Sir, from an international perspective, what challenges and bottlenecks do you assess Vietnam is facing in developing renewable energy and energy transition?
- From JICA's perspective, Vietnam's energy transition process is facing three main challenges. First, regarding policy and institutional implementation. The establishment and implementation of the FIT (Feed-in Tariff) electricity purchase and sale mechanism in the period 2018-2021 has made an important contribution to the rapid expansion of renewable energy projects. However, the application of the FIT electricity purchase and sale mechanism for solar power ended at the end of 2020 and for wind power ended at the end of 2021. The transition to a market-based price system has not been fully institutionalized and the lack of a clear replacement framework has created a policy gap. Therefore, many projects are facing delays and uncertainty due to lack of clarity in implementation regulations, sample contracts and implementation progress. In Vietnam, fluctuations in the electricity price mechanism and terms of electricity purchase and sale contracts (PPAs) that are not consistent with credit requirements have increased risk awareness, leading to increased bidding costs and delayed investment decisions.
Second, infrastructure development and technological constraints. In the phase of applying the FIT electricity purchase and sale price mechanism when the number of solar and wind power projects is increasing rapidly, the electricity transmission and system operation infrastructure has not kept up with the development speed of power sources. This leads to overloading the power grid and having to cut power generation from renewable energy sources, making it impossible for power plants to operate at full capacity. In addition, the development and application of advanced energy storage technologies such as battery energy storage systems (BESS) is still slow, reducing the flexibility of the system and limiting the ability to expand renewable energy sustainably.
Third, despite receiving great attention from investors, many renewable energy projects still have difficulty raising capital not because of lack of financial resources but due to credit risks from electricity buyers, limitations in electricity purchase and sale contracts (PPAs), exchange rate risks and lack of risk assurance mechanisms.
So what solutions should Vietnam prioritize in the coming time to attract investment and ensure energy security, sir?
- Regarding priorities and orientations in the future to attract private and international investment, I have two recommendations for Vietnam. The first is the consistency and predictability of policies. In the coming time, to build a stable, transparent and predictable policy environment, the following measures need to be implemented: Develop a clear roadmap for the transformation of the electricity price mechanism; Standardize the framework of PPA electricity purchase and sale contracts to meet international standards and increase access to capital.
Second, limitations in electricity transmission infrastructure. The development of transmission grid is a prerequisite for the development of renewable energy and an important factor in investment decisions. To solve issues related to transmission grid, it is necessary to implement the following solutions: Develop and implement integrated transmission grid planning, taking the lead rather than following the development of power sources; prioritize investment in transmission grid in areas with great potential for renewable energy.
Moreover, in order to improve capital mobilization for transmission grid development, promoting public-private partnership (PPP) and mixed-finance models is considered effective methods. At the same time, it is necessary to strengthen the financial capacity of the National Power Transmission Corporation - the unit responsible for developing the power transmission system, and continue to encourage the use of preferential financial resources such as ODA.
In the coming time, how will JICA support Vietnam in the energy transition process, sir?
- In the coming time, JICA will coordinate with the Government of Vietnam and international financial institutions to continue implementing projects to support the development of electricity infrastructure and energy transition through ODA loans and private sector investment finance.
Thank you, sir!
