Last week, the Government of Vietnam issued a Decision significantly revising the Power Development Plan 8 (PDP8). This comes less than two years after the first PDP8 was issued and makes some substantial changes to what is intended to be the overarching guide to developing Vietnam’s energy sector.
However, whereas this could have been an opportunity to redesign the PDP8 to align more closely with on-the-ground realities, this opportunity looks to have been missed.
Instead, the revised plan seems to muddy the power planning waters further by not only failing to address key challenges that have surfaced since the first PDP8, but also by expanding targets that in the first iteration looked to already be particularly onerous.
For one, the original PDP8 included 6 gigawatts (GW) of offshore wind power by 2030. When this was announced back in 2023 it already put offshore wind on a tight timeframe with most projects taking 7 to 12 years to complete. Two years later, however, with no offshore wind power projects under construction, it looks near impossible.
In the new PDP8, however, said lack of approvals is not addressed at all (though there are a broad range of reasonable reasons). Rather the timeline has simply been pushed out to 2035 and the target converted to a range of between 6 GW to 17 GW.
This is important in that when the first PDP8 was announced in 2023 it was heralded as a “major breakthrough”. This was set to drive foreign investment in Vietnam’s energy sector, particularly in renewables, powering Vietnam’s green energy transition.
However, this wasn’t how it panned out.
Just months after the first PDP8 was announced Danish energy developer Orsted announced it would be halting its renewables projects in Vietnam. A year later Norway’s Equinor announced it was pulling out of the market, amid reports that Italy’s Enel was planning to exit the country too.
That is to say, for all the fanfare around the first iteration of the PDP8, at least in the case of renewables, it did not seem to have instilled a lot of confidence in foreign investors and with the revised PDP8 following a similar structure it seems unlikely that it will either.
And this is important because the revised PDP8 is carrying a price tag of US$835 billion between 2026 and 2050, of which US$136.3 billion is needed between 2026 and 2030. This is up significantly from the first PDP8 which estimated a cost of US$657.8 billion over 30 years.
For some perspective, that initial US$136.3 billion works out to about US$262 per head of population, per year, or about 7 percent of the average annual wage. That would mean a considerable jump in taxes or electricity prices and that’s just covering costs, whereas most investors expect to make a profit, too.
More to the point, the revised plan only makes very broad mention of where those funds are expected to come from. This is much the same as the first PDP8, however, this time around this absence seems markedly more significant.
For one, the Just Energy Partnership agreement, which was fresh and new in 2023, now looks to have stalled on account of most of the funds on offer being market rate loans as opposed to the grants Vietnam had been hoping for.
Moreover, early investors in Vietnam’s renewables sector were profiting from very attractive feed in tariffs when the first PDP8 came around. These tariffs, however, are at risk as the government considers retroactively changing the criteria that needed to be met to receive them. A change that has spooked foreign investors.
That is to say the price tag has gone up at the same time as investor confidence seems shaken. In this context, the revised PDP8 could have been an opportunity to provide some reassurance that the energy market was in fact a safe investment.
All of that said, it’s worth noting that the estimates detailed in the new PDP8 are predicated on some fairly shaky assumptions.
For one it assumes that between 2026 to 2030 Vietnam’s economy will grow at 10 percent a year after which it will grow by 7.5 percent a year to 2050.
The World Bank and the Asian Development Bank, however, have both said they are expecting GDP growth next year of between 6 and 7 percent.
That said, on the off chance it were to meet its GDP growth assumptions, Vietnam’s economy would be worth approximately US$2.67 trillion by 2050.
If its energy intensity from 2022 of 652 kWhs per US$1,000 of GDP were to remain unchanged, its US$2.6 trillion 2050 economy would need about 1,742 billion kWh of electricity to power it.
This is significantly higher than the revised PDP8 estimate of a maximum of 1,375.1 kWh.
Of course, there is an argument to be made that energy efficiency would increase over time as the economy transitioned to producing higher-quality goods and services, and this may be true.
However, despite a range of policies designed to drive energy conservation–the 2010 Law on Economical and Efficient Use of Energy or the National Program on Economic and Efficient Use of Energy, for example–already in existence, none are mentioned in either version of the PDP8.
In fact, there is very little, if anything, said about how demand-side power planning might be addressed.
It’s with all of this in mind, that the revised PDP8 looks to have been a missed opportunity to communicate to investors that the challenges are known, that there is a realistic understanding of what is possible including over what time frames, and that Vietnam’s energy sector is most definitely open for investment it just has a few kinks that need to be worked out.
Instead, the revised PDP8 seems to be more of the same big targets on tight time frames with a lot of blue sky thinking–nuclear power to come online within a decade, for example.
That said, one reading of the revised PDP8 may be that it has in large part been constructed around the needs of domestic stakeholders and is perhaps not intended for external consumption. That, however, doesn’t negate the fact that this was an opportunity to clear up ambiguity and reassure investors that the energy sector is indeed investable, an opportunity that unfortunately seems to have been missed.