Vietnam: Vietnam Energy Profile

Vietnam officially the Socialist Republic of Vietnam (Cộng hòa Xã hội chủ nghĩa Việt Nam), is the easternmost country on the Indochina Peninsula in Southeast Asia. With an estimated 90.3 million inhabitants as of 2012, it is the world's 13th-most-populous country, and the eighth-most-populous Asian country. The name Vietnam translates as "South Viet", and was officially adopted in 1945. The country is bordered by China to the north, Laos to the northwest, Cambodia to the southwest, and the South China Sea to the east. Its capital city has been Hanoi since the reunification of North and South Vietnam in 1976.

The Vietnamese became independent from Imperial China in 938 AD, following the Battle of Bạch Đằng River. Successive Vietnamese royal dynasties flourished as the nation expanded geographically and politically into Southeast Asia, until the Indochina Peninsula was colonized by the French in the mid-19th century. The First Indochina War eventually led to the expulsion of the French in 1954, leaving Vietnam divided politically into two states, North and South Vietnam. Conflict between the two sides intensified, with heavy foreign intervention, during the Vietnam War, which ended with a North Vietnamese victory in 1975. Vietnam was then unified under a Communist government, but was politically isolated and impoverished.

In 1986, the government initiated a series of economic and political reforms, which began Vietnam's path towards integration into the world economy. By 2000, it had established diplomatic relations with most nations. Vietnam's economic growth has been among the highest in the world since 2000, and in 2011 it had the highest Global Growth Generators Index among 11 major economies. Its successful economic reforms resulted in it joining the World Trade Organization in 2007. However, the country still suffers from relatively high levels of income inequality, disparities in healthcare provision, and poor gender equality.

Energy sources

Total installed electricity capacity (2009): 18,481 MW; of that total, 69% was managed by Viet Nam Electric Power Group (EVN) and 29% was managed by others. In addition, more than 4100 GWh was imported from China.
 

• Total primary energy supply (2009): 39,600 ktoe
• Combustible Renewables and Waste: 41.7%
• Oil: 43%
• Coal: 32%
• Natural gas: 18%
• Other: 7%
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Energy contributes greatly to Viet Nam’s economic development, supporting industrial growth and generating foreign revenue from exports. Viet Nam is relatively rich in diverse fossil energy resources, such as oil, gas and coal, as well as renewable energy such as hydro, biomass, solar and geothermal. In 2009 Viet Nam’s proven energy reserves consisted of 615 million tonnes (Mt) of oil, 600 billion cubic metres (bcm) of gas, 5883 Mt of coal, and a hydropower potential of 20,000 MW. Natural gas and crude oil are found mainly offshore in the southern region, while coal reserves (mainly anthracite) are in the northern region. Since 1990, Viet Nam has become a net energy exporter; its main energy exports are crude oil and coal.

Vietnam’s coal production increased steadily from 4.6 Mt in 1990 to 39.8 Mt in 2007, matched by the growth in exports and domestic demand. In 2007, the country exported 22.2 Mt of coal, a record amount. Nearly 56% of coal production in 2007 was exported to China, Japan, Korea, Chinese Taipei, Thailand, France and other economies. Primary coal supply increased by 12% per year from 2000 to 2007, from 4,372 ktoe to 9,681 ktoe, before a 21.5% rise to 11,767 ktoe in 2008. In 2007, coal used for power generation accounted for 14% of total coal consumption. Viet Nam’s gas reserves are more promising than its oil reserves. In 2005, the latest year for which figures are available, proven gas reserves were estimated at 600 bcm, although that figure is likely to increase as more oil and gas are discovered. Gas resources are found in many parts of Viet Nam, but large gas reserves are almost all found in offshore basins.

Electricity generation increased at an average annual rate of 13% between 2000 and 2009, from 26,562 GWh in 2000 to 83,161 GWh in 2009.    

Low-income households in rural areas rely primarily on biomass, which consists of wood and agricultural waste, for cooking. In Vietnam, biomass accounted for less than 30% of TPES in 2007; the share of biomass has decreased significantly since 1995, when it was 70% of TPES.

