Energy supply, demand, and policy in viet nam, with future projections

Energy Policy 39 (2011) 6814–6826 Contents lists available at ScienceDirect Energy Policy journal homepage: www.elsevier.com/locate/enpol Energy supply, demand, and policy in Viet Nam, with future projections Pham Khanh Toan, Nguyen Minh Bao n, Nguyen Ha Dieu Institute of Energy, Ton That Tung Street, Khuong Thuong, Dong Da, Hanoi, Viet Nam a r t i c l e in f o a b s t r a c t Article history: Received 30 September 2009 Accepted March 2010 Available online 31 March 2010 This article provides background on the current status and recent trends of energy use in Viet Nam, as well as projections of energy demand and energy supply in the coming decades The article summarizes the results of the current national Master Plan for developing the electricity supply sector to meet increasing electricity demand Also described are the evolution and current status of Viet Nam’s energy policies, including those related to energy security, energy efficiency and conservation, the environment, and development of renewable energy sources, as well as strategies for power sector development and restructuring of the energy sector toward greater use of competitive energy markets The initial phase of the Viet Nam energy sector modeling effort under the Asian Energy Security (AES) project is described The final section of this article offers conclusions regarding the status of Viet Nam’s energy sector and policies, and recommendations regarding ‘‘next steps’’ in energy security analysis & 2010 Elsevier Ltd All rights reserved Keywords: Viet Nam Energy demand Energy security Introduction Viet Nam, a developing country in Southeast Asia, shares common borders with the People’s Republic of China (PRC) in the north, and with Laos and Cambodia in the west Viet Nam stretches along the east coast of Indochina over a length of 1600 km between the northern latitudes of 81 and 231 Of Viet Nam’s total area of about 330,000 square kilometers (km2), or 33 million hectares (ha), 50 percent is in productive use Of the total land area, 21 percent, or about 6.9 million ha, is used in agriculture, and the remaining 9.8 million (29 percent) are productive forestlands Fig shows the regions of Viet Nam Although the country is located in the tropics, the climate is tropical only in central and southern Viet Nam, with warm and humid weather all year round (22–35 1C) In the north, there is a distinct winter season due to cold inland winds Usually, the winter is also the dry season for the entire country, but the rains are highly unpredictable owing to the influence of several monsoons The population of Viet Nam in 2007 was 85.2 million, of which 61.2 million or 71.8% lived in rural areas Viet Nam’s energy sector: current status and recent trends Below we describe some of the key drivers of energy use, and provide sketches of the current status, and recent trends in energy n Corresponding author Tel.: 84 574 4160; fax: 84 852 3311 E-mail address: nguyenmbao@hotmail.com (N Minh Bao) 0301-4215/$ - see front matter & 2010 Elsevier Ltd All rights reserved doi:10.1016/j.enpol.2010.03.021 demand and supply in Viet Nam, with a focus on the important electricity generation sector 2.1 Key drivers of energy use Starting in 1986, Viet Nam has undertaken a comprehensive reform called Doi Moi, and the Government of Viet Nam liberalized economic production and exchange in 1989 As a result of these policies, Gross Domestic Product (GDP) grew at an annual average rate of 7.6 percent since 1990, with all sectors growing rapidly Viet Nam’s rapid economic growth has resulted in a corresponding rapid increase in energy needs Between 1995 and 2008, per capita GDP increased from US$290 to US$605 in 1995 dollars, an annual growth rate of 7.3 percent Even with growth at that level, as of 2005, Viet Nam’s per capita GDP remained below those in neighboring Thailand and China Though Viet Nam’s economic output was dominated by the agricultural sector for many years—agriculture and related industries accounted about for 57 percent of total output in the 1990s—the last twenty years have seen a considerable increase in the importance of the industrial sector and the commercial/services sector in overall GDP The total of the industrial and commercial/ services sector accounted for about 80 percent of GDP in 2005, increasing to nearly 83 percent by 2008, with the remaining fraction of GDP being in the agricultural sector (GSO, 2009) Fig provides a summary of GDP by sector during the period 2000–2008 Viet Nam’s economic growth rate increased every year during the years from 2001 to 2005, rising from 6.79 percent to 8.4 percent annually, with a decrease to 6.23 percent/yr in 2008 as the global economic downturn began Table compares GDP 6815 P Khanh Toan et al / Energy Policy 39 (2011) 6814–6826 Table Annual GDP growth in Viet Nam by sector, 2000–2008 (percent per year) 2000 2001 2002 2003 Industry 10.07 10.39 9.48 Agriculture 4.63 2.98 4.17 Commercial 5.32 6.10 6.54 Total 6.79 6.89 7.08 2004 2005 2006 2007 2008 10.48 10.22 10.69 10.38 10.60 6.33 3.62 4.36 4.02 3.69 3.40 3.79 6.45 7.26 8.48 8.29 8.68 7.20 7.34 7.79 8.44 8.23 8.48 6.23 over time (1.22 percent annually since 2005) Although over 70 percent of the population continues to live in rural areas, growth in urban population during that period greatly outstripped rural population growth, as people moved to cities to seek jobs in the industrial and service sectors The transport sector also has undergone explosive growth in Viet Nam in recent decades, with the number of vehicles—especially private cars and two-wheeled motor vehicles (motorcycles and scooters) growing very rapidly, especially in cities During the period from 1990 to 2007, per capita commercial energy (purchased fuels) consumption in Viet Nam rose at a rate of 9.3 percent per year, from 66 kilograms oil equivalent (kgOE) to 301 kgOE per person as a result of the combination of the industrialization of the Viet Namese economy—and particularly the development of energy-intensive industries—plus urbanization, population growth, and growth in personal consumption as a result of rising incomes Electricity consumption grew even faster, from 93 kilowatt-hours (kWh) per capita to 718 kWh/capita, a 12.8 percent growth rate per annum A national program of electrification of cities, towns, and villages has contributed to the high growth in electricity consumption (see below) As a result, Viet Nam had a relatively high income elasticity of energy demand (increase in energy use per unit increase in economic activity) over the period 2000–2007 of 1.46, and an even higher income elasticity of electricity demand of 2.0 Fig Viet Nam’s major regions and cities 2.2 Energy demand 250,000 Industry Billion VN Dong 200,000 Agriculture Commercial 150,000 100,000 50,000 2000 2001 2002 2003 2004 2005 2006 2007 2008 Fig GDP in Viet Nam by sector, 2000–2008 growth rates by sector