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INVESTMENT OPPORTUNITIES IN VIETNAM - Part 2. Electricity and renewable energy
Investment Opportunities IN VIETNAM [1]
PART II. Electricity and renewable energy
PART II. Electricity and renewable energy
Electricity and renewable energy Vietnam's energy consumption increased significantly, where the energy consumption structure shifted towards industrialization. Currently many coal mine projects with large capacity are construction invested; commercial coal mining output has increased; hydroelectricity developed rapidly, wind power and solar power started to grow at high speed. The electricity industry actively converts to the market mechanism; mobilizing great resources for development investment with the participation of many economic sectors, the core of which is state-owned enterprises.
Currently, Vietnam still has energy shortages due to resource limitations, the amount of coal imported for electricity production in 2020 is expected to be 12 million tons and will more than double in 2025 with 30 million tons and, by 2030, will be 50 million tons. Meanwhile, coal is almost exhausted and renewable energy sources such as wind and solar are heavily dependent on price mechanisms as well as large investments.
Risks such as environmental impacts, can heavily affect the development of hydropower, which have influenced the national green development strategy.
Vietnam's renewable energy sources are considered to have great potential, but still depend on weather conditions, climate and terrain. Electricity projects require large investment capital, loan structure up to 70% of total capital needs, prolonged repayment period leading to risks of fluctuating interest rate, exchange rates, investment mechanisms due to strict control of Vietnam Electricity corporation (EVN).
The power grid system has not met the requirements of power transmission leading to many wind power / sun power projects that have invested in the grid system being overloaded, making it impossible to sell off the electricity produced. Some wind power projects operating before the new preferential price issued are also subject to the inability to distribute all the electricity produced on the grid.
• Status of electricity production and consumption in 2015 - 2019
CAGR of the total supply in the period 2015 - 2019 reached 10.4%, which the domestic production source accounts for about 99% of the total output. Vietnam still imports electricity mainly from two sources, China and Laos. From 2013 to 2019, electricity output EVN purchased from China reached nearly 14 billion kWh and 1.1 billion kWh from Laos.
Renewable energy has not been widely applied for electricity development, 88.6% of electricity produced from renewable energy in Vietnam is from small hydropower plants (capacity less than 30 MW). Wind power and other renewable power sources contributed very little (0.4%) to the nationwide electricity production structure. By the end of 2019, there are 87 solar power plants, with a total capacity of about 4,464 MW connected to the national grid to increase the solar power capacity of solar power, accounting for 8.28% of the installed capacity of Vietnam's power system. Currently, EVN exclusively holds segments from electricity wholesale, transmission, distribution to retail. The electricity trading company (EPTC) under EVN is the only unit that is allowed to buy electricity wholesale from all generators in the market and wholesale it to power distribution companies. The Northern and Southern Power Corporations are the two units with the greatest commercial electricity output in the country in 2019 because these are in the prime industrial zones.
In 2019, electricity supply for the industrial and construction sectors accounted for the highest proportion with 53.8%, being an increase of 6.5 compared to the same period in the previous year. This is followed by electricity supply for the management and consumption sector, accounting for 32.9% of the total commercial electricity output nationwide. Ranked 3rd is the commercial area are hotels and restaurants with 5.6%. The agricultural, forestry, and fisheries sectors account for- 3.1%. Although accounting for a very small proportion of the total electricity consumption structure, the agriculture, forestry and fisheries sectors have shown good signs of growth in recent years
[1] Vietnam Investment Promotion Guidebook
Currently, Vietnam still has energy shortages due to resource limitations, the amount of coal imported for electricity production in 2020 is expected to be 12 million tons and will more than double in 2025 with 30 million tons and, by 2030, will be 50 million tons. Meanwhile, coal is almost exhausted and renewable energy sources such as wind and solar are heavily dependent on price mechanisms as well as large investments.
Risks such as environmental impacts, can heavily affect the development of hydropower, which have influenced the national green development strategy.
Vietnam's renewable energy sources are considered to have great potential, but still depend on weather conditions, climate and terrain. Electricity projects require large investment capital, loan structure up to 70% of total capital needs, prolonged repayment period leading to risks of fluctuating interest rate, exchange rates, investment mechanisms due to strict control of Vietnam Electricity corporation (EVN).
The power grid system has not met the requirements of power transmission leading to many wind power / sun power projects that have invested in the grid system being overloaded, making it impossible to sell off the electricity produced. Some wind power projects operating before the new preferential price issued are also subject to the inability to distribute all the electricity produced on the grid.
• Status of electricity production and consumption in 2015 - 2019
CAGR of the total supply in the period 2015 - 2019 reached 10.4%, which the domestic production source accounts for about 99% of the total output. Vietnam still imports electricity mainly from two sources, China and Laos. From 2013 to 2019, electricity output EVN purchased from China reached nearly 14 billion kWh and 1.1 billion kWh from Laos.
Renewable energy has not been widely applied for electricity development, 88.6% of electricity produced from renewable energy in Vietnam is from small hydropower plants (capacity less than 30 MW). Wind power and other renewable power sources contributed very little (0.4%) to the nationwide electricity production structure. By the end of 2019, there are 87 solar power plants, with a total capacity of about 4,464 MW connected to the national grid to increase the solar power capacity of solar power, accounting for 8.28% of the installed capacity of Vietnam's power system. Currently, EVN exclusively holds segments from electricity wholesale, transmission, distribution to retail. The electricity trading company (EPTC) under EVN is the only unit that is allowed to buy electricity wholesale from all generators in the market and wholesale it to power distribution companies. The Northern and Southern Power Corporations are the two units with the greatest commercial electricity output in the country in 2019 because these are in the prime industrial zones.
In 2019, electricity supply for the industrial and construction sectors accounted for the highest proportion with 53.8%, being an increase of 6.5 compared to the same period in the previous year. This is followed by electricity supply for the management and consumption sector, accounting for 32.9% of the total commercial electricity output nationwide. Ranked 3rd is the commercial area are hotels and restaurants with 5.6%. The agricultural, forestry, and fisheries sectors account for- 3.1%. Although accounting for a very small proportion of the total electricity consumption structure, the agriculture, forestry and fisheries sectors have shown good signs of growth in recent years
[1] Vietnam Investment Promotion Guidebook
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