The water levels at hydropower plant reservoirs have decreased to alarming levels

If the drought is severe and occurs on a large scale, and there is no flood or there are low floods, the electricity supply situation will be serious in the time to come, EVN said.

The water levels at hydropower plant reservoirs have decreased to alarming levels. Some reservoirs have fallen to low water levels and a few have been at the dead level since early May.

Since early 2023, EVN has been releasing reports about the serious power supply situation, warning that the electricity system in the north may not satisfy the peak usage in May and June with the biggest capacity shortage estimated to reach 1,600-4,900MW.

In 2022, the coal price soared dramatically, but Vietnam did not see an electricity shortage because the decrease in coal-fire electricity output was partially offset by hydraulic power. 

However, EVN took a loss of VND26.2 trillion as it had to mobilize electricity generation sources at high production costs.

Hydropower is the cheapest electricity generation source now, with average production cost of VND1,100-1,200 per kwh. Thermal power is expensive because of the sharp rise in coal prices. 

Despite the considerable price decrease, the electricity purchase price from thermal power plants that use domestic coal is high at VND2,100 per kwh. 

As for power plants using mixed coal (domestic coal mixed with imports), the purchasing price is VND2,400 per kwh. If 100 percent imported coal is used, the production cost is VND4,000 per kwh.

As for wind and solar power, the prices are hovering around VND2,000 per kwh.

As such, except for hydropower and gas turbines, the purchase prices are all higher than retail prices (after the latest price adjustments, the current retail prices are over VND1,900 per kwh).

The situation will be extremely serious, an expert said, if hydropower plants lack water.

In fact, electricity shortages have been warned about since 2019. However, Covid-19, the development of solar and wind power, and the high hydropower output all helped supply enough power.

But the situation is different now, as many disadvantageous factors have appeared at the same time.

The report the government has sent to the National Assembly shows that in the seventh national power development plan (PDP 7), while the capacity of renewables has exceeded 480 percent, thermal power capacity is only 60 percent of the plan. 

Meanwhile, solar power production heavily depends on weather conditions, so the supply is unstable. 

“The slow execution of thermal power projects in both the north and the south will lead to power shortages and difficulties in operation because of the lack of provisioned power, especially in the north from now to 2025,” the government's report said.

In principle, investment in coal-fired thermal power needs to gradually decrease as Vietnam must implement its commitments made at COP26 to obtain net zero emissions by 2050. 

Meanwhile, gas-fired power developed by private and state-owned enterprises are also facing difficulties.

Delta Offshore Energy (DOE) is developing an LNG plant in Bac Lieu which has the designed capacity of 3,200MW and investment capital of $4 billion. 

However, the project, licensed in January 2020, still has not started after three years because negotiations about power purchase agreements have not been completed.

The gas-fired projects invested in by EVN have also been making no headway because procedures for the projects using ODA (official development assistance) capital are complicated. The O Mon III project is an example.

Investments in wind and solar power have been suspended because there is still no new policy, and the FIT (feed-in tariff) policy has expired.

In such conditions, the explosion of solar and wind power in recent years has been helpful as it supplied electricity when coal-fired power project implementation went slowly. 

This helped ease the power shortage in the 2018-2019 period.

One report says that electricity output from wind and solar power in 2019, 2020 and 2021 was 5.242 billion kwh, 10.994 billion kwh and 29 billion kwh, respectively. 

Thanks to the power supply, EVN could reduce the use of oil which had doubled in price. 

The government’s report showed that the volume of used oil reduced in 2019 and 2020, allowing to save VND10.850-21 trillion.

This means that if there had not been solar and wind power, EVN would have incurred bigger losses.

Nevertheless, investments in power sources would be more difficult in the time to come.

So far this year the PDP 8  has not been released yet, which makes it difficult for investors to plan their investments in new power sources.

Luong Bang