Wholesale electricity market in 2019: The "race" begins!

After the pilot phase, Viet Nam wholesale electricity market (VWEM) has officially come into operation since January 2019. The activeness of five Power Corporations plus the participation of some large power plants in the market are fundamental advantages for VWEM to officially enter the "race".

Proactive and ready

In 2018, VWEM switched from the pilot phase to the real payment phase, instead of simulating calculations as previous periods. Accordingly, power generation corporations and power distribution corporations actively participated in the market; in particular, power distribution corporations who joined the electricity market for the first time had a change in their awareness as well as implementation arrangement.

Mr. Nguyen Anh Tuan - Director of the Electricity Regulatory Authority of Viet Nam (Ministry of Industry and Trade) said that, in the past power corporations had not or did not pay much attention to electricity generation forms, electricity prices, operation schemes, dominant power sources, the stability of operation, etc. Over the last year, these corporations changed their minds, actively approached and learned how to deal with power plants to attain efficiency as electricity is traded in the retail market at a uniform tariff across the country, etc. The power corporations have enhanced capabilities of their human resources in forecasting loads, examining, cross-checking, reviewing, certifying payment statements, especially improving the capacity of their metering systems.

The operation of VWEM has increased transparency and served as a basis for assessing the suitability of wholesale electricity market operating schemes with the approved detailed design. In addition, the market participants have had opportunity to familiarize themselves with the new operating scheme, enhancing training to improve the capacity of electricity market operation.

In 2018, three important requirements were timely met to serve the operation of VWEM: Legislative system; human resource training and infrastructure preparedness. In particular, the National Load Dispatch Center (A0) has prepared equipment infrastructure (hardware, software) to meet requirements of VWEM operation since early 2019.

It is expected that from the beginning of 2019, some big power plants will participate in the competitive wholesale electricity market such as: Vinh Tan 4, Vinh Tan 4 Extension and Thai Binh 1 Thermal Power Plants. These power plants have possessed adequate IT infrastructure systems and been ready to participate in the competitive wholesale electricity market.

EVN’s member organizations are ready to participate in the competitive wholesale electricity market which will officially operate from 2019

Challenges are still ahead

Although preparation works for VWEM operation are done, many challenges are still ahead. One of the difficulties is to build a cross-subsidy mechanism among power corporations. Currently, all inputs (power generation) are determined on the basis of market prices, whereas power retail tariffs persist to be regulated, and among power corporations there always exist differentiations in revenues as well as costs, etc.

For example, currently, the volume of electricity purchased in the market of the Northern Power Corporation accounts for only 4.42% and is expected to be 12% of the total electricity purchase in 2019. Without a proper cross-subsidy mechanism for this volume of electricity purchased in the market, the Northern Power Corporation will suffer more losses than other corporations due to specific characteristics of their service areas which are mountainous and remote areas, where the cost is very high but the average retail tariff is low, etc.

In this regard, Mr. Nguyen Anh Tuan said, the Ministry of Industry and Trade will carefully consider and introduce a cross-subsidy mechanism on prices, enabling power corporations’ financial balances. However, the power corporations need to pay special attention to investment in infrastructure systems, metering systems, as it is very important for these corporations in order to gather sufficient data as well as cross-check with other units. The metering data gained through these systems will help forecast load demands accurately, especially the newly arisen loads.

In addition, the official operation of competitive wholesale electricity market in early 2019 will face many challenges, due to the forecast that hydropower sources will not be abundant and coal supply for thermal power plants will encounter difficulties. Although some solar power projects will possibly complete before June 2019, the transmission capacity in the Central Highlands and the South Central region will yet to be adequately capable.

Mr. Nguyen Duc Cuong, Director of the National Load Dispatch Center, said that the Ministry of Industry and Trade assigned EVN to carry out a supply - demand balance for 2019, which concretely determines contribution portions of power sources (hydropower, coal fired, gas turbines, renewable energy), whether there will be power redundancy or shortage, how to allocate for every month, etc. It is predicted that in 2019 the load demand will increase at the same pace as 2018, but the energy mix will not be favorable.

It is known that in order to increase the capacity of power generation sources as well as to encourage power plants’ active participation in the electricity market, from 2019, the Ministry of Industry and Trade requests that all power plants which sign power purchase agreements with EVN from the commercial operation date will directly participate in the electricity market. At the same time, the Ministry continues to study and develop a mechanism to bring EVN's multi-purpose strategic hydropower plants into the competitive generation market. In the long term, it will analyze and build a mechanism to encourage renewable energy power plants to join the electricity generation market, etc.

Mr. Nguyen Anh Tuan affirmed that the complete preparation for the official operation of wholesale electricity market from the beginning of 2019 hopefully will create an open and transparent VWEM.

As of the end of 2018, 87 power plants directly participated in the electricity market, with a total capacity of nearly 23,000MW, accounting for 49.12% of the installed capacity of the whole system.

  • 08/01/2019 03:38
  • evn.com.vn