from 2000 to 2008 (Pham, 2007, with updates) Among the industrial subsectors, those contributing the most to growth in overall GDP have been the steel, cement, chemical, textiles, and paper industries Another key driver of increased energy use has been population growth, accompanied by a considerable increase in the fraction of the population living in cities Table summarizes recent trends in overall population growth, and growth in population in rural and in urban areas As shown, during the period 2000–2008, total population growth in Viet Nam averaged 1.31 percent annually, with population growth slowing somewhat Fig shows changes in energy demand by sector for Viet Nam over the period 1990–2007 Most notable here is the considerable growth in energy demand in all sectors, but particularly in industry, transport, and the residential sector in the 1990s, and in the service sector The residential sector accounted for the largest portion—60.3 percent—of total final energy demand in 1990, out of which most of the energy used consisted of biomass fuels used for household cooking, followed by the industrial sector (27.8 percent), the transportation sector (8.7 percent), the commercial sector (2.0 percent), and the agricultural sector (1.4 percent) The share of total energy consumption by the residential sector fell during the period from 1990 to 2007 due to a significant portion of households switching from biomass fuels to commercial fuels, which are used with higher-efficiency stoves At the same time, the share of energy consumption by industry has increased continuously from 1990 to 2007 Fig shows the division of energy demand by sector in 2007 When Viet Nam’s economy was mostly agriculture-based, biomass (wood and crop wastes) supplied the bulk of energy needs As the country’s economy has developed, the role of biomass fuels in the energy sector have diminished, but even as of 2005 the biomass/renewable energy (or non-commercial energy) consumed in Viet Nam totaled 14,880 kilotonnes oil equivalent (kTOE), comprising over one third of total energy demand in the country Fig provides a summary of trends in energy demand by fuel in Viet Nam Among petroleum fuels, demand is strongest for diesel oil, gasoline, and residual fuel oil Diesel oil accounted for the largest portion of total oil consumption, at 43.9 percent in 6816 P Khanh Toan et al / Energy Policy 39 (2011) 6814–6826 Table Population trends in Viet Nam in urban and rural areas, 2000–2008 Population of the whole country Growth rate Urban population Rural population Million persons %/yr Million persons Million persons 2000 2001 2002 2003 2004 2005 2006 2007 2008 77.6 1.4 18.8 58.9 78.7 1.4 19.5 59.2 79.7 1.3 20.0 59.7 80.9 1.5 20.9 60.0 82.0 1.4 21.7 60.3 83.1 1.3 22.3 60.8 84.1 1.24 22.8 61.3 85.2 1.21 23.4 61.8 86.2 1.18 24.0 62.1 45000 40000 Residential Commercial 35000 Agriculture Industry Transport KTOE 30000 25000 20000 15000 10000 5000 1990 1993 1996 1999 2002 2005 Fig Total energy use by sector in Viet Nam, 1990–2007, including non-commercial energy (wood and other biomass) the Red river Delta area Estimated coal reserves as of 1/1/2006 totaled 6.16 billion tons (of which class A + B+ C were 4.99 billion tons; Pham, 2007) The classification of coal as reserve categories A, B, and C follows the official adopted definition in Viet Nam Category A means the most reliable reserves based on the results of detailed exploration and exploratory drilling Category B includes all established reserves based on detailed exploration with limited extrapolation Category C is estimates of reserves based on preliminary exploration and extrapolation from geological and geophysical data Most of the coal found in Viet Nam is anthracite, accounting for 93% of the country’s coal reserves As of 2008, Viet Nam’s coal production stood at 39.8 million tonnes per year Viet Nam produces crude oil from offshore fields As of 2008, Viet Nam’s crude oil production amounted to 14.85 million tons per year In Viet Nam at present there is one (DinhCo) small oil refinery (actually an associated gas liquefaction plant) in VungTau province, with an installed capacity of 300,000 tons liquefied petroleum gas (LPG); 151,000 tons condensate and 1.64 billion m3 dry natural gas per year A larger oil refinery started operation in the beginning of 2009 with a capacity of 6.5 million tons of crude oil per year; it is located in Quang Ngai Province Natural gas is produced from offshore wells As of 2008, Viet Nam produced 7.94 billion cubic meters of gas per year Uranium is extracted on only a small scale at present, but the uranium resources in Viet Nam include 113 tons in Reasonably Assured Reserves, as well as 16,563 tons in Estimated Additional Reserves Approximately 45 million metric tons of biomass (dry basis) were produced annually as of 2005, with an energy content of about 621 million gigajoules Apart from biomass, hydropower is Viet Nam’s leading renewable energy resource, as described below 2.4 Electricity supply infrastructure and trends Fig Total energy use, percent by sector, 2007 1990, increasing to 48.1 percent in 2007, followed by gasoline and residual fuel oil with fractions of 26.1 percent and 11.4 percent in 1990 and 25.8 percent and 10.5 percent in 2007, respectively 2.3 Energy supply Viet Nam is endowed with a variety of primary energy resources, including coal, oil, gas, uranium, and renewable energy Coal resources are of the anthracite and lignite types, with anthracite coal found in Quang Ninh Province, and lignite found in Viet Nam’s power sector has been a key target for development in the past two decades As a result of a continued emphasis on electrification, the nation has an extensive electrical grid, divided into Northern, Central, and Southern zones As of the end of 2008, 100 percent of rural districts were connected to the national power grid, and 97.26 percent of communes and 94.03 percent of rural households were connected to the national power grid Over 8.07 billion kilowatt-hours of electricity was supplied to rural areas as of 2005, growing at an average rate of over 10 percent per year in the 2001–2005 period Though electricity demand grew steadily at a rate of around 15 percent per year in the decade from 1996 to 2005, at the same time, as a result of electricity infrastructure improvements, transmission and distribution losses have been cut nearly in half, from almost 22 percent in 1995 to just over 11 percent in 2006 Fig presents trends in electricity demand and total generation over the past decade The average annual growth rate of generation was 13.8% in the 2001–2008 period In general, electricity generation over the period from 2006 to 2008 fairly closely tracked the targets of Viet Nam’s Master Plan VI for the electricity sector (see Fig 7) 6817 P Khanh Toan et al / Energy Policy 39 (2011) 6814–6826 16000 14000 12000 KTOE 10000 8000 6000 4000 2000 1990 Coal 1992 1994 Petroleum Products 1996 1998 Natural