A seminar discussing groundbreaking policies to attract investment in the power sector was held August 20.

Chair of the Vietnam Valuation Association (VVA) Nguyen Tien Thoa commented that Vietnam’s policies related to power development remain confusing and do not follow basic principles to encourage various economic sectors to participate in the power sector to ensure the national energy security.

Thoa named four main problems. First, electricity pricing doesn’t follow market rules, thus causing difficulties for electricity production and trade.

The statistics released in 2022-2023 showed that an unreasonable management policy caused the loss of VND47.5 trillion, which caused problems of cash flow to the power sector. 

Second, the current electricity prices are set up in a way to implement multi-purpose tasks. The prices must be high enough to cover expenses and encourage investment in the power sector. But they also must be low enough to not put a heavy burden on consumers, including households and businesses. 

Also, they must be reasonable to ensure social security and energy security, and help control inflation. It is very difficult to reach all that goals.

Third, Vietnam is applying a cross-subsidy scheme in electricity pricing between electricity users. The electricity production cost in island districts and communes is VND7,000-9,000 per kwh, but sells for just VND2,000.

Fourth, there is no differentiation between commercial prices and social welfare.  

Hoi believes that the major problem lies in the electricity pricing scheme. If Vietnam differentiated the work for public good and commercial activities, there would be a reasonable pricing mechanism.

“We built the pricing scheme in 2014 when we wanted to promote production, and we set electricity prices for the production sector at low levels. If we want to ensure financial capability for EVN (Electricity of Vietnam), we have to push commercial prices up. We need to adjust the prices step by step by reducing the preferences for the production sector,” Hoi said.

However, Hoi warned that the immediate cross-subsidy scheme elimination must not be implemented, or it would cause a shock to the national economy. It is necessary to take actions to regulate the electricity prices based on market rules.

Hoi believes that though Vietnam has developed renewable energy resources, it cannot skip basic energy, such as coal-fired and gas-fired electricity.

“As coal- and gas-fired electricity always plays a very important role in ensuring energy security, electricity prices will surely increase in the context of material price increases,” Hoi said.

“Because of the current geopolitical conflicts, it would be unreasonable to hope that input material prices will decrease. We have to accept the real situation,” he added. 

Regarding the net-zero plan by 2050, Hoi said that other countries also want to develop clean electricity sources. '

Solar power systems can generate electricity for no more than four hours a day, while wind power is unstable. So, it is no feasible to think that these energy sources will be cheap.

“In a word, because of the geopolitical conflicts in the world and the energy transition trend, the electricity supply cost will be increasing,” Hoi concluded.

Meanwhile, Nguyen Dinh Tuan, CEO of Son Dong Thermopower, noted that hydropower resources have been fully exploited, while coal-fired electricity will be reduced gradually by 2030 and will stop by 2050 under the net-zero program. 

As such, the development of new sources in the future will rely on gas-fired and offshore wind power. Hoi pointed out that electricity sources will have a big impact on the operation process and have a high investment rate.

“Of course, renewable power will have high prices, thus affecting the average market prices, which will have adverse impact on EVN prices and the government’s price management,” Tuan said.

He said that thermal power development units will adjust the mixture of input materials as requested by the Ministry of Industry and Trade (MOIT). However, the problem still lies in input material prices. The price of biomass burning material and pellets may be 2-3 times higher than coal prices. This is the problem experts need to consider.

Luong Bang