Challenges facing Vietnam in ensuring energy security

Wind turbines of Dam Nai power project in Ninh Hai and Thuan Bac districts in the south-central province of Ninh Thuan, slated to enter commercial production in the final quarter of 2018. - VNA/VNS Photo Nguyen Thanh

Vietnam’s demand for energy rises by an average 9.5 per cent year-on-year in the last 15 years, reaching 13 per cent increase in 2006-11 and 11 per cent in 2011-16 period.

According to Vietnam Energy Outlook 2017 report released last September, imported energy could account for 37.5 per cent of its total supplies in 2025 and more than half (58.5 per cent) in 2035.

Vietnamese economy has transformed itself from an agrarian economy which relied primarily on traditional biomass fuels, to a modern mixed economy, one of the fastest growing ones in the world, resulting in rapid changes in the energy sector.

According to the Electricity and Renewable Energy Department under the Ministry of Industry and Trade (MoIT), oil, coal, natural gas, hydropower and non-commercial biomass (woods, agricultural waste) are the main primary domestic energy sources. In recent years, the total output of these forms of energy doesn’t witness any substantial change, the department said.

Nguyen Van Thanh, deputy head of the department, said after more than 10 years of implementing Vietnam National Energy Development Strategy 2020, “in general, the energy sector has seen positive results, evidence in the achievement of several targets,” especially ones dealing with electricity access in rural areas or meeting socio-economic energy demands.

According to the department’s report, total electricity production and purchase of the State-owned Electricity Vietnam (EVN) reached 192.45 billion kWh, up 8.6 per cent compared to the previous year; the national power sales achieved 174.05 billion kWh, an increase of 8.92 per cent.

Vietnam scored 78.69/100 points in the Getting Electricity indicator (part of Word Bank’s Doing Business index) and ranked 64th out of 190 nations and economies, moving up 32 places against 2016.

Installed generating capacity of Vietnam in 2015, for example, reached 39,350MW, up 1.8 times compared to five years before, and ranking second in ASEAN countries.

However, the energy sector failed to meet set targets on oil refinement and oil reserves, nuclear energy, or connecting its electrical lines and natural gas supply lines with other countries in Southeast Asia.

The Government originally aimed to refine 30-35 million tonnes of oil a year by 2020, but going on the current rate, realistically, it will only meet half its goal (16.5 million tonnes) in two years’ time.

Vietnam still doesn’t have its own oil reserves, and can currently only hold 30 days’ worth of oil for commercial purposes while the goal is to maintain stable storage worth 45 days of usage in 2010, and 60 days of usage in 2020, in a bid to offset price volatility.

One of the energy sector’s strategic power connectivity plans is to link with regional countries’ power grids on the 500kV transmission lines, but so far, Vietnam is only capable of purchasing/selling contracts with China or Laos on the 220kV lines. A natural gas linkage with regional countries, similarly, remains a pipe dream.

Reliance on imports

According to Tran Van Tung, deputy minister of science and technology, the country’s energy sector is facing ‘layered challenges.’

On one hand, the sector needs to produce as much energy as possible to meet the demands of socio-economic development, on the other hand, it needs to honour international commitments on sustainable development and reduces reliance on fossil energy, which is already nearing its limits.

“In the context of rising demands, near maximum exploitation of hydropower resources, and the venture into nuclear energy halted indefinitely, Vietnam has been importing primary energy sources to produce electricity,” Tung said.

"The increase of the ratio of imported energy in the total primary energy output will have worrying implications for the country’s energy security," he said.

Regarding electricity supply, until 2020, the country would not have much to worry about, said Nguyen Van Vy, vice chairman of Vietnam Energy Association (VEA).

However after 2020, the prospect of electricity shortage would become more and more visible, which could be blamed on delayed schedule of several key power projects, such as the Thai Binh II thermopower plant project by the State-owned oil and gas group PetroVietnam and other Build-Operate-Transfer (BOT) projects in the southern region.

Renewable energy

Experts maintained the only viable way forward for Vietnam is to focus on renewable energy to secure its future.

“What we need right now is mechanisms to stimulate renewable energy projects. Vietnam won’t have to be concerned about electricity paucity, provided sufficient attention and resources are poured into renewable energy, especially solar energy, given how a project can start from conception to operation within a year if the paperwork is handled quickly,” Vy told Hai Quan Cuoi Tuan (Customs, Weekend Edition) newspaper.

Deputy minister Tung also agreed that "this is the time Vietnam needs to make a breakthrough and master the new energy forms".

“It’s entirely possible if the authorities, businesses and scientists all work together, and with the technical expertise support from developed countries and international energy associations,” Tung added.

Dr Nguyen The Mich, consultant for the German Agency for International Co-operation or (GIZ), is steadfast in his belief that with its abundant renewable energy potentials, Vietnam can even become a net energy exporter by 2050.

However, with the current progress on solar and wind energy development in Vietnam, Mich is not convinced the country will be able to achieve 6.5 per cent of renewable energy in the total supplies by 2020.

Installed capacity of wind energy is now 200 MW, with several new projects slated to be completed later this year, but even so, the capacity reaches just 360-400MW. To fulfill the Government’s target of 800MW by 2020, another 400MW is needed in two years’ time.

“A wind energy project requires several procedures, calculating wind potentials in at least 365 days, data analysis and setting up several databases to see the viability and feasibility of the project. This puts the prospect of attaining 800MW in wind energy by 2020 at risks,” he said.

In addition, wind energy technology is much more complicated than solar energy, and Vietnam is not the producer of equipment, while the Government’s offered feed-in tariffs (Government’s purchase price) for wind energy stayed at an unattractive 7.8 cent/kWh.

“GIZ has proposed the feed-in tariff for onshore wind projects be raised to 8.78 cent/kWh, and 9 cent/kWh for offshore wind projects. This would certainly draw in quality investors,” Mich said.

Pham Phu Uynh, an energy expert, said the priority must be put on developing renewable energy technologies domestically.

“Most renewable energy projects use technologies bought overseas, resulting in higher production prices compared to the traditional energy forms of hydropower or thermopower,” Uynh said.

In addition, the seas of Vietnam face frequent turbulences and typhoons, therefore, “any imported wind energy technology should be customised to our natural conditions first,” he added.

Steve Sawyer, Secretary General of Global Wind Energy Council, has also expressed interests in co-operation with the Vietnamese Government in settling legal bottlenecks and promoting transparency in bidding process to make “Vietnam an attractive destination for international investors.”