EOR21 offers prescriptions to Vietnam to reach net zero target by 2050

The challenges include affordable energy, the need for additional transmission capacity, dependency on fuel import, over-reliance on fuel imports, higher import costs and air pollution. The report has eight findings and recommendations for the country to reach the net zero target by 2050.

First, it is possible to reach a net zero emissions energy system in 2050 at an extra cost of only 10 per cent compared to the baseline scenario. Early actions are required to make emissions peak no later than in 2035 to avoid paying excessive costs, the report says.

Second, to reach net zero emissions by 2050 at the least cost, renewable electricity (RE) should be the main substitute for fossil fuels, either directly or indirectly through production of electro-fuels. The power system is expected to satisfy 70 per cent of the total energy demand in 2050. The primary sources of RE-based power production are solar (75 per cent) and wind (21 per cent).

Third, the green transition of the power system will be quite capital-intensive and could require annual investments of up to $167 billion in 2050 in the net-zero scenario, corresponding to around 11 per cent of the projected national gross domestic product in 2050.

Power system costs will shift towards less fuel costs and much more capital investment costs. Capital investment costs will be around half of the total power system costs in 2030 in all scenarios while towards net zero in 2050, it will increase to 90 per cent of the total power system costs. Therefore, it is crucial to achieve access to cheap financing options, the report suggests.

Fourth, Vietnam should stop planning new coal-fired power plants and refurbish existing plants to become more flexible to better integrate renewables. It is also recommended to limit the expansion of gas and LNG-fired power plants as the current planned 25 GW capacity is more than sufficient to reach net zero emissions in 2050, Vietnamese news media report.

Fifth, storage systems should play a central role, but batteries are necessary only after 2030. Batteries are expensive now and not needed in the short term as balancing can be provided by existing hydro and thermal power plants.

In the next 10 years, reinforcement of transmission capacity is urgently needed, especially to connect the best renewable resource in South with demand in the north. 

Sixth, nuclear power is only cost-efficient if the implementation of renewable energy, particularly solar energy is severely constrained.

The analysis shows that current nuclear power technologies are not cost-competitive compared with the combination of solar, wind, storage and transmission. Only when these technologies are prevented from being fully utilised, nuclear power can be competitive towards net zero in 2050.

Seventh, early action is needed to decarbonise the transport sector. Additional benefits are much less air pollution and less dependency on fuel import.

Direct electrification is key—around 80 per cent and 50 per cent of passenger and freight demand respectively should be electrified in 2050. Vietnam should start phasing out vehicles using fossil-fuels from 2025, switch to collective transport modes, and shift freight transport towards railway from 2030 and electrify all land transport, the report recommends.

Eighth, reaching net zero will make the country independent of fuel import. Vietnam's import dependency is expected to increase significantly in the next decade and by 2050, the share of imported fuels can reach 70 per cent in the baseline scenario with imported fuel costs corresponding to $53 billion. Lowering fuel imports will reduce risks related to fuel price variations.