(Bloomberg) — Vietnam, one of the fastest-growing economies in Southeast Asia, needs clearer regulation and policy to support a clean-energy boom that would sustain its manufacturing ambitions, a report published by a local business group said on Tuesday.
Vietnam has become increasingly vital to the global supply chain, with electronics makers such as Apple Inc. setting up plants, partly in response to rising tensions between the US and China. But the boom is straining the power sector — while increasing demand for low-carbon energy.
According to Made in Vietnam Energy Plan 3.0, published by the Vietnam Business Forum’s Power and Energy Working Group, the country lacks clarity on policy and pricing, undercutting investor confidence and slowing negotiations on measures that would speed progress, for example allowing direct power purchases from energy producers.
“The absence of a dedicated legal framework for renewable energy in Vietnam is a major obstacle to energy investments,” the report said.
The country agreed to a $15.5 billion funding deal last year to help finance its transition away from coal and to bring its peak-emissions date forward to 2030. But, as with a similar agreement in Indonesia, an investment plan has hit hurdles around the cost of the funding.
The agreement calls for 47% of Vietnam’s electricity to be generated from renewable sources by 2030, significantly higher than the 39% forecast by the government’s power development roadmap.
To attract more renewable energy investments, power purchase agreements need to conform to international standards, the report said.
“On bankability of power purchase agreements, within Vietnam, there is a well-founded concern regarding curtailment risk, particularly with the significant rise in solar capacity observed between 2019 and 2020,” it said. “This surge had notable impacts on power system operations, leading several solar projects to halt production unnecessarily, causing difficulties in repaying loans to banks on time.”
Vietnam’s government isn’t keen to guarantee agreements between investors and state monopoly Vietnam Electricity Group, said John Rockhold, head of the power and energy working group. And that is apt to throw a wrench in the funding of projects through the Just Energy Transition Partnership, or JETP, he said.
Northern Vietnam experienced power blackouts in May and June, prompting officials to ask some factories to operate during off-hours to reserve power for households at night. The country’s state utility Vietnam Electricity Group has warned that the country is in danger of future outages, particularly during summer months.
“The problem is they are running out of electricity,” Rockhold said.
—With assistance from Mai Ngoc Chau.
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