Power shortage may pose a development challenge for Vietnam

Vietnam could run into electricity shortages over the next five to seven years as pressure builds to cut back on coal and hydropower plants, funds become scarce and there is little investor interest in energy projects.

The Ministry of Industry and Trade (MOIT) expressed this concern in a recent meeting with Party General Secretary Nguyen Phu Trong.

Hoang Quoc Vuong, Deputy Minister of Industry and Trade, told Trong that the power sector faced many difficulties in meeting the target of producing 96,000MW by 2025.

The state’s push for less coal and hydropower and more renewable energy projects, limited funding, slow pace of major power projects and lack of private sector interest, including that of foreign investors, were some of the major difficulties, Vuong said.

“Renewable energy is expensive field, given the nation’s income level,” Vuong said.

“At the same time, provinces are shying away from building coal and hydroelectricity power plants due to their environmental impacts, and the sector already faces difficulties in finding suitable project locations before asking for a business license.”

Funding is another problem that the sector faces. Nguyen Van Binh, head of the Party’s Central Economic Commission, said sourcing capital for power projects was an “extremely difficult” challenge.

“How can we find funds for future energy projects when the country’s public debt is still high?” Binh asked.

He said Vietnam needs a $10 billion budget to keep power generation rising at the required pace, and by 2035, this could reach up to $60 billion.

Vuong also said that power provider sector was still working to attract foreign investors but there were several barriers in this area as well. Binh also mentioned the need to attract greater investment from the private sector.

The slow pace of projects was adding to the pressure at a time Vietnam aims to increase the annual production rate by 6,000-7,000 megawatts each year for the next 15 years.

At the moment, construction has begun on just four BOT power projects while up to 14 are still in negotiating stages. These projects are large and will take a long time to finish, Vuong said.

He urged the government to establish a committee to tackle current and future problems in the power generation sector, and to expedite major projects.

Deputy Prime Minister Trinh Dinh Dung acknowledged that finding a middle point between supply and demand for electricity was still a challenge for the industry.

“Electricity shortage is inevitable, which will affect economic growth and the people’s lives,…” Dung said.

The government has asked MOIT to come up with contingency plans for electricity shortage and suggest possible solutions like importing electricity from Laos.

Party General Secretary Trong also recommended that MOIT studies and monitors power issues both nationally and internationally to foresee all possible developments.

Deputy PM said Dung said that while hydropower plants are very important, MOIT should carefully study environmental impacts and possible disasters for it proposes any project.

Until now, Vietnam has been able to meet the country's demand for electricity, especially during the recent heat wave in the country's northern and middle regions, Vuong said.

Electricity Vietnam, EVN, said that on July 2, power consumption in the north reached a record-breaking 345 million kWh, an increase of 6 million kWh over the previous high on June 22 this year. This figure was also 12 percent higher than the country’s peak electricity consumption day last year.