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Highlights of Vietnam's electricity market in 2020 and future outlooks

Thursday 17, 09 2020
Although electricity sectors in Vietnam are facing challenges due to climate changes and the Covid-19 pandemic, the industry remains investment potentials for private sectors in the near future.
Highlights of Vietnam's electricity market in 2020 and future outlooks

Overview of Electricity Market in Vietnam

Vietnam’s Electricity Industry has been established for 65 years, under the management of the Vietnamese Government. In 1995, Vietnam Electricity (EVN), a state-owned company, was founded with the responsibility to invest, manage and develop the electricity sector in Vietnam. Currently, EVN still holds the dominance in all stages of the electricity value chain from production, transmission, distribution to electricity purchase and sale. In order to ensure the sustainable development of this market, EVN is operating with the direct supervision of the Ministry of Industry and Trade. Besides, the implementation of electricity policies is based on the consultation of the Ministry of Finance and the Ministry of Planning and Investment. 

Overview of Electricity Market in Vietnam

Statistics from Vietnam Credit Ratings reveals that there are currently more than 700 enterprises registered to operate in the power sector with the number of employees estimated at nearly 82 thousand. Most of the businesses are generating and distributing electricity, accounting for more than 90% of the total. The power transmission stage is currently monopolized by National Power Transmission Corporation (EVNNPT) and its over 50 units and subsidiaries. Power distribution is the most labor-intensive sector, creating jobs for more than 52 thousand people. 

Highlights of the industry in 2020


Generated electricity in 2019 was estimated at 231.1 billion kWh, increasing approximately 8.7% compared to the amount of 2018. During 2013-2019 period, the compound annual growth rate of the power generation sector was a double-digit number of over 10%. Statistics from EVN shows that, imported and generated power in the first half of 2020 reached 110 billion kWh, up 1.74% over H1/2019. 50% of the installed capacity in Vietnam is contributed by EVN. In the first six month of 2020, EVN and Power Generation Corporations (including joint-stock companies) generated nearly 55% of the total produced electricity with an amount of 66.52 billion kWh. 

Hydropower is currently the most important power source in the structure of Vietnam’s electricity industry due to the low involved time and costs of production and the positive impacts on the environment. However, the capacity of hydropower in Vietnam has been fully exploited. Besides, hydropower is drying up due to the negative effects of climate changes. Total amount of hydropower in the first quarter of 2020 was 7.8 billion kWh, the lowest level in the recent years. Therefore, the industry must depend heavily on coal-fired power to ensure the sufficient supply of electricity. 
Amid the Covid-19, EVN had reduced electricity prices and bills for customers who were influenced by the pandemic for 3 months from April to June 2020. Specifically, the retail price for household customers was discounted by 10% for level 1 to level 4 usage tiers. A 10% discount was also applied for business and manufacturing organizations electricity price. This price after reduced was applied for tourist accommodations. Nearly 26.7 million households and non-household customers were supported with the reduced amount was equivalent to more than 4,500 billion VND. 

OPPORTUNITIES

  • According to Power Planning VIII, the national electricity demand will increase at a rate of 8.5% per year during the period of 2021-2025 and 7.5% per year since 2026, indicating prospects of the market development in the next 10 years. 

  • Resolution No. 55 is expected to create more investment potentials for private sectors, contributing to eliminating the monopoly of EVN in the market starting from 2020. Accordingly, there will be more transparency in the auction process and electricity prices as suppliers and customers can cooperate based on direct contracts. 

  • As the amount of hydropower is decreasing due to water scarcity, other types of energy, especially coal-fired power, are having more opportunities to be invested and developed with higher expected profits. 

CHALLENGES

  • As the raw materials for electricity generation are gradually reducing and climate changes are having negative impacts on the hydropower sector, the growth of electricity output has not catch up with the pace of electricity demand and annual GDP growth rate, therefore, the power shortage remains a huge challenge of Vietnam’s electricity industry. According to the Ministry of Industry and Trade, by 2021, there will be an electricity shortage of 6.6 billion kWh in Vietnam. This amount is estimated at 11.8 billion kWh by 2022 and reach the peak at 15 billion kWh by 2023. 

  • Since the outbreak of Covid-19, the process of importing materials for building new power projects have been taken longer time and several expats and consulting specialists cannot travel to Vietnam. Therefore, some of the power projects have been postponed and might be delayed for several months. 

  • Investments in wind power is growing to take advantage of high fixed prices rather than sustainable profits in long-term, leading to certain risks of failure.  

INDUSTRY FORECASTS 

INDUSTRY FORECASTS
  • The electricity industry is forecasted to require 117 billion USD from investment by 2030. Of with, power sources investment will account for 60% while the power transmission and distribution sectors constitute over 30% of the total investment. 

  • As the mechanism has not been completed yet, there are difficulties for private investors to join the market. Besides, EVN continues to hold a monopoly position in power transmission, therefore, enterprises are reluctant to invest and in the need of supports from the Government. 

    VIETNAM ELECTRICITY REPORT 2020

Source: Cindy Khanh-Vietnamcredit

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Industry Report

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