Reliance

Vietnam is a net energy exporter. Previously, due to a lack of indigenous refining capacity, all crude oil production was exported. The economy imports most of its petroleum products, but the Dung Quat refinery in Quang Nam province (capacity 150,000 b/d) has been in operation since February 2009, providing around 6.5 Mt of petroleum products annually for domestic consumption. Oil product imports increased from 8882 ktoe in 2000 to 14 805 ktoe in 2009 at an average annual growth rate of 9.2%. Oil is still the most important energy source in Vietnam, accounting for 43% of the economy’s primary supply in 2009, compared to 41% in 2008.  At present, Vietnam supplies electricity to the Lao PDR and Cambodia by medium voltage lines, and purchases electricity from China through 110 kV and 220 kV lines.

Vietnam has seen by far the strongest increase in electricity demand. From an energy security perspective, Vietnam’s import dependency actually decreased, while its electricity generation increased by a factor of 8 from 1990 to 2009. These changes are due to two facts: the development of the country’s gas resources (generation up from 6 GWh in 1990 to 36141 GWh in 2009) and its hydro resources (up from 5369 GWh in 1990 to 29981 GWh). Vietnam relied on domestic resources to decrease dependence and chose hydro as a cost‐competitive option to do so along with gas. With RE technologies moving further down their learning curves, Vietnam can also be expected to develop its currently untapped non‐hydro resources.

Extend network

At the end of June 2005, the National Power Grid has reached all provinces, connecting 95% of communes and 89% of households in rural areas.  About 73% of the economy’s 85 million people live in rural areas, and 6% of households in those regions have no access to electricity. In total, 97.6% of the population have access to electricity, leaving 2.1 million people without electricity service. The state power company, Electricité du Vietnam (EVN) plans to develop a national electricity grid by 2020, by inter-connecting several regional grids. The distribution infrastructure his been poorly maintained, but has benefited from recent improvements. A North-South power cable transmits electricity from Vietnam’s largest generator, the Hoa Binh hydropower plant in the North, to large population centres in the South, helping to alleviate electricity shortages in Ho Chi Minh City. The total distribution network of EVN extends 19,396 km. Transmission occurs at 500 kV, 220 kV and 110 kV, with a 35/22 kV medium-voltage distribution network.

Capacity concerns

Vietnam is diversifying its energy consumption by developing regional indigenous resources and expanding regional cooperation. The country hopes to minimise its dependence on oil, and places priority on ensuring that energy supplies meet the needs of a growing population, and support socio-economic development. In addition, diversification will reduce the threat posed by drought to hydro-electric power generation. Beyond 2015, Vietnam expects a transformation from being a net energy exporting economy to being a net importing economy.

The economy needs to overcome many challenges to ensure energy security: oil products will still have to be imported, although Vietnam’s first oil refinery was completed in 2009; the economy currently has no strategic oil stockpiling; the power sector is in the early stages of reform; electricity shortages still occur; and power systems operate without adequate reserves. Capacity shortfall at peak demand times is estimated to be 1,500 – 2,000 MW. Investment in energy development, especially in electricity generation, is currently insufficient to meet rapid demand growth. It is estimated that energy demand will be 110-120 million toe by 2025, and 310-320 million toe by 2050.

Renewable energy

Hydropower
Vietnam has 2,400 rivers of 10 km or longer, indicating high potential for small- and large-scale hydro-electric power generation. The economic hydropower potential is estimated at 84 TWh/yr, which is in excess of the total electricity consumption of 67.9 TWh in 2008. Vietnam currently has five hydroelectric expansions under-way. The country’s Son La project, which began construction in late 2005, is anticipated to have a generating capacity of 2,400 MW by 2012, and will be the largest hydroelectric project in Vietnam, producing almost 10 billion kWh each year.  Vietnam also plans to build three additional plants in the near future. In 2008, about one-third of generating capacity came from hydroelectric power (second after oil and gas). The potential generating capacity from hydropower in Vietnam is estimated to be around 800-1,400 MW.

Vietnam’s economic potential for pumped storage hydro-electricity is over 10,000 MW. These resources are mainly located in the northern and southern areas. About 1050 potential sites for small sized hydropower, ranging from 0.1 to less than 30 MW, have been identified with a total capacity of 4,044.5 MW, equivalent to 16.7 million GWh/year. More than 200 plants have been realized and 800 more are planned. Provinces with strong potential are Son La (95 projects), Kontum (80 projects) and Lao Cai (80 projects).

Geothermal energy
With more than 300 hot streams from 30 °C to 148 °C, Vietnam is estimated to have 1,400 MW of suitable geothermal potential, for direct use and producing electricity. From this potential, 400 MW of could be developed for producing electricity by 2020. Several potential sites have been identified, with plant capacities ranging from 20 to 50 MW.

