WB expert: Electricity tariff is low, Vietnam is among the top electricity consumption countries in East Asia

Mr. Franz Gerner, Head of Energy Team at the World Bank in Vietnam, said that the prevailing electricity tariff in Vietnam is still lower than those in neighboring countries such as Laos, Cambodia and Indonesia, etc.

On December 1, 2017, the Ministry of Industry and Trade decided to revise the average electricity tariff by 6.08% from VND 1,622/kWh to VND 1,720/kWh. This is the only electricity tariff increase in the recent three years.

The reporter had a talk with Mr. Franz Gerner, Head of Energy Team in the WB in Vietnam about this issue.

Reporter: What do you think about the recent decision by the Ministry of Industry and Trade to increase the electricity tariff by 6.08%?

Mr. Franz Gerner: The main challenge facing Vietnam Electricity (EVN) at present is the inability to increase the electricity tariff in proportion to the increase of costs.

Currently EVN operates at low cost but the low electricity tariff has made the financial situation of EVN not satisfactory. Electricity tariff has been frozen since 2015 at USD 0.076 per kWh, while the total electricity production cost is USD 0.113 per kWh in 2017.

This increase will help bring the electricity tariff closer to a level fully reflecting production costs that all consumers can afford and at the same time protect low - income consumers through the existing available social security network.

Reporter: Do you think that the current roadmap for raising electricity tariff is appropriate? Is the electricity tariff high or low? How is Vietnam compared to other countries in the region and in the world?

Mr. Franz Gerner: The current electricity tariff is lower than the price that EVN has to pay to purchase electricity from power sources in the future, including renewable energy and thermal power. The demand for investment in electricity production has been increasing rapidly in order to meet the increasing demand for electricity. To meet that need, the electricity tariff should reach USD 0.143 per kWh by 2021.

Energy potentials and electricity production costs vary from country to country.  In the case of Vietnam, the inexpensive sources such as hydropower, coal fired, or gas fired power have been fully exploited to generate electricity. All the new electricity output generated from imported coals and domestic gas reserves will have higher production costs.

Despite the fact that productions costs vary among different power sources, the electricity tariffs applicable to industrial and business customers in Vietnam are relatively low compared to other countries at the same development level (GDP per capita) in the region and the world. For example, the electricity tariffs in Cambodia, Laos, the Philippines and Indonesia are US cent 19, US cent 9, US cent 14.6, and US cent 7.3 per kWh, respectively.

Reporter: The load growth rate in Vietnam is forecasted to increase at double digits in the period 2016 - 2020. How much should Vietnam invest in new power projects each year? Is the current tariff attractive to foreign investors?

Mr. Franz Gerner: As the economy grows rapidly, the demand for electricity in Vietnam is increasing rapidly at about 8% per year from now until 2020. At that rate, the total investment capital needed will be around USD 12.8 billion (USD 11 billion invested in generation sources and USD 1.8 billion invested in power transmission and distribution) during the period 2016 - 2020.

The traditional model of funding the power sector of Vietnam which relies heavily on public investments will be no longer feasible at present because the Government will not continue to provide EVN with guarantees for borrowings from commercial banks and international financial institutions.

Vietnam is one of the countries consuming most electricity in the Pacific East Asia, therefore, intensifying energy savings and conservation is the cheapest way to avoid raising power generation capacity in the context of increasing demand for electricity. To this end, the World Bank offers a comprehensive financial and technical support package that promotes energy savings in plants.

Reporter: Thank you Sir!

  • 14/12/2017 05:44
  • evn.com.vn