5 notes on Investors’ Investment Plans from the Eighth National Power Development Plan

Investment Plans from the Eighth National Power Development Plan

The National Power Development Plan VIII was issued by the Prime Minister on 15 May 2023 under Decision No. 500/QD-TTg on Approving the National Electricity Development Planning for the period of 2021 – 2030, with a vision to 2050 (hereinafter collectively referred to as “PDP VIII”). The main goal of PDP VIII is to successfully implement an energy transition associated with modernizing production, develop smart electrical grids and advanced governed electrical systems, and conform to worldwide trends of green transition, emission reduction, and science and technology development. Accordingly, the Government has developed a roadmap to achieve this goal. Thus, what information do investors need to know about before planning to invest in the electricity sector in Vietnam?

In this article, BLawyers Vietnam presents 5 notable points for investors’ consideration.

1. By 2050, how will the electricity source structure in Vietnam change?

Under the PDP VIII, the electricity sources structure in Vietnam is oriented to develop according to two timelines of 2030 and 2050 as follows:

  1. The total capacity of power plants
    • By 2030: The total capacity of power plants serving domestic demand will be 150,489 MW (excluding export, existing rooftop photovoltaic installation, and renewable energy for production of new energy);
    • By 2050: Total capacity of power plants 490,529 – 573,129 MW of total capacity of power plants (excluding imported electricity, and renewable energy serving production of new energy).
  2. Strong development orientation for offshore wind power (from 4% to more than 14% of total power plant capacity) and solar power (from 8,5% to more than 33% of total power plant capacity electricity);
  3. Reducing the capacity of power plants from electricity sources such as hydropower (from 19,5% down to 7%), and domestic gas-fired electricity (from 9,9% down to 1,4%). In particular, by 2050, coal-fired electricity will not be used.
2. Vietnam’s long-term goal is to build a roadmap for gas power plants to use LNG and hydrogen
2.1 Development structure of gas power sources
  1. Gas-fired electricity
    • Prioritize domestically available gas for generation. If domestic gas quantity is low, import additional natural gas or LNG. Develop projects utilizing LNG with matching LNG import infrastructure in appropriate scale and use modern technology. Implement a roadmap for transition to hydrogen fuel when the technology is commercialized at a reasonable market price.
    • By 2030, power plants using domestically available gas will reach 14,930 MW of total capacity and produce 73 billion kWh.
    • By 2050, around 7,900 MW will continue to use domestically available gas or LNG and produce 55,9 – 56,9 billion kWh of electricity; 7.030 MW is expected to entirely use hydrogen to produce 31,6 – 31,9 billion kWh of electricity.
  2. LNG-fired electricity
    • Restricting the development of electricity sources using LNG if any alternative is available to reduce dependence on imported fuel.
    • By 2030, LNG sources will reach a maximum of 22,400 MW of total capacity and produce 83.5 billion kWh. By 2050, power plants using LNG will make a gradual transition to hydrogen, reaching 25,400 MW of total capacity, and producing 129.6 – 136.7 billion kWh.
2.2 Orientation on the total capacity of electricity sources
  1. By 2030
    • 14,930 MW of domestic gas-fired electricity (9.9%);
    • 22,400 MW of LNG electricity (14.9%).
  2. By 2050
    • 7,900 MW of domestic gas-fired electricity transitioned to LNG (1.4 – 1.6%);
    • 7,030 MW of domestic gas-fired electricity transitioned to hydrogen (1.2 – 1.4%);
    • 4,500 – 9,000 MW of LNG and hydrogen co-firing thermal electricity (0.8 – 1.8%);
    • 16,400 – 20,900 MW of LNG thermal electricity transitioned to hydrogen entirely (3.3 – 3.6%).
2.3 By 2050, use only LNG combined with hydrogen and exclusively with hydrogen

According to the development plan and capacity orientation of gas power sources in 2030 and 2050, there will be a transition from a structure using only LNG to a structure using LNG combined with hydrogen and completely using hydrogen.

