Vietnam‘s Energy Development in the Context of Climate Change

By Hoang Van Tam

Friday, 10 Jul 2020

Vietnam is a Southeast Asian country, with Laos and Cambodia in the West borders, and China in the North borders. In 2017, Vietnam’s population was 86.92 million, GDP reached 5,005,975.0 billion VND, and GDP/person was USD 2,389.0 (in current dollars). According to the data released by the General Statistics Office of Viet Nam (GSO), GDP growth in 2017 reached 6.8%, higher than 2016 with 6.2%, also higher than the average growth for the whole period of 2015- 2017 (6.51%) and the period of 2011-2015 (5.91%), which showing many positive signs of the economy.

Vietnam’s Energy Circumstance

According to the latest statistics in the Statistical Yearbook of Viet Nam in 2018 published on the production energy structure, the total primary energy supply in 2017 reached 72,688.3 KTOE, an increase of 1.8% compared to 2016 and 3% compared to 2015. The two largest components in the structure are coal and crude oil, which reached 21,412.7 KTOE and 13,828 KTOE, respectively accounting for 36% and 23%. Natural gas, biomass, and electricity account for approximately the same proportion of about 13 to 15% (Figure 1).

The proportion of energy sources of Domestic exploitation in 2017Figure 1. The proportion of energy sources of domestic exploitation in 2017

The total amount of exploited and domestically produced energy sources in 2017 reached 59,745.8 KTOE, a decrease of 13% compared to 2015. Industry and construction are the largest energy consumption sectors by nearly 53% (Figure 2).

The proportion of energy sources of final consumption by sectors in 2017 Figure 2. The proportion of energy sources of final consumption by sectors in 2017

Energy Supply Policies for Mitigation

Vietnam’s economy has grown rapidly with an average GDP growth rate of nearly 7% per year over the past two decades. However, this growth is assessed to have high energy intensity and greenhouse gas (GHG) emissions, still tend to increase sharply. Shifting towards a low-carbon development roadmap not only benefits the global climate but also makes the economy more efficient and competitive, increases the level of supply diversity that contributes to energy security, creates environmental and social benefits.

Recognizing the above problem, Vietnam has implemented policy measures to promote the development of a low-carbon economy in order to reduce GHG emissions such as National Strategy on Green Growth, and National Strategy on Energy Development. The amount of renewable energy (RE), and in particular, the Nationally Determined Contribution (NDC) Report, underlines the government’s commitment at COP 21 to reduce GHG emissions by 2030 by 8% compared to emission of the normal development scenario using domestic resources, and likely to be reduced by up to 25% in case of international assistance.

Immediately after the submission of the proposed NDC, a series of important policies on the energy sector, especially the energy and electricity suppliers, were signed by the Prime Minister and will be implemented in the period of 2016-2030, including:

  1. Renewable energy development strategy of Vietnam until 2030, vision to 2050 in the Prime Minister’s Decision No. 2068 / QD-TTg dated 25th November 2015;
  2. Adjust the National Power Development Plan from 2011 through 2020, taking into account 2030 in the Prime Minister’s Decision No. 428 / QD-TTg, dated 18th March 2016;
  3. Adjust the Master Plan for Vietnam’s Coal Industry Development to 2020, taking into account 2030 by the Prime Minister’s Decision No. 403 / QD-TTg, dated 14th March 2016;
  4. Master plan on development of Vietnam’s gas industry up to 2025, orientation to 2035 in the Prime Minister’s Decision No. 60 / QD-TTg, dated 16th January 2017;
  5. Issue the avoided cost tariff for biomass power projects in 2016 in Decision 942 / QD-BCT of the Ministry of Industry and Trade, dated 11th March 2016;
  6. A mechanism to encourage the development of solar power projects in Vietnam in the Prime Minister’s Decision No. 11/2017 / QD-TTg, dated 11th April 2017.

