With the theme “Energy Transition towards a Green Economy,” the Vietnam Annual Economic Report 2024, published by the Institute of Economics and Policy Research (VEPR) in collaboration with the Friedrich Naumann Foundation (FNF) Vietnam on June 20, offers a comprehensive overview of the energy sector and the challenges and barriers to Vietnam’s renewable energy transition.
According to Dr. Nguyen Quoc Viet, Deputy Director of the Institute of Economics and Policy Research and lead editor of the report, investing in renewable energy consumption and striving for a green growth model are global economic trends.
As one of the Asian countries with the highest ambitions at COP26, Vietnam’s net-zero emissions strategy pledges to reduce greenhouse gas emissions by 43.5% by 2030. However, the increasing pressure from developed countries’ stringent environmental regulations is urging the Vietnamese government and businesses to accelerate their energy transition towards a greener economy.
This presents both a challenge and an opportunity for countries like Vietnam to promote a sustainable economic restructuring, enhance competitiveness, and seize new trade and investment opportunities.
The report also highlights the significant proportion of global foreign direct investment allocated to the renewable energy sector. Additionally, international trade and investment requirements regarding green production credits, energy transition, energy justice, and carbon borders (by the EU) necessitate responses from Vietnamese businesses.
Moreover, there is a mismatch between Vietnam’s energy supply and demand, both currently and in the future, if we rely solely on traditional energy sources, particularly fossil fuels such as coal and oil. These sources will eventually deplete and struggle to meet the growing energy demands.
Empirical studies in Vietnam since 2020 indicate that we have had to import energy to meet our industrial and transportation needs. Conversely, Vietnam’s renewable energy potential is substantial, with solar energy exhibiting the most robust growth in the ASEAN region.
However, the report identifies challenges in Vietnam’s renewable energy transition, including infrastructural, human resource, and institutional unpreparedness. Policy inconsistencies, divergent viewpoints, and policy exploitation in certain projects have led to a halt in supportive policies, particularly the feed-in tariff (FIT) mechanism, since 2020, stalling investments in renewable energy.
There is also a lack of clarity and hesitation in policies regarding decentralized energy sources, such as rooftop solar panels in residential and industrial areas.
The study emphasizes barriers to Vietnam’s renewable energy transition, including the absence of licensing standards and technical regulations for the power sector. Investment hurdles include difficulties in capital mobilization, lengthy project completion and payback periods, uncertain tax incentives, and unattractive electricity prices. Incomplete data on renewable energy sources further complicates the matter.
To accelerate the energy transition, the report underscores the critical importance of supportive policies to promote the development of renewable energy sources like solar, wind, and biomass power. A dual focus on policy and market mechanisms will foster the growth of new energy sources, compensating for Vietnam’s future energy deficits.
Mr. Viet emphasizes that government supportive policies are vital in reducing investment costs for new energy technologies such as smart grids and energy storage systems.
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