Evaluating the viability of nuclear power implementation in vietnam ad as models approach

With the desire to use an energy source that is economical yet provides energy enough for excessive consumption domestically and is safe to the environment, nuclear power is always a wor

FOREIGN TRADE UNIVERSITY

HO CHI MINH CITY CAMPUS

MID-TERM REPORT

Module: PRINCIPLES OF ECONOMIC MANAGEMENT

Class Code: 157 — DTUE301

TOPIC: Evaluating the Viability of Nuclear Power

Implementation in Vietnam: AD-AS Models Approach

Supervisor: PhD Nguyen Quynh Huong

Student’s name ID Contribution Signature

Phan Thanh Tién 2112155200 100% AS

Ho Chỉ Minh City, November 2023

TABLE OF CONTENTS

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INTRODUCTION | 2

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INTRODUCTION

1 Rationale of the report

Concerns about the conservation and effective utilization of energy hold great significance for every nation Energy demand significantly affects life since energy sources have a direct impact on the growth of all production sectors, including households, industry, and agriculture every day Energy resources are so significant that every government, including Vietnam, views them as national policies

Vietnam’s energy industry has developed strongly in the past twenty years, basically meeting the needs of the country’s socio-economic development However, the scale and efficiency of the energy sector are still low Vietnam's energy security status is not guaranteed (power cuts occur frequently during peak periods; national oil reserves are not capable of stabilizing prices when there is an oil price crisis in the international market ) Vietnam will face the risk of energy shortage in the period from 2015 - 2020 onwards Vietnam's energy problem will shift from being limited to one country to being part of the international market and subject to its changing impacts (Nang Luong Viét Nam, 2022.)

With the desire to use an energy source that is economical yet provides energy enough for excessive consumption domestically and is safe to the environment, nuclear power is always a worthy consideration option of the Vietnam Government Nuclear power combines the benefits of security, dependability, and extremely low greenhouse gas emissions to provide electricity at a reasonable cost Current plants perform well and are highly predictable With a relatively minimal risk of operational cost inflation, these facilities have lower operating costs than nearly all of their fossil fuel competitors It is currently anticipated that plants will run for 60 years, if not longer (Nuclear Power Economics, 2021)

However, the construction of nuclear power plants is still not widely popular in Vietnam This is always a hot debate among experts about whether or not to build nuclear power plants Vietnam has a lot of potential to develop clean energy such as wind power and solar power Dr Ngo Duc Lam, an energy expert and former official of the Ministry

of Industry and Trade, said that the reason many countries choose nuclear power is because they do not have the potential to develop other energy sources Meanwhile,

Vietnam has more types of resources to generate electricity than many countries In addition, the cost and resources needed to build a nuclear power plant are also issues that need to be considered (Hi, 2022)

Our team will thoroughly examine the contributing elements, present energy usage

in Vietnam, and draw comparisons with other nations in this report Next, approach the AS/AD model to analyze the viability of implementing a nuclear power facility in Vietnam

2 The report’s aims and objectives

The primary aim of this report is to provide a comprehensive analysis of the factors impacting the development of nuclear power in Vietnam through the lens of the AS-AD model The specific objectives include:

® To elucidate the role of human capital, technological advancements, infrastructure investment, and government policies in shaping the landscape for nuclear power

® To assess the impact of these factors on aggregate supply and aggregate demand within the nuclear energy sector

® To offer strategic recommendations for policymakers and stakeholders to facilitate sustamable and advantageous growth of nuclear power in Vietnam

3 Scope of the report

This report concentrates on scrutinizing the pivotal factors—human capitals, technology, infrastructure mvestment, and government policies—driving or impeding the development of nuclear power in Vietnam The analysis encompasses the impact of these factors on both aggregate supply and aggregate demand, aiming to highlight their influence on prices and outputs within the nuclear energy domain

4 Methodology

The methodology employed in this report involves an extensive review and synthesis of existing literature, government reports, statistical data, and expert opmions relevant to the AS-AD model's application in the context of Vietnam's nuclear power development Additionally, case studies and empirical evidence are imcorporated to substantiate the analysis and recommendations provided