Biomass energy
Biomass resources that could be used for generating electricity include rice husks, paddy straw, bagasse (sugar cane, coffee husk, and coconut shell), and wood and plant residues, with an annual output of approximately 93 Mt, and an estimated potential of 1000-1600 MW. In addition, it is estimated that 25,000 household biogas digesters have been installed in the country since the 1960s. The livestock population is estimated at 30 million, although the lack of industrial-scale poultry or pig farming makes large-scale biogas production difficult. Despite this, biogas energy potential in Vietnam is estimated at 6.4 Mtoe/year.  Rice husking plants in the Mekong Delta region could fuel a power station with a capacity of 70 MW, and waste materials from sugar cane could produce 250 MW. So far only 3 from 43 sugar plants supply surplus electricity to the power grid - about 50 MW in total. In 2005, the first 750 kW waste-to-power project was completed (US$16m, 60% funded by the Netherlands). Two additional turbines were commissioned in 2006, with the potential to generate about 250-400 MW in total. Municipal solid waste is also another potential source of energy for the country, with the Go Cat power station rated at 15.5 GWh for electricity production from solid wastes.

Solar energy
Vietnam lies from 23° to 8° North latitude, and has good constant solar sources, with roughly 2,000-2,500 hours of sunshine per year on average, with some regions receiving 5,000 sunshine hours per year. In the southern and central areas, solar radiation levels range from 4 to 5.9 kWh/m2/day, uniformly distributed throughout the year. The solar energy in the north is estimated to vary from 2.4 to 5.6 kWh/m2/day. Solar PV systems are currently installed in off-grid applications, e.g. telecommunications and rural health services. At present, the total installed capacity of solar photovoltaic systems in Vietnam is estimated at 1.5 MW, distributed evenly between rural consumers, telecommunications and marine communications facilities, with about 5,000 sites around the country using some form of solar power. The potential generating capacity of the off-grid solar photovoltaic systems is estimated at around 2 MW.

Wind energy
With a coastline of 3,000 km, and average wind speeds of 5.6 m/s in coastal regions, and up to 8 m/s on certain islands, the potential for wind power generation is high. Wind density varies by area: estimated values of 800-1,400 kWh/m2/year on islands and of 500-1,000 kWh/m2/year in the Central Highlands, coastal areas of Central Vietnam and the Mekong Delta are considered feasible. Total potential of wind energy in Vietnam is estimated at 713,000 MW of which 510,000 MW on land and 200,000 MW on islands. Excluding restrictions on the exploitation of the potential, 120.5 GW of wind power capacity, about 10 times the peak load demand in 2005, is estimated as being economically feasible for producing electricity. Around 10 sites are currently being investigated for large wind-power generation, however, no preferential pricing scheme is given to the technology by EVN, as is the case with biomass or hydropower technologies, and hence the development of the resource is at a disadvantage. Wind Power Plant no1 in the southern coastal province of Binh Thuan is one of the large projects hosted by Vietnam, and was the first wind turbine plant project in South-East Asia. Two other wind power plants in Binh Thuan were scheduled to be completed in 2010, and will have a combined capacity of 75MW. However, the overlapping nature of potential wind power sites with previously-granted titanium mining concessions has delayed further development. In April 2010, the Government approved the development by EVN of a pilot wind power project, with a capacity of 30MW, in the central coastal province of Ninh Thuan.

Energy efficiency

Total primary energy supply increased by 7.5% from 2006 to 2007, and the current trend in economic growth is expected to bring increased demands for electricity. Losses in transmission and distribution totalled 7,362 GWh in 2008, or approximately 10%. The Decree on Energy Saving and the Efficient Use of Energy (102/2003/ND-CP) of 2003 institutes a number of measures to improve efficiency, particularly that of large consumers of energy. These measures include mandatory annual energy reports from consumers of 1,000 toe or 3 million kWh of electricity, as well improved energy efficiency incentives, and improved labelling standards for appliances. The largest consumer of energy by sector in 2008 was the residential sector, contributing 58% to the total final energy consumption, followed by the industrial (23.5%), transport (16.1%) and commercial (3.0%) sectors. The residential sector is responsible for the entirety of end-use biomass consumption in the country also.

