Setting priority for clean energy investment

Vietnam would increase its attractiveness in foreign investment by developing green energy. That is the confirmation of many delegations attending the meeting on the free trade agreement between Europe and Vietnam organized by the European Business Association in Vietnam.

$ 8 billion per year to meet energy demand

Christoph Schill, Vice President of the Green Growth Commission, European Business Association in Vietnam, said that electricity supply in Vietnam is doubled after every six years. Therefore, in order to meet this demand for energy, Vietnam needs nearly $8 billion a year from now to 2020 to invest in supplies. It is worth mentioning that until now, Vietnam is still giving the priority for developing low-cost energy sources such as hydropower and coal-fired electricity without any effective investment policies for the development of clean energy supply. Meanwhile, Vietnam has a great potential for developing clean energy to meet the national energy needs growing.

Investment in clean energy development not only helps Vietnam take advantage of natural resources but also ensure energy security in the future. Even in the case of rising energy prices, it does not affect the investment attractiveness of enterprises. This is the latest research conducted by the Green Growth Commission (Euro Cham GGSC) and the International Institute for Sustainable Development, following a survey of 150 foreign investment enterprises in Vietnam.

Businesses which are surveyed confirmed that the ability to attract foreign direct investment of Vietnam is not based on cheap energy. Energy price is the least important factor of the 10 factors influencing their investment decisions in Vietnam. The more important factors for investors are cost, availability of skilled labor, domestic market conditions and the development policy of the Government. When asked to evaluate the importance of energy prices in investment decisions (with an incremental scale of 1 to 10), 72% of companies rated at 5 or below. Foreign investors are not worried about rising energy prices because they spend a relatively negligible cost on electricity. 90% of foreign companies in most of the industries spend less than 10% of total operating costs for electricity. 60% of companies have electricity costs lower than 5%. Most companies surveyed said that they are willing to withstand a 15% or more annual increase in electricity prices before rethinking their investment intentions in the future, and over 65% of companies can accept to raise the electricity price by 10% per year.

 


It is necessary to limit the development of energy from hydropower and coal in the future.


Changing the investment direction to clean energy

The research results provide a policy space for the Government of Vietnam to be more committed to planning for the development of renewable energy sources and setting reasonable energy prices without worrying that it can cause adverse reactions, or disadvantages for attracting national investment. However, businesses say that with the adoption of converting energy sources into clean energy plus increasing the cost of electricity consumption, Vietnam needs to improve the quality of power supply. This stems from the fact that 65% of companies said that they feel dissatisfied with their energy supply infrastructure. Two-thirds of the companies disclose that they use their own back-up systems. In addition, 73% of companies said that being not enough reliability in their ability to supply energy is a factor that affects Vietnam's competitiveness in attracting investment rather than the price of energy by the time.

In addition, Mr. Xavier Denoly, President of Schneider Electric Vietnam, said that Vietnam needs long-term plans for the use of green electricity and encourage private sector investment in this sector. More importantly, a legal environment for the future development of renewable energy needs to be built. The representative of the European Business Association emphasized that the European community is not only one of the major trading partners of Vietnam with a total trade value of EUR 27.6 billion but also one of the largest investors in Vietnam with 1,810 foreign direct investment projects. These figures are expected to increase faster when the Europe-Vietnam Free Trade Agreement (FTA) is signed.

The Europe-Vietnam Free Trade Agreement (FTA) is in the final stages of negotiations. The signing of the agreement is expected in 2016, in addition to strengthening cooperation and market access opportunities for Vietnamese goods and partners in Europe, it will also create more opportunities for the commercial and investment activities of European businesses in Vietnam, especially in the field of clean energy and green growth. The remaining problem is that the Government of Vietnam should soon complete the legal framework that encourages private investment and a new legal environment for an explicit investment environment.

By Hung


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Energy Conservation and Cleaner Production Center of Hai Phong City
Add: No. 104 Nguyen Duc Canh - Hai Phong
Tel: (84) 313 7340488 * Fax: (84) 313 630 626
Email: ecc-hpc@haiphong.gov.vn
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