Battery Electricity Storage Systems, the energy sector’s
next big tech
Minh Ha-Duong
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Battery Electricity Storage Systems,
the energy sector’s next big tech
Minh Ha-Duong1
3909 words (reading time 15mn), 2024-07-16
Abstract: Vietnam's rapid expansion in renewable energy, particularly solar and wind,
necessitates the adoption of Battery Electricity Storage Systems (BESS) to address the
intermittency of these sources and ensure grid reliability. This article provides an
overview of BESS fundamentals, including their operational principles, economic
implications, and potential benefits for Vietnam. Despite the current lack of large-
scale BESS deployment in Vietnam, the global market is growing rapidly, driven by
technological advancements and decreasing costs. The article examines the present
state of BESS in Vietnam, highlighting local manufacturing capabilities and regulatory
challenges. It also explores strategic approaches outlined in Vietnam's National Power
Development Plan (PDP 8) and long-term projections for BESS integration. While
BESS has the potential to significantly enhance Vietnam's energy landscape, its
successful implementation will depend on addressing economic, regulatory, and
technical challenges.
1 CIRED, CNRS. Campus du Jardin Tropical, 45 avenue de la Belle Gabrielle, 94736 Nogent sur Marne,
France. Corresponding author: [Link]-duong@[Link]. ORCID 0000-0001-9988-2100.
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1. Introduction
Vietnam's rapid growth in renewable energy, particularly solar and wind power, marks
a significant step towards a greener future. However, to address the variable nature of
these sources and ensure a reliable electricity supply, Vietnam may soon need to adopt
Battery Electricity Storage Systems (BESS). BESS can store extra power when
renewable sources produce too much, and release it when needed. This helps stabilize
the grid, use more renewable energy, and reduce waste. With the global BESS market
growing at over 20% annually and Vietnam's strong industrial manufacturing base, the
question arises: Is BESS the next big development in Vietnam's power sector?
This article explores the fundamentals of BESS, including its functionality, economic
implications, and potential benefits for Vietnam's energy landscape. We will examine
the current state of BESS deployment in Vietnam, its future role, and the necessary
regulatory framework to support its implementation. By addressing these key aspects,
we aim to provide a comprehensive overview of BESS's potential to transform
Vietnam's energy sector, making it more sustainable, reliable, and efficient.
2. Understanding Battery Electricity Storage Systems (BESS)
To fully grasp the potential impact of BESS on Vietnam's energy sector, it's crucial to
first understand how these systems operate and their key characteristics. BESS store
electrical energy for later use. These systems play a crucial role in managing the supply
and demand of electricity, particularly in grids with a high penetration of renewable
energy sources. BESS operates on a simple principle: they charge (or store energy)
when there is surplus electricity and discharge (or release energy) when there is a
deficit. The process involves three main steps:
1. Charging: Excess electricity, often generated from renewable sources like
photovoltaic (PV) modules in the afternoon, is used to charge the batteries.
2. Storing: The energy is stored in the batteries until it is needed. Typical storage
duration is four hours.
3. Discharging: When demand for electricity exceeds supply, in the evening for
example, the stored energy is discharged to the grid.
BESS is a very modular technology. It can scale from household systems as small as a
fridge to projects larger than a football field.
Household BESS installations are typically in the range of 3-20 kWh. As an example,
in the USA a 13.5 kWh Tesla Powerwall costs $11 500 with installation. These systems
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enhance self-consumption by storing surplus solar energy generated during the day
for use at night or during cloudy periods. They also provide grid support by reducing
the load during peak demand times and can offer up to 11.5 kW of backup power during
outages.
Integrating BESS with renewable energy projects, for example 30 MW solar or wind
farms, enhances the overall efficiency and reliability of these projects. By storing
excess energy generated during peak production times, BESS can reduce curtailment
and ensure a steady supply of electricity. This integration also allows for better energy
management and smoother grid integration. The Edwards & Sanborn solar plus
storage project in California, online since January 2024, boasts the world’s largest
battery at 3,287 MWh of capacity to support 1.9 million PV modules.
