The energy fleet in Vietnam is composed primarily of large hydropower (37%), coal (33%) and natural gas (19%). Renewables contribute only a fraction of total installed capacity (39GW), with small hydropower (2GW) and other renewables (less than 100MW) making up 5.2% of capacity or 3.7% of the nation’s electricity generation. A recent government plan aims to increase the share of renewables, while simultaneously promoting new coal build and LNG import facilities to support a growing industrial sector. Electricity demand is forecast to increase 9% annually from 141TWh in 2015 to 506TWh by 2030.
In March 2016, the Prime Minister approved the revised Power Development Plan VII for the period 2016-2030, a follow up to the previous 2011 Power Development Plan. The new legislation puts stronger emphasis on renewable growth, fuel diversification and transmission reliability. Most importantly, it increases the renewable generation target to 6.5% by 2020 (previously 4.5%) and to 10.7% by 2030 (previously 6%). It also adds technology-specific targets for biomass and solar, in addition to previously set wind goals. The targets are: 710-800MW of wind by 2020 and 6GW by 2030; 850MW of PV by 2020 and 12GW by 2030; and 1GW of biomass, biogas and geothermal by 2020 and 3.4GW by 2030. At the same time, the plan calls for another 40GW of new coal to be built by 2030 and several new LNG import facilities.
Vietnam has a number of existing laws and incentives to support renewables. This includes a feed-in tariff (FiT) of $0.087 per kWh for wind, $0.10 per kWh for waste-to-energy, and $0.07 per kWh for CHP biomass, as well as an avoided-cost tariff of $0.034 per kWh for all other renewables. These are adjusted annually according to inflation and currency fluctuations. A 2001 investment law allows renewable projects to claim a preferential corporate income tax rate of 10% for 15 years, compared to 25% for other industries and accelerated depreciation on assets 1.5 times faster than other property.
Nonetheless, existing incentives have failed to boost the industry and development remains stagnant. Projects cannot compete against subsidised coal and natural gas prices, and FiTs for wind and biomass are insufficient to encourage new build. The avoided-cost tariff is only relevant for existing hydro, and renewable projects, which typically do not have taxable income so have little use for the tax exemption. As a result, to date only 53MW of wind has been built, 150MW of biomass plants remain unconnected to the grid, small-hydro resources are becoming scarce and no major utility-scale PV has been commissioned.
Vietnam scored 1.56 in Climatescope 2016, up from 1.28 in the previous survey. This improvement moved it five places up the order to 17th position on the list of countries overall. Its best performance was on Low-Carbon Business & Clean Energy Value Chains Parameter III.
On Enabling Parameter I, the country’s score was almost unchanged, yet it fell five places to 40th. Clean energy policies, such as feed-in tariffs and an energy target supported the score, but the absence of a distributed energy framework was a weakness.
Vietnam’s score on Clean Energy Investment and Climate Financing Parameter II more than doubled from last year and the country took 20th position in the ranking.
On Parameter III, the country’s score increased and it was ranked 10th globally, up from 14th the year before. It has value chains in every clean energy sector, and four varieties of financial institutions serve the clean energy sector.
On Greenhouse Gas Management Activities Parameter IV, its score increased in the Carbon Policy category, thanks to the introduction of a GHG emissions reduction target and a carbon tax. It was placed 14th.
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