Jan 01 21 Vietnam Investment Review Source With breakthrough provisions on national energy development, Vietnam's National Energy Development Strategy towards 2030 and with a vision until 2045 will open up enormous opportunities for the private sector to participate in energy development. John Rockhold, chairman of the Vietnam Business Forum's Power and Energy Working Group, writes on recommendations that would improve the sustainability, reliability, and affordability of Vietnam's energy system.Vietnam can achieve its commitments to reduce greenhouse gas emissions under the 2015 Paris Agreement through the application of appropriate and timely policies.
We recommend that the Ministry of Industry and Trade (MoIT) increases the share of electricity from renewable energy sources such as solar and wind in the National Power Development Plan as a means of reducing dependence on fossil fuels while also investigating a range of carbon taxation policies, including taxation at the source, border adjustment taxes on untaxed fossil fuels, carbon pricing for high carbon industries and sectors, and carbon trading mechanisms.
This combination of policies will help Vietnam to both meet and exceed its emission reduction targets and avoid punitive border adjustment taxes on embodied carbon in Vietnamese exports. In addition, revenue from carbon taxes can be used to fund research and incentives to support Vietnam's transition to a low carbon economy. We agree these projects should not be based on subsidy but on a real cost and tariffs.
Increased use of natural gas can be the current best-fit baseload for renewable energy. Gas-fired electricity can easily scale to the size necessary to meet the significant demands of Vietnam and can respond to intermittent load fluctuations and outages more rapidly than coal. Incorporating imported liquefied natural gas supply into the energy mix adds to Vietnam's energy capacity, while long-term supply contracts for domestic offshore gas are developed.
A regulatory and permitting environment that attracts private sector investment in clean energy generation and energy efficiency must be constructed. The Made in Vietnam Energy Plan 2.0 recommends that the standard power purchase agreement (PPA) for wind, solar, and gas projects be made internationally bankable by establishing feed-in tariffs (FiTs) well in advance and reducing regulatory hurdles.
We strongly urge transparency regarding any changes to FiTs and encourage discussion on how to navigate the permitting process of master plan approval. Ultimately, these efforts should lead to a decline in investor risk and the ability to decrease FiTs as projects become simpler and more profitable.
Meanwhile, direct PPAs can accelerate renewable energy development between buyer and seller and relieve pressure on Electricity of Vietnam (EVN). We encourage the government to seize the benefits of facilitating easy investment in behind-the-meter solar, battery, biomass, and waste-to-energy plants developed by power consumers and specialist suppliers.
This will require an increase in the limits placed on generation behind-the-meter to 30MW to fully capture the benefits of renewable energy, especially within Vietnam's many industrial zones. Supportive regulation will help to develop a dynamic market while preserving a safe and reliable power supply.
We believe that market pricing, gradually introduced, will encourage consumers to use electricity more economically and that by issuing a roadmap for price increases, consumers, including those in the industrial sector, will have time to invest in technology solutions for energy saving and energy efficiency, especially if the roadmap is accompanied with incentives for investment in energy efficient capital assets. To compliment the roadmap, it is also important to have a promotional campaign aimed to educate stakeholders on the need for, and benefits of, energy efficiency.
Policy for solar power projects, rooftop solar systems, and wind power projects should be made on a long-term and sustainable basis with consideration of the global ongoing pandemic. Accordingly, the government should consider such as extending the FiT deadline by at least six months, or preferably 12 months, beyond the current deadline of December 31, 2020 for both solar farms and rooftop solar systems.
It should also consider extending the onshore FiT for six months, followed by a viable new tariff for onshore wind projects grid-connected by the end of 2023; a two-year extension to the current offshore wind FiT to the end of 2023; and providing a tariff for grid connected battery storage, especially grid connected solar and battery combinations, to improve grid stability and reduce curtailment of solar energy during peak generation hours.
We have recommended that the exemption from the requirement to obtain a power operation licence should be increased from 1MW to 3MW. We continue to recommend that the MoIT considers increasing the exemption to 3MW to fully capture the benefits of investment in solar rooftop energy systems. In addition, Vietnam should retain incentives to motivate different economic sectors to develop solar energy in Vietnam.
Behind-the-meter clean energy power generation, that exports no power to the EVN grid, is exempted from the need to obtain an operating licence up to 30MW capacity, and not required to seek approval in the national master plan. It should be a requirement to give EVN reasonable notice of when the power plant is to be commissioned and simplify and clarify the process of licensing and approving onsite/behind-the-meter power plants of 1-50MW.
As renewable and natural gas energy sources grow in contribution to the grid, there are challenges associated with incorporating more decentralised power plants that provide intermittent power supply. Given the surging increase in solar and wind generation, especially in the southern region, there is an urgent need for investment to strengthen and expand the transmission and distribution network.
Further, there are likely opportunities to include and leverage private sector and international donor expertise in the area of renewable energy grid integration, battery storage, and flexibility.
Specific policies on waste solar panels towards material recycle and reducing emissions into the environment also need looked at. Solar panels after their expiry date should be collected and recycled to reduce waste and impacts on the environment.
To do this, we recommend that the MoIT has specific regulations and policies on waste solar panels. This include regulating responsibility for collection and treatment to the producer instead of only assigning this responsibility to the investor (the electricity seller) according to the MoIT's Circular No.18/2020/TT-BCT dated July 17, 2020 on prescribing the development of solar power projects and model electricity purchase and sale contracts applicable to solar power projects; and considering allowing the seller to charge for the cost of waste disposal as an input cost and establish technology requirements to treat waste from the project in the basic design dossier.
These proposed regulatory actions will aid both the Vietnamese and foreign private sector to mobilise their expertise, technology, and financial capacity to assist the Party and state in building an affordable, reliable, sustainable, and secure energy system.