Draft revised Electricity Law: Offshore gas and wind power projects remain uncertain
The ambition to develop new energy sources in Vietnam is huge, however, without a solid legal basis, it will create risks affecting national energy security.
On October 16, the Vietnam Petroleum Association held a seminar on the Electricity Law (amended): Legal gaps that need to be filled and supplemented in the spirit of Resolution 55-NQ/TW and Conclusion 76-KL/TW.
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| Mr. Nguyen Quoc Thap, Chairman of the Vietnam Petroleum Association, commented that through research, synthesis and comparison with orientations and policies, the Vietnam Petroleum Association found that the realization of power projects from domestically exploited gas and imported LNG, and offshore wind power still faces difficulties and obstacles, causing the risk of not being able to develop power sources as planned. |
According to Dr. Nguyen Quoc Thap, Chairman of the Vietnam Petroleum Association, the full institutionalization of the contents of Resolution No. 55-NQ/TW, Conclusion No. 76-KL/TW and the Party's guidelines and policies into the Electricity Law will encourage and create favorable conditions for domestic and foreign organizations and individuals to participate in electricity activities in Vietnam; promote investment in the energy sector in general and the electricity sector in particular to meet the needs of socio-economic development.
Waiting for pilot mechanism for offshore wind power
From the actual implementation of the DGNK project, Mr. Nguyen Tuan, Head of Commercial Department of Vietnam Oil and Gas Technical Services Joint Stock Corporation (PTSC) said that the draft revised Electricity Law currently has 130 articles, but only 9 articles are related to offshore wind power and are general, general regulations.
Vietnam Oil and Gas Group (Petrovietnam) and PTSC have proposed 17 issues with the aim of clarifying development orientation and policies, but only 4 issues have been accepted.
Recommendations that have not been accepted include: orientation and models for development stages; institutionalization of the role of Petrovietnam according to 76-KL/TW; agreement on management guidelines and the role of the Government; synchronization of land allocation with sea areas; clear mechanisms for offshore wind power exports.
This leads to unclear procedures for offshore wind power , and lack of mechanisms to develop sustainable projects.
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| Mr. Nguyen Tuan, Head of PTSC Commercial Department |
“ Offshore wind power projects are a new field in Vietnam that is in great need of a pilot mechanism, therefore, PTSC recommends that the draft Law assigns the Government and the Prime Minister to decide on the development phases of the industry; criteria for selecting investors, decentralization of authority, procedures for approving policies; and pilot development of offshore wind power projects for domestic use and export,” commented Mr. Nguyen Tuan.
Another important recommendation mentioned by PTSC is to strengthen the role of Petrovietnam and its member units participating in the offshore wind power supply chain according to Conclusion 76/KL-BCT, presiding over the implementation of geological and geotechnical surveys, wind and hydrological measurements; encouraging Petrovietnam member enterprises to participate in the supply chain and develop offshore wind power projects, increasing the shareholding ratio of Petrovietnam/Petrovietnam member units in offshore wind power projects, and piloting exports.
Discussing the problems of offshore wind power , Dr. Du Van Toan, The Institute of Environmental, Marine and Island Sciences (Ministry of Natural Resources and Environment) said that offshore wind power has good potential in Vietnam, especially in the South Central region. Therefore, the registration of sea areas for survey and investment is "full".
According to Dr. Du Van Toan, there are currently 4 problems with offshore wind power projects as determined by the Ministry of Industry and Trade: It is unclear which authority has the authority to assign sea areas, permit or approve organizations to use sea areas to carry out measurement, monitoring, investigation, exploration, and survey activities to serve the establishment of offshore wind power projects.
The national marine spatial planning has not been approved, so there is no basis for implementing the VIII Power Plan. There are problems with the authority to approve investment policies. Conditions for market access for foreign investors in the offshore wind power sector. Mr. Toan acknowledged that the planning story needs the Electricity Law (amended) to soon review the licensing issue with measurement standards.
From that reality, Dr. Du Van Toan proposed a mechanism to serve the pilot project, recommending that the National Assembly issue a Resolution on piloting offshore wind power development, with a scale of 1000 MW - 2000 MW, and at the same time stipulating the time and price for implementation.
Regarding the area and location of the survey, Mr. Toan said that PTSC should propose to conduct a pilot project in the sea area of Quang Ninh or Binh Thuan - two areas with good wind, favorable for sea transportation and easy to mobilize partners. In addition, Mr. Toan also mentioned the pilot mechanisms for preliminary survey, time, area, capital, management - acceptance - evaluation process.
Electricity : legal procedures take too long
Another field identified by the draft Electricity Law (amended) as gradually becoming an important source of electricity supply is electricity.
As the unit implementing these projects, Mr. Nguyen Duy Giang, Deputy General Director of Vietnam Oil and Gas Power Corporation (PV Power) shared that the company has been preparing for the power projects for 8 years, of which the procedure process takes 2/3 of the time, showing that completing legal procedures takes up a lot of time.
