Group of Seven (G7) members finalized the $15.5 billion pledge to help Vietnam reach net-zero emissions by 2050, among which offer more than 300 million, accounting for 2% of a total package which made up mostly of costly loans that Hanoi has been reluctant to accept.
Vietnam pushed for a large share of grants and cheap funding to smooth costly phase-out of coal-fired power plants and replace them with wind farms and other renewables sources. But donors offered mostly expensive loans at market rates amid chronic delays in the country's power projects, especially in the current global context of high interest rates.
The documents settled by donor countries in late October and seen by Reuters the overall public funding was slightly increased to $8 billion from the $7.75 billion, but over half is in commercial loans at market rates. The remaining $7.5 billion are expected to come from private investors in costly loans, but those investments hinge on regulatory reforms and the quality of specific projects, the documents said.
To classified by region, European Union and EU states are the top financial supporters with total pledges of $2.6 billion which includes $320 million in grants, almost entirely from the European Union and EU states, which together are the top financial supporters with total pledges of $2.6 billion. Another $2.7 billion are in concessional loans at low interest rates, of which about two-thirds are provided by the EU, Germany and France, and the other third by the Asian Development Bank - with a small portion from Canada. And the United States has pledged $1 billion, almost exclusively in loans at market rates.
Vietnam remains committed to cooperating and has prepared a draft list, seen by Reuters, of reform commitments and over 400 projects which could receive G7 money, including 272 on energy infrastructure such as wind and solar farms, power grid upgrades and battery storage systems.
Vietnam's Prime Minister Pham Minh Chinh urged G7 countries to continue practical implementation of the JETP in a bid to help Vietnam become a renewable energy hub in the region. (Photo: G7 Hiroshima Summit)
G7 funds are for an initial three-five year period and are meant to attract much larger private investments. But, under Vietnam's plans, energy generated from coal will increase until 2030, before falling in the following two decades. Vietnam government estimates the country needs roughly $135 billion until 2030 to finance its power generation plans.
Other than funding, the legal framework of renewable energy is also a problem for foreign investor in Vietnam. According to Viet Nam News, businesses save at least 30% of electricity costs each month when they install solar power panels in factories. However, Vietnam only allows solar power in homes and offices.
Nguyen Van Yen, head of the Office of the Vietnam Energy Association, said it mainly because electricity purchasing prices. The preferential purchasing price of solar power is about 9.35 cents/kWh. Many enterprises produce solar power to sell to EVN, while EVN's commercial price of solar power is only 7.2 cents/kWh. “This causes damage to the State”, Yen explained.