Vietnam - Power GenerationVietnam - Power Generation
Electric power represents one of the most promising areas for U.S. commercial prospects in Vietnam. Electricity of Vietnam (EVN), a state-owned enterprise that reports directly to the Prime Minister, is the largest buyer of electricity, and holds a monopoly on transmission and distribution. Electric power is under the jurisdiction of the Ministry of Industry and Trade (MOIT). The Vietnamese government relies on the national power development plans to advance the sector. They forecast growth in demand and map out the overall development of the power industry to meet demand ten years out.
The country’s robust industrialization process has fueled a surging demand for energy in general and electricity. The GVN expects electricity consumption to grow by 10-12 percent annually through 2020, though external assessments forecast a more conservative 8 percent annual growth. This demand is attributed to increasing industrial and residential use. Power shortages are expected during this period if adequate measures are not taken to increase the supply accordingly. It is also estimated that an additional capacity of 4,000 MW will be required per year on average during from now through 2020 to meet demand.
Per EVN, by the end of 2016, the total installed capacity was approximately 38,553 MW and power generation was 164.31 billion kWh.
The government strictly regulates the retail price, recommended by MoIT and requiring approval by the Prime Minister. A unified tariff is applicable across the country and is low in comparison with other countries in the region. Both urban and rural residential rates are cross subsidized by higher rates for industry, commerce, and foreign consumers. To attract more investment from the private sector in developing IPP projects, MoIT and EVN have been working on a roadmap for price increases and the gradual elimination of government control. By current regulations EVN may increase the retail price up to 7%, twice a year, without approval from the Ministry of Industry of Trade or the Prime Minister.
Independent Power Producers (IPPs)
As EVN’s self-financing and other sources of debt financing only meet about 66 percent of the total investment requirement, IPPs are expected to carry a large portion of the investment in the power generation sector, including those to be developed by foreign investors. Now, only one U.S. company, AES Corporation, is an IPP and has invested in Mong Duong 2 Power Plant in Quang Ninh Province. This is a US$2.1 billion coal-fired power plant with a capacity of 1,240 MW. Mong Duong 2 is the largest foreign invested power project in Vietnam and the country’s first private power plant commissioned in the last ten years, per Vietnam Investment Review. AES contributed a 51% share.
Transmission and Distribution
Per EVN’s Annual Report 2016, by the end of 2015, 100% of the districts were connected to electricity; 99.59% of the communes with 98.22% of rural households have access to the power grid with a target reaching close to 100 percent by 2020. These figures may be exaggerated but were according to the plan.
Projected Expansion of the Power Transmission System to 2025
In addition to the transmission system, Jetnam developed an investment plan for the period 2011-2020 with the total capacity of 48,900 MVA for substation (S/S) and 8,219 km of transmission lines (T/L) corresponding to the total investment of $4.3 billion. The estimated investment for the development of 500 and 220 kV power transmission systems from 2014 to 2020 is estimated at $6.7 billion and the estimated investment in the distribution system during 2014–2020 is $6.6 billion, per the “Viet Nam: Energy Sector Assessment, Strategy, and Road Map,” a report issued by ADB in December 2015.
With major investments, Vietnam is expected to have an increased demand for control and protection equipment and devices such as power transformers, circuit breakers, disconnect switches, capacitors, calculated software, and telecommunication and information technology equipment.
Power Master Plan VII Revised
In 2016, the Prime Minister approved the revision of the power development plan for 2016-2020 to a vision towards 2030. The Power Master Plan VII revision emphasized renewable energy and the liberalization power market.
Establishment of a Competitive Power Market
In 2004, the Vietnamese National Assembly passed the new Electricity Law that outlines the development of a competitive electricity market. In 2006, the Prime Minister issued Decision 26/2006/QD-TTg to detail the implementation of a competitive power market.
Master Plan VII revised the priorities developing renewable energy in wind power, solar power, and biomass power. Projections are to increase the percentage of renewable energy power to 7% percent by 2020 and 10 percent by 2030.
The plan is to increase the combined capacity of all wind power plants to 800 MW by 2020 and 6000 MW by 2030 and to raise the percentage of wind power from almost zero to 0.8 percent by 2020 and 2.1 percent by 2030. Low feed-in-tariffs and an underdeveloped regulatory environment continues to hinder investments. In 2014 the GVN increased the feed-in-tariff for renewable power generated from solid waste plants to US$10.5 cents per KW/h.