To be consistent with the orientation of gas power source structure under PDP VIII, investors when developing and building LNG power plants need to plan carefully to be able to convert LNG power plants into hydrogen-burning LNG power plants or convert into a power plant running entirely on hydrogen according to the policy of the future national electricity development plan.

3. Electrical load

The Electricity Law in 2004 stipulates the State’s policies in electricity development as follows:

  1. Building and developing the electricity market on the principle of publicity, equality, and fair competition with the State’s control to raise efficiency in electricity-related activities; protecting legitimate rights and interests of electricity utilities and electricity consumers; attracting all economic sectors to participate in investment in the construction of transmission grids on the basis of ensuring national defense and security and according to planning for electricity development, electricity generation, electricity distribution, electricity wholesaling, electricity retailing and/or electrical consulting.
  2. Non-state economic sectors are allowed to operate transmission grids they have built themselves.
  3. In addition, the policy also says that the State holds a monopoly in the operation of distribution grids, except for the transmission grid built by non-state economic sectors.

However, up to now, there have been no specific instructions for investing and operating transmission grids built by organizations themselves.

4. Limiting carbon emissions
4.1 PDP VIII’s goal for limiting carbon emissions

PDP VIII sets out goals to reduce emissions and greenhouse gas to meet net zero emissions by 2050, aiming towards fulfilling regulations on carbon emission per unit of export commodities and carbon market.

4.2 Impact on investors
  1. On the positive points
    • Carbon market: Proposing regulations on emission quota exchange activities and carbon credits must ensure transparency and harmonious interests of participants in the carbon market.
    • Organizations and individuals participate in the carbon market voluntarily.
    • Trading through the carbon market: participating subjects can auction, transfer, borrow, return GHG emission quotas, and use carbon credits to offset greenhouse gas emissions.
  2. On the limited points
    • Strengthen management and supervision of corporate carbon emissions: Establishments with annual greenhouse gas emissions of 3,000 tons of CO2 equivalent or more or in one of the special cases must comply with current greenhouse gas inventory.
    • Set out requirements when implementing greenhouse gas emission mitigation, such as measurements must be carried out according to measurement, reporting, and appraisal procedures issued by competent authorities, ensuring accuracy, transparency, continuity, and consistency of measurement results; or the greenhouse gas emission mitigation report must show complete and accurate information on measurement methods, operational data, applied emission factors, technological solutions, and management methods to reduce greenhouse gas emissions and the resulting mitigation of greenhouse gas emissions.
5. Developing and completing the policy framework and legal basis for renewable energy

According to PDP VIII, the Prime Minister proposed solutions to improve the legal framework on renewable energy as follows:

  • Research, develop, and promulgate a Law on Renewable Energy: The Government requests the Ministry of Industry and Trade to urgently research and complete the dossier requesting the development of a Law on Renewable Energy according to the tasks assigned by the Government and report to the Prime Minister in August 2023. However, up to now, there has been no new information from the Ministry of Industry and Trade.
  • Develop mechanisms and policies to encourage domestic enterprises to participate in renewable energy development, develop renewable energy industry and new energy for domestic and export purposes, and develop manufacturing industry electrical industry equipment.
  • Amend the Law on Electricity to improve policies on investment, planning and electricity price management, develop a competitive electricity market, handle problems, institutionalize development mechanisms, and create breakthroughs and promote strong development of power sources using renewable energy; separate the role of state management from enterprise production and business.
  • Promulgate a pilot, moving towards officially building a direct power purchase contract mechanism between renewable energy power producers and consumers in synchronization with amendments to the Electricity Law and market implementation roadmap on competitive electricity.

The above is not official advice from BLawyers Vietnam. If you have any questions or suggestions about the above, please contact us at consult@blawyersvn.com. BLawyers Vietnam would love to hear from you.

Date: 25 October 2023

Writers: Tinh Nguyen and Minh Truong


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