Dinh Thi Hoang Yen, ICD – MOITUNESCAP, EGM on SGD7

June 2016

Contents� Overview on the development of energy sector in

Vietnam� Capital investment directed toward improving access

to electricity and clean cooking and lighting facilities -RE success and lessons

� Financing energy access and other means of implementation in Vietnam - Role of ODA and international cooperation for energy sector

� Challenges and policies ahead

VietnamEnergySector� Basically energy supply meet the demand for socio-

economic development, contribution to country’s modernization and industrialization and raise people’s living standards.

� Vietnam has diversified primary energy sources like coal, oil and gas, hydro power and renewable energy.

� To date, 100% of districts, communes and 99% of the 98.4% of households have electricity.

PowerSectorDevelopmentIndicatorsElectricity consumption and production (1976-2009)

Per capita electricity consumption and GDP (1985-209)

PowerSectorDevelopmentIndicators

Composition of Power Generation (2001-2014)

In 2014, 42% of installed generation capacity comes fromrenewable energy (hydro)

OthersImportedCCGTGas firedOil fired Coal firedHydro

PowerSectorDevelopmentIndicators

P installed = 11.6 GW

Generation Type 2005

Hydropwer:38%

DO-basedthermal:2%

Coalbasedthermal:13%

Generation Type 2014

Hydropwer:40%

Gasturbine:22%

DObasedthermal:2%

Coalbasedthermal:28%

Gasbasedthermal:1%

Imported:2%Diesel+Wind:5%

P installed = 34 GWoIn 2014, total installed capacity was 34 GW (peak load 22. GW)oFrom 2013 to 2014, installed generation capacity increased by 10.8%oIn October 2015, installed generation capacity has reached 38.8 GWoEVN owns 54%, foreign BOTs 10% and the rest is owned by other SOEs (PVN,Vinacomin, etc).

PowerSectorIndicators

0

2000

4000

6000

8000

10000

12000

14000

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 9/2014

Length of transmission lines 500/220kV in period 2004 - 2014

500 kV

220 kV

Lines 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

500kV(km) 2023 3265 3286 3286 3455 3758 4243 4319 4847 5292 6737

220kV(km) 4798 5230 5650 6487 7987 9400 9870 10828 11313 11750 12007

RuralElectrificationProgram

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1976 1986 1996 2006

40 YEARS OF ESTABLISHMENT AND DEVELOPMENT

2.5%

Cooperatives 63% EVN 19%

Cooperativs, Joint stock Company

(58%)EVN(32%)

EVN86%cooperatives,Joint stock company 14%

Self-managerd commune,agricultural cooperatives,

individual households,

Recovery after warInvestment development

Investment preparation

Re-organized management

Comprehensive investment

Quality improvement

WB (RE) WB (RE2+AF+RD) WB(DEP)ADB(L2517), KfW

1986 1993 1997 2004 2009 2015-2020

RuralElectrificationSuccess� Phase I: Recovery After the War 1976-1985 (2.5-9.3%)• Electricity supplied to big cities and key industries and agricultural irrigation stations in rural areas,

in 1975 only 200,000 rural households accessed electricity.� Phase II: 1985 – 1993 (10% - 14%)• Economic reform, new power plants and North – South 500 kV transmission line• in 1986 about 1.2 mill rural households accessed electricity.� Phase III: Focus on Investments 1993-1997 (14-61%)• 1.6 million households electrified annually (average 4,400 households/day)• in 1996 about 7.4 mill rural households accessed electricity.� Phase IV: Management Reinforcement from 1998-2004 (61-87%)• Enhanced financial support from state budget to EVN/provinces & active participation of

international organizations, particularly World Bank . In 2000, 100% districts, 7.314/8.930 communes (81,9%), 9.414.735/12.817.743 Rural households (73,45%).

�Phase V: Quality Improvement 2005-2009 (92-95%)• Improvement of rural power grid to enhance quality and reduce power loss�Phase VI: Targeted Investments 2009-2015 (95-98%)• Unified electricity tariffs and policies to subsidies poor consumers. Investments on power supply on

islands and remote areas. �Phase VII: Achieving the Last Mile 2016-2020 (98-100%)• Connect remaining households in rural areas, mountains and islands (1.1 million households) - total

investment capital needed USD 1.6 billion USD• Investment needs for upgrading distribution grid phase 2016-2020 to 2.5 billion USD to ensure

stable power supply, reducing power loss and improve power supply reliability in rural area.

ChangeinHouseholdEnergyUse

Increased household electrification caused changes in energy use patterns, increased electrical appliance buying and increased household electricity consumption

StateandPeople,CentralandLocalWorkingTogether

Before 2004, commune and district electricity group accounted around 60% of rural electricity supply, then split between cooperatives and PCs.

RuralElectrificationLessons� Strong government commitment in response to strong

demand from society� Long-term vision, gradual approach, prioritization,

adjustment� The leading and efficient role of the WB and EVN for RE� Suitable technical choices for indigenous people� Clear responsibilities among all stakeholders� Sharing costs and diversifying financial resources

mobilization� Ensure the economic and financial viability for rural

electricity supply

GenerationStructureintheRevisedMasterPlanVII(2015-2030)

Thuỷ điện+TĐ tích năng

25%

NĐ than58%

NĐ khí+Dầu19%

TĐ nhỏ+NLTT

4% Điện HN0%

Nhập khẩu2%

Cơ cấu điện năng năm 2025Generation structure in 2025

Coal based thermal: 58%

Gasturbine+DO:19%

SmallHydro+renewable:

4%NuclearPower

Imported:2%

Hydropower:25%

P installed = 85 GW

Thuỷ điện+TĐ tích

năng12%

NĐ than60%

NĐ khí+Dầu18%

TĐ nhỏ+NLTT

5%

Điện HN4% Nhập khẩu

1%

Cơ cấu điện năng năm 2030Generation structure in 2030

Coal based thermal: 60%

Gasturbine+DO:18%

SmallHydro+renewable:

5%

NuclearPower:4% Imported:

1%

Hydropower:12%

P installed = 116 GW

Hydropower:

-Total installed capacity of large and medium size HPP will be 18,000MW by 2020 (almost utilized).

