For the past 15 years, Vietnam has enjoyed enviable gross domestic product increases, averaging 7% annually. That kind of economic growth increases power demand, but financing new capacity remains a challenge. Reaching its ambitious capacity growth goals will require Vietnam to expand its financing and vendor base, attract foreign investment, and ensure future fuel supplies in a region thick with competition for those resources.
The decade after the Fall of Saigon in April 1975 was for reunified Vietnam a period of repression, economic hardship, and international isolation. Behind the Iron Curtain, the country scarred by 21 years of civil war was shunned by the world—including former North Vietnam ally China, whom it fought and defeated in a 29-day war in 1979, and South Vietnam ally the U.S.—for its decade-long occupation of Kampuchea (Cambodia) and violent removal of the genocidal Khmer Rouge regime. Backed only by the Soviet Union, the battered country saw foreign aid needed for restructuring evaporate and membership in the World Bank, International Monetary Fund, and Asian Development Bank denied.
In 1986, after domestic policies proved ineffective in stimulating economic growth, the Sixth Congress of the Communist Party of Vietnam cast off the Soviet model of central economic planning, and Vietnam began to embark upon reforms transitioning it to a market economy. The end of the Vietnam-Cambodian conflict in the early 1990s accelerated this process. As Vietnam devalued its currency and decontrolled most prices, a U.S. trade embargo was lifted, the country reestablished formal relations with China and member countries of the Association of Southeast Asian Nations, and it obtained access to concessional international finance.
Those actions bore fruit. Vietnam, now a nation of 88 million people, has for the past 15 years seen dizzying gross domestic product (GDP) growth at an average annual rate of 7%. In 2011, despite the global economic slowdown, the country recorded a 6.5% GDP increase, making it the 35th largest economy in the world, according to Goldman Sachs.
But now the country faces a new critical problem. Development at such an accelerated pace has left Vietnam struggling to upgrade its infrastructure—even though over the past 12 years, the nation invested 10% of its GDP into infrastructure improvements. Though its paved roads have increased in length threefold and the percentage of rural households connected to its power grids has improved from 2.5% in 1975 to 96% in 2009, the country continues to battle widespread, crippling power shortages, particularly in the dry season (December to April).
Power demand has outpaced supply by about 3% in the past five years, and consumption is expected to double to 175 billion kWh in 2015, from 98 billion kWh in 2011, and then taper off to 11.15% growth per year from 2016 to 2020 and 7.4% to 8.4% per year from 2021 to 2030. Commercial usage in particular has seen a sharp increase, skyrocketing 9.8% to 94 billion kWh in 2011 compared with 2010 levels (Figure 1). The demand surge last year prompted officials to slash power usage in the manufacturing sector, inciting public outcry.
|1. Electricity consumption by sector, 2010. Source: Vietnam Ministry of Industry and Trade|
Meanwhile, the country generated 109.29 billion kWh in 2011, up 9.2% from 2010. In 2012, if Vietnam is to sustain GDP rates of between 6.5% and 7%, the Ministry of Trade and Industry has warned state-owned entities that they will need to generate 120.795 billion kWh to ensure supply.
The government, which routinely drafts plans that serve as a roadmap for the country’s energy future, is acutely aware that financing will be its foremost challenge. Improvements to Vietnam’s power sector will require massive investment of nearly 2.359 trillion Vietnamese dong (VND, $123.8 billion) over the next two decades, it says. About 66.6% of this funding is earmarked for new power sources and the remainder for improvements to the grid.
Restructuring the Power Sector
Vietnam’s government concedes that the bulk of the country’s power woes stem directly from how that sector, which is still dominated by public ownership, is structured. In its push for private sector participation, the country split energy sector operations into three state-owned companies in 1995: PetroVietnam, Vinacomin (former Vinacoal), and Electricity of Vietnam (EVN). By 2005, EVN—a vertically integrated corporation—produced 80.6% of the nation’s electricity, 40% of which came from hydropower.
The National Assembly then passed the 2005 Electricity Law in accordance with Vietnam’s Strategy for Electricity Development set out by the prime minister in October 2004. This strategy seeks to incentivize privatization of EVN power generation assets and provide domestic and foreign investors a chance to capitalize on increasing energy demand and sets ambitious targets for electricity output up to 2020. Change has been swift. Today, independent power producers (IPPs) own about 29% of Vietnam’s power capacity, and the remainder—a growing share—is held by a number of state-owned enterprises such as PetroVietnam and VinaComin. However, EVN still controlled about 71% of Vietnam’s power capacity, transmission lines, and electricity distribution and retail systems in 2010.