Overall Vietnam has established many major policies, directly and indirectly, to reduce GHG emissions, specifically:

Table 1. List of policy frameworks related to electricity/energy

Year Policy Frameworks
2004 Electricity Law dated 3th December 2004
2007 Vietnam’s National Energy Development Strategy to 2020, vision to 2050 (Prime Minister’s Decision No. 1855 / QD-TTg, dated 27th December 2007)
2008 Regulations on avoided cost tariff and sample power purchase agreement (SPPA) apply to small hydropower (≤30MW)
2009 Master plan on development of Vietnam Oil and Gas industry in the period to 2015, with orientations to 2025 (Prime Minister’s Decision No. 459 / QD-TTg, dated 30th March 2011)
2011 Regulation on supporting mechanism for the development of grid-connected wind power projects (FIT)

National power development plan (PDP VII) for the period of 2011-2020, vision to 2030

A master plan for the development of Vietnam’s gas industry in the period to 2015, orientation to 2025 (Prime Minister’s Decision No. 459 / QD-TTg, dated 30th March 2011)

2012 Law amending and supplementing a number of articles of the Electricity Law of 20th November 2012

Planning on development of Vietnam’s coal industry up to 2020, with a vision to 2030 (Prime Minister’s Decision No. 60 / QD-TTg, dated 9th January)

2012 Releasing Sample power purchase agreement (SPPA) for wind power
2013 The List and the roadmap of equipment using low-efficiency energy and removing low-efficiency generating sets not newly built (Prime Minister’s Decision No. 24/2018 / QD-TTg, dated 18th May 2018)
2014 Regulations on supporting mechanism for the development of biomass power projects (FIT)

Regulations on supporting mechanism for the development of waste power projects (FIT)

2015 Releasing Sample power purchase agreement (SPPA) for waste power

Renewable Energy Development Strategy of Vietnam until 2030, with a vision to 2050 (Prime Minister’s Decision No. 2068 / QD-TTg, dated 25th November 2015)

Issue the SPPA for biomass power (cogeneration)

2016 Revising the National Power Development Planning (revised PDP VII) for the period of 2011-2020, with a vision to 2030 (Prime Minister’s Decision No. 428 / QD-TTg, dated 18th March 2016)

Regulations on avoided cost tariffs and sample power purchase agreement (SPPA) apply to other biomass power projects

Revising Vietnam’s coal industry development planning (Decision No. 403 / QD-TTg of the Prime Minister, dated 14th March 2016)

2017 A master plan for the development of Vietnam’s gas industry up to 2025, orientation to 2035 (Prime Minister’s Decision No. 60 / QD-TTg, dated 16th January 2017)

Regulations on supporting mechanism for the development of solar power projects (FIT) and Sample Power Purchase Agreement (SPPA)

 

In 2011, Vietnam approved the National Power Development Plan (PDP VII), which set out a scenario of rapidly increasing electricity demand, and mainly supplied by fossil-fuel power plants. In PDP VII, the electricity increased from 194 TWh in 2015 to 695 TWh in 2030. Most of this rapidly increasing demand is provided by fossil fuels that accounting for 70.8% of the electricity produced domestically in 2030, in which coal thermal power account for 56.4%. The basis of this rapid expansion is the estimated GDP growth rate of 8.0% in the period of 2016-2020 and 7.8% in the period of 2021-2030, combined with the elasticity coefficient between electricity demand and GDP which will be greater than 1 until 2020.

The increase in electricity demand calculated above is based on the optimistic scenario of the GDP growth rate. However, under the direction of the Government, from the beginning of 2014, the Ministry of Industry and Trade held a review and updated the growth needs to revise PDP VII. After reviewing and evaluating, PDP VII was amended in Decision No. 428 / QD-TTg dated 14th March 2016 by the Prime Minister. Accordingly, lower electricity demand levels stem from lower rates of economic growth than previously expected. By 2030, electricity production is expected to increase to only 574 TWh instead of 695 TWh as in the original PDP-VII. In the revised PDP VII, the structure of the power source has shifted significantly towards the development of more than the proportion of RE sources, although fossil-fuel electricity still dominates (by 2030, 53.2%). The electricity produced is from coal-fired power plants). The table below illustrates the changes in Vietnam’s electricity structure until 2030 between PDP VII (2011) and revised PDP VII (2016).

Table 2. Power structure until 2030: comparison between PDP VII and revised PDP VII

Source PDP VII Revised PDP VII
Year 2020 Year 2030 Year 2020 Year 2030
Total capacity (GW) 75.00 146.80 60.00 129.50
Total electricity produced (TWh) in which: 330.00 695.00 265.00 572.00
Large hydropower 64.68 64.64 66.78 70.93
Coal power 154.44 391.98 130.65 304.30
Gas and oil electricity 79.20 100.08 43.99 96.10
Nuclear 6.39 70.19 0 32.60
Import 9.90 26.41 6.36 6.86
Renewable energy 14.85 41.70 17.26 61.20

Source: Prime Minister ‘s Decision number 1208/QĐ-TTg and Decision number 428/QĐ-TTg

Energy Demand Policies for Mitigation For energy demand

It is realized that energy efficiency (EE) is the short way to obtain sustainable energy since it provides benefit for various aspects such as the reduction of investment for energy supply, energy intensity, pollution, and GHG. With the achievement of national target program on EE period 2006-2015, Vietnam has continued to implement the new national program on EE during 2019-2030 by Prime Minister’s Decision 280, dated 23th April 2019 (VNEEP – Vietnam energy efficiency program). It is believed that the energy-saving is not only to help the country in energy consumption efficiently but also to contribute significantly to GHG reductions of the country, especially since energy utility in industry and the commercial sector takes into account for 30-40% of total energy consumption.