- The present capacity of small HPP is of 1,635MW and will be of 3,100MW by 2020, and 4,600MWby 2030.

RenewableEnergyProductionProduction (kWh)

2015 2020 2030 2050

Renewable 58 billion 101 billion 186 billion 452 billion

Share of total 34% 37% 31% 42%

Hydro 56 billion 90 billion 96 billion

Wind 1% 2.7% 5%

Solar 0.5% 6% 20%

Biomass 1% 3% 6.3% 8.1%

TransmissionintheRevisedMPVII(2010-2030)

020000400006000080000

100000120000140000160000180000

2010 2015 2020 2025 2030

(MVA

)

Capacity of transformer 500/220kVin period 2010-2030

500 kV

220 kV

0

5000

10000

15000

20000

25000

30000

35000

40000

2010 2015 2020 2025 2030

(km

)

Length of transmission lines 500/220kV in period 2010 - 2030

500 kV

220 kV

Transformers 2010 2015 2020 2025 2030

500 kV (MVA) 11.550 26.400 48.150 71.550 90.000

220 kV (MVA) 21.039 51.277 87.165124.365171.303

Transformers 2010 2015 2020 2025 2030

500 kV (MVA) 11.550 26.400 48.150 71.550 90.000

220 kV (MVA) 21.039 51.277 87.165124.365171.303

TotalInvestmentforPowerDevelopment

2016-2020 2021-2030 2016-2030

Total investment (USD)

40 billion (7.9billion per year)

108 billion (10.8 billion per year)

148 billion

Power generation 75% 74%

Grid development 25% 26%

Total investment for power development resources and grid does not count the investmentin the form of BOT.

InvestorsinVietnam’sPowerGenerationfor2014- 2030

No Investors Invesment share

1 EVN 34,97%

2 Vinaconmin 1,87%

3 PVN 12,66%

4 BOT 29,70%

5 IPP 20,80%

Total 100,00%

EVN/NPT & PCs are responsible for investment of national transmission and distribution systems

Measuresforraisingenergyinvestmentproject� GENCO equitization of EVN, PVN, Vinacomin.� Enhance the efficiency and financial capacity of

energy industry through energy saving programs.� Develop trusted company to reduce the cost of loans.� Sell energy bonds domestically and internationally,

use domestic savings for energy infrastructure investment.

� Establish joint-ventures for power projects, transit port for importing coal and LNG projects.

� FDI attraction, ODA, and commercial loans.

ODAtoEnergySectorinVietnam� During 1993-2013, MOIT received about USD 11 billion for ODA

projects, of which energy sector took USD 10 billion. � ODA is the essential financial resources for maintaining the

production, business operations in the power industry mostly for energy infrastructure building, human resource development, and technical assistance in the collaboration with ADB, WB, JICA/JBIC, UNDP, EU, AFD, KfW, SECO, ect.

� In 2015, the project is being implemented by the MOIT has disbursed USD 564 million of ODA and preferential loans (ADB 35%, Japan 28%, WB 24%), reached 56.65% of the plan.

� Since Vietnam became middle income country, soft loans of donors will soon change to market-based loans of development partners.

ODAManagementStructureforEnergySector

Prime Minister

National Assembly

Development Partners

MPI, MOF, SBV, MOJ

MOIT

EVN, PVN, Vinaconmin,Project developers

ForecasttheInvestmentDemandforEnergySectorinVietnam� The total commercial energy demand will increase by an

average of over 7% per year in the period 2010-2025, in which the demand for electricity will increase by 15% each year.

� The need to mobilize non-refundable aid for TA is expected to increase due to the period 2016-2020 is an important stage in the transition market mechanism of power sector.

� Expected financial resources mobilized for the power sector in the period 2016-2020 is USD 1.636 million, of which ODA loans / concessional loans is USD 1.6 billion, non-refundable aid of USD 36 million.

ChallengestoODAforEnergySectorinVietnam� Vietnam is facing great challenges for meeting huge

investment demand for economic development, especially when coping with global climate change, sea level rising, natural disasters affected region.

� Therefore, Vietnam need a transition period to less concessional or market-based loans and improve the system of legal documents to attract, manage and use ODA and preferential loans.

� Synchronize the work of attracting aid as well as the standardization of monitoring projects between ministries / agencies / local authorities and harmonization of procedures with the donors.

Wayforward� Continue RE, enhance and accelerate bankable investment projects to diversify

energy supply for electricity production and transmission while promoting energy saving programs and the efficient use of energy, environmental protection.

� Electricity tariff reform, development of a competitive power market, power restructuring, improving demand side energy efficiency (Implement roadmap energy prices according to the market mechanism, eliminate monopoly and encourage private sector to invest in energy sector, create incentive mechanism development of wind power, biomass power, and power generation from solid waste, solar power).

� Develop human resource capacity, reform management mechanism, enhance international integration and cooperation in energy sector (Improve the system of legal documents to attract, manage and use ODA and preferential loans; Synchronize the work of attracting aid as well as the standardization of monitoring projects between ministries / agencies / local authorities and harmonization of procedures with the donors).

Thankyouforyourattention!