Power Development Planning VIII (“PDP8”) – The Vietnamese government’s plan to decarbonize the country – what you need to know

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Question 1. What impact is the PDP8 likely to have on the country’s efforts to decarbonize the economy?

Answer 1: The Power Development Planning VIII (“PDP8”) project strengthens the Vietnamese government’s current position on prioritizing renewable energy sources in order to minimize the negative impacts caused by electricity production on the environment. The import of fuels (coal, LNG) is encouraged as a means of diversifying the country’s primary energy sources, as is the establishment of transmission and distribution network links with China, Laos and Cambodia in order to to maximize the energy potential of each country. Sources of electricity imported from neighboring countries should be considered as priority projects because imported electricity will reduce the environmental impact compared to national production.

In 2020, the country’s total generating capacity is around 69.3 gigawatts (GW), including 16.5 GW of solar power (around 24% of total capacity) and 0.6 GW of wind power. Over 50% of Vietnam’s electricity production came from coal in 2020. Vietnam’s dependence on coal-fired electricity remains heavy to meet rapidly growing demand for electricity. Hydropower generation is also important as the country is home to a number of major rivers. Non-hydropower renewable sources such as wind and solar accounted for 5% of Vietnam’s electricity production in 2020. Under the PDP 8 project, Vietnam plans to increase solar capacity to 18.6 GW and wind capacity to 18 GW by 2030.

Question 2. Does PDP8 target specific regions of the country? Are these regions the most likely to be impacted by the transition to a low carbon economy?

Answer # 2: Yes, one of the most notable differences between interim PDP 8 and revised PDP 7 (the latest official national electricity development plan) is the level of electricity demand between the North and South. According to the PDP8, the proportion of commercial electricity in the North will gradually increase from 42.4% in 2020 to 45.8% in 2045, while the South will decrease its proportion from 47.4% in 2020 to 43.6% of by 2045. By 2040, the commercial electricity of the North the demand for electricity will start to exceed that of the South. As a result, this will significantly affect the PDP8 strategy to develop the transmission network and generation sources (including renewable energy sources) to meet demand.

The PDP 8 project is focused on developing a transmission network of at least 220 KV to address overcapacity issues that have arisen in recent years. As for the development of the network, over the period 2021-2030, the MOIT sees the need to build 86 GVA with a capacity of 500 kV per substation and nearly 13,000 km of DLZ. From 2031-2045, an additional construction of 103 GVA with a capacity of 500kV and nearly 6000 substations is necessary. The 220 kV electrical network requires a construction of 95 GVA, or nearly 21,000 km DMZ and 108 GVA, at more than 4,000 km NE. The total investment capital for the development of electricity during the period 2021-2030 is approximately USD 128.3 billion, of which: USD 95.4 billion for energy sources, USD 32.9 billion for networks. The average capital investment structure will be 74% / 26%.

The PDP8 project seems to concern a sudden oversupply of solar energy in 2030 in many regions, such as the central highlands (estimated at 1,500 MW but recorded at 5,500 MW), the center-south (estimated at 5,200 MW but registered at 11,600 MW), or the south (estimated at 9,200 MW but registered at 14,800 MW). Wind energy shares the same situation because the recorded capacity exceeds the normal estimated capacity in the central highlands (estimated at 4,000 MW but recorded at 10,000 MW) and southern (estimated at 6,800 MW but recorded at 17,000 MW). ). As a result, the PDP8 project must resolve this imbalance to ensure the sustainable development of renewable energy sources in Vietnam. Future renewable energy policy is expected to be based on auctions rather than FIT.

For example, below is the draft policy for solar energy projects. At the end of January 2021, the Ministry of Industry and Trade (“MOIT”) published the Prime Minister’s draft decision guiding the selection of investors implementing solar energy projects under the appeal mechanism of ‘offers (“the Project”). Depending on the project, the decision would apply to projects whose networks are directly connected to the national electricity grid. The Ministry of Industry and Trade is coordinating with the Electricity of Vietnam and the People’s Committees of the localities to organize the elaboration and approval of the development plan for renewable energy sources for a period of 5 years and all 2 years to serve as the basis for the auction system. In addition, every 02 years, the Ministry of Industry and Trade will publish a price framework for power generation to determine the ceiling price of auctions to select investors of solar energy projects with DCO during of the next 02 years. The renewable energy source development plan for a 5-year period shall include the total capacity scale for each renewable energy source over the 5-year period, the total capacity scale for each source of energy. renewable energy for each charging region (8 regions) and a list of transmission lines and substations (at least 220 kV) to be commissioned for a period of 5 years. The 02 year plan will have similar content but for a 2 year period only and will be more province specific.

