Vietnam has abundant renewable energy resources, yet coal imports continue to rise. (Photo: iStock)
Vietnam leads Southeast Asia in solar power generation, and the government has actively set policies to promote renewable energy. However, the International Energy Agency (IEA) forecasts that Vietnam's coal imports will surpass Taiwan in 2024, making it one of the top five global coal importers for the first time.
The primary reason for this is the country's strong energy demand, coupled with the slow development of its power grid.
Insufficient power grid limits renewable growth
To achieve net zero by 2050, the Vietnamese government is gradually reducing the share of coal in its energy mix and plans to cut it to 20% within six years, a 20 percentage point decrease from its current level.
However, the IEA points out that extreme heat and insufficient hydropower generation this year caused a sharp rise in electricity demand, which actually led to an increase in coal consumption.
Despite the government's efforts to open up direct power purchase agreements (DPPA) for renewable energy and plans to expand wind and solar power, the existing power grid is outdated, and new infrastructure cannot meet the growing demand for electricity in time.
This issue is further exacerbated by Vietnam's increasing role as a key manufacturing hub in the global supply chain shift from China, highlighting the lack of sustainable and decarbonization-related infrastructure.
The grid problems are consequently pushing up coal imports and creating power shortages for businesses and factories. For instance, Samsung briefly suspended operations, and Toyota's supplier, Giai Phong Rubber, decided to invest in power generation equipment. Regardless, the hope remains that the country will upgrade its power grid system.
Vietnam's existing power grid is outdated, and new infrastructure cannot meet the growing demand for electricity in time. (Image source: EVN)
European officials criticize bureaucracy for Vietnam JETP stall
Furthermore, Vietnam's progress with the Just Energy Transition Partnership (JETP) has been slow, highlighting the influence of vested interests in the coal industry.
As of now, the $15.5 billion in funding committed by developed countries through JETP has yet to be activated. Markus Bissel, program director at the German Agency for International Cooperation (GIZ), acknowledged, "There's also a coal industry. There are still conflicts of interest."
European diplomats have also voiced frustrations with Vietnam's bureaucracy, which they claim is slowing down the JETP process. Politico Europe revealed that the UK officials questioned the Vietnamese Ministry of Natural Resources and Environment (MoNRE) for lacking political influence, resulting in agreements that fail to reflect the local energy, finance, and government participation required.
In July, the Vietnamese government acknowledged encountering numerous policy and procedural difficulties while pushing forward with JETP cooperation but expressed continued efforts to ensure proper allocation of funds across 220 projects. When Nikkei Asia sought comment from the Vietnamese Ministry of Foreign Affairs regarding the bureaucratic issues, they did not receive a response.
Source: IEA, Nikkei Asia
