Challenges of energy transition in Vietnam

Our country's energy resources are diverse and abundant, especially renewable energy. Photo: N.Thanh

Challenges from planning and infrastructure

Referring to the energy transition in Vietnam, Nguyen Tai Anh, Deputy General Director of Electricity of Vietnam (EVN), said that the view on energy transition and national energy planning was consistent with Resolution 55-NQ/TW of the Politburo on orientations of Vietnam's national energy development strategy to 2030, with a vision to 2045, and the commitment of Prime Minister Pham Minh Chinh at the 26th Conference of the Parties to the United Nations Framework Convention on Climate Change (COP26) on Vietnam reaching net zero emissions by 2050. “Vietnam can absolutely do it,” said Tai Anh.

Particularly for EVN, in addition to converting the energy of existing plants using coal, EVN also prepare a system to absorb other primary and renewable energy sources. However, rapid growth has posed many challenges for the current power system.

In-depth analysis of the challenges of the electricity market with the development of renewable energy, Nguyen Duc Ninh, Director of the National Center for Dispatch of Power System (EVN) said that besides the problem of transmission line congestion, overload with 220 kV, 110 kV lines in the Central region and congestion in the North-South transmission line, currently, there were more than 200 renewable energy power plants that have not been fully deployed, due to local congestion.

“Due to the high penetration rate of renewable energy in the central and southern regions, there will be an excess of load demand, causing overload for the 500 kV line at noon. Challenges in the operation of the power system have affected the electricity market planning, as it is difficult to forecast the possibility of renewable energy in the long-term planning," said Ninh.

According to Hoang Tien Dung, Director of the Department of Electricity and Renewable Energy (Ministry of Industry and Trade), as well as favorable factors in the energy transition, Vietnam must solve difficulties and challenges in ensuring energy security while minimizing environmental impacts of power generation activities.

"The high-speed growth of the load puts pressure on the energy industry's infrastructure, requiring large investment capital and complex technical solutions," said Dung.

Similarly, according to a representative of the Institute of Energy (Ministry of Industry and Trade), Vietnam's energy transition has faced many opportunities and challenges. Energy resources in the country are diverse and abundant, especially renewable energy. Vietnam is also located in an area with favorable energy exchange potential in the region and in the world.

However, the weakness of the industry is the limited capacity and technology level, and lack of technical infrastructure and services to support repair, maintenance, and replacement of equipment. Additionally, the legal framework to create momentum for efficient use of energy, new and renewable energy is lacking in synchronization and needs to be completed.

Furthermore, the localization rate of technology in the energy industry is low, there is a lack of mechanisms to support and promote technology localization; and the competitive energy market is at an early stage, not yet synchronized.

Ensuring a continuous and stable policy

Sean M. Lawlor, energy expert (US Embassy in Vietnam) said that the US started the energy transition more than a decade ago. So far, coal power has been cut in half, gas power development has reached 38% of the total energy mix, and clean energy solutions have been encouraged. The Biden administration will continue this effort with a goal of installing 30 GW of offshore wind by 2030 and increasing the share of solar power to 40% of the energy mix by 2035.

“As a long-term partner, we are encouraging the Vietnamese Government to implement innovative policy solutions to attract foreign investment, promote energy transition, towards implementing the commitment that Prime Minister Pham Minh Chinh set out at COP26. The policies include direct electricity purchase and sale mechanisms, auctions, loan standards and approvals for power transmission projects and investments. The US is willing to share technology, capital, policy, and technical expertise to accompany Vietnam on this journey,” Lawlor affirmed.

From a business perspective, Nguyen Thai Ha, General Director of Energy JSC of T&T Group said that the group has been involved in the energy transition for a long time. Seeing the opportunity in investment, the enterprise actively coordinated with major foreign partners (Denmark and France) and invited them to participate in the Group's next projects through capital mobilization.

“Over the past three years, the Group has implemented a series of onshore wind and solar power projects. Renewable energy is expected to boom after the Government's commitment at COP26. Opportunities open up, but how they are realized depends on the policies and guidelines of the State.

“Therefore, to attract investment in the energy sector, enterprises need to have a guarantee of continuous, long-term policies and stable commitments. The policies need to be more specific in mobilizing capital from foreign organizations; the simplest is the power purchase agreement. We urgently need master plans on marine space, detailed instructions on installation, survey, and wind measurement to set a plan to attract investment in the future," said Ha.

According to Ninh, in the future, it will be necessary to promote the development of ancillary services and mechanisms for battery energy storage system (BESS). The BESS mechanism can act as an integrated source to provide a reserve source when there is a gap between supply and demand in the power system (unit failure, or sudden decrease in renewable energy); simultaneously, it can participate directly in the electricity market or ancillary service market.

The leader of the National Load Dispatch Center also said that it is vital to promote the implementation of commercial power load adjustment programs, to improve the responsiveness of the load based on the market; at the same time, create a new financial derivative market for electricity such as contract auction, forward market, and futures market.

"Especially, it is necessary to enhance and upgrade the information technology and training infrastructure, improve human resources to meet the new requirements of electricity system operation and market," said Ninh.