Net zero emission by 2050 has kick started the energy transition process all across the globe. Many countries are facing challenges to follow the path towards net zero emission. Vietnam is also one of the countries facing the challenge to balance economic growth with the need to achieve its net-zero targets by 2050. In this endeavour, Vietnam has also gained US$15.5 billion support from the International Partners Group to help towards coal reduction. However, experts predict that since government still support its ongoing expansion plans of gas-fired power sector, indicating the dominance of fossil fuel still in the country’s power mix.
In a report by David Thoo, Power & Renewables Analyst at Fitch Solutions expressed his concern, saying that the Just Energy Transition Partnership (JETP) for Vietnam, which the International Partners Group is supporting, focuses on coal and allows growth for the gas-fired power sector.Furthermore, the report noted that the JETP for Vietnam limits the peak coal-fired power capacity from 37.0GW to 30.2GW, the report expects this target’s impact to abate conventional thermal power dominance this decade to be marginal.
The JETP aims to advance the country’s peak emission target from 2035 to 2030. The International Partners Group supporting the JETP includes the European Union, the UK, the US, Japan, Germany, France, Italy, Canada, Denmark, and Norway. Of the US$15.5b, half will be from public sector financing and the remaining will be from private financing.
It also seeks to reduce the annual power sector emissions from 240 metric tonnes of carbon dioxide equivalent (mtCO2e) to 170mtCO2e. The partnership also restricts Vietnam’s peak coal-fired power capacity from 37 gigawatts (GW) to 30.2GW, and have renewables account for 47% of the power mix from the current plan of 36%.
The coal sector is reported to have an expansion leeway of close to 6GW, excluding the consideration of replacing old plants, coming from the around 24.4GW coal-fired power capacity by end of 2021 as estimated by the International Renewable Energy Agency.
However,Fitch hopes for the long-term outlook for natural gas production in Vietnam to be bullish, supporting the sector’s growth in the latter half of the decade on the back of government support at the expense of its coal expansion plans.
By 2030, the report expects this dominance to persist, and even slightly increase to 64%, which is about 250TWh in power generation.
Vietnam leads the planned gas expansion amongst markets in Southeast Asia with 56.3GW projects under pre-construction and construction stages, followed by the Philippines with 29.9GW, according to a report by the sustainability think-tank Center for Energy, Ecology, and Development. The report tracked developers’ and financial institutions’ activities from 1 January 2016 to 31 March 2022, focusing on fossil gas and LNG.
However,looking at the the installed capacity of Vietnam’s non-hydropower renewables sector, the report expects it to show the strongest growth rate this decade amongst all power types, to reach 4-.5 GW in 2031 from 21GW by end-2022, with an annual growth rate of 8.1%.This comes as the JETP supports solar photovoltaics and offshore wind power as “bright spots” for the country. The expected renewable growth, almost all will come from solar and offshore wind at 13.3GW and 5.4GW, respectively, over the same period. The rise of solar will be supported by rooftop installations and large-scale projects which have a project pipeline of 7.7 GW, pointed out the report.
Fitch said developers can leverage a growing production base for solar as companies from Mainland China, South Korea, and the US are setting up solar manufacturing facilities in Vietnam.
Overall, with the increasing financial support of USD15.5bn from the JETP, we believe that there will be upside risks to the current robust growth that we forecast for Vietnam, the report said.
“Nevertheless, Vietnam’s 2050 net-zero emissions target is providing enough scale potential to accommodate sizeable players and bold ambitions.”