Energy supply, demand, and policy in viet nam, with future projections

Also described are the evolution and current status of Viet Nam’s energy policies, including those related to energy security, energy efficiency and conservation, the environment, and dev

Energy supply, demand, and policy in Viet Nam, with future projections

, Nguyen Ha Dieu Institute of Energy, 6 Ton That Tung Street, Khuong Thuong, Dong Da, Hanoi, Viet Nam

a r t i c l e i n f o

Article history:

Received 30 September 2009

Accepted 9 March 2010

Available online 31 March 2010

Keywords:

Viet Nam

Energy demand

Energy security

a b s t r a c t

This article provides background on the current status and recent trends of energy use in Viet Nam, as well as projections of energy demand and energy supply in the coming decades The article summarizes the results of the current national Master Plan for developing the electricity supply sector to meet increasing electricity demand Also described are the evolution and current status of Viet Nam’s energy policies, including those related to energy security, energy efficiency and conservation, the environment, and development of renewable energy sources, as well as strategies for power sector development and restructuring of the energy sector toward greater use of competitive energy markets The initial phase of the Viet Nam energy sector modeling effort under the Asian Energy Security (AES) project is described The final section of this article offers conclusions regarding the status of Viet Nam’s energy sector and policies, and recommendations regarding ‘‘next steps’’ in energy security analysis

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1 Introduction

Viet Nam, a developing country in Southeast Asia, shares

common borders with the People’s Republic of China (PRC) in the

north, and with Laos and Cambodia in the west Viet Nam

stretches along the east coast of Indochina over a length of

1600 km between the northern latitudes of 81 and 231 Of Viet

Nam’s total area of about 330,000 square kilometers (km2), or 33

million hectares (ha), 50 percent is in productive use Of the total

land area, 21 percent, or about 6.9 million ha, is used in

agriculture, and the remaining 9.8 million ha (29 percent) are

productive forestlands.Fig 1shows the regions of Viet Nam

Although the country is located in the tropics, the climate is

tropical only in central and southern Viet Nam, with warm and

humid weather all year round (22–35 1C) In the north, there is a

distinct winter season due to cold inland winds Usually, the

winter is also the dry season for the entire country, but the rains

are highly unpredictable owing to the influence of several

monsoons

The population of Viet Nam in 2007 was 85.2 million, of which

61.2 million or 71.8% lived in rural areas

2 Viet Nam’s energy sector: current status and recent trends

Below we describe some of the key drivers of energy use, and

provide sketches of the current status, and recent trends in energy

demand and supply in Viet Nam, with a focus on the important electricity generation sector

2.1 Key drivers of energy use Starting in 1986, Viet Nam has undertaken a comprehensive reform called Doi Moi, and the Government of Viet Nam liberalized economic production and exchange in 1989 As a result of these policies, Gross Domestic Product (GDP) grew at an annual average rate of 7.6 percent since 1990, with all sectors growing rapidly Viet Nam’s rapid economic growth has resulted

in a corresponding rapid increase in energy needs Between 1995 and 2008, per capita GDP increased from US$290 to US$605 in

1995 dollars, an annual growth rate of 7.3 percent Even with growth at that level, as of 2005, Viet Nam’s per capita GDP remained below those in neighboring Thailand and China Though Viet Nam’s economic output was dominated by the agricultural sector for many years—agriculture and related industries accounted about for 57 percent of total output in the 1990s—the last twenty years have seen a considerable increase in the importance of the industrial sector and the commercial/services sector in overall GDP The total of the industrial and commercial/ services sector accounted for about 80 percent of GDP in 2005,

remaining fraction of GDP being in the agricultural sector (GSO,

2009) Fig 2 provides a summary of GDP by sector during the period 2000–2008

Viet Nam’s economic growth rate increased every year during the 5 years from 2001 to 2005, rising from 6.79 percent to 8.4 percent annually, with a decrease to 6.23 percent/yr in 2008 as the global economic downturn began Table 1 compares GDP

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growth rates by sector from 2000 to 2008 (Pham, 2007, with

updates) Among the industrial subsectors, those contributing the

most to growth in overall GDP have been the steel, cement,

chemical, textiles, and paper industries

Another key driver of increased energy use has been

population growth, accompanied by a considerable increase in

the fraction of the population living in cities.Table 2summarizes

recent trends in overall population growth, and growth in

population in rural and in urban areas As shown, during the

period 2000–2008, total population growth in Viet Nam averaged

1.31 percent annually, with population growth slowing somewhat

over time (1.22 percent annually since 2005) Although over 70 percent of the population continues to live in rural areas, growth

in urban population during that period greatly outstripped rural population growth, as people moved to cities to seek jobs in the industrial and service sectors The transport sector also has undergone explosive growth in Viet Nam in recent decades, with the number of vehicles—especially private cars and two-wheeled motor vehicles (motorcycles and scooters) growing very rapidly, especially in cities