The residential energy efficiency programme, from 2004-2006, through the second phase of the Demand-Side Management (DSM) programme by EVN and its subsidiary companies, was expected to achieve a 120MW reduction in the peak demand over three years.  One of the major activities conducted by EVN in the second phase of its DSM programme was to promote the sale of 1 million Compact Fluorescent Lamps (CFLs) to households located in high-load areas. The recently proposed Law on Energy Conservation and Efficient Use aims to act as the establishing legislation for a new wave of energy efficiency measures in Vietnam. A number of target sectors have been identified, with aid from the World Bank Asia Sustainable Technology and Alternative Energy (ASTAE) program, including the electric power industry, industrial fuel use, petroleum use in transport, and residential/commercial electricity use.

Industry

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• Capacity-building for energy auditing, as well as subsidies for involved costs.
• Proposals for mandatory EE&C management measures.
• Energy intensity benchmarking proposals.
• Support industrial enterprises with EE projects.

Utilities

• Proposals to reduce T&D losses, and improve supply-side efficiency.
• Currently-implemented and proposed DSM measures, including direct load control, load-shaping and more.

Transport

• Proposals for optimal use of transport facilities, minimising the amount of fuel consumed. Diesel use in the transport fleet is also to be encouraged.

Residential

• Minimum energy performance standards for appliances via MOIT, including 3 primarily. A/C, refrigerators, and electrical fans.
• Labelling projects for: T8 FTL, T5 FTL and electronic ballasts.  
• CFL and FTL lighting adoption.
• Provision of solar water heaters for the sector.
• Comprehensive EE building codes.

Public

• EE&C advocacy measures in schools, hospitals et al, including the adoption of efficient lighting and equipment.
• Efficient public lighting projects, funded by the GEF, with estimated annual CO2 reductions of 99,000 tons.
• Education and dissemination programmes: schools and public awareness.
   

Ownership

Electricity market
Electricité du Vietnam (EVN, www.evn.com.vn) is a state-owned utility founded in 1995. In 2009, 68% of power generation was operated by the company. The group is engaged in the generation, transmission and distribution of electricity for the whole of Vietnam. EVN is responsible for electricity supply to support economic development, and to provide power to meet the needs of the people. EVN also has the key responsibility of ensuring investments in power generation and network expansion to meet power demand in the economy. Apart from EVN, other companies are also responsible for many aspects of the market, supplemented by the Build–Operate–Transfer and independent power producer (IPP) schemes run in partnership with private investors. In 2009, 32% (~5,400 MW) of the power supply system in Vietnam was owned by companies other than EVN. The National Load Dispatch Centre, fourteen main power plants, four transmission companies, and the Institute of Energy operate as dependent accounting units under EVN.

Oil and gas market
The Prime Minister approved a scheme to form the Vietnam National Oil and Gas Group (PVN, www.pvn.vn) in August 2006 by reorganising the core business and its subsidiary units. PVN has multiple owners, but the government holds the dominant share. The restructured PVN will comprise four businesses, which will hold 100% of the assets: the Petroleum Exploration and Production Corporation, the Gas Corporation, the Electricity Production and Trading Corporation (established when PVN power plant investments come into operation), and the Oil Refining and Petrochemical Corporation (to be established when the group’s refining and petrochemical plants come into operation). PVN also includes joint stock companies, joint venture enterprises, scientific and technological enterprises.

Competition

EVN is an entirely state-owned and vertically-integrated company. PVN has a wide range of public and private owners, with the government holding the dominant share. PVN is also a vertically-integrated company.

In accordance with the Strategy for Electricity Sector Development approved by the government in October 2004, Vietnam is implementing a policy to gradually establish a competitive power pool, to diversify investment and trading, and to stimulate the participation of several economic sectors. The state maintains a monopoly on transmission and the operation of large-scale hydropower and nuclear power plants. The Electricity Law, approved by the Vietnam National Assembly, came into effect in July 2005. The law outlines the major principles for the establishment of the power market in Vietnam.

Prime Ministerial Decision 26/2006/QD-TTg (January 2006) establishes the development of a competitive electricity market that attracts investment from foreign and domestic companies. Under this legislation, Vietnam’s power market will be established and developed through three levels:

• Level 1 (2005–2014): an end to subsidised prices and generation monopoly. Generation companies compete to sell electricity to EVN.
• Level 2 (2015–2022): the establishment of a competitive wholesale power market. Competition in generation is intensified, power companies and large customers participating in the market have a choice of whom to buy power from.
• Level 3 (after 2022): the realisation of a competitive electricity retail market. Retail distribution companies compete to sell power, and all customers will have a choice of whom to buy power from.