EVN will restructure in 2012, the company said in January; it plans to divest capital in sectors such as real estate, securities, and banking and pour it into power projects. EVN also plans to revamp its industry, ownership, and administration structures.
The Bane of Low Power Prices
Several organizations and businesses say that the availability of capital to develop power projects, which require large investments, remains “modest,” because selling prices of electricity remain low. “[With such a] low selling price of electricity of some 5.5 US cents/kWh, no private investor dares invest in the sector,” Deputy Minister of Industry and Trade Do Huu Hao was quoted as saying in a July 2010 EVN news release. Hao noted that it was “hard to raise power prices” to 9 to 10 cents/kWh so that investors can make profit. “As a result, the power sector will still face difficulty in calling for local and foreign investors to pour money into it.”
Renewables in particular will be affected. The lowest price for 1 kWh of wind power is at least 9 to 10 U.S. cents, equivalent to the cost of nuclear power but much higher than hydropower (3 to 4 cents) and coal-fired power (5 to 6 cents).
Low power prices have proven costly to EVN itself. During periods of intense heat in 2008 and 2009, EVN was forced to pay 120 billion VND ($5.7 million) each day for losses to maximize the capacity of coal- and oil-fueled power plants such as Ca Mau and Nhon Trach to meet demand for electricity, Hao said.
Key players in Vietnam’s power sector have urged the government to adjust power prices, and the government has considered asking international credit institutions to invest in the power sector and issuing government bonds to fund important projects. The government also has called on Vietnam’s industries to cut down on energy use, saying steel, cement, ceramic, and frozen food sectors could save 20% to 30% while the service sectors could cut up to 25% to 30%.
Reform here, too, is budding. The Electricity Law that became effective in 2005 sets out a three-phase plan for a competitive power generation market. The first phase was expected to begin in January 2012 and end in 2014, but it has been delayed until April because generating units had yet to install technology for the collection and processing of information to calculate their power prices. The second phase, from 2014 to 2022, involves the introduction of a competitive wholesale power market. The third phase, starting in 2022, will introduce a new competitive retail power market.
Meanwhile, a 15% hike in wholesale power prices in March 2011 (though retail prices were not raised, to help curb inflation) was followed by a new law in September that will allow EVN to adjust monthly pricing so that it is in line with foreign currency fluctuations, fuel prices, and power output levels. In late December, EVN announced it would raise retail prices by 5%, to 1,304 VND (6.2 cents)/kWh, to offset costs incurred last year. State media reported that Finance Minister Vuong Dinh Hue has promised retail prices would see a steeper hike, to 10%, in 2012.
The measures have so far had a modest impact. Foreign build-operate-transfer (BOT) and domestic IPP projects account for 62% of the total new thermal capacity planned from 2007 to 2015. Unlike foreign BOT projects, though, domestic IPPs typically only have short-term power purchase agreements with EVN, without government guarantees and no fixed annual capacity charge in the form of a take-or-pay agreement.
Increasing Power Capacity
In 2010, Vietnam’s installed capacity and power imports totaled 21,297 MW, but available capacity was just 19,713 MW. About 36% of the country’s capacity was sourced from hydropower in that year, 18% was coal-fired, 37.2% was oil- and gas-fired (including 30% from gas turbines and 2.5% from diesel), 3.2% came from renewables, and 4.8% was imported.
Under the July 2011–approved Master Plan VII, power capacity is expected to increase to between 69,000 MW and 75,000 MW by 2020 and to between 139,000 MW and 146,800 MW by 2030 (Figure 2). Among the plan’s other priorities are to increase power prices and create a competitive power market; this includes relinquishing state control of power generation, though Vietnam intends to continue holding a monopoly on the transmission network. The country will need to increase its total of imported and produced power from 194 billion kWh to 210 billion kWh by 2015, 330 billion to 362 billion kWh by 2020, and 695 billion to 834 billion kWh by 2030. Vietnam also plans to embark on a rural electrification program, putting 800,000 more households on the grid. Finally, the plan calls for reducing the electricity elasticity coefficient/GDP from the current average of 2.0 to 1.5 in 2015 and 1.0 in 2020.
|2. How the Master Plan VII envisions capacity growth between 2010 and 2030. Coal is poised to provide a significant share of short-term capacity increases. Source: Vietnam Ministry of Science and Technology|
Growing the Grid
Among Vietnam’s more prominent plans is an overhaul of the national grid. Its 500-kV transmission network and a 220-kV line are managed and operated by EVN’s National Transmission Power Corp., while regional power utilities manage smaller lines of 110 kV, 35 kV, and 6 kV.