The overall target of the program is mobilizing all domestic and international resources to promote EE through the synchronous implementation of state management tasks and measures, technical assistance, scientific and technology research, product development, market transformation, training and development of human resources, making use of experience and support of the international community in the EE sector.

For the specific objective by 2030, achieving the energy-saving from 8% to 10% of total national energy consumption, reducing the power loss to below 6%, Reducing the average energy consumption in industrial sectors/sub-sectors compared to the 2015 – 2018 period, specifically for: (i) The steel industry: from 5% to 16.5% depending on product type and production technology; (ii)  The chemical industry: minimum 10%; (iii) The plastics production industry: from 21.55% to 24.81%; (iv) The cement industry: minimum 10.89%; (v) The textile industry: minimum 6.8%; (vi) The alcohol, beer and soft drink industry: from 4.6% to 8.44% depending on product type and production scale; (vii) The paper industry: from 9.9% to 18.48% depending on product type and production scale.

Doing VNEEP, a number of regulations has been issued, which is great contributions to EE to the economy and supporting narrow gap of energy intensity of the country. For the industry sector, at least six circulars on minimum energy performance standards (MEPs) have been enforced including such sub-industries as steel, chemical, paper, sea food processing, sugar cane, and plastic.

For this program more and more activities will be doing for those of working in:

  • Review, amend, supplement, and systematize legal documents on EE&C; research and develop technical guidelines on EE&C;
  • Research, develop the energy efficiency certification system for EE&C solutions;
  • Review, amend, supplement technical and economic standards, norms on EE&C in buildings, develop green buildings, green urban areas; establish the evaluation and certification system for EE&C buildings; develop standards, enhance the capacity of laboratories to conduct the evaluation, energy labeling for building material products, which require thermal insulation, to be used in buildings;
  • Research, develop and issue policy mechanism, legal regulations on the energy efficiency service company model (ESCO);
  • Review, amend, supplement and finalize the system of technical standards, regulations on EE&C;
  • Develop the system of capacity assessment, recognition, and publication of the list of qualified energy auditing organizations in accordance with the law;
  • Review, set up and develop, issue the energy consumption benchmarks, minimum energy performance standards for sectors/sub-sectors in industry, agriculture, transportation, construction, and service;
  • Develop the policy mechanism on EE&C promotion for small and medium-sized enterprises; policy mechanism to encourage, promote public-private partnership in the implementation of energy efficiency and renewable energy (RE) integration solutions;
  • Develop policies, mechanisms, and measures to promote the use of new energy, EE&C in transportation vehicles and equipment.

With many policies to support RE development, RE achievements are significant for clean-energy target in Vietnam. With potential solar and wind sources, RE capaicty in Vietnam will be more and more attractive to investors by the next decade. For EE, Vietnam expected to have greater development in all aspects of society, much more opportunities to explore the deeper works and solutions for enhancing EE for all economy sectors toward low carbon development, greener and cleaner energy, and NDC targets for Paris Agreement.

About the Author
Mr Hoang Van Tam

Hoang Van Tam

Deputy Head of Climate change and Green growth Office under the Steering Committee’s Ministry of Industry and Trade of Vietnam

Focal Person of Vietnam on Energy for ACCEPT

Mr. Hoang Van Tam currently is the Deputy Head of Climate change and Green growth Office under the Steering Committee’s Ministry of Industry and Trade of Vietnam about climate change and green growth for the energy and industry sectors.

He has been engaged to the climate change and green growth topic under the MOIT for over ten years. He is focal person who is in charge of working various topics related to climate change and green growth such as negotiation process in the Conference of Parties of UNFCCC, developing and updating NDCs development for energy sectors.

Engaging different policies development and implementation program for energy efficiency, renewable energy such as national program on EE period 2019-2030, master plan on energy and power development plan by next 10 years 2021-2030 and vision to 2045.

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