[HO CHI MINH CITY] Even as Vietnam has the greatest utility-scale wind and solar capacity among its peers in South-east Asia, the perennially high costs of storage systems and batteries are still proving to be the biggest hurdles to wider adoption, say industry players.

Their comments come in the wake of the long-awaited Power Development Plan VIII, which was finally given the green light last year to shift the country’s power generation mix away from coal towards renewables such as hydrogen and ammonia, and new technologies such as storage systems.

“The lack of green finance sources and support policies from the government has undermined customers’ confidence,” said Trinh Viet Dung, the chief technology officer of Cenergy, a battery developer in Vietnam. “For imports of bulky battery systems in large quantities, there are large upfront costs and shipping fees.”

Many startups are counting on home-grown battery technologies to harness Vietnam’s abundant renewable energy resources as they hold out for more robust incentives.

Under the landmark power strategy, Vietnam targets a total capacity of at least 2,700 MW and 30,650 MW for pumped storage hydropower and other battery storage sources by 2030 and 2050, respectively.

Industrial energy storage

Cenergy is hoping that its efforts to develop vanadium redox flow batteries – which store energy in liquid electrolytes containing vanadium ions – can be popular in the market.

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This type of energy storage system has been utilised alongside electrical grids and power plants in other countries, said Dung.

He said that bringing the technology closer to Vietnam by employing locally sourced materials and setting up a large-scale production facility could cut prices by up to 30 per cent.

This is expected to result in greater interest from industrial clients, given how electricity prices are forecast to rise by 3 per cent annually in Vietnam, he added.

Such a vision, however, requires hefty financing. Cenergy’s operations, production and commercialisation of 200 MW in annual battery storage capacity would need US$10 million to US$20 million by 2025, said Dung.

Electric vehicle batteries

Data from the International Energy Agency showed that transportation currently accounts for about 30 per cent of global energy use, besides electricity (20 per cent) and heat (50 per cent).

As such, all eyes are on the battery technologies developed by Vietnam’s leading carmaker VinFast as it aims to bring the prices of its electric vehicles (EVs) further down to appeal to a wider base.

According to some statistics, the cost of a battery varies from 13 per cent to 32 per cent of the total cost of an EV, depending on the composition and metals used.

Boston Consulting Group pointed out in an analysis that the manufacturing of battery cells takes the lion’s share of the total profits derived from the entire lithium-ion-battery supply chain, which also includes raw material extraction and chemicals production phases. 

However, cell manufacturing has proven to be a tough nut to crack.

VinFast – in which Vietnam’s largest private conglomerate Vingroup and its billionaire founder has pumped in nearly US$10 billion to date – has mainly integrated imported cells into its rechargeable battery packs.

“Given the value of the battery within an EV and the sensitivity of the supply chain, all OEMs (original equipment manufacturers) should aim to vertically integrate their own battery supply chain,” said Lukas Neckermann, the managing director of Neckermann Strategic Advisors, a London-based mobility-focused consultancy.

With logistics and packaging making up less than 10 per cent of the cost of an EV battery, he suggested that more carmakers consider alternative ways to maximise their profits.

“VinFast has already embraced the more cost-effective LFP (lithium ferro-phosphate) batteries and is expanding production capacity dramatically, so it’s clear they will get some gains there,” said Neckermann. 

After acquiring its battery-maker sibling VinES last October, VinFast will produce LFP battery cells from the third quarter of this year following a joint venture with China-based battery maker Gotion Hi-Tech. Even with such advancements, VinFast has constantly sought new funding sources to develop its battery-making capability. Last December, VinFast announced its formal application to the Development Financial Corporation (DFC) for a US$500 million loan to establish a lithium-ion battery manufacturing facility in Vietnam.

VinFast has also expanded battery production beyond Vietnam to countries such as India and Indonesia. It said that this gives it access to government incentives for local manufacturing, relief from certain tariffs, and access to raw materials at attractive rates.

Thermal energy storage

Another underserved market that Vietnam’s energy startups are busy exploring is thermal energy storage for heating, which comprises half of the world’s total energy consumption.

Alterno, based in Ho Chi Minh City, utilises a mixture of sand and a small amount of its “trade secret” ingredients to enable high-temperature thermal energy storage of up to 600 deg C captured from renewable energy.

Sand batteries were first invented to power the central heating systems for European districts to replace carbon-intensive fossil fuel sources such as coal and gas.

Vietnam, which is among the world’s largest suppliers of rice and coffee beans, could adopt emission-free heating systems for processing export-oriented agricultural products, said Alterno co-founder Ho Viet Hai.

“Converting heat to heat (with thermal energy storage systems) is always more effective than converting electricity to heat,” Hai told The Business Times, estimating that customers could recoup the system costs in about four years.

“The sand we use is abundant and found at beaches and deserts, which is distinct from the scarcer type of sand used in construction,” he added.

Claiming to be the world’s first producer of sand batteries dedicated to agriculture, Alterno has a goal of achieving a 25 per cent share of agricultural heating supply by 2030, with its primary markets being Vietnam, Indonesia and South Africa.

“Our most pressing need is to collaborate with more green financing providers to ease the financial burden for clients and accelerate the green transition of industries,” Hai said.