Expert analysis of new national power development plan

After three years of drafting and preparation, on May 15, 2023, Prime Minister Pham Minh Chinh issued Decision No. 500/QD-TTg, approving the much-awaited National Power Development Plan for 2021-2030 with a vision to 2050 (PDP VIII). Duong Anh, senior partner of VILAF law firm, analyses the key points of the plan, which may have remarkable effects on the private sector.

1. National power development orientation

Renewable energy power projects

The development of power sources from renewable energy (including wind, solar, waste-to-energy, biomass power, etc.), especially solar power and wind power in the form of self-production and self-consumption (“tự sản-tự tiêu” in Vietnamese) (including rooftop solar power for residents and businesses to use on the spot without generating or selling electricity to the national grid), is highly encouraged under PDP VIII.

Renewable energy power sources (e.g., offshore wind power) used to produce new energy (hydrogen, green ammonia, etc.) for domestic demand and export are prioritized and allowed for unlimited development under PDP VIII on the basis of ensuring national defense, energy security, and economic efficiency.

Solar power

Rooftop solar power for residents and businesses, especially in areas at risk of power shortages such as provinces in the North, and solar power in the form of self-production and self-consumption are strongly encouraged. The total capacity of this solar power source is expected to increase to 2,600 MW by 2030 and is prioritized for unlimited capacity development, provided that costs are reasonable and grid connections are available for use without any new investment or upgrades.

The specific timeline for implementation of solar power projects, which have been included in the planning and have had their investment policy approvals issued, will be considered in the implementation of PDP VIII.

Solar power projects which were included in the amended National Power Development Plan for 2011-2020, with a vision to 2030 (amended PDP VII), but the investors were not selected, shall not be permitted for implementation until 2030, unless those projects are developed for self-production and self-consumption.

The list of the solar power projects to be considered after 2030 is provided under Appendix IV of Decision 500 (which includes the 928 MW KN Tri An floating solar power project in Dong Nai province, and the remaining part of the 1,050 MW Dau Tieng project in Tay Ninh province.

It is aimed that the development of solar power projects in the future must include battery storage systems when the cost is reasonable.

Wind power

Offshore wind power combined with other types of renewable energy (solar power, onshore wind power, etc.) to produce new energy (hydrogen, green ammonia, etc.) for domestic demand and export will strongly be encouraged and allowed for unlimited development on the basis of ensuring national defense, energy security and economic efficiency. The capacity for offshore wind power is estimated to be around 15,000 MW by 2035 and 240,000 MW by 2050.

Biomass power, power produced from garbage, solid waste

The development of biomass power and power produced from garbage, solid waste will be prioritized under PDP VIII to utilize agricultural and forestry by-products, wood processing by-products, and to promote afforestation and environmental treatment in Vietnam. It is estimated that the total capacity of these power sources will reach 2,270 MW by 2030 and 6,015 MW by 2050.

Hydropower power

PDP VIII prioritizes the exploitation to maximize the potential of hydropower on the basis of environmental protection, forest protection, and water source security. It is estimated that the total capacity of hydropower power sources (including small ones) will reach 29,346 MW by 2030 and 36,016 MW by 2050.

Medium and large hydropower projects under the amended PDP VII that have not been put into operation shall be governed by PDP VIII.

Coal-fired power

Until 2030, PDP VIII only allows the development of coal-fired power projects which were included in the amended PDP VII and are under the investment and construction process. Coal-fired power plants which have been in operation for at least 20 years will be converted to use biomass/ammoniac as fuel if the cost is reasonable. Any coal-fired power plants which have been in operation for more than 40 years but cannot be converted to use [clean] fuel will be terminated.

PDP VIII lists five coal-fired power projects (with total capacity of 7,220 MW), which are now under development but with slow progress and facing difficulties in financing and shareholder changes, including Quang Tri, Nam Dinh I, Song Hau II, Vinh Tan III and Cong Thanh. The Ministry of Industry and Trade (MoIT) will work with the investors of these projects and allow investors to delay them until June 2024. Any project failing to meet the stated timeline could trigger termination.

