Coal and Climate Change: Prime Minister and MOIT adjust electricity supply strategy
Climate change and funding challenges are putting pressure on Viet Nam’s electricity supply. The Ministry of Industry and Transport (MOIT) and the prime minister are adjusting the power supply strategy with an update to the 8th National Power Development Plan (PDP8) and ad hoc measures, including new targets for renewables and coal power.
Climate change is significantly affecting electricity demand in Viet Nam. The record heat of 2024, the hottest year in over 50 years, saw electricity demand surge to over 1 billion kWh/day. This extreme heat exacerbates existing challenges. Hydropower produces nearly a third (28%) of Viet Nam‘s annual 280.6 billion kWh (2023). High temperatures reduce hydropower output while simultaneously increasing demand for air conditioning, creating the potential for severe power shortages. Meanwhile, the average electricity price (VND 1953/kWh ~ €0.073) was 6.92 per cent lower than the production cost (VND 2088/kWh ~ €0.078), resulting in a loss for electricity enterprises and leading to a substantial underfunding of the power sector.
To meet additional demand, Viet Nam’s PDP8 for 2021-2030, with a vision to 2050, aims to add 59,318 MW of electricity capacity by 2025. However, late projections suggest that 56 percent of the plan is likely to be reached. In January, Prime Minister Pham Minh Chinh directed urgent action in power production, transmission, and energy saving, including various projects in renewables.
Measures dedicated to renewable energy
- Promoting rooftop solar panels and self-consumption solar energy to reduce pressure on the national grid.
- Adapting operational procedures for water reservoirs in the Red River basin to ensure a continuous electricity supply.
Energy efficiency
- Promoting innovative practices to maximize energy efficiency, such as replacing inefficient equipment, implementing energy-saving practices, and demand-side management to reduce peak demand. This is built on previous directives that suggested 5% savings in offices and 30% in street lighting.
Investments in power plants and transmission
- Investment studies for transmission projects to enhance regional connections and improve operational safety and stability for national power systems.
- Securing investors for all power plants listed in PDP8 by 2028, particularly Liquefied natural gas (LNG) plants that were already due for completion in 2025.
- Speeding up projects currently under construction and under planning review, to be completed 6 months to 2 years faster than originally expected.
- Completing investments in the Ninh Thuan Nuclear Power Plant within five years.
PDP8 will also be revised in the next months. Current drafts show substantial increases in capacity planning, both for renewables and fossil fuels. Solar power targets are expected to increase from 18 GW to 34 GW, doubling the current 30 GW capacity. Wind power targets rise from 19.5 GW to 22 GW, although the 6 GW offshore wind goal will be postponed by five years to 2035.
Considering the slow progress from gas and offshore wind, coal capacity is expected to grow to 175 GW by 2030 from the initially planned 150 GW, in addition to the 4.8 GW of nuclear energy by 2050. First concrete projects have emerged, as EVN seeks to invest in a 1,320 MW formerly abolished coal-fired power project in Quang Tri, central Viet Nam.
These developments reveal a challenge: while climate change poses a significant threat to Viet Nam’s power production, the world’s fifth-largest coal importer appears set to continue investing in the climate change-accelerating technology for the foreseeable future. This is largely due to a lack of investment and progress in more climate-friendly projects.
However, initiatives like the Just Energy Transition Partnership (JETP) and the recently legislated direct power purchase agreements have the potential to boost renewable energy supply and demand, attracting direct investment in cost-effective renewables and the transmission grid. These efforts could pave the way for Viet Nam to achieve a net-zero electricity supply.