Gas 2000 2004 2002 Electricity 2006 2008 Renewable Energy Fig Total energy use by fuel in Viet name, 1990–2007 Fig Electricity demand and generation in Viet Nam, 2000–2008 Fig summarizes recent trends in electricity generation capacity by fuel, as well as peak power demand, on Viet Nam’s system As of 2005, the total installed capacity of power plants was 11,298 MW (megawatts), of which privately developed and operated plants—independent power producer (IPP) and build-operate-transfer (BOT) units, totaled 2439 MW, or 21.6% In 2006, a variety of plant upgrades in thermal power plants brought total capacity to 12,221 MW The maximum power load on the system in 2005 was 9255 MW By November of 2006, the maximum load had increased to 10,187 MW, an increase of over 10 percent By 2005, the transmission network infrastructure in Viet Nam included 3249 km of lines, and 6150 million voltamperes (MVA) of substation capacity on the 500 kilovolt (kV) transmission network, plus 5272 km of lines and 14,890 MVA of substations on the 220 kV network, and 10,290 km of lines and 21,100 MVA of substation capacity on the 110 kV network As of 2008, the transmission network included 3286 km of lines and 7050 MVA of substation capacity on the 500 kV transmission network, 7107 km with 18,639 KVA on the 220 kV network, and 11,751 km; with 23,834 KVA on the 110 kV network Current projections of energy demand and supply in Viet Nam The most recent overall projection of energy demand and supply in Viet Nam was prepared as a part of the process of assembling Master Plan VI (six) The Viet Nam Institute of Energy (IE) implemented this project The elements of the MP VI process included preparation of an electricity demand forecast, a forecast of non-electricity energy needs for Viet Nam, a power grid development plan, and a plan for 6818 P Khanh Toan et al / Energy Policy 39 (2011) 6814–6826 Fig Correspondence of trends in electricity generation with targets of Master Plan VI, 2006–2008 Fig Electricity generation capacity by type, and peak power demand (Pmax), 2001–2008 electric power exchanges and regional interconnections for the years 2010, 2020, 2025, and 2030 The forecasting method used in MP VI is a combination of econometric and techno-economic approaches The main driving variables for the demand projections are GDP and population growth rates, which were taken from external projections by the Central Institute for Economic Management (Ministry of Planning and Investment) The MP VI process also include preparation of a plan for implementing improvements in power system dispatch and communications, plans for environmental protection in power sector operations and development, and plans for power sector investment, together with financial analysis of future electricity sector activities and electricity prices Below we summarize the overall results of the most recent master planning process for the energy sector, then focus specifically on the methods and results of the most recent master plan (MP VI) 2006 to 2020, slowing to 8.0 percent/yr for the 2021–2030 period; a base case of 7.6 percent/yr from 2006–2010, slowing to 7.2 percent/yr in 2011–2020 and 7.0/yr in 2021–2030; and a low case of 6.2 percent/yr from 2006–2010, rising slightly to 7.0 percent in 2011–2020, then remaining at the same level (7.0 percent/yr) for 2021–2030 Viet Nam’s population is projected to increase from 83.2 million in 2005 to 101.6 million by 2025, with population growth slowing somewhat over time Under base case MP VI projections, a shown in Fig 9, energy use in the industry, transport, and residential sectors all show very steep demand growth Industrial demand is projected to grow from 11,454 kilotons of oil equivalent in 2005 to 57,078 in 2030 Demand in the transportation sector is projected to rise from 6401 kTOE to 28,577 Residential demand was forecast to increase from 15,098 to 42,278 kTOE, the commercial sector shows growth, from 2009 to 14,102 kTOE in the same period, while the agricultural sector has relatively flat growth, from 532 to 1156 kTOE Though Viet Nam currently has a surplus in primary energy supplies, as shown in Table 3, the country’s rapid economic growth is projected to quickly turn it into a net importer of energy In 2005, Viet Nam had a net surplus of over 17,000 kTOE By 2020, Viet Nam is projected to run a net deficit of over 28,000 kTOE, which will balloon to over 104,000 kTOE by 2030 It is this projected deficit, even assuming an increase in domestic production of oil, gas, and coal, which has spurred Viet Nam’s policymakers to focus on the development of other energy resources, including renewable energy and nuclear power, as well as to look to neighboring countries and other fuels exporters as they plan for the nation’s future energy supplies As the Viet Namese economy develops, renewable energy is expected to account for an ever-decreasing proportion of total energy, dropping from over 40 percent in 2005 to less than 10 percent in 2030 (Fig 10) This is in large part due to the low growth in biomass energy use, as commercial fuels for households become more available, as well as limits to the availability of un-harnessed hydroelectric resources In terms of energy resource development, Master Plan VI projects the following ranges of domestic energy output for 2020 and 2030:      Coal: 75–86 million tons/annum Crude oil: 20.7–22 million tons/annum Natural gas: 14.85–18 BCM/annum Hydropower: 59.6–69.7 TWh/annum Uranium potential: RAR: 113 tons, EAR-I: 16,563 tons Of the gas resources described above, the Southeast continental shelf of Viet Nam is projected to yield about 8–9 billion cubic meters annually, with the Southwest continental shelf providing about 6–7 billion m3/yr, and the North: 1–2 billion m3 annually For large hydropower the technical–economic potential of the 11 main basins in Viet Nam is estimated as $ 75–83 billion kilowatthours (kWh) (equivalent to 75–83 terawatt-hours (TWh)) of electrical energy annually, with an estimated potential capacity of 20,500 MW, of which the potential in the North region of the country is 51.6 percent, in the Center 31.9 percent, and in the South 16.5 percent Viet Nam is richly endowed with renewable energy (RE) resources: 3.1 Overall energy sector results from MP VI  According to a preliminary assessment of hydropower and For the MP VI process, three separate scenarios of economic growth were used: a high case of 8.5 percent/yr GDP growth from hydraulic planning by local authorities, the total technical potential of small hydropower resources of Viet Nam is 6819 P Khanh Toan et al / Energy Policy 39 (2011) 6814–6826 Fig Overall energy projections by sector under MP VI (base case), 2005–2030 Table Projected overall energy balance under MP VI (base case), 2005–2030 Fuel (physical unit) 2005 Physical 2010 KTOE Physical 2015 KTOE 2020 Physical KTOE 65 20 9.92 57.94 4.17 47.2 Physical 2030 KTOE Physical KTOE Primary energy demand 43,832 59,440 