Hydropower, Thermoelectricity and Different Approaches

The water shortfall is threatening a power shortage in Vietnam. The Ministry of Industry and Trade has sent a report to the Prime Minister about problems in hydropower plant investment and blaming electricity shortage on some unreasonable investments.

These shortcomings are partially rooted in the assessment and approval of energy investment projects in Vietnam.

Unrealistic forecasts, real corollaries

Electricity of Vietnam (EVN) had forecast that Vietnam would not face power shortages in 2010, as 14 new plants with a combined capacity of 3,300 MW will be put into operation, bringing total capacity to over 18,400 MW.

To date, the total capacity of power plants is about 14,400 MW, of which a third comes from hydropower plants. Nonetheless, with unexpected drought, hydropower plants are running at just a third of capacity, causing a serious lack of electricity in the country.

Regarding energy investment, the power shortage cannot be blamed on authorities as we heavily rely on hydroelectricity. Vietnam focuses on developing hydropower plants because of its low investment cost and the suitability with natural conditions. Besides, investments in hydropower production have been implemented for decades.

In recent years, the Government has realized that it is necessary to reduce reliance on hydropower by developing other kinds of energy.

However, this new approach is not well understood by local authorities. Many small power facilities do not help solve power shortage problems, but may cause many negative consequences.

According to a report sent by the Central Region Electricity Corporation to EVN, although nine central region and highlands provinces have invested in hundreds of small and medium hydropower plants, they can only provide 1 million KWH per day. Unexpected weather and drought have also caused instability in this limited source. Most of the power consumed by the central region, about 16.2 million KWH per day, is still provided by EVN. Meanwhile, the central region is forecast to need a total of 21.2 million KWH per day.

The Ministry of Industry and Trade’s report on hydropower plants in nine key central provinces in March 2010 showed that hydropower plant projects were licensed too quickly and project efficiency was exaggerated in many cases. As a result, despite a large number of hydropower projects, power shortages still happen.

In light of low investment efficiency, doubts have been raised about the effectiveness of power projects with total capacity of 7,500 MW from nine central provinces. These include 226 blueprint projects and 120 other micro projects which have not yet found investors. That is why the Ministry of Industry and Trade has proposed cancelling 38 approved investment projects and another 35 unreasonable projects to avoid destabilizing the upcoming supply source.

Double thought

From another angle, other power sources like thermal and gas-fuelled projects can offset hydropower shortage. But, investments in other sources of energy have encountered numerous problems and the compensation for power supply shortage is uncertain.

Take thermal electric investment as example. In 2008, EVN decided to return 13 big thermal power projects to the Government, citing lack of capital and difficulties in purchasing coal. The state-owned utility could not find partners willing to sell coal under long term contracts, even showing strong financial capacity. Other investors, who planned to invest in power projects, also pitched the difficulty in importing coal.

Nevertheless, the Ministry of Industry and Trade recently said that Australia, the world’s fourth largest coal exporter, is ready to negotiate with Vietnamese enterprises to sell coal under long term contracts, even partnering with Vietnam to mine coal. In the coming time, Australia will increase coal exports and will promote investment in exploiting new coal mines with large reserves.

For that reason, the ministry said it was incorrect to blame the failure of thermal power investment on the coal source, although negotiations with foreign partners may take much time. The process of importing coal has begun after the ministry signed a memorandum of understanding on energy cooperation with the Australian Department of Resources, Energy and Tourism. Hence, according to the ministry, it is necessary to speed up implementation of thermal power plant projects.

In the process of approving projects, authorities should take investors’ motivations into consideration. For instance, several investors applied for a large thermo power centre in the southeast, while at the same time eyeing building coal importing ports.

Ports will bring quick benefits for investors and they may put power projects on the back burner, thus affecting investment calculation and energy security.

VCCI

Tags: Vietnam thermoelectricity, Vietnam energy, Vietnam power plants