Vietnam Electricity (EVN) has announced an adjustment in the average retail electricity prices by 4.5% from Nov. 9. After four years of frozen increases, electricity prices in Vietnam have been adjusted twice this year.
In early November, EVN experts predicted that there will not be an electricity shortage in Vietnam in 2024, but prices are expected to increase. Unexpectedly, following approval of adjustment of the 2023 average retail electricity price "according to actual circumstances" by the Government's Standing Committee, EVN promptly implemented the price adjustment. The average retail electricity price is increased by 86.4168 Vietnamese dong/kWh, rising from 1,920.3732 Vietnamese dong/kWh to 2,006.79 Vietnamese dong/kWh (excluding VAT).
(Photo: EVN)
Currently, Vietnam's electricity price shall be considered and adjusted according to Decision No. 24/2017/QD-TTg issued in 2017. The average retail electricity price increase below 5% will be adjusted by EVN right away, an increase between 5-10% will need approval of MOIT, and more than 10% will go through the Prime Minister of Vietnam. The MOIT has submitted a draft mechanism for adjusting average retail electricity prices to the Prime Minister, suggesting shortening the adjustment interval from every 6 months to every 3 months, with electricity prices being updated quarterly based on generation costs.
Experts unanimously believe that prices must be adjusted to approach market mechanisms. Since maintaining the current low electricity prices makes it difficult to implement the competitive electricity market, unprofitable electricity price policies and investment mechanisms make it difficult to attract investors.
According to Associate Professor, Dr. Bui Xuan Hoi, Principal of the Northern Electricity College in Vietnam, though a 3% increase in electricity prices this May, the prices had been kept unchanged for 4 years to ensure welfare, macroeconomics goals, led to challenges in the electricity industry development. The most obvious, EVN is struggling to adequately invest in expanding the transmission grid. It is considered indirectly led to an electricity shortage in northern Vietnam in June. The World Bank estimated economic losses of up to $1.4 billion by this electricity shortage event.
Therefore, the expert warned the Vietnamese government to seriously consider the problem of electricity shortage with the goals of welfare, macroeconomics, and sustainable development of the electricity industry and economy.
In the electricity supply site, Nguyen Dac Vinh, the former Vice Chairman of the National Assembly's Economic Committee in Vietnam said that in the past few years, due to the impact of the COVID-19 pandemic and production disruptions, economic growth was only at 3-4%. Thus, it is estimated that Vietnam's economy can grow at a rate of 7% per year in the future, the current electricity supply capacity can not meet demand. Besides, based on predictions of a GDP growth rate of approximately 6.0-6.5% for the next year, the Ministry of Industry and Trade (MOIT) and EVN constructed power supply forecast, there are concerns that the total installed electricity capacity of about 50,000-52,000 MW will not be sufficient to support economic growth.
The government has instructed relevant departments to come up with solutions. For instance, the Government's Standing Committee has instructed the MOIT, the State Capital Management Committee, and EVN to ensure a steady supply of coal fuel for thermal electricity plants and operate at the most effective capacity. Furthermore, according to experts, tapping into renewable energy sources immediately is one of the options to solve the short-term electricity supply in 2024.
The MOIT has also asked EVN to report the development status of rooftop solar electricity, address existing issues, and provide a detailed draft for policy development. These drafts may include specifying the scale or total installed capacity of rooftop solar projects, their utilization, whether they will be for self-consumption or sold to electricity companies based on energy use ratios, and regional supply capacity compared to loading capability limits.
