Vietnam is among the fastest growing economies in Asia and is poised to continue to grow at an annual average of 7 per cent at least over the next decade. However, the country’s electricity sector, which is one of the critical foundations for promoting rapid and sustainable economic development and for the most part managed by the state-owned vertically integrated Electricity of Vietnam (EVN), has been facing power supply shortages that have become severe during this summer. To achieve energy security as well as the country’s commitment to reach net zero emissions in 2050, Vietnam recently released its long-term sustainable vision for the electricity sector.
In May 2023, Vietnam’s prime minister approved the much awaited Power Development Plan VIII (PDP VIII) for the period from 2021 to 2030, with a vision to 2050 prepared by the Ministry of Industry and Trade. The electricity master plan has been under development for almost three years and is the result of several drafts and revisions. The PDP VIII gives a broad vision for future electricity generation, transmission and consumption in the country. The emphasis is on developing new energy sources including offshore wind (OSW) and transmission grids with voltages of 220 kV or higher, including connections with neighbouring countries. Further, the country aims to achieve 100 per cent electricity access to rural households by 2025.
The PDP estimates a substantial annual electricity sector investment requirement of over $13 billion by 2030, which could increase to up to an annual investment of $52 billion during 2031-50. This provides potential opportunities for international investors in the sector.
A look at the key highlights of PDP VIII…
Future electricity demand and transformation of generation mix
The PDP aims to meet the country’s electricity demand the country, which is assumed to achieve an average annual GDP growth rate of 7 per cent up to 2030, and 6.5-7.5 per cent during 2031-50. Accordingly, commercial electricity consumption is expected to reach about 335 TWh by 2025, around 505.2 TWh by 2030 and about 1,114.1-1,254.6 TWh by 2050.
The plan takes into account Vietnam’s commitments to energy transition, particularly through the Just Energy Transition Partnership (JETP). Signed in December 2022 between Vietnam and the International Partners Group (IPG), which comprises nine developed countries and the European Union (EU), the JETP is an initiative designed to mobilise financial resources and assist Vietnam in achieving a fair and sustainable transition to clean energy. The key JETP objectives relate to a reduction in carbon emissions generated by the electricity sector; a reduction in coal-based capacity; and increased renewable energy capacity.
In line with this, the plan aims to reduce coal-based capacity to around 20 per cent share by 2030 (compared to 30 per cent presently) and to completely phase it out by 2050. This will be done by converting coal-based plants into biomass/ammonia-fuelled projects with a capacity of 25,632-32,432 MW in the long term. Further, gas-based plants totalling around 32 GW will be converted into the use of hydrogen.
Notably, PDP VIII outlines an ambitious installed capacity from renewable energy sources (RES) (including wind, solar and battery storage) target of 41 GW or 28 per cent of total installed capacity by 2030 and about 366 GW or 70 per cent by 2050. Specifically, the 2030 electricity generation mix includes 21,880 MW onshore wind, 6,000 MW of OSW, 12,836 MW of solar power and 300 MW of battery storage. By 2050, the country targets 60,050-77,050 MW onshore wind, 70,000-91,500 MW OSW, 168,594-189,294 MW of solar and 30,650-45,550 MW of energy storage capacity. Vietnam plans to tap into the vast solar potential of approximately 963 GW including through off-grid installations. Further, having a substantial OSW potential of 600 GW across the country’s coastline stretching over 3,200 km, Vietnam plans to develop further OSW capacity to produce new energy such as hydrogen and green ammonia to meet both domestic and export demand. In line with this, PDP VIII outlines additional OSW capacity for new energy production, targeting 15 GW by 2035 and 240 GW by 2050.
In parallel, to develop the renewable energy industry and service ecosystem, the plan is to establish two interregional renewable energy industrial and service centres in the northern, south-central or southern regions by 2030. These centres will encompass various components, including RES capacity of 2-4 GW with a focus on OSW power, manufacturing facilities for RES equipment and new energy production technology, green and low-carbon industrial parks, and research and training centres.
Growth in the transmission network
The power transmission system development aims to meet growing load demands and connect new generation capacity to the grid. Key measures include prioritising the development of 500 kV and 220 kV grids to enhance capacity and reliability and minimise power loss.
The country plans to add 28,585 km of new transmission lines and 127,875 MVA of new transformer capacity up to 2030, besides renovating 7,808 km and 73,165 MVA between 220 kV and 500 kV levels. In the long term (between 2031 and 2050), the plan is to construct HVDC lines totalling 5,200-8,300 km and a capacity of 40-60 GW, in addition to 20,795-22,855 km and 215,775-239,525 MVA in new construction and 1,305-1,455 km and 223,275-226,900 MVA through renovation at 220 kV and 500 kV.
