Overview of renewable energy development in Vietnam
Vietnam is endowed with a relatively large amount of renewable energy resources distributed throughout the country. Biomass from agricultural products and residues is available at equivalent to 10 million tons of oil a year. Biogas energy potential is approximately 10 billion m3 a year, which can be collected from landfills, animal excrements and agricultural residues. The technical potential of small hydropower (<30MW) is larger than 4,000MW. Solar energy is abundant with average solar radiation at 5kWh/m2 per day throughout the country. Vietnam’s geographic orientation with approximately 3400km of coastline also provides abundant wind energy at an estimated potential of 500-1000 kWh/m2 per year. These alternative sources of energy can be harnessed to meet Vietnam’s rapidly increasing demand for energy. While there has been some early success, deployment of renewable energy has not reached the country’s potentials yet.
Current legal framework to encourage development of renewable energy
Vietnam’s renewable energy policies are driven by the needs to supply sufficient energy for economic development and ensure environmental protection. Since energy demand is expected to increase four times from 2005-2030 and electricity demand increase nine times from 2005-2025, developing renewable capacity will help Vietnam reduce its reliance on foreign sources of energy and ensuring ample energy security in the future.
The Government of Vietnam has had different policies to encourage the development of renewable energy, establish the targets for renewable energy production and move toward a competitive energy market with diverse investment and business models. In Decision No. 1855/QĐ-TTg dated December 27, 2007 approving the National Energy Development Strategy of Vietnam for the period up to 2020 with outlook to 2050 the Government encourages the development and use of new and renewable energy sources; provides financial support for the investigation, research, trial manufacture and establishment of pilot locations; and exempts for the import, production and circulation taxes.
Specifically, the Government set targets to increase the share of renewable energy in total commercial primary energy from 3% in 2010 to 5% in 2020 and 11% in 2050 (Decision No. 1885/2007/QD-TTg) and to increase the share of electricity generated from renewable resources such as wind and biomass from 3.5% of total electricity generation in 2010 to 4.5% in 2020 and 6% in 2030 (Decision No. 1208/QĐ-TTg dated July 21, 2011 or Master Plan VII).
For biofuels, the Government has targeted an annual output of 100,000 tons of E5 and 50,000 tons of B5 by 2010 which is equivalent to 0.4% of the country’s projected oil and gasoline demand; 1.8 million tons of ethanol and vegetable oil, or 5% of oil and gasoline demand by 2025 (Decision No. 177/ 2007/QD-TTg). E5 is gasoline with a 5% volumetric of bio-ethanol content; B5 is diesel with a 5% volumetric of biodiesel content.
In order to achieve these targets, the Government has provided various incentives to investors. Renewable energy power plants will receive incentives for investment, electricity tariffs and taxes. Investors can enjoy advantages such as import tax exemption and land fee exemption over a certain period of time. In the Joint Circular 58/2008/TTLT-BTC-BTN&MT dated 4 July 2008 the Ministry of Finance (MoF) and the Ministry of Natural Resource and Environment (MONRE) prescribed the object of subsidy, the conditions of subsidy, and the method of calculating the subsidy rate for one unit of production, the annual subsidy amount, the term of subsidy, and the application process to request the subsidy for CDM projects in Vietnam to which renewable energy is eligible.
The existing incentives however are not sufficient yet to create the appropriate conditions for planning and implementing numerous renewable projects as well as the sale of renewable energy products in Vietnam. These incentives are beneficial to small hydropower projects only and not to other forms of renewable energy.