As of 2011, reform of the power sector has not occurred outside of the successful establishment of IPP involvement in generation, predominantly due to EVN’s development of its current conglomerate model. The 2007 proposal by EVN to establish a Power Trading Company, owned in majority by EVN, to act as a single-buyer whilst keeping the structure of the company intact, was eventually rejected by the government on grounds of conflict of interest, which has lead to further delays in the reform of the power sector.

Energy framework

The National Energy Development Strategy for the period up to 2020, with an outlook to 2050, was approved by the Prime Minister on 27th December 2008 (Decision No. 1855/QD-TTg). The strategy set  the following targets:

• Ensuring sufficient supply of energy to meet the demands of socio-economic development, in which primary energy is expected to reach 47.5–47.9 Mtoe in 2010, 100–110 Mtoe in 2020 and 310–320 Mtoe in 2050;
• Developing power plants and power networks, ensuring sufficient supply of electricity for socio-economic development, and ensuring the 99.7% reliability of electricity supply in 2010;
• Ensuring the phased development of refineries to meet domestic demand for petroleum products, and increasing the capacity of refineries to roughly 25–30 Mt of crude oil in 2020;
• Ensuring strategic oil stockpiling adequate for 45 days in 2010, 60 days in 2020 and 90 days in 2025;
• Achieving a share of renewable energy in the total commercial primary energy supply of 3% in 2010, 5% in 2025 and 11% in 2050;
• Completing the energy program for rural and mountainous areas, and increasing the proportion of rural households using commercial energy to 50% in 2010 and 80% in 2020 (by 2010, 95% of rural households will have access to electricity)
• Changing the electricity, coal and oil–gas sectors to operate in competitive markets with state regulation; establishing a competitive electricity retail market after 2022; in addition to establishing a coal and petroleum product business market by 2015;
• Actively preparing the conditions for putting the first unit of a nuclear power plant into operation in 2020, and then increasing the contribution of nuclear power to the economy’s energy structure (by 2050, nuclear electricity will account for about 15%–20% of total commercial energy consumption).

Incentives for Renewable Energy
Vietnam has not established a feed-in tariff for renewable energies., but the Avoided Cost Tariff (ACT) Regulation provides incentives for renewable energy developers. The “Avoided Cost Tariff” is defined as; “the electricity tariff calculated by avoided costs of the national power grid when 1 kWh is generated to the distribution power grid from a small renewable energy power plant”, with the “avoided cost” defined as; “the production cost per 1 kWh of the most expensive power generating unit in the national power grid, which would be avoided if the buyer purchases 1 kWh of electricity from a substitute small renewable energy power plant”.

From 1st January 2009 until 31st December 2009, the grid-connected renewable energy power plants which met certain criteria were eligible for the Avoided Cost Tariff. A project which is eligible for the Avoided Cost Tariff must have installed capacity of not more than 30 MW, and all electricity must be generated from renewable energy. In addition, the renewable energy project must employ the standardised power purchase agreement, in a form issued by the Ministry of Industry and Trade pursuant to the SPA Regulation, for the sale of electricity.

The Vietnam National Energy Efficiency Program (VNEEP) was established in 2006, and aims to institute measures for improving energy efficiency and conservation in all sectors of the Vietnamese economy. In light of the Law on Energy Efficiency and Conservation 2010, Phase II (2011-2015) of the program is currently underway, and aims to achieve energy savings of 5-8% on total final energy consumption through a wide variety of measures, including the promotion of energy-efficient appliances and industrial equipment, a comprehensive review of building energy codes, efficient public and private lighting initiatives, capacity-building and information dissemination, and many more.

Energy debates

To lessen dependency on oil imports and to ensure energy security, Vietnam is implementing the following policies:

• Strengthen domestic energy supply capacity through legislative reforms and the expansion of infrastructure;
• Apply preferential policies for financing and widen international cooperation to strengthen the exploration and development of indigenous resources, thereby increasing reserves and the usable potential of oil, gas, coal and new and renewable energy;
• Strengthen the exploitation and use of domestic energy resources to reduce dependence on imported energy, which is prone to price volatility, especially petroleum;
• Improve EE, reduce energy losses, and implement extensive measures for the conservation of energy;
• Support Vietnam’s oil company to invest in the exploration and development of oil and gas resources overseas;
• Intensify regional and international energy cooperation and diversify energy import sources;
• Develop clean fuels, especially nuclear and new and renewable energies.