The plan promotes the development of grids with long-term backup, the use of multi-circuit poles and multiple voltage levels to optimise land usage and the installation of transmission substations that support neighbouring load areas. While the 500 kV grid enables regional power system integration and cross-border electricity exchange, the plan does not include any major interregional transmission lines connecting South Central (where the major OSW capacity is proposed) to the northern region (where power demand is highest) before 2030. This could be based on the assumption that major OSW development may not take place prior to this period. At the 220 kV level, the focus will be on ensuring the reliability of the grid; building substations in high-load density regions for flexible operations; and constructing automatic and unmanned substations besides gas-insulated switchgear substations and underground substations at load centres.
The plan calls for research on the application of back-to-back HVDC systems, flexible power transmission equipment to improve transmission capacity and alternating current (AC)/DC technology with a voltage of over 500 kV. Beyond 2030, the plan is to develop super high voltage transmission lines connecting the central, south-central and northern regions to exploit the OSW potential.
Capital investment
The investment required for the development of generation capacity and transmission grids is significant. During 2021-30, the estimated total investment needed is approximately $34.7 billion. This includes an investment of $119.8 billion in power generation, translating to an annual average investment of $12 billion. The transmission grid will account for the remaining $14.9 billion, which translates into an average annual investment of $1.5 billion. In the 2031-50 period, the projected investment requirement is estimated to be in the range of $399.2 billion to $523.1 billion. This includes total investment of $34.8 billion-$38.6 billion or an annual requirement of $1.7 billion-1.9 billion in transmission.
To secure the necessary funding, various solutions have been proposed. Firstly, financial mechanisms will be researched and refined to facilitate capital mobilisation in the sector. Diversification of capital sources and mobilisation methods has also been emphasised, including the effective measures to attract domestic and foreign capital, while ensuring national defence, security, and competition in the electricity market.
Leveraging international support commitments such as the JETP and the Association of Southeast Asian Nations (ASEAN) Zero Emissions Coalitions (AZEC) (a concept proposed by Japan to promote regional co-operation among Asian countries to reduce carbon emissions, foster collaboration and resource sharing, and develop global supply chains to achieve decarbonisation and sustainable economic growth) will be crucial. In addition, accessing green credit sources, climate credits, and green bonds will play an essential role in these efforts.
Cross-border interconnections
Vietnam plans to export 5-10 GW of electricity to neighbouring countries by 2030. Towards this, it is strengthening its cross-border 500 kV and 220 kV interconnections with ASEAN and countries of the Greater Mekong subregion (which includes Cambodia, Laos, Myanmar, Thailand, Vietnam, and the Chinese provinces of Yunnan and Guangxi Zhuang Autonomous Region).
One key initiative is the ongoing connection of the power grid with Laos through the establishment of 500 kV and 220 kV transmission lines. Laos’s advantageous geographic location near Thailand, Cambodia, and China allows establishing connections between Vietnam’s grid and other Southeast Asian countries. Vietnam has set a target to import a total capacity of 3,000 MW from Laos by 2025 and 5,000 MW by 2030, as per the agreed memorandum of understanding (MoU) signed on October 5, 2015. Vietnam’s prime minister has approved electricity imports from specific projects totalling 2,689 MW.
EVN is collaborating with Laos’s state-owned power company, Electricite du Laos (EDL) for these interconnections. The Northern Power Project Management Board (NPPMB), a branch of EVN National Power Transmission Corporation (EVNNPT), is implementing the 220 kV Nam Sum (Laos)-Nong Cong (Vietnam) line, scheduled for completion in 2023 and enable Vietnam to import over 500 MW of electricity from the Nam Sum hydropower complex in northern Laos. Another 220 kV line Nam Mo 2 (Laos)-Tuong Duong (Vietnam) will allow Vietnam to access power from the Nam Mo Hydropower Complex in Laos. EVNNPT is also constructing the two 500 kV lines – the 97 km Nam Ou 7 (Laos)-Lai Chau (Vietnam) and the 73 km Nam Ou 5 (Laos)-Dien Bien (Vietnam) to connect to the Nam Ou 5, 6, and 7 hydropower plants in Laos. These lines are expected to become operational between 2023 and 2024.
Recently, in May 2023, the China Southern Power Grid (CSG) and EVN signed an electricity sales agreement to enable power transfer from Shengou in China’s Guangxi province to Mong Cai in Vietnam through 110 kV power lines. Under the sales agreement, approximately 68 GWh of electricity will be transmitted and sold to Vietnam in the first phase, with a subsequent monthly volume of 30 GWh.
The way forward
Vietnam’s power plan prioritises building new power infrastructure to support national energy security, socio-economic development, and industrialisation. It emphasises energy transition, smart grid construction, and advanced power system management to align with global green trends. Vietnam aims to transform its generation mix by focusing on RES and new power plants and enhancing grid infrastructure through interregional connections and cross-border interconnections. These measures demonstrate Vietnam’s commitment to realising its energy goals and building a sustainable energy sector.
