Viet Nam has installed 6 coal plants’ worth of solar in a year

Global energy demand slipped last year to the lowest level since World War II.
As fossil fuels declined, renewables have surged forward.
Coal-dependent Viet Nam has pulled off a 25-fold increase in its solar capacity in just one year.
Incentives for homes and businesses to install rooftop solar panels led to the boom.

One of the few bright spots in COVID-19 pandemic has been a leap in the amount of electricity being generated from renewable sources.

2020 saw the biggest fall in energy demand since World War Two, according to the International Energy Agency (IEA). That’s a drop seven times larger than that caused by the global financial crisis of 2008/9.

At the same time, the share of energy generated from renewables leapt 7% last year. “It’s mostly driven by solar energy,” said Dr Fatih Birol, IEA Executive Director. “Renewables appear to be immune from COVID.”

One place that illustrates this trend is Viet Nam, which offered generous incentives to households and businesses to install rooftop solar last year. By the time the scheme ended, 9.3 gigawatts of extra generating capacity had been added – equivalent to six coal-fired plants.

The country, which has previously been heavily dependent on coal for electricity generation, now has more than 101,000 rooftop installations on homes, offices and factories, creating a 25-fold increase in its solar generating capacity in just one year.

Cash for spare power

A key feature of the incentive scheme was a generous feed-in tariff for solar users to sell surplus power to the national electricity grid at a price guaranteed for 20 years. Viet Nam favoured rooftop solar because it does not use scarce land or require new transmission lines.

Among the sites for a new installation was the rooftop of the Da Nang offices of Viet Nam’s Central Power Corporation (EVNCPC), the state-owned electricity company. The solar panels generate an average of over 100 kilowatt hours per day to power the offices.

The scheme is not the country’s first big spend on renewables. Back in 2019, it made a major investment by installing 4.5 gigawatts of conventional ground-based solar power. With the latest burst of new rooftop installations, the country now generates a quarter of its electricity from solar.

Solar has also received a boost from changes to the law on public/private partnerships in Viet Nam which mean that investments in coal-fired stations no longer automatically attract a government guarantee.

“Changes to Vietnam’s power market structure and emerging competition from alternative and renewable technologies are also facilitating a shift in focus away from conventional coal power investments,” says Thu Vu, Energy Analyst at the Institute for Energy Economics and Financial Analysis (IEEFA).

What's the World Economic Forum doing about the transition to clean energy?

Moving to clean energy is key to combating climate change, yet in the past five years, the energy transition has stagnated.

Energy consumption and production contribute to two-thirds of global emissions, and 81% of the global energy system is still based on fossil fuels, the same percentage as 30 years ago. Plus, improvements in the energy intensity of the global economy (the amount of energy used per unit of economic activity) are slowing. In 2018 energy intensity improved by 1.2%, the slowest rate since 2010.

Effective policies, private-sector action and public-private cooperation are needed to create a more inclusive, sustainable, affordable and secure global energy system.

Benchmarking progress is essential to a successful transition. The World Economic Forum’s Energy Transition Index, which ranks 115 economies on how well they balance energy security and access with environmental sustainability and affordability, shows that the biggest challenge facing energy transition is the lack of readiness among the world’s largest emitters, including US, China, India and Russia. The 10 countries that score the highest in terms of readiness account for only 2.6% of global annual emissions.

To future-proof the global energy system, the Forum’s Shaping the Future of Energy and Materials Platform is working on initiatives including, Systemic Efficiency, Innovation and Clean Energy and the Global Battery Alliance to encourage and enable innovative energy investments, technologies and solutions.

Additionally, the Mission Possible Platform (MPP) is working to assemble public and private partners to further the industry transition to set heavy industry and mobility sectors on the pathway towards net-zero emissions. MPP is an initiative created by the World Economic Forum and the Energy Transitions Commission.

Is your organisation interested in working with the World Economic Forum? Find out more here.

Rising demand

Viet Nam is the second-largest electricity consumer in Southeast Asia, according to the IEA. The region has one of the fastest-growing levels of energy demand in the world, driven by increasing prosperity leading to greater use of air conditioners and household appliances.

Over the past 20 years, demand has grown at a steady 6% per year and the IEA says the four largest consumers – Indonesia, Viet Nam, Thailand and Malaysia – account for more than 80% of total regional demand.

Viet Nam was ranked number 65th out of 115 countries in the World Economic Forum’s 2020 Energy Transition Index, behind Namibia and ahead of Ghana. Although it slipped from 56th place the year before, the ranking was based on data collected before the country’s rooftop solar surge.

The Index benchmarks countries on the performance of their energy system and their readiness for transition to clean energy. It is designed to help countries accelerate their transition by analysing their current energy system and highlighting areas for improvement.