The Role of Energy in Economic Development: Insights from Experts
At a recent forum, experts delved into a crucial aspect of modern economics: the role of energy in driving economic development. The discussions highlighted the mechanisms necessary to propel energy transition processes, essential for fostering sustainable growth.
Energy: The Economic Lifeline
Ta Dinh Thi, Vice Chairman of the National Assembly’s Committee on Science, Technology, and Environment, aptly described energy as the “lifeblood” of an economy. He emphasized that energy underpins business production, national security, and social stability. Thi stressed the need for the energy sector to outpace GDP growth to ensure that production, consumption, and innovation can flourish. Specifically, for GDP growth at 8%, energy growth must increase by at least 10-11%.
The Inevitable Energy Transition
In light of climate change and dwindling global resources, transitioning to sustainable energy sources is not just an opportunity but a necessity. Thi pointed out that state-owned and private enterprises must innovate to remain competitive in this evolving landscape. Vietnam has committed to achieving net-zero emissions by 2050, reshaping its energy system towards more sustainable and intelligent practices. Over the past decade, the country has transformed its renewable energy capacity, now constituting nearly half of its total installed power capacity, positioning itself as a leader within the ASEAN region.
Ambitious Power Development Plans
Vietnam’s recently approved Power Development Plan VIII outlines ambitious targets for energy development by 2030. Notably, onshore and nearshore wind power could reach between 26,000-38,600 MW, with offshore wind capacity projected at 6,000-17,000 MW. Solar power targets range from 46,500-76,000 MW, alongside hydropower and natural gas contributions. To achieve a total installed capacity of 183,000 MW, the country will need significant investment, estimated at around $136 billion between 2026 and 2030.
Navigating Barriers to Energy Transition
Despite these goals, the energy transition faces numerous obstacles, including inconsistent policies, convoluted administrative processes, and various financial and technological risks. The forum provided a platform for discussions on viable solutions, focusing on capital mobilization, enhancing legal frameworks, advancing technology, and promoting digital transformation.
Thi underscored that Vietnam is on the brink of a historic energy transition. Realizing this potential requires unyielding political will and collective efforts from various sectors, including politics, business, and the general populace. Strategic, long-term thinking, a market-centered approach, and robust institutions will be paramount for sustainable energy development.
Positive Trends and Major Challenges
Economist Tran Dinh Thien noted Vietnam’s remarkable progress in renewable energy from 2015 to 2023, bolstered by stable pricing policies that facilitated rapid growth in wind and solar sectors. However, he also pointed out the challenges that arose from this boom—many projects faced operational hurdles post-completion due to outdated policies.
Thien highlighted the urgency of addressing the growing energy demand projected through 2050, particularly as Vietnam aspires to attain high-income status by 2045. He cautioned that with an anticipated growth rate of 8-10% per year from 2026-2030, the energy sector must adapt accordingly.
Economic Growth and Energy Demand
With aspirations for rapid industrial growth—especially in high-tech sectors such as semiconductors and green technology—Thien raised concerns regarding the corresponding surge in electricity demand. Comparing Vietnam to Taiwan, where semiconductor development significantly increased energy consumption, he emphasized the need for recalibrating the national energy structure to meet future demands effectively.
Policy Implications for Energy Development
Nguyen Quoc Thap, chairman of the Vietnam Oil and Gas Association, characterized the growth of new and renewable energy as a “golden window” for Vietnam. However, he warned that while the government has laid a solid political foundation, significant challenges remain—especially in terms of infrastructure and investment policies.
Thap pointed out that the high upfront costs associated with new energy projects and fluctuating power purchase agreements pose barriers to financing. Further, he argued that investment in energy infrastructure should be prioritized, comparable to investments in transport infrastructure, to ensure sustainable development.
A Balanced Energy Strategy
Ha Dang Son, director of the Centre for Energy and Green Growth Research, echoed the importance of prioritizing electricity infrastructure over traditional transport. He proposed a diversified energy strategy, underscoring that no single energy source is without its drawbacks. A balanced energy mix is essential to ensure long-term stability and a seamless energy transition.
To address concerns related to energy generation and consumption, Son advocated for synchronized policies across the entire energy chain—generation, storage, transmission, and consumption—warning that neglect in one area could lead to inefficiencies and waste.
The discussions at the forum illuminated the multi-faceted challenges and opportunities that lie ahead for Vietnam’s energy transition. The convergence of political will, innovative approaches, and a commitment to sustainability will define the trajectory of Vietnam’s energy landscape in the coming decades.