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Home / Economy / Industry
Vietnam suffers power shortage risk amidst uncompetitive prices
Minh Tam 08:10, 2018/07/27
Vietnam will face a severe shortage of electricity in the next few years as domestic demand is surging rapidly while investment in the industry isn`t attractive due to low retail price.
According to experts, the country's robust industrialization process has fueled demand for electricity. The government estimated electricity consumption to grow by 10-12 percent annually through 2020, thus power shortages are expected during this period if adequate measures are not taken to increase the supply accordingly.
 
Vietnam will need US$10 billion per year for the construction of power plants.
Vietnam will need US$10 billion per year for the construction of power plants.
In the revised Power Development Plan VII (PDP 7) released in 2017, installed power-generation capacity in Vietnam amounts to 42.13 GW, of which 37.6 percent is hydropower and 34.3 percent is coal-fired thermal power.
It also sets out US$148 billion worth of investments to increase power generation and develop the electricity network, with US$40 billion to be spent in the 2016-2020 period, of which 75 percent is to be directed to power sources and 25 percent to grid development.
Deputy Minister of Industry and Trade Hoang Quoc Vuong said that the country will need to generate an addition of 6,000-7,000 MW of power yearly to meet the nation's GDP growth of 7 percent in the next few years.
It means the country will need US$10 billion per year for the construction of power plants, exclusive funding for power transmission and distribution, Vuong estimated.
Hindrance to investors
Head of the Party Central Committee for Economics Affairs Nguyen Van Binh said that the state budget cannot afford the whopping investment capital amount amidst the nation's high public debts.
As the country's largest electricity producer Electricity of Vietnam (EVN)'s self-financing and other sources of debt financing only meet about 66 percent of the total investment requirement, independent power producers are expected to carry a large portion of the investment in the country's power generation sector, including those to be developed by foreign investors. 
However, the country currently has only 4 BOT power plants invested by foreign firms in operation while 14 projects are still under negotiation, far behind schedules according to the Power Development Plan VII. Among them, AES Corporation from the US has invested in the US$2.1 billion Mong Duong 2 Power Plant in Quang Ninh Province, which has a designed capacity of 1,240 MW. 
Experts attributed the less attraction of the country's power industry to the uncompetitive power retail price. Currently, the government strictly regulates the retail price, which is recommended by the Ministry of Industry and Trade and then requires approval by the prime minister. A unified tariff is applicable across the country and is low in comparison with other countries in the region. The government has so far also decided not to increase the power retail price this year to control inflation under 4 percent as targeted.
To attract investors to the country's power industry, Deputy minister of Industry and Trade Hoang Quoc Vuong proposed that special regulations should be applied for billion-dollar power plants to speed up its construction, of which price policy should follow market mechanism.
The MoIT and EVN have been also working on a roadmap for electricity price hike and the gradual elimination of government control in the sector, Vuong said. 
World Bank expert Dilip R.Limaye also expected that a higher power retail price will force consumers to save energy as in other countries such as China and India. 
In Vietnam, despite the government's efforts, the energy saving rate has remained modest with only 6 percent in the 2011-2015 period, the expert said.
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