INSIGHT by Mili Fomicov, Lecturer and Co-Director – Climate Finance Academy, Imperial College London.
Vietnam requires large-scale renewable energy investment to meet its ambitious climate targets and retain its position as the ASEAN region’s fastest growing economy in light of projected significant increase energy demand over coming decades, according to a report by Imperial College Business School’s Centre for Climate Finance & Investment (CCFI).
This report summarises Vietnam’s power market structure and outlines the main opportunities and challenges for renewable power deployment in Vietnam in the context of its economic growth potential. It also introduces priorities and potential solutions for local and foreign players to accelerate renewables deployment.
It follows its predecessor report, ASEAN Renewables: Opportunities and Challenges, published by the CCFI in March 2023 with the support of the Singapore Green Finance Centre (SGFC).
The Vietnamese government has been pivotal in driving renewable energy development through public capital investment. Various mechanisms, such as feed-in tariffs (FiTs) and power purchase agreements (PPAs), have been established to provide financial incentives for renewable energy projects.
While several initiatives are underway, challenges remain:
〉Coal dependency
〉Uncertainty over current policy and investment frameworks
〉Lack of transparent legal and financial frameworks
〉Renewables Power Purchase Agreement (PPA) risks
〉Restrictive monetary controls and investment conditions
〉Higher cost of capital in Vietnam
〉Lack of hard currency support
〉Lack of investment in the northern region
〉Constraints for offshore wind
〉Grid integration issues
Additionally, the energy market in Vietnam has operated as a monopoly throughout most of the energy value chain. Liberalizing this market and the participation of private operators and investors could increase market transparency and allow the energy market to develop price signals for renewables. A portfolio of mechanisms will be required to build confidence and accelerate the energy transition.
An important one is to enable early coal phase-out, as the country has a relatively young coal fleet. Other areas the government of Vietnam should address to increase confidence and build on the existing clean energy initiatives include:
〉Bolster additional investment in transmission capacity
〉Address stranded renewable assets
〉Provide incentives to invest in large-scale renewables in North Vietnam
〉Introduce regular competitive tenders and encourage bankability
〉Introduce risk hedging facilities to tackle foreign currency exchange risk
Our aim with this report is to help accelerate renewable power deployment in Vietnam in the context of its economic growth and incredible resource potential by recommending a combination of policy and market mechanisms.
More articles by Mili Fomicov
Scale up of clean energy funding in Southeast Asia needed to meet climate goals | Report
| about
Mili Fomicov is a Teaching Fellow and leads clean energy research at the Centre for Climate Finance and Investment, Imperial College London. She also works on transition finance frameworks and teaches Clean Technology Investment. She is a Co-Director for the Singapore Green Finance Climate Academy.
Before joining Imperial College, she was a Director and Portfolio Manager in the Multi-Asset Strategies team at BlackRock. Previously, Mili was a Portfolio Manager on J.P. Morgan’s CIO team, and managed US and Japan equity funds at Barclays. She started her career at AllianceBernstein in the US. Graduate of the University of Chicago Booth School of Business, where she received an MBA in Finance, Economics, Econometrics and Statistics. She is on the Spark Change Advisory Board.
| All opinions expressed are those of the author and/or quoted sources. investESG.eu is an independent and neutral platform dedicated to generating debate around ESG investing topics.
