As a traditional exporter of indigenous coal, natural gas and oil, Vietnam currently relies on fossil fuels for around 80% of its primary energy mix, dominated by coal at close to 50%.
Vietnam has committed to achieving a net zero carbon target by 2050 and reducing the proportion of coal in the primary energy mix to 30% by 2030 to be replaced by natural gas and non-hydro renewable energy. The country is at the same time reducing its historically high use of hydro energy which has badly impacted the environment. Hydro power’s contribution to electricity generation is expected to decline from 27.8% in 2020 to 12.4% in 2030.
Vietnam’s challenge in reducing its reliance on coal is sizeable, given the sharp rise in its coal use over the past five years – including a jump from coal making up less than 33% of electricity generation in 2017 to comprising close to 50% in recent years. In many ways Vietnam typifies the challenge of many Asian nations, seeking to continue economic growth that has been among the region’s strongest while striving to meet ambitious climate objectives.
There have been projections that Vietnam will have the 20th-biggest economy in the world by 2050.
Focus on achieving that balance increased in late 2022 with news that Vietnam would become the third country in the world – after South Africa and Indonesia – to agree to a Just Energy Transition Partnership with a coalition of developed economies. Vietnam’s JETP is valued at $US15.5 billion and seeks to bring forward the projected peak date for greenhouse gas emissions to 2030, limit peak coal capacity to 30.2 GW (down from 37GW) and accelerate adoption of renewable energy so that it accounts for at least 47 per cent of electricity generation by 2030 (up from 36 per cent).
The Ministry of Industry & Trade’s (MOIT) long-awaited Power Development Plan 8 (PDP-8) was approved in May 2023, clearing the way for natural gas to replace coal as Vietnam’s primary source of power by 2030. While the share of domestic natural gas in the Vietnam’s energy mix will decline slightly between now and 2030, LNG imports are expected to jump from being non-existent to making up 14.9% of the primary energy mix.
Vietnam submitted an updated Nationally Determined Contribution as part of COP27, pledging to increase its unconditional greenhouse gas emissions reductions target to 15.8% by 2030 subject to a business-as-usual scenario from 2010 (the previous target had been 9% from 2014), or to achieve emissions reductions of 43.5% by 2030 with international support.
Gas, as a lower carbon alternative to coal and natural partner to renewables, will clearly have an integral role to play in Vietnam’s energy transition. Domestic natural gas demand in Vietnam was expected to overtake production in 2021, triggering LNG imports from 2022 onwards. Progress on achieving imports has been slow but it was reported in early March 2023 that state-owned PetroVietnam Gas was scouting for its first LNG shipment. The updated power plan will only increase the focus on LNG.