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Renewable Energy Would Give Vietnam ‘Competitive’ Sourcing Advantage, H&M and Nike Say

H&M and Nike want Vietnam to make it easier to purchase green energy.

The brands are part of a consortium of 29 businesses that is urging the Southeast Asian nation to fast-track a policy that would allow commercial and industrial organizations to more easily tap into renewable energy in the form of direct power purchase agreements (DPPA). At present, companies can only access electricity through the national grid or via small-scale projects such as rooftop solar panels or wind farms.

“Without the DPPA we believe renewable energy development will plateau and fall short of meeting the growing energy needs of Vietnam’s industries,” the consortium said in the Dec. 15 letter, which Nikkei Asia obtained.

Brands are facing mounting pressure from consumers and stakeholders to reduce carbon emissions in their supply chains. Switching from fossil fuels to renewables in Vietnam, the world’s third-largest textile exporter after Bangladesh and China, would help them achieve their targets at a faster pace.

Most of the letter signatories, including Target, Mulberry, PVH Corp., Ralph Lauren and VF Corp, are members of the Fashion Industry Charter for Climate Action, a United Nations-led initiative to help the fashion industry collectively achieve net-zero emissions by 2050. Some of them are also part of campaigns such as RE100, which The Climate Group developed in partnership with CDP to urge businesses to commit to sourcing 100 percent of their electricity from renewable suppliers by 2050.

“The success of the DPPA pilot in Vietnam will…send important signals across the region as to the possible national actions available to meet the renewable energy requirements,” a spokesperson for H&M, which has signed both the UN charter and RE100, told Nikkei Asia.

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The consortium said it had anticipated a DPPA pilot in Vietnam in 2020 to no avail. Vietnam currently draws on renewable energy for roughly 10 percent of its power supply, a number it plans to ramp up to 15 percent to 20 percent by 2030 and to 25 percent to 30 percent by 2045. Most of its energy stems from coal. A DPPA mechanism, experts say, would help renewable-energy developers marshal private capital to build new solar and wind farms.

“A bankable PPA is a key factor in opening the door to capital investment at the levels needed to build a mature renewables industry in Vietnam,” McKinsey & Company analyst Matt Rogers said in 2019.

The brands noted in the letter that implementing the DPPA would allow Vietnam to hit its renewable energy targets “years ahead of other countries in the region,” handing it a “strong competitive advantage” as companies decide where to source their goods.

The letter follows a similar missive, dispatched by brands such as Adidas, Gap and H&M to the Cambodian government in August, expressing concerns about the latter’s plans to nearly triple the amount of power it derives from coal.

“Electricity decisions made today will lock Cambodia into a future that appears to be the opposite of global and regional trends and less attractive to our industry,” the letter said. “Countries that today prioritize [renewable energy] and a green future will avoid wasting money on outdated technologies that will soon be obsolete and expensive.”