In the 2001 to 2010 period, Vietnam's economy experienced rapid growth with an average rate of 7.2%/year, leading to an increase in electricity demand for economic and residential usage purposes, about 14.5%/year. Faced with the challenges of providing electricity for socio-economic development and responding to climate change, renewable energy is the optimal solution to ensure national energy security as well as protect the environment. According to the World Bank's assessment, Vietnam is the country with the largest wind potential in Southeast Asia, especially in the South Central and Southern provinces.
On June 29, the Prime Minister signed and promulgated Decision No. 37/2011/QD-TTg on the mechanism to support the development of wind power projects in Vietnam with incentives for capital, taxes, land fees, and Feed-in Tariff (FIT) for 20 years. The electricity buyer must purchase the entire electricity output from wind power projects with the price at the power delivery point of 1,614 VND/kWh (equivalent to 7.8 UScents/kWh). This is an important legal document that is expected to promote the development of wind power projects in potential localities in the near future.
The Government's commitment to promoting the renewable energy sector is further confirmed in Decision No. 1208/2011/QD-TTg dated July 21 on approving PDP VII. In which, the goal of the Government of Vietnam is to prioritize the development of renewable energy sources for electricity production, increasing the proportion of electricity produced from 3.5% in 2010 to 4.5% of total electricity produced. production by 2020 and 6% by 2030. The specific goal is to bring the total wind power capacity from negligible at that time to about 1 GW (~0.7% of total electricity generation) by 2020, about 6.2 GW (~2.4% of total electricity production) by 2030. Biomass and cogeneration at sugar mills have a target of 0.5 GW by 2020 and 2 GW by 2030. PDP VII has not set specific targets for solar power. To develop the power system to ensure national energy security under PDP VII for the whole period 2011 - 2030, Vietnam needs a total investment capital of about 2,359 trillion VND (equivalent to 123.8 billion USD). by 2030, in which: investment in power source accounts for 64.5% and investment in power grid accounts for 34.5%.
By the end of 2011, there was still a significant gap between the current state of power sources and the renewable energy development goals of PDP VII as hydroelectricity, gas-fired thermal power and coal power still played a key role in the structure of power generation with the capacity share of 46%, 38% and 16% respectively. In this year, Vietnam has no large-scale wind and solar power plants in the system. Only a very small part of non-hydro renewable energy comes from cogeneration (CHP) systems in sugar mills that sell excess electricity to the grid. Nearly half of the installed capacity is hydroelectricity with low electricity production costs, making Vietnam's power system highly dependent on seasonality. During the rainy season, hydropower plants are prioritized to mobilize first, coal-fired power plants and gas turbines are mobilized later cover the load curve, so the output of hydroelectricity in rainy season months usually double the output in dry season. In contrast, in the dry season, hydropower plants lack water to generate at high capacity, coal-fired power plants and gas turbines play a major role in supplying electricity to the loads. The biggest advantage of the power system at this time is that the cost of electricity generation is very cheap because most of the source is hydropower. Therefore, the power system can operate flexibly, especially in the rainy season, but there is always a potential risk of power shortage in the dry season when there is slow return of waterflow on the northern and central river systems, and the Central Highlands.
In this year, most of the power sources were owned by the State-owned Enterprises (SOE), of which the Vietnam Electricity (EVN) played the most important role by owning 50% of total installed capacity and 14% of capacity belonged to joint stock companies with EVN had put capital in. PetroVietnam (PVN) owned 10% of power capacity and the Vietnam National Coal-Mineral Industries Holding Limited (TKV) owned 6%. In addition, 12% of total capacity was owned by domestic investors and 8% by international investors.
