Electricity prices highly unlikely to decrease

36MW Sông Lô Hydropower Plant in the northern province of Tuyên Quang. VNA/VNS Photo Vũ Quang

HÀ NỘI – It is highly unlikely that electricity prices will go down given the current demand, said Nguyễn Anh Tuấn, director-general of Vietnam Electricity (EVN), during a conference organised by EVN yesterday in Hà Nội.

Tuấn said electricity production requires natural resources, which are finite and being depleted, including hydropower. Coupled with the financial challenges faced by EVN, minor decreases in fuel prices do not have an effect significant enough to bring electricity prices down.

According to Tuấn typically Việt Nam’s hydropower output accounted for 35 per cent of total output. However, due to droughts in 2023, many hydropower reservoirs were at dead water levels, resulting in hydropower accounting for just 28.4 per cent of total output.

Meanwhile, coal-fired thermal power, which typically accounts for 33.2 per cent, managed to account for 46.2 per cent of total output in 2023. Gas turbine and oil-fired thermal power, normally making up 10.3 per cent, accounted for 9.8 per cent. Imported electricity had a very low share of 1.46 per cent, and renewable energy with an installed capacity of 26.9 per cent only achieved 13 per cent in production.

For now, hydropower remains the most stable output but it can only meet less than a third of the nation’s demand for electricity. Renewable energy remains expensive due to earlier incentive policies, which have driven its prices as high as US9.35 cents per FiT1, higher than EVN’s electricity retail prices. 

“With our output structure, the cost to produce electricity mainly relies on natural resources. As resources are depleting, the cost will increase. This must be communicated clearly to our customers,” Tuấn said.

According to EVN, the average total cost of electricity generation, transmission and distribution is VNĐ2,092.78/kWh, while the selling price is VNĐ1,950/kWh.

“Of the VNĐ2,092.78/kWh, the production cost of buying electricity from EVN units and non-EVN enterprises is approximately VNĐ1,620/kWh, equivalent to 80 per cent of our total operating costs. In other countries, the cost of buying electricity is typically about 50 per cent compared to the selling price, with the remaining 50 per cent allocated to transmission, distribution and operational management. Meanwhile, we only have 20 per cent for these processes, making it very difficult for EVN and its units to balance our books,” said Tuấn.

EVN’s efforts to optimise costs and improve savings in recent years have not produced significant results, at least not enough to address its financial challenges. Therefore, adjustments to retail electricity pricing policies in 2024 are necessary to address EVN’s financial difficulties.

Total revenue from electricity sales for the entire group in 2023 is estimated to reach VNĐ497,000 billion, a 5.4 per cent increase year-on-year. The total consolidated asset value of EVN as of the end of 2023 is estimated at VNĐ630,537 billion, 94.7 per cent compared to 2022, with equity capital of VNĐ201,535 billion, 89.4 per cent compared to 2022.

According to the director-general, Việt Nam’s total power capacity has reached over 80,000 MW, an increase of nearly 3,000 MW compared to 2022, with renewable energy exceeding 21,000 MW, making the country the top ASEAN renewable producer.

However, due to management issues, there were shortages in the country’s northern regions in June last year. 

He said the shortages occurred due to various unfavourable factors, including both objective and subjective reasons. These included a low power reserve in the northern region, and the impact of El Nino leading to prolonged drought and reduced water flow to hydropower reservoirs, especially in the northern region. Other causes included high demand for supplementary load, as well as malfunctions in many coal-fired thermal power plants across the system due to the increased water temperature for cooling, extended repair work, and troubleshooting at some non-EVN coal-fired thermal power plants. VNS