The Master Plan specifically calls for investment in the national power grids to bring their development in line with national and local power development plans, increase reliability, reduce power losses, and enable mobilization of power sources in the rainy and dry seasons (see table). This includes building out the 500-kV grid, though the state said it would research development of power networks at voltages of 750 kV, 1,000 kV, and high-voltage direct current after 2020. A notable aspect of the plan includes cooperation with other Southeast Asian countries for an interconnection of Vietnam’s grid through transmission networks at voltage levels of 110, 220, and 500 kV.
|Table 1. Grid support. Vietnam plans to overhaul its national grid to support ambitious plans to increase power capacity from 21 GW to 75 GW by 2030, increase reliability, and reduce power losses. This table shows the country’s plans for building out its high-voltage and smaller lines over that period. Source: Vietnam Ministry of Trade and Industry|
A Water Constraint
Today, roughly 36% of Vietnam’s electricity is generated by hydropower, and the long and narrow country through which course the mighty Red and Mekong Rivers and well-known smaller waterways including the Ka Long O River and Huong River (Perfume River) continues to have colossal hydropower potential. Since Vietnam’s independence in 1954, the governing Vietnamese Communist Party has actively promoted development of hydropower, spurring construction of 1,021 large and small hydropower projects in 36 provinces and cities, according to the Ministry of Industry and Trade. Hydropower potential is concentrated along the country’s 10 largest river systems: Da (Black), Lo-Gam-Chay, Ma-Chu, Ca, Vu Gia-Thu Bon, Tra Khuc-Huong, Se San, Ba, Serepok, and Dong Nai.
Vietnam’s power plan calls for rapid hydropower development for the next five to 10 years. Under Master Plan VII, hydropower resources will be expanded to 17,400 MW by 2020. Over the period 2016 to 2030, project development will also focus on pumped-storage projects: Vietnam plans to increase its pumped storage capacity from 1,800 MW in 2020 to 5,700 MW by 2030.
The Dong Nai River Basin, in particular—which originates in the central highlands of the southern portion of the country and runs 586 km (364 miles) across 11 provinces and cities—has a total of 17 hydropower projects under construction with a total designed capacity of 3,000 MW. Among the projects under construction is one of the largest in Southeast Asia: the 2,400-MW Son La project on the Da River in the north, which features a roller-compacted concrete gravity dam that is 138 meters (453 feet) high. The second of six 400-MW units at this plant was commissioned in August 2011 (Figure 3).
|3. Big hydro. While commissioning the first of six Son La units in 2010, Russian engineering firm Institute Hydropower’s chief design engineer, Alexander Volynchikov, said that designing the dam required “several unconventional layout alternatives” because engineers had only six years to put the first unit into commercial operation. The project’s unique river diversion method is said to enable spillway capacities of 38,000 cubic meters (49,702 cubic yards) of water per second, exceeding those of even more massive Russian plants, like the 6,400-MW Sayano-Shushenskaya, whose maximum discharge is 15,900 cubic meters per second. (See a story about the disaster at that Russian facility in our Dec. 2010 issue.) Courtesy: Institute Hydropower|
Construction of new hydropower on such a massive scale will introduce critical new problems, Nga Dao, cofounder and director of the Center for Water Resources Conservation and Development in Vietnam, told POWER. “Problems with technical and socio-environmental issues, such as floods downstream or resettlement difficulties, are readily observed,” Dao, who published a paper in the Journal for Vietnam Studies on the matter last summer, said. The projects will boost Vietnam’s economy, but they will place a high toll on citizens living along the rivers, particularly those in the northwest, who face displacement, heightened pollution, and reduced water supplies. A less-obvious impact is that costs of hydropower construction have been systemically underestimated, because, simply put, “project bottom lines do not reflect reality,” she said.
The country is also prone to droughts, such as the one that afflicted the country in 2010 and 2011 and forced the government to take severe water consumption mitigation measures such as rationing power and increasing electricity prices by 15%.
