Renewable energy in Vietnam has emerged as a vital component of the country’s energy landscape, driving economic growth while safeguarding the environment. As Vietnam strives to meet its rising energy demand, it has embraced renewable sources such as solar, wind, hydro, and biomass. This article explores the significance of renewable energy for Vietnam’s economic and environmental sustainability, highlighting the government’s promotion measures to foster its development.
1. Importance of renewable energy for Vietnam’s economic and environmental sustainability
Renewable energy plays a pivotal role in Vietnam’s pursuit of economic and environmental sustainability. With a rapidly growing population and expanding industrial sector, Vietnam faces an increasing energy demand.
By tapping into renewable sources, Vietnam reduces its dependence on fossil fuels, mitigates greenhouse gas emissions, and improves air quality. Moreover, renewable energy offers a stable and diversified energy mix, reducing vulnerabilities to fluctuating fuel prices. Additionally, it stimulates job creation, technology transfer, and local manufacturing, thus fostering economic growth and resilience.
Vietnam utilizes four main sources of renewable energy are: hydroelectricity, wind power, solar power, and biomass. Vietnam’s share of renewable energy in total final energy consumption (TFEC) was around 27% in 2019.
The government has set targets to raise electricity output generated from renewable sources, aiming for approximately 186 billion kWh by 2030. According to McKinsey & Company, a successful renewables-led pathway includes building out the country’s wind and solar generation capabilities (39 GW and 61 GW by 2030, respectively). This would require significant investments in grid infrastructure, policy support and market reforms.
2. Promotion measures in renewable energy
With a clear understanding of the importance of renewable energy to Vietnam, let’s explore the promotion measures implemented by the Vietnamese government to encourage its development and attract foreign investors.
A. Policy and regulatory frameworks
Vietnam has established a comprehensive policy and regulatory framework to attract foreign investors in the renewable energy sector. Some of the key policies and regulations are:
- The National Power Development Plan (PDP 7 revised) which sets the targets and strategies for the development of the power sector until 2030, including the share of renewable energy in the electricity mix.
- The Law on Environmental Protection (2014) which provides the legal basis for environmental management and protection, including the promotion of renewable energy and energy efficiency.
- The Law on Investment (2020) which provides the general principles and conditions for foreign investment in Vietnam, including incentives and guarantees for renewable energy projects.
- The Law on Electricity (2019) which regulates the electricity market and activities, including the rights and obligations of electricity producers, consumers, and distributors, as well as the mechanisms for supporting renewable energy development.
- The Prime Minister’s Decision No. 13/2020/QD-TTg which stipulates the mechanisms for encouraging the development of solar power projects in Vietnam, including feed-in tariffs, power purchase agreements and grid connection.
- The Prime Minister’s Decision No. 39/2018/QD-TTg which stipulates the mechanisms for encouraging the development of wind power projects in Vietnam, including feed-in tariffs, power purchase agreements and grid connection.
In addition, the government also offers tax incentives, including import tax exemptions and reductions for renewable energy projects. Corporate income tax (CIT) exemptions and reductions are granted for a period of up to 15 years, with the possibility of an extended duration for large-scale projects requiring special investment attraction.
B. Investment and financing mechanisms
Foreign investors in renewable energy projects can benefit from various investment and financing mechanisms in Vietnam.
The Vietnam Development Bank provides state investment loans for building power plants using renewable energy resources, allowing investors to borrow up to 70% of the total investment capital with a maximum loan term of 15 years.
Furthermore, the government’s strategy for developing the banking industry grants green credit and allows the issuance of green bonds for investment projects offering environmental benefits. This has led to banks implementing lending programs with favourable rates for renewable energy projects, such as VPBank and VietCapital Bank, offering loan ratios of up to 80% and 85% respectively.
C. Land incentives
Investors involved in renewable energy projects in Vietnam can benefit from land incentives as per the current regulations. These incentives include exemptions or reductions in land use fees or land leasing fees. Typically, projects are entitled to a land rental exemption for up to 3 years for the initial construction phase, starting from the date of the land lease decision. Additionally, Decree 46/2014/ND-CP and Decree 135/2016/ND-CP allow for the possibility of extension of the exemption period, depending on the project’s location:
- Projects located outside the list of administrative divisions eligible for investment incentives may receive an extension of 11 years after the fundamental construction period.
- Projects located in administrative divisions facing difficult socio-economic conditions may receive an extension of 15 years after the fundamental construction period.
