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| Overview of the Forum on Realizing the Goal of LNG Power Development According to Power Plan VIII, on the afternoon of December 7 in Hanoi. (Photo: Nhu Trung) |
The forum is an opportunity for industry experts, businesses and investors to exchange, discuss and orient the development of LNG power in Vietnam; at the same time, make recommendations to resolve difficulties and problems arising, contributing to promoting LNG power in accordance with the proposed Power Plan VIII.
Vietnam has many opportunities and advantages for LNG electricity
Speaking at the Forum, Mr. Hoang Quang Phong, Vice President of VCCI, stated that Vietnam has many opportunities and advantages for developing LNG power. LNG power is also a solution to limit electricity dependence on coal-fired power plants. In particular, it helps the electricity industry develop "greener", contributing to implementing strong commitments at the COP26 conference.
However, besides opportunities, developing LNG power in Vietnam also has difficulties because our country has to completely import liquefied gas fuel, accounting for 70-80% of the cost of electricity production. The challenge is to build a suitable price mechanism that can adapt to changes in fuel prices while ensuring that it does not affect retail electricity prices.
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| Mr. Hoang Quang Phong, Vice President of VCCI, spoke at the Forum. (Photo: Nhu Trung) |
The Power Plan VIII aims to convert 18 GW of coal power by 2030 to replace it with 14 GW of LNG power and 12-15 GW of renewable energy sources. Thus, by 2030, 23,900 MW of gas power will be developed, equivalent to a proportion of more than 14.9% of the power source structure. LNG import demand will increase, reaching about 14-18 billion m3 by 2030 and about 13-16 billion m3 by 2045.
Developing LNG power contributes to ensuring a stable power supply for the system, minimizing greenhouse gas emissions affecting the environment; is a backup source when the proportion of renewable energy sources increases in the source structure, without interruption and dependence on nature such as wind power or solar power. LNG thermal power is also a solution to limit dependence on coal-fired thermal power plants, which account for a high proportion in the current system; in particular, helping the electricity industry develop greener, contributing to implementing the strong commitment at the COP26 Conference on net zero emissions by 2050.
Sharing the same view, senior expert on tax and corporate governance Nguyen Van Phung also said that the development of LNG electricity is currently facing major challenges such as complexity in technology, high technical requirements, large investment costs, production and business processes containing many risky stages and higher risk levels than traditional electricity projects, and high production costs.
There is currently no electricity price framework for LNG power plants, nor commitments on annual electricity purchase volume (due to the cost of LNG electricity being higher than other electricity sources), no commitment on annual gas output, no commitment on the project's transmission and power connection system, etc.
According to economist Ngo Tri Long, developing LNG power is considered a “green” solution in the sustainable energy transition in our country. However, the legal framework for LNG power projects in Vietnam has not yet been fully developed.
LNG imports must follow international LNG trading practices. Meanwhile, Vietnam currently does not have a set of technical standards related to the design, construction and operation of import infrastructure. LNG projects often require capital of up to billions of USD for the entire gas-power chain.
There are about 120 countries and territories in the world that have developed gas industry and gas market. Each country's gas market has its own characteristics depending on geographical and natural conditions, oil and gas resources and other minerals, scientific and technological achievements, economic - political - social system, viewpoints and development goals in each period.
"In recent years, most countries have aimed to develop a competitive gas market to achieve multiple goals of sustainable national economic development, green growth; energy security, safe gas supply and reasonable gas prices, maintaining sustainable growth in demand and investment in infrastructure," said Mr. Long.
Identifying the challenges, Mr. Long said that the current legal framework for LNG projects for electricity in Vietnam has not been fully developed. LNG imports must follow international LNG trading practices. Meanwhile, Vietnam does not have a set of technical standards related to the design, construction and operation of infrastructure serving imports.
The biggest challenge is negotiating the power purchase agreement (PPA). PPA negotiations must be carried out in accordance with regulations of the Ministry of Industry and Trade. Accordingly, investors will have to negotiate the purchase and sale of electricity with EVN based on the investment cost of the plant, gas price for power generation, allowable profit, etc.
Vietnam cannot take the initiative in LNG supply because it has to import 100% of this fuel. In the context of many changes in the world's geopolitics, LNG prices fluctuate erratically. Because it often accounts for 70-80% of the cost of electricity production, building a suitable price mechanism to adapt to changes in fuel prices without having too much impact on retail electricity prices is a huge challenge for Vietnam.
The issue of storage is also a big challenge. Currently, our country has only one warehouse built and put into operation in Ba Ria - Vung Tau. In addition, many LNG warehouses are in the planning stage nationwide.
Developing a competitive and efficient LNG market
Dr. Nguyen Quoc Thap, Chairman of the Vietnam Petroleum Association, said that to realize the goal of developing gas-fired thermal power according to the eighth power plan, it is necessary to promote the development of a competitive and effective LNG gas market.
Accordingly, it is necessary to expand and develop the LNG electricity consumption market in line with the LNG electricity supply target in the Power Plan VIII. That is, to build concentrated and synchronous industrial parks/factories with large enough electricity consumption scale along with the implementation of LNG port warehouse and power plant projects.
This is also a policy to help attract and encourage investors in various types of industrial parks/factories to commit to long-term electricity consumption along with a chain of power plants and LNG port warehouses. In addition, we need more policies to stimulate electricity demand, stimulate production and consumption in parallel with encouraging electricity saving.
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| The forum was attended by many experts in the industry. (Photo: Nhu Trung) |
At the same time, it is necessary to promptly amend the Electricity Law, the Environmental Protection Law and related guiding laws and decrees. First and foremost, it is necessary to accept that the LNG gas-electricity business chain operates according to market mechanisms and that state management agencies will monitor and post-audit all operations of the chain.
Next, allow gas-fired power plant owners to negotiate competitive electricity sales between EVN and electricity consumers. Strengthening and expanding international cooperation will create opportunities to build and perfect energy policy mechanisms in general and LNG electricity in particular; build and perfect investment management models for construction, operation, and optimal exploitation of LNG electricity; and select investors with potential in technology, finance, and implementation experience.
Regarding LNG electricity prices, according to economist Vu Dinh Anh, we do not have an electricity market yet, basically there is only freedom and competition in electricity generation. Electricity transmission currently depends on EVN. Our resources are soft resources. If we have not made or implemented the planning, it will be difficult to succeed.
Mr. Anh suggested: “Do whatever you want, there must be a market before talking about prices. At least from 2024, let's stop talking about policy mechanisms for implementation. 7 years is extremely fast. To properly implement the planning as desired, if the efforts are not determined correctly, it will become a very expensive lesson.”
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