Standalone utility-scale BESS are large installations that operate independently of
specific generation sources. They are typically connected to the grid and can store over
100 MWh electricity. For example, the Hornsdale Power Reserve in South Australia has
a capacity of 150 MW/193.5 MWh.
As with any emerging technology, BESS is evolving quickly, with various types of
batteries and ongoing innovations shaping its future. There are several types of
batteries used, but the most common and widely adopted are Lithium-Ion batteries.
These batteries are favored today for their high energy density, efficiency, and long
cycle life. Lithium-ion batteries used in BESS have an efficiency rate of 95% and a
lifecycle of over 10,000 cycles. Other types of batteries include lead-acid, sodium-
sulfur, and flow batteries, each with its own set of advantages and applications. Recent
innovations include the development of solid-state batteries, which offer higher
energy density and improved safety features over lithium-ion batteries.
Though BESS technology is promising, its widespread use depends heavily on cost-
effectiveness. Let's examine the costs and benefits associated with implementing BESS
in Vietnam's context.
The cost of installing and operating BESS is a significant barrier to widespread
adoption. In 2023, EVN PECC3 estimated that the cost for a 2 MWh BESS system was
360–420 USD/kWh, and that the investment would requires electricity prices in
Vietnam above 18 UScent/kWh to be profitable – this is twice the current levels.
However, BESS costs are declining rapidly. According to BloombergNEF, the cost of
lithium-ion battery packs has fallen by 89% in the past decade. This trend is driven by
advancements in battery technology, economies of scale in manufacturing, and
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increased market competition. The 2022 Vietnam Technology Catalogue estimated that
the nominal investment for BESS will decrease from 578 USD/kWh in 2020 down to
264 USD/kWh in 2030 – more than a fifty percent decrease.
Other concerns with BESS include the limited supply of Lithium, the environmental
impact of battery production and disposal and, as it stands now in Vietnam, the
reliance on international technology and expertise.
Despite these challenges, BESS offers significant economic advantages, particularly as
renewable energy sources become more prevalent in Vietnam's power mix. These
systems help reduce curtailment of renewable energy, meaning that less energy is
wasted when production exceeds demand. BESS also enhances grid stability by
providing ancillary services like frequency regulation and voltage support. In addition,
they can defer investments in grid infrastructure by reducing peak demand and
alleviating grid congestion.
• Enhanced Efficiency: BESS can store excess energy generated during periods
of low demand and release it during peak demand, thereby enhancing the
overall efficiency of the power grid. There is less need to build power plants for
the peak demand period. Depending on LNG prices, BESS can already compete
with open-cycle gas turbines, and possibly with gas engines, for that
application.
Figure 1: Fluence’s 20MW/20MW Kabankalan project, Negros Occidental,
Philippines. Image: Philippines.
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• Improved Reliability: By providing a steady and reliable power supply, BESS
can reduce the frequency and severity of power outages. This is particularly
important for a rapidly growing economy like Vietnam. BESS can provide
blackstart capability, which is crucial for restarting power plants and restoring
electricity after a complete or partial shutdown of the power system. This
enhances grid resilience and recovery speed during major outages.
• Energy Management: BESS can help manage the intermittency of renewable
energy sources, ensuring a balanced and stable supply of electricity. Vietnam
has 20.1 GW of solar and wind power, and congestion in the electricity
transmission grid sometimes lead to waste of electricity. In other rapidly
developing renewable markets, curtailment rates can reach up to 10-20% of
total renewable generation during peak times.
• Grid Stability: BESS can provide ancillary services such as frequency
regulation and voltage support, which are essential for maintaining grid
stability. In the Philippines, for example, the San Miguel Global Power is putting
up approximately 1,000 MW of BESS, operating at 32 locations in the country.
They started in 2018 from a 10 MW system on the Luzon grid in the Philippines
in Masinloc, Zambales (see also Figure 1).
With decreasing costs and increasing demand, the trend in BESS economics is
promising. In IEA’s World Energy Outlook 2023, the world’s installed BESS capacity
grows from 45 GW in 2022 to 552 GW in 2030 for the baseline “Stated Policies”
scenario, to 725 GW in 2030 for the “Announced Pledges” scenario and to 1,018 GW in
2030 for the “Net zero by 2050” scenario.
