According to Electricity of Vietnam (EVN), fuel prices in the first months of the year decreased compared with 2022, but are still at high levels compared with 2020-2021.

The high import coal prices are a burden on its electricity production costs. The gbNewC coal import price has increased by 2.97 times compared with 2020, and 1.3 times over 2021. HSFO price has increased by 1.86 times over 2020 and 1.13 times over 2021.

The coal prices from domestic coal miners are also on the rise. The products of Dong Bac Corporation have seen prices increase by 29.6-49 percent compared with 2021.

As the prices of coal, oil and gas all have escalated, the amount of money EVN has to pay to buy coal- and gas-fired electricity has also increased. In 2023, coal- and gas-fired power plants make up 55 percent of the total electricity output.

The input material cost is the main reason for the electricity production cost to increase to the estimated level of VND2,098 per kwh, or VND178 per kwh higher than the average retail price. In other words, the cost prices are higher than selling prices. 

The problem is that the proportion of coal imports is on the rise. About 43-45 million tons of coal are exploited domestically each year, which can only satisfy half of the amount of coal needed for coal-fired power plants. 

With the current coal-fired power production scale, domestic sources can only provide material to produce less than 20 percent of total electricity output. This means that the other power plants will have to use coal imports, or mixed coal.

The General Department of Customs (GDC) reported that the coal imports have increased rapidly from 6.9 million tons in 2015 to 54 million tons in 2020. In the first 10 months of 2023 alone, imports exceeded 40 million tons.

The Ministry of Industry and Trade (MOIT) estimated that the total output to be exploited in 2021-2025 would be 40-44 millions tons of merchandise coal a year, while the total demand would be 108-110 million tons.

Of this, the coal demand for electricity production would account for 70 percent of total demand (78-79 million tons, including 38-39 million tons of imports).

As such, to satisfy the domestic coal demand, Vietnam would have to import 66-68 million tons.

The total domestic gas demand is 11,200 billion cubic meters a year, while domestic sources can provide 10,071-10,463 billion cubic meters. So, to satisfy the domestic demand, Vietnam will have to import 737-1,129 billion cubic meters.

Under the eighth national power development strategy (Plan 8), the electricity output from coal- and gas-fired power plants would account for 52 percent of total output by 2025 and 60 percent by 2030. 

Of this, the electricity output from coal-fired power plants would account for 42 percent by 2025 and 34.8 percent by 2030. So, the fossil fuel prices will have a big impact on electricity production costs from now to 2030.

Other countries also feel pressure on electricity prices because of higher fuel costs.

Thailand, for example, raised the electricity price by 13 percent from January to April 2023.

In Japan, five power companies have submitted to the government a plan on raising electricity prices for daily life consumption by 28-46 percent, starting April 2023.

According to Ha Dang Son, director of the Center for Research on Energy and Green Growth, as input costs have become high, Singapore has been facing an energy crisis, and most small supply companies have had to shut down.

“The biggest challenge for Vietnam when integrating into the world’s energy market is that it has to observe the law of supply and demand,” he said. “This has led to big changes in the input costs and electricity production."

The pressure from fuel prices has forced Vietnam to raise the electricity prices by 3 percent, starting on May 4, after four years of keeping prices unchanged. However, the price increases were not high enough to cover the expenses.

Comparing electricity and petroleum price management, Nguyen Quoc Thap, chair of the Vietnam Oil and Gas Association, noted that petroleum pricing has been pursuing market performance, and the same mechanism needs to be applied to electricity pricing.

Luong Bang