To implement the policies for wind power development approved in Decision No. 37/2011/QD-TTg, the Ministry of Finance issued Circular No. 96/2012/TT-BTC on June 8 on the guiding mechanisms to support electricity tariff for grid-connected wind power projects. On November 12, the Ministry of Industry and Trade (MOIT) issued Circular No. 32/2012/TT-BCT regulating the implementation of wind power development and the Standard Power Purchase Agreement (PPA) for wind power projects. Support policies from the government and regulations of ministries have shown the special attention of the State to promote this type of energy. In early 2012, Binh Thanh wind power plant (formerly known as Tuy Phong) with an installed capacity of 30 MW has commissioned, marking the first time that Vietnam had a large-scale wind power plant. However, until the end of 2012, very few wind power projects were implemented because investors considered the support mechanism not economically attractive enough to activate the market. By the end of 2012, the installed capacity of 3 main sources (hydroelectricity, coal, gas) still accounted for the majority, with more than 50% from hydropower. The growth of hydroelectricity in the system has been significantly contributed by small hydropower projects concentrated in the Northwest, Central, and Central Highlands regions.
On September 25, the National Strategy on Green Growth was issued by the Prime Minister in Decision No. 1393/QD-TTg, which sets the target towards a low-carbon economy with the strategic mission of reduce the intensity of greenhouse gas emissions by 8-10% compared to 2010 levels in the period 2011 - 2020 through solutions to restructure energy sources in the direction of reducing fossil fuel sources, encouraging exploitation and use of renewable energy, improving energy efficiency.
2012 is also an important milestone in the process of building the electricity market in Vietnam. After a trial period until July 1, the competitive power generation market (VCGM) was officially put into operation with 32 plants (total capacity of 9.2 GW) directly participated, accounting for nearly 40% of electricity generating units nationwide. VCGM is the first step in the Roadmap to develop the electricity market in Vietnam, which is concretized in Decision No. 26/2006/QD-TTg dated January 26, 2006 of the Prime Minister. The operation of VCGM is to introduce competition into the power generation stage toward eliminating subsidies in the power industry, creating motivation for power plants to improve production and business efficiency, and attracting investment from all domestic and international economic sectors to participate in electricity activities, ensuring transparency in electricity generation operation and pricing. This is an important development step of Vietnam's electricity sector transforming to a market-based operation, a prerequisite to promote the restructuring of the electricity market towards competitive electricity wholesale and retail.
Recognizing that the transformation in the structure of electricity generation is a challenge for the management of the power grid in ensuring stable, sustainable and affordable supply, on November 8, the Government of Vietnam issued Decision No. 1670/QD-TTg on Smart Grid Development in Vietnam. This roadmap aims to improve the quality and reliability of power supply while promoting economical and efficient use of electricity. The smart grid would be deployed through the tasks of building a legal framework, implementing the program to increase the efficiency of power system operation, focusing on the distribution grid; equip the information and telecommunications technology infrastructure and develop the SCADA/DCS/EMS system for the dispatch centers.
In 2013, Vietnam's renewable energy market did not have the expected breakthrough even though the supporting mechanism for wind power was issued. According to Lazard's report, the average levelized cost of electricity (LCOE) price for wind power in the world in 2013 was 7.0 UScent/kWh. With a FIT of 7.8 UScent/kWh under Decision No. 37/2011/QD-TTg for a new market like Vietnam, investors find that it is not economically attractive enough to participate.
As there was no breakthrough in renewable energy development, the power mix did not change much compared to 2012. The total installed capacity of the power system in 2013 was 30.7 GW, of which hydropower accounted for 50%, followed by coal power (23%), gas and oil thermal power accounted for 27%. Thus, hydropower has remained the main source of electricity for many years. In 2013, two more wind power projects, namely Bac Lieu project phase 1 with a capacity of 16 MW and Phu Quy project with a capacity of 6 MW, were completed. Thus, Bac Lieu is the second wind power project connected to the grid while the wind power on Phu Quy island is not connected to the grid and is used for local demand.
On November 8, the Prime Minister issued Decision No. 63/2013/QD-TTg (replacing Decision No. 26/2006/QD-TTg) regulating the roadmap, conditions and structure of the industry. electricity to form and develop different levels of electricity market in Vietnam. The milestones to bring the wholesale and retail markets to market competition are pushed back 2 years compared to the previous decision. According to Decision 63/2013/QD-TTg, from 2017 to 2021, Vietnam will implement a complete competitive wholesale electricity market and after 2023, the competitive retail electricity market will be officially operated.
