In recent years, Vietnam celebrated a meteoric rise in renewable energy, establishing itself as a Southeast Asian leader with a remarkable surge in solar and wind power projects. This triumph, however, came with unforeseen challenges that have cast a shadow over the nation’s renewable energy narrative. The unexpected twist in Vietnam’s renewable energy saga unravels a complex tale of overachievement, lapses in leadership, and a strained national power grid. Despite the initial success, the Inspection Commission of the Central Committee of the Communist Party of Vietnam (CPV) discovered serious shortcomings in the advisory and policy-making processes, leading to disciplinary actions against key officials.
Explore the intricacies of Vietnam’s renewable energy journey, exploring the highs and lows, the competitive frenzy driven by feed-in tariffs, and the governmental dilemma in navigating the aftermath. As Vietnam grapples with the consequences, the nation stands at a critical juncture, learning valuable lessons for the future of its energy policies and sustainability endeavors.
The Rise and Fall of Vietnam’s Renewable Energy Boom
Vietnam experienced an unprecedented surge in renewable energy projects, particularly solar and wind, over a three-year period. This rapid growth, attributed to the implementation of high feed-in tariffs (FITs) for certified projects, catapulted Vietnam to the forefront of the region’s renewable energy landscape. By 2022, the country accounted for an impressive 69% of Southeast Asia’s solar and wind power generation.
This success, however, came with its own set of challenges. A key issue was the discrepancy between the targets set in the amended Power Development Plan VII (PDP7) and the actual installed capacity of renewable energy projects. By May 2023, the total installed capacity of wind, solar, and rooftop solar projects had far surpassed the goals outlined in PDP7. This overachievement placed an unprecedented strain on the national power grid, particularly in the central region where the majority of renewable energy projects were concentrated.
Lapses in Leadership
The Inspection Commission of the Central Committee of the Communist Party of Vietnam (CPV) uncovered significant shortcomings in the advisory and policy-making processes for renewable energy development. Two prominent figures, Tran Tuan Anh, head of CPV’s Central Economic Commission, and Trinh Dinh Dung, former deputy prime minister, were among the senior officials held responsible. Their tenure, from 2016 to 2021, coincided with the surge in renewable energy projects.
Disciplinary actions were recommended against these officials and others involved in the decision-making processes. This revelation raised questions about the oversight and regulatory mechanisms that allowed the renewable energy boom to spiral out of control. The consequences for these key figures could be severe, potentially marking one of the most significant policy mishaps in Vietnam’s recent history.
Challenges of Over-achievement in Renewable Targets
The overachievement in renewable energy targets set by PDP7 had far-reaching consequences, particularly in the central region where the majority of projects were concentrated. The sudden surge in renewable energy projects created a strain on the national power grid, impacting its stability and reliability. The absence of new traditional power plants, necessary for providing a stable baseload for weather-dependent renewable sources, exacerbated the situation.
The strain on the power grid forced Vietnam Electricity (EVN), the state-owned utility company, to curtail the amount of power purchased from renewable sources. This decision resulted in substantial financial losses for project owners and raised significant safety concerns for the national power system. The unexpected challenges faced by the grid highlighted the need for a more balanced and sustainable approach to renewable energy development.
Feed-in Tariffs Frenzy
A driving force behind Vietnam’s rapid growth in renewable energy was the implementation of attractive feed-in tariffs (FITs) for certified projects. These FITs, locked in for 20 years, led to fierce competition among local investors to build solar and wind projects. However, a significant number of these investors lacked experience in the energy sector, relying on connections and questionable practices to secure project licenses.
The rush to meet FIT deadlines resulted in numerous violations in the licensing and certification of renewable energy projects. For example, the installed capacity of wind, solar, and rooftop solar projects by May 2023 had far exceeded the targets outlined in PDP7. The lack of a track record in the energy sector, coupled with the challenges posed by the COVID-19 pandemic and cut-throat competition, led to the failure of 62 wind projects to start operation before the FIT deadlines.
These setbacks left project owners facing severe financial difficulties, compounded by EVN’s curtailment of power purchases from renewable sources. Even projects that qualified for FITs faced certification violations, putting them at risk of disqualification and potentially causing losses for foreign investors acquiring projects from local counterparts.
Government Dilemma
In the wake of these challenges, the government has been grappling with finding a satisfactory solution to contain the damage. Measures such as stopping power purchases from rooftop solar projects completed after 31 December 2020 and thorough inspections of renewable energy projects have been implemented. Projects found with serious violations may face termination of power purchase agreements with EVN.
The government’s attempt to address the situation took a controversial turn when EVN proposed lowering the FITs for 38 projects. However, the proposal was quickly withdrawn, reflecting the complexity of finding an effective resolution. The government faces a dilemma, as being lenient could perpetuate losses for the state budget, while a heavy-handed approach could lead to extensive financial losses for investors, potentially affecting the banking system.
The situation not only has economic implications but also raises concerns about investor confidence in Vietnam’s investment climate and the country’s commitment to an energy transition. The uncertainty surrounding the resolution of this complex issue underscores the need for the government to carefully navigate the path forward and draw valuable lessons for future policy decisions.
Conclusion
Vietnam’s unexpected twist in its renewable energy saga has revealed a nuanced situation that demands a careful and strategic approach. The successes and setbacks in the renewable energy sector underscore the importance of a well-balanced and sustainable approach to achieve energy transition goals without compromising economic stability and investor confidence. As the government addresses the fallout from this policy challenge, the lessons learned will undoubtedly shape the trajectory of Vietnam’s future energy policies.