- Projects situated in administrative divisions of rural districts listed as facing extremely difficult socio-economic conditions may enjoy a complete exemption for the entire lease term specified in the land lease decision.
D. Technological innovation and research and development
The Ministry of Science and Technology issued Decision No. 38/2020/QD-TTG, dated December 30, 2020, which outlines high technologies that are given priority for development investment, and encouraged for development, including but not limited as follows:
- Hydrogen energy.
- Power generation technologies using large capacity renewable energy storage.
- Technology for designing and manufacturing control devices and power electronics converters for renewable energy generating stations.
- High capacity, large capacity renewable energy storage systems and equipment.
- Control equipment, high-performance electronic conversion equipment for renewable energy generating stations.
Vietnam’s government is taking steps to assist in the study and development of renewable energy technology. Additionally, a 10% incentive tax will be imposed for 15 years on the renewable energy enterprises that qualify for the high technologies that are given priority under Decision 38 above. The landscape of the country’s renewable energy sources and Vietnam’s economic development may be significantly impacted by these projects.
Vietnam has achieved certain successful renewable energy R&D projects.
- Project: Development of Floating Solar Farms
This project in Vietnam focuses on the development and implementation of floating solar farms on water bodies such as reservoirs and lakes. By utilizing the vast surface area of these water bodies, the project aims to maximize solar energy generation while conserving land resources (for more information, click here )
- Project: Biomass Conversion Technologies
This R&D project explores innovative technologies for converting biomass into renewable energy sources, such as biofuels and biogas. The project aims to enhance the efficiency and sustainability of biomass conversion processes by developing advanced pre-treatment methods, optimizing fermentation and conversion techniques, and investigating the utilization of different biomass feedstocks (for more information, click here )
E. Public awareness and education
Vietnam pledged to be net-zero at COP26, and as a result, the government issued Notice No. 30/TB-VPCP outlining implementation guidelines. In the area of 8 highlights, efforts were made for the government-led campaign in order to promote public awareness of the renewable energy and its effectiveness.
Campaigns that were operated by the Government:
- Green Energy for a Sustainable Vietnam: This government-led campaign aims to raise public awareness about renewable energy and its effectiveness in creating a sustainable future for Vietnam. It emphasizes the role of individuals in adopting clean energy practices and encourages community engagement in supporting the transition towards a greener and more environmentally friendly Vietnam.
- Powering Vietnam: Renewable Energy Revolution: This campaign focuses on showcasing success stories and highlighting the achievements of renewable energy projects across Vietnam through documentaries, case studies, and interactive exhibitions.
- Energy Conservation Starts with You: This campaign emphasizes the importance of energy conservation and encourages individuals and households to adopt energy-saving practices in their daily lives. It promotes simple yet impactful actions such as reducing electricity consumption, using energy-efficient appliances and practicing mindful energy habits.
3. Prospects and challenges for the development of renewable energy in Vietnam
Prospects for the Development of Renewable Energy in Vietnam
- Favourable Government Policies: Vietnam has implemented supportive policies and incentives to attract foreign investment in the renewable energy sector.
- Abundant Renewable Resources: Vietnam possesses abundant renewable resources, including solar, wind, biomass, and hydro power. The country’s geographical location and natural resources provide favourable conditions for the development of various renewable energy projects.
- Growing Energy Demand: The transition to renewable sources not only helps meet the rising energy needs but also contributes to energy security and reduces dependence on fossil fuel imports.
Challenges for the Development of Renewable Energy in Vietnam:
- Financing and Investment Constraints: Despite the attractive investment environment, financing and investment barriers remain a challenge for renewable energy projects in Vietnam. Access to affordable capital, long-term financing, and a stable regulatory environment are crucial for attracting foreign investment.
- Grid Integration and Infrastructure: Expanding and upgrading the transmission and distribution networks to accommodate intermittent renewable sources is essential for the successful integration and utilization of renewable energy.
- Regulatory and Administrative Processes: Streamlining and simplifying these processes can enhance the ease of doing business and attract more foreign investment in the renewable energy sector.
4. Final thoughts
Vietnam’s drive towards renewable energy underscores its commitment to sustainable development. With favorable government policies, abundant renewable resources, and growing energy demand, Vietnam is poised for significant progress in the renewable energy sector. However, challenges such as financing, grid integration, and regulatory processes need to be addressed. By overcoming these obstacles, Vietnam can unlock the full potential of renewable energy and achieve its goals of economic growth, energy security, and environmental protection.