By the end of 2013, there were 48 plants from 35 companies participating in the competitive power generation market with a total installed capacity of 12.9 GW, accounting for 39.2% of the total installed capacity of the entire system. The remaining 49 plants (excluding small hydroelectricity) not participating in the market, have a sum capacity of more than 18 GW, accounting for 60.8% of the total capacity of the system.
On March 24, the Prime Minister issued Decision No. 24/2014/QD-TTg on the mechanism to support the development of biomass power projects in Vietnam. This is also the first legal document providing a policy tool to support the development of this sector. Before 2014, Vietnam had about 40 sugar mills applying cogeneration technology (using bagasse) with a total capacity of 150 MW.
Power generation from waste is also a technology that is encouraged to develop through a mechanism on electricity purchase prices. Waste power projects receive FIT at 10.5 UScents/kWh for incineration technology and 7.28 Uscents/kWh for landfill gas recovery technology according to Decision No. 31/2014/QD-TTg dated May 5, 2014 of the Prime Minister.
Regarding small hydropower, by the end of 2013, there were 180 projects in operation with a total capacity of about 1.8 GW. This number is well below the identified potential of more than 7 GW. MOIT issued Circular No. 32/2014/TT-BCT stipulating the process of construction, application of Avoided Cost Tariff and standard PPA for small hydropower plants. EVN will be responsible for buying all the power output of small hydro power plants with a contract period of 20 years and renewal as agreed. Another highlight is that small hydropower plants are entitled to participate in the competitive electricity generation market if they meet all conditions in terms of infrastructure, metering, connection, etc. As of December 31, MOIT issued Decision No. 12086/QD-BCT on the avoided cost tariff in 2015, calculated according to the time of use of the day and seasons of the year.
In 2014, the structure of installed capacity of power sources did not change significantly compared to previous years. There are still 3 main types of power sources: hydroelectricity, coal-fired power and gas-fired thermal power. the number of power plants participating in VCGM has increased to 55 out of 107 plants.
In September 2015, the Government of Vietnam submitted the "Intended Nationally Determined Contribution" - INDC to the United Nations Framework Agreement on Climate Change (UNFCCC) in which it committed that Vietnam would reduce emissions by 8% compared to the Business-as-usual (BAU) scenario by 2030 and can be reduced up to 25% with effective international supports.
Towards the implementation of emissions reduction commitments, on November 25, the Prime Minister issued Decision No. 2068/QD-TTg approving Vietnam's Renewable Energy Development Strategy to 2030, with a vision to 2050. The strategy set targets to increase electricity produced from renewable energy (including hydroelectricity) in total electricity production from about 35% in 2015 to about 38% by in 2020; about 32% by 2030 and about 43% by 2050. This is the first time that Vietnam has a separate national strategy for renewable energy development with specific targets.
Vietnam's commitments to reduce greenhouse gas emissions were brought to the Conference of the Parties to the UNFCCC 2015 (COP21) in Paris in December. This marked a historic milestone when all 195 parties consented to a new agreement on reducing global emissions (Paris Agreement).
In order to concretize the biomass power development policy according to Decision No. 24/2014/QD-TTg, the Ministry of Industry and Trade issued Circular No. 44/2015/TT-BCT on December 9, stipulating project development, Avoided Cost Tariff (ACT) and Standard PPA for biomass power projects. Biomass power projects will sell all electricity at ACT, which issued annually by MOIT. This tariff is developed according to peak, normal and off-peak hours, by region and includes two components of electricity price and capacity price.
By the end of 2015, the installed capacity of the whole system increased by 5 GW, mostly from more than 3 GW of coal power plants, increasing the share of this source in the power mix from 28.6% to 33.5%. All other sources had quite moderate increase, only oil thermal power slightly decreased from more than 1 GW to 875 MW. Renewable energy also did not have a breakthrough in 2015 when no more wind or solar power projects were developed.
