Wait until 2024 for Vietnam to have a retail electricity market?
Up to now, the electricity market in Vietnam has gone through two levels: competitive electricity generation, competitive electricity wholesale and is in the process of implementing the competitive retail electricity market level.
In particular, the competitive electricity generation market officially operated from July 1, 2012. From January 1, 2019 to now, the electricity market in Vietnam has moved to the phase of operating the competitive wholesale electricity market and is in the detailed design phase, preparing to deploy the competitive retail electricity market.
To implement a competitive retail electricity market, in August 2020, the Ministry of Industry and Trade issued Decision No. 2093/QD-BCT approving the design of a competitive retail electricity market model. In this decision, the Ministry of Industry and Trade expects that after 2024, customers will be able to choose to buy electricity from electricity retailers.
However, before having a competitive retail market, it is necessary to complete a competitive wholesale market, because this market is the input of the competitive retail electricity market.
On the other hand, according to the Ministry of Industry and Trade, it is necessary to reform retail electricity prices, including eliminating cross-subsidies and separating electricity subsidies. Retail electricity prices must accurately reflect costs for each customer group as well as geographical area.
In addition, it is necessary to issue full legal documents for market operations and to transparently determine the cost components that make up the retail electricity price, including costs at the stages of electricity generation, electricity transmission, electricity distribution, ancillary services, etc.
In addition, it is necessary to thoroughly restructure the electricity industry in the direction of clearly separating natural monopoly activities including: transmission, distribution, power system dispatch and electricity market transaction management from competitive activities (wholesale and retail electricity).
Accordingly, in the retail electricity market, the distribution unit only provides distribution services to retailers and electricity customers. The electricity system and electricity market operator must be independent of buyers and sellers in the market, to ensure that the wholesale electricity market operates effectively, transparently, without discrimination, creating a solid support for the retail electricity market.
In this restructuring project, the Ministry of Industry and Trade also aims to complete the competitive wholesale electricity market according to the approved design; complete legal and infrastructure preparations, and deploy the competitive retail electricity market.
In particular, piloting the direct electricity trading mechanism between power plants and electricity users from now until 2025; researching and implementing the separation of electricity distribution activities (natural monopoly) from electricity retail business activities (competitive) to improve transparency and efficiency in the electricity sector.
Retail price matters
However, to be able to implement a competitive retail electricity market, the Vietnamese electricity industry still has many challenges to solve. In the immediate future, it is necessary to complete the competitive wholesale electricity market.
In a report by EVN, this unit said: For the wholesale electricity market, up to now, only nearly 39.4% of the installed capacity directly participates in the electricity market, even lower than when the electricity market started operating from July 1, 2012. The electricity market is essentially still a single buyer with a low participation rate in the electricity market.
In May 2023, EVN also proposed that customers connected to the grid with a voltage of 110kV or higher must directly purchase electricity on the electricity market. If approved, EVN will no longer be the sole buyer on the electricity market.
In addition, although competition has been introduced into the electricity generation sector since 2012, the adjustment of retail prices according to the market mechanism has not yet been achieved. Therefore, the restructuring project of the Industry and Trade sector also sets out the task of "reforming retail electricity prices in accordance with the levels of the electricity market, synchronizing with the prices of electricity generation, wholesale electricity, using electricity efficiently and economically".
Citing experience from other countries, the Ministry of Industry and Trade said: The most basic and important mechanism to ensure the competitive retail electricity market of the above countries operates effectively is that these countries allow each electricity retailer to decide on the retail price. The retail electricity price must be calculated to ensure completeness, synchronization and connection with the input factors that make up the retail electricity price.
This is also an important factor for the formation of new electricity retail units to create competition in the electricity retail market.
The Ministry of Industry and Trade is continuing to accelerate related work to soon put into pilot operation and replicate the competitive retail electricity market model approved in Decision No. 2093/QD-BCT. However, the Ministry of Industry and Trade believes that the successful and effective construction of a competitive retail electricity market is a major task that requires the coordination and determination of many relevant agencies. In particular, the restructuring of the electricity sector is chaired by the State Capital Management Committee at Enterprises and the task of investing in infrastructure for electricity market operations has been directly assigned to EVN by the Prime Minister in Decision No. 63/2013/QD-TTg. |
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