CHAPTER 1: OVERVIEW OF ENERGY IN VIETNAM

1.1 Introduction to Vietnam’s energy landscape

The main energy sources in Vietnam today include coal energy, hydroelectric energy, wind energy, solar energy and biomass energy This energy source is currently used to provide electricity for manufacturing products, services and civil activities (Téng thầu EPC, 2023) Vietnam's rapid economic growth has been a catalyst for an upsurge in energy demand, a pivotal element driving various sectors including manufacturing, services, and civil activities Over the past four decades, the country has witnessed notable fluctuations in energy consumption patterns, propelled by shifts in energy sources and burgeoning economic activities (EREA&DEA, 2019)

As can be seen from the data provided by the World Bank (2022), energy use in Vietnam over the period of 43 years experienced upward trends There was a slight decrease from 300 kg of oil per capita in 1971 to approximately 250 in 1977 Since then,

it was reported to have little change in the consumption of energy in Vietnam and remained at merely 250 kg of oil per capita Vietnam entered a significant crease period from 1997 and reached its peak at over 650kg of oil per capita in 2010 This new record doubled the amount of energy consumed in 1971

Figure 1.1 Energy use in Vietnam

Energy use (kg of oil equivalent per capita)

Presently, Vietnam stands as one of Asia’s fastest-growing energy markets, with its economy undergoing significant expansion Projections from the government indicate

a burgeoning increase in power consumption, estimating an annual rise between 10% to 12% until 2030 To meet this escalating demand, Vietnam is diversifying its energy portfolio, encompassing rock energy, hydroelectricity, wind, solar, and biomass sources (Năng Lượng Việt Nam, 2023)

However, despite this pursuit of diversification, Vietnam predominantly relies on coal-fired electricity, constituting nearly 50% of its power generation, with oil, hydropower, renewable energy, and gas contributing to the remaining share The emphasis on coal underscores the need for a substantial shift towards renewable energy sources for sustainable growth Data recorded by Co quan cua Hiép héi Nang Luong Viét Nam (2022) shows that this country still mostly relies on coal-fired electricity, which accounts for 49,77% of power generation; oil 21.76%; hydropower 16.44%; renewable energy 6.25%; gas 6.02% Thus, coal accounts for the highest proportion, and renewable energy, if including hydropower, has a proportion of 22.69%, which is relatively high in the world

Regarding the energy use situation in Vietnam, Resolution 55 of the Politburo on Strategic Orientation for Vietnam’s National Energy Development to 2030, with a vision

to 2045, forecasts that primary energy demand by 2030 will reach about 175 - 195 million TOE (tons of oil equivalent), by 2045, reaching about 320 - 350 million TOE; The total capacity of power sources by 2030 will reach about 125 - 130 GW, electricity output will reach about 550 - 600 billion kWh The proportion of renewable energy sources in the total primary energy supply will reach about 15 - 20% by 2030; 25 - 30%

by 2045 The ratio of energy savings to total final energy consumption compared to the normal development scenario reaches about 7% in 2030 and about 14% in 2045 1.2 Vietnam’s energy goals

The National Program on economical and efficient use of energy for the period

2019 - 2030 (approved under Decision No 280/QD-TTg dated March 13, 2019 of the Prime Minister) sets the following goals:

e The period until 2025: Achieve energy savings of 5.0 to 7.0% of total national energy consumption in the period from 2019 to 2025; Reduce the average energy consumption level for industrial sectors/sub-sectors compared to the period 2015 -

2018

e The period until 2030: Achieve savings of 8 - 10% of total national energy consumption in the period from 2019 to 2030; Reduce the average energy consumption level for industrial sectors/sub-sectors compared to the period 2015 -

