The Proposed Vietnam PDP8 Update and the Risks From the Coal Pivot
12 October 2021 – by Viktor Tachev
As far as success stories go, Vietnam’s renewable energy leaps are one of the globes foremost examples. The 100-fold increase in solar power capacity the country achieved in just two years ranked it amongst the top markets globally. However, in the proposed update of its PDP8 policy, recent political developments in Vietnam could risk yesterday’s green champions becoming tomorrow’s climate villains. The approach reveals concerning plans that risk derailing the country’s remarkable clean energy progress.
Vietnam’s PDP8 Draft and the Proposed Update
In February 2021, the Ministry of Industry and Trade of Vietnam (MOIT) released the first draft proposal for the national power development plan (PDP8) for public comment. The plan listed various potential scenarios for energy development, including an increased focus on renewables.
In a nutshell, the plan proposed 19-20 GW of solar, 18-19 GW of wind, 22 GW of gas-fired, and 37 GW of coal-fired capacity by 2030.
However, concerns amongst experts rose as the domination of caseload coal and gas-fired power will continue to play a prominent role in Vietnam’s energy mix. “PDP8’s usefulness as a roadmap will be limited due to the rapid pace of [renewable] energy transition globally,” concluded The Institute for Energy Economics and Analysis (IEEFA).
Vietnam’s plans to sacrifice renewables for coal further worsen its net-zero progress and ambition. The latest draft of the PDP8 policy, as of September 2021, proposes to raise coal-fired powers capacity by 3 GW by 2030, seeing a further 10 GW installed by 2035. This plan sacrifices 8 GW of renewables in a pivot back to coal. Offshore wind is removed entirely from the base case scenario.
Instead of striving towards a sustainable future, the recent proposal is a step backward. How Vietnam’s top decision-makers read into and evaluated the latest technology and finance trends in power markets is confusing at best.
The Risks for Vietnam
Pursuing the plans proposed in the Vietnam PDP8 policy highlights risks on several fronts.
The Lack of Financing for New Coal Projects
In 2019, China, Japan, and South Korea accounted for about 80% of the new coal plant finance for construction globally. Vietnam was and continues to be among the leading recipients of that funding. However, due to heavy public criticism, Japan and South Korea announced their halt to overseas coal financing.
This left China as the sole hope for nations, Vietnam included, looking for international coal-fired power plant financing. But in a twist of events, at the UN’s General Assembly in September 2021, China announced its intention to cease its funding of overseas coal projects.
With China’s withdrawal as a lender, the future of several high-profile projects in Vietnam is now in limbo. These projects – Nam Dinh 1, Song Hau 2, An Khanh Bac Giang, Cong Thanh, and Vinh Tan 3 – were all given pre-investment phase backing from Chinese financing before the latest announcement.
According to The Saigon Times, another 18 planned coal-fired power plants – with a total capacity of 20.4 GW – listed in the PDP8 draft are unlikely to access funding for development.
Missing on the Clean Energy Funds
Today, Vietnam is the leading renewable energy market in Southeast Asia. If past indicators are to go by, it positions the nation to benefit from an influx of green capital in the coming decades.
A cohort of international financing programs – including those by the Japanese government, climate funds, and other joint philanthropist and banking initiatives – are already supporting decarbonisation across the region.
These events suggest that a transition toward a green economy will open up a USD 1 trillion opportunity for Southeast Asia by 2030.
However, the PDP8 policy will put Vietnam into an unfavourable position with established clean energy sponsors. It will further distance Vietnam from the swelling pool of sustainable finance, preventing it from scaling up renewable energy grids to generate reliable and affordable electricity.
Climate Impact and Negative Effect on the Country’s Public Image
The reversal toward coal moves against the interests of Vietnam’s dynamic economy, which is highly exposed to global investment and consumer markets. In a world racing to decarbonise, such action undermines the country’s credibility for investors and the public.
The Era of Coal Has Ended – Sustainability is No Longer a Choice, but the Only Option
Over the past year, Vietnam has established itself as a nation with one of the most remarkable strides in renewable energy adoption. However, the proposed updates to the PDP8 policy risk tarnishing this progress. The era of coal is over, with sustainability no longer becoming a choice but the only option.
With the UN’s climate change conference – COP26 – around the corner, the spotlight is now on Vietnam’s officials. The return to coal will raise uncomfortable questions from the international community. Fortunately, there is still time to set the record straight by revising PDP8 toward a cleaner direction.
by Viktor Tachev
Viktor has years of experience in financial markets and energy finance, working as a marketing consultant and content creator for leading institutions, NGOs, and tech startups. He is a regular contributor to knowledge hubs and magazines, tackling the latest trends in sustainability and green energy.Read more