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The electricity industry has a "headache" because coal power has been rejected, and solar power prices are too expensive

19:36 | 08/11/2019

VCN - Coal thermal power has been rejected by many localities, while the price of wind and solar power is quite high, leading to cross-subsidisation, which has been a difficulty for the electricity industry.

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Grid overload is the current problem when solar power projects have developed strongly in some localities. Photo: Nguyen Thanh

Coal thermal power denied in many places

The Ministry of Industry and Trade has just reported to the National Assembly several issues in the field of industry and trade at the eighth session of the 14th National Assembly, ofwhich electricity management and regulation; the implementation of electricity development planning, and new energy and renewable energy planning wasmentioned first.

The Ministry of Industry and Trade stated power projects, especially projects outside the Electricity of Vietnam (EVN), were often behind schedule, affecting electricity supply assurance. Specifically, according to the revised Power Development Plan VII (the revised PDP VII), in 2016-2030, a total of 116 power source projects need to be invested and put into operation (excluding renewable energy projects).

After three years, many projects such as coal power projects in Bac Lieu, QuangNinh and Ha Tinh have not been implemented due to local proposals and recommendations. While many other localities including Bac Lieu, Ba Ria-Vung Tau and NinhThuan proposed adding new gas power centres.

Most of the BOT projects implemented by foreign countries were behind schedule. Many projects under construction were also behind schedule such as Long Phu 1, Song Hau 1 and Thai Binh 2.

According to recent reviews, the total capacity of power projects that can be put into operation in 2016-2020 was only 15,500 MW/21,650 MW (achieved nearly 72 percent). The slow progress of power projects or unfulfilled projects has created great difficulties and challenges in ensuring electricity supply in the future.

Besides, the Ministry of Industry and Trade assessed: “In the coming period, only projects implemented by EVN can meet the schedule, other power investors, especially BOT power sources, are mostly slow.”

One of the outstanding difficulties mentioned by the Ministry of Industry and Trade was raising capital for projects. According to calculations in the revised PDP VII, the average annual investment capital of the electricity industry is nearly US$7.6 billion per year. However, in the context that Vietnam's electricity prices have only brought EVN modest profits, other State-owned enterprises such as Vietnam National Coal-Mineral Industries Holding Corporation Limited (TKV) andVietnam Oil and Gas Group (PVN) also are facing financial difficulties, raising capital for power projects of these businesses will be very tough.

Similarly, power projects invested in by the private and foreign sector also are facing difficulties in arranging capital due to high demand from lenders (Government guarantee, foreign currency conversion, etc.).

High renewable energy price

In the past, while exploiting traditional power sources was difficult, many people believedpromoting renewable energy, such as wind and solar power, wasa feasible planto offset the electricity shortage.

However, according to the Ministry of Industry and Trade, the high price and price compensation mechanism that must be implemented are shortcomings of renewable energy.

The price of electricity from renewable energy sources is higher than that of traditional energy sources (large thermoelectricity and hydroelectricity). EVN is being assigned to buy all electricity from renewable energy projects at a price set by the State.

"Thus, EVN is performing the function on behalf of the State, the cost compensation price for renewable energy is mixed with the cost of the electricity industry, not clearly separated in the electricity bill," the Ministry of Industry and Trade said.

Notably, as the proportion of renewable energy increases, the price offset component will increase and greatly affect the cost of electricity.

In addition, according to the Ministry of Industry and Trade, due to heavy dependence on weather conditions, topography and climate, the potential of renewable energy sources is usually concentrated in some provinces which have small on-site consumption load and their grid system has not yet met requirements for transmission capacity.

A prominent issue mentioned by the Ministry of Industry and Trade was that investment in renewable energy projects had large capital demand, high risks due to its capacity and production depends on weather and climate, and slow capital recovery because investment rates and electricity prices were higher than traditional energy sources. Therefore, financial institutions and commercial banks are not ready to lend for projects that invest in renewable energy.

Talking to Customs News, energy expert Nguyen The Mich said to develop renewable energy in a sustainable way, without falling into the passive situation, it was necessary to set a clear plan and follow it.

In fact, when developing a plan, specialised units such as EVN and the Energy Institute all knew such information as, how much power was planned to balance the capacity required of the economy, where and how to build electricity transmission, in which EVN will play the leading role. However, it is necessary to have a responsible unit such as the Department of Energy (Office of the Government Office) or the Electricity and Renewable Energy Authority (Ministry of Industry and Trade).

To solve the remaining problems in renewable energy development, one of the solutions mentioned by the Ministry of Industry and Trade is to advise the Prime Minister to allow wind and solar power plants to sell electricity directly to customers to form a competitive electricity retail market.

By Thanh Nguyen/ Ha Thanh