The Prime Minister of Vietnam approved the National Power Development Plan for the 2011-2020 period with the vision to 2030 (the "Power Master Plan VII") on 21 July 2011 under his Decision No. 1208/QD-TTg. The Power Master Plan VII puts strong emphasis on energy security, energy efficiency, renewable energy development and power market liberalisation. It also aims to address various problems encountered during the implementation of the previous Power Master Plan VI.

In a statement to the Energy Working Group in November 2010, Viet Nam highlighted these achievements in the area of energy efficiency in the economy:

•      Approval of a law on energy efficiency and conservation by the National Assembly (in June 2010).
•      Creation of a standard for energy efficiency for electrical equipment including refrigerators, air conditioners, electrical cookers, street lights, and six sets of energy efficiency standards and testing procedures for household appliances (Center for Vietnamese Standard).
•      Survey of energy consumption in 500 key enterprises.

In order to bring the law on energy efficiency and conservation into efficient and easy implementation, the government of Viet Nam is issuing related legal documents, including the Decree on Detail Regulations and Measures for Implementation of the Law (released in March 2011), the Road map for Labelling Energy Equipment, and the Decree on Public Lighting Management.
 

Energy studies

In the power sector, the governments of Vietnam and the Laos People’s Democratic Republic have signed an agreement on energy cooperation. Under this accord, Vietnam will import about 2,000 MW of electricity from Laos. The governments of Vietnam and Cambodia have also signed an agreement on energy cooperation, through which Vietnam supplied 80–200 MW of electricity to Cambodia via a 220 kV transmission line in 2008 and 2009. When Cambodia builds hydropower plants and starts participating in the regional electricity market, Vietnam will in turn purchase electricity from Cambodia. Vietnam joined the Inter-Governmental Agreement on Regional Power Trade in the Greater Mekong Sub-Region, which was signed by all six regional economies in November 2002. In addition, the country is a member of the Association of South-east Asian Nations (ASEAN), an organisation that promotes regional integration and initiatives to integrate the power sectors of member states, and so promote economic development and improve living standards in member countries. Vietnam has also benefited extensively from the World Bank’s Asian Sustainable Technology and Alternative Energy (ASTAE) program, as well as through direct co-operation, such as the Clean Production and Energy Efficiency Project, which aims to strengthen capacity for the implementation of the VNEEP.

Finally, the EASE (Enabling Access to Sustainable Energy) project, in partnership with the Institute of Environment and Sustainable Development (IESD) and CSTM Technology and Sustainable Development (University of Twente, Netherlands) is conducting a study into biogas impact assessment in the country.

Role of government

The Ministry of Industry and Trade (MOIT, www.moit.gov.vn) was formed after the merger of the Ministry of Industry and the Ministry of Trade. The MOIT is in charge of activities related to the energy sector and other industries, in accordance with Decree 189/2007/ND-CP issued by the Prime Minister on 27 December 2007.

The MOIT is responsible for management of all energy industries, including electricity, new and renewable energies, coal, oil and gas industries. It is in charge of the formulation of law, policies, development strategies, master plans and annual plans for those sectors, and submits them to the Prime Minister for approval. The Ministry is also responsible for directing and supervising the development of the energy sector, and reporting its findings to the Prime Minister.

Inside the MOIT, the Energy Department administers the Vietnam Electric Power Group (EVN), the Vietnam National Coal and Mineral Industries Group (Vinacomin) and the Vietnam Oil and Gas Group (PVN). Many other ministries also have responsibilities relating to energy. The Ministry of Planning and Investment (MPI, www.mpi.gov.vn) sets the Socio-economic Development Strategy and Plan, coordinates the distribution of economy-wide capital investment among projects submitted by ministries and agencies, and distributes foreign direct investment. The Ministry of Finance (MOF, www.mof.gov.vn) has jurisdiction over tariffs and taxation related to energy activities.  The Ministry of National Resources and Environment (MONRE, www.monre.gov.vn) plays a key role in research and development in energy and environmental protection. 

Government agencies

Key organisations studying or developing RE are EVN and the Institute of Energy.  EVN, the Institute of Energy and some other organisations are responsible for studies and the implementation of policies relating to sustainable energy. The Institute, in particular, takes positive actions for RE, such as establishing the Centre for Renewable Energy and Clean Development Mechanisms in 2007, and conducting the Master Plan on Renewable Energy in Vietnam.

