No borders for Vietnam's power needs

With a rapid economic growth (GDP projected to grow at about 8 to 9 percent during 2006-2010), the power demand in Vietnam is forecast to grow at an average of 16 percent per year during the next five years. During the January 2008 to May 2008 period, the national consumption surged by 19 percent, with the southern region (home to the country's industrial hub), jumping 28 percent, up from an average growth of nearly 14 percent in the same period of 2007.

This summer the power utility managed the problem through rotating outages. Meanwhile, the power output of all existing and new plants could only expand 15 percent in 2007 and 17 percent in 2008.

The country is also facing an electricity shortage of around 1,400MW or 10% of total capacity, during peak hours. This situation is more serious in the north, where the demand surged to 78.7 million kWh/day (increase of 21.4%) in April and 83 million kWh/day in May 2008, but all the generation capacity in north is just able to provide 48 millions kWh/day in April and 55.5 millions kWh/day in May.

Capacity Expansion Plans – The Usual Route

To cope with urgent shortage in the north, since first quarter of 2008, Electricity of Vietnam (EVN) has planned to use more output from gas-fired power plants in the country's south and transmit through the 500 kV line and also urged government offices, businesses and households to use power more responsibly.

Beside that, EVN and PetroVietnam (local oil company, which is also an independent power producer), the major investors in new power plants, would add 3,000 megawatts (MW) of new generation capacity in 2008, including 1,950 MW from two gas-fired complexes in Ca Mau and Nhon Trach province in the south and a 300-MW coal-fired plant in Uong Bi province in the north.

EVN also would start building three new coal power plants this year with combined capacity of 1,900 MW, including the 600-MW Nghi Son, 300-MW Uong Bi 2 and 1,000-MW Mong Duong plants, all in the north.

Besides the investment of more than $2.00 billion last year in new grids and power plants, EVN would need to invest as much as $30 billion to build 33,200 MW of new generation capacity by 2015, if it has to meet the growing power demand.

Drivers for Cross-Border Power Trading

EVN has been adding significant hydropower capacity; but lower water levels at major reservoirs during the dry season threaten the supply of hydropower nationwide. To avoid overdependence on hydropower, EVN has decided to shift its focus to coal during the development plan 2010 to 2020. However if the thermal capacity addition progresses as planned, the country may fall short of domestic coal production by 2013 and may be forced to import coal. However running power plants on imported coal bought from international market may not be attractive to investors, considering the low domestic electricity prices.

To tide over this problem, EVN has been actively looking for neighboring countries such as China, Laos and Cambodia to sell their excess power capacity.

Since 2005, EVN has signed contracts to purchase electricity from China's Yunnan and Guangxi electricity companies. In 2007, EVN has also signed a contract with China' Southern Electric Grid Corporation to link their 220kV and 500kV grids to exchange electricity in the framework of bilateral and Greater Mekong sub-regional cooperation.

The quantum of these contracts is 200 million kWh/year or about 2 percent of the country’s power output. This electricity supply is mainly used as a backup for the hydropower plants during the dry season. Moreover, the average price at which EVN is purchasing electricity from China is US C4.5/kwhr. If counting on the transmission, management fee and the loss during the transmission, the electricity cost is about US C6.8 /kWh.

Meanwhile, the purchase price from Ca Mau 1 plant (a power plant of local IPP PetroVietnam) is US C7/kWh in January 2008, and US C8 /kWh in February 2008, while EVN sells electricity at US C5 /kWh on average. As such, EVN has every reason to purchase electricity from China instead of PetroVietnam.

Foreign Investment

Vietnam is planning to build 31 hydropower plants from 2008 until the year 2020, in Laos, with a total installed capacity of 5,100 MW.

Besides the two hydropower projects currently being executed - Sekaman3 (250 MW) and Sekaman1 (200 MW) - the Vietnamese government has just approved the project of EVN to build hydropower plants at Namet 1 (140 MW), Namet 2 (170 MW), Namet 3 (110 MW) and Namcong 2 (60 MW).

EVN will begin construction of two hydroelectric plants in Cambodia using investment capital of about US$600 million. They are Se San 5 (90 MW) and Se San 2 (400 MW); together they will generate about 2 billion kW-hr of power every year, which will be used in Cambodia and Vietnam. The two plants will be finished within five years, and they will be put into operation by 2014.

Interconnection

With the purchase of electricity from China (through border-line of North Vietnam), the demand to expand the transmission grid is also increasing. Since 2005, EVN has planned to build a 220 kV grid to transmit electricity from China to provinces in the North.

Besides, a new 205 km line from border province of Ha Giang to Thai Nguyen province has been completed in April 2007 to provide electricity for 6 provinces of North Vietnam. In addition, to be able to serve for Ha Noi capital city area, EVN will upgrade the line of Thai Nguyen - Soc Son from 110kV to 220 kV with length of 44 km.

Opportunities

To serve for all transmission and distribution plans, from now until 2015, EVN is planning to buy at least 24 transformers (capacity of 21,600 MVA in total) for its 500kV grid, 103 transformers (capacity of 18,814 MVA in total) for its 220/110 kV grid. Opportunities for other related T&D equipment and services are aplenty.

To facilitate overall economic development and to sustain balance between demand and supply, it is critical to strengthen the power grid in Vietnam, as well as expand ing the network.

Countries such as Laos, Cambodia, China, and Vietnam are planning some significant interconnections to promote cross-border electricity trading and capacity leveling, apart from investments in new power plants.