What mechanism for Vietnam to develop sustainably gas, wind and solar energy sources?

Recently, in Ho Chi Minh City, Department of Electricity and Renewable Energy – Ministry of Industry and Trade cooperated with Science Council of Vietnam Energy Magazine and Center for Energy Information to organize an international conference on “Policies for the development of wind power, solar power and gas power projects in Vietnam”. The workshop was divided into three sessions (two morning sessions and one afternoon session).

Session 1: Overview of “Policies for the development of wind, solar and gas power projects”:

Mr. Pham Nguyen Hung – Deputy Director of the Department of Electricity and Renewable Energy.

Mr. Pham Nguyen Hung – Deputy Director of Electricity and Renewable Energy Department opened the workshop with an overview of the situation of Vietnam’s power system.

Speaking at the workshop, Mr. Pham Nguyen Hung said: By the end of 2021, the total installed power capacity of the whole system will reach 76,620 MW (an increase of nearly 7,500 MW compared to 2020). The scale of Vietnam’s power system has risen to the top in the ASEAN region in terms of power capacity. Currently, the proportion of clean power sources (including hydroelectricity and other renewable energy sources) in the power structure has reached 65.6% of the total installed capacity of the system.

The country needs huge investments in electricity to ensure economic growth. Determining mechanisms (including financial mechanisms) and organizing the implementation of the plan to make the volume of power sources and grids feasible, and ensure energy security are issues that need to be paid much attention in the next time.

This is a scientific forum for domestic and international investors and businesses operating in the fields of gas power, wind power, and solar power to share and highlight the favorable factors of the State’s policy orientation, reflecting difficulties, obstacles and barriers in the process of project implementation and proposing specific policy recommendations to develop gas, wind and solar power projects in Vietnam, towards realizing the commitment to reduce emissions to zero by 2050.

Mr. Hoang Dang Khoa – Planning Department
(Department of Electricity and Renewable Energy).

The discourse of the Electricity and Renewable Energy Department summarizes the situation of power source development according to the Draft Power Development Master Plan VIII (PDP VIII), orientations for the development of renewable energy and gas power projects. Coal thermal power will not develop after 2030, so gas thermal power will be played a very important role. While solar and wind power is developing hotly, gas power has not added any new sources in recent years. The Government’s policy will prioritize domestic gas sources. However, imported LNG is expected to account for a large proportion by 2030. After 2035, gas power must switch to using hydrogen. In the North, the load increased faster than the power source, causing the crude reserve to decrease.

LNG gas power challenge: LNG gas power project has advanced technology, requires large investment capital, so it needs experienced investors and strong financial capacity. There is no LNG electricity price mechanism. Regulations on investment procedures are inconsistent between laws.

Mr. Nguyen Thai Son – Permanent member of the Scientific Council
(Vietnam Energy Magazine)

The Scientific Council of Vietnam Energy Magazine contributed an overview of challenges for the development of low-emission power sources, ensuring energy security in our country in the new context. That is to develop energy in the direction of enhancing low-emission power sources such as wind power and solar power, in accordance with the orientation in Resolution 55 of the Politburo, and at the same time consistent with the declaration of Vietnam, with international support, move towards ‘zero’ net greenhouse gas emissions by 2050 as stated by the Prime Minister in COP26, November 2021.

According to the Scientific Council of Vietnam Energy Magazine: It is necessary to have a policy of direct electricity trading or bidding for solar and wind power in a continuous and long-term manner. If we do not remove the difficulties, we will not have offshore wind power by 2030 according to the Draft PDP VIII. Domestic gas-powered electrification such as Block B, O Mon 3 with approval procedures are too slow, the policy is still too inadequate. Currently in the spot market, the price of liquefied natural gas (LNG) is too high. Therefore, a combination of investors is required to be able to buy large volumes, long-term contracts, and stable prices; at the same time, the state needs to have a plan for LNG import warehouses and ports to avoid the situation of building warehouses and ports according to each LNG power project, reducing investment efficiency.

Mr. Ngo Quoc Phuong – Deputy Head of Investment Department
(Vietnam Electricity Corporation – EVN).

