The reformation in the power sector—from state-owned monopoly to competition based market—is one of the prime reasons that attracted IPPs’ investment in the country. And the other reason to lure IPP is to meet the escalating demand for power.
The liberalised power policy has created new market mechanism for IPPs. The Ministry of Industry and Trade has selected five power buyer corporations who can choose power supplier (IPPs) before making purchase. Any power plant generating 30 MW or more can to join the wholesale market of electricity whereas plant producing less than 30 MW has to fulfill infrastructure demand before participating. The competition within power buyers and among power suppliers is likely to create quality wholesale market.
The competitive wholesale market mechanism is expected to deliver better service in retail market at revised tariff. The country has been suffering from low retail price of electricity due to which investor did not get fast return on investment earlier, although the government subsidised the slow recovery through capital investment.
But the new market structure is likely to reduce the cost recovery time of investors (IPPs) because it is expected that retail market will not compromise the quality service under revised tariffs. This is one of the key reasons for IPPs to invest in the power sector.
The reformation in the power industry has already shown its effect as more than 35 IPP power projects in Vietnam will be in operation in between 2016 to 2020. Their estimated investment of over US $30 billion will be generating almost 4000 MW in near future.
Moreover, the soaring demand for electricity further unfolds investment opportunity for IPPs’ in the country. With rapid industrialisation process and increasing urbanisation rate, the government of Vietnam (GVN) forecasts its electricity consumption to grow by double digit in between 10% to 12% per annum till 2020.
To address the growing power need Vietnam plans to generate more than 60,000 MW by 2020 out of which over 50% production is expected from IPPs which means there are more investment opportunities for investors in the powers sector of Vietnam.
Subarna Poudel is a researcher with Frost & Sullivan. He can be reached at firstname.lastname@example.org
Sapan Agarwal drives content and marketing for Frost & Sullivan. Sapan is based out of Kuala Lumpur Malaysia and can be reached at email@example.com | +603 6204 5830