Regional front-runner
Certain steps are required for Vietnam to foster a hydrogen energy market and be aligned with the global clean energy shift.
As of early 2023, more than 40 countries and territories had issued national hydrogen strategies along with significant financial support policies to shape and develop the hydrogen industry. In Vietnam, the development of hydrogen energy has been directed by the Politburo through Resolution No. 55-NQ/TW on the orientation of Vietnam’s National Energy Development Strategy by 2030 with a vision to 2045. This includes specific initiatives to conduct technological research, implement experimental production projects, and encourage the use of hydrogen energy in line with global trends.
Green hydrogen has emerged as a prominent solution in the pursuit of a “green future”, Minister of Planning and Investment Nguyen Chi Dung told the National Summit on Green Hydrogen in Vietnam held in Hanoi recently as part of Vietnam International Innovation Expo 2023. “It holds promise for developing countries, including Vietnam, enhancing the value of renewable energy across various industries and in daily life,” he said in his remarks. “The development of green hydrogen is considered essential in Vietnam’s energy transition.”
SHAPING THE FUTURE
According to Mr. Chey Tae-won, Chairman of the SK Group, hydrogen stands out as a powerful alternative in the world of clean energy. It has the potential to directly reduce carbon emissions in power generation and transportation through the transition to clean fuel. The journey from production to utilization involves barriers and requires cooperation across different industries, but the payoff is significant economic and social benefits.
Vietnam is one of the fastest-growing countries in the world but remains highly dependent on fossil fuels, Mr. Chey noted. But it can also leverage decarbonization using its potential in different regions. “In the south, where renewable energies are plentiful, we can expand renewable energy generation and green hydrogen production,” he said. “But in the north, as the demand for electricity grows within the industry, we see the opportunity for expanding the range of power generation and producing blue hydrogen using available gas resources. This approach allows us to explore various hydrogen production methods, tailoring them to each residence, resource, and need.”
Meanwhile, Ms. Ji Young-lee, Head of the Global Hydrogen Business Team at SK E&S, said hydrogen is the most essential decarbonization solution for Vietnam’s netzero emissions goal, under which it needs to reduce over 400 million tonnes of greenhouse gases by 2050. Acting as fuel feedstock and energy storage, hydrogen will be used to decarbonize older emitting sectors, including industries, power generation, and transportation, with a potential of over 250 million tonnes of greenhouse gas reduction to begin with. To achieve this goal, hydrogen demand will grow at a 25 per cent compound annual growth rate (CAGR), reaching up to 440 million tonnes by 2050. Hydrogen’s impact on Vietnam is one of the highest among different solutions, with a projected $50 billion added to GDP, 45,000 new jobs, a large new export industry, and support for other industries transitioning to greener practices.
Understanding the importance of developing the green hydrogen industry in Vietnam, the Ministry of Industry and Trade (MoIT) is currently drafting a development strategy for hydrogen energy to 2023 with a vision to 2050. According to Mr. Dang Hai Anh, Head of the Petroleum Division at the MoIT’s Petroleum and Coal Department, the specific goal of the plan is to achieve a hydrogen production volume from renewable energy processes for green hydrogen production and other carbon capture processes of 100-500,000 tons by 2030 and a targeted direction of 10-20 million tons by 2050. Vietnam also aims for hydrogen and synthetic fuels with hydrogen content to account for approximately 10 per cent of energy supply by 2050.
To achieve these goals, Mr. Anh proposed pilot projects to establish centers, production facilities, and the distribution of small and medium-scale green hydrogen energy that aligns with safety considerations. Simultaneously, the adoption of new technologies and the gradual mastery of hydrogen energy production technologies, along with the step-by-step incorporation of carbon capture and utilization technologies into the hydrogen production process from various energy sources, are crucial. Regarding workforce development, a comprehensive plan for serving the green hydrogen energy sector needs to be established, along with enhanced cooperation in training with domestic and international institutions.