93,588 135,317 234,205 Domestic energy resource including: Coal (million tons) Crude oil (million tons) Gas (billion m3) Hydro (TWh) Small hydro (TWh) Renewable energy 61,145 18,271 18,120 6205 3762 77,063 28,000 20,217 7046 6458 428 14,914 94,644 36,400 20,360 8930 12,458 896 15,600 107,100 42,000 21,073 13,368 12,814 2105 15,740 129,384 56,000 22,396 16,200 14,993 3423 16,372 Surplus (+ ) deficit ( À ) 32.6 17.8 6.89 17.49 44.8 14,788 + 17,313 50 19.86 7.82 30.03 1.99 45.2 + 17,623 + 1056 75 20.7 14.85 59.6 9.79 47.7 À 28,217 Fig 10 Fraction of projected energy supply in Viet Nam as renewable energy under MP VI, 2005–2030 100 22 18 69.7 15.9 49.6 À 104,820 6820   1.6–2 million kilowatts (kW), with categories of resources as follows: (i) 500 small hydropower stations with capacity from 100 to 10,000 kW/station and with total capacity of about 1,400,000–1,800,000 kW (accounting for 80–97% of total small hydropower stations); (ii) 2500 sites of small hydropower stations with capacity from to 100 kW per station with total capacity of 100,000–150,000 kW (accounting for 5–7.5 percent of total small hydropower); and (iii) small hydropower stations with capacity from 0.1 to kW/station (also called as MicroHydro Power Stations) with total capacity of 50,000–100,000 kW (accounting for 2.5–5% of total small hydropower capacity) Viet Nam has average wind energy potential in comparison with other countries in the world and in the region The wind speed in the mainland is low (about 2–3 m/s) and is not suitable for electric power generation However, with its 3000 km of coastline, and with mountainous land accounting for 70% of the country’s area, wind power may be further developed One study carried out by the Institute of Energy on nine islands indicated that the average wind speed is in the range of 4.1–7.1 m/s (ADB, 2004)) Viet Nam has significant biomass resources such as sugar cane dredges (bagasse), rice husks, coffee husks, coconut shells, and wood residues, but only a portion of sugar cane dredges is used for electricity generation The biomass resources used for power generation/co-generation in Viet Nam, apart from sugar cane dredges, are wood residues, rice husks and rice straw It is estimated that about 1.5–2.5 million tons of sugar cane dredges and 2.5–3.8 million tons of rice husks can be used for energy production Residues from wood processing such as sawdust and wood chips from hundreds of wood-processing facilities are also biomass resources Viet Nam has good constant solar resources in the south and central regions of the country, but substantial seasonal fluctuations in the north Solar radiation levels in the south and central regions average just below kWh/m2/day and are almost constant during the year, ranging from 4.0 to 5.9 kWh/ m2/day The solar regime in the north exhibits averages around kWh/m2/day, but varies widely from 2.4 to 5.6 kWh/m2/day Table summarizes MP VI projections for the availability of renewable resources (other than large hydro) to generate electricity Only 800 kW of wind power are currently installed, but this figure could reach as much as 300–400 MW by 2020 Installed solar capacity is currently 1.15 MW, but could increase to 4–6 MW by 2020 Biomass produces 150 MW of electricity, a figure that could more than double to 310–400 MW by 2020 The country does not currently produce any geothermal energy, but has an estimated potential of 100 MW In 2005, Viet Nam produced approximately 600 gigawatt-hours (GWh) of electricity Through aggressive expansion of renewable power, that figure could reach 4200–5200 GWh by 2020, and 10,000 GWh by 2030 3.2 Electricity forecast and plan: background and methodology For the electricity forecast and supply plan described below, the period 2006–2010 was projected using a techno-economic method In this method, we (The Institute of Energy) reviewed the development of the steel, cement, chemicals, and garment sectors to determine the loads of large industrial facilities and concentrated industrial zones We then aggregated from the demand forecasts of 60 of 64 provincial power development plans, which together account for 96.5% of the electricity demand of nationwide Using these methods, total electricity demand (in the base case scenario) of the provinces was found to increase by about 17.1 percent per year For the period from 2011 to 2030, an indirect forecast method was used, involving multi-regression analysis and international comparisons: the ‘‘simple E’’ software program (Simple Econometric Simulation System) This model includes processes of regression analysis and forecast simulation, but in a form that is automated to the maximum possible extent Simple E is equipped with various estimation options such as ordinary least square (OLS), auto-regression, and non-linear estimation methods Simple E was transferred to the Institute of Energy from the Japan International Cooperation Association, and was connected with the direct forecast from the previous step The results were then compared to the forecast and historical average electricity consumption per capita of countries in the region After consulting with experts, we upgraded the forecast by assessing the results of Demand Side Management (DSM) programs on loadshapes (referring to a DSM impact assessment by World Bank consultants on reducing maximal peak demand) 3.3 Electricity forecast and plan: summary results Using different assumptions, and based on the process above, we generated three scenarios for energy demand: a high, low, and base case (as noted above) The results of those cases were as follows (see Fig 11 and Table 5) In 2007, the annual electricity consumption per capita was 718 kWh By 2025, that figure projects to grow to just under 3000 kWh in the low case; over 3700 in the base case, and over 3800 in the high case At this level, Viet Nam’s 2025 per capita electricity use would be similar to that of Malaysia in 2005 Annual demand growth in the base case is expected to peak at around 18 percent annually in 2009, and decline steadily thereafter to under percent by 2025 Viet Nam currently has one of the lowest per capita electricity production among APEC countries, at 635 kWh per person 1000000 20% 900000 800000 Resource Small/mini hydro Wind power Solar cells Biomass Geothermal Total 2005 To 2020 To 2030 MW GWh MW GWh MW GWh 185.00 0.80 1.15 150.00 336.95 555 na na na $ 600 1000–1200 300–400 4–6 310–410 100 1700–2100 4200–5200 3500 10,000 15% 700000 600000 GWh Table Projected renewable energy resources for power generation under MP VI 2005–2030 500000 400000 Low Case Base Case 10% High Case Base Case Growth Rate 300000 5% 200000 100000 0% 2008 2010 2015 2020 2025 2030 Fig 11 Forecast growth in electricity sales in Viet Nam, 2008–2030 %/yr Growth Rate  P Khanh Toan et al / Energy Policy 39 (2011) 6814–6826 6821 P Khanh Toan et al / Energy Policy 39 (2011) 6814–6826 Table Projected electricity sector demand, 2005–2030 Category Low case