The discourse of Vietnam Electricity (EVN) said: EVN is participating in the development of many domestic gas power projects from Blue Whale and Block B. Total electricity in 2030 is expected to reach 595 GWh, of which gas sources Domestically, LNG reached 172.28 GWh (28.9%). Thus, the proportion of gas-electricity in the coming time will play the main role of supplying electricity in the national power system.

Due to high input gas prices, leading to high electricity production costs, while EVN’s electricity selling price is decided by the State, it is necessary to harmoniously share benefits between the State, businesses and people. The Government needs to consider planning large LNG thermal power centers, linking the LNG value chain (gas, electricity, seaports) to get gas prices after regasification and electricity prices at a reasonable level. Gas supply contracts must have a large volume (for the whole thermal power center cluster) to increase volume, reduce costs and stabilize in operation and consumption.

When the technology for extraction, transportation and power generation using hydrogen fuel is sufficiently developed and reasonably priced, consider gradually switching to gas turbine power plants using hydrogen gas, which is processed and exploited on the basis of integrated with offshore wind power plants to have a sustainable, clean and cost-effective power generation chain.

Session 2: Topic on “Policies for the development of gas power projects in Vietnam”:

Mr. Dang Hai Anh – Head of Petroleum Department
(Department of Petroleum and Coal – Ministry of Industry and Trade).

The speech of the Department of Petroleum and Coal – Ministry of Industry and Trade gives an overview of Vietnam’s gas industry: In 2022, Vietnam is expected to produce 9.1 billion m3 of gas, of which 85% is for electricity production. The gas fields are located in the Cuu Long, Nam Con Son, Malaysia – Tho Chu and Hong River basins. There are currently 15 gas-fired power plants with a total capacity of about 8.000 MW. However, gas production at fields is declining while the demand for gas is increasing.

Resolution 55/NQ-TW stated: “Prioritize investment in technical infrastructure for import and consumption of liquefied natural gas”. Therefore, Vietnam will develop LNG depots in Thi Vai, Hai Linh, Hai Phong, Southeast, Southwest…

The gas industry is facing many challenges. Some mechanisms and policies have not been perfected, complicated technologies are copyrighted, requiring large investment capital, and must be developed according to project chains, so the capital is even larger. The international gas market fluctuates greatly at the same time as the global energy transition trend.

We need solutions to adapt to new circumstances. These are supplementing and adjusting specific mechanisms and policies for a number of important energy projects, creating an investment attraction environment, speeding up the implementation of a competitive electricity market, direct electricity purchase and sale, and creating favorable conditions for investment, land fund and site clearance. The gas price mechanism needs to be promulgated to harmonize the interests of the State, enterprises and consumers.

Mr. Hoang Xuan Quoc – Energy Director (VinaCapital Investment Fund).

A representative of VinaCapital Investment Fund said: The fund is working with GS Energy of Korea to pursue the Long An LNG Power Plant project in the form of IPP. LNG is an indispensable step in the transition to Net Zero. The Fund has completed the procedures for converting the Long An Coal Thermal Power Project into LNG Gas Thermal Power with a total capacity of 3.000 MW. The project has selected the location and gas supply plan from the LNG Thi Vai terminal.

The representative of VinaCapital Investment Fund proposed to guarantee the exchange rate, guarantee the Government for the responsibility of the electricity buyers and sellers, and partially cover the electricity output.

Ms. Nguyen Thi Thanh Binh – Deputy General Director of T&T Group.

T&T Group participated in the seminar with a presentation about the Hai Lang LNG power project, Quang Tri.

T&T currently operates many wind and solar power plants, pursuing LNG Hai Lang, Quang Tri and LNG Quang Ninh 2 and Vung Ang 3 gas power projects. However, due to the Government suspending loan guarantees, for power projects, financial arrangements are facing difficulties. The market price of LNG is increasing rapidly. If you want to sell electricity at 8-9 cents/kWh, the LNG price must be at $12/MMBTU and the consumed electricity output must be 80-90%.

Regarding site clearance, according to Ms. Nguyen Thi Thanh Binh – Deputy General Director of T&T Group: The conversion of forest land use purposes must be approved by the Government, so it takes time. The project needs a government guarantee for binding obligations between the parties, exchange rates and output offtake.

Mr. Watanabe Yasuaki – Deputy General Director
Marubeni Asian Power Vietnam..

