Scenarios for developing power plants and grids under the impact of investment promotion policies

In almost 10 years of implementing PDP VII and PDP VII adjusted although facing many difficulties and challenges Electricity industry of Vietnam has made a strong development in both scale and quality, which ensured the safe and reliable electricity supply for socio-economic development, energy, and national defense security of the country and daily-life needs of the people

The total capacity of power plants that EVN put into the generation in 2011 – 2015 as 9,762 MW, equal to 102% of the volume assigned in PDP VII, and in 2016 –2020 as 5,908 MW, equal to 82.2 % of the volume of PDP VII adjusted.

Thus, in the whole period of 2011 - 2020, EVN has successfully completed the task of investing in power plants with a high completion rate of over 93%.

Power plants behind schedule were mainly ones made by the investors other than EVN.

The Draft PDP VII:

On the basis of the Government's direction, PDP VIII will be oriented, open and create a space to mobilize and promote social resources. The direction in the coming time will be full exploiting renewable energy sources, but ensuring safe, economic and environmental operation; reasonable development of natural gas and LNG power industries for less dependence on imported LNG and creating conditions for the domestic investors and enterprises to participate in electricity generation.

To ensure the feasibility, EVN proposed a number of solutions as follows:

Firstly, asking the competent authorities to finalize and promulgate decrees, circulars and guidelines for Law No. 03/2022/QH15 (amending and supplementing a number of Articles of the 9 Laws), clarifying the content of the state monopolizing the operation of the power transmission grid (only making the socialization for the transmission grid system serving the connection of the power plants and not to bring a business nature as EVN many times proposed to the Prime Minister, the Ministry of Industry and Trade- MOIT). The Government needs to promulgate regulations for the State to manage and control the investment in the transmission power grid of non-state economic sectors for ensuring national energy security and safety. At the same time, the Government as soon as possible to finalize the mechanisms and regulations on the responsibilities of the non-state investors in self-operating, or handing over the transmission grid to the EVN units.

Secondly, researching, developing and promulgating the Renewable Energy Law for creating a solid legal corridor to invest, operate and develop the supply chain for renewable energy.

Thirdly, adding new tasks to organizations of the Ministry of Industry and Trade and the National Steering Committee for Electricity Development in implementing PDP VIII.

Fourthly, Completing to build the competitive electricity market.

Fifthly, developing the new mechanisms on investment in PDP to ensure the PDP implementation and a mechanism to deal with additional PDP after approving PDP VIII.

Sixthly, developing the mechanisms to attract investment and mobilize capital.

Seventhly, developing mechanisms to ensure the operation of the power system and electricity market in a highly integrated system with the variable renewable energy power plants.

The structure of power plants in the Draft PDP VIII:

The structure of power plants in the Draft PDP VIII by MOIT submitted to the Government (April 2022) and approved by the Appraisal Council of PDP VIII has met the director of the Politburo in Resolution No. 55-NQ/TW and Vietnam's commitment to net zero emissions by 2050 at COP26.

Accordingly, the Institute of Energy has proposed an energy transition scenario with a total power capacity of 145,185 MW in 2030 and 413,054 MW in 2045. In there:

1/ Coal thermal power plants will gradually switch to biomass and ammonia, the natural gas and LNG thermal power plants will gradually switch to using hydrogen.

2/ Rejecting 6 undeveloped coal-fired projects (Quynh Lap 1 and 2, Vung Ang 3, Long Phu 2, Long Phu 3, Pha Lai 3, Dao Bai) with a total capacity of 8,800 MW.

3/ Balancing 10 coal-fired projects under construction with a total capacity of 10,842 MW and 8 coal-fired power projects under progress of construction preparation with a total capacity of 9,650 MW. Switching Quang Trach 2 thermal power plant to LNG use.

4/ Not developing coal power plants after 2030, LNG gas thermal power plants after 2035.

In this scenario, there are 5 coal-fired projects with a total capacity of 6,600 MW (including Nam Dinh - 1,200 MW, Cong Thanh - 600 MW, Quang Tri - 1,200 MW, Vinh Tan 3 - 1,800 MW, and Song Hau 2 - 2,000 MW) likely not to come into operation until 2030. Therefore, the Institute of Energy proposed to accelerate the progress of power plants with 11,200 MW, including 6,000 MW LNG fired combined cycle gas turbines (CCGT), 2,200 MW of on-shore and near-shore wind power projects and 3,000 MW of offshore wind power projects from 2031 – 2035 period to 2026 – 2030 period. Accordingly, the Operation Plan with a total capacity of the power plants by 2030 will reach 156,385 MW.

The sources of capital for electricity development:

The total investment capital, that EVN mobilized in the 2011-2020 period was 1,222.045 billion VND (average rate as 5 billion US$/year). EVN ensured to arrange investment capital for 5-year plan and annual plan. However, mobilizing investment capital for the power projects of EVN in recent years still faced certain difficulties.

According to the Credit Law, capital mobilization is limited by no more than 15% of the charter capital of the bank for EVN and 25% for all units under EVN, while most domestic banks exceeded this limit for EVN and its units.

The ODA sources of foreign concessional loans gradually reduced so EVN and its units could not assess the capitals with the low costs as in previous times.

In Draft PDP VIII, the total investment capital for electricity development in 2021-2030 period is about 165.7 billion US$ with 131.2 billion US$ for power plants and 34.5 for the power grid, an average of 3.45 billion US$/year, while only for the transmission grid investment in 2011-2020 period, EVN and EVNNPT arranged only 1 billion US$ /year. So it needs concrete and clear mechanisms to socialize investment and stimulate the private sector for participating in investment in the power transmission grid.

On the basis of the structure of power plants approved in the PDP VIII, in order to meet the electricity supply for socio-economic development in the coming period, EVN is currently conducting a study on various scenarios for developing the power plants under the impact of investment promotion policies with the following recommendations:

Firstly, allocating power plants of power development scenarios by region/province, city.

Secondly, calculating the power grid to release the power capacity of scenarios for developing power plants; the portfolio of the backbone transmission grid is suitable for the power development scenarios of EVN in particular and other components in general.

Thirdly, encouraging the private sector to invest in the transmission grid. Law No. 03/2022/QH15 amends and supplements a number of articles of the Electricity Law

effective from March 1, 2022, regulates "Attracting all economic sectors to participate in investment activities in the construction of transmission power grids on the basis of ensuring national defense and security and according to PDPs.

However, there are no decrees, circulars, and guidelines from competent authorities regarding the investment in the transmission grid and other related issues such as electricity transmission prices, investor selection mechanism, management of costs of investment, and operation of transmission grids... Especially state management in controlling and ensuring the security and safety of power transmission grids invested by non-state economic sectors.