By the end of 2015, the structure of power sources by ownership did not change much compared to 2011 when the majority of power capacity (77.3%) was still belonged to SOEs. EVN and its subsidiaries owned 61.2% of the total capacity while PVN and TKV accounted for 11.5% and 4.6% respectively. Aside from SOEs, projects invested in the form of Build - Operate - Transfer (BOT) or by other investors accounted for 22.7%.
The most prominent milestone of 2016 was the issuance of Decision No. 428/QD-TTg by the Prime Minister on March 18, approving the adjustment of the National Power Development Plan for the 2011-2020 period, with visions to 2030 (PDP VII Revised).
Although the PDP VII revised has reduced the scale of coal power development by 2030 from 73 GW to 55.3 GW, coal would still have the highest growth as planned with installed capacity double by 2020 from approx. 13.0 GW, and quadruple by 2030. According to the plan, Coal power’s installed capacity will always account for over 40% of the system’s total capacity in 2020-2030 period, while hydropower capacity decreases significantly (from 41.2% in 2015 to 21.4% in 2030). This shows that coal power development will still be focused on to become the main source of electricity, replacing hydropower. The reason is because the potential of hydropower has almost been fully exploited, as well as concerns about the social environment related to the operation of hydropower. At the same time, the impacts of climate change on the hydrological regime affect the stable electricity supply from hydropower. The share of renewable energy in electricity output is expected to be 7% in 2020 and 10% in 2030, including small hydro, biomass, wind, and solar power with the proportions of 2.5%, 2.1%, 2.1% and 3.3% respectively. Specific targets for renewable energy include raising the total installed capacity of wind power to 0.8 GW by 2020 and 6 GW by 2030, solar to 0.85 GW by 2020 and 12 GW by 2020. 2030.
At the time of the revised PDP VII’s approval, nuclear power is expected to be developed with 4.6 GW of installed capacity. However, the National Assembly voted in November to pass a Resolution on suspending the implementation of Ninh Thuan nuclear power project due to economic reasons as well as considering the potential of energy savings, renewable energy and regional grid connection. However, the alternative for the missing capacity to 2030 is to invest in coal-fired power and LNG.
In 2016, two more wind power plants (Bac Lieu 2 with a capacity of 83.2 MW and Phu Lac with 24 MW) was added to the power system bringing the total wind power capacity to 160 MW. However, this is still a very modest figure compared to the system’s capacity (41.4 GW). In the 2011 - 2016 period, coal power grew rapidly from more than 3 GW to 14.5 GW, which is almost equal to the total capacity of large hydropower plants (15.8 GW). However, with a higher capacity factor, coal power production in 2016 (68.8 TWh) surpassed hydroelectricity (63.5 TWh), becoming the largest source of power supply (38% of total electricity production).
Despite having excellent potential to develop solar power, this resource has not been focused on in the past due to its high cost. In 2011, the LCOE of solar power in the world was 15.7 Uscent/kWh, twice as much as wind power (7.1 Uscent/kWh). But with the technology advancement as well as supply chain expansion, the cost of solar power production has driven down rapidly (to 5.0 Uscent/kWh in 2017), making this type of renewable energy become competitive with wind power and even with traditional sources such as coal power.
Recognizing this technology development trend, the Government has issued Decision No. 11/2017/QD-TTg on the mechanism to encourage solar power development in Vietnam, whereby solar power will be purchased at a FIT of 9.35 UScents/kWh (equivalent to 2,086 VND/kWh) for 20 years - much higher than the purchase price of other types of electricity generation, provided that it must be operated and connected to the system electricity before June 30, 2019. This price is said to be very attractive to investors when compared to the average LCOE price of solar power in the world in 2017 (about 5.0 UScents/kWh) and is expected to deliver stronger breakthroughs for renewables than the modest impacts of FIT prices for wind.
The power source structure by the end of 2017 included 19 GW of coal-fired power, accounting for 38% of the total installed capacity of the system, following by hydropower with 17 GW (34%), 9 GW of gas and oil (18%). Renewable energy has a total installed capacity of nearly 4 GW, accounting for 8% of the source structure, of which mainly small hydroelectricity. In 2017, Huong Linh 2 wind power with a capacity of 30 MW connected to the grid, bringing the total wind power capacity in the system to 183 MW. Biomass power plants with a total capacity of about 307 MW are located in sugar factories, using bagasse as fuel for electricity generation.