Marubeni ASIAN Power Vietnam has made great contributions to Vietnam’s energy industry. Marubeni has experience in both coal power, gas power, renewable energy, electricity transmission and storage.

According to Mr. Watanabe Yasuaki – Deputy General Director of Marubeni ASIAN Power Vietnam: Currently, Marubeni is participating in the O Mon 2 gas power project in Can Tho and the LNG power project in Quang Ninh. In the current period, Vietnam needs IPP power plants using foreign investment capital, from international banks. Therefore, a strong legal and regulatory framework is needed and the PPA contract can convince the banks.

Mr. Vu Van Loi – Head of Investment – Construction Department
(PetroVietnam Electricity Corporation).

The speech of PetroVietnam Power Corporation briefly introduced the Corporation and immediately went into difficulties and recommendations.

PetroVietnam Power Corporation currently has a total installed capacity of 4.205 MW, producing 21 billion kWh/year, accounting for 8% of the total national electricity output, of which there are 4 gas power plants. The Corporation is building Nhon Trach 3 and 4 gas power plants.

According to Mr. Vu Van Loi – Head of Investment – Construction Department (PetroVietnam Electricity Corporation): The advantage of gas power is the reduction of CO2 emissions and pollutants, the ability to quickly change loads to meet regulatory response when the rate of renewable energy is high. However, the Corporation is currently facing difficulties such as: No experience in building and operating LNG power plants, no experience in purchasing LNG in the international market.

In the long-term view, Mr. Vu Van Loi said: The long-term LNG price is quite stable. The project has arranged capital, although it is difficult because the Government does not guarantee. Some provisions of the Law on electricity construction are not reasonable. Therefore, the Corporation proposes to soon approve PDP VIII so that investors have a basis for implementation. On the other hand, there should be specific regulations and guidelines in selecting investors for LNG power projects. Along with that is the LNG electricity price framework mechanism and allows LNG power plants to shift the cost of gas prices to electricity prices, a mechanism to ensure annual electricity output (Qc). At the same time, consider reducing import tax on LNG and equipment, income tax for gas power plants.

Mr. Nguyen Thanh Binh – Deputy General Director Vietnam Gas Corporation..

The presentation of the Vietnam Gas Corporation (PV GAS) raised the difficulties in deploying gas/LNG supply for gas power projects. Gas for electricity is being supplied directly from the field via gas pipelines, but the power plant operates according to the daily electricity market with fluctuating demand. Gas for industry is not being prioritized, only when the surplus of power generation is sold to industry, it is difficult to take initiative in business.

PV GAS is arranging to supply LNG for Nhon Trach 3 and 4 plants. The investor is proposing to the Government to switch from gas consumption to electricity consumption with Qc = 80 – 90% of electricity output (about 1.3 billion VND m3 of reprocessed LNG/year) for a period of 15 years as a basis for the gas seller to arrange a long-term LNG purchase contract. Although the news reports that international gas prices are high, long-term LNG accounts for 80% of the volume of purchases and sales with stable prices, only less than 20% of which are spot deliveries in the international market, with prices rising erratically.

There is a discrepancy between the LNG delivery plan and the power system operation plan.

According to Mr. Nguyen Thanh Binh – Deputy General Director of PV GAS: Gas power will have to run in the background instead of coal, ensuring energy security. Currently, domestic gas sources are declining, which will have to be supplemented by imported LNG. The long-term future of LNG will be very competitive compared to Vietnam’s new domestic gas source. Therefore, there is a need for an LNG electricity price mechanism to transfer gas prices, and technical standards when supplying LNG to existing gas power plants.

According to Mr. Binh: The role of the State is very important, without a mechanism, no one would dare to invest.

Delegates discuss.

The discussion of Session 2 attracted many questions and comments:

One opinion given: Reform of the electricity market is still bilateral, not going to the free market for buyers to meet directly with electricity sellers. There needs to be a more transparent market for everyone. When will there be a direct power purchase agreement?

The question that interests many people is if there is no Government guarantee (because the Government will not change the public debt policy), how to convince credit institutions to invest?

The answer is to gradually convince credit institutions with the company’s capacity. Initially contacting financial institutions that they also disagree. Credit rating must gradually increase. That is a whole process.