Vietnam also routinely competes with its neighbors on the lower Mekong River for water, making its reliance on hydropower a contentious political issue (see sidebar). These reasons considered, once Vietnam reaches its hydropower potential, it plans to diversify its power generation profile, reducing hydro’s share to 16% by 2030.
The Coal Conundrum
Vietnam’s ambitious plans to increase power capacity are marked by a proposed rapid build-out of thermal power plants: By 2020, total coal power capacity is expected to surge to 36,000 MW (or about 50% of total power production), consuming 67.3 million metric tons of coal. A further expansion of coal capacity is expected by 2030 to about 75,000 MW (52.3% of total power production), requiring 171 million metric tons of coal. The government has already reportedly earmarked $83 billion to build 90 new coal power plants with a combined capacity of 106,000 MW by 2025, which could boost coal demand beyond 100 million metric tons. However, due to the country’s artificially capped power prices, it continues to have difficulty attracting foreign investment to fund power infrastructure improvements.
Nevertheless, billions of dollars of contracts have been awarded over the past three years for new thermal plants. Among numerous notable projects is a $1.5 billion long-term construction contract awarded by Vietnamese state-owned PetroVietnam to its subsidiary Petrovietnam Technical Services Corp. for the development of the 1,200-MW Song Hua 1 coal power plant in Hau Giang. AES Corp. recently closed on another $1.5 billion long-term contract for the 1,200-MW Mong Duong II coal plant in Quang Ninh province—a build-operate-transfer (BOT) joint venture between AES Corp. and Vietnam Coal and Mineral Corp. And Malaysia-based JAKS Resources Berhad Group broke ground in September 2011 for construction of the $2.25 billion 1,200-MW Hai Duong thermal plant in the northern province of Hai Duong. These plants could be operational by the second quarter of 2017.
But even this massive addition in new capacity is not guaranteed to alleviate shortages, the government acknowledges. The Ministry of Industry and Trade admitted in an August 2011 report following up on progress made on the sixth Master Plan that of 42 power plants, including hydropower and coal facilities, scheduled to go online between 2010 and 2012, 28 were going to be late by one or two years. Those plants include EVN projects Quang Ninh 1 and Hai Phong 1 (Figure 5)—both delayed by more than 27 months. The same report suggests that eight power plants with a total capacity of 3,410 MW, which should have begun generating power in 2010 or 2011, won’t be operational until at least this year. Meanwhile, a government update at the end of 2011 showed that of 33 power plants under construction, only 11 were on schedule. Factors causing delays ranged from “unprejudiced or subjective reasons,” to “carelessness in the implementation, management or supervision,” the government says.
|5. Delays and doldrums. When construction on the 1,200-MW two-unit Hai Phong coal-fired power plant in Thuy Nguyên, Hai Phong, began in November 2005 by China’s Dongfang Electric Corp. and Japan’s Marubeni Corp., the project was hailed as one of the largest thermal power plants in the nation, and the largest contract between China and Vietnam at the time. Overshooting their completion deadline by more than 27 months, the first two 300-MW units of Hai Phong 1 were expected to join the national grid in mid-2011—a milestone POWER could not confirm—and the second two units, part of Hai Phong 2, are scheduled to start operations in April 2013 and September 2013. Courtesy: Panaromio|
Vietnam Energy Association Chair Tran Viet Nghia, who last September pointed out that many of the projects that were delayed were being carried out by Chinese contractors, urged the government to limit those contractors’ participation in future projects. Besides lacking better technology and equipment, Chinese construction standards weren’t high enough, and Chinese projects used only Chinese personnel, he said. Nghia suggested that existing bidding laws be changed because they barred investors from choosing vendors from the U.S. and European Union.
From Coal Exporter to Importer
Perhaps the most prominent challenge is that, with massive new coal facilities, Vietnam—a country that in 2008 produced 40 million metric tons (mt) of coal a year and exported nearly 80% of it—will see swelling domestic demand for coal but cannot guarantee its future fuel supply. To meet this demand, which is set to increase from 42 million mt in 2010 to 171 million mt by 2030, experts project that the country will cease exporting coal altogether as soon as 2025 and begin competing for imported coal with energy-hungry coal power users like China and India.
