In renewable energy, Vietnam is a regional leader. But there’s a problem. Transmission lines lack the capacity to carry all that power to where it needs to be.
To avoid putting extra pressure on an already overloaded energy grid, state-run Vietnam Electricity (EVN) has advised solar farms in central Vietnam to reduce their output by up to 70% this year.
Insufficient infrastructure poses big problems for the renewable energy industry across the Southeast Asian region. The International Energy Agency estimated the region will need to invest $1.2 trillion by 2040 to modernise its grid. But building infrastructure takes time that a lot of power producers don’t have. This reality has seen utility scale battery storage (USBS) touted as a possible stop gap.
“In some cases, installing a small amount of energy storage downstream from the nearly overloaded transmission node could defer the need for an upgrade for a few years,” the Asian Development Bank suggested in its 2018 “Handbook on Battery Energy Storage Systems.”
Seriously pursuing USBS could provide a wealth of opportunities for the region, from which Vietnam is uniquely poised to benefit. Yet there are a number of challenges that need to be overcome.
Insufficient infrastructure poses big problems for the renewable energy industry across the Southeast Asian region
Vietnam has an abundance of nickel, a key ingredient in lithium-ion (LI) batteries that international mining companies have been eager to exploit. The surge in demand for battery storage has led to the reopening of nickel mines that were not previously lucrative because they have become an attractive new investment option.
Australian mining company Blackstone Minerals Limited is working to reopen a shuttered nickel mine in Ban Phuc, northwest of Hanoi. The mine shuttered in 2016 when falling nickel prices coupled with high export taxes made the mine unprofitable for the previous operator, Canadian firm Asian Mineral Resources Limited.
Blackstone head of corporate development Patrick Chang said the mine has a number of key selling points: “It’s got sealed roads all the way to the mine from Hanoi and then there are actually power lines from the hydro dam not far from the mine itself.”
The access to renewable energy was critical for Blackstone. “Electric vehicle customers demand their product to be green and rightly so, I think. So we are trying everything we can to do all of the right things,” Chang said.
A scoping study by Blackstone last year found the mine had the potential to produce 12.7 kilotons per annum of nickel for 8.5 years. This could bring Vietnam closer to Indonesia and the Philippines, which are the regional nickel powerhouses and two of the world’s top producers of the metal.
Blackstone also intends to operate its own nickel refinery. The existing Vietnam operations of major battery manufacturers like LG Chem could considerably reduce the transport distance for mined nickel.
International brands are not the only potential buyers of Ban Phuc nickel. Vingroup, the country’s biggest conglomerate, also announced plans in October to build a $387 million battery cell plant to provide batteries for its own electric vehicles.
This may not come to fruition for some time, though, with the domestic market for battery cells still in its infancy.
“There’s no one on the other side of the supply and demand curve,” said Son Nguyen, CEO and founder of Dat Bike, which uses imported LI batteries to power its electric motorbikes manufactured in Ho Chi Minh City. “If you make cells, no one will buy from you yet because electric cars and electric motorbikes are really new here.”
As demand grows, locally made batteries could become a more viable option. “I believe that in the future Vietnam should start making cells,” Nguyen said.
Vietnam has some key advantages as a manufacturing base. Cheap labour, a huge manufacturing industry, key membership in the ASEAN trade bloc and participation in a broad swathe of free trade agreements all put Vietnam in a stable position to profit from battery storage growth.
LI batteries are not necessarily the way to go for USBS, with Nguyen suggesting Lithium Iron Phosphate (LiFePO4) could be a more feasible option.
LiFePO4 batteries don’t use nickel and run at about half the cost of LI batteries. Yet they are not as energy dense, making them impractical for electric vehicles but an option for greatly reducing USBS cost.
Another alternative is stored hydropower. Earlier this year the World Bank approved a loan for Indonesia to build its first pumped-storage hydropower plant. A similar facility has been approved for the Philippines.
Pumped storage has limitations. Dams need space, lots of it, as well as an abundant water supply. These requirements place most hydro facilities away from population centres, which subsequently means costly transmission infrastructure.
By comparison, battery storage can be utilised at any point between the generator and the consumer. In recent years, home storage facilities linked to rooftop solar kits have increased in popularity, although they still face challenges in Southeast Asia.
Effective use of battery storage units with rooftop solar requires regulation, according to Indochina Energy Partners managing director Thomas Jakobsen.
Battery storage can seriously disrupt power supplies if not adequately managed
“Batteries are absolutely the future and that goes for every country in the world, but for many countries here under Vietnam they are not the present because of a lack of legislation,” Jakobsen said.
There needs to be a legal framework around when and how much a battery can be charged and discharged to ensure a stable electricity supply, Jakobsen said.
Theoretically, batteries in electric bikes and cars could function in much the same way, selling power back to the grid during peak periods and drawing from the grid when the price is low. The process, called vehicle to grid (V2G), is under trial in several locations worldwide.
Battery storage can seriously disrupt power supplies if not adequately managed. Despite these risks, battery storage solutions are set to go online across the region.
Thailand has already installed two 10-kilowatt battery storage systems in Ayutthaya Province, while the US consulate general awarded $3 million earlier this year to AMI AC Renewables to pilot USBS at a Vietnam solar farm.
Although small in scale, these projects could be the start of something big. In the use of battery storage to regulate power flows, Southeast Asian nations that are the best prepared stand to benefit the most.
For Vietnam, projects like Blackstone’s nickel mine and Vinfast’s battery cell factory could signal the start of a booming battery ecosystem paying dividends not just to investors but to power consumers, the domestic economy and the environment.
Mark Barnes is a freelance journalist based in Hanoi with extensive experience covering Southeast Asia. He has written about a broad range of topics from business, finance and energy to religion, the environment and social justice. You can follow him on Twitter at @mbarnesau.
This feature is part of an article series on energy landscape in Southeast Asia supported by Heinrich Boell Stiftung SEA Regional Office.