TRUST IN VIETNAM
So, what will the hydrogen market look like in Vietnam? According to Ms. Ji, different approaches will be needed for each region of the country. Central and southern Vietnam are suited for green hydrogen based on the quality of solar and wind power resources, while the north can produce blue hydrogen by using the infrastructure of liquefied natural gas (LNG) hubs. Hydrogen will be in all parts of Vietnam, decarbonizing key industries, powering plants, and supporting free mobility in a balanced manner. The hydrogen market doesn’t exist today, and it will take time to come together.
Over the last few years, SK has developed a quick-win hydrogen project for Vietnam in partnership with ministries and related government offices, Ms. Ji noted. The project will produce 100,000 tonnes of clean hydrogen by 2030, with 30 per cent being green hydrogen based on renewable energy and a polymer electrolyte membrane (PEM) electrolyzer, and 70 per cent being blue hydrogen using carbon-neutral LNG and carbon capture and storage (CCS). Clean hydrogen will be used for green fertilizer production, powering plants, fueling hydrogen fuel cell buses, and vehicles. This project has significant benefits, including 380,000 tonnes per annum carbon dioxide abatement, a $1 billion a year addition to GDP, and 38,000 jobs created by 2030. The timeline can be pushed back a little depending on LNG preparation.
For his part, Mr. Francois Michel, CEO of John Cockerill, expressed his strong belief in the Vietnamese market for the group’s strategy of developing the hydrogen industry. “We believe there will be a number of regional hubs worldwide producing the apparatus and equipment to produce green hydrogen.” For John Cockerill, he went on, one such hub will be the US, for the US market. Green hydrogen systems need to be maintained in a country almost constantly. And so, where the Belgian group locates its plants is of paramount importance for the competitiveness of green hydrogen production. “We will have one hub in Europe, one in the Middle East, and one in India, and we believe the hub for the Asia-Pacific will be in Vietnam,” he explained. “This is where we will manufacture the majority of the systems to produce green hydrogen cheaply for the region.”
The fact that John Cockerill localizes the production of systems in Vietnam will have a direct effect on the competitiveness of producing green hydrogen in the country,
Mr. Michel highlighted. The shorter the supply chain, the better it is to produce green hydrogen. And so, Vietnam will not only have access to a massive domestic market of renewable energy but also to an extremely cost-competitive manufacturing footprint for electrolyzers. “This is one of the reasons why we strongly believe in the country,” he said.
Mr. Markus Bissel, Head of the Energy Efficiency Component of the 4E Project at GIZ Vietnam, believes that Vietnam is in a good position to be a front-runner in ASEAN for the green hydrogen rollout. In terms of green hydrogen production advantages, it possesses a stable and forward-looking energy policy framework as well as a large and diverse renewable energy industry. The country is located near major importers in the Asia-Pacific region, with its industry consuming more than 50 per cent of energy. In addition, strong renewable energy resource potential, low political risk, and a fast-growing economy with an increasing energy demand of 10 per cent per annum are also strong advantages for the country.
However, there are still some challenges that Vietnam must face in the process of striving to become a leading green hydrogen producer in the region, Mr. Bissel noted. First of all, it has limited land availability when compared to other major potential exporting countries such as Australia, Chile, and Morocco. Secondly, its resource quality is slightly lower than some of the other potential energy competitors, in particular solar. Greater geographic distance to the EU, which leads to higher green hydrogen shipping costs, and a higher cost of capital than other potential exporting countries are also issues that Vietnam needs to address.
Given the substantial impact on shipping costs, it is likely in the next decade that Vietnam’s international trade in green hydrogen will occur primarily on a regional basis, with major markets being South Korea and Japan. Furthermore, regional trading hubs based on bilateral contracts are already starting to emerge in the Asia-Pacific region as well as in Europe and North Africa.
Regarding the potential of green hydrogen exports, Mr. Asheesh Sastry, Managing Director and Senior Partner of Asia-Pacific Energy at the Boston Consulting Group, emphasized the importance of establishing a robust domestic market in Vietnam before considering exports.
There are three key aspects to this. “One is clearly stimulating demand,” he continued. “Two is creating the right supply environment. And three is making sure that transport costs are minimized as much as possible. And that only happens when you have very strong clusters through which you can enable that demand in the domestic market to take off.”
The development of green hydrogen is considered essential in Vietnam’s energy transition.”
Minister of Planning and Investment Nguyen Chi Dung