Vietnam's Growing Investment in Renewable Energy
Vietnam has risen to 8th place, surpassing France and Germany, in the global ranking of renewable energy investments in 2020. The country invested approximately 800 trillion VND in solar and wind energy in 2020, positioning itself as a potential leader in renewable energy in the future. This article explores three reasons behind the surge in renewable energy investment in Vietnam and examines business entry opportunities in this sector.
Electricity Demand Driven by Economic Growth
Firstly, Vietnam's investment in renewable energy is driven by the need to meet increasing electricity demand resulting from its robust economic growth. From 2010 to 2019, Vietnam's economic growth rate was between 5-7%. As the domestic industry develops alongside this economic growth, electricity demand within the country increases, raising concerns about potential power shortages due to delays in expanding coal-fired power generation facilities. Comparing the annual electricity consumption in Southeast Asian countries (2018 data), Vietnam ranks second (227 TWh), following Indonesia (275 TWh), and ahead of Thailand and Malaysia (both 195 TWh). Furthermore, according to annual statistics from the Vietnam Electricity Corporation, domestic electricity demand is expected to more than double by 2030, reaching 491 TWh, and to more than quadruple by 2045, reaching 877 TWh.
Currently, electricity shortages are already apparent. In May 2020, the Vietnamese government issued Directive No. 20, calling on the private sector to reduce electricity consumption by 2% annually. Specific targets vary, with public lighting and businesses handling outdoor decorations and advertisements required to save 20% of electricity by adopting energy-saving technologies. Thus, power shortages are a significant concern in Vietnam amidst economic growth.
Abundant Resources and Reduced Renewable Energy Investment Costs
Secondly, Vietnam has ample natural resources necessary for long-term renewable energy investments. For instance, situated near the equator, Vietnam receives 4-5 kWh of sunlight per square meter, providing ideal conditions for solar power generation. Additionally, Vietnam has a 3,000-kilometer coastline along the South China Sea, with wind speeds of 5.5-7.3 meters per second, offering substantial potential for wind power generation—the largest in Southeast Asia. Moreover, technological advancements have significantly reduced investment costs for solar and wind power, making it feasible to leverage Vietnam's rich natural resources for renewable energy development.
Climate Change Response and Government's Renewable Energy Investment Plans
Lastly, the Vietnamese government has begun efforts to reduce greenhouse gas emissions, which are internationally emphasized. Given the reliance on coal-fired power is not viable, renewable energy is necessary to address power shortages. In September 2015, Vietnam formulated its Intended Nationally Determined Contribution (INDC) for climate change, which was adopted at the COP21 Paris Agreement in December of the same year. The INDC set a goal to reduce greenhouse gas emissions by 8% through domestic efforts by 2030. This situation necessitates sustainable power generation to replace fossil fuels.
Regarding national strategies for replacing coal-fired power with renewable energy, the Communist Party issued Political Bureau Resolution No. 55 in February 2020, outlining national energy development strategies until 2030 and a vision for 2045, with targets for renewable energy and greenhouse gas reduction. According to the draft 8th National Power Development Plan, released by the Vietnamese government in February 2021, the share of renewable energy in Vietnam's power generation is planned to increase from 21% to 30% by 2030 and to over 40% by 2045.
Opportunities for Foreign Companies
Given these reasons, investments in solar, wind, and biomass sectors in Vietnam are expected to increase. Since many solar power plants are already operational, business opportunities must be explored from different angles. For example, the Operation & Maintenance (O&M) sector in Vietnam remains underdeveloped. There is a demand for remote monitoring systems to track power generation, recovery services for operational issues, and expertise in site management for power plants.
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