Vietnam’s Power Development Plan VIII aims to transition 18 GW of coal-fired power to 14 GW of LNG-fired power and 12-15 GW of renewable energy sources by 2030.
LNG-fired power, or liquefied natural gas, is envisioned as the baseload replacement for coal-fired power and is considered Vietnam’s power source of the future.
Lack of mechanisms for foreign currency guarantees and international payment obligations for LNG imports. Image: PVN
Dr. Nguyen Quoc Thap, Chairman of the Vietnam Petroleum Association, stated that the total capacity of 23 LNG-fired power projects to be invested in and operated by 2030 is 30,424 MW.
Of these, domestic gas-fired power plants will account for 7,900 MW (10 projects), while LNG-fired power plants will reach approximately 22,400 MW (13 projects).
By June 2024, the O Mon I Thermal Power Plant, with a capacity of 660 MW and previously using oil fuel, was put into operation and will subsequently use gas from Lot B. The Nhon Trach 3 and 4 Power Plant Project, with a capacity of 1,624 MW and 85% progress, will utilize LNG from the Thi Vai LNG Terminal, which is currently under construction.
Additionally, there are 18 projects in the early stages of investment, including nine projects using domestically produced gas and three projects in the process of selecting investors, with a total capacity of 4,500 MW.
However, the Chairman of the Vietnam Petroleum Association pointed out that LNG-fired power faces several challenges. The consumer market is growing slowly compared to the goals set out in the Power Development Plan VIII.
Meanwhile, the legal framework to expedite the negotiation and signing of legal, economic, and commercial agreements among entities in the LNG-related project chain remains incomplete.
Dr. Thap also noted that Vietnam currently lacks regulations requiring electricity buyers to guarantee offtake volumes for LNG-fired power and a mechanism to convert gas prices to electricity prices for LNG-fired power plants.
Furthermore, the current Law on Pricing does not include import, storage, and regasification charges for LNG, which are considered state-priced commodities. As a result, these charges will be negotiated and agreed upon by the concerned parties, leading to difficulties in negotiating and signing LNG and corresponding electricity purchase agreements.
To address these challenges, Dr. Nguyen Quoc Thap emphasized the need to study the development of the electricity market in line with the goals of Power Development Plan VIII. He suggested focusing on the concentrated and synchronous construction of LNG terminals, power plants, and industrial zones or factories with a large enough demand for electricity.
The Vietnam Petroleum Association also proposed that LNG-fired power should be absorbed or consumed by industrial zones or processing plants and, more broadly, by the economy.
Given that import costs make up a significant portion of LNG-fired power production costs, it is proposed that LNG-fired power pricing be market-based. Therefore, “LNG-fired power needs long-term commitments for power purchase agreements with consumers and an expansion of direct power purchasing entities,” Dr. Thap recommended.
On July 3, the government issued Decree No. 80 on the mechanism for direct power purchase between renewable energy generators and large power consumers. This mechanism includes solar, wind, small hydropower, biomass, geothermal, ocean energy, and rooftop solar power but does not yet include LNG-fired power.
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