2018

In conclusion, Vietnam stands at a crucial juncture in its energy trajectory The government’s strategic orientations and policy directives underscore a focused approach towards energy conservation, efficiency, and the integration of renewable sources into the energy matrix However, there remains a pressing need for concerted efforts to drive substantial shifts away from coal reliance and promote sustainable energy alternatives As Vietnam navigates its energy landscape, balancing economic growth with sustainable energy practices is paramount Aligning developmental pursuits with energy-efficient practices not only mitigates environmental impact but also fosters economic resilience, positioning Vietnam on a trajectory of sustainable growth and energy security

CHAPTER 2: OVERVIEW OF NUCLEAR POWER IN THE US & FRANCE

2.1 International case study from the USA and France

Nuclear energy harmesses the power stored within atomic cores, making it a significant source of electricity globally (Merk, 2016) It relies on the process of nuclear fission, wherem atoms split, releasing tremendous energy This energy is utilized in nuclear reactors that employ uranium pellets as fuel During fission, uranium atoms disintegrate, initiating a chain reaction that generates heat This heat is then used to warm the cooling agent circulating in the reactor, producing steam The steam drives turbines, which, in turn, power generators to produce electricity (Budnitz, 2016)

Despite its advantages - cleanliness, renewable nature, and minimal greenhouse gas emissions - nuclear energy’s widespread utilization is limited to countries under the

result, most nuclear power plants are in developed countries, producing about one-tenth

of the world's electricity The United States and France are the two most dominant global producers, with the United States being the leading producer and France accounting for around 70% of nuclear-generated electricity (Maizi, 2014)

One of the most important reasons for the success of the United States and France

in nuclear power is that they are leading countries in nuclear power investment, developing various indigenous designs at the dawn of the nuclear age The Pressurised Water Reactor (PWR) was originally designed for the US Navy to power maritime platforms but was later deployed on land to generate electricity (Wang, 2018) Later, Argonne National Laboratory and General Electric (USA) collaborated to develop the Boiling Water Reactor (BWR), a simplified PWR with a single coolant loop PWRs and BWRs both use normal light water for cooling and neutron moderation (slowing neutrons

to make them more easily captured by the uranium fuel, resulting in fission) and are thus referred to as LightWater-Reactors (LWRs) (Wang, 2018) And, the low prices for early LWRs with an increase in the electricity growth rate (which reduced the gross generating plant margin from 23.7% in 1964 to 16.6% in 1969) led to a significant increase in nuclear ordering began in 1967 (Maizi, 2014) Although it was followed by a reduction

later it was still a significant starting for nuclear power in The US Realizing that from The US, France also learned and had its own N4 design, ordered in 1984, which was the first that could fully draw on French operational experience (Rangel, 2015) The efficiency of learning appears to be a major determinant of plant performance, opening opportunities to develop the nuclear power industry (Budnitz, 2016)

Besides, a strong, demonstrably independent safety regulator is perhaps one of the most important requirements for a successful nuclear power program For nuclear power

to be publicly acceptable, safety regulators must be seen to be applying stringent standards to utilities and reprimanding them harshly if standards are not met Utilities in the United States of America have complained that regulations are too stringent and that safety standards are too stringent It is difficult to say whether the additional safety requirements have made a significant contribution to safety (Budnitz, 2016) However, a few points should be raised (Merk, 2016) For starters, changes in safety requirements can be extremely disruptive to costs and schedules; however, where designs have been fully worked out and discussed with regulators before construction, these disruptions can

be minimized Second, tightening regulations in the United States has resulted from incidents that have eroded trust in utilities’ abilities (Rangel, 2015) These were the poor operational practices exemplified by the Browns Ferry and Three Mile Island disasters in the United States Meanwhile, in France, utilities and regulators have very close relationships This undoubtedly results in effective communication and a high level of trust between the utility and the regulator However, this closed, relatively informal style

of regulation may not inspire public confidence in its independence and rigor And, there appears to be little recognition of this problem, and the late disclosure of details of incidents with significant safety implications harms regulators’ credibility (Budnitz, 2016)

Government influence is pivotal in nuclear power implementation, shaping safety regulations, and policies (Rangel, 2015) For instance, the structure of regulatory authorities, resource allocation, and reactor safety procedures are dictated by the government Contrasting approaches between France’s directed policy and the United States’ more laissez-faire stance highlight different modes of decision-making While

