for the traditional coal power plant to the effective development of waste to energy, solar, and wind energy, flexible gas engine, energy storage, and a comprehensive smart grid system that enables efficient operation of the domestic energy market and with neighboring countries. International investors and technology providers are working with the government of Vietnam to meet the needs of the country’s energy development. Some Finnish leading energy technology suppliers are actively exploring the market in the following particularly energy area:

• Technological solution for thermal power plants including the conversion of current coal power plants into co-firing using biomass and waste-to-energy.
• Technological solution in improving the efficiency of hydropower plants including water basin/lake management.
• Technological solutions for energy systems including energy storage, hydro-pump, flexible power, and smart grid.