Vietnam plans energy shift toward building more solar, less reliance on gas and coal

HANOI: Vietnam is revising its energy plans to focus more on large solar farms and less on reliance on coal and natural gas. The fast-growing economy now aims to get 16 per cent of its energy from the sun - more than triple its earlier target of just 5 per cent.

A draft of the new policy outline, likely to be finalised in coming weeks, scraps plans to build offshore wind turbines, instead building more onshore wind capacity, rooftop solar and energy storage.

Offshore wind and new gas projects have proven expensive and difficult. Large solar farms are cheaper and easier to build.

But Vietnam also is emphasising expansion of large solar farms to meet soaring demand for power generation. It forecasts it will need more than 211 gigawatts of energy by 2030 as its economy grows, 40 per cent more than its previous estimate and more than Germany's current total capacity.

“This reflects both an overall increase in potential power demand by 2030 and the fact that LNG (or liquefied natural gas) projects are not on track to be completed by 2030,” said Giles Cooper, a partner at the international law firm Allens based in Hanoi who specializes in energy policy.

Solar power expanded rapidly in Vietnam from 2018 to 2020, helped by generous government policies, as it leaped past its neighbours and some richer nations like the United Kingdom.

But construction of new solar capacity stalled in 2020 as the Southeast Asian nation realised that its creaky electricity grid was getting overloaded since electricity was only available when the sun shone.

“It was like the market almost stopped,” said Dimitri Pescia, of Berlin-based thinktank Agora Energiewende.

Use of polluting coal, which releases earth-warming gases into the atmosphere, has surged and Vietnam is set to become one of the world's top five coal importers, displacing Taiwan, according to the International Energy Agency.

Like many other markets, Vietnam still needs to upgrade its rickety grid, which has failed to keep up with the rapid growth of clean power generation. However, it has made improvements and gained experience dealing with energy sources that are not always available, Cooper said.

Last year, authorities allowed electricity-guzzling factories to buy power directly from energy producers, aiming to ease pressure on the overstrained power grid and help big manufacturers like Samsung Electronics meet their climate targets. But that was hindered by a lack of space to build clean energy projects close to factories.

Solar energy is “seen as the most promising technology to kick start” those direct purchases, Cooper said.

But while it's building clean power capacity, Vietnam is also ramping up the use of coal. That's partly to make up for lost hydropower capacity due to drought, and also to meet soaring demand as businesses shift factories from China to Vietnam.

Vietnam is Southeast Asia's second-biggest coal producer after Indonesia. It also imported 50 million tons of coal in the first three quarters of 2024 - a 31 per cent increase, according to government data.

Pescia noted that Vietnam’s coal-fired power plants are not very old and operators have yet to recoup their investments.

“Phasing out coal in a country like Vietnam will take more time,” he said.