August 7, 2020 – By Market Forces: Vung Ang 2 is a controversial 2 x 600MW coal-fired power station planned in Central Vietnam. The three major Japanese banks, Mitsubishi UFJ Financial Group (MUFG), Sumitomo Mitsui Financial Group (SMFG), Mizuho Financial Group as well as Japan’s export credit bank, Japan Bank for International Cooperation (JBIC), are currently looking to finance the project despite a myriad of problems including environmental and human rights issues which will lead to real financial and reputational risk.
Here are the 5 reasons the Vung Ang 2 coal power plant is a financial and environmental disaster that should not be built.
Vung Ang 2:
- Is planned beside the site of the Formosa toxic chemical spill and Vung Ang 1 coal power plant
- Has air pollution standards far lower than for Japan and Korea (*1)
- Is being built in Vietnam where renewables are already cheaper than coal
- Has an estimated negative profitability of USD 158 million
- Against the spirit of Japanese banks’ commitments to stop overseas coal finance
1. Vung Ang 2 is proposed to be constructed on a site proximate to the Formosa Steel plant and the Vung Ang 1 coal plant, both of which have raised community protest.The Formosa Steel plant is the site of the most serious environmental disaster in Vietnam’s history. In 2016, there was a toxic chemical spill into the ocean which devastated a hundred miles of coastline and has rendered these areas presently ‘unfishable’, depriving communities of food and livelihoods. Nearby, Vung Ang 1 has seen controversy due to the proximity of coal ash heap to residential areas and farmland, as well as air pollution resulting from the plant. The decision to develop or financially support additional coal power on a site already known to have polluted air and water will cause further impacts to livelihoods of local communities.
2. An expert analysis of Vung Ang 2 emissions by the Centre for Research on Energy and Clean Air found that the environmental impact assessment applies weaker emission standards than those in Japan or Korea. The graph below shows Vung Ang 2 emissions of sulphur-dioxide (SO2), nitrogen-oxide (NOx) and fine particulate matter (PM) are much higher than limits for new coal plants in other countries.
3. According to a recent report from financial think tank Carbon Tracker, in 2020 it will already be cheaper in Vietnam to invest in new solar PV than new coal, with new onshore wind generated power expected to become cheaper than coal power in 2021. Any new coal capacity commissioned after 2020, including Vung Ang 2, would be more expensive than renewables. In addition, Vietnam is trying to move away from coal. The leaders of Ha Tinh province, where Vung Ang 2 is being planned, have developed a plan that sees no coal development in the province’s energy mix.(*2) These factors create the risk that Vung Ang 2 could quickly become a stranded asset.
4. The pre-feasibility study for Vung Ang 2(*3), conducted by Korean Development Institute (KDI), estimates that the project has a negative profitability of USD 158 million. KDI’s assessment found that the operating cost will be higher than the operating revenue because of additional costs for environmental protection facilities and dredging of the port area. The assessment also noted that project delays were possible because of local opposition and environmental issues. The study gives a clear indication that investment in Vung Ang 2 is a financially risky decision.
5. The three major Japanese banks, MUFG, SMBC, and Mizuho have policies commiting to not providing finance to new coal power projects. Mizuho bank has also committed to phasing out credit exposure to coal power projects by 2050, and halving its current balance of 300 billion yen by 2030. While the banks do consider exceptions to the policy in certain cases, financing Vung Ang 2 goes against the spirit of these policy commitments. Japanese banks must live up to their own policies and avoid financing polluting coal power projects like Vung Ang 2.
*1 The average new coal power plant in Japan and Korea
*2 People’s Committee of Ha Tinh province. “Implementation of the National Energy Development Strategy till 2030, with a vision to 2045 under the Political’s Resolution NO. 55-NQ / TW OF 11/02/2020. (8 May 2020), online:https://thukyluat.vn/vb/ke-hoach-164-kh-ubnd-2020-chien-luoc-phat-trien-nang-luong-quoc-gia-tinh-ha-tinh-6bfc3.html
*3 KDI Pre-feasibility Study for KEPCO’s Vung Ang 2 Project (May 2020) from Congressman SH Kim’s Office.
Source: https://www.nocoaljapan.org/the-5-reasons-the-vung-ang-2-coal-power-plant-is-a-financial-and-environmental-disaster/. Accessed on Feb. 25th, 2021