Energy procedure

The United Nations Development Programme (UNDP) and the Vietnam Ministry of Science and Technology have been implementing a project to raise the effectiveness of energy use in small and medium enterprises (SMEs). The project is funded by the Global Environmental Fund through the UNDP. From 2006 to 2010, US$29 million was spent on 500 SMEs operating in clean production, ceramics, weaving, paper and pulp manufacture, and food processing. The project includes six sub-programs: supporting policy and institutional development; improving communications and awareness; building technical capability; supporting providers of energy-saving services; providing financial assistance; and providing guidance in using energy economically and effectively. It was estimated that the project would save 136,000 tonnes of fuel oil and reduce CO2 emissions by 962,000 tonnes by 2009.

The Promotion on Energy Efficiency and Conservation Project, funded by Japan, began in 2000 and is continuing through 2010. This project is jointly implemented by the ASEAN Centre for Energy, ASEAN economies and the Energy Conservation Centre, Japan. The project has focused on the building, industry, energy management and transport sectors.

EVN will spend VND3.1 trillion (about US$194.7 million) to build 37 small-scale hydro-electric power stations in the northern provinces bordering China. Of those, 10 to 13 stations with a maximum capacity of 5 MW each were built from 2007 to 2010, in the border districts of Lai Chau, Lao Cai, Ha Giang and Lang Son provinces.

Some recent wind-power developments include 15 kW solar PV – wind power hybrid systems in one of the smaller villages in the country. The project was implemented by the Institute of Energy with a grant from Tohoku Electric Company of Japan. Another project, for an 800 kW wind power generator in Bach Long Island, is financed completely by the government of Vietnam. Future wind energy developments, with a total installed capacity of 150 MW, include the Ly Son Island project (2 MW), the Phuong Mai wind farm in Binh Dinh Province (15 MW), a wind power project in Phuong Mai (84 MW), a wind farm in Phu Yen Province (15 MW), a wind farm in Binh Thuan province (30 MW), and the Con Dao Island project (2.5 MW). 

The Road Map for Electricity Market Establishment and Development in Vietnam, recently approved by the Prime Minister, envisaged the corporate restructuring of EVN to initiate the first stage of the competitive power market.

The National Renewable Energy Development Plan is set for the 2010-2015 period, with a “vision” for further development until 2025. The Power Development Plan (PDP) in general, and Master Plan VII in particular, the latest plans for the national electricity development for 2011-2015 with the vision to 2025, are the two plans at the national level. Under the PDP, investors who contribute to small-scale hydropower projects, wind energy, solar energy, geothermal energy, biomass and biofuels will receive government support. Six key directions were set out, including the integration of power system development with wider socio-economic development, and improving the quality of electricity services whilst adjusting tariffs to create market incentives for the further development of the power sector. In addition to developments in generation capacity planned for the milestone years of 2020 and 2030, the State will make further investment in the national power transmission grids to bring their development in line with the national and local power development plans. The State will also carry out further research into the use of higher-voltage (750 kV, 1000 kV) transmission lines, and the use of HVDC technology. The State will also implement cooperation programs with other countries in the ASEAN such as Laos, Cambodia and China and the Greater Mekong Subregion for inter-connection of Vietnam's power networks with the respective countries via power transmission networks at voltage levels of 110-220- 500 kV.

Supported by the World Bank, the development objective of the Clean Production and Energy Efficiency Project (2011-2016) is to strengthen the capacity of the socialist Republic of Vietnam and other key stakeholders for the effective delivery of the national energy efficiency program in key industrial sectors, thereby improving energy efficiency and reducing associated greenhouse gas emissions. There are three components to the project. The first component of the project is energy efficiency action plans for key industrial sectors. This component will provide technical assistance for the activities such as: formulation of energy efficiency strategies and action plans for energy-intensive and high growth industrial sectors; and establishment and implementation of voluntary agreements with pilot enterprises in such sectors. The second component of the project is development of energy service providers. This component will provide technical assistance for the development of energy service providers, key market players, and other stakeholders for purposes of establishment of a mechanism for the delivery of increased energy savings in the energy efficiency market. The third component of the project is capacity building for program management, and monitoring and evaluation. This component will support capacity building of Ministry of Industry and Trade's (MOIT's) Energy Efficiency and Conservation Office (EECO) through provision of expert assistance and training activities in implementation, and monitoring and evaluation (M&E) of various energy efficiency projects, programs, and policies.

