The link between renewables generation in the north and the load centres in the south needs strengthening
DIGITAL TOOLS
Digitalisation of the transmission network may help reduce renewables curtailment
SECTOR COUPLING
Linking demand load to renewables through stronger transmission would limit curtailment
KEY QUOTE
The idea is to favour locations for the projects where the grid has capacity but increases in grid capacity are also inevitable to cater for demand growth
Vietnam had been facing energy supply shortages, with rolling brown- and blackouts across the southern part of the country predicted to start in 2020. The onset of the Covid-19 pandemic and resulting economic contraction gave the country’s power companies some breathing room. Much of the energy supply crunch stems from the country’s rapid economic growth of above 6% over the past decade, second only to China in the Asia-Pacific region, requiring evermore electricity production to fuel that growth. Vietnam’s energy supply problems are partly geopolitical. Several times since 2018, China has prevented the state-run power company PetroVietnam and its international partners from developing natural gas resources within Vietnam’s UN-mandated 370 kilometres exclusive economic zone. In a knee jerk response, Vietnam turned to developing liquefied natural gas (LNG) infrastructure, particularly with help from American agencies and energy companies. Two major LNG import terminals are being constructed in the south, with at least six more approved and with more sites under consideration at various provincial levels. However, these will do little for the country’s green credentials. Though Vietnam’s energy supply problems have temporarily subsided due to the economic contraction as a result of the pandemic, the return to steady economic growth has meant the need for more electricity production has reappeared.
SOLAR BUILD-OUT To help counteract the forecasted energy crunch, and given the excellent resource available in the country, Vietnam had turned its attention to solar power development. The government put in place a generous feed-in-tariff (FIT) scheme in mid-2019 to attract both domestic and foreign investment in the sector, which encouraged funding by guaranteeing an above-market price for producers. Feed-in tariffs, for their part, help mitigate the inherent risks in renewable energy production by providing operators with long-term contracts. Such tariffs also mitigate unfavourable power purchase agreements offered by state-run power distributor Electricity Vietnam (EVN), which retains a near-total monopoly on transmission in the country. According to the BP Statistical Review of World Energy 2020, under the feed-in-tariff scheme, all projects that became operational prior to June 30th, 2019, are able to sell their electricity to EVN and its subsidiaries at $93.5/MWh for 20 years. Again, just like Vietnam’s favourable solar radiation, its generous tariff scheme became the envy of the region. However, by April 2020, the Vietnamese government finalised a new solar feed-in-tariff plan that was 10-24% lower than before but still uniform across regions and differentiated by type (ground-mounted, floating, and rooftop). The revised plan came shortly after the government said it intended to double its power generation capacity over the next decade. Nonetheless, this second round of feed-in-tariffs was still generous enough to spur solar foreign investment and development. These tariffs set solar power development in the country on a trajectory that even the most optimistic energy planner could never have envisioned. A massive solar build-out followed, both large scale utility and commercial projects in addition to the residential sector. Over much of the country, new solar panels could be seen atop thousands of buildings, including smaller residential structures. Vietnam boasted the highest installed solar PV capacity in Southeast Asia, around 6,500 megawatts (MW) at the end of 2020, up from only 86 MW in 2018 and 4,750 MW in 2019. Solar power now represents around one-quarter of the country’s installed power capacity, according to an Institute of Southeast Asian Studies (ISEAS) report. Vietnam’s solar capacity far surpasses the government’s 2020 target of 850 MW set in 2016, while solar PV systems generated about 10.6 terawatt-hours (TWh) of electricity in 2020. Rooftop solar contributed about 48% of Vietnam’s total solar capacity by the end of 2020, the ISEAS report adds.
WIND POWER AMBITIONS Following its successful solar power development, Vietnam has also been developing its wind power sector. Vietnam has marked advantages in its wind power development plans over many of its neighbours in the region, including a vast coastline of around 3,260 kilometres, excluding islands, ideal for both offshore and near-shore wind-power development. Yet, Vietnam’s wind power development currently pales in comparison to its solar build-out. By the end of 2020, wind power accounted for just 1% (670 MW) of the country’s energy mix, compared to around 16.6 GW for solar, according to the US Energy Information Administration. Under Vietnam’s latest draft national power development plan—published in February 2021 and known as PDP8—the country aims to ramp up solar capacity to around 18.6 gigawatts (GW), with wind capacity to 18 GW by 2030. By the start of 2021, there were reportedly as many as 157 onshore and offshore wind projects proposed in Vietnam, though many of these are by new entrants in the sector so have little chance of either gaining governmental approval or sourcing investment. 
