Vietnam’s Energy Transition: After Coal, What Next?

In one of Asia’s fastest-growing economies, a transition away from coal increasingly seems a question of if, not when. But how the new Power Master Plan balances between renewables and liquefied natural gas (LNG)is another growing concern for climate advocates.  Tran Dinh Sinh, Deputy Director of Vietnam’s leading clean energy NGO GreenID, said that he is awaiting the release of the Power Master Plan VIII. This plan will spell out Vietnam’s energy development for the next ten years. “Hopefully, the Power Master Plan VIII will be a Green plan—with no new coal projects in the pipeline, infrastructure for renewable energy development, and a just transition.”  The plan is currently being finalized by the Ministry of Industry and Trade and pending approval from the Prime Minister Office. Announcements from the authorities indicate an emphasis on liquified natural gas (LNG) and the development of renewables.  From an economic perspective, coal seems to beseeing its waning days in Vietnam. With ever-mounting pressure from environmental advocates, major financial institutions in Asia including Mitsubishi, Japan Bank for International Cooperation (JBIC), and HSBC  have announced commitments to cease new investments in coal. This renders the capital needed for these projects extremely difficult to raise.  In 2020, three East Asian powers, Japan, Korea, and China, have committed to achieving carbon neutrality  by mid-century.  Public institutions from these three countries also happen to be the only foreign financiers keeping Vietnam’s coal alive, collectively responsible for 13 coal power projects with a total capacity of more than 14,500MW. Hai Phong 2 Thermal Power Plant, one of several in Vietnam constructed with loans from the Export-Import Bank of China and JBIC.And there might be more definitive legislation coming. Jieon Lee is the Climate and Energy Coordinator at The Korea Federation for Environmental Movements. “A proposal to ban overseas public financing on coal was proposed by the ruling party in July, but it has not been discussed in the National Assembly yet,” he explains.  This proposal would prevent Korea’s public institutions and utility companies, including KEXIM, from financing new coal projects abroad. A more lenient version of this ban, pushed by the Ministry of Finance, would prohibit the financing of any coal plant that does not meet ultra-supercritical standards.  Meanwhile, in Japan, a new policy was passed in 2020. Itstated that public financial institutions in the country would no longer be involved in funding new coal plants overseas. This was a belated but much-welcomed announcement for the country’s climate advocates. “Overall, it’s an important step towards decarbonization,” said Ayumi Fukakusa from Friends of the Earth Japan. Due to these developments, a Vietnam-based large coal power projects’ host  has been left without investors, including seven investors are expected to be discontinued in the upcoming Power Master Plan:Hải Phòng III, Vũng Áng III, Long An I và II, Tân Phước I, Long Phú III and Long Phú II. Or at least, they will not continue using coal. Of these seven plants, provincial authorities have indicated that four might still come into existence in the next decade under another name: LNG-fired plant. LNG: Clean Energy or Just Another Fossil Fuel?  Just as interest in coal financing is waning in its very last strongholds, another energy source is on the rise: LNG. From 2019 to 2020, at least 11 megabanks and energy corporations have formally proposed to finance LNG projects across Vietnam worth 60 billion dollars. The diversity of these institutions is noticeable, from the US to Thailand and Germany. LNG is gas liquified for transportation and regasified to be burnt in gas-fired power plants. Gas and coal are both fossil fuels. However, from an environmental perspective, gas turbines can be much cleaner than coal-fired thermal plants.   They release significantly lower levels of carbon dioxide, NOx, and SOx while operating.  Gas is also a more efficient fossil fuel, requiring much less volume for the same amount of energy generated, as Sinh pointed out. However, carbon released while burning are not the only emissions that need consideration. According to Fukakusa, LNG is still a fossil fuel and should be discouraged “if we want to achieve carbon neutrality by-mid century.”  Gas extraction via fracking leads to the leakage of another potent greenhouse gas, methane, at rates higher than previously thought. “[The common rhetoric is] that LNG is better than coal for the climate, but in reality, it is not that simple,” Fukakusa said.  One thing is certain, however—environmental advocates and journalists cannot paint the same story about LNG as they did for coal. LNG’s emissions are mostly upstream during the production stage and can easily be “out of sight, out of mind.” Gas extraction may have led to environmental damage and social injustices.  In Cabo Delgado, Mozambique, vil

Vietnam’s Energy Transition: After Coal, What Next?

In one of Asia’s fastest-growing economies, a transition away from coal increasingly seems a question of if, not when. But how the new Power Master Plan balances between renewables and liquefied natural gas (LNG)is another growing concern for climate advocates. 

Tran Dinh Sinh, Deputy Director of Vietnam’s leading clean energy NGO GreenID, said that he is awaiting the release of the Power Master Plan VIII. This plan will spell out Vietnam’s energy development for the next ten years. “Hopefully, the Power Master Plan VIII will be a Green plan—with no new coal projects in the pipeline, infrastructure for renewable energy development, and a just transition.” 