During the period from 1990 to 2007, per capita commercial energy (purchased fuels) consumption in Viet Nam rose at a rate

of 9.3 percent per year, from 66 kilograms oil equivalent (kgOE) to

301 kgOE per person as a result of the combination of the industrialization of the Viet Namese economy—and particularly the development of energy-intensive industries—plus urbaniza-tion, population growth, and growth in personal consumption as a result of rising incomes Electricity consumption grew even faster, from 93 kilowatt-hours (kWh) per capita to 718 kWh/capita, a 12.8 percent growth rate per annum A national program of electrification of cities, towns, and villages has contributed to the high growth in electricity consumption (see below) As a result, Viet Nam had a relatively high income elasticity of energy demand (increase in energy use per unit increase in economic activity) over the period 2000–2007 of 1.46, and an even higher income elasticity of electricity demand of 2.0

2.2 Energy demand

Fig 3shows changes in energy demand by sector for Viet Nam over the period 1990–2007 Most notable here is the considerable growth in energy demand in all sectors, but particularly in industry, transport, and the residential sector in the 1990s, and in the service sector The residential sector accounted for the largest portion—60.3 percent—of total final energy demand in 1990, out

of which most of the energy used consisted of biomass fuels used for household cooking, followed by the industrial sector (27.8 percent), the transportation sector (8.7 percent), the commercial sector (2.0 percent), and the agricultural sector (1.4 percent) The share of total energy consumption by the residential sector fell during the period from 1990 to 2007 due to a significant portion

of households switching from biomass fuels to commercial fuels, which are used with higher-efficiency stoves At the same time, the share of energy consumption by industry has increased continuously from 1990 to 2007 Fig 4 shows the division of energy demand by sector in 2007

When Viet Nam’s economy was mostly agriculture-based, biomass (wood and crop wastes) supplied the bulk of energy needs As the country’s economy has developed, the role of biomass fuels in the energy sector have diminished, but even as of

2005 the biomass/renewable energy (or non-commercial energy) consumed in Viet Nam totaled 14,880 kilotonnes oil equivalent (kTOE), comprising over one third of total energy demand in the country.Fig 5provides a summary of trends in energy demand by fuel in Viet Nam Among petroleum fuels, demand is strongest for diesel oil, gasoline, and residual fuel oil Diesel oil accounted for the largest portion of total oil consumption, at 43.9 percent in

0

50,000

100,000

150,000

200,000

250,000

2000

Industry Agriculture Commercial

2001 2002 2003 2004 2005 2006 2007 2008 Fig 2 GDP in Viet Nam by sector, 2000–2008.

Table 1 Annual GDP growth in Viet Nam by sector, 2000–2008 (percent per year).

2000 2001 2002 2003 2004 2005 2006 2007 2008 Industry 10.07 10.39 9.48 10.48 10.22 10.69 10.38 10.60 6.33 Agriculture 4.63 2.98 4.17 3.62 4.36 4.02 3.69 3.40 3.79 Commercial 5.32 6.10 6.54 6.45 7.26 8.48 8.29 8.68 7.20 Total 6.79 6.89 7.08 7.34 7.79 8.44 8.23 8.48 6.23

Fig 1 Viet Nam’s major regions and cities.

1990, increasing to 48.1 percent in 2007, followed by gasoline and

residual fuel oil with fractions of 26.1 percent and 11.4 percent in

1990 and 25.8 percent and 10.5 percent in 2007, respectively

2.3 Energy supply

Viet Nam is endowed with a variety of primary energy

resources, including coal, oil, gas, uranium, and renewable energy

Coal resources are of the anthracite and lignite types, with

anthracite coal found in Quang Ninh Province, and lignite found in

the Red river Delta area Estimated coal reserves as of 1/1/2006 totaled 6.16 billion tons (of which class A+ B+ C were 4.99 billion tons;Pham, 2007) The classification of coal as reserve categories

A, B, and C follows the official adopted definition in Viet Nam Category A means the most reliable reserves based on the results

of detailed exploration and exploratory drilling Category B includes all established reserves based on detailed exploration with limited extrapolation Category C is estimates of reserves based on preliminary exploration and extrapolation from geological and geophysical data Most of the coal found in Viet Nam is anthracite, accounting for 93% of the country’s coal reserves As of 2008, Viet Nam’s coal production stood at 39.8 million tonnes per year

