Experts: Vietnam must raise electricity prices to lower emissions

Sep 17, 2009, 12:23 GMT

   Hanoi - Vietnam must dramatically change the structure of its energy sector if it wants to produce sufficient power without massive increases in carbon emissions, experts at an international green business forum said Thursday.

   Ultimately change would require that Vietnamese consumers accept higher prices for electricity, Oliver Massmann, a lawyer and expert on Vietnam's energy sector, said

   'We have to create a mindset among the Vietnamese people that it costs a lot of money to turn on the light,' Massmann said. 'Then the government can justify giving [renewable energy investors] a higher tariff.'

   Experts spoke of delays in opening the state-monopoly electricity market and of a lack of incentives for foreign-funded energy projects, including renewable ones.

   'The legal system for the development of the energy sector is still unsynchronized and unsuitable to international practices,' said Le Tuan Phong, deputy director of the energy department of the Ministry of Trade and Industry.

   Massmann said major foreign investors in renewable energy projects were still awaiting approval of a 'feed-in tariff' law, which would regulate the price the national electricity grid could pay new power generators. Such a law was still at least a year away, he added.

   'Movement in the right direction of feed-in tariffs and a build-operate-transfer (BOT) law is still, let's say, very slow,' Massmann said.

   Vietnam plans to break up the monopoly of Electricity Vietnam (EVN), the state-owned power distributor, and create a retail market for electricity by 2024. That would create incentives for foreign investment in the sector, but Massmann said it should happen sooner.

   Vietnam needs vast new generating capacity to continue its export-led industrial growth. Electricity generation grew from 67 billion kilowatt-hours in 2007 to an estimated 78 billion this year, but must more than double by 2020 to keep pace with demand.

   Some conference participants criticized the government's reliance on plans for nuclear power, wanting to build two nuclear power plants by 2020, failed to promote wind turbine farms.

   The Vietnamese government cannot afford the subsidies needed for wind-generated electricity to be viable, Vice Minister of Industry and Trade Bui Xuan Khu said.

   'The price of electricity to the consumer is about 5 cents per kilowatt-hour,' Phong said. 'But the price of buying it from the wind farm can be 10 cents. So the government must subsidize 5 cents to the wind farm.'

   Subsidies for a major wind farm project could quickly mount to tens of millions of dollars per year, Phong said.

   Vietnam's current plans involve large numbers of new coal-fired power plants. Gwen Andrews, an executive at the power company Alstom, said it was crucial for Vietnam to build those plants so that in the future, it could retrofit them with 'carbon capture and storage' technology, to prevent atmospheric carbon dioxide emissions.