YCP Solidiance charts the way forward for Vietnam’s energy transition

05 March 2023 Consultancy.asia 5 min. read

Vietnam aims to ramp up renewable energy as part of its climate objectives. According to a new report by YCP Solidiance, the transition to greener pastures is gaining momentum.

Renewable energy is a crucial focus for Vietnam, as the country balances rapid economic growth with reducing its environmental impact. The government’s energy policy is at the center of the industry, and major corporations have also incorporated climate change and sustainability into their operations.

While Vietnam has made considerable progress in renewable energy generation over the past, the road to net-zero carbon emissions by 2050 is still long – and full of challenges.

YCP report Installed Capacity in Vietnam, by source (2020 – 2030)

As it stands, coal is Vietnam’s largest source of energy, according to analysis by YCP Solidiance, an Asia-focused strategic consultancy firm. In the years up to 2030, the use of coal will continue to grow in absolute amounts, but as energy consumption grows and so does renewable energy, its share of the total will drop to around 24% in 2030.

Notably, the researchers predict that wind power will see the largest jump in market share, from hardly non-existent today to 15% by 2030. Meanwhile, solar energy will see its cut drop from 24% to around 10%.

Further reading: Fossil fuels to take a back seat in the global energy landscape.

Zooming in

In their report, YCP consultants zoom in on three specific segments of the energy mix: liquefied natural gas (considered a transitionary source to reduce coal dependency), wind power, and energy storage (such as pumped hydro and battery storage).

Total Installed Generation Capacity (in GW), by source (2020-2045)

LNG
Vietnam is treating liquefied natural gas (LNG) as a transitional energy source to replace coal while non-carbon energy generation is developed. LNG generating capacity is forecasted to reach 39 GW by 2030 and 46 GW by 2045. In comparison, wind will by then have hit a generating capacity of 120 GW.

In the case of LNG, Vietnam enjoys a strategic geographical location and a convenient transportation route, with many deep-water ports and existing gas infrastructure systems available for use. The researchers therefore describe the rapid short-term growth of LNG as understandable and feasible, as part of an agenda to maintain energy security and affordability while pushing towards climate targets.

Several LNG power projects are in advanced stages of development. However, the reliance on imported LNG, and its volatility in price, poses a risk to energy security and project viability.

Wind
With a large coastline stretching over 3,200 kilometers and a large range in geography, YCP Solidiance asserts that Vietnam has the potential for wind generation up to 512 GW – that by its estimates is the greatest in Southeast Asia.

Forecasted Wind Generation Installations in Vietnam (2025-2045), by type

There are currently no offshore Wind installations operating in Vietnam, but it is planned that about 30% of all wind installations will be offshore by 2035 and 54% by 2045. “Despite higher initial capital requirements, investment costs, and technical complexity, offshore wind offers an opportunity to add large amounts of capacity with a higher level of reliability and stability to the grid compared to Solar and onshore Wind,” stated the report.

South Central Vietnam (including Binh Thuan, Ninh Thuan, Khanh Hoa, Phu Yen, and Binh Dinh provinces) is forecasted to have the highest offshore wind potential nationwide.

Energy storage
The inclusion of storage in renewable energy systems is critical to increase efficiency and reliability. In Vietnam, pumped hydro and battery technologies are currently the most feasible solutions. Pumped hydro can connect to solar and wind installations to generate electricity for later use, while battery storage is limited to small-scale or distributed generation settings.

Anticipated Renewable Energy in Vietnam, 2025-2045

The two energy sources are projected to account for approximately 11% of total renewable energy output in 2045, with energy storage rising more than 5%, according to YCP Solidiance’s estimates.

The road to successful energy storage is however long, warn the researchers. “There are barriers in technology, financial feasibility, procedures for registration, and policy regulation and guidance.”

“There is currently no official regulatory mechanism on energy storage technology. Moreover, the current high investment in energy storage makes it financially infeasible to integrate it into the existing renewable energy projects.”

Industry-wide collaboration

The YCP Solidiance report concludes that with all challenges in the market, collaboration between key players – both from government and private sector level – will be key. “Developers and investors must collaborate closely with central and provincial agencies. And the government must ensure that innovative systems and regulations are geared at stimulating and advancing the growth of sustainable energy sources.”