With consistent policy and many preferential incentives for solar power, Vietnam has attracted a wave of investments from domestic and foreign investors. By the end of 2018, there were about 10 GW registered, of which 8.1 GW was added to the PDP, about more than 100 projects signed power purchase agreements (PPAs). The first two grid-connected solar power projects - Phong Dien and Krong Pa - also commissioned this year with a total capacity of 86 MW.
Wind power also has two more completed projects, increasing the total capacity to 163 MW. In order to promote wind power to develop as strongly as solar power, the Prime Minister issued Decision No. 39/2018/QD-TTg on September 10 amending and supplementing Decision No. 37/2011/QD-TTG by increasing the FIT for onshore and offshore wind power to 8.5 and 9.8 UScent/kWh, respectively. At the same time, at this time, technology for wind power has made great progress, reduced investment costs significantly plus abundant supports from foreign organizations such as the World Bank (WB), the Asian Development Bank (ADB) or the German Reconstruction Bank (KfW), all promise to create a big leap for wind power.
2018 continued to see a significant increase in coal power capacity in the power mix (from 23.1% in 2013 to 38.7% in 2018), while hydroelectricity gradually decreased (50% in 2013 to 41% in 2018), showing clearly that the power structure has changed from hydroelectricity to coal-fired power.
In 2018, there were 6 biomass power plants generating on the national grid with a total output of about 0.5 TWh, accounting for only 0.22% of Vietnam's total electricity generation. This number is still quite modest compared to the targets set by the Government for biomass energy: such as 1% of total electricity generation in 2020 under the revised PDP VII. Commercial production is still developing slowly due to the problem of supporting price for bagasse. However, the prospects for the development of this energy source are still positive based on the increasing amount of agricultural, forestry and urban waste.
2019 is an extremely exciting year for the renewable energy market, especially the race of solar power to get FIT. According to EVN's statistics, by the end of June 30, 82 solar power plants were commissioned with a total capacity of 4464 MW. Meanwhile, according to the revised PDP VII, the capacity of this type of source in 2020 is only 850 MW, showing a growth rate exceeding the plan’s target for solar power.
Although the increase of renewable energy in the system is a very positive sign, a large number of solar power plants connected to the grid in a short time have been causing difficulties for the system operation. The reason is due to the uncertain, weather-dependent nature of this type of power source. Besides, the massive development of solar power projects concentrated in some provinces such as Ninh Thuan, Binh Thuan and Dak Lak has caused overload of 110 kV and 220 kV grids in the areas.
By the end of the year, in addition to 9 wind power projects that have been certified for commercial operation (COD), there are still 31 projects with a total capacity of 1645 MW that have signed PPA but have not yet COD. In order to avoid an overload like solar power, the Government has issued a directive to prioritize the approval of projects that capacity can be evacucated, along with supplementing the planning of transmission grid projects.
With the promotion of renewable energy development, Vietnam is following the global trend to shift energy to a low carbon system. This is also consistent with the reality of the market when the construction of coal power plants is becoming increasingly difficult because the door to access capital from international finance institutions for coal is closing quickly. Although Vietnam's coal-fired power projects have been planned, their implementation has been slow with many delayed projects, some could not find investors or capital sources, and faced opposition from some local authorities.
2019 is also an important milestone for Vietnam's electricity market when the competitive wholesale electricity market officially operates from January 1, after 2 years of piloting. Since then, EVN is no longer the only electricity wholesaler as before, but the five Power Corporations (PCs) will directly participate in buying electricity on the spot market as well as signing bilateral contracts with other power utilities. Although this is an important step forward, the wholesale market is still not fully competitive since 5 PCs are still units under EVN. The next steps still need to be assessed and implemented in order to transform Vietnam's electricity market to full competition at the highest level (retail competition), enhance sector’s performance, and ensure national energy security.
