Green policies for industrial parks to sustain FDI

Vietnam has witnessed significant growth in the number and scale of industrial parks over the past few decades. In the early stages, the goal of industrialization was to attract FDI – using incentive-based policies aimed at getting manufacturers to establish factories or plants in the country. That groundwork has paved the way for today’s 425 industrial parks and export processing zones that cover approximately 89,200 hectares of land across Vietnam. But industrial clusters continue to take a toll on the environment as globally, industrial clusters contribute to up to 20% of global carbon emissions.

To facilitate the expansion of large industrial parks that advance green economic growth, the Ministry of Planning and Investment in March proposed drafting a new law, tentatively named the Law on Industrial Parks and Economic Zones. Deputy Minister of Planning and Investment Nguyen Thi Bich Ngoc highlighted that transitioning towards a green and circular economy in industrial parks is key to increasing competitiveness and ensuring sustainable development​​. Among its six main policy groups, one focuses on developing modern and smart industrial parks, and attracting new investment sectors such as the digital economy, green economy, and semiconductor industry. This builds on the growing trend of deploying clean energy in large-scale operations across the world.

One of SP Group's rooftop solar panel installation projects for an industrial complex in Vietnam

But overhauling operations to become more sustainable is easier said than done. Industrial parks still face significant pressure when transitioning to a green model as slow progress may mean missing out on opportunities to attract new FDI. Apart from challenges such as high initial costs and the lack of specific regulations, having supportive legal frameworks and the capability to implement the right solutions is vital for a successful green transition.

Three strategic keys for the green transition of industrial parks

According to SP Group (SP), Singapore’s national grid operator with extensive experience in managing major sustainable energy projects across the Asia-Pacific region, industrial parks in Vietnam should prioritize three key strategies for clean energy.

Harnessing the power of the sun

Vietnam's geographical advantage near the equator offers great potential for solar energy initiatives. By installing solar photovoltaic systems, businesses could potentially benefit twofold: reducing both carbon emissions and operational costs. Vietnam can look to neighbouring countries like Singapore, where more than 20,000 rooftop solar panels were installed at six of real estate investment trust AIMS APAC REIT’s (AA REIT) industrial, logistics and warehouse properties in 2023. The system will enable AA REIT to avoid over 5,900 tonnes of carbon emissions every year, which contributes to the business’ sustainable practices.

More than 20,000 rooftop solar panels were installed at six of real estate investment trust AIMS APAC REIT’s (AA REIT) industrial, logistics and warehouse properties

However, installing solar power systems is only part of the process. Industrial parks must make an informed decision before embarking on decarbonisation. This involves balancing cost, sustainable outcomes, and long-term goals which includes energy and financial savings.

Vietnam has made decision-making easier with the recently approved Direct Power Purchase Agreement (DPPA) mechanism which facilitates clean energy adoption and enhances energy independence. This offers industrial parks more choices to tap the full potential of solar projects to meet their energy needs.

Get comfortable with district cooling

Soaring temperatures in Vietnam have led to high energy consumption, with cooling accounting for approximately 50% of the total energy used in buildings and industrial parks. For a country with ambitious energy savings and emission reduction goals, incorporating sustainable ways of cooling within industrial parks is vital.

District cooling systems are designed to optimise energy use within industrial parks by centralising cooling processes. This approach reduces the need for individual air-conditioning compressors in each development, saving on initial investment and operational costs. For example, SP Group designed and is in the process of installing Singapore’s largest industrial district cooling system for STMicroelectronics (ST). SP will design, build, own and operate the district cooling system, providing chilled-water-as-a-service to meet both the manufacturing and spatial cooling needs of ST. This sustainable cooling solution will help ST achieve 20 per cent savings in cooling-related electricity consumption annually, and enables them to reduce carbon emissions of up to 120,000 tons per year for ST Technopark – equivalent to taking 109,090 cars off the road.

Increase energy efficiency with smart microgrid solutions

Microgrids play a crucial role in this context by enabling localised energy management, reducing downtime, and increasing overall operational efficiency in industrial parks. For example, Singapore Institute of Technology's future Punggol campus will house a microgrid that is expected to bring annual consumption down from over 78,000MWh to below 52,000MWh.

Singapore Institute of Technology's future Punggol campus will house a microgrid that is expected to bring annual consumption down from over 78,000MWh to below 52,000MWh

Smart grid technology not only helps to reduce energy waste but also provides a reliable, localised source of power that relieves pressure on the main power grid. It also supports the effective integration of renewable energy sources such as solar and wind, while allowing flexible adjustments to optimise energy supply and demand in real-time. This advances the transformation of industrial parks and supports Vietnam's overall goal of sustainable development.

Another way to promote energy efficiency and generate reductions in carbon emissions is through SP Group’s smart Green Energy Tech (GET™) digital solutions. The solutions will be able to help industrial park owners to view and analyze utilities data on a single dashboard to easily optimize costs and energy usage. By leveraging these smart solutions, industrial parks can quickly optimize energy usage efficiency and reduce their carbon footprint without the need for costly and time-consuming redevelopment.