According to the latest electricity industry report by VNDIRECT Securities Joint Stock Company, electricity consumption growth in 2023 is forecast to reach 6%, which is the same as the forecast of the Ministry of Industry and Trade for the 2023 power supply plan.
Growth in electricity demand is forecasted to be quite modest due to the influence of electricity demand of industrial and construction sector, especially in cement and iron and steel production, which will be limited this year. However, this year's public investment is expected to be disbursed more strongly than last year, which is expected to partially offset the decrease in electricity demand of this sector.
On the other hand, this year's summer temperature is likely to be high when the warm phase (El Nino) is expected to return from May 2023. Along with that, commercial and service activities are gradually recovering to pre-COVID-19 levels, which partly helps to offset the low consumption level of industrial and construction sector.
Regarding source capacity development in 2023, VNDIRECT Securities said that coal-fired power is expected to increase its proportion to 34% thanks to the addition of 2,632MW coming into operation, followed by hydroelectricity, accounting for 29% of total capacity. The capacity of other power sources has not changed much, and only renewable energy has recorded transition projects but the time of going into operation is unknown.
In terms of production mobilization, hydropower output is forecast to drop sharply in 2023 due to unfavorable weather conditions. Coal-fired power plants will continue to record a low proportion. Gas-fired thermal power plants will likely record a more active mobilization with 12% thanks to the decline of hydropower and cooling input gas prices. Renewable power generation is expected to increase thanks to an additional 2,000MW of transition projects.
For gas-fired thermal power plants, gas prices recorded a downward trend, which is in line with the decline of Singapore FO oil prices. Currently, the price of FO oil has decreased from the peak of 2022 - about nearly 700 USD/ton to less than 400 USD/ton in March 2023. Although this is still a much higher price than the average of the last 5 years, VNDIRECT Securities considers this a positive signal, supporting the price competitiveness of gas-fired power sources in the context that imported coal prices are very high.
Accordingly, the gap between gas and coal prices is gradually narrowing because the current coal price is much higher than in the past. In the period of 2023-24, VNDIRECT Securities forecasts that the price of Brent crude oil will be around 85-80 USD/barrel, supporting a decrease in gas prices. The selling price of gas-fired power plants is more competitive and much cheaper than imported coal-fired power plants. At the same time, gas power still plays an important role.
VNDIRECT Securities estimates that electricity output generated from gas this year will increase by 15% over the same period last year. In the period 2023/2024, it is expected to increase by 9%. Therefore, gas companies such as PetroVietnam Power Corporation (POW), Nhon Trach 2 Petroleum Power Joint Stock Company (NT2) and Power Generation Corporation 3 - Joint Stock Company (PGV) ) will benefit in the near future.
For coal-fired power, it is expected that coal power output will gradually improve this year, increasing by 8 - 12% compared to the low level of mobilization in 2022. However, the prospect of this power source will be different depending on the region and type of coal input. It is expected that world coal prices will remain high due to strong demand when China fully reopens its economy. While on the supply side, Australia, which is currently one of the world’s largest coal exporters, has passed new laws to limit emissions and demand for coal, putting pressure on the country's export capacity.
New coal-fired power plants using completely imported coal such as Song Hau 1, Duyen Hai 2, Nghi Son 2 as well as plants that are about to go into operation such as Thai Binh 2 and Van Phong 2 will face many difficulties in operation due to the higher price than other factories. In contrast, thermal power plants using mainly domestic coal will have more competitive advantages.
Hydropower recorded a slight decrease in output and accounted for the same proportion as the same period last year (25%). Normally, the first quarter is the time when hydroelectric plants target to store water to serve the dry season and heat waves. Coal power recorded an improvement from the low level in the second half of 2022, accounting for 45% of total electricity production, mainly thanks to the cooling of imported coal prices from February 2023. The proportion of gas-fired power output is stable, accounting for 12% of the total electricity generation.
Meanwhile, solar power recorded a strong capacity reduction in the context of weak electricity demand in the South while the source capacity is in excess. On the contrary, wind power contributed a positive output level thanks to a good wind season, supporting a significant increase in the share of renewable energy, reaching 17% of total output.
Source: VNDirect Securities
Compiled by VietnamCredit