Electricity shortage unlikely, but prices must rise: analysts

The government last week ordered the Ministry of Industry and Trade, the State Capital Investment Corporation, and state power provider Vietnam Electricity to ensure enough coal sources for thermal power plants to operate at maximum capacity, and this shows that a shortage is not a concern next year, Bui Xuan Hoi, president of the Northern Electricity College, told a meeting Tuesday.

But Hoi was worried about the fact that retail prices had been kept unchanged for four years until this May, proving that they were not updated to coincide with market fluctuations such as coal, oil and gas price hikes.

"We eventually need to start amending electricity prices according to market developments."

As per the nation’s latest official Power Development Plan 8, Vietnam needs $132 billion to develop power projects and the state coffers alone cannot cover the high cost. Thus, private investment is needed.

But inviting private funds requires the government to improve its legal framework to reduce risks and ensure profits, Hoi said.

"If the current low prices remain unchanged, we will not have a competitive electricity market. Changes to ensure profits for private investors will guarantee electricity security."

Nguyen Duc Kien, former deputy head of the National Assembly’s Economic Committee, said that having the government set retail prices creates many issues.

Prices should be changed many times per year to follow market changes and create competition, he said.

The Ministry of Industry and Trade recently proposed that the government shorten the frequency of price review and changes from six months to three months.

Analysts also urged the government to connect more renewable sources to the national grid.

Hoi proposed the government consider buying from rooftop solar sources and resolve the issues faced by developers of wind and solar power projects.

Transmission capacity needs to be increased, he said, adding that a 500-kilovolt line connecting the northern province of Hung Yen with the central province of Quang Binh needs to be completed before June next year.