The statements of some foreign companies also show that they are very interested in investing in pumped-storage hydroelectricity. But are foreign companies allowed to invest?

The answer is two planned hydropower projects. Bac Ai Storage Hydroelectricity has an investor and is under construction. As for Phuoc Hoa Hydroelectricity, there is no investor. Vietnam needs more hydroelectricity to balance renewable energy. The future will have regulations for investors.

Another foreign representative said: It is necessary to have an offtake contract to develop LNG power. When will Vietnam have this contract?

Answer: In the process of developing a draft to promulgate a price framework, including gas prices in electricity, there will be regulations on Qc as well. The Ministry of Industry and Trade will record comments.

Session 3: Topic on “Policies for the development of wind and solar power projects”:

Mr. Hoang Trong Hieu – Deputy Chief of Office National Steering Committee for Electricity Development.

The presentation of the Office of the National Steering Committee for Power Development commented: Despite strong development steps, wind, solar and gas power sources face great difficulties and challenges. The planning has not been effectively managed and is not synchronized. The investment license period is prolonged. To now, there is no marine spatial plan for offshore wind power. In terms of technology, it is highly dependent on foreign countries. The strong development of wind and solar power leads to unbalance of source – load. Financial risks depend on the pricing mechanism and operational management capacity. Site clearance is always difficult for projects.

Ms. Anita H.Holgersen – Chief Representative of Vietnam (Equinor ASA Corporation).

Equinor ASA Group in Vietnam shared: Equinor was an offshore oil and gas company, and now has successfully transformed energy into this source of electricity. The company has experience in developing wind power on the North Sea, Baltic, East coast of the US, Korea. The company emphasized that the cost of offshore wind power continues to decrease due to increasing turbine capacity, up to 15 MW per turbine.

The offshore wind farm development process can take from 5 to 11 years (including project development, construction preparation, construction, commissioning.) Therefore, Vietnam needs a suitable legal framework, including strategic vision, maritime space handover, grid connection, tax incentives, and supply chain development incentives. Grid connection is needed because if you produce hydrogen and then generate electricity onshore, at least 30% of the energy is lost, not to mention the cost.

Mr. Phung Dang Huy – Method Engineer, Methodology Department National Load Dispatch Center – A0.

The National Load Dispatch Center – A0 gave a presentation on technical issues in power system operation in the context of increasing penetration of renewable energy sources.

In three years (2019 – 2021) installed capacity increased sharply (18%/year), mainly wind and solar power. In 2021, wind and solar power will account for 26% of installed capacity and 12.3% of electricity output. The high rate of RE has created challenges for the stability of the power grid. These are transmission line congestion, redundant RE power, low system inertia, large false prediction error, error fault risk through (FRT) and low short circuit current (SCR) causing instability. The graphs and numbers clearly illustrate those incidents. Meanwhile, there is no incentive for ancillary services for the parties to invest.

A0 already has some countermeasures to these situations, but needs longer-term solutions. Government needs to update technical regulation of voltage control, response to FRT of RE power. It is necessary to adjust the primary and secondary frequency control mode, impose a special protection scheme to increase the stability of the system. Forecasting needs to diversify forecasting sources. Renewable power companies need to participate in ancillary services and have a mechanism for the storage system. The dispatching center will apply new technologies in system control.

Mr. Nguyen Xuan Huy – Senior Advisor, R&D Team Leader offshore wind power (IPC Engineering and Construction Joint Stock Company).

IPC Engineering and Construction Joint Stock Company shared with the seminar on risks, risk management and mitigation solutions in the development of offshore wind power in Vietnam.

According to Mr. Nguyen Xuan Huy – Senior Advisor, Head of offshore wind power R&D team (IPC Engineering and Construction Joint Stock Company): By 2030, it must reach 7.000 MW of offshore wind power. The risks raised are geopolitical issues, overlapping of oil and gas blocks and offshore wind blocks, legal issues in the licensing of marine space, unclear distinction between nearshore and offshore wind power, overlapping regulations. In addition, technical risks include geological structure, geomorphology, environmental impact, risk of waves and wind and storm speed. Economic risks include PPA power purchase agreement, electricity price, iron and steel prices, turbines, bank interest rates (Vietnam 10 – 12%, China 3.8%), inflation, transmission line construction is not timely or congested.

