- From 2021, Vietnam will suffer a serious shortage of electricity when demand exceeds the speed of construction of power plants.
- Power shortages could be a barrier for foreign investors and challenge Vietnam's position as one of the countries that will most benefit from the U.S.-China trade war.
- Vietnam is at risk of a 6.6 billion kilowatt-hours shortage by 2021, approximately 11.8 billion kWh by 2022, and possibly 15 billion kWh by 2023.
Vietnamese Prime Minister Nguyen Xuan Phuc has warned of a possible power shortage in 2021 and asked other officials to speed up stalled power plant projects, according to the Financial Times. In late September, Vietnamese media reported on the risk of power shortage, while a series of power plant projects were behind schedule. Power shortages could be a barrier for foreign investors and challenge Vietnam’s position as one of the countries that will most benefit from the U.S.-China trade war, according to Reuters analysis.
Severe power shortage
Vietnam is at risk of a 6.6 billion kilowatt-hour shortage by 2021, approximately 11.8 billion kWh by 2022, and possibly 15 billion kWh by 2023, according to Vietnam News. Demand for electricity in Vietnam is increasing by about 9% per year, faster than the economic growth rate— which only increased by more than 7% in 2018, according to the Financial Times. Adding to this shortage, many energy projects in Vietnam are behind schedule, according to the Ministry of Industry and Trade’s information provided to Reuters.
Delayed projects are mainly located in the South. State media said 47 out of 62 power generation projects in Vietnam with a capacity of 200 megawatts (MW) are at risk of being delayed. The cause of the electricity shortage is the lack of connection between power projects and roads, land and urban development projects.
Some other projects are due to contractors having to choose a new location to place the power station to avoid stepping on existing projects in other areas. In addition, due to land clearance issues, people do not accept the compensation given. There is also a lack of raw materials, such as gas, to run thermal power plants, according to Vietnam Insider.
Also, investors have difficulty securing enough funds from local sources, and the government limits the guarantee for foreign loans, according to the Ministry of Industry and Trade. Vietnam will need an average of $6.7 billion a year to expand its annual electricity generation capacity by 10% from 2016 to 2030.
The World Bank said last year that Vietnam needs to invest up to the $150 billion by 2030 to develop its electricity industry, nearly doubling the $80 billion spent on electricity since 2010. Vietnam is increasingly dependent on coal, accounting for 38.1% of the country’s generating capacity, the Ministry of Industry and Trade said. Vietnam will have to use 720 million tons of domestic coal, along with 680 million tons of imported coal, to supply to power plants in the period 2016-2030. Vietnam will also have to import liquefied natural gas (LNG) for its power plants. Power shortages are expected to subside after 2025 when new gas-fired power plants are online.
Increase electricity imports from Laos and China
According to Vietnamese officials, and the Financial Times, to cope with the power shortage crisis, Vietnam is currently looking for alternatives, such as developing solar power, importing liquefied natural gas, and importing electricity from neighboring countries. While praising the Vietnamese government’s solar power development rate, Mr. Gavin Smith, Director of Clean Development of Dragon Capital in Ho Chi Minh City, said that it was still necessary to see if it was sufficient to combat the risk of shortage. A Vietnamese official confirmed to the Financial Times that there may be a risk of serious power outages in unexpected situations, such as when the dams are empty.
A number of US companies are pushing to sell liquefied gas to Vietnam, as a way to reduce Vietnam’s trade surplus with the US. However, liquefied gas will not be a quick enough solution to address the risk of an impending energy crisis because Vietnam needs to build liquefied gas plants. Vietnam has also discussed increasing imports of electricity from Laos and China— although this is thought to be politically sensitive at this time, as tensions between the two countries in the South China Sea are increasing— according to Reuters.
A $391 million solar power project, the largest in Southeast Asia, began operating in Tay Ninh in September 2019. The Electricity of Vietnam (EVN) says more than 4,000 households have installed solar panels on their roofs, collecting about 200MW. About 300MW more could be produced by the end of 2019.