Vietnam’s Power Sector:

An Overview
Richard Spencer
Power Sector Experience Sharing
Event
Dhaka February 9, 2011
 Outline

• Vietnam’s power sector

• The reform program
• Investment planning
 Who Does What in the Power Sector
• Office of Government
• Ministry of Industry and Trade
– Sector policy
– Sponsor of EVN
– Sponsor of Institute of Energy
• Ministry of Planning and
Investment
• Ministry of Finance (and VDB)
• Ministry of Natural Resources
and Environment
• State Bank of Vietnam
• Provincial, District and
Commune People’s
Committees
 Demand is Growing!

Electricity Production and Consumption Per Capita and Total Consumption

1976 - 2009 1976 - 2009

90,000 1200
Electricity production and consumption

80,000

Per capita electricity consumption

1000
120,000 70,000
100,000

Electricity consumption
60,000 800
80,000

(kWh/capita)
60,000 50,000
600
(GWh)

(GWh)
40,000 40,000
20,000 30,000 400
0
20,000
200
10,000
0 0
Years

Consumption Generation Years

Total consumption, GWh Per capita consumption, kWh
 How It’s Being Met is Changing

EVN OWNED
2004
85% 9,989 MW
Oil and gas
3,161
Coal 32% Oil and gas
1,205 1,305
12% 13%
Other
Hydro 42
4,121 Coal
41% 155
OWNED BY
OTHERS 2%
15% EVN OWNED Other-1
300
2010
69%
Coal 1% 19,735 MW
Oil and gas
2,285
3,461
12%
18% Oil and gas
4,027
20%

Hydro
7,420 Other-2
38% 1,024
Coal Hydro 5%
OWNED BY
725 493
OTHERS
4% 2%
31%
So Is Where It’s Being Used
Power Consumption by Sector, 2000 and 2010 Compared, TWh

8.2 2010
10%
1.9
8%

2000
9.1
41%
44.4
32 52%
37% 11
49%
0.4
2%

0.9
1%

Industry and construction Agriculture, Forestry and Acquaculture

Residences and Administraion Commerce, Hotels and Other
 EVN Finances
• Increasing size of 15% 90%

investment program not 10% 80% 75%

matched by tariff increases, 5% 60%
risking a spiral of higher 0% 53% 54% 45%
borrowing and debt service, -5% 37% 38% 30%
32%
further reducing ability to -10% 26% 15%
ROE SFR 17%
finance own investments -15% 0%
• Capitalization of National 2002 2004 2006 2008
Power Transmission
100% 6
Company (too low) 50% 47% 46% 47% 44% 47% 36% 32%
5.3
5
• High proportion of foreign 80%

debt requiring revaluation 4

60% 3.6 3.6
because of exchange rate 3
depreciation 40% 2.2 2.1 2
1.8
• Vietnam’s own macro 20% 1.1 1.1 1
instability in 2007 (before 50% 53% 54% 53% 56% 53% 64% 68%
financial crisis) increasing 0% 0
costs not matched by tariff 2002 2004 2006 2008
increases Debt Equity DSCR
 Key Challenges
Above all: improving the quantity and quality of electric power for
economic growth, inclusion and the environment

• Surging demand – 15% annual

growth
• Limited financing
• Reducing energy security
• Increasing carbon intensity
• Substantial State involvement

A major reform program

 The Reform Program
Aimed at ensuring that there is adequate financial resource to support
continued growth in demand
Retail Market
Wholesale Competitive Market
• Key legislation – Electricity Law Competitive Generation Market
(Single Buyer)
– Started preparation in 1998, passed in 2004
2005 2011 2014 2016 2022 2024
– Move to competition in electricity sector
– Planning process retained but oversight

Competitive Generation Market

Wholesale Competitive Market

Internal Single Buyer Market
shifted to MoIT

Competitive Retail Market

Pilot Wholesale Market

Pilot Retail Market

– Creation of ERAV

(Single Buyer )
• Roadmap for Market Development
– Three phases (see adjacent diagram)
– Two step ‘trial and implement’ approach in
each phase
• Restructuring of actors
Preparing for Single Preparing for Preparing for Retail market
Buyer Market Wholesale Market

Consensus driven – slow but sure

 Market Design
Contract payment

BOTs
MO Market
Payment
Wholesaler
Bids
Market
/ Single Payment
IPPs Dispatch
Payment schedule
Buyer (SB)
Power
Distribution
Joint Stock
Generation SO Companies
companies Real time (PCs)
operation

Strategic
Multi-
purpose Transmission
hydropower Operator
Power Power
(SMHPs)
(TNO)

Power Service Distribution

Wholesale Unit
Generation Unit Providers Unit and Retail Unit
 Expected Sector Structure

Generation State-owned Wholesale, Retail and

Distribution
Services

PVN GENCO 1 EVN

NLDC -
System
Vinacomin GENCO 2 and Market
Operator
National Electric Power
Power
Other IPPs GENCO 3 (SMO) Transmission Power Corporations
Company Trading
Company
BOTs Equitized (DISCOs)
Gencos (TNO)
(SB)

SMHPs +
Nuclear Power
 The Planning System

Political Orientation
2011 - 2030
Every 20 years

Socio-Economic
Development Strategy Every 10 years
2011 - 2020

Socio-Economic
Development Plan Every 5 years
2011 – 2015

Power Master
Development Plan 7 Every 5 years
2011 – 2020
With a view to 2030

Various sub-plans
e.g. Hydro Master Plan
Province Power Plans
 Power Master Development Plan 7
• Prepared by IoE on behalf of
MoIT: still ‘Master Plan’ for VCGM,
not yet indicative
• Two somewhat conflicting
objectives
– Investment planning
– Investment approval
• Principles
– Least economic cost for a given level of
reliability
– Limit impact on security of supply of
transmission reliability (build generation
in N, C and S)
– Diversify power sources, in particular
start to build coal
– Accelerate regional integration (Lao
and Cambodia)
– Plan for renewables
 Power Master Development Plan 7
• Planning tools:
– WASP III (with limits on hydro
simulation)
– Strategist (optimizes expansion)
– PDPAT (treats system as
interconnected subsystems and
simulates operation of expansion
system)
– Slow!
• Load forecasting based on GDP,
regional/province plans, sector
plans