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Gridlock for renewables in Vietnam

The government has set out an ambitious plan for renewables generation, but the underdeveloped grid will prevent transmission to sources of demand

The economic impact of Covid-19 and the limitations of Vietnam’s national grid will hinder the country’s attempts to turn away from coal and embrace renewable energy. 

The attempted transition is ambitious; Vietnam needs to meet electricity demand growth of about 8pc/yr, with power consumption forecast to rise from 265-278 TWh in 2020 to 572-632 TWh in 2030. A draft power development plan says the country will move forward with 15 coal-fired power projects with a combined capacity of 18GW by 2026. Vietnam will  cancel or postpone until after 2030 nearly half of its previously planned increases in coal power capacity.

In terms of natural resources, the country is well endowed for solar and wind generation, with extensive coastlines, slopes and rivers combined with high annual rainfall. Its wind power potential exceeds that of Thailand. As of June, 12GW of wind power projects proposed by private investors had been approved.

Transmission constraints

A November report from thinktank the Institute for Energy Economics and Financial Analysis  says that renewable energy will make discussion of new coal power “obsolete” by the end of the decade.

“[Grid capacity] has been and is likely to continue to be a constraint for both onshore and offshore installations” Andrews-Speed, National University of Singapore

However, war and its legacy have delayed the development of Vietnam’s national grid, with the first 500kV line connecting three regional grids coming into operation only in 1994. Analytics firm IHS Markit said in June that many southern transmission lines and substations were at full load or overloaded. It warned that developing transmission lines between the north, central and southern parts of the country was “critical”.

According to researchers led by Thi Thu Nga Vu of the Electric Power University in Hanoi, transmission lines between north and central Vietnam are always in high load status, especially in flood season. The transmission network to the heavily populated urban centres of Hanoi and Ho Chi Minh City is often stretched. In the southern and central regions, where solar projects are concentrated, the grid remains poorly developed. The current grid, the researchers write, may be able to absorb only about 2GW of renewable energy.

Grid capacity “has been and is likely to continue to be a constraint for both onshore and offshore installations,” says Philip Andrews-Speed, principal fellow at the energy studies institute of the National University of Singapore. Solar and wind, he adds, will grow in importance but are “unlikely to be dominant until the issue of cheap storage is solved”.

Vietnam could follow the approach of the Philippines and invite bids for grid investment, he says. “The obvious candidate would be China's State Grid Corporation, but that would probably not be welcome in Vietnam for political reasons.”

Hydropower accounts for the largest share of Vietnam’s renewable energy supply. The country could import hydropower from Laos as a stopgap, Andrews-Speed says, but that assumes transmission lines being in place.

Back to coal

Vietnam needs about $10bn/yr of energy investment to meet demand, according to professional services firm Dezan Shira & Associates. That has prompted the government to allow 100pc foreign ownership of energy companies.

c.2GW – Available grid capacity to accept new renewable power

A key to the mix will be how quickly Vietnam’s LNG regasification plants and associated gas-fired power plants can be built, Andrews-Speed says. But according to consultancy Rystad Energy, planned regasification projects globally are at risk due to the Covid-19 economic slump, leaving the use of coal as the only viable option. It highlights Vietnam as a case in point.

Rystad says Vietnam will produce only 7bn m3 of gas in 2025 versus an earlier projection of 10bn m3. Increasing LNG imports will be difficult due to terminal constraints. Four planned terminals will make only a marginal impact on LNG import capacity by 2023, Rystad says. So, to ensure stable and affordable power supply, Vietnam will “likely have to increase coal imports”.

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