In 2012, according to state-owned coal producer Vinacomin, the country plans to slash exports by 18.2% from 2011 numbers, to 13.5 million mt, and then cut exports to 8 million mt in 2013 and 4.5 million mt in 2015 to save supplies for domestic consumption. Additionally, in June last year, on what Vinacomin called a “trial basis”—that is, without an official import plan—the country imported its first thermal coal shipment from Indonesia. Import coal volumes are expected to reach 28 million mt by 2015.
Vietnam supposedly has vast coal resources, but its proven reserves (in the northern Quang Ninh province, the country’s main coal mining and processing zone) are only 150 million mt. Over 30 billion mt have been said to be located in the northern Red River basin, but these are largely untapped not only because the region is the country’s largest rice-growing area after the Mekong Delta but also because Vietnam doesn’t have the capital to develop new mines. Experts also point out that Vietnam’s coal is primarily anthracite—which as of Jan. 1, 2012, cost $230/mt compared with $109.29/mt for steam or thermal coal.
“While it is possible to use hard coal for power, it is a little like feeding caviar to chickens—it works but is not a good idea,” says David Dapice, an economist at the Harvard Kennedy School’s Vietnam Program. “If anthracite can be exported from Vietnam at premium prices, it would certainly make sense not to become self-sufficient in coal, but rather to export the high priced coal and import the cheaper coal.”
Gas Power Poised to Increase
About a third of Vietnam’s capacity is generated by oil- and gas-fired power plants, and by 2020, gas-fired plants will total 10,400 MW of installed generation capacity, accounting for 17% of the nation’s power production, according to the National Gas Master Plan issued in March 2011 (Figure 6). By 2030, gas capacity will increase just a fraction, to 11,300 MW, making up about 10% of total capacity. To diversify fuel sources for power, Vietnam plans to develop power plants using liquefied natural gas (LNG): 2,000 MW worth to be built by 2020 and 6,000 MW by 2030.
|6. Stepping on the gas. One of Vietnam’s newer gas plants is the 760-MW Nhon Trach 2 combined cycle power plant in the south of Dong Nai province. It started commercial operation on Oct. 16, 2011, after a construction period of only 28.5 months. This made it one of the fastest-track projects in Asia, according to Siemens, which supplied the power block. Courtesy: Siemens|
The Master Plan VII also foresees building new pipelines to supply new power plants, a majority of which are planned for the southern part of the country. This means that gas demand for power generation could triple to between 22 billion and 29 billion cubic meters by 2025, compared to just 8 billion cubic meters in 2010.
As with its coal problem, Vietnam may need to overcome a gas supply challenge to ensure reliability. Current and probable gas reserves fall short of the nation’s growing gas demand, and the Ministry of Industry and Trade has been studying the costly possibility of importing LNG.
Some experts opine that Vietnam has enough gas to fuel future supply, pointing out that PetroVietnam produces about 9 billion cubic meters of gas per year. They say that the problem resides in a lack of coordination between Vietnam’s power sector and its gas sector to achieve common objectives toward competitive energy supply. Records show that PetroVietnam only sells 5.7 billion cubic meters to EVN for power generation, for example, not the 6.6 billion cubic meters EVN said (at a Dec. 7 meeting discussing future power supply) it needs to ensure that state-owned power plants are adequately fueled.
EVN added that it has been using oil at a steep price to run power units to make up for the gas shortfall, and it will continue to do so if it cannot get more gas.
As well as ordering PetroVietnam, EVN, and Vinacomin to address future coal and gas shortfalls, officials have urged the government to further raise electricity prices to enable EVN to buy the supplies it needs and to tackle site clearances for electricity network projects with exigency.
An Atomic Future
Among Vietnam’s broader ambitions is its goal to introduce nuclear power to its supply portfolio. That goal, which dates back as far as the early 1980s, includes developing 8,000 MW of nuclear capacity by 2025 and 15,000 MW by 2030 at up to eight sites in five provinces. Following passage of a general law on nuclear energy in mid-2008, the country made public that it would begin building two reactors (Russian-built VVER-1000s, totalling 2,000 MW) at Phuoc Dinh in the southern Ninh Thuan province by 2014 for operation by 2020 and 2,000 MW more (Japanese Gen III reactors) at nearby Vinh Hai, which could come online as soon as 2021.
The government then plans to add four more units to these two sites and to build six units at three or four central sites in the provinces of Quang Ngai (Duc Thang or Duc Chanh), Binh Dinh (Hoai My), and Phu Yen (Xuan Phuong). According to the World Nuclear Association, that could mean at least one reactor coming online each year from 2020 through 2027.