Viet Nam produces crude oil from offshore fields As of 2008, Viet Nam’s crude oil production amounted to 14.85 million tons per year In Viet Nam at present there is one (DinhCo) small oil refinery (actually an associated gas liquefaction plant) in VungTau province, with an installed capacity of 300,000 tons liquefied petroleum gas (LPG); 151,000 tons condensate and 1.64 billion m3

dry natural gas per year A larger oil refinery started operation in the beginning of 2009 with a capacity of 6.5 million tons of crude oil per year; it is located in Quang Ngai Province

Natural gas is produced from offshore wells As of 2008, Viet Nam produced 7.94 billion cubic meters of gas per year Uranium

is extracted on only a small scale at present, but the uranium resources in Viet Nam include 113 tons in Reasonably Assured Reserves, as well as 16,563 tons in Estimated Additional Reserves Approximately 45 million metric tons of biomass (dry basis) were produced annually as of 2005, with an energy content of about

621 million gigajoules Apart from biomass, hydropower is Viet Nam’s leading renewable energy resource, as described below

2.4 Electricity supply infrastructure and trends Viet Nam’s power sector has been a key target for development

in the past two decades As a result of a continued emphasis on electrification, the nation has an extensive electrical grid, divided into Northern, Central, and Southern zones As of the end of 2008,

100 percent of rural districts were connected to the national power grid, and 97.26 percent of communes and 94.03 percent of rural households were connected to the national power grid Over 8.07 billion kilowatt-hours of electricity was supplied to rural areas as of 2005, growing at an average rate of over 10 percent per year in the 2001–2005 period Though electricity demand grew steadily at a rate of around 15 percent per year in the decade from

1996 to 2005, at the same time, as a result of electricity infrastructure improvements, transmission and distribution losses have been cut nearly in half, from almost 22 percent in

1995 to just over 11 percent in 2006

Fig 6 presents trends in electricity demand and total generation over the past decade The average annual growth rate of generation was 13.8% in the 2001–2008 period In general, electricity generation over the period from 2006 to 2008 fairly closely tracked the targets of Viet Nam’s Master Plan VI for the electricity sector (seeFig 7)

Table 2

Population trends in Viet Nam in urban and rural areas, 2000–2008.

Population of the whole country Million persons 77.6 78.7 79.7 80.9 82.0 83.1 84.1 85.2 86.2

0

5000

10000

15000

20000

25000

30000

35000

40000

45000

1990

Residential Commercial Transport

Agriculture Industry

Fig 3 Total energy use by sector in Viet Nam, 1990–2007, including

non-commercial energy (wood and other biomass).

Fig 4 Total energy use, percent by sector, 2007.

Fig 8 summarizes recent trends in electricity generation

capacity by fuel, as well as peak power demand, on Viet Nam’s

system As of 2005, the total installed capacity of power plants

was 11,298 MW (megawatts), of which privately developed and

build-operate-transfer (BOT) units, totaled 2439 MW, or 21.6%

In 2006, a variety of plant upgrades in thermal power plants

brought total capacity to 12,221 MW The maximum power load

on the system in 2005 was 9255 MW By November of 2006, the

maximum load had increased to 10,187 MW, an increase of over

10 percent By 2005, the transmission network infrastructure in

Viet Nam included 3249 km of lines, and 6150 million

volt-amperes (MVA) of substation capacity on the 500 kilovolt (kV)

transmission network, plus 5272 km of lines and 14,890 MVA of

substations on the 220 kV network, and 10,290 km of lines and

21,100 MVA of substation capacity on the 110 kV network As of

2008, the transmission network included 3286 km of lines and

7050 MVA of substation capacity on the 500 kV transmission network, 7107 km with 18,639 KVA on the 220 kV network, and 11,751 km; with 23,834 KVA on the 110 kV network

3 Current projections of energy demand and supply

in Viet Nam The most recent overall projection of energy demand and supply in Viet Nam was prepared as a part of the process of assembling Master Plan VI (six) The Viet Nam Institute of Energy (IE) implemented this project

The elements of the MP VI process included preparation of an electricity demand forecast, a forecast of non-electricity energy needs for Viet Nam, a power grid development plan, and a plan for

0 2000 4000 6000 8000 10000 12000 14000 16000

1990

Coal Petroleum Products Natural Gas Electricity Renewable Energy

1992 1994 1996 1998 2000 2002 2004 2006 2008

Fig 5 Total energy use by fuel in Viet name, 1990–2007.

