It is summer 2023, and rolling power cuts are becoming a reality in Vietnam as the national power system is at risk of experiencing electricity shortages due to extreme weather conditions and a growing number of hydropower plants reaching dangerously low water levels.
Deputy Prime Minister Tran Hong Ha has made an appeal on behalf of the PM (Directive No 20/CT-TTg) to the entire country to strive to save a minimum of two per cent of total electricity consumption each year, reduce electricity losses over the whole power system to below six per cent by 2025, and decrease the peak load capacity of the national power system by at least 1,500MW by 2025 through the implementation of the demand-side management (DSM) and demand response (DR) programs.
Historically, Vietnam has been strategically developing indigenous renewable energy resources—initially focused on large, multipurpose hydropower resources to small-scale hydropower resources, and since 2018 on solar PV and wind resources. At the end of 2022, the total installed capacity of hydropower was 22.5 GW, and solar and wind resources were about 20.1 GW. Vietnam has also shown leadership by taking steps to reduce its dependence on imported fossil fuels and aspires to be a regional green energy hub.
Despite ongoing power cuts, the country can boast of universal energy access and a supplier of reliable power to the world’s leading manufacturers and corporations that are blossoming in Vietnam. These international corporations have their own global commitments to procuring renewable energy across their supply chains.
Despite the significant installed capacity of solar and wind resources, the generation from these clean indigenous energy resources is not fully utilized, because of bottlenecks in transmission and distribution networks.
To address this immediate challenge and to support the long-term energy transition to clean energy, the Government has taken bold steps in its recently approved Power Development Plan VIII (PDP8) to increase clean energy sources, strengthen transmission network, and allow for energy storage to set the foundation for a green, resilient, and secure power system which can withstand climate impacts and provide reliable and affordable electricity to people of Vietnam.
As per PDP8, the RE share of the generation could increase to 47 per cent by 2030 if international support is fully materialized to help bring more renewables to come online to meet ambitious clean energy goals. The commitment of Vietnam and the international community is enshrined in the political declaration on the Just energy transition partnership (JET-P) signed in December 2022. The $15.5 billion committed as part of the JETP agreement will be made up of public-sector finance and private-sector finance which be mobilized over the next three to five years. Under the JETP the RE target will increase from 36 percent to 47 per cent.
Role of energy storage for supporting a rapid energy transition in Vietnam
The energy storage technologies, including pumped-hydro and battery energy storage systems (BESS), are instrumental in integrating larger volumes of variable renewable energy generation into the power grid while ensuring its safety and reliability.
The BESS system can provide grid infrastructure services, bulk energy services, and ancillary services to generate a profit on the project. While pumped hydro can provide long-duration storage, BESS will play an important role to provide distributed, local grid management support, along with the transmission and distribution upgrades and expansion—all of which are critical to meet the ambitious RE targets in PDP8.
2030 is only a few short seven years away and achieving the ambitious 47 per cent RE share requires much more than the 300 MW of BESS that has been included in PDP. Indeed, the PDP8 foresees this possibility by noting that the affordability of BESS is critical for increasing the BESS capacity in the power system.
While the inclusion of BESS in PDP8 is the first step, Vietnam needs to turn this target into an action plan and policy framework to implement and achieve scale. Currently, only some very small “behind-the-meter” BESS are being piloted by private sector companies, and lack of regulatory clarity has so far thwarted the development of pilot-scale grid-connected BESS, despite its current legal status through the PDP8.
Grid-connected BESS pilots can be used by Electricity Vietnam (EVN) and the Ministry of Trade and Industry (MOIT) to develop advanced technical standards, regulatory and legal policies, and financing mechanisms that can unlock investments for large-scale deployment. which is necessary to unlock the potential and support an implementation plan. The pilot can help regulators understand the specific techno-economic value by evaluating its actual performance in Vietnam’s power system, rather than just relying on international experience alone.
Vietnam has been producing BESS systems and exporting to international markets. Companies such as VinES and Fluence are already producing and assembling BESS and recently two Chinese companies have approached the government to potentially invest up to $900 million to build a BESS production facility in Vietnam.
BESS initiatives in other countries
While Vietnam is just embarking on its BESS journey, Taiwan has become one of the most active energy storage markets in the Asia Pacific region. The growth momentum of the energy ecosystem is driven by a clear target and objectives for renewable energy and net zero emission set by the local government. The State-owned electric power company Taipower has set a target for 1,000MW of BESS within its service areas by 2025 to help balance the grid.
South Korea is another prominently growing country in the BESS market. The country has been actively promoting the development and deployment of BESS to improve the stability of its grid, manage peak demand, and integrate renewable energy sources into its energy mix. The BESS market in South Korea has been driven by the country's strong manufacturing base in the battery industry and strong government policies and incentives.
In Taiwan and South Korea, the BESS scale-up started with pilots, for e.g., in S. Korea the first three pilots were each at KEPCO’s substations, RE sites, and houses & buildings in 2017.
India like Vietnam is also planning to increase the RE energy mix to 50 percent by 2030. To balance the significant capacity of renewables, the BESS requirement is projected to rise by 9 GW in 2026-27 and to 47 GW in 2031-32 across the electricity delivery value chain from generation to transmission to distribution sectors. In India, the Global Energy Alliance for People and Planet is supported the 20MWh BESS pilot by providing concessional funding to take the pre-commercial risk associated with grid-scale BESS and to test financial and tech viability.
GEAPP India also plans to support the evaluation of a project pipeline of ~200 MW with DISCOMs in North, South, and West India that can be expedited for commissioning and financial closure in the next 18 to 24 months.
As the Vietnamese government takes strides to develop a strong, reliable, and green power supply for global industries and for its citizens, greater use of BESS in the Vietnam power system is inevitable. The greening of the grid will provide energy security and attract greater foreign direct investment (FDI) from international corporates who are committed to using renewable energy—all of which benefits the Vietnamese people by advancing the sustainable green growth goals, espoused by Vietnamese leadership. GEAPP is committed to supporting the first BESS project in collaboration with the government by providing concessional financing, technical support, knowledge sharing, and bringing experience from India.