GRID CURTAILMENT QUANDARY As successful as Vietnam’s renewables build-out has been, considerable challenges remain including needing new electricity transmission and distribution infrastructure to accommodate additional capacity and carry the new power to where it is needed. This problem started appearing at the start of 2020 when a number of solar projects had to curtail production by as much as 70-80% because transmission lines were already operating at capacity, resulting in less revenue being earned and an inability of some project backers to service debts incurred in the building of projects. Vietnam’s draft PDP8 acknowledges that grid systems will need to be developed and suggests a focus on smart grid development and the use of digital technology to manage supply and demand. “Grid improvement is a major issue in Vietnam and both the Ministry of Industry and Trade and EVN are aware,” the government said recently. The PDP8 also proposes a mechanism encouraging the development of tools to provide flexibility services, such as battery storage. Installation of battery storage together with smart grids are considered a solution for integrating renewable energy into the power system from 2030, according to a 2021 report by Watson Farley & Williams, a law firm. Better system planning and a greater focus on system flexibility and power storage, plus enhanced renewables sector participation in transmission development to connect their projects, would also facilitate more efficient integration of solar PV into the electricity system, the report added. The ISEAS–Yusof Ishak Institute, a Singapore-based research centre, believes enhanced private sector participation in transmission development to connect their projects, would also facilitate more efficient integration of solar PV into Vietnam’s electricity system. However, these and other measures may suffer from the bureaucracy of Electricity Vietnam and other government agencies, while ultimate grid investment will depend upon obtaining the necessary financing. This may be difficult to achieve because the country’s feed-in tariff scheme has expired. As a result, most international investors are not as interested in Vietnam’s renewables, save offshore wind. Moreover, international stakeholders are also uninterested in investing in the grid problem due to the negative reputation of the state-run power distributor. 
Ho Chi Minh Vietnam needs to connect its renewables capacity in the north to the load centres in the south
SOLUTIONS AND ANSWERS While the government notes the grid curtailment quandary in the development of its renewable ambitions, solutions could still come from the private sector and international stakeholders, which have the experience and know-how in upgrading transmission infrastructure elsewhere in the world—so long as they are comfortable doing business with the state. This would allow for greater renewables integration while taking better advantage of existing latent capacity. Other solutions such as dynamic line ratings, advanced power flow, and topology optimisation software would improve grid resilience and reliability and prevent bottlenecks. Mark Hutchinson, a member of a Southeast Asia task force with the Global Wind Energy Council (GWEC), said there are a number of ways for Vietnam to deal with grid curtailment. His group has been talking to the Vietnamese government about optimal design for new wind power by utilising development zones. “The idea is to favour locations for the projects where the grid has capacity but increases in grid capacity are also inevitable to cater for demand growth,” he says. When solar development ramped up in Vietnam in 2019 and 2020, peak demand was less than 40 GW, but with 17-18 GW of new solar capacity, on a bright sunny day it creates challenges for the grid, Hutchinson explained. “Forecasting of wind and solar is also very important, including day-ahead, hour-ahead and 15 minutes-ahead. This helps to better manage the grid by scheduling other types of resources. Digitisation and better monitoring of flows across the grid are also very helpful,” he added. Bruce Tsuchida, from The Brattle Group consultancy, says about a third of the power currently generated in Vietnam is hydro. However, almost two-thirds of that hydro capacity is located and produced in the north, while much of the power needs to be sent to the south to cover increasing demand in and around Ho Chi Minh City, Vietnam’s economic hub. “Ho Chi Minh City’s load has been growing at approximately 10% per year,” Tsuchida explained. “But there’s no place there to build new generation plants. Plus, nobody wants a power plant in their backyard.” Meanwhile, wind power development in Vietnam has been receiving a lot of press coverage over the past year or so but developing offshore wind near Ho Chi Minh City can be difficult because it is a major import area with high levels of shipping activity. Therein lies the quandary. If Vietnam focuses on increasing renewables in the north, there is not enough load to use all of the solar and wind, and the north-to-south transmission line is already congested. As such, Vietnam’s renewable curtailment problems could worsen. According to Tsuchida, the solution seems straightforward: bolster transmission wires north to south so the grid can send more power to the increasing demand in the south. Additional transmission capacity helps reduce curtailment because it provides geographical diversity for both renewable generation and load. For example, wind speeds may fall in one location but increase in another location. Without sufficient transmission infrastructure, those in the area where wind decreases could lose power while a wind plant in other areas may need to be curtailed. The same applies to load. “Let’s say residential load increases starting at 7:00 am and runs to 10:00 pm but is close to minimum from 11 pm to 7 am. Industrial load is flat throughout 24/7. If you try to serve the residential load with wind, you may need to curtail wind at night when the load is low. But if you connect the two loads with transmission, you won’t have to curtail wind at night because the industrial load can consume it,” Tsuchida says. Altogether enhancing transmission will utilise better lower cost generation and lead to lower bills for end-users. Reducing curtailment from renewables also aligns with Vietnam’s plan reached at the COP26 climate change meeting in November 2021 of not building any more coal-fired power plants. “The question is then, does the utility have the incentive to build more transmission?” Tsuchida asked. “If the utility is taking advantage of transmission congestion and making money through its generators on the congested end, there may not be.” To solve that problem, international pressure may need to be applied, which at times carries considerable weight in Vietnam. •
TEXT Tim Daiss