Renewable energy is still a growth sector in Southeast Asia, but a steady drip of reports about idle off-grid installations, oversupply and regulatory bottlenecks has thrown the rush to roll out cleantech into question.
That’s particularly the case for Vietnam.
After leading the pack in the region, Vietnam’s renewable goldrush has been mired in regulatory limbo for the past two years.
Vietnam boasts almost 70% of the region’s solar and wind power capacity, but a significant section of that is sitting idle because renewable energy policy plans have still not been finalized, “while fresh rounds of auctions and pricing plans that would spur new solar and wind projects are nowhere on the horizon,” reports Eco-business.
As an Aljazeera report from last year puts it, “After an unprecedented boom in renewable energy investment in recent years, the transmission lines that connect solar and wind projects to the national grid lack the capacity to deal with spikes in supply.
“Policymakers have not been able to keep up either, leaving regulatory gaps that prevent some investors from monetising the power they harness.”
In what is now easy to call out as a classic boom-and-bust cycle, between 2017 and 2021, Vietnam was offering better feed-in tariff rates than Thailand, which Vietnam surpassed in terms of installed solar and wind power in 2019, taking the regional renewables lead.
By the following year, Vietnam was far outreaching the government’s FIT targets, with installed solar power capacity alone at 16,500MW compared to the government’s target of 850MW.
Unsurprisingly, the government hit the brakes on the boom for a broad policy rethink, leaving countless fixed-price investors – including regular small-business owners who had installed rooftop solar power, for example – in the lurch and left with excess power idled and unprofitable.
“Despite state power employees going door to door towards the end of 2020 telling villagers not to invest any more, installations continued,” reported Aljazeera.
This should not necessarily sound the bells for the usual critics of excess to hold forth on the impracticality of incorporating less-than-100% reliable cleantech into traditional fossil-fuel grids. Rather, it is a reminder that massive transitions are achieved in stages.
As the Eco-business report notes, the Thai government is “mulling another round of clean energy tenders just months after an earlier tranche was oversubscribed by three times,” while the Philippines is shaping up to the next hotspot for foreign investment after the government there allowed full foreign ownership of projects from the end of 2022.
Meanwhile, Singapore and Indonesia this year announced a breakthrough USD 37 billion renewable-energy deal for a “Green Corridor” between Singapore and nearby Indonesia’s Riau region.
In short, the renewables boom is far from out of gallop, even if Vietnam is rethinking its strategy.
The bigger picture
More broadly speaking in terms of the regional picture, China is in a league of its own, with its own unique problems.
China has been bedeviled by electricity shortages in recent years, and they are expected to continue this year, according to Bloomberg. This year’s peak power load is expected to reach a record 1,360 gigawatts (GW) this summer compared to what was a record 1,290GW last year.
This puts China in an awkward place. Despite its avowed commitment to renewable energy and green cities, basically China has to generate all the power it can – and however it can – bearing in mind that, along with its own domestic issues, it also exports power to its neighbors.
As the International Trade Administration puts it: The modern industrialized world “requires large amounts of energy consumption – and the world still uses the burning of fossil fuels:
“This dependency has been put into stark relief over the last few years as a series of rolling energy crises buffeted the world economy—a surge in oil and gasoline prices in the wake of Russia’s invasion of Ukraine, power shortages forcing blackouts across China, natural gas shortages across Western Europe, and a massive surge in global energy prices that has only recently reversed. It’s more clear than ever that today’s global economy is still extremely dependent on fossil fuels.”
That’s definitely the case in China, which has responded to recent power deficits with a massive rollout of new coal-burning power plants. But some analysts see a peak in even China’s dependence on fossil fuels, perhaps as soon as within several years.
A recent BloombergNEF report, for example, argues that the current global spike in emissions is temporary in nature and can be explained by a number of world-riling issues.
“Not only is Europe burning more to replace Russian gas, but China is trying to prop up its economy in the face of a devastating real estate crash and a potential zero-covid-driven recession via a 6.8 trillion–yuan (about US$1 trillion) infrastructure stimulus. These are both, however, short-term phenomena: we will soon be back to the emissions plateau on which we have been since around a decade.”
In China, as The Diplomat recently reported, China’s renewable energy aspirations have been held back by the country’s deep commitment to energy security and the fact that “the country’s carbon pricing scheme for coal plants was designed in a way that does not reward a shift from coal to clean energy, and arguably even rewards some operators for maximizing generation.”
All the same, China’s coal power generation accounted for 66% of the total in 2022 compared to 78% in 2011, and that ration is expected to continue to tip in the favor of renewables as they inevitably become cheaper and easier to install.
The return of Vietnam
China is a giant of a country, and although it has reshaped its urban landscapes at a pace that surprise many foreign visitors, the transition to a fossil-fuel-powered energy sector was always going to happen in lurches rather than overnight.
The same is true of Vietnam, except that Vietnam should be expected to resolve its regulatory issues and return the track of sound investment for a cleaner future.
As numerous reports point out – and recent seasonal weather events have borne out – Vietnam is one of the most vulnerable countries in the world to climate change and the onus is on the government to devise a comprehensive power vision for the future, which it has been trying to do for some years.
At present, the government’s “Power Development Plan 8” (PDP8), has been delayed by two years – drafts have reportedly been exchanged within the government, but the sticking point seems to be how much green energy should be the goal and by when. Meanwhile, as one sector analyst told Eco-business, the grid problems meant that the authorities “completely lost trust” with FIT as a way to support renewables development.
Some investors are reportedly eyeing Thailand, Malaysia and the Philippines as the next key investment destinations for renewable-energy plays, but that does not mean that Vietnam is down and out.
By its own admission, the Vietnam government estimates it needs around USD 3.6 billion a year to upgrade its power grid so that it can accommodate green energy from a diversity of sources. Just last year, it opened its grid to private investors and signed a US$15.5 billion “Just Energy Transition partnership” deal aimed at rich countries and foreign investors.
In short, it’s been bumpy journey, not just for Vietnam, but for everyone, but the reality is renewables are here to stay. The investors are waiting in the aisles for when governments in the region have smoothed regulatory paths for them.