Vietnam: Scaling renewable energy deployment and overcoming market barriers

Mobilising Investment for NDC Implementation (MI), supported by the German Government’s International Climate Initiative (IKI), was launched by CDKN, SouthSouthNorth and LEDS-GP in 2017. The project works with seven partner countries around the world, namely Bangladesh, Ethiopia, Kenya, Peru, Dominican Republic, Philippines and Vietnam, to accelerate public and private investment in priority NDC sectors and markets.

 Context – NDC goals and regulatory environment 

The Government of Vietnam has established a NDC goal to reduce greenhouse gas emissions by 8% by 2030 compared to business as usual levels, utilizing domestic resources.  Emissions intensity is also addressed, with the target to reduce per unit of GDP by 20% compared with 2010 levels. With additional international support, Vietnam’s contribution could be increased by up to 25%.  The mitigation efforts center on the energy sector.

Despite the low level of installed renewable energy (RE) to date, the Government of Vietnam has begun to spur investment through a range of policies, targets and incentives. The government has put in place several supporting sectoral policies, including a Renewable Energy Development Strategy that seeks to “increase the electricity output produced by renewable sources from approximately 58 billion kWh in 2015 to 101 billion kWh by 2020, and 186 billion kWh by 2030.” 

This new policy (April 2020) allows businesses in Vietnam to procure electricity directly from private firms producing renewable energy and enable them to power their operations with 100 percent renewable energy.” – the Direct Power Purchase Agreement (DPPA) regulation.

Scoping Study

Programme scoping commenced in January 2017.  A “bottom-up” approach was taken to identify opportunities for NDC financing in Vietnam. Such an approach starts with an interrogation of a specific sector or entry point technology that could contribute to the achievement of a country’s NDC objectives. This approach resulted in the selection of the commercial and industrial sector in Vietnam, and the potential for this sector’s uptake of renewable energy, specifically solar energy.

The local country implementation partners, CEIA convened with a variety of public and private sector stakeholders to identify the key barriers to clean energy investment in the commercial and industrial sectors as well as to understand ongoing efforts by development partners in this space.   

Key stakeholders included:

• • Government: Electricity and Renewable Energy Agency, Ministry of Industry and Trade (MOIT), Ministry of Planning and Investment (MPI)
  • Development partners: USAID, GIZ, GGGI, P4G
  • Industry partners: Renewable Energy Buyers Alliance, various multinational companies, developers, investors, industrial parks

The private sector, in most markets, can often provide an excellent overview of the key regulatory, policy, and market barriers to deploying a particular technology or business model, and this was true in Vietnam. Scoping analysis concluded that the private sector’s investment in Vietnam’s rooftop solar sector could expand if a core set of key issues are addressed and resolved, including: 

• • Net metering should be fully implemented with timely and reliable compensation from the state-owned utility; 
  • Rooftop solar projects should not be limited to 1 MW, which prevents investors from maximizing potential; and 
  • Increased transparency and a clear power pricing roadmap from the state utility would improve rooftop solar investment and planning.

Project activities – Strategy and Execution to address investment mobilisation 

The IKI MI team identified an approach that centred on enabling a quick ramp-up of corporate and municipal renewable energy procurement, respectively. This approach was chosen based on the strong interest by the public and private sectors. The team elected to leverage existing partnership with the USAID Vietnam Low Emission Energy Program (VLEEP), who provide technical assistance and capacity building to the Vietnam public and private sectors on direct power purchase agreements and other related clean energy policies.

In Vietnam, the execution strategy includes engaging with “purchasers”, in other words the private sector entities that are interested in acquiring rooftop solar or entering into long-term power purchase agreements (PPAs) for solar or wind energy. Government was also engaged on resolving key policies and regulatory changes that are needed to enable corporate procurement of clean energy. 

Private sector activities  

Led by the Clean Energy Investment Accelerator (CEIA) – a public-private partnership initiative co-led by Allotrope Partners, the World Resources Institute, and the U.S. National Renewable Energy Laboratory – the following project activities were undertaken:

• • Facilitating the V-LEEP engagement with Vietnam’s influential Renewable Energy Buyers’ Alliance (REBA) network (REBA’s membership includes many of the large multinationals that have made 100% renewable energy commitments). The collaboration is important because VLEEP leads a major technical support effort to Vietnam’s electricity regulator and its implementation of the DPPA pilot regulation.  

• • The programme supported and collaborated with V-LEEP’s momentum to pilot a direct power purchase agreement (PPA) to demonstrate proof of concept

• • The team supported the planning, engagement of attendees, and production for the REBA Apparel Working Group meeting in Ho Chi Minh titled: “Engaging Corporate Buyers on Direct Power Purchase Agreements and Science-Based Targets.”  At the meeting, the team provided an overview presentation on “Corporate Renewable Procurement Options”. There were nine corporate brands and apparel suppliers and 80 participants in attendance.

• • Corporate renewable energy buyers were assisted with tools to assess feasibility of RE and navigate the procurement process, Guide for Commercial & Industrial Facilities in Vietnam. 

• • CEIA has helped corporates to voice a demand for solar energy to the Vietnam Government.  This is a clear business case for large, offsite renewable energy procurement. This should further reduce renewable energy costs on a per kWh basis while meeting larger portions of corporate buyers’ energy load. 

Policy 

The scoping assessments identified the fact that there were no formal mechanisms for direct business-to-business renewable energy sales in Vietnam. To this end, IKI MI provided direct technical assistance on the design of the Direct Power Purchase Agreement (DPPA) regulation. This new policy (April 2020) allows businesses in Vietnam to procure electricity directly from private firms producing renewable energy and enable them to power their operations with 100 percent renewable energy.

Ongoing activities 

• • Continue convening key stakeholders through the CEIA working group that brings together over 50 C&I companies and 140 of their representatives, developers, investors, and government officials to educate on procurement options, business models, lessons learned, and new regulations and policies. For example, this webinar hosted in April 2019, presents an update on Vietnam’s rooftop solar photovoltaic (PV) market and the shifting regulatory environment for commercial and industrial energy users, as well as updates regarding the Direct Power Purchase Agreement (DPPA) pilot programme led by the USAID Vietnam Low Emission Energy Program (V-LEEP).

• • Momentum from CEIA’s engagement has resulted in the formation of REBA buyer’s alliance, which consists of over 200 local corporate, developer, investor and technical partner organizations. Members seek to advance clean energy investments in the commercial and industrial space. The CEIA convenes quarterly with the working group to provide market updates, share insights from recent projects, conduct trainings on procurement best practices, and provide real-time information on any recent regulatory or policy changes.

• • The CEIA convenes bilaterally with multiple corporate renewable energy buyers (including Unilever, Arcteryx, Nike, Heineken, MM Mega Market, Samsung, Mango Bay Resort, and Saigon Hi-Tech Park) and offers no-cost support to determine feasibility for on-site solar development and procurement.

• • In  the policy arena, the CEIA continues to bring corporate voices into the policy process to demonstrate demand for clean energy, convey key barriers, and promote “balanced policies that improve investment” to support implementation of the direct power purchase agreement (D-PPA) pilot. 

Photo Credit for display image (far right): google.com/maps

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