Fig 6 Electricity demand and generation in Viet Nam, 2000–2008.

electric power exchanges and regional interconnections for the

years 2010, 2020, 2025, and 2030

The forecasting method used in MP VI is a combination of

econometric and techno-economic approaches The main driving

variables for the demand projections are GDP and population

growth rates, which were taken from external projections by the

Central Institute for Economic Management (Ministry of Planning

and Investment)

The MP VI process also include preparation of a plan for

implementing improvements in power system dispatch and

communications, plans for environmental protection in power

sector operations and development, and plans for power sector

investment, together with financial analysis of future electricity

sector activities and electricity prices

Below we summarize the overall results of the most recent

master planning process for the energy sector, then focus

specifically on the methods and results of the most recent master

plan (MP VI)

3.1 Overall energy sector results from MP VI

For the MP VI process, three separate scenarios of economic

growth were used: a high case of 8.5 percent/yr GDP growth from

2006 to 2020, slowing to 8.0 percent/yr for the 2021–2030 period;

a base case of 7.6 percent/yr from 2006–2010, slowing to 7.2 percent/yr in 2011–2020 and 7.0/yr in 2021–2030; and a low case

of 6.2 percent/yr from 2006–2010, rising slightly to 7.0 percent in 2011–2020, then remaining at the same level (7.0 percent/yr) for 2021–2030

Viet Nam’s population is projected to increase from 83.2 million in 2005 to 101.6 million by 2025, with population growth slowing somewhat over time

Under base case MP VI projections, a shown inFig 9, energy use in the industry, transport, and residential sectors all show very steep demand growth Industrial demand is projected to grow from 11,454 kilotons of oil equivalent in 2005 to 57,078 in

2030 Demand in the transportation sector is projected to rise from 6401 kTOE to 28,577 Residential demand was forecast to increase from 15,098 to 42,278 kTOE, the commercial sector shows growth, from 2009 to 14,102 kTOE in the same period, while the agricultural sector has relatively flat growth, from 532

to 1156 kTOE

Though Viet Nam currently has a surplus in primary energy supplies, as shown in Table 3, the country’s rapid economic growth is projected to quickly turn it into a net importer of energy In 2005, Viet Nam had a net surplus of over 17,000 kTOE

By 2020, Viet Nam is projected to run a net deficit of over 28,000 kTOE, which will balloon to over 104,000 kTOE by 2030 It

is this projected deficit, even assuming an increase in domestic production of oil, gas, and coal, which has spurred Viet Nam’s policymakers to focus on the development of other energy resources, including renewable energy and nuclear power, as well as to look to neighboring countries and other fuels exporters

as they plan for the nation’s future energy supplies

As the Viet Namese economy develops, renewable energy is expected to account for an ever-decreasing proportion of total energy, dropping from over 40 percent in 2005 to less than 10 percent in 2030 (Fig 10) This is in large part due to the low growth in biomass energy use, as commercial fuels for households become more available, as well as limits to the availability of un-harnessed hydroelectric resources

In terms of energy resource development, Master Plan VI projects the following ranges of domestic energy output for 2020 and 2030:

Coal: 75–86 million tons/annum

Crude oil: 20.7–22 million tons/annum

Natural gas: 14.85–18 BCM/annum

Hydropower: 59.6–69.7 TWh/annum

Uranium potential: RAR: 113 tons, EAR-I: 16,563 tons

Of the gas resources described above, the Southeast continental shelf of Viet Nam is projected to yield about 8–9 billion cubic meters annually, with the Southwest continental shelf providing about 6–7 billion m3/yr, and the North: 1–2 billion m3annually For large hydropower the technical–economic potential of the 11 main basins in Viet Nam is estimated as 75–83 billion kilowatt-hours (kWh) (equivalent to 75–83 terawatt-kilowatt-hours (TWh)) of electrical energy annually, with an estimated potential capacity

of 20,500 MW, of which the potential in the North region of the country is 51.6 percent, in the Center 31.9 percent, and in the South 16.5 percent

Viet Nam is richly endowed with renewable energy (RE) resources:

According to a preliminary assessment of hydropower and hydraulic planning by local authorities, the total technical potential of small hydropower resources of Viet Nam is

Fig 8 Electricity generation capacity by type, and peak power demand (P max ),

2001–2008.

Fig 7 Correspondence of trends in electricity generation with targets of Master

Plan VI, 2006–2008.

Fig 9 Overall energy projections by sector under MP VI (base case), 2005–2030.

Table 3

Projected overall energy balance under MP VI (base case), 2005–2030.

