To attract investment in the electricity industry to avoid the risk of power shortages in the future, experts recommend adjusting electricity prices according to the market and calculating costs correctly and fully.
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| The electricity industry finds it difficult to attract investment because current electricity prices do not follow market mechanisms (Arnh: D.T) |
Inconsistent electricity prices
Attracting investment in the electricity sector will be difficult if the shortcomings in electricity prices are not quickly adjusted in the direction of calculating correctly, fully and transparently the production costs to build a retail electricity price structure close to the market. This is the opinion of experts at a recent discussion on attracting investment in the electricity sector.
Price expert Nguyen Tien Thoa pointed out that it is very difficult for the electricity industry to attract investment because current electricity prices do not follow market mechanisms.
The evidence is that input costs such as oil, coal and gas prices have followed the market, but output electricity prices do not accurately reflect costs. Sometimes the adjustment takes too long, and sometimes the adjustment is not calculated correctly or fully, and does not ensure full compensation for the costs incurred in electricity production and trading.
“Input prices follow the market, but output prices are not market-based” is the reason why electricity production and business are more difficult than ever, Mr. Thoa said.
The electricity industry is facing a huge challenge in terms of capital for power source development. According to the Power Master Plan VIII, by 2030 this demand will be 119.8 billion USD, meaning that at least 11 - 12 billion USD/year of investment capital is needed.
This will cause a loss of up to VND47,500 billion for Vietnam Electricity (EVN) in 2022-2023, while also making it more difficult to reinvest in power sources and grids. In addition, electricity prices are also said to be shouldering multiple tasks.
Mr. Thoa analyzed: “We have to calculate correctly, calculate sufficiently, ensure cost compensation, but also encourage investment attraction, and then ensure social security, energy security, and control inflation. There are many goals, including conflicting goals.” Furthermore, the cross-subsidy mechanism for electricity prices has lasted for many years, but there is no solution yet.
That is the cross-subsidy in the ladder of household electricity consumption groups; cross-subsidy between household and production prices, cross-subsidy between regions. Therefore, electricity prices do not ensure the correct principles of market prices, and do not encourage economic sectors to participate in investment.
Further analyzing the consequences when electricity prices are not calculated correctly and fully, Associate Professor, Dr. Bui Xuan Hoi, an energy economist, said that in 2023, a very typical story is the forced power outage when the supply is not enough, negatively affecting production and business activities, the investment environment, and people's lives.
According to Mr. Hoi, the lack of electricity and the need to stop the supply of electricity is a huge loss that the economy must bear, because electricity is an input, a special essential commodity, an input of inputs. "The economy shifts from agriculture to industry, without that input it cannot operate. And if the economy does not operate, there will be no growth," Mr. Hoi analyzed.
Fear of lack of investment capital and risk of power shortage
According to experts' analysis, if electricity prices continue to be managed in a multi-purpose manner as they are now, and retail prices have not fully calculated all costs, EVN will lose money, and EVN is a state-owned enterprise, which means the State will lose capital.
On the contrary, if the capital cost is calculated correctly and fully into the selling price, the State will have profit and resources for EVN to reinvest in expansion.
Once there is no profit, there is no reinvestment in expansion and it certainly affects power generation and grid investment.
At the question-and-answer session at the National Assembly Standing Committee on the morning of August 21, Minister of Industry and Trade Nguyen Hong Dien admitted that at times, the difference between EVN's input costs and selling prices was up to 208-216 VND/kWh.
Worrying further, Associate Professor, Dr. Bui Xuan Hoi analyzed: “If EVN’s financial situation is at a loss and it cannot invest, there is a risk of power shortages. At the same time, when EVN suffers too many losses and loses its ability to pay, other businesses participating in selling electricity to EVN will certainly be affected, creating a domino effect, leading to more difficulties in attracting investment in the electricity industry.”
According to the Power Master Plan VIII, by 2030, the investment demand is 119.8 billion USD, which means 11 - 12 billion USD/year is needed. Meanwhile, EVN's ability to arrange capital is very limited because there is no longer a government guarantee mechanism, accessing ODA capital requires basic commitments, and commercial loans require proving project efficiency, so it will not be easy to mobilize capital.
Mr. Phan Duc Hieu, Standing Member of the National Assembly's Economic Committee, said that the slow change in electricity price mechanism and electricity price management mechanism is a reality that makes it difficult to attract investment. According to him, unreasonable input and output prices make it difficult to operate, therefore, comprehensive and synchronous policy reform is required.
Regarding the structure of the electricity industry, which includes both state-owned and private enterprises, the financial mechanism needs to be transparent, clarifying what is social subsidy, what is price compensation, what is business...
“The key to competition in all activities and stages of electricity, in selling electricity and calculating prices, is to increase competitiveness and market nature. For example, when input prices fluctuate, output prices can be adjusted. If there are fluctuations that we cannot control, leaving them open for 6 months to 1 year to operate, that is not the market,” said Mr. Phan Duc Hieu.
Therefore, experts recommend that the Prime Minister continue to be determined in improving the structure of retail electricity prices, because it is impossible to let an important document on electricity price management applied since 2014 remain unchanged.
At the same time, the price structure and price management mechanism should be legalized at a higher level. Currently, gasoline is regulated once a week, electricity may not be able to do the same, but it can be regulated at the legal level to be adjusted every 3 months, then electricity prices will be basically more stable.
Above all, if electricity prices are not calculated correctly and sufficiently, the electricity industry and electricity enterprises are at risk of cash flow imbalance, have no motivation to develop additional power sources, leading to the risk of power shortages in the future.
Source: https://baodautu.vn/ly-do-khien-nganh-dien-kho-thu-hut-dau-tu-d223015.html
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