In any scenario, BESS is an very fast growing industrial sector. Having explored the
fundamentals of BESS, let's now turn our attention to the current landscape of this
technology in Vietnam.
3. The Current State of BESS in Vietnam
As of 2024, Vietnam has practically no BESS installed. So far, only private renewable
power projects have trialed BESS development, there is nothing at the utility scale.
The largest electricity storage project in Vietnam is the Bac Ai Pumped Storage
Hydropower Project. Located in Ninh Thuan province, the project has a capacity of
1,200 MW and is expected to play a crucial role in stabilizing the grid when it
completes in a few years. This project does not use batteries. Instead, it will pump water
up when electricity is available, and uses it to generate power like a hydroelectric
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power plant when needed. BESS are not as cost-effective as pumped hydropower
storage, so it is rational to prioritize projects like this.
The startup Alternō proposes the “sand battery” as an energy storage technology in
Vietnam. This is not BESS either. Instead of using electricity directly to dry agricultural
product, the electricity is used to heat a mass of sand. Well insulated, the sand can stay
hot for weeks so that renewable or off-peak grid electricity can be used. To discharge
the energy, flowing air through the sand mass extracts the heat required for the
process.
Vietnam is present in the industrial race to supply the technology globally. Vingroup
and Gotion, a Chinese battery maker, has ventured into LFP battery manufacturing in
2022, building a factory in Ha Tinh. It expects to start production in the third quarter
of 2024 with an initial capacity of 5 GWh per year. While primarily focused on electric
vehicles, this initiative significantly boost the local supply chain for BESS. Siemens and
AES manufacture the Fluence Cube, lithium-ion-based battery energy storage
solutions (BESS) in Vietnam, nearly 2 GW have been exported worldwide. Other
companies, such as LG Chem and Samsung SDI, are also building battery factories in
Vietnam.
Vietnam can make BESS parts, but using BESS in the country is challenging. There's
little local experience with BESS projects. Also, current laws don't allow BESS
installations or make them profitable.
In light of these challenges, let us examine Vietnam's strategic approach to BESS
implementation. The National Power Development Plan (PDP 8) states that “Solar power
development orientation must be combined with battery storage when the price is suitable”, and
they should be “distributed in close proximity to wind and solar power sources or load centers”.
The plan expects battery storage to reach a capacity of about 300 MW by 2030. This
would be only 0.2% of the national total power supply, the plan implicitly assesses that
batteries are not yet reasonably priced for large-scale deployment in Vietnam, so the
idea is to implement pilot projects to test the feasibility and benefits of BESS in
different settings, including standalone utility-scale storage and integrated renewable
energy projects.
The PDP8 aims for significant renewable energy growth by 2030: 21 GW of onshore
wind, 7 GW offshore, and 18-20 GW solar. However, the plan's proposed 300 MW BESS
capacity raises concerns about its adequacy in handling the intermittency of these
renewable sources. Figure 2 shows that the existing levels of solar power capacity
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already strongly impact the demand addressed to thermal power generation: it was
reduced from 20 GW in the morning to 9 GW at noon, before returning to 20 GW en
the evening. The need for flexibility will only increase in the future. Rooftop solar
systems for self-consumption, which are not bound by the plan’s objective of 18-
20 GW for solar PV, can be expected to depress the noontime demand by 5 to 10 GW as
early as 2030.
Alternatives to BESS for managing this so-called “duck-curve” problem include
demand side management, flexible thermal sources, other energy storage technologies
like compressed air or gravity storage, and hydroelectric power plants. These are
already used today to compensate for the variability of solar and wind: water can be
turned on and off quickly. Additional hydroelectric storage facilities are planned. But
as the EREA/DEA 2024 Viet Nam Energy Outlook Report states: “Any significant increases
in renewable generation will naturally challenge this current mode of operation, as there are limits
and technical requirements to the balancing capacity of Viet Nam’s hydropower plants.”