Physical KTOE Physical KTOE Physical KTOE Physical KTOE Physical KTOE

Crude oil (million tons) 17.8 18,120 19.86 20,217 20 20,360 20.7 21,073 22 22,396 Gas (billion m 3

1.6–2 million kilowatts (kW), with categories of resources as

follows: (i) 500 small hydropower stations with capacity from

100 to 10,000 kW/station and with total capacity of about

1,400,000–1,800,000 kW (accounting for 80–97% of total small

hydropower stations); (ii) 2500 sites of small hydropower

stations with capacity from 5 to 100 kW per station with total

capacity of 100,000–150,000 kW (accounting for 5–7.5 percent of

total small hydropower); and (iii) small hydropower stations

with capacity from 0.1 to 5 kW/station (also called as

Micro-Hydro Power Stations) with total capacity of 50,000–100,000 kW

(accounting for 2.5–5% of total small hydropower capacity)

 Viet Nam has average wind energy potential in comparison

with other countries in the world and in the region The wind

speed in the mainland is low (about 2–3 m/s) and is not

suitable for electric power generation However, with its

3000 km of coastline, and with mountainous land accounting

for 70% of the country’s area, wind power may be further

developed One study carried out by the Institute of Energy on

nine islands indicated that the average wind speed is in the

range of 4.1–7.1 m/s (ADB, 2004))

 Viet Nam has significant biomass resources such as sugar cane

dredges (bagasse), rice husks, coffee husks, coconut shells, and

wood residues, but only a portion of sugar cane dredges is used

for electricity generation The biomass resources used for

power generation/co-generation in Viet Nam, apart from sugar

cane dredges, are wood residues, rice husks and rice straw It is

estimated that about 1.5–2.5 million tons of sugar cane

dredges and 2.5–3.8 million tons of rice husks can be used

for energy production Residues from wood processing such as

sawdust and wood chips from hundreds of wood-processing

facilities are also biomass resources

 Viet Nam has good constant solar resources in the south and

central regions of the country, but substantial seasonal

fluctuations in the north Solar radiation levels in the south

and central regions average just below 5 kWh/m2/day and are

almost constant during the year, ranging from 4.0 to 5.9 kWh/

m2/day The solar regime in the north exhibits averages around

4 kWh/m2/day, but varies widely from 2.4 to 5.6 kWh/m2/day

Table 4 summarizes MP VI projections for the availability of

renewable resources (other than large hydro) to generate

electricity Only 800 kW of wind power are currently installed,

but this figure could reach as much as 300–400 MW by 2020

Installed solar capacity is currently 1.15 MW, but could increase

to 4–6 MW by 2020 Biomass produces 150 MW of electricity, a

figure that could more than double to 310–400 MW by 2020 The

country does not currently produce any geothermal energy, but

has an estimated potential of 100 MW In 2005, Viet Nam

electricity Through aggressive expansion of renewable power,

10,000 GWh by 2030

3.2 Electricity forecast and plan: background and methodology For the electricity forecast and supply plan described below, the period 2006–2010 was projected using a techno-economic method In this method, we (The Institute of Energy) reviewed the development of the steel, cement, chemicals, and garment sectors

to determine the loads of large industrial facilities and concen-trated industrial zones We then aggregated from the demand forecasts of 60 of 64 provincial power development plans, which together account for 96.5% of the electricity demand of nation-wide Using these methods, total electricity demand (in the base case scenario) of the provinces was found to increase by about 17.1 percent per year

For the period from 2011 to 2030, an indirect forecast method was used, involving multi-regression analysis and international comparisons: the ‘‘simple E’’ software program (Simple Econo-metric Simulation System) This model includes processes of regression analysis and forecast simulation, but in a form that is automated to the maximum possible extent Simple E is equipped with various estimation options such as ordinary least square (OLS), auto-regression, and non-linear estimation methods Simple E was transferred to the Institute of Energy from the Japan International Cooperation Association, and was connected with the direct forecast from the previous step The results were then compared to the forecast and historical average electricity consumption per capita of countries in the region After consult-ing with experts, we upgraded the forecast by assessconsult-ing the results of Demand Side Management (DSM) programs on load-shapes (referring to a DSM impact assessment by World Bank consultants on reducing maximal peak demand)

3.3 Electricity forecast and plan: summary results Using different assumptions, and based on the process above,

we generated three scenarios for energy demand: a high, low, and base case (as noted above) The results of those cases were as follows (seeFig 11andTable 5) In 2007, the annual electricity consumption per capita was 718 kWh By 2025, that figure projects to grow to just under 3000 kWh in the low case; over

3700 in the base case, and over 3800 in the high case At this level, Viet Nam’s 2025 per capita electricity use would be similar to that

of Malaysia in 2005 Annual demand growth in the base case is expected to peak at around 18 percent annually in 2009, and decline steadily thereafter to under 8 percent by 2025 Viet Nam currently has one of the lowest per capita electricity production among APEC countries, at 635 kWh per person

Table 4

Projected renewable energy resources for power generation under MP VI

2005–2030.

