In Vietnam, Power Appetite Outruns Availability

Published: 14/08/2012 at 02:58 PM
Newspaper section: Asia focus

Energy sources around the world are being depleted while demand is increasing, a simple and sobering fact for developing countries that face crises in the near future if they cannot secure their energy supplies.

In Vietnam, power shortages and cuts have been an obsession of people and businesses since 2007. Conditions worsened in the hot seasons of 2010 and 2011 when power was cut two or three times a week, disturbing the lives of millions of people and causing heavy losses for businesses.

International newspapers frequently report that persistent electricity shortages deter foreign companies from investing in what should be one of Asia’s most promising destinations.

From 2008-11, the country witnessed a 14.4% annual increase in electricity consumption from 62.6 terawatt-hours (TWh) to 93.6TWh (one TWh per year equals 114 megawatts). At the same time, electricity generation capacity rose only 13.7% per year.

Vietnam relies mainly on thermal sources and hydropower for its electricity. Thermal generation accounts for 73%, of which natural gas made up 44%, coal 27% and oil-fired generation 2%. Hydropower, the leading fuel a few years ago, now accounts for only 27% of generation capacity.

Power imports from China have been around 1 TWh per year and are used to supply several northern provinces.

Vietnam is forecast to be a power importer by 2015, given forecast annual power consumption increases of 15% on average.

The government’s expansion plan is intended to diversify energy sources, with coal’s share forecast to rise to 46%, while natural gas would decline to 29% and hydropower to 23%.

Vietnam, a net coal exporter, in 2011 imported coal for the first time from Indonesia to fuel plants in the central and southern regions. The state-run coal group Vinacomin, expects imports at 10 million tonnes a year by 2015 to supply thermal power plants.

Under the power master plan for 2011-30, the country projected that new power plants with a total capacity of at least 20,000 MW would come online between 2011 and 2015. To make this a reality, the government has been gradually liberalising the power sector.

From 2005-14, authorities have been focusing on establishing a competitive power generation market and eliminating subsidies. From 2015-22, a competitive wholesale market will take shape, and the retail market will be liberalised from 2022 onward.

Electricity prices in Vietnam, among the lowest in the region, now can be adjusted four times per year depending on changes to input prices. The current price is about 7 US cents per kWh and is expected to rise to 8-9 cents by 2020.

Because energy resources are being exhausted rapidly, the Vietnamese are eagerly seeking alternative sources and giving priority to developing wind and nuclear power plants.

According to the master plan, the share of renewable energy including wind, solar and biomass should increase from almost zero to 4.5% in 2020 and 6% in 2030.

In October 2011, Vietnam’s Development Bank signed an agreement worth $1 billion with the US Export-Import Bank to fund the development of new wind power plants in the provinces of Bac Lieu, Soc Trang and Kien Giang in the Mekong Delta area.

At the meantime, in open contradiction to the global anti-nuclear sentiment that has emerged in the wake of the Fukushima crisis in Japan last year, Vietnam continues to affirm its determination to developing nuclear power.

Plans are afoot to start building the country’s first nuclear power projects in southern Binh Thuan province, including two plants with a total capacity of 4,000 MW. The Ninh Thuan 1 plant will be built in 2014 with Russian technology and start operating in 2020. Currently the plant is in the planning stage. Ninh Thuan 2 will be built in 2015.

By 2050, nuclear power is expected to account for 15-20% of total capacity in Vietnam.

“Development of nuclear power is an inevitable choice in the energy structure of Vietnam. Following the development of Ninh Thuan 1 and Ninh Thuan 2, safety will be the top priority,” said Hoang Anh Tuan, deputy director of the Atomic Energy Department at the Ministry of Science and Technology.

Currently, the government is doing public-relations work to promote the benefits and safety of nuclear power. It is also committed to spending around $143 million for human resources development.

However, according to the market research company Business Monitor International, financial constraints and impediments to the business environment (poor institutions, high corruption, and red tape) are likely to obstruct project development, imposing substantial delays and possibly derailing some of the projects, especially those in the nuclear segment.

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