France’s centralized approach may enhance efficiency, it could undermine public participation and trust In contrast, the US government’s limited financial intervention in the nuclear industry poses challenges in influencing its development, despite the varying stances of different administrations towards nuclear power (Merk, 2016) The impact of government policies, regulatory frameworks, and safety standards is instrumental in shaping the trajectory of nuclear power in different countries, underscoring the interplay between technological advancement, regulatory oversight, and public perception 2.2 Lessons for Vietnam

Learning from the experiences of advanced nations like the United States and France, Vietnam can glean crucial insights for its nuclear energy development Emphasizing safety measures through the establishment of a robust, independent regulatory body stands as a cornerstone Stringent safety standards, diligent enforcement, and transparent communication are pivotal to engender public trust and confidence in the nuclear industry

Moreover, technological innovation and assimilation of best practices are key Investing in research, development, and learning from established nuclear nations could enhance operational efficiency and safety in nuclear power plants Effective public engagement and governance strategies, inclusive of community participation, are vital Policies shaped with public input and transparent information dissemination can foster broader support and credibility

Government leadership holds a significant role in formulating policies, resource allocation, and fostering a conducive environment for nuclear energy Strategic planning and resource allocation by the government can sustain the industry's development in a safe and sustainable manner

In essence, Vietnam’s nuclear energy endeavors necessitate a holistic approach, encompassing safety, technology, governance, and community engagement Drawing lessons from established nuclear nations can provide invaluable guidance for Vietnam to build a safe, efficient, and resilient nuclear energy sector

CHAPTER 3: THE AS-AD MODEL

3.1 Introduction to the AS-AD model

comprehensive macroeconomic framework delineating the dynamic relationship between the aggregate demand for goods and services and the corresponding aggregate supply This model, being an invaluable analytical instrument, facilitates the examination of the repercussions of economic policies on critical macroeconomic variables, including output, prices, and employment (Jim, 2023)

Figure 3.1 The AS-AD Model

Price Level Aggregate Supply

spe antity of Output Equilibrium Output Quantity of Outpu

(Source: Author’s compilation, 2023)

of factors of production, (2) returns from alternative activities, (3) technology, (4) seller expectations, (5) natural events, and (6) the number of sellers (Agénor, 2015)

AD - Aggregate Demand: AD represents the total quantity of goods and services that consumers, businesses, the government, and foreign buyers are willing to purchase at

a specific price level within a certain period AD reflects the overall demand for consumption and investment in an economy Demand shifters include preferences, the prices of related goods and services, income, demographic characteristics, and buyer expectations (Agénor, 2015)

The interaction between AS and AD is considered crucial for the stability and development of an economy Changes in both AS and AD can affect inflation, the production of goods, unemployment, and the overall economy of a country (Agénor, 2015)

3.2 Application of AS-AD model to energy sector

The Aggregate Demand-Aggregate Supply (AD-AS) model plays a pivotal role in understanding the intricate relationship between the energy sector and the broader economy (Mitchell & Watts, 2019) Its significance is multifaceted, highlighted by several key factors that underscore its importance in analyzing and guiding policy decisions within the energy domain One crucial aspect is the impact of policies on both Aggregate Demand (AD) and Aggregate Supply (AS) in the energy sector (Hubbard, 2014) Changes in energy policies, such as incentivizing renewable energy or imposing carbon emission levies, significantly influence consumer and business behaviors Understanding how these policy shifts affect aggregate demand is crucial For example, increased government support for renewable energy initiatives can substantially elevate demand for associated goods and services Similarly, policies influencing resource availability, exploration, and extraction directly shape the aggregate supply of energy, impacting the broader economy (Hubbard, 2014) In summary, the AD-AS model serves

as a critical instrument for policymakers and economists, offering profound insights mto the complex interplay between energy dynamics and broader economic factors It enables informed decision-making in a rapidly evolving energy landscape, guiding strategic policies for sustainable growth and development (Agénor, 2015)