Figure 2: The duck curve has arrived in Vietnam. The red curve shows the load after
substracting solar and wind sources on the first day of Têt. The blue area shows the
total power load (GW), the green, red and purple areas the load in the North, Center
and South regions. Source: A0
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While near-term projections for BESS in Vietnam may seem modest, the long-term
outlook paints a different picture. The PDP8’s vision for 2050 is that the capacity of
hydroelectricity and storage batteries will reach 30,650-45,550 MW to match the high
proportion of renewable energy. The share of hydroelectric storage will be limited by
the finite geological opportunities.
BESS also has a great role in the net-zero scenarios for Vietnam, but different stories
can be told. The 2024 McKinsey study relies on about 20 GW of batteries in 2030 and
about 60 GW in 2050. In the 2024 Vietnam Energy Outlook scenario, however, pumped
storage serves the majority of storage need until 2045, when it reaches its full potential
of 26 GW / 200 GWh. The first utility-scale battery storage are installed by 2035-2040
with small investments (0.6-1.5 GW). Battery storage investment increases rapidly
after 2040, amounting to 98 GW in the NZ scenario in 2050. However, the study also
finds that storage technologies such as Lithium-ion batteries are well suited as reserves
to maintain a reliable and stable power system, and recommends to support large scale
deployment of electric storage after 2030.
With the right policies and investments, BESS can transform Vietnam's energy
landscape, making it more sustainable, reliable, and efficient. As the country continues
to grow and develop, integrating BESS will be crucial in ensuring a stable and resilient
power supply.
4. Who benefits from BESS?
BESS is relevant not only for EVN, but also for renewable energy producers and final
electricity consumers. Who has interest to spend money to install batteries?
EVN, as the state-owned utility responsible for electricity generation, transmission,
and distribution in Vietnam, stands to gain from the higher system efficiency
permitted by deployment of BESS. The company prepares pilot projects to test the
integration of BESS with the existing grid infrastructure. According to the PDP8
implementation plan, investment in Energy Storage by 2030 should include: a) A pilot
BESS project of 50MW/50MWh capacity by EVN to explore ancillary services, inform
pricing mechanism design, and establish technical standards. b) Additional pilot
projects such as a 7MW/7MWh BESS integrated into a 50MW solar farm and a
105MW/105MWh BESS integrated within a 400MW solar farm. c) Other battery
storage projects, 138 MW.
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Financial resources are anticipated to come from international partners according to
the Just Energy Transition Partnership, development partners such as the Asian
Development Bank, and Vietnamese commercial banks. A preliminary study by the
Institute of Energy, published in June 2024, demonstrates that “a 50MW BESS can play a
significant role in managing Vietnam’s power system frequency stability. It is also observed that the
location of BESS does not have much effect on the frequency stability. Therefore, for the purpose of
frequency stability improvement, BESS can be installed at every bus in the power system if the land
and connection plans are available.”
Renewable energy project owners, including developers of solar and wind farms, can
also benefit from integrating BESS with their projects. BESS enables project owners to
store excess energy produced during peak generation times (the afternoon) and release
it during periods of high demand (the evening). Batteries can help project owners
reduce curtailment and sell ancillary services to the grid. In principle, the PDP8 does
not limit PV+BESS and Wind+BESS combined projects, since they are not counted
towards the 300 MW goal for 2030. However, whether a BESS improves the overall
profitability of a renewable energy project depends on market conditions. As the next
section will show, they are not yet favourable.
Consumers, both residential and commercial, can also play a role in the adoption of
BESS. By installing BESS, consumers can enhance their energy independence, reduce
electricity bills, and contribute to grid stability. BESS allows consumers to store energy
generated from rooftop solar panels and use it during periods when solar generation is
not possible, such as at night or during cloudy days. This reduces reliance on the grid
and enhances energy security – factories can alleviate grid reliability concerns by
installing a rooftop solar system with an attached battery. Wood Mackenzie reports
that 11.1% of residential and 5.3% of non-residential solar systems installed in the US
in Q1 2023 were paired with energy storage.