The new build plans have generated heated competition among Russia’s Atomstroyexport, Toshiba-owned Westinghouse, AREVA, the Korea Electric Power Co., and China’s Guangdong Nuclear Power group.
Under terms of an October 2010 contract, Russia will finance at least 85% of Vietnam’s nuclear projects, and Russian state company Atomstroyexport will build the first project at Phuoc Dinh in Ninh Thuan province for Electricity Vietnam, using a VVER-1000 or 1200 design, starting in 2014. The turnkey project could come online in 2020. An agreement signed with Japan will see two other reactors built at Vinh Hai in Ninh Thuan province by a consortium of Japanese companies; Japan is expected to finance 85% of that project.
As well as supplying Vietnam with nuclear fuel, Russia is expected to reprocess fuel used by the Russian-built plants, though wastes will be returned to Vietnam eventually. Vietnam is also reportedly prospecting for uranium in the central Quang Nam province, where resources of 8,000 mt of uranium have been reported as being recoverable.
Fuel supply and waste storage aside, the country’s nuclear ambitions could be hampered by several critical challenges, as Doan Phac, deputy director general of the Vietnam Atomic Energy Agency—an entity overseen by the Ministry of Science and Technology—told attendees at an International Atomic Energy Agency forum for small and midsize nuclear reactors in Vienna last October. First, Vietnam lacks the human resources in almost all relevant aspects, such as policy setting and regulation, management, and technology. Second, Vietnam’s “education and training institutions are still limited,” he admitted. Then the country must overcome the hurdle of developing nuclear plants from scratch; improving infrastructure; and establishing a competent regulatory body (and one that will oversee myriad projects with several partners, requiring different technical regulations), a technical support organization, and research and development organizations.
Besides assessing and choosing third-generation technologies (of 1,000 MW or larger—though Vietnam has not excluded small modular reactors from its plans), the country must iron out how it will finance the new plants and related infrastructure, Phac said.
Meanwhile, in the shadow of the Fukushima accident, Vietnam will have to garner public support and pay particular attention to ensuring safety and security, which will, in turn, require it to join international nonproliferation organizations.
Vietnam continues to charge ahead despite these issues, Phac said, because if it doesn’t include nuclear power in its future energy strategy, it will face critical energy shortfalls. “If there will be no new resources added, the Ratio of External Dependency will be 36% in 2020 and up to 57% in 2030 and continues to increase. In this context, nuclear power development is a sound decision,” he said.
The nation is already making progress. In May 2010, the government established a steering committee, and it has embarked on a state-funded training program that includes upgrading five universities and establishing a nuclear training center. Site preparation and the creation of a legal framework and development are also of “high priority,” Phac said.
A Small Role for Nonhydro Renewables
Vietnam’s hunger for power has limited its focus to thermal, hydropower, and nuclear power in the short to medium term, but to satiate needs for a more diversified energy mix and investments, the country has initiated preliminary steps for adopting nonhydro renewable power. In 2005 the country passed a law requiring environmental assessments for new projects. At the end of 2009, the Ministry of Industry and Trade established design principles for implementation of the Vietnam Competitive Generation Market. And in 2011, the government launched pilot deployment of the market, allowing 48 out of 73 plants with a capacity of more than 30 MW to make direct offers in the market.
Even though the government has neglected to ensure practical application of these legal tools, experts say there is new momentum for broader investment in a sustainable energy supply chain, and the country has vast natural resource potential.
However, many experts agree that Vietnam has a long way to go before non-hydro renewables can make up a sizeable portion of its power profile, despite its plans to increase their share from 3% in 2010 to 5% by 2020. According to Vietnam’s Institute of Energy Director of the Center for Renewable Energy Nguyen Duc Cuong, the country must embark on a gradual removal of institutional and financial barriers. Cuong noted at a June 2011 workshop on obstacles preventing renewable energy development in Vietnam that investors in wind and biomass power found it difficult to conclude power purchase agreements with EVN because the utility only bought renewable power at prices comparable to power from fossil fuels—which it subsidized. Meanwhile, as rural electrification remains a government priority, no mechanisms exist to support off-grid distributed generation, he said.
An overview of renewable projects and plans follows.