Along with the explosion of solar power, the structure of power sources by owner is also expected to shift significantly in the direction of increasing the proportion of private investors up to 27.7%, of which the investment capacity by BOT form accounts for 7%. Power capacity owned by EVN and Power Generation Corporations (GENCO) decreased to 53.6%, PVN and TKV decreased to 8.1% and 3.4%, respectively.
On February 11, the Politburo issued Resolution No. 55-NQ/TW orienting Vietnam's national energy development strategy to 2030, with a vision to 2045. The resolution set out specific goals to firmly ensure national energy security such as economical and efficient use of energy, synchronous and diversified development of energy types, especially giving priority to renewable energy sources. The Resolution also aims to encourage and create favorable conditions for all economic sectors, especially the private sector, to participate in energy development towards a diversified and transparent competitive energy market.
After 6 years from the date of issuance of Decision No. 24, by February 2020, the total biomass electricity capacity currently in operation is about 400 MW. In which, co-generation of thermal power at sugar mills still accounts for a large proportion: 390 MW with 175 MW of electricity connected to the grid. The rest about 10 MW is from garbage power projects. To change the current status, the Prime Minister issued Decision No. 08/2020/QD-TTg on March 5, to amend and supplement a number of articles of Decision No. 24/2014/QD-TTg on the mechanism for biomass project development. This decision includes some of positive changes such as increasing the FIT price for cogeneration from 5.8 to 7.03 UScents/kWh and for non-CHP biomass power projects to 8.47 Uscent/kWh. However, the biomass supply chain has not been established, leading to risks in ensuring the supply of biomass for power generation, as well as the lack of support mechanisms for taxes and land rental fees not yet draw investment in exploiting this resource. (Assessments on the impact of the mechanism have been published by VIET in the report published in June 2020).
In Decision No. 13/2020/QD-TTg dated April 6, the Prime Minister issued the FIT 2 for solar power: 7.09 UScents/ kWh for solar farm, 7.69 UScents/kWh for floating solar and is 8.38 UScents/kWh for rooftop solar power, applicable to projects COD from July 1, 2019 to the end of 2020. With this level of support, rooftop solar power has grown as explosively as farm solar power did in 2019 with 9.3 MWp installed in 2020, of which 8.9 GW will be connected to the grid. the last 6 months of the year. Especially, 2.4 MWp has been connected within the last 5 days of 2020.
By the end of December 31, the total installed capacity of solar and wind power has reached 16.5 GW. This also means that over 25% of total power capacity is from variable renewable energy sources (wind, solar). The total installed capacity of solar power has so far exceeded the targets of PDP VII adjusted for 2030.
With the strong development of renewable energy sources, the trend of shifting the capacity structure by owner becomes even more obvious when private ownership has reached 31.6% of total installed capacity, plus 8.5% capacity in the form of BOT. This has shrunken the ownership ratio of EVN and GENCOs to 48%, and of PVN and TKV to 8% and 3% respectively.
Being greatly affected by the COVID-19 pandemic, the growth of electricity demand slowed down, while solar power exploded, leading to the reduction of some generating sources or putting many generating units from highly mobilized to standby mode. The rapid development with large capacity concentrated in some areas of the South Central region and the Central Highlands has put pressured on local and regional transmission grid with generation capacity exceeded load demand. To overcome this situation, traditional energy sources have been reduced to the technical limit with minimal configuration but electricity output still redundant. Hence, renewable energy sources are required to be curtailed further.
In order to support providing suitable solutions to this issue, VIET has carried out a number of studies to evaluate the possibility of integrating renewable sources of Vietnam's power grid until 2022 (for onshore wind and solar power). sky) and 2030 (for offshore wind). Realizing that power generation forecasting is a key factor to help operate the system safely and effectively, and at the same time save costs for both investors and operators, VIET also held a workshop on "Meteorological forecasting and nowcasting power generation" to discuss with experts and contribute ideas on this issue.