Mr. Nguyen Xuan Huy said: Risks need to be managed and responsibility assigned to each project participant.

Mr. Tran Cong Dien – Deputy Head of Technical Department (Southern Power Corporation).

Southern Power Corporation – EVNSPC participated in the workshop with a discussion on issues related to rooftop solar power: The total connected rooftop solar capacity in the area under the management of EVNSPC is 5.432 MWp, mainly to the medium voltage grid and a part (64 MWp) to the low voltage grid. Currently, there is no national technical standard for the equipment of the rooftop solar power system. There is no regulation on supervision and control of rooftop solar power systems, so the dispatching level cannot command and operate.

On the other hand, forecasting capacity and output is difficult. Some households install additional panels themselves after connecting. There is no consensus on guidelines for fire prevention and fighting, land use, construction safety, environmental impact, and business registration. The effects of the rooftop solar power on power quality (voltage, harmonics, voltage flicker) should be studied and remedial measures taken.

EVNSPC proposes to soon issue a set of standards, regulations and technical regulations on solar power equipment for each province in terms of solar power, self-use rate. Soon to promulgate a legal basis for monitoring and control of the rooftop solar power systems. Along with that, ministries need to issue regulations on fire prevention, construction, and land use…

Mr. Ngo Ngoc Thuong – General Director PetroVietnam Engineering Consultancy JSC.

A short presentation by PetroVietnam Engineering Consultancy JSC (PVE) introduces design capabilities for offshore rigs. That experience helps PVE to survey, design foundations and piles for offshore wind power. PVE has designed gas processing plants. Design of oil and gas pipelines. The company can participate in the chain of electricity and gas projects, design fire protection systems for energy projects.

Mr. Nguyen Tuan Dung – Deputy Head of the Planning Department (Ho Chi Minh City Electricity Corporation).

Similar to EVNSPC, Ho Chi Minh City Electricity Corporation (EVNHCMC) also shared the need to develop rooftop solar power and problems from the point of view of the electricity buyer and the connection.

Ho Chi Minh City has a large radiation volume, averaging about 1.581 kWh/m2/year, the highest in February and the lowest in July. Currently, the city has 14.210 rooftop solar power projects with a total installed capacity 358 MWp. EVNHCMC has organized a preliminary survey of the potential of each customer group, showing that the production group has the greatest potential.

Currently, the FIT price mechanism has expired, but there is no new price mechanism. Therefore, EVNHCMC proposes to quickly have a new price mechanism. There are instructions on the process of acceptance, inspection, maintenance, and periodical testing for solar and the rooftop solar power systems. Researching and promulgating the process of recovering and handling used solar panels and inverters. Conduct in-depth research on the influence of the rooftop soloar power on the operation of medium and low voltage grid systems to ensure the safety of the power grid. In the PDP VIII, it is necessary to approve the policy for the City to develop the rooftop solar power System directly for potential objects in HCM City.

Mr. Le Tuan Anh – Deputy General Director of Sao Mai Group.

Sao Mai Group analyzes inconsistencies in current regulations on project development, regulations on COD project and proposes recommendations to remove them. On that basis, the enterprise recommends:

1/ It is necessary to develop policies and mechanisms for renewable energy development with long-term, uninterrupted.

2/ Completing the legal system related to COD work for RE plants, it should be a specialized State agency instead of EVN.

3/ Overcome the unreasonableness in the regulations on the acceptance work.

Delegates discuss.

The discussion on wind and solar power has many specific opinions and questions raised:

Recently, the drafts of PDP VIII and comments from the Government Office have stated the priority of self-use renewable energy, not generate to the grid. Currently there is no written power limit for self-use. Enterprises have studied to invest in solar and wind power for their own use, but the provinces have not yet approved it because PDP VIII has not been available. So how will investors proceed? According to the planning of the province? Do we have to wait for the PDP VIII?

Answer: This is a very good but very difficult question. It is not possible to answer when PDP VIII has not been approved, it is necessary to issue some specific regulations. These regulations are new not only for Vietnam but also for the whole world. Vietnam is moving too fast in renewable energy development, so it is very cautious. All are currently drafts. Wait until there is an official document will do the instructions.