Solar Energy. Though Vietnam’s climate varies considerably from the north to the south, the country averages 2,000 hours of sunshine a year with an average solar radiation of 4.5 to 6.5 kWh/square meters daily (about two-thirds the amount available in the southwestern U.S.). By 2011, 1.5 MW of solar power had been installed, mostly photovoltaic panels in rural communities. Vietnam had also actively backed a massive photovoltaic panel manufacturing facility in Ho Chi Minh City that would have begun operating in 2012, but its owner, U.S. firm FirstSolar, halted construction of the factory, citing a demand slump in late 2011.
Wind Energy. Vietnam is also strategically located in a monsoon zone, where the cold northeast monsoon wind from Siberia and China wafts across the nation during winter and the warm, southwest and southeast monsoon blows in from the equator during the summer. The total potential of wind energy is estimated at 713 GW, about 510 GW on land and the remainder on outlaying islands. About 42 wind power projects ranging from 6 MW to 150 MW are at different development stages, but only one project has been connected to the national grid (Figure 7). The off-grid 800-kW Bach Long Vy power plant has been in operation since the end of 2004. Under Master Plan VII, Vietnam will expand wind capacity to 1,000 MW by 2020 (0.7% of total power production), and to about 6,200 MW by 2030 (2.4% of total power production).
|7. Testing the wind. The Vietnamese Renewable Energy Joint Stock Co. (REVN) connected 20 1.5-MW wind turbines in Binh Thuan province to the national grid in March 2011. Local developer Cong Ly Co. Ltd. is planning a second phase to add 80 more turbines and bring the farm’s total capacity to 120 MW. The project, which supplies power to Vietnam’s Mekong Delta in the south, is the country’s first grid-connected wind farm. Courtesy: REVN|
Small Hydro. Vietnam’s small river basins consisting of short rivers and high river bed grades have enabled the building of 200 small hydropower plants of between 0.1 MW and 30 MW, and 800 more are in planning stages. Most projects are in the Son La, Kontum, and Lao Cai provinces.
Biomass. An age-old agricultural nation, Vietnam long ago adopted biomass for fuel, burning forestry, solid waste, and agricultural byproducts. The country produces nearly 53 million tons of agricultural waste, including rice husk from paddy milling stations, bagasse from sugar factories, coffee husks from processing plants in the Central Highlands, and wood chips from wood-processing industries. However, no projects set up to produce power using rice husk in the Cuu Long Delta localities of Can Tho, Dong Thap, and Tien Giang have succeeded so far, officials note. The Go Cat landfill 1-MW waste-to-energy plant has been operating since 2005 in Ho Chi Minh City, and two 40-MW power plants burning solid waste are in the pipeline. Future plans call for 500 MW of new biomass power in sugar mills by 2020, which will be expanded to 2,000 MW by 2030.
Geothermal. More than 300 hot streams with temperatures from 30C to 148C (86F to 298F) traverse northwestern and central Vietnam, but only about 400 MW of the country’s 1,400 MW potential could be exploited by 2020. No geothermal power installations have yet been reported in the country.
Sharpening an Iron Rod
According to Vietnam’s Master Plan VII, during the 2006–2015 period, and looking toward 2025, energy growth is forecast, in a baseline scenario, at 17% percent annually and in a high scenario at 20% per year. As Vietnam energy expert Nga Dao puts it, “For every one percent increase in GDP, therefore, power output must increase by at least two percent.”
But even if Vietnam were to meet its goals to build as much as 75,000 MW of capacity by 2020, as ordained by its master plan, it wouldn’t be enough, Tran Viet Ngai, chair of the Vietnam Energy Association, told English online newspaper Vietnam Net last August. “If the economic growth rate is higher, at 7–8 percent per annum and the living standards get improved, the capacity would not be able to meet the demand, while rural areas would face electricity shortage,” he said. Ngai was also unconvinced that the country would reach its basic goal, citing a failed previous master plan. From 2001 through 2010, under Master Plan VI, the country’s capacity grew just 3,870 MW annually.
Meanwhile, several challenges will need to be overcome, including diversifying its energy mix, securing future fossil fuel supplies, rooting out corruption, and raising enough capital to build new projects. Making strides in these realms will require a reasonable energy pricing mechanism, a phase-out of energy subsidies to achieve market prices, and improved coordination between government policy-making entities to implement policies.
The nation has made marked progress in several aspects of its power sector over the past two decades, and in two more decades, much more could certainly change. An old Vietnamese saying puts it best: Sharpen an iron rod enough, and it will become a needle.
— Sonal Patel is POWER’s senior writer.