15:05 | 03/07/2015 Industry
The nation’s demand for electricity is forecast to increase two-fold over the next six years primarily fuelled by economic growth, according to speakers at a recent meeting in Ho Chi Minh City discussing the EU-Vietnam free trade agreement.
“The nation will need to invest US$8 billion annually for each of the next five years just to keep pace with the demands of business,” said Christoph Schill from the European Chamber of Commerce in Vietnam (EuroCham).
Schill, who serves as vice president of EuroCham’s Green Growth Sector Committee (GGSC) cautioned however that thermal power plants are still preferred in Vietnam’s power development plans, which poses devastating consequences for the environment.
In particular, he said under the nation’s Power Master Plan VII, coal-fired thermal power facilities are projected to generate 46.8% of the country’s total electricity output by 2020, which calculates out to 36,000 MW.
The capacity of coal-fired thermal power would then, according the master plan, rise to 56.4% of the total electrical output by 2030, which comes out to 75,000 MW.
“For the country to derive such a large percentage of its electrical supply from dirty thermal power is unreasonable,” Schill said and it would have severe and negative consequences for the health of the nation and climate.
Meanwhile, Vietnam currently produces only a mere 48.2 MW of electricity from wind energy when a recent study by the World Bank showed the nation has a current capacity of around 513,000 MW.
To make matters worse, under the nation’s Power Master Plan VII the wind power capacity is expected to increase to just 1,000 MW by 2020, Schill underscored.
To reduce Vietnam’s environmental pollution, the government needs to rethink its energy strategy and increase is investment in developing renewable energy.
Both the EU public and private sector, long a leader in the clean energy field are prepared to assist with raising the investment needed and are willing to pay more for electricity if need be, Schill stressed.
The country has vast potential in the field but has been focusing solely on low-cost energy, such as hydroelectricity and coal, without a proper investment strategy to develop clean energy, he said.
Shifting investment to green energy
Energy price hikes are not a major concern of foreign invested businesses, according to a recent survey conducted of 150 businesses by the GGSC and the International Institute for Sustainable Development.
In response to a question detailing 10 factors most respondents said the cost of energy was the least important of the factors affecting their decision to construct manufacturing facilities in Vietnam.
The most critical factors they considered were the available labour pool, domestic market conditions and government policies.
A majority of companies said they wouldn’t have any qualms with paying an increase of 15% or more in the cost of energy and could live with a price hike of 10% per year over the next couple of years to fund investment in wind or alternative clean energies.
The consensus of the experts said Vietnam should draw up long-term plans to promote the use of green energy while encouraging private investors to join the field and build a legal framework for the development of renewable energy.
Europe is one of the biggest trade partners of Vietnam with 27.6 billion EUR worth of goods and is among the country’s largest investors with 1,810 investment projects in the industry.