Small/mini hydro 185.00 555 1000–1200 4200–5200 3500 10,000

Wind power 0.80 na 300–400

Solar cells 1.15 na 4–6

Biomass 150.00 na 310–410

Total 336.95  600 1700–2100

0 100000 200000 300000 400000 500000 600000 700000 800000 900000 1000000

2008

0% 5% 10% 15% 20%

Low Case Base Case High Case Base Case Growth Rate

per year, somewhere between that of Indonesia (552) and the

Philippines (681)

In the forecast’s initial year, 2008, electricity production

nationwide is 75.9 billion kWh At an average of about

882 kWh/person, this value is among the lowest in the

ASEAN countries During 2006–2010, favorable conditions for

socio-economic development, continuing industrialization, and

rapid power demand increases pave the way for development of

the electricity sector, with expanded infrastructure construction

making a base for increased growth in coming years After 2010,

the institution of energy conservation and efficiency programs,

DSM measures, electricity pricing measures, and the shifting

structure of electricity use toward services leads to a gradual

decline in the growth rate of electricity demand

3.4 Viet Nam’s energy policy

3.4.1 Overall national energy development strategy

In order to meet the national electricity demand forecast

above, as well as the need for energy services provided by other

fuels, Viet Nam has prepared a National Energy Development

Strategy for the period up to 2020 with outlook to 2050 This

document was approved by the Prime Minister on 27 December

2008 (PM, 2008), and set national targets for energy development

as follows (seeAPEC, 2009for a summary):

 Ensuring sufficient supply of energy to meet the demands of

socio-economic development Primary energy use is expected

to reach about 47.5–47.9 MTOE in 2010, 100–110 MTOE in

2020 and about 310–320 MTOE in 2050

 Developing power plants and power networks to ensure

a sufficient supply of electricity for socio-economic development, with high reliability

 Developing refineries, step by step, to meet demand for petroleum products in the country, and increasing capacity

of refineries to about 25–30 million tonnes of crude oil by 2020

 Ensuring that the national strategic oil stockpile is equivalent

to 45 days of national oil use by 2010, 60 days in 2020, and 90 days in 2025

 Achieving a share of renewable energy of 3 percent in the total commercial primary energy supply in 2010, 5 percent in 2020,

8 percent in 2025, and 11 percent in 2050

 Completing the rural energy program for rural and mountai-nous areas This will include increasing the share of rural households using commercial energy to 50 percent in 2010 and to 80 percent in 2020 By 2010, 95 percent of rural households will have access to electricity

 Changing the electricity, coal, and oil–gas sectors to operate under competitive market mechanisms, with state regulation Establishing a competitive electricity retail market in the period after 2022; and establishing a coal and petroleum product business market by 2015

 Actively preparing the necessary and harmonious conditions for putting the first unit of a Viet Namese nuclear power plant into operation in 2020, then growing nuclear power’s share in the national energy structure By 2050, Viet Nam’s target is

Table 5

Projected electricity sector demand, 2005–2030.

Low case

Agriculture-forestry-fishery 661 1.00 718 0.85 1039 0.61 1323 0.47 1583 0.38 1882 0.32 Industry-construction 33,110 50.22 44,056 52.11 90,439 53.18 155,742 55.06 233,783 55.89 329,867 56.19 Commercial-service 3229 4.90 3958 4.68 9234 5.43 14,135 5.00 24,650 5.89 35,282 6.01 Household-management 26,602 40.35 32,437 38.36 61,216 36.00 98,619 34.86 139,273 33.30 193,539 32.97

Base case

Agriculture-forestry-fishery 661 1.00 1125 1.21 2027 0.97 2752 0.78 3471 0.66 4313 0.60 Industry-construction 33,110 50.22 45,794 49.45 104,259 49.90 179,538 50.86 269,462 51.52 372,391 51.80 Commercial-service 3229 4.90 5536 5.98 12,494 5.98 22,203 6.29 34,034 6.51 48,885 6.80 Household-management 26,602 40.35 35,219 38.03 75,656 36.21 116,441 32.98 159,912 30.57 215,671 30.00

High case

Agriculture-forestry-fishery 661 1.00 1210 1.21 2500 0.97 3505 0.78 4441 0.66 5519 0.60 Industry-construction 33,110 50.22 49,439 49.45 128,599 49.90 228,657 50.86 344,773 51.52 476,470 51.80 Commercial-service 3229 4.90 5982 5.98 15,411 5.98 28,277 6.29 43,546 6.51 62,548 6.80 Household-management 26,602 40.35 38,010 38.02 93,318 36.21 148,298 32.98 204,605 30.57 275,948 30.00

that nuclear electricity will account for about 15–20 percent of

total commercial energy consumption nationwide (see further

discussion of Viet Nam’s nuclear power plants below)

