Vietnam needs financial mechanism for power development: ministry

The Ministry of Industry and Trade has proposed the government assign the Ministry of Finance to develop a financial mechanism to mobilize capital for power development under the Power Development Plan VIII (PDP VIII).

The ministry (MoIT) is in charge of drafting a scheme to implement the PDP VIII, and the ministry made the proposal in a report sent to Deputy Prime Minister Tran Hong Ha. It aims to specifically determine responsibilities, progress and capital mobilization for priority investment projects in the electricity industry under the new plan.

According to the PDP VIII, Vietnam will need $135 billion to invest in power source and grid development projects by 2030, using resources outside public investment capital. “Therefore, a financial mechanism is needed to mobilize capital for projects under the PDP VIII to promptly and fully meet the power demands of society,” the MoIT said.

The Ministry of Finance has been requested to work with the Ministry of Industry and Trade to develop a policy on electricity prices under a market mechanism as well as financial mechanisms and incentives for investment in power projects.

The State Bank of Vietnam needs to direct banks to create favorable conditions for power source and grid project developers to access credit sources, the MoIT said.

Meanwhile, the Ministry of Planning and Investment has been asked to set up a bidding mechanism to select power project developers openly and transparently, and adopt policies to attract foreign investment, official development assistance (ODA) and private resources to develop the electricity industry.

As the energy management agency, the MoIT will work with other ministries and agencies to finalize the draft revised Electricity Law and the draft Law on Renewable Energy to submit to the legislature for approval. It is also responsible for submitting to the government policies on direct power purchase agreements (DPPA), mainly from renewable energy sources.

The ministry will work with coal power plant investors to deal with delayed projects.

Also in the report, the MoIT stated a series of difficulties in developing plans to realize the PDP VIII. Currently, 23 solar power projects/project segments with a total capacity of over 2,360 megawatts have had investment policies and investors approved. But according to the PDP VIII, the total capacity of the projects that can be put into operation is 1,500 MW.

Another difficulty, according to the MoIT, is that in the scheme to implement the PDP VIII, there are about 1,019 power source and grid projects prioritized for investment by 2030. However, renewable power sources such as wind, solar, biomass, and small hydropower plants are not included on the list as they lack necessary conditions such as legal status, land use and other planning, as well as electricity price and economic efficiency estimates.

Citing localities’ reports, the MoIT said that at present, among over 2,000 projects with implementation plans, many have not been located, so it is difficult to devise plans to connect them to the power grid.

The PDP VIII was approved by the Prime Minister in May, but after nearly four months there is still no scheme to implement the plan.

Under the plan, coal will account for 20.5% by 2030, down from almost 29% in 2020. Gas will make up 21.8% by 2030, up from 10.2% in 2020. Renewable sources (including hydroelectricity, solar and wind power, and biomass) will account for 50.3% by 2030, but contributions from hydroelectricity alone will drop to 20% from 30% in 2020. The PDP VIII also includes generating green energy for export, with a target of 5-10 GW by 2030.

The ministry said that by 2030, half of office buildings and homes in the country will be powered by rooftop solar panels. However, this source will not be connected to the national grid.