(VEN) - The domestic energy sector is lacking capital and it remains difficult for it to attract investment. Recently, an international workshop was held in Hanoi to discuss solutions that help the energy sector overcome these difficulties.
Huge capital amounts wanted
The energy sector plays a very important role for socioeconomic development as well as the lives of people in any country. Therefore, investing in the energy sector is one of the top priorities. However, energy development projects require large amounts of investment capital. Tran Viet Ngai, the president of the Vietnam Energy Association, said, "From 2010, Vietnam will need huge amounts of investment capital to carry out projects in the fields of coal, electricity, oil and gas, and renewable energy."
Specifically, from 2010, the Vietnam National Coal and Mineral Industries Group (Vinacomin) will have to raise about VND25-30 trillion (US$1.3-1.6 billion) of investment capital each year to meet the demand for development. Of that total amount, 70-80 percent will be invested in coal and electricity projects. In 2010-2015, the oil and gas sector will need about US$75 billion of investment capital. In the same period of time, the electricity sector will need to invest US$80 billion in development (US$52 billion in power source projects and US$28 billion in power grid projects). Renewable energy development projects also require large amounts of investment capital. For example, it costs about US$2,500-3,000 to produce each kWh of wind power (this includes the construction, installation and operation costs). So it has become urgently necessary for Vietnam to seek solutions to attract investment into the energy sector.
Electricity prices must be adjusted
Many experts and businesses in the field of energy share the opinion that to encourage investment in electricity production, electricity prices must be adjusted. The good effects of the Government-proposed sliding scale pricing system and its policy to subsidize the use of the first 50kWh of electricity and coal power plants are undeniable. However, Deputy Minister of Industry and Trade Do Huu Hao said, "The use of electricity by individuals and businesses are equally subsidized while power supply remains insufficient to meet the practical demand."
To improve the situation, in the opinion of many experts, the Government should adjust the existing way of pricing electricity. A common market price must be fixed and any changes on the electricity market must be controlled by the State. An appropriate subsidy policy must be put in place to apply to people who really need the Government's subsidy, for example students and poor people. Actually, the existing price of 5 cent per kWh is not attractive enough to encourage investment in the electricity sector.
Clear, appropriate price adjustments will promote the growth of the electricity market. It is forecasted that by 2020 Vietnam will have a competitive electricity market that will be operational under the State management. When this market comes into operation, it will help Vietnam attract investment into the energy sector and improve the power supply situation.
Presently, the price of coal that is sold to power plants is 30 percent below the average. Meanwhile, open-cast coal mines are becoming exhausted. To ensure sufficient supply of coal, the coal sector has to invest large amounts of money in extracting coal from pits. Electricity price adjustments will bring about changes in coal prices and the coal sector will be subsidized to expand production and attract investment in coal extraction projects.
Vietnam cannot rely fully on hydropower. Coal resources are predicted to become exhausted in the next several ten years and it is too costly to run oil power plants. In such circumstances, it's time for Vietnam to develop and utilize renewable energy resources. Tong Hung, the chairman of the board at the HD Investment Company, which specializes in investing in small-sized wind power and hydropower plants of Vietnam, said, "Low electricity prices discourage investment in renewable energy development. Moreover, low prices are synonymous with low technology."./.
By Phuong Lan
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