The plan is currently being finalized by the Ministry of Industry and Trade and pending approval from the Prime Minister Office. Announcements from the authorities indicate an emphasis on liquified natural gas (LNG) and the development of renewables. 

From an economic perspective, coal seems to beseeing its waning days in Vietnam. With ever-mounting pressure from environmental advocates, major financial institutions in Asia including Mitsubishi, Japan Bank for International Cooperation (JBIC), and HSBC  have announced commitments to cease new investments in coal. This renders the capital needed for these projects extremely difficult to raise. 

In 2020, three East Asian powers, Japan, Korea, and China, have committed to achieving carbon neutrality  by mid-century. 

Public institutions from these three countries also happen to be the only foreign financiers keeping Vietnam’s coal alive, collectively responsible for 13 coal power projects with a total capacity of more than 14,500MW.

Hai Phong 2 Thermal Power Plant, one of several in Vietnam constructed with loans from the Export-Import Bank of China and JBIC.

And there might be more definitive legislation coming. Jieon Lee is the Climate and Energy Coordinator at The Korea Federation for Environmental Movements. “A proposal to ban overseas public financing on coal was proposed by the ruling party in July, but it has not been discussed in the National Assembly yet,” he explains. 

This proposal would prevent Korea’s public institutions and utility companies, including KEXIM, from financing new coal projects abroad. A more lenient version of this ban, pushed by the Ministry of Finance, would prohibit the financing of any coal plant that does not meet ultra-supercritical standards

Meanwhile, in Japan, a new policy was passed in 2020. Itstated that public financial institutions in the country would no longer be involved in funding new coal plants overseas. This was a belated but much-welcomed announcement for the country’s climate advocates. “Overall, it’s an important step towards decarbonization,” said Ayumi Fukakusa from Friends of the Earth Japan.

Due to these developments, a Vietnam-based large coal power projects’ host  has been left without investors, including seven investors are expected to be discontinued in the upcoming Power Master Plan:Hải Phòng III, Vũng Áng III, Long An I và II, Tân Phước I, Long Phú III and Long Phú II.

Or at least, they will not continue using coal. Of these seven plants, provincial authorities have indicated that four might still come into existence in the next decade under another name: LNG-fired plant.

LNG: Clean Energy or Just Another Fossil Fuel? 

Just as interest in coal financing is waning in its very last strongholds, another energy source is on the rise: LNG. From 2019 to 2020, at least 11 megabanks and energy corporations have formally proposed to finance LNG projects across Vietnam worth 60 billion dollars. The diversity of these institutions is noticeable, from the US to Thailand and Germany.

LNG is gas liquified for transportation and regasified to be burnt in gas-fired power plants. Gas and coal are both fossil fuels. However, from an environmental perspective, gas turbines can be much cleaner than coal-fired thermal plants.   They release significantly lower levels of carbon dioxide, NOx, and SOx while operating. 

Gas is also a more efficient fossil fuel, requiring much less volume for the same amount of energy generated, as Sinh pointed out.

However, carbon released while burning are not the only emissions that need consideration. According to Fukakusa, LNG is still a fossil fuel and should be discouraged “if we want to achieve carbon neutrality by-mid century.” 

Gas extraction via fracking leads to the leakage of another potent greenhouse gas, methane, at rates higher than previously thought. “[The common rhetoric is] that LNG is better than coal for the climate, but in reality, it is not that simple,” Fukakusa said. 

One thing is certain, however—environmental advocates and journalists cannot paint the same story about LNG as they did for coal. LNG’s emissions are mostly upstream during the production stage and can easily be “out of sight, out of mind.”

Gas extraction may have led to environmental damage and social injustices.  In Cabo Delgado, Mozambique, villagers have been uprooted and their land damaged to build onshore LNG infrastructure. 

In Vietnam,  gas-fired power plants will likely not lead to the type of air pollution, smog, and environmental degradation of surrounding areas that became the rallying talking points against coal. This is also the case for other fast-developing, power-hungry Southeast Asian countries,

Even within the climate community in Southeast Asia, opinions about LNG differ. In fact, Sinh believes that LNG might be “a necessary step in the next phase of Vietnam’s energy development.” 

However, he also emphasized that Vietnam has an immense, untapped source of wind and solar energy. These are the only energy sources that the country doesn’t need to import. If storage technology and transmission infrastructure allow, electricity generated from these two sources could exceed Vietnam’s power demands by many times. 

In the near future, Vietnam, Southeast Asia, as well as the rest of the world will transition away from coal. What policymakers and advocates need to decide is whether to shift to truly clean, self-sufficient energy infrastructures, or more of the same.  

The article was written after Climate Tracker’s workshop and mentorship on Climate & Energy reporting supported by FES Regional Project Climate and Energy in Asia.