Vietnam is moving ahead with plans to "limit" the development of coal-fired power stations in the next phase of growth in its electricity sector. The move is part of a long-term strategy to give a boost to cleaner sources of energy and lift overall investments in the country's power sector.
Vietnam has laid out a plan for the next decade, which will begin next year. The plan, commonly known as Power Development Plan-VIII (PDP-VIII), aims to ensure "adequate power supply for social-economic development in every situation", its deputy minister for industry and trade Hoang Quoc Vuong said at a workshop in Hanoi in July, according to a post last week on the website of Vietnam's Institute of Energy.
The steps undertaken are in line with a resolution approved in February by the country's ruling communist party with regards to an energy development strategy to 2030.
Growth of renewable energy and restraining the development of coal-fired capacity will be key pillars of the policy that will come into effect next year, he said, without elaborating on the steps to be taken to curtail the growth of coal-based generation.
Coal has been the mainstay of Vietnam's energy mix in recent years, with the country's coal imports climbing to record highs in recent months as buyers snapped up cargoes at historically low prices. The trend has underscored the growing appetite for coal in the country, with new power plants that have come on line boosting consumption.
Vietnam's coal imports rose to 31.2mn t in January-June 2020 from 20.6mn t in the same period last year, customs data show. Vietnamese customs data do not differentiate between coking and thermal coal.
The steady rise in imports has helped absorb some oversupply in the seaborne market as traditional key buyers China and India have reduced purchases as the Covid-19 pandemic dented power demand. Vietnam's imports, however, grew on business continuity resulting from an effective strategy to contain the spread of coronavirus.
The country has acknowledged economic pressure from the pandemic, which has also jolted power demand projections. "A power load forecast with a vision of 5-10 years and beyond faces a certain awkwardness," Tran Ky Phuc, director-general of the Institute of Energy, in charge of formulating the power sector growth plan said at the Hanoi workshop.
Curtailing coal-based generation growth
It is not immediately clear how many proposed coal-based power plants could be shelved by the government. Vietnamese government officials and a spokesperson did not respond to a request for comment.
But analysts said there is a likelihood that some proposed projects could be scrapped, especially those that are still in the early stages of planning.
Such a decision could be driven by a combination of environmental issues and increased difficulty in financing, as well as public opposition, Daine Loh, analyst at Fitch Solutions told Argus.
Renewable and cleaner energy sources have been gaining traction in the last couple of years and the push comes on falling costs and strong investor interests, she said.
But coal will still be a key source of fuel to meet Vietnam's energy needs as there is a lot of capacity under construction over and above the plants that have come on line in recent years.
"Several projects that are already under construction or in an advanced stage will likely continue to progress over the coming years," Loh said. "The pipeline still remains substantial so any new announcements we see could possibly just be progress from projects that are already in the existing pipeline."
Vietnam commissioned 1.2GW of new capacity last year, bringing its total to 19.2GW. Another 2.1GW is scheduled to come on line this year and a further 3.7GW is under construction and set for commissioning in 2021. Around 3.2GW is under construction and scheduled for launch in 2022, while another 870MW is planned, with construction yet to start.
