Nation lacking coal supply for sufficient power generation

May 19, 2022 | 17:39
Vietnam is in the midst of a major coal shortage due to falling imports, rising energy demand, and transmission limitations, with the issue not only deepening risk of power shortages this summer but also affecting economic recovery.
Nation lacking coal supply for sufficient power generation
Flexibility is required in handling raw material issues for power plants and easing coal supply pressures, Photo: Shutterstock

Thai Binh Thermal Power Plant under Electricity of Vietnam (EVN) has been in a coal shortage since the beginning of 2022. Ta Trung Kien, director of the plant, said that the volume of coal delivered “has been reduced significantly” compared to the signed contract. Vinacomin Group and Dong Bac Corporation – two of the coal suppliers for the Thai Binh Thermal Power Plant – delivered only just over 74 per cent of the monthly plan.

“The two units of our plant need about 6,400 tonnes of coal per day. Due to a lack of coal, the plant was forced to use backup coal to maintain the operation. By the end of the first quarter, these reserves were at just about 14,000 tonnes, much lower than the required norm of 80,000 tonnes,” Kien said.

Many other plants are facing similar problems, including Nghi Son 1, Vung Ang 1, Vinh Tan 2, and Duyen Hai 1, which currently only have enough coal to operate one unit at 60-70 per cent of capacity.

Meanwhile, Hai Phong Thermal Power Plant only has enough coal to run one unit, while three other units have had to stop operating. In the first quarter of 2022, coal power accounted for 45 per cent of the power output of the whole system.

In its updated report on March 30, EVN confirmed, “Many units have had to stop operating and reduce power generation due to coal shortage and low inventory, causing the power system to lack more than 3,000MW. The volume of coal supplied in the first quarter was nearly 4.5 million tonnes, 1.36 million tonnes short of the volume agreed on with suppliers.

Short supply, high coal prices, and internal problems have dragged down Vietnam’s coal import turnover. According to the General Statistics Office of Vietnam, from the beginning of the year to March 15, the country imported nearly 5.1 million tonnes, with an average price of $228.5 per tonne, up 170 per cent over the same period last year.

The high prices of imported coal and the decrease in import volume are putting pressure on domestic coal suppliers. State-run Vietnam National Coal and Mineral Industries Group (Vinacomin), in a document sent to the Ministry of Industry and Trade at the end of March, warned of the risk of “not having enough coal for its customers, especially power plants.” Coal output to power producers accounts for more than 80 per cent of Vinacomin’s coal throughput.

According to Vinacomin, thermal power plants are not properly registering coal purchases through long-term contracts, stating that only when supply is limited and prices are high, would coal users turn to domestic sources.

Another reason for the pressure on coal supply for power generation, according to Vinacomin, is the lack of flexibility in handling raw material issues for thermal power plants. Vinacomin has opened four international bidding packages in the second quarter of 2022.

But, on March 2, EVN approved the mixed coal price mechanism, causing Vinacomin to miss many import opportunities.

The April 23 meeting between the two companies is expected to change the coal supply for thermal power plants of EVN, which owns more than 13,000MW worth of coal-fired power plants.

At the meeting, Vinacomin committed to compensating for undelivered coal in the first quarter of the year according to the contract volume, equivalent to about 800,000 tonnes in the remaining quarters of 2022.

The coal supplier also plans to compensate for about 300,000 tonnes for EVN’s thermal power plants in the second quarter and will supply as assigned under the contract for the remaining months. The total volume of coal supplied in the second quarter was 5.1 million tonnes.

Duong Quang Thanh, chairman of EVN’s Member Council, said that EVN and Vinacomin agreed to coordinate the supply of coal for EVN’s thermal power plants in 2022. However, Thanh did not give specific solutions to ensure a sufficient supply for electricity production.

Nevertheless, even with an agreement between Vinacomin and EVN, the coal supply is still facing many challenges. The mobilisation of coal inventories in Mao Khe and Uong Bi, coupled with imported coal, is unlikely to make up much of the total coal output for power production.

Like Vietnam, many other countries that depend on thermal power, such as China, do not have a clear alternative to the coal problem, which could create a global scramble. Analysts said that the shortage of coal for Vietnam’s electricity production may be worse when China changes its policy on coal imports to limit large-scale blackouts this summer.

China’s Ministry of Finance announced that it would reduce the import tax rate of coal to zero from May 2022 to March 2023. The amount of coal imported by China in the first quarter of 2022 decreased by 24 per cent compared to the same period last year due to the sharp increase in global coal prices.

By Hai Van

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