Question 3. Have issues of economic, racial and gender equity been taken into account in the development of PDP8?

Answer 3: Yes, any government policy must take these issues into account, but it is very difficult to identify if they are well reflected in the policy, including the PDP8. It is a very large and difficult question.

Question n ° 4. Has there been a debate among political leaders about the costs and benefits of PDP8?

Answer n ° 4: Yes, of course. It seems that the new government now has different views and priorities from the old one and therefore the PDP8 needs to be revised to reflect these priorities.

As you may know, at the end of March 2021, the very first PDP8 PM draft decision (“Draft Decision”) was released via unofficial sources (i.e. not via the ministry website. of Industry and Commerce (MOIT)). This draft Prime Minister’s decision was due to be signed at the end of March during the final days of Prime Minister Nguyen Xuan Phuc’s administration, but it was delayed as the transfer to the new administration was already underway. It appeared that investors and projects to convert LNG to electricity in this first draft decision of the PM have been reduced compared to those in the PDP8 proposal published earlier by the Ministry of Industry and Trade (MOIT) .

On April 23, 2021, Deputy Prime Minister (DPM) Le Van Thanh led a government meeting on PDP8 and concluded that, among other things, PDP8 needs to be (i) updated with the qualifications for priority projects , and (ii) revised to reasonably consider and allocate the development of energy sources, especially LNG-to-power projects in PDP8 to ensure competition, optimization of power system development. The DPM asked the MOIT to carefully consider and digest the opinion of EVN in its official letter No. 1645 / EVN-KH of April 2, 2021. Finally, the DPM asked the MOIT to submit the updated PDP8 proposal. day before June 15, 2021.

Unfortunately, due to the Covid-19 situation and the heavy workload of updating the PDP8 proposal, the Ministry of Information and Regulation has not submitted a revised proposal to the government for consideration. On June 17, 2021, the Minister of MOIT held a press meeting to update the progress of PDP8 and planned to submit the revised proposal of PDP8 to the government by June 2021. So far, based on Our information, the MOIT is still reworking its project and the PDP8 is should be COB approved this year ideally.

Question n ° 5. What role have various stakeholders (eg businesses, non-profit organizations) played in advocating for or against PDP8 or in trying to influence its development?

Answer # 5: Yes, there are many stakeholders here eg EVN, local developers, business communities (such as chambers and VBF) and state authorities. However, please note that the draft PDP8 is mainly drafted by the Energy Institution (NB: an institution under EVN until it was taken over by the MOIT since 2010). The MOIT gathered the opinions of all stakeholders for the draft PDP8 prepared by the Energy Institution. It should be noted that EVN’s opinion is still of crucial importance as it (including its affiliates and subsidiaries) still remains the position of a monopoly wholesaler in the market. The new government asked the MOIT to review EVN’s opinion for the revision of the current draft PDP8. Question n ° 6. Which key stakeholders were in favor of PDP8? How did they organize and influence decision making?

Answer n ° 6: Yes, it is very difficult to answer this question in black or white. The PDP8 is the Government’s priority policy for the energy sector. So, there is always a favorable trend for this policy to come out soon. We note, however, that there are different views on the content of PDP8, but not a question of support or opposition.

Question n ° 7. Which key stakeholders were against PDP8? How did they organize and influence decision making? Have there been specific measures to address their concerns?

Answer # 7: Yes, it is very difficult to answer a question in black or white. The PDP8 is the Government’s priority policy for the energy sector. So, there is always a favorable trend for this policy to come out soon. We note, however, that there are different views on the content of PDP8, but not a question of support or opposition.

Question n ° 8. Was the PDP8 well received by the public?

Answer n ° 8: Yes, it was well received by the public. However, business circles with foreign capital still have some concerns, among others, regarding the current PDP8: • No clear plan for variable renewable energies in the technological mix. PDP8 should ensure that planning in Vietnam remains on the cutting edge to include a full representation of variability and assess the reliability of the power system. • No plan for nuclear energy. • Need to create a regulatory and licensing environment that attracts private sector investment in clean energy production and energy efficiency. • Need for a clear policy to ensure that EVN shares market risks: for example, a bankable power purchase agreement (take or pay) with generators. • Need to stop the development of coal-based projects: it is recommended to suspend the approval of any new coal-fired power plant and to conduct a strategic review of those that are already approved but do not have a contract. financing or purchasing electricity. • Need to develop a flexible transport network in view of the market orientation and the increase in variable renewable energies. • Need to put in place programs to deal with uncertainties: from fuel prices to growing demand and oversupply and downsizing.


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