Coal and transmissions set to drive power infrastructure sector

The Government, along with international observers, has been pushing for a decrease in reliance on coal and an increase in renewables usage to lower greenhouse gas emissions, said Fitch Solutions Macro Research (Photo: VNA)

Fitch Solutions Macro Research, a subsidiary specializing in market research services of Fitch Group, said in its newly-released outlook for Vietnam’s power sector that the country’s electricity generation is set to increase to 236 terawatt hours (TWh) by 2023 and to 318TWh by 2028.

The research unit said that the Government, along with international observers, has been pushing for a decrease in reliance on coal and an increase in renewables usage to lower greenhouse gas emissions, reduce air pollution, and achieve sustainable growth in light of challenges posed by climate change.

However, according to the Fitch Solutions Key Projects Database (KPD), coal projects current dominate the power infrastructure construction pipeline – out of 57 projects currently in the pre-construction phase, 17 are coal-fired plants, accounting for more than 85 per cent of the total project value.

Together with facilities currently under construction, coal-fired plants are expected to provide an additional 66GW of capacity if all pipeline projects turn operational, a figure that is well ahead of other sources of energy.

This indicates a short-term reliance on coal to meet the rapid increase in demand for electricity within the country, which will result in the construction of coal-fired plants as the primary driver of the local power sector.

Fitch Solutions believes the construction of non-hydro renewable power plants, currently the second largest component of the pipeline, with 24 projects in the pre-construction phase with a total value of US$4.7 billion, will gain traction in the next few years.

This view is underpinned by increasing efforts to promote usage of renewable energy, such as wind and solar, along with technological advancements in renewable and grid technology that would further drive down the cost of implementation.

In particular, Fitch Solutions expects an increase in the launch of wind and solar power projects given the Government’s renewable push via the recent adjustment of feed-in tariffs. The KPD reveals 15 projects currently under construction and a further 24 projects, mostly wind and solar, in the pre-construction phase, underscoring the growing opportunity in the renewable construction sector.

The research unit also expects additional investment in grid infrastructure in tandem with rising demand for electricity in the country. Demand for electricity is mainly driven by rapid urbanization and economic growth in the country’s two most populous localities - Hanoi and Ho Chi Minh City.

The current network transmitting electricity from the north and central regions to the south is overloaded and under strain, causing instances of power outages and larger power losses.

To address the issue, the National Power Transmission Corporation (EVNNPT) has announced plans to launch three 500kV and 30 220kV power transmission projects in 2019, to increase capacity for power transmission. Hence, upgrades to existing grid infrastructure would help to minimize power distribution losses, Fitch Solutions asserted.

Power losses have been on a steady decline since 2011 and the EVNNPT intends to make further improvements to transmission efficiency, especially on the 220kV lines, which carries the majority of the electricity produced.

These projects will continue to be led by State-owned utility Vietnam Electricity (EVN), with opportunities in financing, construction and provision of equipment by local and foreign companies, the research unit noted.