Electricity industry outlook report for 2022: high demand, predicted shortages in the future – VIRAC
Evolution of electricity supply in 2022
Among utility sectors, the electricity one is assessed as the most complex by many branches with distinct characteristics. It is forecast that nationwide electricity demand in 2022 may increase by 8% compared to the same period in 2021. Therefore, the electricity industry in general is predicted to have many growth opportunities, but the divergence is also clear among different sectors. production type.
According to IRI, under the La Nina climate impact, the average temperature in October 2022 across the country tends to be about 0.5 degrees Celsius higher than average. It will keep this increase until early 2023. The sea in the Western Pacific Ocean around Indonesia and Vietnam is about 0.5 degrees Celsius higher than the average for many years, causing a lot of evaporation.
At the same time, the low-pressure trough from China pulls down to the north, causing thunderstorms in Vietnam during the dry season. Hydroelectric power is expected to continue to be a major source of energy in the future. The La Nina climate pattern is forecasted to continue from now until the end of 2022 with a probability of about 80-90%, and possibly extending into the first few months of 2023 with a probability of about 60-65%.
Favorable hydrological conditions can increase hydroelectricity production and supply throughout the system by 25-26% year-over-year, reaching approximately 125 million kWh in 2023.
Thermal power in Vietnam will continue to import coal until the end of 2022. Specifically, coal demand is expected to increase to 94-127 million tons per year by 2035.
Due to the limited potential of Vietnam’s coal resources, the country will need to import the most coal – about 80 million tons – by 2030. Domestic production of commercial coal is expected to reach only 43-47 million tons per year by that time.
The forecast is optimistic about the long-term business activities of coal power enterprises, given the ongoing high demand for coal and gas thermal power.
Highlights from thermal power plants:
- Thai Binh 2 Thermal Power Plant, after many years of stagnation, successfully burned coal for unit 1 for the first time on June 16, 2022, and connected to the grid with a capacity of 600 MW. Both units are expected to begin generating commercial power in 2023, adding 1,200 MW of coal power capacity to the Northern load area.
- Nghi Son 2 coal-fired thermal power plant is expected to begin generating commercial power for unit 2 with a capacity of 600 MW in 2022, adding a total of 1,200 MW of coal power capacity to reduce power supply pressure for the Northern region.
- Construction of the Van Phong 1 Thermal Power Plant is expected to be completed by the end of 2022, with a plan to connect to the grid with 1,320 MW of coal power in 2023.
In conclusion, Vietnam will need to continue importing LNG to serve new gas power plants. Annual costs are not fixed because gas prices sold to power plants fluctuate according to world crude oil prices, creating favorable conditions for the development of gas electricity.
However, gas output in fields is declining. Currently, the power system has 15 gas-fired power plants with a total capacity of about 8,000 MW, but no new gas-fired power plants have been put into operation in the entire system in 2022.
Wind and solar power
Wind and solar power show promising signs in renewable energy power projects as the government of Vietnam focuses on promoting the strategy of developing clean energy and reducing carbon emissions.
However, it is not expected that renewable energy electricity output will meet the targets set out in the Draft Power Master Plan VIII in 2022 due to difficulties in project implementation.
Instead, hydropower and thermal power will remain the core contributors to the national grid from 2023 to 2025. After that, renewable energy sources may gradually replace traditional power sources.
The reasons for wind and solar power not meeting expectations:
- Solar power has not been able to generate capacity effectively. There is a paradox in which solar power plants, after being put into operation, always have to cut their electricity output and only operate at 60% capacity.
- The main reason for this is the hot and massive investment in solar power plants concentrated in the provinces of Ninh Thuan, Binh Thuan, and Dak Lak, which has put constant pressure on the transmission grid in this area.
- The paradoxical nature of solar power means that it is completely dependent on weather conditions and only operates during hours of high solar radiation. Therefore, when the weather is favorable, all solar power plants generate simultaneously, overloading the relevant lines and substations. This is in stark contrast to hydropower, which can actively generate electricity throughout the day.
- Offshore wind power requires a long development time. The investment and development process of offshore wind farms can take from 7 to 11 years, including the phases of project development, construction preparation, construction, and trial run.
Forecasting the future prospects of the electricity industry
VIRAC assesses that hydropower will play an important role as a fundamental energy source in ensuring national energy security due to its high stability in the future. However, the risk of coal shortage and rising input material prices has caused factories to actively seek imported coal sources to supplement the shortfall, which will affect the thermal power group in the coming years.
A shortage of coal is only a short-term risk, and coal power output will also benefit from recovering demand and higher average selling prices in the competitive power generation market (CGM).
Input coal prices for coal-fired thermal power plants increase. While the recovery of electricity demand nationwide continues, VIRAC believes that the average CGM price for the whole year in 2022 could reach VND 1,400/kWh, up 41% from the same period last year.
Over the next 5 years, the power industry is expected to grow at a rate of about 8.5% per year. According to EVN’s updated report on the balance of power supply and demand in the 2021-2025 period, the shortfall in power output may reach 27.7 billion kWh by 2025. The national capacity reserve ratio for 2025 (excluding renewable energy) is only about 18%.
Specifically, the reserve ratio of the Southern power system will decrease sharply from 2023. There will be insufficient electricity in 2025. In the North, the reserve ratio in 2025 will be only 10%.
Renewable energy is expected to gradually replace hydroelectricity and thermal power in the near future for the benefit of the community. However, appropriate policies from the state are needed to promote rapid development.
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