3.4.2 Key aspects of Viet Nam’s energy policy

The elements of the National Energy Development Strategy

described above embody and result from key aspects of Viet

Nam’s energy policy Some of the main focus areas for energy

policy in Viet Nam, and the main initiatives being used to address

them, are summarized below

 Energy Supply Security—Policies used to address Viet Nam’s

energy supply security include continuing to develop new

domestic oil refineries and oil stockpiles, and reforming the

market structure of the power sector to improve investment,

avoid shortages, and increase reserve margins Fossil fuel

reserves have been declining, and policies are being

promulgated to encourage both domestic and international

investment in new supplies and plants, and to improve

the environmental performance of coal and other supply

infrastructure

 Energy Efficiency and Energy Conservation—Government

Decree no 102/2003/ND-CP on Energy Conservation and

Energy Use, developed by the Ministry of Industry (MOI),

regulates energy conservation and energy efficiency in

industrial production and in buildings, with regard to

energy-consuming equipment and appliances (PM, 2003) This

decree focused on policies such as preferential tax treatments

for energy-saving products, creation of a Support Fund to help

to pay for energy efficiency investments, subsidizing research

and development in energy efficiency areas, developing

national standards for energy usage for equipment and other

devices, designing loan mechanisms to spur investment in

these areas, and developing residential tariffs that spur energy

efficiency and energy conservation

 Restructuring Energy Markets—In accordance with the

Strategy for Electricity Sector Development approved by the

government in October 2004, Viet Nam is implementing

policies to gradually establish a competitive power pool (PM,

2004a, 2004b) The State will maintain a monopoly in power

transmission, and in operation of large-scale hydropower

plants (used for both controlling river flows and for electricity

generation), and will also control the operation of nuclear

power plants in the future The Electricity Law, approved by

the Viet Nam National Assembly (2005), came into effect

in July 2005 and outlines the major principles for the

establishment of the power market in Viet Nam, including its

regulation by the Electricity Regulatory Authority of Viet Nam

no 258/2005/QD-TTg A related decision in August 2005

(Decision no 199/2005/QD-TTg) transformed the state-owned

Viet Nam National Coal Corporation (VINACOAL) into the

Group (VINACOMIN) with a broader scope of business interests

in the energy, minerals, and transportation equipment

sectors

 Environmental Policies—The August 2004 Decision no 153/

2004/QD-TTg, issuing Viet Nam’s ‘‘Agenda 21’’ policies,

includes strengthening the legal basis for environmental

protection, supporting research and development into, and

transfer of, environmentally friendly technologies, and

stipulating Viet Nam’s active participation in international

activities related to the 1992 United Nations Framework

Convention on Climate Change (PM, 2004b)

Renewable Energy Policies—Promotion of development and use

of renewable energy was a part of the ‘‘Decree on Energy Conservation and Energy Use’’, developed by MOI in 2003, and also a part of the Electricity Law The Government of Viet Nam has subsidy policies for renewable energy including subsides for capital investments in renewable technologies, subsidized loans, and preferential tariffs for renewable energy products (PM,

2003)

3.4.3 Additional electricity sector-specific policies

In addition to the goals noted for the power sector above, additional general goals of energy policy development in Viet Nam for the electricity sector include:

Giving priority to development of hydropower, especially for multi-purpose projects

Ensuring reasonable fuel shares and supply safety between coal- and gas-fired generation

Ensuring a reasonable arrangement of generation resources by load areas, thus reducing transmission distances

Promotion of projects for importing of electricity from Laos, Cambodia, and China

Taking into account the risk of power plant development schedules to ensure continued adequate power supply

Giving priority to special projects with commitment of Official Development Assistance (ODA), as well as Ordinary Capital Resource (OCR) financing

Encouraging power projects developed under private or partially under schemes such as Independent Power Produc-tion (IPP), Build-Own-Transfer (BOT), and others

Upgrading of the abilities of Viet Nam’s power sector planners

to evaluate options for an increasingly complex national electricity grid

3.4.4 Electricity supply plan Based on the goals as noted above, and the demand forecast presented inTable 5andFig 11, an electricity supply plan was developed as summarized andFig 12

Viet Nam’s electricity transmission system consists of three regional power systems:

The Northern power system, including northern provinces from Ha Tinh Northward

The Central power system, including central provinces from Quang Binh to Khanh Hoa and four provinces in the highlands: Kon Tum, Gia Lai, Dac Lac, and Dac Nong

The Southern power system, including the southern provinces and provinces of Binh Thuan, Ninh Thuan, and Lam Dong Key objectives for the transmission network elements of the electricity plan include:

Aim the 220–500 kV transmission network development to increase reliability, flexibility, safety, and stable electricity supply, especially for the important economic areas in the South and the North