The Renewable Energy Development Project (2002), last updated in 2009 and jointly developed by the World Bank and EVN as part the Energy Sector Management Assistance Programme, serves as the framework for development of Vietnam’s renewable energy policies. It is a long term project until June 2014, which aims to accelerate large-scale development of renewable energy projects for rural electrification and grid supply in Vietnam. The Project has pinpointed, among others, the need for a policy and legal framework to guide involvement from the private sector.

Finally, the World Bank supports improvements in energy efficiency in Vietnam with a US$225 million credit. The funding is expected to help optimise the transmission and distribution system, reduce system peak load, and improve the rural power networks so that the poor in the rural areas have access to good quality electricity at reduced prices.

Energy regulator

Under the new Electricity Law, the Ministry of Industry and Trade (MOIT) is responsible for administering electricity activities, and the People’s Committees manage electricity activities in their respective regions.

In November 2005, the Electricity Regulatory Authority of Vietnam was established. The ERAV assists the MOI in managing the power sector, including the planning and regulation of electricity tariffs.

Degree of independence

The ERAV was established as a subsidiary of the MOI. The granting of licenses for electricity service is performed only after approval is gained from the Minister.  The Authority is administered by two leaders, known as the Head and Vice-head of the Authority, appointed by the Minister for Industry. Funding for the Authority comes from the state budget, and revenues collected for the licensing of electricity service.

Regulatory framework

Decision No. 258/2005/QD-TTg, signed by the Prime Minister in October 2005, stipulates the functions, duties and organisation of the ERAV. The ERAV’s main function is to assist the Minister for Industry and Trade in implementing regulatory activities in the electricity sector; to contribute to a market that is safe and stable, and provides a high-quality supply of electricity; to foster the economical and efficient consumption of electricity; and to uphold the equity and transparency of the sector in compliance with the law.

No dedicated sector law yet exists for renewable energies. The current law for the electricity sector is the Electricity Law, which came into force on the 1st July 2005. The law stipulates the development plan for the electricity sector, as well as the role of the ERAV in licensing and tariff-setting.

Regulatory roles

The ERAV assists the MOI in the following regulatory activities:

• preparing national master plans for the power sector;
• developing regulations on the operation of a competitive power market and directions for their implementation;
• assessing and promulgating tariffs for electricity and its wholesale, and fees for transmission and distribution;
• assessing electricity retail tariffs, and submitting to the government for approval, issuing, amending and revoking electricity licences;
• issuing guidance on the conditions and procedures for electricity outages and on the reduction of electricity consumption;
• studying and recommending measures to regulate power supply-demand relationships, and manage the realisation of power supply-demand balance;
• issuing guidance on the conditions and procedures for interconnection to the national electricity system;
• monitoring the implementation of plans and investment projects in the development of electricity sources, and electricity transmission and distribution grids, for compliance with the master plans;
• monitoring the implementation of the approved electricity tariff;
• settling complaints and disputes in the electricity market.

Energy regulation role

The Prime Minister is responsible for issuing regulations and conditions for forming and developing power markets. Power price is set to market development levels, and to facilitate investors to achieving reasonable profit, encouraging energy saving, protecting the lawful rights and benefits of electricity companies, as well as consumers.

The Ministry of Industry (MOI) is responsible for the state management of energy industries, including the formulation of law, policies, development strategies and annual plans.

Regulatory barriers

Insufficient co-ordination between the multiple bodies responsible for the deployment of RE have been described as a barrier to the successful adoption of these technologies. Specifically, the current policy and regulatory framework for promoting renewable energy is considered inadequate to drive its development. A lack of financing mechanisms for RE projects is also an identified barrier. Whilst the current Avoided Cost Tariff guarantees a small return to renewable energy producers, the size of the return is directly dependent on the price of other sources of energy in the power system. Discussions on the adoption of a rudimentary traditional feed-in tariff system have begun, as of March 2011. The production of resource assessments, as well as the building of capacity within institutions as to renewable energy technologies and their usage, would improve the uptake of these technologies.

Barriers also exist to the continued reform of the power sector, including the lack of a dedicated, independent energy regulatory agency, and the continued acceptance of conglomerate development by EVN in the electricity sector..