Power Development Plan

On May 15, 2023, the Prime Minister issued Decision No. 500/QD-TTg approving the National Power Development Plan for the period 2021-2023, with a vision to 2050 (hereinafter referred to as Power Development Plan No. 8 – PDP8).

In this article, CNC will compare the important contents of the PDP8 with the PDP7 as well as the previous Draft of the PDP8. In addition, the article also aims to assess the implementation capability of upcoming power projects.

The contents of the Power Development Plan VIII

PDP8 planning on the development of power sources and transmission grid at the voltage level of 220 kV or higher, industry and services in renewable energy, and new energy in the territory of Vietnam in the period of 2021 – 2030, with a vision to 2050, including works to connect the grid with neighbouring countries.

Facing the trend of shifting to a clean and green energy source which is taking place strongly around the world, especially after the COP26 Conference took place, the Power Development Plan VIII sets the goal of asserting national energy security to meet the needs of socio-economic development, industrialization, and modernization of the country.

In parallel with this goal, the PDP8 also aims to successfully implement a fair energy transition associated with production modernization, smart grid construction, and advanced power system management to be in line with the trend of green transition, emission reduction, and scientific and technological development as the focus of COP26.

Hightlights of Power Development Plan VIII

If the PDP7 still focused heavily on coal-fired power (48-51%) and nuclear power (1.3-6.6%) while the orientation towards renewable energy sources (38-25%) was still low and tended to decrease towards 2050; then PDP8 is a complete ‘transition’ of energy.

Specifically, PDP8 sets a new development orientation when focusing on renewable energy sources by increasing the scale of renewable energy power capacity (48% of the total capacity of 150,489 MW in 2030 and 65.8-71% of the total capacity of 490,529-573,129 MW with a vision to 2050) and at the same time significantly reduces the composition of coal thermal power in the power distribution plan (reduced from 20% of the total capacity of 150,489 MW by 2030 to 0% with a vision to 2050).

Evaluation of the possibility of implementing upcoming power projects after the approval of Power Development Plan VIII

According to the Power Development Plan VIII, the implementation capabilities of power projects are shown as follows:

Coal thermal power:

Power Development Plan VIII tends to continue to develop coal-fired power plants that have been built in the period of Power Development Plan VII and do not carry out new projects. The coal-fired power plants (after about 20 years) are considered to be shifted to biomass and ammonia fuel before 2050. Plants with a lifespan of over 40 years that cannot be shifted will be shut down.

It can be seen that the proportion of coal thermal power in the ‘shape’ of Power Development Plan VIII has lost its place compared to the proportion of coal thermal power specified in Power Development Plan VII.

Solar power:

Power Development Plan VIII aims to develop (without capacity limitation) self-produced and self-consumption rooftop solar power. Thus, after the approval of Power Plan VIII, grid-connected solar power projects are no longer prioritized for development promotion as before, but instead will be a mechanism to promote the development of self-produced and self-consumption rooftop solar power.

In addition, in the Draft Power Development Plan VIII, the Ministry of Industry and Trade has proposed not to allow deployment in the period 2021-2030 with 27 projects/parts of solar power projects without investors, with a total capacity of 4,136, 25 MW; and  12 solar power projects/parts of solar power projects with a total capacity of 1,634.4 MW which have been approved for planning, approved by a competent authority and assigned to the investor but are in the stage of making a feasibility study report. In this regard, in the context of Power Development Plan VIII, 27 projects/projects with a total capacity of 4,136.25 MW (not yet assigned to the investor) which have not been implemented will be considered after 2030, except for the case that these projects/parts of projects are implemented in the form of self-produced and self-consumption on the basis of non-validation if there are violations of planning, land and other provisions of law. For 12 projects/projects that have been approved for planning and assigned to the investor, the specific progress will be considered in the Implementation Plan of Power Development Plan VIII.

Wind power:

Power Development Plan VIII orients strongly developing offshore wind power in combination with other types of renewable energy (solar power, onshore wind power…) to produce new energy (hydrogen, green ammonia…) to serve domestic and export needs. Specifically, the total capacity of offshore wind power (excluding types used for export and types used to produce new energy) is 6,000 MW (2030), 70,000-91,500 MW (2050) and onshore is 21,880 MW (2030), 60,050-77,050 MW (2050). Compared to PDP7 with a wind power capacity of 1,000 MW (2030) and 6,200 MW (2050), the total wind power capacity under PDP8 has increased significantly, with a corresponding increase of 26,880 MW (2030) and 123,850- 162,350 MW (2050). Thus, it can be seen that the opportunity for investors to participate in wind power projects in the near future is still very open.

In addition, according to PDP8, renewable energy projects (except grid-connected solar power) which are used for producing new energy for domestic and export demand will be prioritized/allowed for unlimited development.

LNG thermal power:

PDP8 restricts the development of new LNG-using power projects to reduce dependence on imported fuels, specifically by 2030, the capacity scale of LNG thermal power will reach 22,400 MW and decrease to less than 7,900 MW orients 2050. In addition, by 2050, LNG-using plants will gradually switch to hydrogen (with a total capacity of 16,400-20,900 MW). This once again shows the focused development direction of PDP8 towards renewable energy sources for export and new energy production (hydrogen, green ammonia…).

