The newest report of the Ministry of Industry and Trade regarding Power Development Plan VIII and the expectation of approval by the Prime Minister

Following the order of the Prime Minister, the Ministry of Industry and Trade (“MOIT”) has amended the Draft National Power Development Plan for the 2021-2030 period, with a vision to 2045 (“PDP VIII”). On 11 November 2022, the MOIT sent the report No. 7194/TTr-BCT (the “Report 7194”) to the Prime Minister for the approval of the PDP VIII. Accordingly, the Report 7194 of the MOIT is expected to be the last draft and will be early approved to establish a new foundation for the electrical power industry investment project.

Throughout this article, BLawyers Vietnam will briefly highlight some significant points on the draft of PDP VIII updated to November 2022.

MOIT

1. Coal-fired power

In the Report 7194, the MOIT proposed that coal-fired power plants should not be included in the PDP VIII. Starting in 2030, new coal-fired power plants should not be established. The coal-fired power plants which have over the technical lifetime (about 40 years) will be stopped from operating and those plants should be converted to biomass and ammonia before 2050.

According to the energy distribution plan, the use of electricity which is created from coal-fired power will decrease from 29.8% in 2030 to 3.3% in 2045. Accordingly, the MOIT would like to remove the use of coal-fired power to produce electricity for the national electricity grids by 2050.

The MOIT proposed to use other sources of energy such as wind power and biomass to replace coal-fired power.

2. Natural gas power

The PDP VIII determined that the development of thermal power projects which use domestic natural gas sources will be the priority. This will help to reduce the dependence on imported natural gas.

From now to 2030, the PDP VIII will focus on developing two projects of natural gas-electric projects with a total capacity of 6,900 MW, at the Block B project and the Blue Whale project. Besides the two mentioned projects, MOIT plans to develop more downstream power plant projects in the period 2031-2035. Depending on the result of the evaluation and negotiation process, the MOIT will report to the Prime Minister to bring into operation soon.

The MOIT predicts that the price of Hydrogen would be decreased, so that such authority recommended not to develop a new natural gas power project after 2035. Instead, natural gas power plants will gradually transition to using Hydrogen after 10 years of operation. So that by 2050, most natural gas power plants would use Hydrogen.

3. Solar power, wind power

The current operating capacity of wind power is 4,126 MW. The priority of PDP VIII is to aggressively develop onshore and offshore wind power. Accordingly, onshore wind power capacity is expected to reach 21,480 MW and offshore wind power reach 7,000 MW (in which, Northern Vietnam’s capacity is 4,000 MW) in 2030.

Currently, solar power projects have not been synchronized in the source development and the power system is still limited, with a lack of ability to release power source capacity in time. Thus, the high proportion of solar power sources is causing difficulties in the normal operation of the power system, affecting the operation of coal-fired and gas thermal power sources.

In the Report 7194, the MOIT also requested the Prime Minister’s approval to continue implementing and bringing into commercial operation before 2030 the completed solar power projects which are waiting for new electricity prices; projects/ parts of projects that have already been invested to build or are under construction; projects/ parts of projects that have been approved for basic design, have had land acquisition, decisions/ land lease contracts/ land allocation decisions; equipment purchase and sale contracts, power sale contracts. The total capacity of these projects is 726.02 MW.

However, these projects are only implemented by the regional power system facilities and the general absorption ability of the national power system (the MOIT will assign Electricity Vietnam to calculate and inspect each project).

The PDP VIII encourages businesses to develop rooftop solar power and wind power for self-use rather than selling to the national grid. In the future, the MOIT will develop incentives to encourage the development and management of such projects.

According to the MOIT, in the comparison with other countries in the region and the world, Vietnam’s electricity price is generally low (average 7.9 US cents/ kWh). Wind and solar power prices are rapidly falling and are expected to fall further in the coming years. According to the PDP VIII, the price of onshore wind power will decrease from 7.74 US cents/ kWh before 2025 to 6.35 US cents/ kWh before 2030 and 5.3 US cents/ kWh before 2050. The cost of solar-generated electricity would decrease to 5.5 US cents/ kWh by 2030 and 3.4 US cents/ kWh by 2050.

Therefore, the Report 7194 dated 11 November 2022 has been significantly revised in comparison to the versions issued in 2021. The PDP VIII should be approved soon so that many projects can soon be put into operation.

Should you have any questions about the above contents, please revert to BLawyers Vietnam at consult@blawyersvn.com. We are more than happy to hear from you!

Date: 02 December 2022

Writer: Linh Nguyen & Tinh Nguyen

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