Renewables-led pathway vital for Vietnam

11:21 | 24/01/2019
Renewables could become Vietnam’s lowest-cost option to meet its energy needs, according to a whitepaper released by global management consulting firm McKinsey & Company on Wednesday.
renewables led pathway vital for vietnam
A worker of EVN Hanoi installs panels for solar electricity production for poor households in the capital city’s suburban Quoc Oai District. According to McKinsey & Company, renewables are potentially the lowest-cost option for Vietnam to meet its energy needs.-VNA/VNS Photo

‘Exploring an alternative pathway for Vietnam’s energy future’ evaluates how Vietnam could meet its growing energy demand at the lowest cost, with the least impact on public budgets and the least risk.

“As one of the 18 outperforming emerging economies we identified globally, Vietnam needs more capacity to meet the rapidly growing energy demand it requires for sustainable growth. The path Vietnam chooses to build this capacity will have far-reaching implications on GDP growth potential, trade, environmental performance and energy security,” said Marco Breu, managing partner, Vietnam, McKinsey & Company.

The research found Vietnam’s significant natural endowments of solar and wind power combined with a drop in the capital costs of solar and wind over the past five years – 75 per cent decrease in solar costs and 30 per cent decrease in the costs of wind – strongly positions renewables to be a more affordable source of electricity than thermal generation.

Vietnam’s current power plan requires an investment of roughly US$150 billion by 2030 in additional generation assets and grid infrastructure. The power-generation investments focus largely on coal (about 45 additional gigawatts by 2030) and to a lesser extent renewables (18 gigawatts by 2030).

The research suggests that a renewables-led pathway could help Vietnam’s power sector perform better than the current trajectory because overall power costs between 2017 and 2030 would be reduced by 10 per cent, primarily driven by savings in fuel costs resulting from a move away from high levels of fuel-intensive thermal generation.

Greenhouse gas and particulate emissions would be reduced by 32 per cent and 33 per cent respectively between 2017 and 2030. This would also boost health and economic productivity.

In addition, the renewables-led pathway relies on 28 per cent less total fuel and 60 per cent fewer imports. This would reduce Vietnam’s reliance on fuel imports and fossil fuels.

“There is no silver bullet that will solve Vietnam’s energy challenges. The ability to meet rapidly growing demand while keeping costs low will depend on the creation of financial and regulatory infrastructure that make the market attractive to capable renewables developers,” said Antonio Castellano, partner and co-lead, electricity and natural gas practice, Southeast Asia, McKinsey & Company.

The whitepaper also discusses the keys that could unlock a renewables-led pathway. These include creating suitable market conditions for renewables development, building the country’s capabilities to deliver large scale renewables projects and expanding natural-gas generation’s role in the country’s power plan.

“This is a watershed moment for Vietnam. Renewables are potentially the lowest-cost option for Vietnam to meet its energy needs. Actions taken today to help lay the groundwork for renewables development would offer the country the prospect of a less expensive, cleaner and more secure future,” he added.


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