5. Regulatory Landscape
The Vietnamese government has recognized the importance of BESS in the country's
energy transition. The revised National Energy Policy includes new incentives for BESS
installations, such as tax credits and subsidies, which are aimed at accelerating the
adoption of energy storage solutions. The government is also considering regulatory
reforms to create a more favorable environment for BESS. This includes establishing
clear guidelines for market participation and ensuring fair compensation for the
services provided by BESS.
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The legal framework for BESS in Vietnam is still developing, but it will likely build
upon existing energy laws. The Law on Electricity provides the overarching framework
for the power sector, while specific regulations will need to be developed for BESS. The
MOIT actively monitors the implementation of energy policies, identifies issues, and
proposes amendments as needed. This adaptive approach will be crucial as BESS
technology evolves and is integrated into the energy mix. Vietnam has policies to
support renewable energy, but not for the deployment of BESS. Permitting guidelines,
market mechanisms, positive price signals, and continuous dialogue are needed to
create a favorable environment for BESS:
• Lack of Guidelines: Circular No. 36/2018/TT-BCT outlines the licensing process
for power generation projects but does not explicitly cover BESS. There are no
comprehensive guidelines for the installation, operation, and maintenance of
BESS, which creates uncertainty for investors and developers. There are always
risks when storing lots of energy in a small place. Technical standards, safety
protocols, and environmental considerations are necessary for legally
responsible risk management.
• Market Participation: BESS faces barriers to participating in the electricity
market. There are no established mechanisms for BESS to provide and get
compensated for ancillary services like frequency regulation and voltage
support. A BESS project can benefit from capacity payments. The idea is not yet
implemented in Vietnamese electricity markets, although a discussion on the
two-parts electricity tariff has started.
• Financial Incentives: Existing electricity tariff structures hardly justify
investing in BESS. Energy storage is more profitable when there is a large
difference between the peak and the low hours wholesale electricity price. On
the contrary, current regulations in Vietnam are geared to reduce the volatility
of this market.
Other countries have created rules that work well for BESS. For example, in Australia,
BESS can make money in different ways, such as buying and selling energy at different
prices and helping control the power grid's frequency. However the technology is not
reserved to countries like the USA, China and Australia, where the BESS market is
several GW per year. The Oasis de Atacama project in Chile, sized at 1 GW of PV
production capacity with 4.1 GW of battery storage, recently reached financial close.
Even larger projects have been announced by the Solar Energy Corporation of India
and the Morroco-UK company Xlinks.
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Under the latest power development plan, Vietnam aims to have renewable electricity
sources accounting for 30.9%–39.2% of all sources by 2030, towards 47% conditionally
on receiving support from international partner countries, otherwise . Making the
high goal happen requires a massive collaboration in energy storage systems. BESS is a
domain when technology transfer from developed countries could have a huge impact
on the global energy transition. We would like to see an international organization in
charge of buying container-sized batteries in bulk and renting them out on reasonable
commercial terms to countries who can move fast forward on wind and solar energy.
6. Conclusion
In 2024, Battery Electricity Storage Systems (BESS) have become essential for
managing the variability of renewable energy, alleviating grid congestion, and
reducing energy curtailment. With a strong foundation in renewable energy, Vietnam's
next step is to integrate BESS to fully leverage these resources.
BESS's modular nature means it is suitable at various scales, making it relevant for
state utilities like EVN, renewable project developers, and consumers. Effective
deployment in Vietnam requires a unified approach from all stakeholders. The
government must lead by setting a regulatory framework that includes clear guidelines
and market mechanisms that align private interests with public energy needs.
Promotion of BESS could follow the successful model of rooftop solar initiatives,
involving awareness campaigns, capacity building, and demonstration projects. As
technology costs decrease and the benefits of energy storage are increasingly
recognized, more investors and developers will engage, and consumers will enjoy
greater energy independence and potential cost savings.
Vietnam's current goal of developing only 300 MW of BESS by 2030 appears modest,
but the figure does not include systems coupled to rooftop solar systems. To foster a
resilient, efficient, and sustainable energy future, Vietnam should aim high. This
includes establishing technical standards, developing market mechanisms for
ancillary services, expediting pilot projects, and investing in local workforce
development for BESS. This collective effort will accelerate Vietnam's transition to a
greener energy system.
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7. References
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