Gas/LNG development is inevitable
The goal of developing gas-fired electricity in general and LNG in particular has been clearly defined as the base power source, ensuring stability and safety for the power system when renewable energy sources with unstable characteristics develop with an increasingly high proportion in the power structure; along with the policy of not continuing to develop coal-fired thermal power projects to meet the goals of green economy, emission reduction according to international commitments as well as global development trends. The development of gas-fired electricity for the power system is also a regular stage for countries around the world. It can be seen that developed countries in the region, Japan, Korea, Singapore mostly up to 100% of thermal power is from LNG and natural gas sources.
LNG plays an important role in ensuring national energy security
According to the National Power Development Plan for the 2021-2030 period with a vision to 2050 (Power Plan VIII), the proportion of gas-fired electricity in general and LNG electricity in particular will account for the highest proportion in the national power structure. Specifically, by 2030, gas-fired electricity and LNG will reach 37,330 MW, equivalent to 24.8% of the total power capacity, of which gas-fired thermal power will be 14,930 MW, accounting for 9.9% and LNG thermal power will be nearly 22,500 MW, accounting for 14.9%.
This is also consistent with the Politburo's orientation in Resolution 55/NQ-BCT with the orientation of Vietnam's National Energy Development Strategy to 2030, with a vision to 2045, emphasizing the need to develop the gas industry, prioritizing investment in technical infrastructure to serve the import and consumption of liquefied natural gas (LNG). The goal is to have sufficient capacity to import about 8 billion m3 of LNG by 2030 and 15 billion m3 by 2045.
Recently, in Notice No. 500/TB-VPCP concluding the Government Standing Committee at the meeting on the implementation of important projects of Vietnam Electricity Group and Vietnam Oil and Gas Group to ensure electricity supply and ensure energy security, the Government continued to direct the Ministry of Industry and Trade to study to convert the base electricity from coal power to gas power.
Why are gas/LNG power projects stagnant?
In recent times, the development of gas/LNG power plants in our country has been extremely difficult, most projects are behind schedule or "standing still" in the context of increasingly declining gas and electricity mobilization, affecting the efficiency of gas exploitation as well as the operation of power plants. Along with that, investment in new projects has encountered many obstacles in terms of mechanisms and policies, not ensuring efficiency, feasibility, and not attracting investment capital.
In the first 9 months of 2024, although the country's electricity consumption had a high growth rate, the mobilization of electricity decreased sharply in both proportion and absolute number compared to the same period last year. On average, in the first 9 months, the proportion of electricity mobilization in the country's power source was only 7.4%, compared to 10% in the same period in 2023.
Developing gas/LNG power plants in our country is currently very difficult.
The implementation of new gas/LNG power projects is facing difficulties due to the lack of government guarantees, difficulty in arranging capital, credit institutions requiring investors to have a long-term commitment to output (Qc) to be able to evaluate project efficiency; the negotiation process of the Power Purchase Agreement (PPA) is prolonged; therefore, it is not possible to negotiate a long-term Gas Purchase Agreement (GSA); mechanisms on gas prices, electricity prices, etc. are not available or are not met.
Meanwhile, for LNG power plants, LNG costs account for 75%-85% of the variable price component. LNG prices play an important role, the lack of a long-term Qc commitment leads to no basis for negotiating long-term gas purchase contracts, no price advantage as well as stable supply. According to calculations, the LNG purchase price under a long-term contract compared to a short-term contract can differ by up to 73% if the long-term purchase commitment is only 20%, compared to a long-term purchase commitment of 90%.
Mr. Raghav Mathur, Research and Analysis expert in the gas and LNG sector at the energy market research and consulting company Wood Mackenzie, said that Vietnam has only recently come into contact with the spot LNG market and has not signed any long-term LNG purchase contracts. Having to buy in the spot market poses more risks than long-term contracts, because there is no long-term protection against fluctuations in prices, supply, etc. Mr. Raghav Mathur said: "The difference between the price of electricity produced from LNG, electricity purchase contracts, and LNG power projects that have not made much progress have become significant obstacles to signing LNG contracts in Vietnam."
Gas/LNG electricity development ensures national energy security and benefits
Experts believe that to develop gas/LNG electricity, there needs to be priority mechanisms to mobilize maximum domestic natural gas power plants based on gas supply capacity and fuel constraints; mechanisms to ensure long-term minimum mobilization output for plants using imported LNG; mechanisms to transfer prices and gas output as input fuel, fully reflecting investment and production costs for gas power projects.
In fact, domestic electricity not only contributes to the power source structure , but also brings revenue to the country in the upstream (gas exploitation) and midstream (gas transportation) stages. In particular, according to a calculation by the Vietnam Oil and Gas Group, if domestic natural gas mobilized in 2024 reaches 90 - 100% of the expected gas exploitation volume, the state budget revenue from upstream gas will increase by 1.75 - 2.14 trillion VND/year. In case of additional Block B gas source from 2027, if the gas volume is fully mobilized according to the exploitation capacity, the state budget will collect about 24 trillion VND/year during the stabilization period. For each kWh of domestic electricity and gas, the state collects a total of about 45%/unit price of electricity. Therefore, in terms of overall national interests, there should be a policy to prioritize the use of electricity from domestic gas sources.
In terms of overall benefits, priority should be given to electrification development.
Regarding LNG power, Mr. Hoang Xuan Quoc - Energy Director of VinaCapital Group said that it is necessary to create a clear and strong legal corridor and mechanism to develop LNG power. In particular, it is necessary to determine the market principle for LNG (similar to imported gasoline or coal), LNG costs need to be fully reflected in the electricity price structure. In addition, to ensure energy security and safe grid operation, it is possible to consider regulations on some strategic LNG power plants that will be operated as baseload and not participate in the electricity market, similar to some current multi-purpose strategic hydropower plants (SMHP) (Hoa Binh, Son La, Tuyen Quang, ...).
Wood Mackenzie experts also suggested policy mechanisms such as: providing more incentives to increase competitiveness to attract investment, building an LNG import mechanism, perfecting the direct electricity trading mechanism, clarifying and having a mechanism to transfer gas prices into appropriate electricity prices to attract investment; considering having long-term LNG purchase and sale contracts to ensure uninterrupted supply in the face of fluctuations;...
Recently, the Government Standing Committee has also directed the Ministry of Industry and Trade, as Head of the Working Group to review legal problems in the implementation of power projects, to continue to preside over and coordinate with the Vietnam Oil and Gas Group and Vietnam Electricity Group in accordance with the direction of the Prime Minister in Decision No. 932/QD-TTg dated September 5, 2024, to urgently complete the draft Law on Electricity (amended) to resolve problems such as output commitments (Qc), gas price transfer, in the direction that the law only regulates major problems with many problems, while specific problems with many fluctuations need to be assigned to the Government to regulate such as electricity prices, technical standards, etc.
Gas/LNG power development has been identified as inevitable, playing an important role in ensuring national energy security, as well as supporting sustainable economic growth. Therefore, strong and timely policies are needed to promote development, meeting the set goals and strategies.
Mai Phuong
Source: https://www.pvn.vn/chuyen-muc/tap-doan/tin/4f6fcb00-d088-4e45-a19f-a1f43deea91f
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