On August 7, MOIT issued a decision approving the design of a competitive electricity retail market. The roadmap proposes a competitive retail electricity market model with 3 phases, including: phase 1 (until the end of 2021) is the preparation phase; phase 2 (from 2022 to 2024) allows electricity customers to buy electricity on the spot market; Phase 3 (after 2024) allows customers to choose electricity retailers. In parallel with preparing the premises for the retail market, the competitive electricity generation market has also developed. If in 2012, there were only 32 plants participating in the competitive power generation market, by March 31, 2020, there were 98 power plants directly competing in the market with a total capacity of 26.9 GW.
In September 2020, Vietnam submitted an update of its Nationally Determined Contribution (NDC) to the UNFCCC committing to a 9% reduction in GHG emissions compared to the BAU scenario with domestic resources and 27% with international supports. Compared with the previous INDC, the updated NDC its commitment to cut another 21.1 million tons of CO2 equivalent in case the country does it itself. Commitment with international support is also enhanced when reducing an additional 52.6 million tons of CO2 equivalent compared to INDC. However, with the NDC being developed before the draft Power Development Plan VIII was published and the BAU scenario based on the revised PDP VII, it implies that Vietnam has the potential to achieve even more ambitious emissions reductions targets.
In 2021, the Covid-19 pandemic seriously impacted all socioeconomic activities in Vietnam; lots of areas were implemented social distancing during the third quarter, forcing manufacturing sectors and businesses to be stopped or cut down and leading electricity consumption plunge. Specifically, the power consumption in III/2021 went down by 10% and 4.14% compared to II/2021 and III/2020, respectively. Total electricity consumption in 2021 decreased 8.5% compared to 2020; several power sources were curtailed for the power system's supply-demand balance, safety, and reliability. Despite that, in general, peak load in 2021 still grew 10% compared to the previous year, reaching beyond 42 GW in June.
Energy elasticity (is a measure of energy efficiency of the economy, calculated as power consumption growth rate/GDP growth rate) tends to decrease in the last few years, from 2.15 in 2020 to 1.3 in 2019. Considering the extraordinary impacts of the Covid-19 pandemic on the economy, the power sale growth rate in 2020 was 3.42% and 3.85% in 2021, substantially shrank compared to 9-14% in the period 2010-2019. Consequently, energy elasticity in 2020 declined to 1.18 and slightly increased to 1.49 in 2021.
2021 is the year of the wind power industry; wind power projects were urgently completed and connected to the grid before 01 November 2021 to get the FIT as in Decision No. 39/2018/QD-TTg. Due to closing port of entry and travel restriction, the manufacture, transportation, and installation of wind turbines had been delayed considerably. At the end of 31 October 2021, 84 wind power projects (3,980.27 MW) met COD out of 146 ones that had signed power purchase agreements with EVN. In 2021, VIET also conducted a number of activities to promote the development of the off-shore wind industry in Vietnam, which involve virtual dialogue on infrastructure requirements, study on supply chain, and environmental-social impact assessment.
In 2019 and 2020, with the rapid growth of the solar power industry, Vietnam has enlisted in the top ten countries with the highest installed solar capacity. By connecting about 4 GW of wind power into the grid only in 2021, the total installed capacity of renewable energy sources accounts for 28% of the total energy mix (~22 GW/78 GW), which leads to significant challenges in management and operation of the power system in terms of safety and reliability. In this context, VIET had carried out studies on the virtual power plant and the energy storage system to provide potential solutions to assist power systems more reactive and flexible in the energy transition process.
Significantly, the growth of renewable energy also increases the private ownership, exceeding 50% of total installed capacity for the first time (32,784 MW owned by the private sector accounting for 42% and 7,273 MW equal to 9% in the form of BOT). This signifies the success of the Vietnam Government in mobilizing investment capital for power generation sources.
The most outstanding event in 2021 was the Climate Summit held within the 26th United Nations Climate Change Conference of the Parties (COP26). Prime Minister Pham Minh Chinh had a statement to net zero emissions by 2050. This Statement has solidified the strong effort of Vietnam moving toward the neutral carbon economy in the long term, which is consistent with the National Green Growth Strategy for 2021 – 2030, vision towards 2050 approved by the Prime Minister on 01/10 right before COP26.
