Vietnam’s Shifting Energy Landscape: A Move Towards Solar and Away from Fossil Fuels

Vietnam is undergoing a significant transformation in its energy strategy, shifting from a heavy reliance on coal and natural gas to a greater emphasis on renewable energy sources, particularly solar power. This shift is driven by the country’s rapidly growing economy and the need to meet soaring energy demand while addressing environmental concerns. The government has revised its energy plans, setting an ambitious target of generating 16% of the country’s electricity from solar power by 2030—a dramatic increase from its previous target of just 5%. This move reflects Vietnam’s commitment to reducing its carbon footprint and diversifying its energy mix to ensure long-term sustainability.

A draft of the new policy outlines a clear pivot away from expensive and complex offshore wind turbine projects, instead prioritizing the development of onshore wind capacity, rooftop solar installations, and energy storage solutions. This strategic adjustment is not only cost-effective but also aligns with Vietnam’s geographical and technological capabilities. Large solar farms, in particular, are seen as a more feasible and efficient option compared to the challenges associated with offshore wind and liquefied natural gas (LNG) projects, which have proven to be both costly and logistically difficult.

The Surge in Solar Power: Opportunities and Challenges

Vietnam’s solar energy sector experienced remarkable growth between 2018 and 2020, fueled by generous government incentives and a push to reduce reliance on fossil fuels. During this period, Vietnam surpassed many of its neighbors and even some developed nations, such as the United Kingdom, in terms of solar energy adoption. However, this rapid expansion hit a roadblock in 2020 as the country’s outdated and overburdened electricity grid struggled to accommodate the influx of solar power. The intermittent nature of solar energy—available only during sunlight hours—further compounded the problem, leading to grid overload and instability.

As a result, the construction of new solar capacity stalled, and the market for solar projects effectively ground to a halt. Despite these challenges, Vietnam has made progress in upgrading its grid infrastructure and improving its ability to manage variable renewable energy sources. These efforts have been crucial in preparing the country to integrate more solar and wind power into its energy mix. For instance, the government has allowed large electricity-intensive factories, such as those operated by Samsung Electronics, to purchase power directly from renewable energy producers, easing pressure on the grid while helping manufacturers meet their climate goals.

The Persistent Role of Coal in Vietnam’s Energy Mix

While Vietnam is making strides in expanding its renewable energy capacity, coal remains a dominant player in its energy mix. The country has seen a surge in coal usage in recent years, driven by a combination of factors, including drought-related declines in hydropower generation and rising energy demand as businesses shift operations from China to Vietnam. This trend has placed Vietnam on track to become one of the world’s top five coal importers, surpassing Taiwan, according to the International Energy Agency.

Domestically, Vietnam is the second-largest coal producer in Southeast Asia after Indonesia, and its coal-fired power plants are relatively young, with operators still recouping their investments. Consequently, phasing out coal in Vietnam will likely take longer than in countries with older coal infrastructure. The sector’s persistence underscores the challenges Vietnam faces in balancing its economic growth with its environmental and climate goals.

Balancing Act: Clean Energy Ambitions and Fossil Fuel Realities

Vietnam’s energy policy reflects a delicate balancing act between its Clean Energy ambitions and the realities of its current reliance on fossil fuels. On one hand, the country is ramping up its solar and wind capacity to meet its climate commitments and reduce greenhouse gas emissions. On the other hand, it is expanding coal production and imports to ensure energy security and keep up with booming demand. This dual approach highlights the complexities of transitioning to a low-carbon economy, particularly in a developing country with significant industrial and economic growth aspirations.

Experts like Giles Cooper of Allens and Dimitri Pescia of Agora Energiewende emphasize that Vietnam’s path to renewable energy will require continued investment in grid infrastructure, policy reforms, and international collaboration. While the country has made notable progress, overcoming these challenges will be essential to achieving its energy and climate goals in the coming decades.