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27 August 2020

Vietnam places question mark on half its coal pipeline

By Andries Wantenaar

Nearly 17.1 GW of Vietnam’s future coal plants will be delayed or cancelled, according to the country’s eighth National Power Plan. Projects amounting to 7.6 GW are to be delayed past 2030 or 2035, while projects amounting to 9.5 GW are to be cancelled entirely. These projects, which were due to come online between 2026 and 2030, account for half of Vietnam’s stated coal pipeline.

It would be no great surprise if the delayed projects are also scrapped at that point, as the economics will have changed in 10 years’ time and as the energy transition accelerates economies away from fossil fuels. These delayed or cancelled projects were to have come online during 2026 to 2030, and made up half of Vietnam’s coal pipeline. The decline of coal comes from three angles – waning interest from Western investors, the depletion of Vietnam’s coal reserves, and local opposition motivated by the environment and air pollution.

In place of this coal, by 2030 Vietnam is now aiming at an additional 7.8 GW of natural gas, and plans for wind and solar have been increased by 13 GW and 6.2 GW respectively – meaning the country is now looking at 18.6 GW wind and 19.6 GW solar by the end of the decade. The total investment cost for power plants over the next ten years is estimated at $105 billion, with 8 GW coming online each year.

Some coal plants will still be built, but they will be required to be supercritical generators, with an exception made only for domestic coal too low quality for supercritical, during the 2021 to 2025 timeframe. After that point, only supercritical generators will be built, with a heightened efficiency standard after 2035. High-efficiency coal plants produce more power for the same pollution.

Plan VIII doubles solar power and more than triples wind power compared to the last amendment of Plan VII, and would see LNG added in both the north and south regions of the country. Where older plans relied totally on traditional generation – fossil fuels and hydropower – plan VIII puts renewables front and center of new development. Vietnam surprised the world and probably itself with the scale of its renewable energy deployments in the past couple years, with solar going from 100 MW to 5.5 GW during 2019, while wind development is also accelerating from a couple hundred megawatts, with 7 GW of projects approved.

As for gas, around two-thirds will be in the South of the country, and Vietnam will need LNG to power between 15 GW to 19 GW capacity. Around one-tenth as much capacity will take the form of internal combustion engine (ICE) power plants. By the middle of the decade LNG imports will have reached about 5 billion cubic meters per annum, and the Prime Minister recently announced the addition of ECV’s proposed natural gas-fired power plant and supporting offshore LNG import terminal in Binh Thuan province to the Plan.

The previous development plan, the adjusted Power Plan VII from 2016, had much more coal. In that vision, the number of coal plants was envisioned at 31 in 2020, rising to 47 in 2025, then 52 in 2030 – and over 50% of total generation. As it turns out, the country has 20 coal plants with 18.9 GW capacity right now – 42% of total generation, which will fall as low as 36% by 2030 under the coming Plan VIII.

Power Type2030 Capacity%2045 Capacity%
Hydroelectric25 GW18.127 GW9.8
Coal37.2 GW26.950 GW18.2
Gas/Oil26 GW18.868 GW24.7
Wind19 GW13.860 GW21.8
Solar20 GW14.552.8 GW19.2
Biomass3.4 GW2.54 GW1.5
Pumped Hydro1.5 GW1.17 GW2.5
Imports5.9 GW4.36 GW2.2
Total138.1 GW100274.8 GW100

Estimates by Nguyen Anh Tuan of the Vietnam Energy Practice Review Council

The finalized Plan will be submitted in October, covering 2020 to 2030 with a ‘vision to 2045’, and the Ministry of Industry and Trade has been developing it since the start of 2019. Demand is expected to grow at 8% per annum in the 2020s, more than doubling to 130 GW by 2030; in the 30s, demand will grow more slowly, at 4%.

By 2050, renewable energy is expected to rise from the current level of 38% (including hydropower) to somewhere between 43% or 50% – a big increase considering the overall power supply will increase several times over too.

The shift to renewables and the decline of coal power is already occurring even before the enactment of Power Plan VIII later this year. Compared to Plan VII’s guidelines, only 57.6% of thermal power actually came online, while renewables reached 205% of the target.

Overall, installed capacity was only 87.7% of the target, and Vietnam faces a risk of power shortages in the 2020 to 2025 period due to delays, largely in coal plant developments. In particular, the 2016 to 2020 period saw only 15.5 GW added, when 21.6 GW had been planned, though this has been mitigated by lower than anticipated demand. Although Chinese finance for Vietnam’s coal plants has remained strong, Western, South Korean and Japanese investors have been losing interest – as opposed to renewable energy, which has money pouring in from both directions. Other factors such as corruption and PPA negotiations have delayed these projects, but the two issues specific to coal are investors’ distaste, and environmentally motivated local opposition.

With a large share of intermittent renewables, the plan also sees a need for flexible gas plants. Vietnam is roughly as wealthy as India per capita, so while it can afford the latest solar and wind, utility-scale battery energy storage remains out of its reach. Instead Vietnam is heading towards setting up the legal framework for a competitive electricity market, including 2-minute response-time internal combustion engines, such as those being developed by Wartsila. Until that framework has been established, investors into this kind of power plant, which could be as small as the 18 MW scale, will struggle to enter the market.

These gas plants will come at a cost: LNG imports will require new infrastructure, and gas electricity is the most expensive right now. Gas is at $121 per MWh, coal at $65, and hydropower at $48. Under the current FiT mechanism, solar is at $78 and wind is at $88 per MWh. The Power Development plan foresees prices rising about 3% per annum to 2025, then more rapidly – less than expected GDP growth.

Nuclear power has not been ruled out, and the Plan mentions in Scenario 6 the possibility of such plants coming online post-2035, potentially as much as 5 GW by 2045. This would depend on how nuclear matches up to other approaches to baseload clean energy to balance intermittent wind and solar – such as battery storage and green hydrogen power plants, which will be much cheaper than they are now come the 2030s and 40s.

If Vietnam is to have nuclear plants in the 30s and 40s, then it would need to get started now with the training of necessary specialists. Vietnam previously had two nuclear plants planned in Ninh Thuan province which would’ve totalled 8 GW, along with contracts for 450 Vietnamese to be trained by Russian and Japanese partners. Those developments were cancelled in 2016 when projected costs were found to have doubled to $18 billion from the original plan in 2009. That cancellation played a role in Vietnam’s solar push shortly afterward, as well as measures to boost power development in the province.