A $15.5 billion energy transition deal struck almost a year ago between Vietnam and a group of rich countries was aimed at helping Vietnam transition away from coal with cheap financing. But as the investment plan for the Just Energy Transition Partnership (Jetp) is announced, it is clear that the reality does not match the original promise.
A major concern is the lack of a timetable for the early closure of coal-fired power plants in the investment plan. Instead, the government plans to operate the plants “flexibly” and rely on the controversial joint combustion of biomass and ammonia with coal.
In addition, rich countries have backed away from their promises to offer financial support on more attractive terms. The investment plan shows that almost 60% of the money will be provided as commercial loans, with only a small part of the available grants mainly intended for technical assistance.
Leo Roberts, coal transition expert at E3G, expresses concern that the investment plan is no longer consistent with the original promise to replace coal power with clean alternatives. Instead, it focuses on expensive or unproven technologies that undermine the pace and scope of the energy transition.
Vietnam’s strategy to promote the use of renewable energy and reduce dependence on coal includes developing hydropower projects, expanding the power grid, investing in battery storage, and offshore wind and solar energy.
However, the construction of dams and reservoirs for hydropower projects has caused social and environmental problems, including resettlement and water shortages.
The investment plan also calls for the continuation of the construction of new coal-fired power plants until 2030, with a gradual conversion of older plants to biomass and ammonia, provided the price is right. Environmentalists criticize that the co-firing of biomass extends the lifespan of coal-fired power plants and damages forest ecosystems, while the co-firing of ammonia is considered costly and only possible to a limited extent.
A major problem is the reluctance of rich countries to provide subsidies and to shut down coal-fired power plants prematurely. Instead, a significant portion of public financing is provided in the form of commercial loans by development banks. The grants represent less than 4% of the total money provided, the rest is financed through guarantees and equity.
Frequently asked questions
Q: What is the Vietnam Energy Transition Agreement?
A: Vietnam has signed a $15.5 billion energy transition deal with a group of rich countries to help transition away from coal.
Q: What concerns have been raised about the investment plan?
A: Concerns have been raised about the lack of a timeline for closing coal plants, the reliance on co-firing with biomass and ammonia, and the focus on expensive or unproven technologies.
Q: What strategies does Vietnam have to promote renewable energy and reduce dependence on coal?
A: Vietnam plans to develop hydropower projects, expand the power grid, invest in battery storage, and explore offshore wind and solar energy.
Q: Why are environmentalists criticizing the investment plan?
A: Environmentalists criticize the continued construction of new coal-fired power plants and the use of co-firing of biomass because it extends the lifespan of coal-fired power plants and damages forest ecosystems.
Q: How much public funding comes in the form of loans?
A: Almost 60% of the public financing offered is in the form of commercial loans provided by development banks.