A green alliance emerges in Vietnam

Vietnam signed onto one of the developing world’s most aggressive climate mitigation commitments in 2021 at the United Nations Climate Change Conference in Glasgow (COP26) while simultaneously pledging to phase out coal power and establish a domestic carbon market. These are courageous policy ambitions for any nation, but especially for Vietnam.

To support these bold objectives, Energy Capital Vietnam (ECV) and SaigonTel (SGT) formed the Green Alliance with the joint mission of delivering low carbon idustrial parks with reliable, turnkey power via distributed LNG for discerning tenants with continuous power needs. ECV is a US-based industrial development and management company focused on energy and infrastructure within Vietnam. SGT is a leading Vietnamese industrial real estate and infrastructure developer whose existing industrial tenants include some of the most well-known global technology brands from around the world, all of whom have their own aggressive net-zero commitments.

This is also why the Green Alliance initiated steps to empower provincial policy development with carbon market expertise and streamline integration with the global voluntary markets. By assisting localities in adoption of international standards in carbon management, those localities become more attractive to investors seeking conscientious supply chain carbon accountability.

New policy framework emerges

In May 2023, Vietnam issued Power Development Plan VIII (PDP8), a new framework for the power sector which codified the centrality of domestic natural gas and LNG imports in providing a foundation for renewables expansion over time. Vietnam aims to import more than 22 million tpy by 2030, putting it on track to capture approximately 20% of new global LNG demand over that same period. This step alone will greatly reduce the carbon intensity of Vietnam’s national power grid, which is predominantly coal. Large scale, integrated LNG power, like the Mui Ke Ga (MKG) LNG project being developed by ECV in Binh Thuan province, represents one of the most pragmatic, cost-effective solutions to satisfy Vietnam’s precarious need for energy security and climate solutions.

PDP8 equipped the Vietnamese Government with new legal tools to better manage its licensing process and improve accountability among licensed projects, while incorporating private sector market feedback. Now, all licensed projects must demonstrate steady progress; those more than 24 months behind may become subject to a government review process to validate that the project remains feasible. Far too many licensed projects in Vietnam have failed to advance, and these new accountability tools are intended to shore up grid availability to reliable power sources over time. The MKG project has been identified within internal government reports by the Institute of Energy as one of the more technically sound and commercially viable LNG projects within the southern region.

In April 2024, the Government Office issued an implementation plan for PDP8 which includes several legislative mandates such as a direct power purchase agreements (DPPA) regime for private offtake, rooftop solar for self-consumption and authorises carbon market development. All policies designed to help develop an industrial ecosystem of green, low carbon industrial parks. In June 2024, the Ministry of Industry and Trade (MOIT) is expected to issue a circular for implementing PDP8 which will include a revised list of projects approved for operation before 2030, opening access for the MKG project to proceed with the licensing process.

Linking energy development with climate responsibility

For Vietnam, LNG represents a major improvement in carbon emissions from its coal-dominated national grid. Moreover, Vietnam is on the frontlines of an increasingly animated global dialogue regarding a ‘just transition’ in energy. But any premise of ‘justice’ in this transition requires that Vietnam not step backwards in reliable power delivery to its population or industry. While there may be aspirational hopes around advanced storage, next-generation nuclear, or other technology further out on the technology development curve, the opportunity immediate available for execution is the transition towards natural gas, which can also support greater renewables adoption.

On a gross reduction basis, if a terawatt-hour of coal generation can be replaced with half renewable electricity and half LNG power, it represents roughly a 75% reduction on gross emissions (prior to considering Scope 3 emissions of those verticals). This is why the Green Alliance is pursuing an ‘all of the above’ strategy to de-carbonise industrial parks that includes rooftop solar, battery storage, energy efficiency improvements, and low carbon technologies to reduce emissions through avoidance and reduction. Dispatchability is what makes natural gas a compelling tool within a holistic decarbonisation strategy that respects the underlying needs of energy-dense emerging economies like Vietnam. Unlike other sources, natural gas can quickly be ratcheted up and down, maximising moment to moment availability from renewables.

ECV and SGT believe a novel and socially impactful pathway exists to reduce the remaining ‘wedge’ of emissions from natural gas towards a near ‘net-zero’ basis. This can be achieved by using the economic tentpole of new assets, like LNG power, as a driving force for simultaneous co-investment into meaningful emissions reduction opportunities within Vietnam. By focusing on the next generation of carbon offsets project types – forestry, agriculture, littoral blue carbon, transport electrification, and urban climate resilience – and tying new development with a localised portfolio of carbon mitigation assets, the Green Alliance believes that LNG power assets and low carbon industrial parks could become core components of a multi-decade net zero trajectory.

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