Getting realistic about solar power’s potential in Vietnam

Readers of this website and other media outlets may be familiar with some recent developments related to electricity in Vietnam. These include rising coal prices in the global market, the release of the International Energy Agency’s 2017 Outlook which noted Vietnam’s growing dependence on coal imports, the government’s decision to grant an investment certificate to Japan’s Sumitomo Corporation to develop a US$2.6 billion thermal coal power plant in Khanh Hoa, and the Ministry of Industry and Trade’s announcement of a six-percent electricity price hike this month.

All of these stories are related to a fundamental shift in Vietnam’s energy strategy. Traditionally, the country has relied heavily on hydropower plants and the sale of electricity to consumers through the state utility company at subsidized prices. However, there is a widespread agreement this approach is not sustainable in the long term.

Hydropower is inherently seasonal and therefore less reliable. Besides, Vietnam has basically maxed out the potential of this power source, as major rivers have already been dammed extensively. As for selling electricity at below market prices, this policy has benign intentions, but it distorts market signals in addition to straining the state budget.

The development of new coal plants is clearly an imperfect solution to this problem. While it is possible to reduce coal’s environmental impact with more advanced technologies, it will never be a carbon-free renewable energy source like solar or wind power.

Air pollution is becoming a more noticeable problem in Vietnam, and people are understandably concerned about the environmental impact of large industrial projects, especially after the Formosa Steel disaster along the central coast last year.

Is the government making a mistake by signing off on these coal power projects? With numerous reports indicating that investors are rushing to build new solar plants in central Vietnam, people might wonder why solar can’t become a much larger component in Vietnam’s energy mix in the future.

The enthusiasm for renewable energy is a global phenomenon driven by several factors. The first is the concern for the environment and global warming. The second is strategic aspirations for national energy security (domestic renewable energy can help reduce dependence on imports.) A third factor is the increasing affordability of renewable energy (especially solar) and its improved cost competitiveness compared to conventional power sources in recent years.

However, my sense is that hype about solar power may be inflating unreasonable expectations. At the current stage, renewable energy amounts to just 7.5 percent of global electricity production. Moreover, this figure would be considerably smaller if EU countries were excluded. Germany, for example, has deployed a strong framework of subsidies and other incentives to boost the role of renewable energy to 25 percent of its total electricity mix. It plans to take this figure to 40 percent in the coming decade. For most other countries, though, reaching these benchmarks is a faraway prospect.

Besides, financial considerations and environmental impact are not the only factors for policy-makers to consider when devising energy strategies, as they must also take availability, reliability, and feasibility into account.

In many places, there isn’t enough wind or sun to make renewable energy projects viable. Even when there is, power generated by wind and the sun is sporadic because the wind doesn't always blow and the sun doesn't always shine. These are not sources of power that we can turn on and off “on demand.”

Renewable power plants can’t operate at anywhere near full-efficiency at this stage because power grids were not built to support them. In Europe, governments are now working to upgrade grids to store power effectively and make renewable energy run more consistently. However, this undertaking is expected to cost hundreds of billions of US dollars.

For many countries, renewable energy’s relatively dismal “energy density” ratio presents another problem. While conventional power plants (coal, oil, nuclear, hydro and natural gas) can generate more than 1000 watts of electricity per square meter of land area, the figure for solar power plants is closer to 20 W/sq2, even in the most favorable locations.

For example, one of the best known Solar Power plants in the world is the Agua Caliente project located in the Arizona desert, which is one of the sunniest places on earth. The plant occupies 971 ha, which is a huge amount of land considering the plant’s capacity is only 290 MW (relatively large conventional power plants in the US and elsewhere generate ten times that amount of electricity or more.)

The large land requirements for solar plants are not such a big problem in Arizona, where the population density is around 22 people per square kilometer, and most people live in a single metro area (Phoenix). But it complicates matters in more densely populated places. Binh Dinh province, for example, has the population density of 290 people per square kilometer (more than ten times greater than Arizona’s), with a larger share of the population living in scattered towns and villages.

In sum, the development of cleaner power sources is obviously important, but we should be realistic about the potential of renewable energy in Vietnam and elsewhere. Renewables can play a larger role in the nation’s energy mix, but developing cleaner and more efficient conventional power plants will likely be the cornerstone Vietnam’s energy strategy over the next decade.

*The author is Business Development Manager at Global Integration Business Consultants (GIBC) in Ho Chi Minh City.