DRAFT POWER DEVELOPMENT PLANNING 8 OF VIETNAM

LEGAL UPDATE

Recently, the Ministry of Industry and Trade of Vietnam (MOIT) released a draft proposal of Vietnam’s national power development planning for the period of 2021‑2030, with a vision to 2045 (PDP8) to solicit public opinions.

In this legal update we will look at the most important takeaways from the draft PDP8.

1. General

1.1 Renewable Energy

The draft PDP8 shows that the government maintains its view on prioritising renewable energy development. The MOIT plans that total installed capacity of power projects will be 137.67 GW by 2030 (base load scenario), with renewable energy to account for 30%, 21‑23% for gas-fired power projects, and 27% for coal-fired power projects.

1.2 Importation of Fuel and Power

The draft PDP8 encourages importation of fuels (coal, LNG) and importation of power from neighbouring countries to diversify the primary energy sources of Vietnam. Importing power from foreign countries also helps to reduce the environmental burden compared to domestic production. Transmission and distribution grid links with China, Laos, Cambodia will be established to maximize each country’s energy potential and optimise operations.

1.3 Grid Upgrading

In the draft PDP8, the MOIT sees the need to reduce grid overload and power curtailment issues. From 2021-2030, the MOIT plans to build 86 Giga Volt-Amperes (GVA) of additional capacity for 500kV stations and nearly 13,000 km of transmission lines. From 2031-2045, an additional construction of 103 GVA with a capacity of 500kV and nearly 6,000 stations is required. The 220kV power grid needs construction of 95 GVA with nearly 21,000 km of transmission lines and 108 GVA with more than 4,000 km transmission lines.

1.4 Better Incentives for Private-Sector Investments

The draft PDP8 recognises the requirements to create a more incentivised regulatory framework in order to boost private-sector investments in power transmission lines and substations which connect individual power plants with the national transmission grid.

1.5 Commercial Electricity Demand between Regions

According to the draft PDP8, the proportion of commercial electricity demand in the North will gradually increase from 42.4% in 2020 to 45.8% in 2045, while the South will decrease its proportion of demand from 47.4% in 2020 to 43.6% by 2045. By 2040, the North’s commercial electricity demand will start to exceed that of the South.

1.6 Investment Capital

The total investment capital for electricity development in the period 2021-2030 is roughly USD128.3 billion, of which: USD95.4 billion is for power sources, and USD32.9 billion is for grids. The average allocation of capital investment shall be 74% for power sources and 26% for grids.

2. Key Notes

2.1 Coal-fired Power

Coal inventory at power plants hit records low in 2018. Many plants did not have enough coal to operate, leading to reduced capacity or even suspension of working units. As an example, because of coal shortage, Quang Ninh plant sometimes had to stop 2 out of 4 of its units. Production of domestic anthracite coal for supply to the North-East region is only approximately 35 million tons or 88% of the total demand, and so coal has to be imported and mixed to meet consumption demand. In the next years, the demand for anthracite coal will continue to increase when new plants, such as: Na Duong II, Hai Duong, Thai Binh 2, An Khanh-Bac Giang, come into operation.

2.2 Gas Use

From 2010-2019, (on average) 9-10 billion m³ of natural gas per year was extracted. Gas is currently being mined at 26 gas fields and combined with oil and gas fields such as Lan Tay, Lan Do, Bach Ho, Rang Dong, etc. There are around 30 fields that have not yet formulated any development plan because most of them are small or located in offshore deep water, with difficult geographical and geological conditions.

2.3 Renewable Energy

By the end of 2020, the total operating solar power capacity (including floating solar energy systems) was about 17 GW, concentrated in the southern provinces and the Central Highlands. Transmission grids are lacking in quantity to accommodate the increasing number of solar power projects with extremely fast and improved construction time, thanks to advanced technology, especially in Ninh Thuan and Binh Thuan provinces. Consequently, most projects that have begun operation in such provinces are subject to daily curtailment in generating capacity to avoid overloading the regional grid.

The total capacity of operating wind power by the end of 2020 is about 600 MW, much less than the total wind power capacity approved to be included in the revised power development planning VII which is 12 GW. By 2021, the remaining projects are expected to begin commercial operation mainly in the South-West and South-Central regions. The draft PDP8 lists several potential wind power projects, details of those added projects can be found in Annex 1.[1]

The Vietnamese Government is examining and implementing in small scale and encouraging the development of renewable energy sources, including flammable ice gas, shale gas, coal gas, liquefied hydrogen gas, biomass, and waste.

2.4 Hydropower

Up to 2019, Vietnam’s total capacity of medium and large constructed hydropower plants was about 17,930 MW. The total small hydropower potential (less than 30 MW) of the country is about 10,000 MW. Because small hydroelectricity impacts the environment and forest conservation, MOIT has conducted a review and rejected around 4,000 MW.

2.5 Liquified Natural Gas-to-Power Opportunities[2]

The draft PDP8 lays out significant opportunities for the development of Liquified Natural Gas (LNG)-to-power projects in Vietnam as approximately 15 GW of LNG-to-power projects have been added to the revised power development planning 7. Details of those added projects can be found in Annex 2. The draft PDP8 also lists proposed power projects to be considered for additional planning, details about those power projects can be found in Annex 3.

According to the MOIT, LNG-to-power projects match the global development trend because they are advanced in technology, highly efficient, and not harmful to the environment. The development of LNG-to-power projects is also backed by the rich supply of LNG in the world being sold at competitive prices. Furthermore, LNG-to-power projects are more likely to receive financing from credit institutions, as well as support from organizations and countries that produce natural gas for exporting.

For more information, please contact:

Mark Oakley / Managing Partner

mark.oakley@acsvlegal.com

Tim Dobson / Of Counsel

tim@acsvlegal.com

Hieu Pham / Special Counsel

hieu.pham@acsvlegal.com

Duc Tran / Associate

duc.tran@acsvlegal.com

© 2021 ACS Legal Vietnam Company Limited – All rights reserved

This legal update is not an advice and should not be treated as such.

Open in pdf: Draft Power Development Planning 8 of Vietnam

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[1] Read our update on Decision on FiT critical for wind energy development in Vietnam.

[2] Read our update on LNG-to-power projects in Vietnam and key legal issues.