Electricity of Vietnam (EVN) has been suffering huge losses and has been unable to pay debts; thus, price hikes are one method to attract investment and ease the power producers’ financial burden. According to the plan for national electricity development in the 2011-2020 period with a vision till 2030 (also known as Electricity Plan 7), the electricity price must be raised to 8-9 cent per kWh, 30 per cent- 40 per cent higher than the current price rate, so that the electricity sector is attractive enough for investors. During a recent press conference in Hanoi to announce Electricity Plan 7, Deputy Minister of Industry and Trade Hoang Quoc Vuong talked about the matter. Huong Ly reports.
Are there any differences between Electricity Plan 7 and the previous ones?
Electricity Plan 7 aims to effectively utilize domestic energy resources and import primary energy resources to serve electricity production, fully meeting the demand of high quality electricity at reasonable cost in order to promote socioeconomic development and guarantee national energy security. Under the plan, Vietnam will annually produce and import 194 to 210 billion kWh in total by 2015, and 330 to 362 billion kWh by 2020.
In comparison with previous plans, Plan 7 will be carried out at the same time with the electricity sector’s ever-biggest restructuring. Following the competitive electricity market which is taking shape from production to distribution, electricity will be sold under the market price. The sector will give priority to the development of regenerative energy resources for electricity production, aiming to raise the rate of such power from 3.5 per cent out of total output in 2010 to 4.5 per cent in 2020.
Another difference in Plan 7 is the development of nuclear power plants to ensure the stable supply of electricity in the future when domestic energy resources may be exhausted. Accordingly, the first nuclear power turbine of Vietnam will operate in 2020.
The current price of electricity has not been attractive enough for investors. What do you think about this?
The average electricity price is currently VND1,242 per kWh, lower than the level where the sector can be profitable. EVN continuously reported its difficulties in finance. The group lost VND8.5 trillion in production and business last year and the figure in the first half of this year was VND3.5 trillion. Also, EVN has been in debt with Vietnam Coal and Mineral Industries Group (Vinacomin) and Vietnam Oil and Gas Group (PetroVietnam), totalling nearly VND10 trillion and still unable to pay. Obviously, with the current selling price, electricity companies are meeting lots of difficulties.
To implement Electricity Plan 7, one of the important things is to get a financial source. In the first ten years of the plan, Vietnam is estimated to need nearly US$5 billion per year and about US$7 billion per year. Under the Electricity Map 7, the power price must rise to reach 8-9 cent per kWh to possibly compensate for costs, particularly financial difficulties of the EVN.
What solutions has the Ministry of Industry and Trade offered to support electricity producers?
Like any sector, site clearance is always a challenge for the electricity sector. The Prime Minister has appointed local authorities to spend a land fund for electricity projects. Under Electricity 7, the number of power and power grid projects is numerous. Thus, appointing localities to arrange a specific land fund will help to solve the challenge.
At present, Vietnam is promoting 11 BOT projects, mainly thermo power ones using coal. In terms of the electricity price policy, the Government has issued the mechanism of price adjustment to fall more than 5 per cent. Plus with development of the electricity market, I believe the sector will soon offer a more flexible price adjustment, attracting more investors as well as getting more profit for producers.
Over the past time, many investors poured capital into small hydro power projects because of reasonable cost. In fact, the necessary cost for a small hydro power project remains very low, only about US$10 million. However, the implementation met with a number of issues. Investment for some small hydro power plants, including transmission, is very high although their production capacity is low. Several others caused floods and impacted the environment. In Electricity Plan 7, the Ministry of Industry and Trade will carefully recheck small hydro power projects in order take advantage of potential of domestic hydro power while protecting the surrounding environment.
Electricity Plan 6 failed to fulfil several tasks. Will Electricity Plan 7 be able to finish the planned tasks?
Under Electricity Plan 6, we only implemented 60 per cent of power grid projects and 70 per cent of power production projects. The remaining has been transferred to Plan 7.
In comparison with the others, Plan 7 has new points. The outstanding one is the task of electricity price measured under the market price in a bid to have electricity sold at 8-9 cent per kWh by 2020.
Another task is to develop an electricity market which is transparent, public and competitive, raising operation efficiency of electricity companies and reducing burden for producers.
Many people still wonder about the monopoly of EVN. Will Plan 7 be able to ease the monopoly?
Currently, EVN is investing in 39 projects with total capacity of 27,000 MW and is planning for a number of big projects. State-owned groups, including EVN, Vinacomin, PetroVietnam, will continue to play a major role in electricity development because electricity projects need capital sources of up to billions dollar. Although private investors are encouraged to enter the electricity field, especially electricity production, they will meet a lot of difficulties with billion-dollar thermo projects.
Under the new plan, many coal-run thermo power plants will be built. What should be done to ensure a sufficient coal supply for these plants?
Where we can import coal and gas from is a difficult problem in the near future. Currently, Vinacomin is promoting a series of plans to import coal from regional countries like Indonesia. The ministry has defined this as an important task relating to national energy security.
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