As coal and hydropower almost have no more room for growth, gas, solar, and wind power will now play a crucial role in the development and expansion of the energy industry, especially as Việt Nam gradually becomes an important production centre in the world.

However, investment in solar and wind power may slow down in the next few years if there are no supportive policies, as well as essential infrastructure such as storage and transmission systems.

Phú Hưng Securities JSC (PHS) said that Việt Nam had witnessed extraordinary economic growth in the last two decades, with GDP growth up to an average of 13 per cent per year, and energy being the most essential factor to ensure sustainable growth.

Electricity consumption demand in Việt Nam has also soared in line with the economy, according to forecasts of large organisations such as the World Bank, Asian Development Bank (ADB), and Fitch Solutions.

The demand is expected to continue to rise rapidly as the country’s economic growth regains momentum in the near future.

Strong FDI inflows from the supply chain shift are also a driver for the economy as well as the energy industry.

Analysts say that FDI has been linked to the expansion of Việt Nam’s economy and the rising capital in the near future will certainly benefit the power industry, as the majority of registered capital, which represents nearly 60 per cent of accumulated capital, is related to the production and processing sectors.

In the last two decades, the country’s electricity output has grown dramatically by more than 11 per cent a year to ensure the necessary consumption.

But since 2019, there has been a big shift in the output structure, whereby the output from renewable electricity (solar power, wind power, hydroelectricity) has increased in proportion rapidly and reached more than 48 per cent in 2022.

Particularly, solar and wind power played big roles in the shift due to massive investment thanks to attractive preferential pricing (FIT) policies, which expired at the end of 2021.

With preferential and incentive policies, especially in terms of prices, Việt Nam has become the leading country in the region in terms of the share of clean energy, far surpassing others that already have advantages in the field such as China, Australia, and Thailand.

The development has been clearly described in Power Plan VIII, the most important development orientation document of the electricity industry in the next decade.

The ban aims to strongly develop renewable energy sources for electricity production. Oriented to 2050, the rate of renewable energy is up to 67.5 to 71.5 per cent.

During the 2021 to 2030 period, it is estimated that the total investment in the development of power sources and transmission grids is around US$134.7 billion.

It is clear that Power Plan VIII pays more attention to the development and expansion of the installed capacity of wind power and gas power in the period from now to 2030.

Challenges vs favourable factors

While wind is considered an abundant resource thanks to the country’s favourable natural conditions for wind power with a long coastline, gas power is identified as an important intermediate step to rapidly reducing carbon emissions and is the power source of base load capacity to ensure energy security.

Actual statistics showed that switching from coal to gas power can immediately reduce greenhouse gas emissions by more than half.

Although it does not completely eliminate pollution, this is considered a quick and effective solution as the investment cost of renewable energy remains high.

Gas power is also the only source of electricity to replace coal power in base load capacity, helping to make the power supply stable and reliable in the next decade, analysts say.

However, Việt Nam is short of domestic gas sources because the reserves of current gas fields are decreasing at an alarming rate.

The solution proposed in the near future is to develop new gas fields off the continental shelf, typically Block B - Ô Môn and Blue Whale, and to import LNG. The drawback is that the solutions are all expensive, pushing gas electricity prices higher and making them less competitive compared to coal electricity.

Although solar power and wind power have experienced explosive growth, the distribution and planning are uneven, as most solar and wind power projects are concentrated in the South, where the temperature is high with many sunny days and the wind is also stronger than the North.

In addition, over the years, the power transmission system has not developed to keep pace with the expansion of renewable electricity, causing the overload to the local power grid while the North can experience serious power shortages as it is completely dependent on two sources: hydroelectricity and thermal power (mainly coal-fired power).

Hydropower, which accounts for almost a third of the total installed capacity and electricity production, is severely affected by the El Nino effects.

As a result, hydropower plants suffer heavy losses. But this will be an opportunity for other power sources (such as thermal power), thanks to increased mobilisation and high electricity prices in the competitive market.

This is a special opportunity for thermal power enterprises to record outstanding business results in 2023, according to PHS.

Poor results despite bright outlook

Even though there were many important factors, such as the approval of Power Plan VIII and power shortage in the North due to the El Nino phenomenon causing drought, affecting the industry in the first half of 2023, business results showed a divergence among the industry's groups, Lê Xuân, an independent trader, told Việt Nam News.

"Most hydropower enterprises continued to post negative growth in the second quarter due to unfavourable hydrological conditions, while the thermal power group saw mixed results," Xuân said.

For example, Bắc Hà Hydropower JSC (BHA) reported a decrease of 94.7 per cent year-on-year in profit after tax to only VNĐ2.2 billion. Northern Electricity Development & Investment JSC No.2 and Bắc Minh Development Investment JSC also saw declines of 75.4 per cent and 70 per cent, respectively, in profit after tax.

For thermal power plants, Phả Lại Thermal Power JSC’s profit after tax surged 146 per cent year-on-year in the second quarter to VNĐ167.4 billion.

Bà Rịa Thermal Power JSC also recorded a profit after tax of VNĐ42.3 billion, seven times higher than the same period last year.

Meanwhile, the profit after tax of Hải Phòng Thermal Power JSC and Quảng Ninh Thermal Power JSC decreased by 35 per cent and 1.3 per cent, respectively, to VNĐ180.9 billion and VNĐ248.3 billion.

On the stock market, she expects power stocks to remain positive in the near future since electricity demand is forecast to increase with the recovery of the economy, and El Nino will still have a negative impact in many sectors.

"However, investors need to choose stocks with good performance and potential big profits in the future such as renewable energy firms. Electricity stocks are suitable for investors who prefer long-term investment because it is a defensive group," Xuân added. — VNS