Business
Vietnamese government seeks investment in energy market
Vietnam aims to increase renewable power output from 58 billion kWh in 2015 to 101 billion kWh by 2020 and 186 billion kWh by 2030, equivalent to 7 percent of total supply in 2020 and 10 percent in 2030
The Vietnamese government is looking for investment capital in the energy industry, especially in renewables, in a move to meet the country’s rapidly rising power demands, officials said.
According to Phan The Anh, deputy head of the Ministry of Industry and Trade in the southern region, the government is seeking responsible and sustainable investment in the energy industry that not only secures the future of the country but also protects the environment.
The move was made as the country’s energy demand is forecast to increase by over 10 percent yearly in 2016-2020 and by 8 percent in 2021-2030, buoyed by the country’s industrial growth, urbanization, increase in residential energy usage and adoption of mechanized transportation systems.
Electricity demand is expected to be 265-278 Terawatt hours (TWh) in 2020 and 572-632 TWh in 2030 versus 86 TWh in 2010. To meet this growing demand, Vietnam needs to add 6,000-7,000MW of capacity annually at a cost of US$148 billion by 2030.
Anh said the government has recently revised the National Power Development Plan to increase the share of renewables like biomass, solar and wind to reduce the gap between demand and supply.
It aims to increase renewable power output from 58 billion kWh in 2015 to 101 billion kWh by 2020 and 186 billion kWh by 2030.
That will be equivalent to 7 percent of total supply in 2020 and 10 percent in 2030, and go a long way in ensuring energy security, environmental protection and sustainable socio-economic development and mitigating climate change.
It is estimated that the country’s renewable power development will require investment of US$23.7 billion by 2030.
Reasonable prices needed
Dao Quoc Vu, a senior expert at Electricity of Vietnam (EVN)’s power market department, said the energy industry should turn to seeking investment from private and foreign investors.
The country has immense wind and solar potential which is sufficient to address the growing power demands, but low feed-in-tariffs (FiTs) have deterred foreign investors due to large investment costs. The government thus needs to gradually increase FiTs or at least adopt a price plan so that investors would be aware of the expected price hikes in the future.
“It’s necessary to increase competition to improve efficiency and ensure reasonable prices and the level of competition in the power market should be gradually increased to strengthen incentives for efficiency,” Anh said.
In addition, experts suggested if Vietnam can introduce a bankable power purchasing agreement (PPA), it could lead to an increase in international financing, which would help the country to meet its renewable energy goals.
Negotiating PPA standards with the country’s sole power distributor EVN is also time-consuming, which leads to an increase in the total project costs. PPA negotiations have to be more efficient to reduce overall costs to investors due to delays.
Quality and sourcing of data for renewable energy sub-sectors should also improve to ensure clarity for investors about available locations, infrastructure capabilities, and government’s targets, experts said.
As the renewable energy sector picks up the pace in the coming decade, the government also needs to focus on developing the human resource capability.
Besides, a competitive supporting industry with the participation of small- and medium-sized enterprises (SMEs) plays a crucial role in the development and quicker adoption of renewable energy technologies as it will help in reducing investment costs for renewable projects. The government thus should promote domestic SMEs through capital subsidy and incentives such as tax breaks and preferential loans, experts suggested.
Renewable power development will need investment of US$23.7 billion by 2030
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The move was made as the country’s energy demand is forecast to increase by over 10 percent yearly in 2016-2020 and by 8 percent in 2021-2030, buoyed by the country’s industrial growth, urbanization, increase in residential energy usage and adoption of mechanized transportation systems.
Electricity demand is expected to be 265-278 Terawatt hours (TWh) in 2020 and 572-632 TWh in 2030 versus 86 TWh in 2010. To meet this growing demand, Vietnam needs to add 6,000-7,000MW of capacity annually at a cost of US$148 billion by 2030.
Anh said the government has recently revised the National Power Development Plan to increase the share of renewables like biomass, solar and wind to reduce the gap between demand and supply.
It aims to increase renewable power output from 58 billion kWh in 2015 to 101 billion kWh by 2020 and 186 billion kWh by 2030.
That will be equivalent to 7 percent of total supply in 2020 and 10 percent in 2030, and go a long way in ensuring energy security, environmental protection and sustainable socio-economic development and mitigating climate change.
It is estimated that the country’s renewable power development will require investment of US$23.7 billion by 2030.
Reasonable prices needed
Dao Quoc Vu, a senior expert at Electricity of Vietnam (EVN)’s power market department, said the energy industry should turn to seeking investment from private and foreign investors.
The country has immense wind and solar potential which is sufficient to address the growing power demands, but low feed-in-tariffs (FiTs) have deterred foreign investors due to large investment costs. The government thus needs to gradually increase FiTs or at least adopt a price plan so that investors would be aware of the expected price hikes in the future.
“It’s necessary to increase competition to improve efficiency and ensure reasonable prices and the level of competition in the power market should be gradually increased to strengthen incentives for efficiency,” Anh said.
In addition, experts suggested if Vietnam can introduce a bankable power purchasing agreement (PPA), it could lead to an increase in international financing, which would help the country to meet its renewable energy goals.
Negotiating PPA standards with the country’s sole power distributor EVN is also time-consuming, which leads to an increase in the total project costs. PPA negotiations have to be more efficient to reduce overall costs to investors due to delays.
Quality and sourcing of data for renewable energy sub-sectors should also improve to ensure clarity for investors about available locations, infrastructure capabilities, and government’s targets, experts said.
As the renewable energy sector picks up the pace in the coming decade, the government also needs to focus on developing the human resource capability.
Besides, a competitive supporting industry with the participation of small- and medium-sized enterprises (SMEs) plays a crucial role in the development and quicker adoption of renewable energy technologies as it will help in reducing investment costs for renewable projects. The government thus should promote domestic SMEs through capital subsidy and incentives such as tax breaks and preferential loans, experts suggested.
