Vietnam slapped with big threats amidst unstoppable energy demand surge

Capacity expansion is aggressive, but headwinds in demand side persist.

Vietnam is poised to significantly transform its electrical power generation mix over the next two decades as it modernises the country's agrarian economy to become a more industrialised nation. According to EIA, to accommodate greater industrial expansion and to support energy security goals, Vietnam is significantly increasing its total electricity generating capacity. “As part of its capacity expansion, Vietnam plans to add substantial coal-fired capacity and also plans to build the first nuclear reactors in southeast Asia and the first offshore wind farm in Asia,” EIA explains.

However, according to ADB in its recent assessment report, Vietnam in its next stage of development will face the following challenges in meeting the rapidly rising demand: coping with the rapid change in energy supply structure; maximising the use of domestic energy resources efficiently and lowering imports, adopting new technologies; mitigating environmental impacts and achieving the set targets in sustainable green development; enhancing energy efficiency; strengthening institutional capacities; diversifying energy supply, including that of renewable energies; and increasing energy prices to its socially and environmentally acceptable level to cover full costs. 

BMI said that this growing dependence on coal-fired power generation aligns with Vietnam's Power Development Programme, which envisages coal's share in the power mix increasing to roughly 60% by 2030 (revised in April 2015). However, the announcement in January 2016 that the government will review the development of all new coal plants contradicts the Power Development Programme and is sending mixed messages regarding Vietnam's future energy agenda.

Furthermore, the government will increase its focus on shifting the power mix towards cleaner sources, notably gas and renewable energy, in a bid to reduce emissions. This rhetoric is undoubtedly catalysed by the global agreement reached at the UN COP21 conference in December 2015