Vietnam’s Power Development Plan 8 (PDP VII) draft for the 2021-2030 period with a vision towards 2045 has been significantly delayed, however, a finalized draft is expected to be submitted to the Prime Minister in May 2022 for approval.
While the PDP8 has gone through several drafts, the latest revision proposes increasing electricity capacity to 146,000 MW by 2030 and incorporate the use of diversified sources of power in renewable energy as well as other fuel sources such as hydrogen and ammonia. This is significant as Vietnam made a commitment to be carbon neutral by 2050 at the UN’s COP26.
The time taken for approval and several revisions to the PDP draft shows that government agencies have found it challenging to come to a common ground with negotiations ongoing to develop a clear plan forward for the country’s energy security.
Vietnam has become a manufacturing hub, increasing its energy needs rapidly. Power demand has increased by approximately 10 percent per year over the past decade. Vietnam went from a net oil exporter to a net oil importer in 2015, owing to its increasing demand for energy with greater dependence on coal.
In fact, Vietnam imports a significant amount of coal from Australia and Indonesia. Coal is responsible for approximately a third of electricity output in Vietnam. State-owned electricity provider EVN in March 2022 warned of electricity shortages due to limited coal supplies. To deal with the shortage Vietnam planned to increase imports from Australia while it also was in talks with South Africa to diversify its coal imports.
Therefore, Vietnam will need to slowly wean off coal and diversify its energy imports to meet supply shortages. And with external factors and geopolitical tensions, the government will need to secure adequate supplies and plan for any future shocks in its energy security.
As per EVN, Vietnam produced around 76,620 MW power generation capacity at the end of 2021. Out of this wind and solar energy made up 27 percent of capacity.
While Vietnam earlier was at the forefront of solar power, leading the Southeast Asian region, the industry has been forced to slow down. The country’s transmission lines have not been able to keep up, resulting in production losses. At times EVN has also told solar companies to cut electricity production as the power grid has not been able to keep up.
In contrast, however, wind capacity has been able to surpass solar and as per Fitch Solutions, this trend is likely to continue in the short to medium term.
While precise details of the PDP8 draft are limited, the government said that it has worked with several agencies on data on renewables, net-zero emissions, and diversifying energy sources, which have been incorporated in the draft. The draft is also in line with Resolution No 55 on the national energy development strategy by 2030 with a vision towards 2045.
This article was first published by VietnamBriefing which is produced by Dezan Shira & Associates. The firm assists foreign investors throughout Asia from offices across the world, including in in China, Hong Kong, Vietnam, Singapore, India, and Russia. Readers may write to [email protected].
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