Regulations on handling panels have a Decree taken on January 1, 2025, manufacturers will have to recall. Standards on solar panels, The Ministry of Science and Technology has a draft, which will be published this year. Regarding the control of photovoltaic panels, the system is only available for plants over 10 MW. The GIZ project is conducting research on the effects of rooftop solar power on low and medium voltage grids.

An electricity project has to carry out construction investment for decades, then the investor runs away. Therefore, faster decisions from the top are needed. About financial and economic risks. For example, inflation risk. The amount is large so inflation can engulf the project. The risk is too great, how should it be managed?

Economists are concerned about risks. The VND interest rate is currently 10 – 11% for onshore electricity. WB, IFC lend to banks and then banks lend back.

Looking at countries in the region, Thailand and China have very favorable interest rates for offshore wind power. Reduction in 3 years without paying income tax. Dossier to convince credit institutions – must be in accordance with international practices. Therefore, Vietnam needs green credit to get preferential interest rates. Otherwise, the projects will be sold to foreign countries in 1-2 years. Vietnamese businesses cannot grow.

Another interesting question: When will Vietnam have a new electricity price for wind and solar power. What will the electricity price be?

Answer: Upcoming trend will not have FIT price. The direction is marketization. Through the method of bidding for projects to select investors, investors will negotiate electricity prices through PPA contracts with EVN on the basis of the prescribed price bracket.

Offshore wind power in PDP VIII has a very large number and needs to be deployed urgently. To survey offshore, wind power, there are regulations on measuring how many measuring points and what type of columns? For example, onshore must measure 1 year. Will offshore be able to measure 3 months?

Answer: At least 1 year. The wind gauge density is still being calculated. The sea surface is managed by the Ministry of Natural Resources and Environment, currently developing a marine spatial plan. Vietnam has committed to net zero and quit coal by 2040. If the carbon market is imposed in Vietnam, how much per ton.

Mr. Nguyen Anh Tuan – Permanent member of the Scientific Council Vietnam Energy Magazine concluded the conference..

Concluding the workshop, Mr. Nguyen Anh Tuan – Permanent member of the Scientific Council of Vietnam Energy Magazine said: With nearly 20 presentations by representatives from state management agencies, corporations, energy companies government, domestic and foreign enterprises. With a sense of responsibility and enthusiasm, there were many opinions discussed and contributed on specific issues such as:

1. Overview of power source development and policy orientation for the development of renewable energy and gas power sources. Opportunities for the development of low-emission energy sources in the future.

2. Current difficulties and obstacles in the implementation of gas power projects in general and LNG power in particular, including some specific projects. Issues on purchase and sale, import of LNG, ability to participate in the electricity market, negotiation of power purchase and sale contracts.

3. Opportunities and difficulties, challenges, obstacles in terms of mechanisms, regulations and actual implementation of wind power and solar power projects in the past and in the future.

4. Capital needs, bank feasibility with investment parties; solution to unlock capital flow.

5. Issues to be implemented to develop offshore wind power – a great resource of Vietnam.

6. Difficulties when the power system operates with a high percentage of variable renewable energy, while the grid infrastructure is not yet guaranteed, solutions.

7. Renewable energy projects are unfinished, the FIT mechanism has expired, but still waiting for new policies/regulations and risks for investors and credit providers.

8. Problems to be solved for rooftop solar, etc…

Through many discussions and sharing and contributions of organizations, experts and scientists, it can be seen that the opportunity to develop solar, wind and gas power sources in Vietnam is huge. Major policies have created opportunities, but difficulties and obstacles remain. Specific policies and regulations have not yet followed reality. The management in implementation is still inexperienced, sometimes loose, but sometimes rigid… Some investors have not yet complied with current regulations.

Department of Electricity and Renewable Energy, Scientific Council of Vietnam Energy Magazine respectfully acknowledges the positive presentations, exchanges, discussions, responsibilities of state management agencies, corporations, businesses and experts in the conference.

The Organizing Committee of the Workshop will summarize the relevant contributions and opinions and send a document to the competent authorities to propose the Government and the Ministry of Industry and Trade to consider and promulgate appropriate policies, mechanisms and regulations which suitable with reality, to encourage and remove current obstacles, promote and create motivation for the development of low-emission power sources in the future.

BBT VIETNAM ENERGY MAGAZINE