Viet Nam has set a goal of becoming a green economy. Thanks to increased investments, the country is making substantial strides in renewable energy. Statistics from the Vietnam Electricity (EVN) showed that the installed capacity of the renewables hit 20,670 MW in 2021, up 3,420 MW year-on-year and accounting for 27 per cent of the total. Sushil Purohit, President of Wärtsilä Energy and Executive Vice President at Wärtsilä Corp, shares his views on how renewables can help Viet Nam reach its Net zero ambition by mid-century.

According to the Ministry of Industry and Trade’s Department of Electricity and Renewable Energy, Viet Nam has set a target for renewables to account for 45 per cent of the national power generation capacity by 2030. What suggestions do you have to help Viet Nam scale up renewable energy into the dominant energy source?

The increase in the share of renewables will definitely depend on the policies that we believe the Government has been working on after the feed-in-tariff mechanisms for wind and solar have ended.

Those policies should include the new tariff structure for both existing solar and wind power plants, and for new renewable energy projects, as well as a direct power purchase agreement (PPA) pilot scheme to enable renewable energy providers to sell clean electricity to directly private off takers.

Moreover, the development of renewable energy needs to be synchronised with the investment and upgrade in grid infrastructure. Otherwise, we will continue to see the issue with curtailment in the future. As our modelling shows, when we have a big share of renewable energy in the system, flexible assets must be added to balance the intermittency, preventing any grid instability at all times.

To provide an analogy – if renewable energy power plants are like cars, transmission lines are like roads and flexibility is like traffic lights. Without roads you cannot move from one destination to the next. However, without traffic lights, the roads will be jammed, or the power systems will be unstable.

What should Viet Nam’s policymakers and regulators do to attract more investment from domestic and foreign firms in renewable energy, which is a key factor to help Viet Nam meet its goal of net-zero emissions by 2050?

Shifting from an established fossil fuel-powered grid is a complex, multi-year process that requires a clear understanding of the interplay between the short and long-term actions. To fully realise the benefits of a high-renewable power system requires key steps to be taken in the coming 5-8 years.

In order to reach the net zero target in Viet Nam and attract more investment in renewable energy, critical regulatory frameworks need to be developed and put in place to incentivise renewables and flexible assets, while creating a more competitive energy market.

There should be additional mechanisms to continue the support for renewable energy development in Viet Nam, providing investment support for new projects and a clear pricing scheme. The increase in the share of renewables definitely will depend on the previously mentioned examples of successive policies.

Flexible assets, such as grid balancing engines and energy storage, are critical for future power systems running on an increasing share of renewables. Therefore, it is crucial to develop mechanisms to ensure the financial viability of those assets.

In the long term, competitive wholesale markets with real time and short interval pricing should be developed, which better reflect the reality of the changing power market. As a result, instead of having fixed price contracts, power plants will have to compete by bidding into the power markets. This would provide incentives to invest in more renewable and balancing capacity to meet demand when supply is low.

Sushil Purohit delivered his speech at Enlit Asia 2022.

According to Wärtsilä’s new report “Rethinking Energy in South East Asia”, renewable-based power systems can enable Viet Nam to reach Net zero by mid-century. What is the key basis for this statement?

The modelling in this report is based on optimisation of the power systems of Indonesia, the Philippines and Viet Nam and shows how the countries can transition to net zero and with a lower cost.

Net zero is not a distant possibility. The modelling shows that it is now both technically and commercially feasible to increase renewable energy to meet almost all of the energy demand of the countries modelled, supported by a mix of technologies and sustainable fuels.

Through our power system modelling work, we have found that, in order to build a net zero power system, there are some similar key steps that regions worldwide should follow:

- We need to rapidly increase the amount of renewables to become the main source of energy.

- By adding flexible technologies, such as grid balancing engines and energy storage, we can support the integration of increasing amount of renewables.

- The modelling shows that inflexible assets, such as coal, can be phased out.

- There is a need for Power-to-X capacity to produce carbon neutral or zero carbon fuels and convert the balancing power plants to run on them.

At this point remaining fossil fuel capacity can then be rapidly phased-out.

The modelling shows that renewable power systems backed by grid balancing engines and energy storage can meet the energy demand while avoiding blackouts and creating the right conditions for future demand growth.

A variable renewable power system does not cost more than the current system. In fact, when factoring in the International Energy Agency’s upper forecasted carbon prices, the levelised cost of electricity in net zero power systems can be 20 per cent less in Viet Nam by 2050 – resulting in annual savings of US$28 billion.

We have modelled over 190 power systems globally and no matter the region, the steps to reach net zero are similar in regions and countries worldwide – although the pace of the transition may differ. — VNS