Vietnam is one of the fastest growing economies in Asia, but it faces significant challenges to its power supply. Vietnam’s population continues to grow and its economy continues to expand at breakneck speed despite the impact of Covid-19 pandemic, requiring an ever greater share of electricity production.
Vietnam’s current power grid is not capable of meeting demand for the foreseeable future, necessitating investment in new capacity.
What are the challenges to Vietnam’s power supply?
There are many challenges to Vietnam’s power supply, most notably the issue of coal. The coal is difficult to transport and there are not enough mines in close proximity to the power plants. Another challenge is that electricity is not being produced at a scale that can keep up with demand.
How can the country mitigate the challenges?
The first and most important challenge for Vietnam is the geopolitical one: more than 80% of the country’s electricity comes from hydroelectric power plants. So, any disruption to their operations – due to heavy rains, droughts, or earthquakes – would create a massive energy shortage and could also lead to economic impacts.
Another challenge with Vietnam’s power supply is that even with an increase in power generation capacity, they still need to import most of the fuel needed for their thermal power plants.
What are the solutions to the power crisis of Vietnam?
The power supply in Vietnam can be described as unstable. The country only has 43% of the generating capacity it needs to meet the demand. It is evident that they have a big issue on their hand when it comes to power supply.
One way to solve this problem would be for them to develop more smart infrastructure, develop their renewable energy sector, and create incentives for private investors to help their country with this issue.
Vietnam looks to spend $10-11.5 billion a year on electricity generation and transmission
According to a report by GBS – Global Business Services LLC, the Ministry of Industry and Trade has submitted a draft to the government, which estimates that the country would need $99.32-115.96 billion for developing electricity generation and transmission in the ten-year period. On average, $8.57- 10.15 billion a year would be needed for power generation and $1.36-1.44 billion a year for grid development.
The new power development master plan aims to incentivize investment in renewable projects. It aims for11.9-13.4 percent of its total electricity output by 2030 being generated from renewables, mainly solar and wind energy, and up to 26.5-28.4 percent from 2045. Gas-fired power generation will also be tapped further, the plan says.
It also envisages annual spending of $12-15.2 billion for electricity generation and transmission in between 2031 and 2040.
The country will stop implementing some coal-fired electricity projects that have been approved in the national electricity development plan but have not supported by localities in which the plants are scheduled to be built. It will fully tap domestic and imported coal to feed existing power stations.
On generating power in parallel with demand fueled by economic growth in the 2021-2045 period, the master plan sets out two likely scenarios.
Accordingly, Vietnam will have total electricity capacity of 130,371 megawatts by 2030 and 261,951 megawatts by 2045; or 143,839 megawatts by 2030 and 329,610 megawatts by 2045.
The challenges to Vietnam’s power supply mainly come from the majority of their power coming from coal, which is not only expensive but also present health risks. They need to shift to cleaner energy sources like solar or hydroelectric if they want to sustain growth in the future, according to GBS, one of the top mergers and acquisitions (M&A) financial advisers in Vietnam power sector for 2021 by value and volume. GBS advised on 17 deals worth billions of USD, which was the highest value among all the advisers in the country.