Vietnam’s journey to net-zero emissions by 2050 is a challenging yet vital goal. The development of green and renewable energy is not just an environmental imperative but also a strategic economic move, especially considering the clean energy requirements of European and international Foreign Direct Investment (FDI) enterprises operating in the country.
Currently, the production needs of these FDI enterprises far exceed the supply of clean energy available in Vietnam. This gap highlights the urgency for Vietnam to expedite the development of Power Plan 8 and to establish robust policies that promote the growth of renewable energy sectors.
The recent participation of Mr. Nguyen Xuan Thang, General Director of Schaeffler Vietnam, and Mr. Anthony Grandpierre, General Director of Messer Vietnam, in the Hanoi Television episode of “The Capital and the World,” underscores the critical nature of this issue. The episode, themed “The Demand for Green Energy in Production,” delves into the challenges that investors face due to the scarcity of green energy in Vietnam’s production landscape.
Watch the full interview (in Vietnamese) here>>> and below is the English script.
Mr. Nguyen Xuan Thang – General Director of Schaeffler Vietnam stated: “The legal frameworks in Europe and the United States are now very stringent. In particular, we have also heard about the framework called CBAM, which stands for Carbon Border Adjustment Mechanism in Europe. This legal framework regulates the amount of carbon emitted by products imported into Europe. It began in 2023 and will officially come into effect in 2026, imposing taxes on products, especially in the steel, cement, and other heavy metal industries, that have high carbon emissions to level the playing field with European manufacturers.”
Greening production includes the energy consumed in the production process, such as electricity, water, and the raw materials supplied for production. Among these, energy for production is one of the key concerns for Foreign Direct Investment (FDI) enterprises when choosing to invest in a country.
He added: “I believe that Vietnam’s primary attraction lies in its potential for renewable energy production. Perhaps nowhere in Southeast Asia is as promising as Vietnam. With wind energy, solar energy, and 200 kilometers of coastline for offshore wind power, Vietnam currently has the greatest potential.”
Hanoi and other Vietnamese localities are becoming prime spots for foreign investment, focusing on clean energy like solar power to attract quality investors. With over 33 MWp generated from 2,102 rooftop solar systems, Hanoi supports its economic and industrial growth. Despite Vietnam’s substantial clean energy potential, FDI firms face challenges in accessing it.
Mr. Thang said: “Access issues are a barrier for businesses, especially for our FDI enterprises. For example, at Schaeffler Vietnam, we have installed a rooftop solar energy system with a capacity of about 2 MW at our factory, which only supplies about 20% of our daily energy needs. We still have to purchase approximately 80%. According to our group’s goal, by the end of this year or early next year, we must ensure that 100% of our electricity usage comes from renewable energy. This is a significant challenge for us in finding these resources.”
Question: Sir, the recent report highlighted the story of green energy demand among FDI enterprises in Vietnam. As one of those FDI companies actively investing and operating here, how do you perceive the current demand for green energy among enterprises in Vietnam, especially those of FDI origin?
Answer: Regarding the demand for clean and green energy, we at Messer—a German gas company and a foreign investor in Europe—have ambitious goals for carbon reduction. This means we must decrease our CO2 emissions. At Messer, we produce gases, and electricity constitutes a significant portion of our costs. Therefore, we are seeking green energy sources to reduce CO2 emissions in our products.
This is crucial for Messer as a European company. Our targets are important not only for us but also for our clients here in Vietnam—major foreign companies and local firms—who also seek to reduce emissions and utilize green energy, such as hydrogen, to lessen their carbon footprint.
Question: It’s clear that there is substantial demand for green energy in Vietnam. How does integrating green energy into production meet EU export standards? Could you elaborate on the role of green energy in Vietnam’s exports and FDI enterprises exporting to other countries?
Answer: Using more green energy in production means using less coal and gas, thereby reducing CO2 emissions. Consequently, the carbon footprint of final products will be lower. Many countries, including Vietnam, have signed the Paris Agreement, aiming for carbon neutrality by 2050. This necessitates gradual reductions in CO2 emissions. Therefore, we must increase the proportion of clean energy in Vietnam’s power grid.
Both Vietnamese consumers and international buyers consider the CO2 emissions of products. To avoid carbon taxes in the EU market, Vietnamese products must be greener and have lower carbon emissions. Developing green energy in Vietnam benefits everyone: European companies, collective entities, and export product markets.
Question: Currently, how capable is Vietnam in meeting its green energy demands? How would a shortage of green energy impact the production of FDI enterprises in Vietnam?
Answer: Let me start with an example from Messer, one of the largest electricity consumers. We’ve directly contracted with a clean energy company. Why? Because Vietnam cannot do everything alone or invest heavily in all sectors. Thus, allowing large manufacturing companies to directly engage with customer energy companies ensures a long-term vision and certainty in business dealings.
This encourages foreign investment and prioritizes reducing carbon emissions in current and future projects. We need to prove to our European shareholders that these projects are beneficial and do not increase global carbon emissions. If no action is taken, we may consider investing elsewhere where green energy is available. Therefore, without advancing green energy, Vietnam’s development could suffer.
Question: It’s evident that government policies are crucial. How do you evaluate the current policies of the Vietnamese government in attracting investment and developing green energy?
Answer: I believe things are moving in a positive direction. There are many good measures, studies, and dialogues. However, now is the time to accelerate. We always advocate for and hope for faster progress. The Vietnamese government is taking this issue seriously, but now is the time to initiate direct electricity purchase agreements and allow companies to implement these procedures. This will have an immediate impact on Vietnam’s development.
Question: In your opinion, what challenges is Vietnam currently facing in developing green energy? What strategic measures does Vietnam need to implement to address these challenges and attract more foreign investment in green energy in the future?
Answer: Let’s begin with the country’s largest electricity consumers, allowing them to directly engage with private green energy producers. This approach would instill more confidence and stimulate greater investment. EVN could invest, and foreign companies in the green energy sector could also contribute. Together, we can support investment and development, but the main challenge remains electricity distribution.
Green energy sources, such as offshore wind or solar energy in the sunny regions of the south, contrast with the major electricity consumers located in industrial zones in the north. Transmitting electricity poses a significant challenge. I hope Vietnam can strengthen its electricity distribution network to reach customers in need. Things are progressing well, and I am optimistic that Vietnam will continue on this path, which will undoubtedly attract more investment.
Conclusion:
One of the primary needs of FDI enterprises in Vietnam is stability in energy supply and access to renewable energy, or green energy. Developing green energy not only facilitates the production processes of FDI enterprises but also enhances Vietnam’s competitive advantage in attracting foreign direct investment (FDI).
According to experts, Vietnam has a significant opportunity to become a hub for green energy in Southeast Asia and beyond. This could involve exporting green energy and related technologies based on domestically manufactured products. However, there is an urgent need to swiftly transition from coal-based electricity production and develop the renewable energy sector. Despite green economy becoming a growth engine globally, including in Vietnam, there are still many challenges facing the country.
Therefore, to promptly achieve commitments to net-zero emissions and to make Vietnam an ideal investment environment for green FDI enterprises, it is necessary to establish legal frameworks and ensure smooth progress for power development projects.
Priority should also be given to policy solutions that scale up large-scale renewable energy projects, especially promising offshore wind power projects in Vietnam, and to establish specific processes to promote the use of rooftop solar panels for self-consumption using net metering. Additionally, there is a need to relax participation conditions in Direct Power Purchase Agreements for renewable energy and reconsider current pricing mechanisms for biomass electricity production and electricity from waste.