On The Horizon - Renewable Energy in Asia: Vietnam

1. What are the driving factors for increasing renewable energy production in Vietnam?

As with many other countries, an important factor in Vietnam driving the increased use of renewable energy is a heightened sense of environmental issues. Another important factor is the steady power-demand growth rate over the years, especially during the dry season when power generation capacity is not enough to supply demand. Economics, too, is important. While Vietnam is a net exporter of crude oil, it is a net importer of petroleum products. Vietnam has current supplies of offshore gas, but Vietnamese fields are limited. The balance between exporting crude and importing refined product will begin to change in the next few years, so Vietnam will become a net oil importer. Coal as a fuel is a major source of pollution, and its use is widespread. While at the moment Vietnam is a net exporter of coal, it is forecasted that Vietnam will be a coal importer from 2015 onward.

Underlying all of this is the fact that there is limited government financing available for construction of traditional power generation plants. The power monopoly, Electricity of Vietnam (EVN) (a state owed enterprise), is on the way to being un-bundled with a new separate structure of generation, transmission, and distribution functions. The Electricity Regulatory Authority under the Ministry of Industry and Trade (MOIT) exercises control over electric power pricing. The current power price regulation is still low so that only hydropower generation is viable. Potential foreign power generators who are interested in investing in wind energy or solar energy still need to wait for a possible feed-in tariff to be accepted by Vietnam’s government.

The hope is that many new forms of renewable energy, including wind, biomass, and hydro power, can be developed more freely outside of the EVN monopoly and by using sources of private financing. However, even if these new forms of energy were developed, power pricing would remain a major barrier, especially due to high production costs related to harvesting renewable energy sources.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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