Vietnam’s transmission sector to receive a major fillip-

In the past few years, there has been a significant increase in the demand for energy in Vietnam, mainly driven by increased industrialisation and expansion of rural electrification in the country. The key long-term objectives of the energy sector are augmenting generation capacities and providing rural households with access to electricity. In line with these objectives, Vietnam has planned to expand its transmission network in order to ensure efficient evacuation of upcoming power generation capacity.

Vietnam aims to add around 27,432 km of transmission lines and 183,626 MVA of transformer capacity at the 220 kV and 500 kV levels by 2030, of which 10,455 km of lines and 57,638 MVA of transformer capacity will be added by 2020. Overall it is expected that about $9.2 billion will be invested in the development of Vietnam’s power transmission segment between 2016 and 2025.

Various transmission projects are being undertaken in the country for expanding its network that includes the Transmission Efficiency Project and Power Transmission Investment Programme among others. Vietnam is also a member of the ASEAN Power Grid (APG), which involves the construction of cross-border transmission lines for electricity trade/exchange.

Existing transmission network

Vietnam’s transmission network comprises over 39,769 km of lines and about 103,467 MVA of transformer capacity. Most of the transmission infrastructure is at the 110 kV and the 220 kV levels, although the country is slowly building its 500 kV network. As of 2015, around 45 per cent of the transmission network was at the 110 kV level, 35 per cent at 220 kV level and the remaining 20 per cent at the 500 kV level. During the period 2008 to 2015, Vietnam’s transmission line network and transmission capacity increased at a compound annual growth rate (CAGR) of 10.1 per cent and 13.1 per cent respectively. The country has cross-border interconnections with Cambodia and China to facilitate power export and import via 230 kV, 220 kV and 110 kV transmission lines. According to Sharad Somani, partner, global infrastructure advisory, KPMG, “The key growth driver in the transmission sector is the country’s single line network diagram connecting the northern and southern grids which play a critical role in bridging the gap between supply (significant hydro resources are in the northern region) and demand centre (50 per cent located in the south). With the growth in demand in the northern and southern regions, the transmission backbone needs to be reinforced and strengthened.“

Vietnam’s electricity sector is dominated by the state-owned, vertically integrated Vietnam Electricity (EVN). EVN holds a monopoly in the transmission segment through its subsidiary National Power Transmission Corporation (EVN NPT), which was established in 2008. EVN NPT is responsible for the development of 220 kV and 500 kV assets in the country. Commenting on the role of EVN, Somani says, “With the change in the senior leadership at EVN, the group is working toward the goals of improving efficiency and the effectiveness of the electricity industry. The privatisation of the first generation company is also a positive sign to show the government’s commitment to open the segment to the private sector.”

Key projects

Cuurently, Vietnam is undertaking various transmission projects, which have been funded by multilateral institutions. One such project is the World Bank-funded Transmission Efficiency Project, which entails the construction of nearly 1,040 km of transmission lines at the 500 kV and 220 kV voltage levels. The project is being developed by the National Power Transmission Company at a total cost of $731 million and is expected to be completed by 2020. Another major project under development is the Power Transmission Investment Programme, which involves the construction of 648 km of 500 kV and 100 km of 220 kV lines. The project aims to balance power loads in northern, central and southern Vietnam. It is being funded by the Asian Development Bank (ADB), Agence Française de Développement, KfW, and the ASEAN Infrastructure Fund. The total cost of the project is $920 million and it is scheduled to be completed by 2020. Another project with multilateral funding is the Hanoi and Ho Chi Minh City Power Grid Development Sector Project. The project, being developed by EVN, aims to strengthen the capacity and reliability of the power infrastructure in Hanoi and Ho Chi Minh City through rehabilitation, expansion and development of the 220 kV and 110 kV electricity power grids. The project has received funding from ADB and the ASEAN Infrastructure Fund and is expected to be completed by 2020.

Vietnam is also undertaking cross-border interconnection projects as a part of the APG. A key project under development is the Lao PDR-Vietnam Project, which entails the construction of a 191 km, 220 kV line to transfer power generated from Unit 1 of the Xekaman hydroelectric power plant in Lao PDR to Vietnam. The project is being developed by EVN and the Song Da Corporation and is scheduled for completion in 2016. Other future projects under APG include the 500 kV Luang Prabang (Lao PDR)-Nho Quan (Vietnam) interconnection project and the Tay Ninh (Vietnam)-Stung Treng (Cambodia) interconnection project.

Investments in the transmission sector

Vietnam is increasingly undertaking investments in the transmission sector in order to ensure sufficient power supply to all regions for the country’s continued socio-economic development through a well-established transmission system and by strengthening the network with the development of a 500 kV system to provide uninterrupted and reliable power supply. Financial assistance in the form of soft loans from bilateral and multilateral financial institutions in recent years has been aiding Vietnam’s drive to enhance the capacity and efficiency of its transmission network and to balance power loads in the northern, central and southern regions of the country. Investment in Vietnam’s high voltage electricity grid has increased from an estimated VND 6,259 billion in 2009 to an estimated VND 14,605 billion in 2014, registering a   CAGR of almost 18.5 per cent.

EVN NPT is expected to invest over $9.2 billion by 2025 in the transmission sector. A large part of this investment will be on the development of high voltage transmission systems of 220 kV and 500 kV voltage levels. The key drivers for future investment will be the need to modernise its ageing infrastructure and to expand the network to support the upcoming generation capacities; further strengthen the 220 kV and 500 kV systems; and promote regional integration activities. Several interconnections with Cambodia and Lao PDR are planned to import hydroelectric power to meet the growing energy needs of the country. These interconnections will also help the country move closer to realising the APG, which aims to connect the 10 member states of the Southeast Asian region.

Future outlook

The country plans to invest extensively in the development of its power transmission assets. Vietnam’s Power Master Plan VII projects that $38,736 million will be invested in developing the national power grid. Of this, 27 per cent will be invested during 2016-20, 32 per cent in 2021-25 and 41 per cent during 2026-30. Given the massive investment requirement for Vietnam’s electricity sector, the government and EVN have launched several initiatives to attract independent power producers.

However, the reform and deregulation process has been plagued by delays due to bureaucratic and other hold-ups. EVN’s restructuring plan is almost stagnant. Further, there is a need for market-based determination of electricity prices to provide sufficient incentives to local and foreign investors to set up generation projects. In transmission, EVN is facing the dual challenges of modernising its ageing infrastructure as well as expanding the network at an unprecedented rate to support upcoming generation capacities. Unless the power sector is adequately reformed, it is unlikely to attract much by way of private investment.