Policies and laws on energy development: In need of a comprehensive outlook

In “The implementation of policies and laws on energy development during the 2016 – 2021 period: Status quo and solutions”, the Conference organized by the Thematic Supervisory Delegation of the National Assembly Standing Committee, experts suggested that a comprehensive outlook is required when formulating an energy development policy. Instead of focusing on the investment cost and the selling price, we should consider the benefits of using advanced technologies as well. 

Efforts to reach the goal of a green and sustainable economy

Vietnam is a fast-paced developing country, therefore, the demand for energy, especially  electricity, is rising. The same goes to the national economic development (evidently, Vietnam’s GDP from 2001–2010 met a 7.26% growth annually, 5.91% per year from 2011–2015, 5.99% per year from 2016–2020), moreover, there was a 10%/year rise in energy demand from 2001–2010, 2011–2015: 11% per year and 2016–2020: 10–11% per year. As the fast-pace development along with high energy usage taking place, consequently, the energy industry’s greenhouse gas emission takes up 63% of the overall national emission in 2010, which is believed to reach 73% and 80% in 2030 and 2045 respectively.

Phan Xuan Dung, the president of the Vietnam Union of Science and Technology Associations, suggested that in order to achieve a green and sustainable economy, adapting to the climate change, Vietnamese Party and State have implemented several guidelines, policies, laws regarding the development of energy, the most notable one amongst which is the Resolution 55-NQ/TW of the Political Bureau, stating “Vietnam’s National Energy Development Strategy to 2030, with a vision to 2045”. Vietnam has been prioritizing the transition of the energy industry on the basis of upholding the internal strength, at the same time encouraging cooperation and supports from the development partners. Moreover, the use of fossil fuel-based energy source has declined, and the development of renewable, alternative and clean energy source is prioritized.

Mr. Dang Duy Dong, Director of Planning and Development Institution, in his speech. Photo by Ho Long

Not only limited solely to implementing policies, Ms. Cao Thi Thu Yen, an expert working for Power Engineering Consulting Joint Stock Company 1, believes that thanks to the Political Bureau’s orientation, the Government, several state authorities and international organizations along with academics and scientists have been, together, completing and adopting institutions and legal grounds to promote the process of reducing greenhouse gas emissions in Vietnam. In particular, the Electricity Law has been revised and synchronized with the national sector plans on energy, on electricity development up to 2030, with a vision to 2050, which have been elaborately studied in a completely new approach to climate change. “In fact, there has been a strong energy transition with great results taking place in Vietnam in the past five years,” said Ms. Cao Thi Thu Yen.

Mr. Dang Duy Dong, Director of Planning and Development Institution, attests that Vietnam has much potential to grow its energy industry in service of developing a green and sustainable economy, adapting to climate change. As the global technological advancement is accelerating at an unprecedented pace, contributing to the increase of output and decrease of market price, especially in renewable energy, wind and solar power. Vietnam will be able to decrease its electricity price, gaining control over the supply chain and develop its domestic industry if it has the capability to attract interational investment in association with conditions to accelerate and increase the localization rate, especially in the case of offshore wind power. At the same time, long coastal terrain offers much potential for offshore wind power to gain competitive advantages in attracting investment, production and exporting renewable energy.

Exemplary and stable policies to attract private investment aiding energy transition 

Besides some achievements, several experts partaking the Conference stated that the increased use of renewable energy without adequate legal grounds, comprehensive research regarding energy transition and thorough research about each type of energy, has led to multiple long-term issues affecting the energy supplying system and the entire society, which needs to be solved synchronously step by step.

Economy wise, Director of Planning and Development Institution, Mr. Dang Duy Dong pointed out that, despite having undergone more than 30 years of transition to a market economy, many economic management mechanisms, especially the mechanism of investment management, inspection and control of costs is still basic under the subsidy regime, causing many consequences for investment projects of budget capital and socialized capital, especially risks for managers partaking the decision-making process of the project. The electricity industry is also stuck in this situation, when the electricity price calculation is still based on the calculation of input costs plus allowable profit (no more than 12%), and bidding procedures follow input criteria and price formation process, instead of auctioning to achieve the final output of competitive electricity prices.

Regarding the process of implementing the energy industry development policies, Director of Planning and Development Institution found that there are some case of abusing said policies, collusion between private sectors and the state, which resulted in forming group interest according to each field. This phenomenon occurs, according to Director of Institute of Planning and Development, partly due to the officials’ qualifications, partly because of their lack of updated knowledge over the global technological advancement and market price fluctuations. A good example is the issuance of renewable energy FIT tariff that are twice as high as that of the region and the world.

Another challenge with Vietnam’s energy industry development in the upcoming period is that a huge source of capital is required to execute Power Development Plan VIII, and there will be a risk of power deficiency, directly threatening the power security. Furthermore, with the approach of negotiating power purchase agreements under the current Circular 57 of the Ministry of Industry and Trade, there will be not enough capital allocated from foreign investor for power plant projects. Under the PPP/BOT mechanism, the negotiation over gaining Government Guarantee and Undertaking (GGU)would take 7 to 11 years , which is the outdated application-approval procedure, discouraging the investors’interest in the project.

To avoid said risks, apart from quickly initiating the Power Development Plan VIII, “it is wise to not be hesitant as we have been before”, Dr. Nguyen Thang Long, at Vietnam Energy Conservation and Energy Efficiency Association provided that it is necessary to have an overall evaluation of the regulations under the Electricity Law, in comparison with the current developing status of the energy field during past period, to carefully study and amend, even though said Law was amended recently. Additionally, Mineral Law also needs amendment to institutionalize the guidelines and policies of the Party. Dr. Nguyen Thang Long also suggested studying and amending several sub-law documents related to the economical and efficient use of energy, in which attention should be paid to considering and adjusting the regulations on the level energy consumption for applicable energy consumption policies in industry and civil construction under relevant guiding documents.

Mr. Nguyen Quang Huan, National Assembly Deputy, in his speech. Photo by Ho Long

From an overall perspective, the National Assembly Deputy, Mr. Nguyen Quang Huan (Binh Duong), a member of the Supervisory Delegation, stated that based on the calculation of the World Bank, Vietnam needs USD 140 billion to execute energy transition, and USD 30 billion out of which will be used to restore and navigate occupations in non-renewable energy sectors. This demands a large sum of investment, therefore, Mr. Nguyen Quang Huan believes that there should be a detailed plan stating specific steps to take, exemplary policies to implement, that is stable enough to gain capital from private investors in this process. Moreover, the authorities should not focus solely on the market price but also take into consideration the benefits of utilizing cutting edge technology in building policies that are suitable for private investors, as well as encouraging researches in innovative technologies that can potentially satisfy the energy demand of Vietnam in the upcoming period.

Source: People’s Deputies Online Newspaper