Agriculture-forestry-fishery Industry-construction Commercial-service Household-management Other Sale T&D losses Plant’s own use Generation Pmax (MW) Base case Agriculture-forestry-fishery Industry-construction Commercial-service Household-management Other Sale T&D losses Plant’s own use Generation Pmax (MW) High case Agriculture-forestry-fishery Industry-construction Commercial-service Household-management Other Sale T&D losses Plant’s own use Generation Pmax (MW) 2008 2010 GWh % 661 33,110 3229 26,602 2324 65,926 1.00 50.22 4.90 40.35 3.53 100 9.4 3.0 75,955 12,636 661 33,110 3229 26,602 2324 65,926 75,955 12,636 718 44,056 3958 32,437 3383 84,552 1.00 50.22 4.90 40.35 3.53 100 9.4 3.0 1125 45,794 5536 35,219 4933 92,607 1210 49,439 5982 38,010 5337 99,978 115,849 19,477 2025 2030 GWh % GWh % GWh % 0.85 52.11 4.68 38.36 4.00 100 8.5 3.0 1039 90,439 9234 61,216 8133 170,061 0.61 53.18 5.43 36.00 4.78 100 7.5 3.6 1323 155,742 14,135 98,619 13,046 282,865 0.47 55.06 5.00 34.86 4.61 100 7.0 4.0 1583 233,783 24,650 139,273 18,974 418,264 0.38 55.89 5.89 33.30 4.54 100 6.5 4.2 191,295 31,194 1.21 49.45 5.98 38.03 5.33 100 10.8 3.0 107,060 18,167 1.00 50.22 4.90 40.35 3.53 100 9.4 3.0 2020 % 95,539 15,803 75,955 12,636 661 33,110 3229 26,602 2324 65,926 GWh 2015 2027 104,259 12,494 75,656 14,500 208,935 317,826 51,104 0.97 49.90 5.98 36.21 6.94 100 9.6 3.6 240,709 39,891 1.21 49.45 5.98 38.02 5.34 100 10.8 3.0 2500 128,599 15,411 93,318 17,885 257,713 3.4 Viet Nam’s energy policy 3.4.1 Overall national energy development strategy In order to meet the national electricity demand forecast above, as well as the need for energy services provided by other fuels, Viet Nam has prepared a National Energy Development Strategy for the period up to 2020 with outlook to 2050 This document was approved by the Prime Minister on 27 December 2008 (PM, 2008), and set national targets for energy development as follows (see APEC, 2009 for a summary):  Ensuring sufficient supply of energy to meet the demands of socio-economic development Primary energy use is expected 0.78 50.86 6.29 32.98 9.09 100 8.5 4.0 403,455 65,328 0.97 49.90 5.98 36.21 6.94 100 9.6 3.6 296,904 49,203 per year, somewhere between that of Indonesia (552) and the Philippines (681) In the forecast’s initial year, 2008, electricity production nationwide is 75.9 billion kWh At an average of about 882 kWh/person, this value is among the lowest in the ASEAN countries During 2006–2010, favorable conditions for socio-economic development, continuing industrialization, and rapid power demand increases pave the way for development of the electricity sector, with expanded infrastructure construction making a base for increased growth in coming years After 2010, the institution of energy conservation and efficiency programs, DSM measures, electricity pricing measures, and the shifting structure of electricity use toward services leads to a gradual decline in the growth rate of electricity demand 2752 179,538 22,203 116,441 32,090 353,023 468,381 74,277 3505 228,657 28,277 148,298 40,869 449,607 513,836 83,202        3471 269,462 34,034 159,912 56,158 523,037 4441 344,773 43,546 204,605 71,854 669,219 757,892 120,163 1882 329,867 35,282 193,539 26,523 587,094 % 0.32 56.19 6.01 32.97 4.52 100 6.0 4.2 653,779 103,656 0.66 51.52 6.51 30.57 10.74 100 7.5 4.2 592,341 93,915 0.78 50.86 6.29 32.98 9.09 100 8.5 4.0 GWh 4313 372,391 48,885 215,671 77,641 718,902 0.60 51.80 6.80 30.00 10.80 100 7.0 4.0 807,756 126,806 0.66 51.52 6.51 30.57 10.74 100 7.5 4.2 5519 476,470 62,548 275,948 99,341 919,826 0.60 51.80 6.80 30.00 10.80 100 7.0 4.0 1,033,512 162,247 to reach about 47.5–47.9 MTOE in 2010, 100–110 MTOE in 2020 and about 310–320 MTOE in 2050 Developing power plants and power networks to ensure a sufficient supply of electricity for socio-economic development, with high reliability Developing refineries, step by step, to meet demand for petroleum products in the country, and increasing capacity of refineries to about 25–30 million tonnes of crude oil by 2020 Ensuring that the national strategic oil stockpile is equivalent to 45 days of national oil use by 2010, 60 days in 2020, and 90 days in 2025 Achieving a share of renewable energy of percent in the total commercial primary energy supply in 2010, percent in 2020, percent in 2025, and 11 percent in 2050 Completing the rural energy program for rural and mountainous areas This will include increasing the share of rural households using commercial energy to 50 percent in 2010 and to 80 percent in 2020 By 2010, 95 percent of rural households will have access to electricity Changing the electricity, coal, and oil–gas sectors to operate under competitive market mechanisms, with state regulation Establishing a competitive electricity retail market in the period after 2022; and establishing a coal and petroleum product business market by 2015 Actively preparing the necessary and harmonious conditions for putting the first unit of a Viet Namese nuclear power plant into operation in 2020, then growing nuclear power’s share in the national energy structure By 2050, Viet Nam’s target is 6822 P Khanh Toan et al / Energy Policy 39 (2011) 6814–6826 that nuclear electricity will account for about 15–20 percent of total commercial energy consumption nationwide (see further discussion of Viet Nam’s nuclear power plants below) 3.4.2 Key aspects of Viet Nam’s energy policy The elements of the National Energy Development Strategy described above embody and result from key aspects of Viet Nam’s energy policy Some of the main focus areas for energy policy in Viet Nam, and the main initiatives being used to address them, are summarized below  Energy Supply Security—Policies used to address Viet Nam’s    energy supply security include continuing to develop new domestic oil refineries and oil stockpiles, and reforming the market structure of the power sector to improve investment, avoid shortages, and increase reserve margins Fossil fuel reserves have been declining, and policies are being promulgated to encourage both domestic and international investment in new supplies and plants, and to improve the environmental performance of coal and other supply infrastructure Energy Efficiency and Energy Conservation—Government Decree no 102/2003/ND-CP on Energy Conservation and Energy Use, developed by the Ministry of Industry (MOI), regulates energy conservation and energy efficiency in industrial production and in buildings, with regard to energy-consuming equipment and appliances (PM, 2003) This decree focused on policies such as preferential tax treatments for energy-saving products, creation of a Support Fund to help to pay for energy efficiency investments, subsidizing research and development in energy efficiency areas, developing national standards for energy usage for equipment and other devices, designing loan mechanisms to spur investment in these areas, and developing residential tariffs that spur