Vietnam faces challenges to reach LNG power target: experts

Vietnam's goal of putting 13 liquefied natural gas (LNG) power plants into operation and replacing 18 GW of coal-fired power with 14 GW of LNG-fired power and 12-15 GW of renewable energy by 2030 is an ambitious target that faces many difficulties and obstacles, said experts.

According to the Power Development Plan VIII (PDP VIII), Vietnam’s gas- and LNG-fired power sources by 2030 will reach 37,330 MW, equivalent to 24.8% of the total power capacity - the largest proportion.

At a Thursday forum on realizing the goal of developing LNG power under the newly approved PDP VIII, participants said LNG-fired thermal power is a solution to limit dependence on coal-fired power, which currently makes up about 46% of the power output structure.

In particular, it will help the electricity industry go green, contributing to fulfilling Vietnam’s commitments made at the UN Climate Change Conference in Glasgow (COP26), they stressed.

However, they noted that LNG-fired power development in Vietnam is facing many difficulties and challenges in terms of policy making, investment, construction, and operation management.

"The electricity consumption market is increasing slowly compared to the target set in the PDP VIII and there is a lack of legal framework to complete negotiations and sign legal, technical and commercial agreements between entities in the LNG power project chain," said Dr. Nguyen Quoc Thap, chairman of the Vietnam Oil and Gas Association.

Therefore, he proposed a number of solutions such as expanding and developing the LNG power consumption market in line with the goal set in the PDP VIII, and building industrial parks/factories with large enough LNG power consumption along with the implementation of LNG terminals and LNG power plants.

"It is necessary to amend the Electricity Law, the Law on Environmental Protection, the Tax Law and related laws and guiding decrees. We must accept that the LNG power business chain operates under the market mechanism, and state management agencies will supervise and check all operational processes of the chain," he stressed.

Gas-fuelled power plant owners should be given the right to negotiate competitive electricity prices with state utility Vietnam Electricity (EVN) and electricity consumers, he added.

Another solution is updating and amending the charters and financial regulations of state-owned Petrovietnam and EVN.

"The government now no longer directly guarantees gas and electricity selling or purchase contracts. This is the right decision, but with the current legal framework, Petrovietnam and EVN do not have enough bases to make guarantees," said Thap.

The government or the State Bank of Vietnam needs to ensure the volume of foreign and local currencies for exchange, but the exchange rate will be determined by the market, he argued.

"LNG power needs to be consumed by industrial parks and processing plants and the economy in general. The perception of LNG electricity prices should be changed. LNG electricity prices must follow the market mechanism because they depend much on the LNG import prices,” Thap added.

Meanwhile, Dr. Vu Dinh Anh, deputy director of the Price and Market Research Institute under the Ministry of Finance, raised worries about resources to develop LNG power according to the PDP VIII. “This issue should be taken into account before including LNG power in the plan,” he said.

Agreeing that there must be input and output market prices for LNG electricity, he emphasized the need to create a retail electricity market.

“Currently we do not have a retail electricity market. Now we only have freedom in electricity generation, while power transmission is still completely dependent on EVN,” Anh added.

“There are a series of variables yet to be solved in developing the LNG electricity market. If unresolved, it is likely that the problems facing renewable energy development such as planning failures will be repeated. However, this time the price we have to pay may be much greater as LNG power is set to have large scale and high value in the plan,” Anh warned.