Need strong enough mechanism to encourage renewable energy projects of domestic enterprises

According to the projected scenario for renewable energy development of Power Plan VIII, Vietnam can exploit up to 50,000 MW of capacity with an output of more than 160 billion kWh from renewable energy by 2030 and up to 260,000 MW by 2050 if there are reasonable support policies.

To gain perspective on the direction for Vietnam's renewable energy projects in the coming time, to fully exploit existing potential, the reporter had an interview with Dr. Ha Huy Ngoc, Head of the Regional and Local Economics Department of the Institute of Economics (Vietnam Academy of Social Sciences).

Dr. Ha Huy Ngoc, Institute of Economics (Vietnam Academy of Social Sciences): Vietnam Oil and Gas Group is a domestic enterprise with full potential to implement renewable energy projects in general and offshore wind power in particular with the support of the Government through a strong incentive mechanism.

PV: Could you tell us about the potential of renewable energy projects in Vietnam?

Dr. Ha Huy Ngoc : Vietnam has many advantages in terms of nature, society and people, bringing enormous potential for green growth in general and renewable energy in particular.

The resources for renewable energy development are strong thanks to its favorable geographical location in the sunny equatorial region with a long windy coastline. It is estimated that the total technical potential for solar energy production is about 840 GW (nearly 50 times the capacity in 2020) and for wind energy production is about 350 GW (nearly 700 times the capacity in 2020).

Vietnam has a large population with growing awareness. Consumers are increasingly aware of environmental and health factors, with over 80% willing to pay more for green products.

In recent years, renewable energy in Vietnam has witnessed strong growth and attracted investment from the private and foreign sectors, especially in the central and southern coastal provinces, with total foreign direct investment (FDI) reaching over 8 billion USD in 2023, 4 times higher than in 2019. By the end of 2020, the total installed capacity of renewable energy sources in Vietnam is estimated at about 38.4 GW.

In May 2023, the Prime Minister issued Decision 500/QD-TTg approving the VIII Power Plan, creating a legal corridor to prioritize the strong development of renewable energy sources for electricity production, with the goal of reaching a rate of 30.9-39.2% by 2030 and 67.5-71.5% by 2050.

In the long-term vision to 2050, renewable energy plays a key role in a sustainable green economy with more than 50% of electricity produced coming from wind and solar power, providing the ability to be self-sufficient in the national energy system.

PV: What difficulties and challenges are renewable energy projects in Vietnam facing, sir?

Dr. Ha Huy Ngoc : There are still many difficulties in renewable energy projects. Currently, with wind power, we do not have a specific pricing mechanism and planning, so foreign investors cannot wait long and are discouraged. They come to survey, research and then leave. Vietnam has just had a pilot mechanism for offshore wind power assigned to the Vietnam Oil and Gas Group (Petrovietnam) to implement on the Group's oil drilling areas, on a small scale.

To build and operate offshore wind power projects, investors must spend large amounts of capital to invest in wind turbines and offshore power transmission infrastructure. Construction is very costly and complicated, and costs are much higher than for solar power and onshore wind power. Therefore, to encourage investors, there needs to be a pilot mechanism, a price mechanism, and open investment mechanisms for businesses.

Offshore wind power base construction site at PTSC port of Vietnam Oil and Gas Group.

In the near future, when operating the carbon market, from the end of 2025, the European Union (EU) will begin to trace carbon footprints, one of the requirements is that products must be produced with clean electricity. This is a way to offset credits, proving carbon footprints to facilitate goods entering EU countries. The Vietnamese government aims to operate the market by 2028. If this roadmap is slow, businesses will have difficulty exporting, so renewable energy projects need to be promoted soon.

However, to invest in a large power project, a business needs to have financial potential and large enough collateral. The general rule of the bank is that to borrow capital, one must have collateral and fixed assets to borrow capital.

Looking at the experience of support policies of countries around the world, it can be seen that countries with strong offshore wind power development such as China and Norway provide great support in terms of electricity prices and credit. Large-scale renewable energy investment projects will receive special credit incentives, with green credit packages and easy support procedures. In Vietnam, in addition to credit, businesses also face difficulties in electricity trading mechanisms and planning.

Gas-fired power projects also face similar difficulties. The Draft Law on Electricity (amended) expresses the view of making gas-fired electricity the base electricity, but there are no regulations on the horizontal transfer of gas prices and other price components into electricity prices. Hopefully, although the Draft Law on Electricity (amended) cannot specify these contents in detail, it will have the words as a basis for the issuance of decrees, circulars or regulations for new types of energy in the future.

PV: In your opinion, what incentive mechanisms do renewable energy projects need to support smooth implementation ?

Dr. Ha Huy Ngoc : The most important factor for renewable energy projects is planning which areas have potential, detailed plots, and how much area is prioritized for development, so that businesses can confidently invest in projects, avoiding overlaps, and only after construction is completed is it discovered that it overlaps with other plans.

Many renewable energy projects have been completed but cannot sell electricity due to legal and planning problems. Typically, wind and solar power projects in the Central Highlands have been completed but have not been connected and put into commercial operation because they overlap with land planning for bauxite mining. While businesses borrow from banks to invest, the country lacks electricity but the problems have not been resolved.

Wind power project in Dak Nong overlaps with mineral planning.

Businesses are hesitant to set up new renewable energy projects because it takes a lot of effort and is risky, especially for domestic investors. They all have to be cautious and wait for policy signals.

This is the story of the near future in the coming years. To meet the electricity supply for national development and attract foreign investment, especially in the technology industry, we can only hope for new projects and resolve the problems in old projects.

Another important factor is improving infrastructure when increasing power capacity. The transmission system must be ready to respond when power increases and renewable energy is integrated into the grid.

PV: In your opinion, to ensure national energy security, what priority pilot mechanisms need to be mentioned?

Dr. Ha Huy Ngoc : Through surveys of localities from the Central region to the Central Highlands, most of the large renewable energy projects are from foreign investors, this is an energy security issue that also needs to be taken into account. The question is how we can encourage domestic investors to participate more deeply in this market to ensure national energy security.

Vietnam Oil and Gas Group and Vietnam Electricity Group are domestic enterprises with full potential to implement renewable energy projects in general and offshore wind power in particular with the support of the Government through large enough credit sources, preferential power purchase mechanisms and hiring foreign consultants.

Regarding solar power technology, Vietnam is also fully capable of mastering it, if the Government has a mechanism to encourage national enterprises to participate in large renewable energy projects. In particular, the most necessary are credit mechanisms, price mechanisms, direct electricity sales mechanisms, land lease procedures, investment procedures...

Recently, the Prime Minister approved the strategy for the semiconductor industry, the Ministry of Planning and Investment issued a human resource training program, striving to turn Vietnam into a new link and stronghold of the global semiconductor industry. This is an industry that uses a lot of electricity, requiring a large and stable power source. To realize this ambition, Vietnam faces the challenge of investing in large-scale electricity projects, especially renewable energy projects.

Thank you very much!

Phuong Thao

Source: https://www.pvn.vn/chuyen-muc/tap-doan/tin/843dc2ab-fabc-4e0e-8104-439a3e1a5e14