Private sector standing ready to invest into energy

10:00 | 18/10/2020
With strong breakthrough provisions on national energy development, Resolution No.55-NQ/TW dated February on the orientation of Vietnam’s National Energy Development Strategy to 2030, with a vision to 2045 will continues to open up enormous opportunities for the private sector to participate in energy development.
1513 p5 private sector standing ready to invest into energy
John Rockhold - CEO, Chan May LNG JSC

Resolution 55 has opened doors for the private sector through new policy mechanisms, including a framework to guide energy development and security and policies to encourage the mobilisation of private sector financial resources.

We have seen positive interest for international financing from banks, export credit agencies, and private sector multinationals like International Finance Corporation in solar and more recently in liquefied natural gas (LNG).

Vietnam can achieve its commitments to reduce greenhouse gas emissions under the 2015 Paris Agreement through the application of appropriate and timely policies. 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.

Increased use of natural gas is the current best-fit baseload for renewable development of certified domestic offshore gas, while import of LNG is 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 LNG supply into the energy-mix adds to Vietnam’s energy capacity while long-term supply contracts for domestic offshore gas are developed.

Vietnam must construct a regulatory and permitting environment that attracts private sector investment in clean energy generation and energy efficiency. Electricity of Vietnam (EVN) can retain current subsidies for low energy users but the government would issue a roadmap for market pricing of all other tariff rates.

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 complement the roadmap, it is also important to have a promotional campaign aimed to educate stakeholders on the need for, and benefits of, energy efficiency.

Meanwhile, we suggest extension of the feed-in tariff deadline for wind and solar power developers. 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 ongoing COVID-19 pandemic. Accordingly, the government should consider two main factors.

Firstly, it should construct a regulatory and permitting environment that attracts smaller scale off-grid investment in clean energy generation and energy efficiency.

The exemption from the requirement to obtain a power operation license should be increased from 1MW to 3MW. The MoIT should consider increasing the exemption to 3MW to fully capture the benefits of investment in solar rooftop energy systems.

In addition, Vietnam should retain incentives in Decision No.13/2020/QD-TTg issued in April on incentives for solar energy development in Vietnam to motivate different economic sectors to develop this type of energy.

Enforcement of the Law on Economical and Efficient Use of Energy must also be improved by accelerating the amendments and supplements to Decree No.21/2011/ND-CP detailing this law.

The second factor is investing in grid infrastructure to improve stability and capacity. 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.

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.

By John Rockhold, CEO, Chan May LNG JSC

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