Vietnam could be at risk of missing near- and long-term clean hydrogen production targets set out in a national industry strategy approved in February due to unattractive conditions that include a lack of funding to incentivise producers and relatively high production costs.

Vietnam’s Ministry of Industry and Trade held a conference in Hanoi on 22 February to outline the hydrogen production strategy that was formulated in summer 2023. The policy document calls for green and blue hydrogen output to reach a combined 100,000–500,000t/yr by 2030, rising to 10–20mt/yr by 2050.

A first draft of the strategy was prepared last summer and then circulated to ministries, departments and groups for comments and recommendations at the end of August 2023. Their feedback was received the following month, with updates and revisions progressing since then until it was approved by Vietnamese Prime Minister Pham Minh Chinh on 7 February.

Achieving the clean hydrogen output targets will not be easy under Vietnam’s current development trajectory

“The goal set in the Hydrogen Energy Strategy is to develop Vietnam’s hydrogen energy ecosystem based on renewable energy, including production, storage, transportation, distribution, domestic use and export, with synchronous and modern infrastructure to contribute to ensuring energy security, implementing national goals on climate change, green growth and net-zero emissions by 2050,” the ministry said in a statement.

Achieving the strategy’s clean hydrogen output targets will not be easy under Vietnam’s current development trajectory. Hydrogen demand in 2022 stood at 494,000t in 2022. That comprised 365,000t of grey hydrogen and 129,000t of brown hydrogen, according to the Vietnam Petroleum Institute.

The hydrogen was primarily produced via reforming, cracking and gasification, and used mainly by oil refineries and for producing fertiliser. There is negligible hydrogen produced by electrolysers using grid electricity, which would have to be trucked to industrial consumers.

Green potential

There is considerable potential for producing green hydrogen in Vietnam, given the country’s abundant renewable energy resources. Utility-scale solar is already the cheapest source of electricity in Vietnam, and the country has great potential for developing offshore wind power, according to research firm BloombergNEF.

Vietnam’s eighth Power Development Plan—approved in May 2023 after a number of delays——calls for the domestic fleet of combined-cycle gas-fired power stations to co-fire hydrogen with LNG during 2035–40, before switching to 100% hydrogen combustion during 2045–50.

But under current circumstances it seems unlikely that the 2030 target will be met unless Vietnam provides sufficient incentives to make a viable economic case for users and developers.

There are at least three green hydrogen projects in Vietnam scheduled to be commissioned by 2030, with aggregate capacity of about 384,000t/yr. PetroVietnam and Singapore-headquartered renewable energy developer Enterprize Energy have proposed projects, but a 24,000t/yr development under construction by The Green Solutions Group in Tra Vinh province is the only one that has passed the announcement stage. The $341m green hydrogen plant began construction in the Mekong Delta nearly a year ago, and commercial operation is scheduled for Q2 2026.

All three may require government funding or other incentives to progress, but the strategy makes no mention of funding for hydrogen energy. Neither has the Vietnamese government made any public statement on the possibility of financial subsidies.

Achieving the 2050 target of 10–20mt/yr is even less probable. The strategy targets both domestic applications and exports, but internal analysis from Vietnam’s Institute of Energy seen by Hydrogen Economist shows the cost of making green hydrogen in Vietnam is unlikely to be significantly lower than in neighboruing countries, limiting export opportunities.

Demand side

The strategy emphasises the use of hydrogen in the three major domestic sectors of power generation, transportation and heavy industry. In the power sector the focus is on the use of hydrogen and ammonia blended with LNG and mixed with coal as fuel for thermal power plants. Vietnam inaugurated its first LNG import terminal in late October after receiving a commissioning cargo from Shell last summer.

But the Institute of Energy’s analysis suggests that these applications are not economical. In Vietnam, hydrogen will be more appropriate for industries such as steelmaking that are difficult to decarbonise through electrification. Hanoi aims to launch pilot projects in these industries within this decade, but the success of these projects will depend on funding.

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Author: Shi Weijun