Develop the 110 kV transmission network with completion of area power systems in order to increase reliability of electricity supply, reduce electricity losses, and facilitate conditions for changing the medium voltage network to 35 and 22 kV from the existing 6 and10 kV networks, as well as for rural electrification

Fig 13presents a map of Viet Nam’s electricity transmission system, including both current and planned infrastructure

Continued rural electrification is an additional key electricity

sector policy During the period 2006–2010, the goal has been for

100% of commune centers and 95% of rural households to have

access to the local power grid, including 90% of rural households

in the North and Highland areas During the period 2011–2015,

the goal is for 98% of rural households to have access to local or

national power grids According to the results of MP VI, from 2006

to 2015, these goals will require investment of Viet Namese Dong

(VND) 37,286 billion, or about 2.155 billion US$ (at the current

rate of 17,300 VND/$) for supply from the national power grid,

and a further VND 16,948 billion, or about 980 million US$ for

local investment in development of off-grid renewable power

As noted above, another key element of future electric energy

policy for Viet Nam is the development of transmission

inter-connections with neighboring countries, including Laos,

Cambo-dia, and China Fig 14 summarizes existing electricity system

interconnections in the region, as well as medium-term

interconnection plans (through 2019) Interconnections with

Laos are expected to provide Viet Nam with access to Laotian

hydropower output of 1700–2300 MW

The financing of the investments required to carry out the

power plan described above is a significant hurdle to be

overcome, and will require a number of different approaches

The total cost of the power sector plans in Viet Nam through 2025

is estimated to be about 1822 trillion VND, or over 115 billion

USD, including interest during construction About two-thirds of

this investment (about 1144 trillion VND) will be for power plants

(of which about 70 percent for thermal plants, and 30 percent for

hydro), with the remaining third of the total investment needed

for transmission and distribution facilities The average annual

required investment over the period 2006–2025 is estimated at

about 5.76 billion USD per year (MP VI) Financial resources that

can be drawn upon for these investments include the resources of

Electricity Viet Nam itself: depreciation funds, development and

investment funds, shares, equity, and the selling of shares of some

power plants Other resources include the state budget (mainly

for compensation for resettlement costs related to the Son La

HPP), ODA loans based on signed agreements, foreign commercial

loans, preferential credits, domestic commercial loans, and the

issuing of bonds

Viet Nam is currently facing a choice about the ownership

structure of its power sector To date, two alternatives have been

considered The first of these is for EVN to remain the main owner

of power generation projects through 2025, except for the IPP and BOT projects for which it has already signed or will sign Power Purchase Agreements, and for joint stock and equitized projects

‘‘Equitized projects’’ in the Viet Namese context means to transform a wholly state-owned enterprise into a shareholding company The second alternative is for EVN to play the role of power buyer in accordance with power sector reform expected over the planned period, in which EVN will invest in and manage some important power plants with financing from loans, but the remaining power plants will be owned by independent power-generating companies outside of EVN Under the second alter-native, EVN would remain the owner of hydropower plants with multi-purpose dam, important thermal power plants and trans-mission lines, but would be a 50 percent owner of other generation facilities The basic concept and development schedule for this second alternative is stipulated in Viet Nam’s Electricity Law and in the Prime Minister’s Decision 26: ‘‘Approval of the Roadmap, the Conditions to Establish and Develop the Levels of the Power Market in Viet Nam’’, issued in January 2006

This second ownership alternative also relates to the electricity sector market development roadmap being considered for Viet Nam Under the roadmap, the first phase is a single-buyer market,

to 2014 The second phase, from 2014 to 2022, contemplates the opening up of wholesale power markets, with the first 2 years of this phase being an experimental period The final phase, starting

in 2022, calls for a retail competition market, again with a 2-year experimental phase at the beginning of the period

3.4.5 Nuclear energy in Viet Nam’s energy policy

As noted earlier in this article, electric power demand in Viet Nam is forecast to increase many fold in the next two decades Ensuring an adequate power supply for the economy is one of the big challenges for sustainable development of the country Though Viet Nam can and will develop additional power plants using coal, oil, gas, hydropower, and renewable energy, nuclear energy is also an option for the country, one that, internationally, has received considerable attention in recent years, and at the same time has many controversial elements (Pham, 2009)

In January 2006, the Prime Minister of Viet Nam signed a Decision no 01/2006/QD-TTg on the approval of the strategy to apply nuclear energy for peaceful purposes by 2020, which aims

to build and develop a nuclear technology industry, and to

0 10000 20000 30000 40000 50000 60000 70000 80000 90000

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Import Nuclear PP Small HPPs Gas/Oil PPs Coal TPPs HPP&PSPP Peak

Fig 12 Power generation development program to 2025: base case.