Vietnam currently relies mostly on large hydropower and natural gas to meet its electricity needs, with the former accounting for 40% (59.8TWh) and the latter 30% (44.9TWh) of its total power generation of 148TWh. Both sources will recede from the total power mix in coming decades if the country’s ‘Power Master Plan 7’ is carried out.
Coal would become a major power source for Vietnam under Power Master Plan 7, which envisages coal-fired power accounting for 47% of Vietnam’s energy mix by 2020 and 56% by 2030. Construction work has already started on Vinh Tan 1 (1,200MW), one of the major planned coal plants. Five Chinese banks provided a syndicated loan of $1.4bn, accounting for 80% of the total project cost. Non-hydro renewables play a minor role in Vietnam’s energy mix but one that also is set to grow.
The government targets an increase in electricity generated from non-hydro renewable sources from the present 3.5% to 4.5% in 2020 and 6% in 2030. Wind and biomass are the sectors identified to realize the target. The installation target for wind is 1GW by 2020 and 6.2GW by 2030; for biomass it is 0.5GW by 2020 and 2GW by 2030.
To incentivize those two renewable technologies, feed-in tariffs (FiT) have been introduced. Early in 2011, a FiT of $0.087/kWh was introduced for wind energy. In 2014 the government extended FiTs to new waste-to-energy and biomass. For waste-to-energy projects using solid waste, a FiT as high as VND 2,114/kWh ($0.1/kWh) was offered. For biomass-fueled combined heat and power projects, the FiT provided was more modest at VND 1,220/kWh ($0.07/kWh). The government is considering a FiT for biogas.
A preferential taxation policy offers an income tax rate of 10% for 15 years to all renewable energy technologies, compared to the statutory rate of 25%. Alternatively, project developers can enjoy tax exemption for the first four years and a 50% reduction in tax payable for nine subsequent years. Depreciation on certain renewable energy assets is allowed 1.5 times faster than other property.
Vietnam’s project development has been limited due to high project costs, steep financing rates and soft costs loaded on due to unclear project permit procedures. The government’s intended revision of the wind FiT has not taken place after several years’ consideration. As of 2014, only 54MW of wind power capacity had been commissioned, though there is a pipeline of 5GW awaiting policy improvements.
Score Summary
Vietnam in 2015 scored 1.28 to finish 22th overall among Climatescope 2015 nations. Its ranking dropped nine places from 2014. This was largely due to a retreat on Parameter I.
Vietnam’s 2015 score on Parameter I Enabling Framework was 1.05, compared with 1.33 in 2014. Although the country introduced feed-in tariffs to the biomass and waste-to-energy sector in 2014, its wind feed-in-tariff has been ineffective so far and an anticipated revision did not materialize.
On Parameter II Clean Energy Investment & Climate Financing, Vietnam’s 2015 score was little changed from 2014 and its ranking improved one spot, to 32nd. The country’s clean energy investment dropped to $67m most recently, less than half that of the previous year.
Vietnam improved its score on Parameter III Low-Carbon Business & Clean Energy Value Chains from 2.99 to 3.19, although it slipped one rank to 14th. Wind and solar equipment manufacturers have emerged in the country, while the number of clean energy service providers continues to grow.
On Parameter IV Greenhouse Gas Management Activities, Vietnam in 2015 surrendered four ranks to 17th place, with a 2015 score of 1.68 versus 2014’s 2.00. The country backslid on the GHG Emissions Reduction Target Indicator.