Mr. Giang shared that during the implementation process, businesses encountered many major difficulties due to fluctuating raw material prices, so the price transfer mechanism played a necessary role. In addition, many power projects are currently unable to be implemented due to problems in the financial model, and lenders cannot identify the source of funds.
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| Mr. Nguyen Duy Giang, Deputy General Director of PV Power: Nhon Trach 3&4 project is one of the first projects in Vietnam to have a credit loan contract without a government guarantee. PV Power used shares of Nhon Trach 1&2 Power Plant and cash flow of Nhon Trach 1&2 as collateral for this first LNG power project in Vietnam. |
“Without a different perception of promoting the electricity trading mechanism, it is impossible to promote the development of LNG power projects. From the experience of the Nhon Trach 3 & 4 Gas Power Plant project, it is recommended that the Ministry of Industry and Trade have a practical view to draw lessons for future LNG projects. Propose a financial model for projects that must have a PPA power purchase agreement,” Mr. Nguyen Duy Giang suggested.
Speaking more about the problems of electricity, Mr. Dinh Duc Manh, PetroVietnam Gas Corporation (PV GAS) said that in the process of implementing the Power Plan VIII, investors in LNG power projects are implementing the direction of investing in separate LNG import terminals, dispersed according to the configuration of one factory and one terminal. This cannot optimize costs to reduce electricity prices, risks not being able to implement projects in time, affecting national energy security.
However, the draft Electricity Law (amended) does not have regulations on the construction of thermal power projects using LNG in chains linked to central LNG port warehouses. Recognizing that risk, PV GAS recommends considering specifying in the revised Electricity Law the mechanism for constructing thermal power projects using natural gas and LNG in chains linked to central liquefied gas port warehouses (LNG Hub) to take advantage of existing infrastructure and ensure state efficiency.
In addition, Mr. Manh also said that the draft Law does not have provisions for green energy projects of hydrogen and ammonia, making it impossible for investors to conduct research and invest in projects, leading to the risk of disrupting the Power Plan VIII. Therefore, PV GAS recommends developing a chain of projects to produce hydrogen and ammonia gas, gradually replacing natural gas in electricity production, taking advantage of the existing gas transportation and distribution infrastructure system.
Assessing the advantages of developing gas-fired electricity in Vietnam, but the current barriers are not small, Dr. Ngo Tri Long, an economic expert, recommended that gas-fired electricity prices - LNG need to follow market mechanisms, because the cost of importing LNG often accounts for a large proportion of the total cost of electricity production. If electricity prices are regulated administratively as they are now, they will not reflect the actual costs, leading to losses and supply shortages.
Mr. Long also said that long-term commitments are needed to help ensure a stable supply of LNG for electricity production. This is important in the context that LNG prices can fluctuate greatly over time and due to market factors.
In addition, the expert proposed expanding the subjects eligible for direct electricity trading, including gas and LNG electricity, creating competition, thereby promoting efficiency and reducing electricity prices for consumers.
Continue to contribute to completing the draft Electricity Law
Sympathizing with the recommendations of member units, Mr. Phan Tu Giang, Deputy General Director of Petrovietnam, said that to implement an average gas power project, it takes 7-8 years, and offshore wind power 7-10 years, so it is necessary to soon complete the mechanism, especially the investment attraction mechanism.
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| Mr. Phan Tu Giang, Deputy General Director of Petrovietnam: It is necessary to soon complete the mechanism, especially the investment attraction mechanism. |
“Cheap electricity sources have reached their limits, coal power cannot be developed further due to emission reduction commitments, at this time we must consider gas power and new energy sources. To do this, we need a transparent investment and operation mechanism, creating conditions to attract investors to participate in the electricity market. This is not only a problem for Petrovietnam but also a necessary condition for all businesses participating in the electricity market in general and new energy electricity in particular,” Mr. Phan Tu Giang suggested.
Receiving opinions at the seminar, Mr. Doan Ngoc Duong, Deputy Director of the Electricity Department (Ministry of Industry and Trade) highly appreciated the attention and research of the Vietnam Petroleum Association and member units of PVN.
The Draft Law has gone through its 5th update, and the process of handling, receiving, and screening many recommendations. However, in the development of electricity in particular and energy in general, there are still many problems.
“The drafting agency will make efforts to focus on handling arising issues and institutionalizing the major policies of the Party and State. For any content that is not mature and has not been summarized from practical experience, the drafting agency will apply general regulations and issue circulars and decrees guiding under the Law,” said Mr. Duong.
Regarding the proposal for the LNG Hub warehouse, Mr. Duong also said that the draft Law does not require supply sources, does not limit investors from investing in the port warehouse system themselves, but taking sources from other ports to optimize costs, reduce electricity prices, and create competitiveness will be encouraged.
In addition, the Ministry of Industry and Trade has reported to the Government recommendations on pilot mechanisms for other renewable energy projects in the spirit that any issues that do not have practical experience will be implemented according to the principle of comprehensiveness.
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