Marginal cost of coal-fired and renewable energy in Vietnam. Photo: Carbon Tracker

The analysis by Carbon Tracker shows that Vietnam committed to cut its greenhouse gas emissions up to 25% compared to business-usual levels by 2030. To reach this goal, the government targets the deployment of 18 gigawatts (GW) of onshore wind and solar PV by 2030.

Indeed, Vietnam supports renewables through a feed-in-tariff (FiT) of $0.09/kWh for wind and solar photovoltaics (PV). The Ministry of Industry and Trade (MoIT) is also partnering with the United States Agency for International Development (USAID) to develop a direct power purchase agreement policy that will enable direct power purchases from independent renewable energy producers.

Matt Gray pointed out another factor is that analysis from the International Energy Agency shows coal power is a significant contributor to air pollution and therefore human health.

If coal use grows as planned, the health burden of coal pollution will increase from 4,300 premature deaths per year to 21,100 cases by 2030, Carbon Tracker cited the Vietnam Sustainable Energy Alliance.

Levelised cost of thermal and renewable energy in Vietnam. Photo: Carbon Tracker

Renewable energy – a good choice 

It could be cheaper to build new renewables than operate existing coal plants as soon as 2022, Carbon Tracker affirmed in a research titled “Economic and financial risks of coal power in Vietnam.”

In terms of investment cost, the research shows that solar PV and onshore wind costs in Vietnam have declined by roughly 50% and 30% respectively over the past 4 years. In a high fuel price scenario, it could be cheaper to build new solar PV by 2022 and new onshore wind by 2028 than operating existing coal.

In addition, since coal power is expected to peak by 2020, roughly US$60 billion will be saved by not building new coal plants according to a study by Vietnamese non-profit organization Green Innovation and Development Centre (GreenID). It shows cancelling 30 GW of new coal power from the revised Power Development Plan 7 would save US$7 billion per year on imported coal costs.

Meanwhile, American worldwide management consulting firm McKinsey & Company said another advantage of renewables is that they are lower risk. They also can be built more quickly versus traditional sources of generation and located more flexibly to meet Vietnam’s load-growth requirements.

Additionally, Vietnam’s extensive hydro generation capacity and the potential to add flexible natural-gas generation, backed by extensive local gas reserves, allow renewable integration at low cost, compared with many markets

Matt Gray makes the outlook more visible by commenting that “Thanks to the dramatic fall in the cost of renewable energy, phasing-out coal power by 2040 will likely prove to be the lowest cost option for these Southeast Asian nations (Vietnam, Indonesia, and the Philippines). Policymakers should act now, to avoid stranded coal assets as the rapid pace of the energy transition becomes increasingly apparent to investors.”

Carbon Tracker, which carries out in-depth analyses on the impact of the energy transition on capital markets and the potential investment in high-cost, carbon-intensive fossil fuels, has conducted a series of researches on the role of renewables in green growth in Vietnam and impacts of fossil energy in the sustainable development in the country of nearly 100 million people.

In the Vietnam Wind Power Conference 2019 held in Hanoi on June 11-12, Matt Gray was a key note speaker showing a presentation on economic and financial risks of coal power in Vietnam.