In a recent interview with the Vietnam Government Portal (VGP), Ms. Ramla Khalidi, UNDP Resident Representative in Vietnam, commended the country for reaching a Just Energy Transition Partnership (JETP) with the International Partners Group (IPG), which consists of the G7 countries plus the EU, Denmark, and Norway, according to a report from the VGP.

Ms. Khalidi said it will include transitioning away from fossil fuels and coal power, adopting cleaner energy sources, increasing energy efficiency, and ensuring that the transition is equitable, inclusive, and just.

The development of cleaner energy sources such as wind, solar, and green hydrogen will bring about substantial economic opportunities for Vietnam.

Strategic planning and investment can create a new renewable energy sector that will generate revenue and new green jobs throughout supply chains, including manufacturing, logistics, installation, maintenance, and research and development (R&D).

Importantly, this will help enhance energy security, reducing Vietnam’s reliance on unpredictable fossil fuel fluctuations and market uncertainties, thereby fostering economic stability and growth.

Notable social benefits of a shift away from coal power are reduced greenhouse gas emissions and lower levels of air pollution.

This, in turn, will lead to better public health outcomes by decreasing the prevalence of respiratory diseases and related health issues. The tangible results are lower healthcare costs and an overall enhancement in the quality of life for Vietnam’s population.

Furthermore, the fruitful achievement of Vietnam’s JETP has the potential to contribute positively and significantly to regional and global efforts to combat climate change, she said.

Vietnam is in an advantageous position to realize its JETP, with one of its notable strengths being its wealth of renewable energy resources.

For instance, its vast coastline of more than 3,260 km holds major potential of over 600 GW in offshore wind power development, while its high levels of solar radiation have already made it a regional leader in solar power development.

By tapping into these resources, she said, Vietnam can reduce its dependence on fossil fuels, diversify its energy mix, and enhance its energy security.

Additionally, Vietnam is situated in a prime geographic location and is a key member of ASEAN. As such, the country is well-connected and well-positioned to export renewable energy to other countries, such as Singapore, strengthening regional cooperation and bringing economic benefits.

The initial commitment of the IPG and the Glasgow Financial Alliance for Net Zero (GFANZ) to mobilize $15.5 billion for the JETP in Vietnam is a very good start, and can help catalyze more capital from other development partners and investors, especially from the private sector.

Although Vietnam has several distinct advantages, it also faces specific challenges in the implementation of its JETP, according to Ms. Khalidi.

First, transitioning to clean energy requires substantial upfront investments. For example, offshore wind will cost $3.5-4.0 billion per GW, while modernizing and strengthening the national electricity grid is crucial to accommodate variable renewable energy sources, and requires investment of $49.5 billion in the 2021-2050 period, equivalent to an investment of $1,6 billion a year.

Such costs cannot be all financed by the State budget, so there is a need to mobilize private investment.

Second, decommissioning of some coal power plants will entail large financial compensation.

As all contracts with coal power plants are long-term, Vietnam will have no choice but to pay investors if its breaks the contract and closes coal power plants earlier than the previously agreed closure date. The compensation will vary, but it ranges from hundreds of million to a few billion dollars per coal power plant.

According to Vietnam’s Power Development Plan VIII (PDP8), the investment needed for power sector development alone to 2030 is estimated at $134.5 billion. The full investment for just energy transition (JET) is much larger.

To address the financing gap, a comprehensive approach to involving domestic and international private sector finance is needed, as they have demonstrated and played a crucial role in developing renewable energy during the period from 2018 to 2021.

Therefore, the development of the domestic financial sector - including public sector institutions and instruments to increase the supply of long-term financing - will be important.

Vietnam should also focus on capacity building, technical expertise, and R&D for the new renewable energy economic sector. This includes training the new generation and retraining and upskilling the existing workforce, Ms. Khalidi recommended.

Regarding the UNDP’s assistance to ensure the implementation of the JETP in Vietnam, she said that throughout this year the UNDP has had the privilege of providing support to the JETP Secretariat, including the preparation of the JETP Scheme and the Resource Mobilization Plan.

Given the importance of the just aspects of the energy transition, UNDP is elaborating on the chapter of the Resource Mobilization Plan centered around the just transition and taking a leading role in developing a programmatic concept note on the just aspects of the energy transition.

The UNDP will work closely with key government ministries, IPG co-leads - the EU and the UK - and IPG members and other relevant stakeholders to develop a Just Transition Framework as a guideline for JETP implementation, to make sure that the just elements and social considerations of the energy transition are well-integrated throughout the development and implementation of the Resource Mobilization Plan.

The Just Transition Framework is designed to incorporate and supplement existing safeguards for energy projects, laying the foundation for a just transition in Vietnam. It will also guide stakeholders to identify the areas that face potential social, economic, and environmental impacts, to ensure the sustainability and resilience of JETP investments and ensure that no one is left behind.

Further, it will be used as a tool for the monitoring and evaluation of the just outcomes during the implementation of the JETP.

“The UNDP believes that a just transition is essential for Vietnam to realize the Sustainable Development Goals and build a better future for all of its people,” Ms. Khalidi said.