Viet Nam: Smart and Energy Efficient City Project, Phase 1

Energy / Energy efficiency and conservation

Viet Nam is increasingly dependent on energy imports and faces uncertainties in future power supply. High reliance on imported fossil fuels could lead to increasing energy costs and carbon emissions, putting pressure on climate change. On the other hand, Viet Nam has a rapidly growing energy demand. Its electricity elasticity is 1.67 in 2020, reflecting a high consumption of electricity per output of gross domestic product. The draft Power Development Plan (PDP) VIII for the period of 2021-2030 with overlook to 2045 called for this ratio to be reduced to 1.24 by 2030 and identified energy efficiency as one of important planning considerations. The PDP VIII is expected to be approved in 2021.

The government also approved Viet Nam National Energy Efficiency Program 3 (VNEEP 3) for the period of 2019-2030 in March 2019, which requires stronger measures to achieve energy efficiency targets. However, the energy efficiency market is not yet fully developed due to relatively low electricity tariffs, no mandatory targets, limited capacity of energy service companies (ESCOs) and related industries, lack of awareness on energy efficiency benefits by energy users, and underdeveloped financing facilities.

In general, cities consume about 80% of global primary energy and emit roughly 50% of the world's total greenhouse gases (GHGs). Due to rapid urbanization, these numbers are likely to rise, requiring a fundamental rethinking on how to supply and use the energy most efficiently to achieve a sustainable and low-carbon development path. Advanced energy efficient solutions have become more affordable, such as light-emitting diode (LED) lamps with smart controls; energy management systems; optimized heating, ventilation, and air-conditioning systems; rooftop solar PV; and battery energy storage. Local governments can apply these solutions to improve energy efficiency in their office buildings, public schools and hospitals, and street lighting to reduce energy consumption, save on electricity costs, increase operational efficiency, and reduce carbon emissions. This will further improve the quality of streetlights and public buildings, thereby contributing to the safety and ambience of cities and provinces, and convenience and comfort of using public services.

Some cities in Viet Nam have already started replacing older street lighting systems with LED technology, but only on a pilot or a small-scale basis: LED represent less than 5% of total public lighting in Viet Nam. Some technical studies have also revealed that Viet Nam's buildings have high energy saving potential of around 10 40% using its most up-to-date energy efficient building code standards; and up to 60% using international best practices. Local governments can demonstrate the impacts of energy efficiency investments, create business opportunities, and provide examples and lessons that can be carried over to the private sector. Local governments can also leverage energy efficiency planning to achieve not just energy efficiency, but also other economic, social, and environmental goals; and climate resilience and mitigation objectives.

While local governments are keen to use a PPP/ESCO approach for smart and energy efficient city development, this requires significant enhancement of relevant regulations and policies. In this regard, ADB is proposing a holistic approach in two phases: Phase I with public financing modality and Phase II with PPP/ESCO approach. During Phase I, ADB will support local government's energy efficiency investment with a public financing modality while at the same time helping to improve the regulations for PPP/ESCO. During Phase II, ADB will use a PPP/ESCO approach with private sector participation under enhanced legal and regulatory environment.

Energy efficiency of streetlighting and public buildings increased

Policy and regulatory environment improved

Capacity strengthened and awareness increased of various stakeholders