On 20 August, a seminar was held to discuss groundbreaking measures to attract investments in the energy sector.
Chairman of the Vietnam Valuation Association (VVA), Nguyen Tien Thoa, commented that Vietnam’s policies on energy development remain confusing and do not follow the basic principles of encouraging the participation of various economic sectors in the energy sector to ensure national energy security.
Thoa identified four main problems: First, electricity pricing does not follow market rules, which leads to difficulties in electricity production and trading.
Statistics released in 2022-2023 showed that inappropriate management policies resulted in a loss of VND 47.5 trillion, which in turn led to cash flow problems in the energy sector.
Second, current electricity prices are designed to fulfil several tasks. They must be high enough to cover costs and encourage investment in the energy sector, while at the same time being low enough not to place an excessive burden on consumers – households and businesses.
In addition, they must be reasonable to ensure social security, energy security and help control inflation. It is very difficult to achieve all these objectives.
Third, Vietnam applies a cross-subsidy system in electricity pricing among electricity consumers. The cost of electricity production in island districts and communes is VND 7,000 to 9,000 per kWh, but it is sold for only VND 2,000.
Fourth, there is no distinction between trade prices and social benefits.
Hoi believes that the main problem lies in the pricing of electricity. If Vietnam differentiated between work for the common good and commercial activities, there would be a reasonable pricing mechanism.
“We developed the pricing system in 2014 to encourage production and set electricity prices low for the production sector. If we want to ensure the financial performance of EVN (Electricity of Vietnam), we need to raise commercial prices. We need to gradually adjust prices by reducing the benefits for the production sector,” Hoi said.
Hoi warned, however, that the immediate abolition of cross-subsidies must not be implemented as this would represent a shock to the national economy. Measures to regulate electricity prices based on market rules are needed.
Hoi believes that although Vietnam has developed renewable energy sources, it still cannot do without basic energy sources such as coal and gas power.
“As coal and gas power always plays a very important role in ensuring energy security, electricity prices will certainly rise in conjunction with material price increases,” Hoi said.
“Given the current geopolitical conflicts, it would be unreasonable to hope for falling commodity prices. We have to accept the real situation,” he added.
Referring to the 2050 net zero plan, Hoi said other countries also want to develop clean electricity sources.
Solar power systems can only generate electricity for four hours a day at most, while wind power is unstable, so these energy sources are unlikely to be cheap.
“In short, due to geopolitical conflicts in the world and the trend towards energy transition, the cost of electricity supply will rise,” concluded Hoi.
Meanwhile, Nguyen Dinh Tuan, CEO of Son Dong Thermopower, noted that hydropower resources have been fully exploited, while coal-fired power generation will be gradually reduced by 2030 and phased out completely by 2050 under the net-zero program.
Therefore, the development of new sources in the future will rely on gas-fired power plants and offshore wind power. Hoi pointed out that power sources will have a great impact on the operation process and will require a high investment rate.
“Of course, renewable electricity will have high prices and thereby affect average market prices, which in turn will negatively impact EVN prices and government pricing,” said Tuan.
He said that thermal power plants will adjust the mix of input materials as required by the Ministry of Industry and Trade (MOIT). However, the problem remains with the price of input materials. The price of biomass fuel and pellets can be two to three times higher than that of coal. This is an issue that experts must take into account.
Luong Bang