At COP26, Vietnam also signed the Global Coal to Clean Power Transition Statement to transition away from unabated coal power generation by 2040. The Statement includes a commitment to cease issuance of new permits for new unabated coal-fired power generation projects, cease new construction of unabated coal-fired power generation projects, and end new direct government support for unabated international coal-fired power generation.
After COP26, the draft PDP8 version in November 2021 had been adjusted to be consistent with the above statements. Specifically, compared to the version in March 2021, the draft PDP8 version in November 2021 reduced total power capacity to about 24 GW in 2030 (from 180 GW to 156 GW), 36 GW in 2045 (from 369 GW to 333.5 GW). This reduction mostly comes from conventional power plants, including 7.8 GW of "hardly-feasible" coal-fired power plants and 27.8 GW of new LNG power plants (by 2045). However, the total installed capacity of coal-fired power in 2030 is foreseen to be 39.7 GW (an increase of around 17 GW from the current number) and reach 43.1 GW in 2045. Meanwhile, the share of renewable energy sources (including small hydropower) in total installed capacity will be 45% and 52% in 2030 and 2045, respectively.
2021 also marked a remarkable improvement in the power sector. Draft PDP8 has been made available for Business comments, reflected in all versions of PDP8 proposed by the Ministry of Industry and Trade.
2022 onward is expected to be years of many radical changes in the power sector in Vietnam, involving comprehensive and synchronous solutions in terms of policy mechanisms, techniques, and technology and mobilizing financial resources. The FIT mechanism has laid a foundation for the renewable energy market in Vietnam, leading Vietnam to be one of the most vibrant markets globally. In the following steps, market-oriented mechanisms like auctions are expected to sustainably promote renewable energy development by a structured, competitive, and transparent process.
Many international companies have tightened their environmental standard requiring more renewable electricity for production. For example, LEGO has announced a plan to build its first neutral carbon factory in Vietnam. In this context, direct electricity purchase between renewable energy generators and electricity users (DPPA) will enable businesses in Vietnam to buy electricity directly from private companies producing renewable energy and create conditions for businesses to use 100% renewable energy. DPPA also aims to encourage the installation and use of on-site solar power, increasing the efficiency of this resource and reducing pressure on the transmission grid. This is necessary to attract more foreign investment to Vietnam and increase competitiveness when the carbon tax has been implemented in many countries.
The PDP VIII draft has, to some extent, revealed the future of the energy sector in Vietnam in the next 10 to 30 years. The latest version showed the positive signals in the transition toward a low emission power system, such as reducing the capacity of coal-fired power plants and increasing off-shore wind capacity. Vietnam's electricity system development strategy is following the direction of "going green," increasing the share of renewable energy reducing the use of fossil fuels while still ensuring stability and reliability in the power supply.
Technology development plays a vital role in the transition to a carbon-neutral economy in Vietnam. Several technologies can support the integration of renewable energy into power systems by improving the system's flexibility and connecting the electricity demand and supply across the country. Energy storage, hydrogen, electrification, etc., have been researched and developed to be widely deployed in many sectors like transport, industry, and residential. In addition, digital technologies will be applied to modernize grid monitoring and control, improve forecasting, and optimize the flexibility and capacity of existing grid infrastructure.
Along with the increasing share of renewable energy, energy efficiency is crucial to ensure national energy security. This is also the most effective solution to lessen the burden on electricity generation sources. In the past few years, Vietnam has put many efforts to encourage people and businesses to save the energy consumption, by a range of approaches, for instance, the National energy efficiency program (VNEEP), and setting benchmarks for the key industrial sector such as steel, plastic, aquaculture, etc. In the future, demand-side management will become a vital enabler of the high share VRE energy system. Each energy-consuming entity will adopt technical and administrative solutions to reduce energy consumption, combined with different demand response solutions to optimize time using low-emission electricity.
The future is unpredictable, and the only certainty is constant change. We hope that what is shown next on this map will continue to reflect the trend towards a stable, reliable, and "zero" emission power system.