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
Electricity production and consumption (GWh) Electricity consumption (GWh) Per capita electricity consumption (kwh/capita) Demand is Growing! Electricity Production and Consumption 1976-2009 Per Capita and Total Consumption 1976-2009 120,000 100,000 80,000 60,000 40,000 20,000 0 90,000 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 1200 1000 800 600 400 200 Years 0 0 Consumption Generation Years Total consumption, GWh Per capita consumption, kwh
How It s Being Met is Changing EVN OWNED 85% Coal 1,205 12% Oil and gas 3,161 32% Hydro 4,121 41% 2004 9,989 MW OWNED BY OTHERS 15% Oil and gas 1,305 13% Coal 155 2% Other 42 EVN OWNED 69% Coal 2,285 12% Oil and gas 3,461 18% Other-1 300 1% 2010 19,735 MW Oil and gas 4,027 20% Hydro 7,420 38% OWNED BY OTHERS 31% Coal 725 4% Hydro 493 2% Other-2 1,024 5%
So Is Where It s Being Used Power Consumption by Sector, 2000 and 2010 Compared, TWh 8.2 10% 1.9 8% 2010 32 37% 11 49% 2000 0.4 2% 9.1 41% 44.4 52% 0.9 1% Industry and construction Residences and Administraion Agriculture, Forestry and Acquaculture Commerce, Hotels and Other
EVN Finances Increasing size of investment program not matched by tariff increases, risking a spiral of higher borrowing and debt service, further reducing ability to finance own investments Capitalization of National Power Transmission Company (too low) High proportion of foreign debt requiring revaluation because of exchange rate depreciation Vietnam s own macro instability in 2007 (before financial crisis) increasing costs not matched by tariff increases 15% 10% 5% 0% -5% -10% -15% 100% 80% 60% 40% 20% 0% 80% 53% 54% 37% 38% 32% 26% ROE SFR 17% 2002 2004 2006 2008 50% 47% 5.3 46% 47% 44% 47% 36% 32% 3.6 3.6 2.2 2.1 1.8 1.1 1.1 50% 53% 54% 53% 56% 53% 64% 68% 2002 2004 2006 2008 Debt Equity DSCR 90% 75% 60% 45% 30% 15% 0% 6 5 4 3 2 1 0
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
Internal Single Buyer Market Competitive Generation Market (Single Buyer ) Pilot Wholesale Market Wholesale Competitive Market Pilot Retail Market Competitive Retail Market The Reform Program Aimed at ensuring that there is adequate financial resource to support continued growth in demand Retail Market Key legislation Electricity Law Started preparation in 1998, passed in 2004 Move to competition in electricity sector Planning process retained but oversight shifted to MoIT Creation of ERAV Roadmap for Market Development Three phases (see adjacent diagram) Two step trial and implement approach in each phase Restructuring of actors Competitive Generation Market (Single Buyer) Wholesale Competitive Market 2005 2011 2014 2016 2022 2024 Preparing for Single Buyer Market Preparing for Wholesale Market Preparing for Retail market Consensus driven slow but sure
Market Design Contract payment BOTs IPPs Joint Stock Generation companies Bids Market Payment Real time operation MO Dispatch schedule SO Market Payment Wholesaler / Single Buyer (SB) Payment Power Distribution Companies (PCs) Strategic Multipurpose hydropower (SMHPs) Power Transmission Operator (TNO) Power Power Generation Unit Service Providers Unit Wholesale Unit Distribution and Retail Unit
Expected Sector Structure Generation State-owned Services Wholesale, Retail and Distribution PVN Vinacomin Other IPPs BOTs GENCO 1 GENCO 2 GENCO 3 Equitized Gencos NLDC - System and Market Operator (SMO) National Power Transmission Company (TNO) EVN Electric Power Trading Company (SB) Power Corporations (DISCOs) SMHPs + Nuclear Power
The Planning System Political Orientation 2011-2030 Every 20 years Socio-Economic Development Strategy 2011-2020 Every 10 years Socio-Economic Development Plan 2011 2015 Every 5 years Power Master Development Plan 7 2011 2020 With a view to 2030 Every 5 years 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