Vietnam Electricity Case Study
Prepared by Lisa Harraway
Comprehensive reforms since 1986 (known as ‘Ðổi Mới’) have put Vietnam on a stable economic growth trajectory, transforming the country from a low- to a middle-income economy in one generation.
Vietnam has one of the most energy-intensive economies in the world. Since 2010, electricity consumption has increased by approximately 10% per annum. This is attributed to strong economic growth and increasing industrialisation, universal electrification and modernisation. Installed electrical capacity grew 10 fold from 5GW in 2000 to 55GW in 2020. Access to electricity increased from 14% in 1993 99% in 2020.
To meet the growing demand, Vietnam would need about 130 000MW installed capacity by 2030. The installed capacity would have to double in size in the next 10 years and EVN (Electricity of Vietnam) estimates an investment close to US$148 billion.
In the past, Vietnam has been dependant on low cost hydropower and State subsidised fossil fuels to generate electricity. The potential for additional big scale hydro projects has almost reached its limits, coal reserves are declining, leading to a marked increase in coal imports and both coal and oil prices are increasing. These reasons, together with increased electricity demand have led Vietnam to look for alternative power generation sources.
To address the growing demand, the government has adopted a programme to restructure the electricity sector through privatisation of power generation facilities, allowing IPP (Independent power producer) participation, forming PPPs (Public private partnerships), and by shifting the energy mix away from coal-fired electricity generation in favour of electricity from renewables and LNG (Liquified natural gas).
Vietnam has done an excellent job of controlling the impact of the COVID-19 pandemic, achieved a positive net GDP growth of 2,91% in 2020. Growth is expected to bounce back to forecasted growth levels of 6,8% in 2021 (World Bank). Nonetheless, due to COVID-19, the forecasts for the next couple of years will be subject to higher-than-normal forecast risk. The electricity sales growth in 2020 was constrained at 2,2% but is forecast to return to 9% growth levels in 2021.