Quick Shift From Coal Plants: Boom in Vietnam’s Renewable Energy Industry

Vietnam's electricity growth provides a clear indication of the country's commitment to renewable energy as the country shifts from coal.

The roadmap for Vietnam’s electricity growth provides a clear indication of the country’s commitment to renewable energy in the decades ahead, as the country marks a swift shift from the coal plant-dominated electrical mix. This article discusses the aspects of the Renewable Energy Industry in Vietnam, as well as investment potential in the sector.

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Booming Renewable Energy Industry 

The installed capacity of non-hydroelectric renewable energy in Vietnam (such as solar, wind, and biomass gasification) was 109 megawatts (MW) in 2014, accounting for around one-third of 1% of the country’s total installed capacity of 34,079 MW. Hydropower (46%), coal (29%), and natural gas (22%) dominated Vietnam’s electrical mix at the time. 

However, by the end of 2019, wind and solar have amounted to 5,700 MW of installed capacity. Subsequently, in only five years, wind and solar have gone from basically 0 to 10% of Vietnam’s energy supply, making Vietnam’s Renewable Energy Industry an ideal spot for investors to tap into the sector’s untapped potential. 

What Is Fueling the Boom in Vietnam’s Renewable Energy Industry?

The fundamental driver of this expansion in the renewable energy industry is Vietnam’s rapid development. 

According to the Asian Development Bank, Vietnam’s economy has risen at a rate of 6% or more every year since 2014, moreover hitting 7% in 2018 and 2019. Despite the impact of the Covid-19 pandemic, Vietnam’s economy grew by 6.61% in the second quarter of 2021 and is foretold to grow up to 7% by the end of the year. As a result of this colossal development, energy consumption is skyrocketing. According to the Diplomat, the amount of energy sold by Vietnam Electricity (EVN), a state-owned electric company, has increased from 128.6 terawatt-hours (TWh) in 2014 to 209.4 TWh in 2019. Electricity consumption has been expanding at a pace of more than 11% per year, significantly faster than GDP. Furthermore, with people spending more time indoors due to the pandemic in 2020 and 2021, household energy consumption is soaring high too. This is feeding a ravenous need for increased electricity generation and investment.

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Vietnam’s government recognizes that the country’s rapid economic growth will require large capital inflows to keep up. According to EVN’s 2017 Annual Report, keeping up with demand in the electricity sector required $22 billion in investment by the end of 2020 and early 2021. Conclusively, it is because of this that the energy sector has experienced such a dramatic shift in such a short period of time.

Investment Prospects in Vietnam’s Renewable Energy Industry 

Power demand in Vietnam has grown at a compound annual growth rate of 13% since 2000 and is predicted to grow at an annual rate of 8% through 2030 as a result of the country’s economic growth. To address increased energy demand and predicted energy shortages, the country will require $8-10 billion investment in the energy sector over the next decade. 

High prices, energy security, environmental and health consequences, and a lack of energy services have encouraged countries such as Vietnam to pursue a more diverse energy mix.

Furthermore, Vietnam’s Politburo passed Resolution 55 in February, urging that the Electricity Law be amended to allow private sector investment in power infrastructure. As a result, Vietnam has attracted a lot of investment, for instance, Ireland-based Mainstream Renewable Power Ltd declared to acquire an 80% stake in a company that is producing a 405-MW portfolio of solar projects in Vietnam. It is also expected to receive much more investment in the future from both domestic and international investors. It is due to the potential of Vietnam’s enormous renewable energy resource and the effectiveness of the solar feed-in tariff.

How Can Cekindo Help?

If you’re a foreign investor looking to invest in Vietnam’s renewable energy industry, having Cekindo by your side can make the whole process hassle-free. Cekindo, with its integrated business registration services, can advise on the most suitable legal entity type. We provide instructions on gathering relevant documents and submission of applications. 

Moreover, Cekindo acts as a local representative to submit your application on your behalf without you being in the country. We also provide legal assistance during the business registration and setup and help you in applying for work permits.

 

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