Biomass energy, electricity produced from garbage, and solid waste to utilize agricultural, forestry byproducts, timber processing, promote afforestation, and waste management in Vietnam:

In comparison to PDP7 in which the planned cap for biomass energy is around 500 MW (2030) and 2.000 MW (2050), PDP8 could be viewed as facilitating projects that follow this model, accordingly, the total power capacity of this type of project would be 2.270 MW (2030), 6.015 MW (2050), which is an increase of 1.770 MW (2030) and 4.015 MW (2050) respectively. Investors could develop projects of this kind at a higher scale if sufficient materials, high efficiency of land usage and requirements on waste management, transmission network, electricity price, and transmission cost are met.

Hydroelectricity:

PDP8 set out the goal to optimize the potential of hydroelectricity through selective expansion of existing hydropower plants, and the development could be taken to a higher level in case of projects specified in Appendix III enclosed with Decision 500-QD/TTg. To be specific, the total power capacity set out for hydroelectricity by PDP8 is approximately 29.346 MW (2030) and 36.016 MW (205), which is much higher than the power capacity set out for hydroelectricity by PDP7 (17.400 MW as of 2030).

Furthermore, PDP8 also set out the development plan for pumped-storage hydropower plants. In particular, PDP8 encourages the development (till 2030) of pumped-storage hydropower plants with a power capacity of 2.400 MW.

Cogeneration powerplants, power plants using residual heat, blast furnace gas, byproducts of technology chain in industrial establishments:

PDP8 encourages investors to develop electricity projects of this kind, and could potentially push the scale of this model of power plant to meet the domestic industrial establishments’ demands for its uses and potential uses. According to PDP 8, the total power capacity of this energy source is 2.700 as of 2030 and 4.500 MW as of 2050.

Gas thermal power:

PDP8 encourages and prioritizes the maximum use of domestic gas for electricity production, and if the amount of domestic gas fall below an acceptable threshold, supplements of natural gas or LNG through import shall be made. However, the further establishment of projects which use gas shall be placed lower in priority, while heavy focus would instead be placed on the implementation of gas power project chain Block B, Blue Whale, in which investing in building 6.900 MW of gas thermal power plants such as O Mon II, III, IV (3.150MW); Central I, II and Dung Quat I, II, III (3.750); project O Mon I shall switch to gas from Block B. Moreover, the implementation of mixed gas turbine plants in Quang Tri shall use gas from Bao Vang field. PDP 8 also abolish the implementation of Kien Giang 1 and 2 projects due to the origins of materials being unable to be identified. The power capacity for this source of electricity shall reach 14.930 MW (2030) and nearly 7.900 MW (2050).

According to the plan set out by PDP7, the scale of power capacity for gas thermal power as of 2030 shall be 10.400 (lower than PDP8), however, the plan for power capacity is expected to reach 11.300 as of 2050 (higher than PDP8). It could be seen that PDP8 is trying to reduce the reliance on imported resources (in cases where domestic gas is insufficient).

Flexible power sources:

this is an essential source of electricity to incorporate alternative energy sources such as wind, and sun when no battery is capable of storing such energy in high volume exists. Facing many suggestions on power source structure, PDP8 places priority on the development of flexible power sources (300 MW as of 2030 and 30.900-46.200 MW as of 2050) through encouraging the development of pumped-storage hydropower plants (as mentioned in the Hydroelectricity section).

The basis for Power Development Plan VIII in comparison to Power Development Plan VII

It is clear that, in PDP 7, the type of power source, power capacity, planned location and schedule of project implementation are specified for each region separately. However, such method of planning demonstrated its flaws throughout the execution of PDP7. Evidenced by the inequality between the division of and demand for electricity among the regions, which put strains on the interregional transmission grid as well as incurring unnecessary costs and losses during the operation.

Different from PDP7, PDP8 set out more flexible requirements. Based on the evaluation of the potential/reserves, the capability to exploit resources within each region, in combination with the annual average demand for electricity of each region, the requirements shall be adjusted accordingly so that the division of and the demand for electricity of each region in each period is balanced. PDP8 no longer set out the power capacity for each specific region and only lists prioritized projects for investment in Appendix II.

PDP8 mentions the potential/reserves, the demand for electricity consumption specific to each of the 3 regions as well as the structure of power sources so that enterprises could have an easier time proactively evaluating and choosing the region and type of power source to invest.

Other notable contents

Aside from the development of power sources, the development of the transmission grid is another matter emphasized in PDP8. Accordingly, the estimated investment capital for the development of the transmission grid for the 2021-2030 period and 2031-2050 are approximately 14.9 and 34.8 – 38.6 billion USD respectively. PDP 8 also orients toward the research, and specification of the policy of socializing transmission grid investment, thereby opening up various opportunities for investors and increasing investment in the transmission grid.

PDP 8 set out the plan for the establishment of an auction and tender system as well as electricity price for the amendments to the Law on Electricity; guiding toward the experiment and official implementation of direct power purchase agreement system (DPPA); research and stipulate the regulation for the direct power purchase agreement fee.

Furthermore, the Law on Electricity and Law on Efficient Use of Energy are in the process of being amended to complete the policies on investment, planning, electricity price management, doubts handling, legislation of the development plan, and promoting the use of renewable energy (expected to submit to the National Assembly in 2024)

Moreover, PDP8 also set out the plan to research and stipulate the Law on Renewable Energy as well as make amendments to the Law of Efficient Use of Energy so that significant changes could be made to the decreasing use of energy in the economy.