Sep 06, 2019 / 10:09

Vietnam power demand to double in next five years: Rystad Energy

The Hanoitimes - Vietnam is making efforts to pursue power diversity to feed the economic growth which posts 6.5%-7% annually.

Vietnam is struggling to ensure sufficient electricity to feed its economic growth which lists the country among fastest-growing nations in the world. 
Vietnam is seeking ways to diversify power sources.
Vietnam is seeking ways to diversify power sources.

For that reason, in the course of attempting to reduce fossil energy, Vietnam is diversifying its power sources with renewables as the top priority.

To address challenges in power diversity for the economic growth in Vietnam, Norway-based Rystad Energy keeps renewables in perspective. 

Rystad Energy – an independent energy consulting services and business intelligence data firm offering global databases, strategy advisory and research products – helps figure out the issues. 

Gero Farruggio, Senior Vice President at Rystad Energy, in an interview with Hanoitimes, provides an overview on the role of renewables in Vietnam’s power mix. 

1. Would you talk about the role of renewable energy in Vietnam’s power mix?

Gero Farruggio: Strong economic growth is driving Vietnam’s thirst for energy, with power demand expecting to double in the next 5 years. Once a hydroelectric powerhouse, the energy mix turned to coal to meet the growth in demand, importing at record levels. More recently, Vietnam is turning to renewables, given the short lead time, cost reduction and environmental benefits. 

2. What’s your idea about Vietnam’s wind and solar power potential? 

Gero Farruggio: Vietnam has abundant renewable energy resources, both for solar and wind. To put into perspective, Vietnam’s lowest solar irradiance is on par with the highest solar irradiance found in central Europe. The onshore wind resource in the country also exceeds that of Thailand, Malaysia, with offshore wind also presenting a sizeable untapped potential.

Gero Farruggio, Senior Vice President at Rystad Energy.
Gero Farruggio, Senior Vice President at Rystad Energy.

3. The mushrooming of solar farms following the deadline (June 30, 2019) to benefit Feed-in-Tariff regime of US cents 9.35/kWh in 20 years has caused an overload on the electrical grid. What do you think about the reality and what’s your advice for investors?

Gero Farruggio: This is a common phase Vietnam is entering, consistent with other regions following a solar boom. The grid is often the bottleneck, with transmission and distribution networks having a longer planning and construction lead time. Fortunately, the government is supportive and aware of this challenge. 

In the future, improved planning and grid analysis will help mitigate this risk. The creation of renewable energy zones, targeting new supply where it is needed most, will focus efforts where they are needed, avoiding curtailment. 

4. What’s the most challenging issue to developers? Is power purchase agreement (PPA) problematic?

Gero Farruggio: Bankability is still an issue in Vietnam, despite attractive PPA prices. 

The monopoly of the electricity market does indeed contribute to the problem but it is the lack of protection clauses and conditions for investors that hurt this PPA. If your deal with the one offtaker in the market falls through, there is nowhere else to go. 

While some solutions have been proposed, such as letter of credit with local banks or EPC financing, it still alienates many overseas investors. 

5. Vietnam is seeking measures to boost the power capacity to feed the annual demand growth of roughly 10%. What kind of power sources do you think the country should exploit to meet the demand? 

Mr. Gero Farruggio: Offshore wind is one of the hottest areas in renewables globally. Vietnam has the potential to be a global hotspot in this exciting emerging sector. This opportunity also presents scale, with the potential to match and supply Vietnam’s annual demand growth. 

6. I’ve read Rystad Energy’s latest report on floating PV in Southeast Asia and Rystad said large-scale floating PV is likely to blossom in the region in next five to 15 years. Floating PV capacity in Vietnam is likely to reach 2 GW. Could you please provide some details for the routine (to reach that capacity)?

Gero Farruggio: As the majority of the floating PV projects are proposed on EVN dams and reservoirs, the pace and scale of development will be driven by EVN. It is unlikely they will develop the projects, with specialized third parties more likely to be involved. 

7. Developing floating PV is to take advantage of under-utilized dams and reservoirs. Do you see any disadvantages in promoting this kind of renewables?

Gero Farruggio: Rather than disadvantages, there is huge potential to combine floating PV on dams and reservoirs with the hydroelectric facilities, not least given the ease of connection and the grid surrounding these projects is typically strong enough to handle a solar farm. Construction cost and lead time is also lower than conventional ground mount.  

Technically, we see no disadvantages. 

Thank you very much!