energy efficiency and energy conservation Restructuring Energy Markets—In accordance with the Strategy for Electricity Sector Development approved by the government in October 2004, Viet Nam is implementing policies to gradually establish a competitive power pool (PM, 2004a, 2004b) The State will maintain a monopoly in power transmission, and in operation of large-scale hydropower plants (used for both controlling river flows and for electricity generation), and will also control the operation of nuclear power plants in the future The Electricity Law, approved by the Viet Nam National Assembly (2005), came into effect in July 2005 and outlines the major principles for the establishment of the power market in Viet Nam, including its regulation by the Electricity Regulatory Authority of Viet Nam (ERAV) as stipulated in the October 2005, Decision no 258/2005/QD-TTg A related decision in August 2005 (Decision no 199/2005/QD-TTg) transformed the state-owned Viet Nam National Coal Corporation (VINACOAL) into the new Viet Nam National Coal and Mineral Industry Group (VINACOMIN) with a broader scope of business interests in the energy, minerals, and transportation equipment sectors Environmental Policies—The August 2004 Decision no 153/ 2004/QD-TTg, issuing Viet Nam’s ‘‘Agenda 21’’ policies, includes strengthening the legal basis for environmental protection, supporting research and development into, and transfer of, environmentally friendly technologies, and stipulating Viet Nam’s active participation in international activities related to the 1992 United Nations Framework Convention on Climate Change (PM, 2004b)  Renewable Energy Policies—Promotion of development and use of renewable energy was a part of the ‘‘Decree on Energy Conservation and Energy Use’’, developed by MOI in 2003, and also a part of the Electricity Law The Government of Viet Nam has subsidy policies for renewable energy including subsides for capital investments in renewable technologies, subsidized loans, and preferential tariffs for renewable energy products (PM, 2003) 3.4.3 Additional electricity sector-specific policies In addition to the goals noted for the power sector above, additional general goals of energy policy development in Viet Nam for the electricity sector include:  Giving priority to development of hydropower, especially for multi-purpose projects  Ensuring reasonable fuel shares and supply safety between coal- and gas-fired generation  Ensuring a reasonable arrangement of generation resources by load areas, thus reducing transmission distances  Promotion of projects for importing of electricity from Laos, Cambodia, and China  Taking into account the risk of power plant development schedules to ensure continued adequate power supply  Giving priority to special projects with commitment of Official   Development Assistance (ODA), as well as Ordinary Capital Resource (OCR) financing Encouraging power projects developed under private or partially under schemes such as Independent Power Production (IPP), Build-Own-Transfer (BOT), and others Upgrading of the abilities of Viet Nam’s power sector planners to evaluate options for an increasingly complex national electricity grid 3.4.4 Electricity supply plan Based on the goals as noted above, and the demand forecast presented in Table and Fig 11, an electricity supply plan was developed as summarized and Fig 12 Viet Nam’s electricity transmission system consists of three regional power systems:  The Northern power system, including northern provinces from Ha Tinh Northward  The Central power system, including central provinces from  Quang Binh to Khanh Hoa and four provinces in the highlands: Kon Tum, Gia Lai, Dac Lac, and Dac Nong The Southern power system, including the southern provinces and provinces of Binh Thuan, Ninh Thuan, and Lam Dong Key objectives for the transmission network elements of the electricity plan include:  Aim the 220–500 kV transmission network development to  increase reliability, flexibility, safety, and stable electricity supply, especially for the important economic areas in the South and the North Develop the 110 kV transmission network with completion of area power systems in order to increase reliability of electricity supply, reduce electricity losses, and facilitate conditions for changing the medium voltage network to 35 and 22 kV from the existing and10 kV networks, as well as for rural electrification Fig 13 presents a map of Viet Nam’s electricity transmission system, including both current and planned infrastructure P Khanh Toan et al / Energy Policy 39 (2011) 6814–6826 6823 90000 Import Nuclear PP Small HPPs Gas/Oil PPs Coal TPPs HPP&PSPP Peak 80000 70000 MW 60000 50000 40000 30000 20000 10000 06 007 008 009 010 011 012 013 014 015 016 017 018 019 020 021 022 023 024 025 2 2 2 2 2 2 2 2 2 20 Fig 12 Power generation development program to 2025: base case Continued rural electrification is an additional key electricity sector policy During the period 2006–2010, the goal has been for 100% of commune centers and 95% of rural households to have access to the local power grid, including 90% of rural households in the North and Highland areas During the period 2011–2015, the goal is for 98% of rural households to have access to local or national power grids According to the results of MP VI, from 2006 to 2015, these goals will require investment of Viet Namese Dong (VND) 37,286 billion, or about 2.155 billion US$ (at the current rate of 17,300 VND/$) for supply from the national power grid, and a further VND 16,948 billion, or about 980 million US$ for local investment in development of off-grid renewable power As noted above, another key element of future electric energy policy for Viet Nam is the development of transmission interconnections with neighboring countries, including Laos, Cambodia, and China Fig 14 summarizes existing electricity system interconnections in the region, as well as medium-term interconnection plans (through 2019) Interconnections with Laos are expected to provide Viet Nam with access to Laotian hydropower output of 1700–2300 MW The financing of the investments required to carry out the power plan described above is a significant hurdle to be overcome, and will require a number of different approaches The total cost of the power sector plans in Viet Nam through 2025 is estimated to be about 1822 trillion VND, or over 115 billion USD, including interest during construction About two-thirds of this investment (about 1144 trillion VND) will be for power plants (of which about 70 percent for thermal plants, and 30 percent for hydro), with the remaining third of the total investment needed for transmission and distribution facilities The average annual required investment over the period 2006–2025 is estimated at about 5.76 billion USD per year (MP VI) Financial resources that can be drawn upon for these investments include the resources of Electricity Viet Nam itself: depreciation