Vietnam News

Vietnam to cancel coal despite power demand growth

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The latest draft of Vietnam’s 8th Power Development Plan (PDP8) shows increased intentions to move away from coal-fired power and toward renewables and natural gas during the next decade, even as the country seeks to keep up with rapid demand growth.

This is according to analysis from IHS Markit that unpacks the third revision of the Vietnam Ministry of Industry and Trade’s PDP8, released in February 2021. The draft covers the period 2021 through 2030 and a final draft is expected in the second quarter of this year.

PDP8 scales back coal-fired power significantly showing Vietnam’s intentions to reduce emissions, as well as to reduce its dependency on imported fossil fuels. The plan also proposes no new coal-fired power plants except those already under construction or planned for completion by 2025 or sooner.

However, IHS Markit highlights that fossil fuels are a long way from exiting Vietnam’s power market. “The draft PDP8 envisions gas-fired power as the backbone of the power system,” wrote Cecillia Zheng, IHS Markit principal analyst-power, in an analysis in April. “Thermal capacity addition remains significant in the plan, with 39 GW of thermal capacity (17 GW coal and 22 GW gas/LNG) projected to come online in the next decade, as opposed to an additional 19 GW of solar and wind capacity in the same period.”

Coal and gas will have a combined market share of about 57% in 2030. “The plan clearly prioritises gas power projects to replace coal,” Zheng wrote.

According to Kevin Adler, editor, Climate & Sustainability Group, IHS Markit, Vietnam’s power demand has grown by about 10% per year for the last decade, one of the fastest rates in the world. Furthermore, alongside an economic recovery, demand will increase by nearly 10% per year to reach 335 TWh and 491 TWh by 2025 and 2030, respectively.

This means that even significant increases in renewable energy wont keep pace with the increase in power demand, likely the main reason behind the country’s modest climate targets.

Vietnam is currently facing specific challenges such as “development constraints, fuel supply, infrastructure development, power supply reliability, lack of investment support, and the need for market reform,” according to the IHS report and the PDP8 offers little in the way of practical solutions to address these challenges.

The Institute for Energy Economics and Financial Analysis (IEEFA) was critical of the PDP8, saying it ignores improvements in the relative costs and reliability of renewable generation.

“Traditional power sector planning disciplines [in Vietnam] were developed during a period when technology was relatively static and generation-led planning was the norm. That is not the right approach for an unprecedented period of innovation and cost reduction we are witnessing now,” IEEFA said in a report in March. “This calls for a fundamental shift away from the traditional planning approach of assessing technology choices on an ‘as is’ basis to a pathway development process that sees each generation technology more holistically.”

By Pamela Largue – Power Engineering International – April 30, 2021

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