The GVN promulgated Decision 37/2011/QD-TTg outlining incentives for wind power development, under which EVN will pay US$6.8 cents per KWh and the State will contribute US$1 cent per KWh, allowing investors to receive a total US$7.8 cents per KWh. There have been 50 wind power projects in 15 provinces with a total capacity of 5,000 MW registered. Only three projects with a total of 50 MW have been added to the national grid due to appropriate feed-in-tariffs and investment capital. The GVN approved a new FIT for solar power which is 9.38 cents, effective from June 2017.
In November of 2016, the Vietnamese government decided to postpone its nuclear power program.
FDI Encouragement and Challenges
The Government of Vietnam’s policies are to diversify investment sources, encourage foreign investors in power development with BOT, BOO, and PPP. However, Vietnam faces several challenges; electricity prices are still low, existing thermal power plants are unable to buy coal at an economical price, leading to unattractiveness of new power plant projects. The procedures for investors under BOT arrangements are still complicated with insufficient guidelines and equipment prices have increased, leading to increased production costs which reduce the financial attraction of power generation projects.
EVN estimates that around $123.8 billion will be channeled into the development of the national power system within the next twenty years. Spending will average $6.8 billion per year. Of this, 66 percent will be spent on power plants and the remaining 33.4 percent on network development.
A 2016 EVN report, for the period of 2015-2017, stated that EVN secured US$2.8 billion for their important power projects from official development assistance and foreign concessional loans. WB and ABD are the two largest donors.
In detail, Vietnam plans to invest in and up to 98 power plants with a total capacity of 59,444 MW, of which EVN would build 48 power plants with 33,245 MW, with an estimated total investment of $39.6 billion.
The power generation market can be divided into five segments: (1) consulting and engineering services, including project management, (2) installation and construction services, (3) machinery, equipment and materials, (4) supply of equipment, spare parts, materials, consumables, and overhaul and maintenance services (aftermarket), and (5) investment in new IPP power projects in the form of BOT, BT, BTO and JV.
The power transmission and distribution market has four main areas: (1) consulting and engineering services, project management, (2) installation and construction services, (3) high, medium, and low voltage electrical equipment for the national grid, and (4) medium and low voltage electrical equipment for industrial, institutional and household users.
In the Department of Commerce’s Smart Grid Top Market January 2017 Update Report, Vietnam ranked as number 14 for overall opportunities for electricity transmission, distribution, and storage firms. It further was ranked fourth for transmission and distribution equipment. The country is also regarded to have an unmatched supply of wind resources in Southeast Asia, which could thrive under the right energy policies. This could bring opportunities for U.S. engineering firms that have expertise in wind power projects.
USTDA has funded nearly 80 activities valued at US$20 million in Vietnam over the last 20 years. Vietnam represents the Agency’s largest country portfolio in Southeast Asia. Through feasibility studies, technical assistance and pilot projects, USTDA’s Project Development Program helps overseas project sponsors identify technological solutions and various sources of financing for priority infrastructure projects. Working with Electricity Vietnam (EVN) and its subsidiary, the National Power Transmission Corporation (EVN-NPT), USTDA is supporting the development of an Information Technology and Smart Grid Roadmap. In addition, USTDA will host a reverse trade mission (RTM) in August 2017 that focuses on smart grid development and implementation, with an emphasis on power distribution efficiency technologies.
U.S. companies will find significant business opportunities in the above market segments, including:
- Equipment sales for ongoing and upcoming power generation projects, and gas-fired and renewable power.
- Investment in IPP projects in the form of BOT, BT, BTO and JV.
- EVN/NPT-funded power transmission and distribution projects.
The following Web sites may be valuable resources for U.S. companies interested in exploring business development opportunities in Vietnam’s electric power industry.
- Electricity of Vietnam Group (EVN)
- Ministry of Industry and Trade (MoIT)
- PetroVietnam Power Corporation (PV Power)
- Vietnam National Power Transmission Corporation (NPT)
Tuyet Trees, Commercial Specialist
U.S. Embassy in Hanoi
Triet Huynh, Commercial Specialist
U.S. Consulate General in HCMC
E-mail : Triet.Huynh@trade.gov Prepared by our U.S. Embassies abroad. With its network of 108 offices across the United States and in more than 75 countries, the U.S. Commercial Service of the U.S. Department of Commerce utilizes its global presence and international marketing expertise to help U.S. companies sell their products and services worldwide. Locate the U.S. Commercial Service trade specialist in the U.S. nearest you by visiting http://export.gov/usoffices.
Vietnam Energy Trade Development and Promotion