funds, development and investment funds, shares, equity, and the selling of shares of some power plants Other resources include the state budget (mainly for compensation for resettlement costs related to the Son La HPP), ODA loans based on signed agreements, foreign commercial loans, preferential credits, domestic commercial loans, and the issuing of bonds Viet Nam is currently facing a choice about the ownership structure of its power sector To date, two alternatives have been considered The first of these is for EVN to remain the main owner of power generation projects through 2025, except for the IPP and BOT projects for which it has already signed or will sign Power Purchase Agreements, and for joint stock and equitized projects ‘‘Equitized projects’’ in the Viet Namese context means to transform a wholly state-owned enterprise into a shareholding company The second alternative is for EVN to play the role of power buyer in accordance with power sector reform expected over the planned period, in which EVN will invest in and manage some important power plants with financing from loans, but the remaining power plants will be owned by independent powergenerating companies outside of EVN Under the second alternative, EVN would remain the owner of hydropower plants with multi-purpose dam, important thermal power plants and transmission lines, but would be a 50 percent owner of other generation facilities The basic concept and development schedule for this second alternative is stipulated in Viet Nam’s Electricity Law and in the Prime Minister’s Decision 26: ‘‘Approval of the Roadmap, the Conditions to Establish and Develop the Levels of the Power Market in Viet Nam’’, issued in January 2006 This second ownership alternative also relates to the electricity sector market development roadmap being considered for Viet Nam Under the roadmap, the first phase is a single-buyer market, to 2014 The second phase, from 2014 to 2022, contemplates the opening up of wholesale power markets, with the first years of this phase being an experimental period The final phase, starting in 2022, calls for a retail competition market, again with a 2-year experimental phase at the beginning of the period 3.4.5 Nuclear energy in Viet Nam’s energy policy As noted earlier in this article, electric power demand in Viet Nam is forecast to increase many fold in the next two decades Ensuring an adequate power supply for the economy is one of the big challenges for sustainable development of the country Though Viet Nam can and will develop additional power plants using coal, oil, gas, hydropower, and renewable energy, nuclear energy is also an option for the country, one that, internationally, has received considerable attention in recent years, and at the same time has many controversial elements (Pham, 2009) In January 2006, the Prime Minister of Viet Nam signed a Decision no 01/2006/QD-TTg on the approval of the strategy to apply nuclear energy for peaceful purposes by 2020, which aims to build and develop a nuclear technology industry, and to 6824 P Khanh Toan et al / Energy Policy 39 (2011) 6814–6826 Fig 13 Power transmission system in Viet Nam actively contribute to socio-economic development and strengthening of the economy’s scientific and nuclear technological capacity According to the strategy, the investment report for construction of the first nuclear power plant project will be approved by 2010 By 2020 Viet Nam will complete construction and commissioning of the first nuclear power plant in the economy At the same time, the country will prepare the infrastructure for development of a long-term nuclear power program The pre-feasibility report on construction of the first nuclear power plant in Viet Nam was prepared by Institute of Energy (Electricity of Viet Nam Group) in coordination with other organizations This report was completed and submitted to the Prime Minister in August 2005 At the end of April 2008, the Institute of Energy was entrusted by the Ministry of Industry and Trade and Electricity of Viet Nam Group to prepare an Investment Report on construction of nuclear power plants at sites in Phuoc Dinh and Vinh Hai, Ninh Thuan province At each site, development of two nuclear units with capacities of 1000 MW each is to be investigated, with operations anticipated to begin in 2020 In the power plan presented earlier in the article, a total of four 1000 MW nuclear units are assumed to be operational in Viet Nam by 2025 (as shown in Fig 12) The planning of potential sites is being studied by the Institute of Energy, and implementation plans for specific sites will be prepared soon Development of nuclear power is expected to have many benefits for the economy, such as diversification of energy P Khanh Toan et al / Energy Policy 39 (2011) 6814–6826 6825 Fig 14 Transmission grid interconnections in Southeast Asia: current and planned sources, energy security, the environment, and development of national science and technology However, implementation of nuclear power in Viet Nam will not be without its challenges First, nuclear power requires a huge upfront capital investment Even with simplified and standardized designs to reduce construction, operation and maintenance costs, nuclear power plants still require huge investments and long construction periods, as well as advanced and sophisticated technologies that Viet Nam does not yet have Investment capital costs are likely to be over US$ billion for one 1000 MW unit (and recent figures for the costs of some new nuclear plants worldwide have been as much as 4–5 times higher still) In addition, the good management of investment preparation, mastering construction techniques, and manpower training for safe operations are some of the key challenges facing Viet Nam if it is to use nuclear power generation as a resource to supply safe, stable, and cheap electricity for economic development of the country in the future The experience of other countries with construction and operation of nuclear power plants indicate that issues such as poor design, delays in construction, and safety concerns can greatly inflate the ultimate costs of plants relative to initially anticipated costs Developing support and consensus in terms of the political aspects and policies involved in siting and operating nuclear plants will reduce uncertainties, helping to ensure stability of the costs of preparation and construction of nuclear power plants Public acceptance of nuclear power, or the lack of same, may have a considerable impact on construction time and cost, even leading to bankruptcy of investors or to nuclear power plants that cannot be put into operation In Viet Nam, recent surveys of public opinion in Hanoi and Ho Chi Minh City, as well as in Ninh Thuan and Phu Yen provinces, indicate that the share of people supporting nuclear power is high—90% consider nuclear power necessary, 47.7% consider nuclear power useful and safe, and only 4.6% consider