In the 2016 – 2030 period, the most important objective of Power Master Plan VII (adjusted) is to supply sufficient power for socio-economic development, meeting the annual average GDP growth rate of 7%. Accordingly, the volume of power produced and imported in 2020 shall be about 265-278 billion kWh; in 2025 about 400-431 billion kWh, and in 2030 about 572-632 billion kWh.
For sourcing sufficient capital for electricity constructions, EVN is not the only one responsible.
To accomplish this goal, by 2020, the total capacity of the power sources shall reach about 60,000 MW. By 2025 and 2030, the total power outputs shall reach 96,500 MW and 129,500 MW respectively. Thus, from now to 2020, Vietnam needs to finish and put into operation about 21,200 MW of all types of power sources.
For the transmission system, from now to 2030, the 500 kV and the 220 kV transmission lines are expected to be additionally built by 10,052 km and 14,999 km respectively; total additional capacity of 500 kV and 220 kV substations shall be 76,650kVA and 101,604 MVA respectively.
According to the Power Master Plan VII (adjusted), the total capital investment for the power sources and networks (excluding the those invested under BOT) in the 2016 to 2030 period is about USD 148 billion. From now until 2020, Power Sector needs about USD 7.9 billion (over VND 160,000 billion) to build power sources and networks each year.
Upcoming challenges…
According to Chairman of the Vietnam Energy Association (VEA) – Mr. Tran Viet Ngai, Vietnam is a developing country, so it needs big capital investment to build synchronized power sources and a power grid system. In fact, to build a big power system like the present, for more than 40 years, in addition to self-funded capital guaranteed by the Government, EVN had to mobilize other funding sources such as ODA, borrowing from commercial banks, etc., of which the foreign capital accounted for 80%.
The huge amount of capital required under the Power Master Plan VII (adjusted) is such a major challenge that it is beyond the self-mobilization capacity of EVN. For the sources of revenues, EVN mainly relies on electricity sale prices. Particularly, in recent years, prices of input materials for the production of power, such as coal, gas, etc., has kept increasing, resulting in the increase in power production costs, too.
Meanwhile, electricity price only goes up slightly and is pressurized from the macro-economic stabilizing policy and social security issues, etc. This also means that the accumulated profit of the power sector for development and investment is not high. On the other hand, as SOEs, EVN still has to perform political duties, social security, etc., leading to resources being dispersed.
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Mr. Allard M. Nooy - Chairman of Renewable Energy Corporation in Lao Cai:
To attract foreign investment in the field of electricity, Vietnam needs to have stable, long-term mechanisms and policies to reassure investors; to consider measures of reducing the risk of exchange rate; etc., On the other hand, electricity tariff should be imposed at an attractive rate, but considering the low income people in society.
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Until now, the most viable funding to implement major power projects is the preferential loans from abroad. However, the Government and international funding organizations are increasingly tightening their lending and loan using conditions.
For example, no loan shall be made to develop coal power projects using old, outdated technologies, not meeting environmental protection requirements. Assuming that a project is eligible for the loan, the period from negotiation for signing the loan contract until the contract being effective for disbursement takes a rather long time, causing bad impacts on the implementation progress of projects. Besides, these projects are subject to risks due to fluctuations in the exchange rate.
The solution to this problem is to encourage local and foreign investors to put investment in developing the power system. However, because power projects require a large capital and capital recovery time is prolonged and risky, while electricity price is low, it is difficult to attract investment from businesses.
What solution to choose?
In Power Master Plan VII (adjusted), the Government also gives solutions to create investment funds for the development of the Power sector such as: equitizing corporations under EVN and other power units; gradually increasing the capacity to mobilize internal financial firms in the electricity industry (self-accumulated capital); Power corporations having to make efforts in improving the management, production and business to achieve higher financial credibility as a basis to mobilize capital without any guarantee from the Government; strengthening the mobilization of funds through issuing bonds inside and outside of the country; implementing joint ventures, affiliating to attract domestic and foreign investment; strengthening the attraction of foreign direct investment into the development of power projects as well as sources of preferential development assistance, commercial loan, etc.
Besides, there need the solution for electricity prices following the market mechanism; creating an investment environment, encouraging comprehensive competition, etc.
According to economic experts, the above solutions are quite comprehensive, but also orientative and the more important solution is how to implement them in reality. For this, there should be specific mechanisms and policies, detailed instructions and synchronization to actually create more favorable conditions to attract more enterprises’ participation. EVN or energy groups such as Vinacomin, PetroVietnam alone can not be strong enough to fulfill the above-mentioned goals.
Total investment for power generation and network development under the adjusted Power Master Plan VII (excluding the power being invested in the form of BOT contracts):
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Period
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Total capital (billion USD)
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Year Average (billion USD)
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Power sources investment rate (%)
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Power networks investment rate (%)
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2016 - 2020
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40
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7.9
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75
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25
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2021 - 2030
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108
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10.8
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74
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26
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