Why investors should look into the renewable energy industry in Vietnam
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At the 2021 United Nations Climate Change Conference, members of Vietnam’s government led by Prime Minister Pham Minh Chinh pledged carbon neutrality by 2050. For Vietnam, a still developing country, to achieve this objective, it should phase out coal. factories and modernize its national network.
Currently, Vietnam expects a 6.5 percent recovery in GDP growth in 2022, according to the Asian Development Bank. As a result, energy consumption has increased by more than 11% per year, significantly faster than national GDP. This is fueling an almost insatiable demand for more power generation and investment.
However, domestic fossil fuel production cannot meet demand, forcing Vietnam to rely on foreign markets to acquire enough resources to power its infrastructure. Therefore, Vietnam’s reliance on imported energy to run its electrical system and climate change are catalysts for the government to turn to renewable energy.
Vietnam’s potential as a driver of renewable energy
Vietnam realizes that the need for a green energy transition has never been more urgent. As one of the fastest growing economies in Southeast Asia, the country has proven its commitment to the initiative, especially when it comes to solar energy.
According to the World Bank, Vietnam currently has the most comprehensive installed solar power capacity in Southeast Asia, with 16,500 MW generated in 2020. Moreover, Vietnam was among the top 10 countries in the world, with largest solar power capacity installed in 2020.
Given Vietnam’s high solar PV potential and ambitious green energy targets by 2050, the country has every chance of becoming a world leader in renewable energy. There is also a compelling rationale for establishing wind power projects in Vietnam due to evidence that it has some of the largest wind resources in the region with a potential of 311 GW.
Market analysts believe that if Vietnam maintains its rapid renewable energy expansion, it will rise much higher in the rankings, possibly overtaking countries like Australia and Italy in renewable energy development and creative solutions. .
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Main areas of the renewable energy sector in Vietnam
Vietnam’s climate and topography make renewable energy, especially wind power, an important investment prospect. Vietnam’s vast wind resources are due to the country’s long and narrow geographical shape, consisting of more than 3,000 kilometers of coastline, including a mixture of hills and mountains.
According to the World Bank, more than 39% of Vietnam has wind speeds above 6 meters per second (m/s) at 65 meters, which is equivalent to 512 gigawatts (GW) of capacity. Vietnam assumes excellent potential, with 8.6% of its land area suitable for large wind farms.
Apart from the cost of building the necessary transmission infrastructure, Vietnam will have to invest billions to reach this goal. Private sector cooperation is imperative given the limits of government resources and the economic challenges involved. This demand has set the stage for international investors to enter and establish a presence in Vietnam’s mostly untapped wind energy sector.
Vietnam has recently seen phenomenal growth in solar photovoltaic (PV) power, which is just the beginning of the country’s vast energy transition away from coal. The country’s solar PV capacity has grown from 86 MW in 2018 to around 16,500 megawatts (MW) in 2020.
Consequently, Vietnam has overtaken Thailand as the ASEAN country with the largest installed solar power capacity. Solar photovoltaic systems provide approximately 10.6 TWh of electricity in 2020, or almost 4% of total production.
Rooftop solar power will account for about half of Vietnam’s total solar capacity by 2030. With a promising solar power generation environment, international investors will find it hard to pass up such lucrative investment prospects. .
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Drivers of renewable energy growth in Vietnam
According to the International Energy Agency, Vietnam is the second largest consumer of electricity in Southeast Asia. Energy consumption in the region is one of the fastest growing in the world, with demand growing steadily at 6% per year over the past 20 years. According to Techwire Asia, 80% of all energy demand in the region comes from four main countries, Indonesia, Vietnam, Thailand and Malaysia.
The Vietnamese government’s commitment to increasing energy supply and strong public demand for better air quality have been a major driving force. Legislation and supporting government policies, including feed-in tariffs, attractive tax incentives, and land lease waivers are also seen as fundamental elements fueling the country’s massive renewable energy (RE) growth.
The public’s desire for environmental preservation is the second most important factor. In addition, severe air pollution in metropolitan areas has sparked public opposition to new coal-fired power plants, and local water and other resource issues have also been a source of concern.
In summary, better system design focusing on system flexibility and energy storage, coupled with increased private sector engagement in the construction of transmission systems, will help solar and wind power become more integrated. efficiently in the energy grid.
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