nuclear power dangerous However, this support is being reduced because of lack of information on the necessity and benefits of nuclear power plants related to the aspects of energy security, economics, and the environment If the nuclear power industry can prove to the public that nuclear power is cheap, less 6826 P Khanh Toan et al / Energy Policy 39 (2011) 6814–6826 polluting, safe, creates jobs, and increases income for localities, then it will get high support Construction and putting into operation of nuclear power plants, as well as the development of a nuclear power industry in Viet Nam, depends on many factors, some of the most important of which, as noted above, include radioactive waste management, keeping production costs low and stable, and convincing people that nuclear power is very safe The current sentiment in Viet Nam is optimistic toward the future of this new industry Starting the industry right is very important for success, as it would make the nation more confident about its energy prospects, but a failure in proper planning or an incident of some sort associated with a nuclear facility would make it more difficult to develop a Viet Namese nuclear power industry in the future Conclusion and ‘‘next steps’’ in energy security analysis in Viet Nam The authors of this article are members of the Viet Nam Country Working Group of the Asian Energy Security (AES) Project The AES project, as described in the initial articles in this Special Issue of Energy Policy, is a collaborative project involving groups from a number of nations in Asia and the Pacific The Viet Nam group is in the initial stages of applying AES methodologies to the study of energy futures in Viet Nam, including the development of a Long-range Energy Alternatives Planning (LEAP) model for Viet Nam This study will focus on evaluating future outcomes for climate change-related pollutant emissions and energy security in Viet Nam based on future energy options and nuclear power plant development scenarios LEAP will be used as a tool for energy demand projection, and for development of alternative energy scenarios addressing climate change problems As described above, the structure of the Viet Nam LEAP Dataset is being built based on available data As a first step, we initially have modeled the Residential Sector, using data on number of households, energy usage patterns and energy intensity from the past surveys, using analysts’ assumptions (pending development of new surveys), or based on data from other studies For other sectors, we used the results of the Master Plan VI process, with three scenarios for nuclear power capacity development in Viet Nam In future years, the study will focus on:  Data collection: Initially, the input dataset was built based on  past studies and assumptions These data need to be updated through additional collection of compiled data and through survey activities, especially to determine key energy intensities such as in the major industrial subsectors, as well as energy consumption per household by type of fuel (including biomass fuels, for which commercial fuels will likely be substituted in the future) Restructuring of the LEAP Dataset (as presented above) for the remaining sectors (industry, transport, agriculture, commer-    cial) for the BAU scenario that each sector will be divided in subsectors and end-uses, in order to enable analysis of policy options for these sectors Development of alternative energy scenarios on the demand side—including energy paths that feature energy efficiency, fuels substitution, and demand-side renewable energy sources—to evaluate the costs and benefits to Viet Nam’s energy sector and economy of alternative approaches to providing energy services and reducing greenhouse gas emissions Analysis and evaluation of the costs and benefits of different nuclear power development scenarios (for example, reflecting ‘‘Business as Usual’’, ‘‘Minimum’’, and ‘‘Maximum’’ nuclear capacity development paths), including the costs for management of nuclear spent fuel, and the costs and benefits of regional cooperation on nuclear energy issues Evaluation of the costs for CO2 emissions abatement through different energy policies and measures (including those listed above) Viet Nam is a country undergoing rapid economic development Though it is endowed with sufficient natural resources to sustain its economy in the short term, economic growth is likely to make it a net energy importer within the next decade As a consequence, careful, thorough, and ongoing analysis of the tools— including resources, energy technologies, energy sector market organization and regulation, and energy policies—available to Viet Nam in shaping its energy future is of critical importance References Asian Development Bank (ADB), 2004 Promotion of Renewable Energy, Energy Efficiency and Greenhouse Gas Abatement (PREGA) Prepared by the Institute of Energy, January 2004 Asia-Pacific Economic Cooperation (APEC), 2009 APEC Energy Overview, 2008 Available at /http://www.apec.org/apec/publications/all_publications/ener gy_working_group.htmlS, dated March 2009 General Statistics Office (GSO), 2009 Statistical Yearbook 2008 Statistic Publish House, Ha Noi, Viet Nam Pham, K.T., 2007 Viet Nam energy review and power development plan: period 2006–2015 with outlook to 2025 Prepared for the ‘‘Asian Energy Security Project Meeting’’, Beijing, PR China, October 31–November 2, 2007, and available at /http://www.nautilus.org/energy/2007/beijingworkshop/papers/ Viet NamEnergy.pptS Pham, K.T., 2009 Development of Nuclear Power in Viet Nam—Dazzling Perspectives and Big Challenges Available on the Viet Nam Institute of Energy WWW site /http://www.ievn.com.vn/Infor.aspx?CategoryId=1089&InforId= 1127&LanguageId=2S The Prime Minister of Viet Nam (PM), 2003 The Decree no 102/2003/ND-CP on Energy Conservation and Energy Use The Prime Minister of Viet Nam (PM), 2004a Decision no 176/2004/QD-TTg on Viet Nam Power Sector Development Strategy The Prime Minister of Viet Nam (PM), 2004b Decision no 153/2004/QD-TTg on the Oriented Strategy for Sustainable Development in Viet Nam The Prime Minister of Viet Nam (PM), 2008 The Decision no 1885/QD-TTg on Strategy on Viet Nam National Energy Development up to 2020, and Outlook to 2050 Viet Nam National Assembly (VNA), 2005 Viet Nam’s Electricity Law  ... Energy Conservation and Energy Use, developed by the Ministry of Industry (MOI), regulates energy conservation and energy efficiency in industrial production and in buildings, with regard to energy- consuming... Strategy described above embody and result from key aspects of Viet Nam’s energy policy Some of the main focus areas for energy policy in Viet Nam, and the main initiatives being used to address them,... world and in the region The wind speed in the mainland is low (about 2–3 m/s) and is not suitable for electric power generation However, with its 3000 km of coastline, and with mountainous land