By 2050, it is oriented that coal will no longer be used as fuel for power generation and coal-fired power must be converted entirely to use biomass/ammoniac as fuel, with a total capacity up to 25,632-32,432 MW, reaching 72.5-80.9 billion kWh.

Gas-fired power projects

PDP VIII prioritizes maximizing the use of domestic gas for power generation. In case domestic gas production decreases, natural gas or LNG will be imported. Gas-fired power projects will be gradually converted to use hydro as fuel when the technology is commercialized and the generation cost is reasonable.

Domestic gas-fired projects

- Accelerating the implementation of Block B and Ca Voi Xanh gas-fired power project chains, including O Mon II, III, IV (3,150 MW), Dung Quat I, II, III and Mien Trung I, II) (3,750 MW) and Bao Vang – gas power project (Quang Tri) (340 MW);

- Accelerating the exploration and evaluation of Ken Bau gas field for development planning and supplementing the downstream power plants in Quang Tri and Thua Thien Hue;

- Development in the southeastern region: Prioritizing the development of infrastructure facilities connecting domestic and regional plants, and facilitate imports of natural gases and LNG to ensure fuel supplies for the Phu My, Ba Ria, Nhon Trach domestic gas-fired power plants;

- Development in the southwestern region: Prioritizing the development of infrastructure facilities connecting domestic and regional plants, and facilitate imports of natural gases and LNG to ensure fuel supplies for gas-fired power plants in Ca Mau.

LNG

- PDP VIII limits the development of power sources using LNG if there is an alternative to reduce the dependence on imported fuels. By 2050, plants using LNG will gradually switch to hydrogen;

- The list of LNG projects of importance and priority for development until 2035 are prescribed under Table 1 of Appendix II, including Quang Ninh (1,500 MW); Thai Binh (1,500 MW); Nghi Son (1,500 MW); Quang Trach II (1,500 MW); Quynh Lap/Nghi Son (1,500 MW); Hai Lang Phase 1 (1,500 MW); Ca Na (1,500 MW); Long Son (1,500 MW); Hiep Phuoc Phase 1 (1,200 MW); Long An I (1,500 MW); Long An II (1,500 MW); and Bac Lieu (3,200 MW).

- The development of the system of warehouses and LNG import ports must be in sync with the LNG power plants included in the plan.

2. Expected total installed capacity

Under PDP VIII, the total installed capacity of power plants during the period of 2021-2030, with a vision to 2050, is as follows:

3. Expected power generation structure under PDP VIII

Under PDP VIII, the power generation structure is as follows:

4. Important and investment-encouraged power sources projects and transmission projects

PDP VIII has provided a list of important and investment-encouraged power sources projects and transmission projects under Appendix II enclosed within Decision 500, which covers (i) important LNG, coal-fired, co-generation, domestic gas-fired, medium and large-scale hydropower, and storage hydropower projects; and (ii) important projects for new construction and renovation of 500kV and 220kV transmission lines and 500kV and 220kV substations in the northern, central and southern regions of Vietnam.

Notable projects on the list include Bac Lieu LNG Project (3,200 MW), Formosa Ha Tinh 2 Co-generation Project (650 MW), O Mon II Gas-Fired Project (1,050 MW), O Mon III Gas-Fired Project (1,050 MW), O Mon IV Gas-Fired Project (1,050 MW), and many others.

Conclusion

PDP VIII will be a comprehensive guiding legislative document, helping to solve some of the current existing issues in the power industry. The new plan will open fruitful opportunities for prospective investors, especially those planning to engage in the renewable energy sector in the form of self-production and self-consumption, or renewable energy to produce new energy (hydrogen, green ammonia, etc.).

Furthermore, PDP VIII highlights Vietnam’s attempts to meet its commitment announced at the 26th UN Climate Change Conference (COP26) to cut emissions to net zero by 2050. Investors hope the PDP VIII will help to get rid of existing obstacles and bring new investment opportunities for Vietnam's power sector in the coming years.