Analysis: Vietnam eyes greener power but banks on coal to avert blackouts

Foxconn Technology

11/06/2024 14:02

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      59% of Vietnam's power output came from coal in Jan-May
period
    

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      Country expands coal plants capacity, seeks energy savings
    

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      It has plans to widen grid, reform energy rules  
    

  
 (Adds detail in EVN official quote in paragraph 7)
    By Francesco Guarascio and Khanh Vu
       HANOI/HOA BINH, Vietnam, June 11 (Reuters) - Lights are
off and air conditioning is down at the headquarters of
Vietnam's state-run electricity provider EVN as the country's
top power utility tries to "lead by example" to avoid a repeat
of last year's crippling blackouts, an official tells visitors.
        But many businesses around Vietnam's capital Hanoi
appear to be ignoring the call to conserve power, keeping
decorative but otherwise purposeless neon lights on the outside
of high-rise buildings on all night.
        The difficulties in curtailing consumption illustrate
the challenges facing Vietnam a year after sudden outages caused
losses of hundreds of millions of dollars to multinational
manufacturers with investments in the Southeast Asian country.
    Vietnam is pursuing a patchwork agenda of energy-saving
measures, grid upgrades, regulatory reforms and a massive
increase of coal power as it seeks to avert electricity
shortfalls, according to government data and interviews with
officials and experts.
     But Trinh Mai Phuong, EVN's communications director,
explains during a media visit that even the biggest
infrastructure upgrade underway, a new $1 billion transmission
line connecting the centre of the country to the highly
industrialised north that was hard hit by blackouts last year,
may not be enough.
    "I would not say it is a game changer," Phuong said of the
line that could be completed as early as this month, noting
    it is one of many measures needed amid multiple issues to
address. Power consumption for instance is expected to hit
record highs in the coming weeks as the country braces for more
heatwaves, he said.
  
    The soaring power demand is making it increasingly difficult
for Vietnam to meet climate change commitments while providing
enough power to satisfy large investors such as Samsung
Electronics  005930.KS , Foxconn  2354.TW  and Canon  7751.T .
    Broader sector-wide reforms are needed over the longer term,
foreign investors and analysts said.
   
 
    EMERGENCY MEASURES
    In the short term, Vietnam is banking mostly on coal to
provide enough reliable electricity. It may be just enough - or
not - but either way it may signal a blow to the country's
commitments to reduce reliance on fossil fuels.
    Coal use rose massively in the first five months of 2024,
with coal-fired power plants accounting on average for 59% of
electricity output, exceeding 70% some days, according to EVN
data.   
    That was up from nearly 45% in the same period last year and
41% in 2021, when Vietnam began drafting plans to cut coal that
persuaded international donors to commit $15.5 billion to help
phase out the fuel.
    Thanks to a new coal-fired power plant that came online in
2023, coal accounted for 33% of total installed capacity last
year, up from 30.8% in 2020, taking Vietnam further away from
the goal of lowering that to 20% by 2030.     
    Energy conservation is another key pillar of the plan. EVN
and its local units have encouraged energy-hungry clients,
including foreign manufacturers, to save power with tailored
measures, especially in peak hours.
    But that risks Vietnam's reputation as a reliable place for
investment and could affect future manufacturing expansion
plans, according to foreign investors who declined to be named
because they were not authorised to talk to media.
    The matter should be addressed by solving generation and
distribution issues, and not from the consumption side, two
foreign investors said.
    Vietnam's industry ministry did not reply to a request for
comment.
   
 
    CLEANER OPTIONS
    Vietnam is using only a fraction of its installed solar and
onshore wind capacity due largely to administrative hurdles.
    It has not approved regulations to kick-start offshore wind
projects and delays dog projects to build power plants fuelled
by imported liquefied natural gas, which is cleaner than coal.
    The four energy sources together should account for more
than 40% of installed capacity by 2030, according to the
government's plans, though analysts are sceptical. 
    Hydropower is projected to fall to less than 20% of
installed power generation by the end of decade from more than
30% in 2020.
    But some capacity is being added in the north where needs
are higher. 
    One of Vietnam's largest hydropower plants at Hoa Binh is
adding two General Electric  GE.N  turbines to its existing
eight, which will boost its total capacity to 2.4 gigawatts from
less than 2 GW now by the second half of 2025, said Dao Trong
Sang, EVN's manager of the expansion project, during a visit to
the dam.
        The Hoa Binh plant, combined with the new transmission
line that brings electricity to the north from separate plants,
may add 8% capacity to the power-hungry north.
    
    REFORMS NEEDED
    The power crisis cannot be solved without long-awaited
reforms, experts say, though progress to date has been slow. 
    In April, the industry ministry issued an updated
methodology for determining electricity prices, a step towards
possibly reviving projects stuck for years because of a lack of
clarity about tariffs.
    However, the methodology could force developers to shoulder
excessive risk, complicating their access to finance, said a
Vietnam-based official who declined to be named because they
were not authorised to talk to media. 
    A separate draft decree enabling manufacturers to buy
electricity directly from producers is seen as close to approval
after years of internal debate, according to several analysts. 
    The use of direct power purchase agreements (DPPAs) could
make it easier for multinational companies to avoid higher
tariffs on exports and boost the use of renewables to help them
meet environmental, social and governance requirements.
    But the DPPA rules need to be combined with other reforms,
such as clearer provisions to directly connect factories to
power-generation projects, the official said.

    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Vietnam power mix    https://tmsnrt.rs/42QliEa
Vietnam's reliance on coal    https://reut.rs/3KoHVs2
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
 (Reporting by Francesco Guarascio and Khanh Vu; Editing by
Jamie Freed)
 ((Francesco.Guarascio@thomsonreuters.com;))