Vietnam and energy

Official Name: Socialist Republic of Vietnam.

Summary: Since the end of the Vietnam War, Vietnam has developed and relies on extensive hydropower for energy generation. However, it has also developed oil and gas reserves, while coal is another important energy source. The country continues to modernize and develop its energy production as demand rises. Electricity generation is beginning to be integrated into the Greater Mekong subregion energy supply network.

Energy production in Vietnam has a long history compared to that of the neighboring countries in Indochina. Coal exploitation started with French colonization in the mid-nineteenth century. The first thermal electricity plant in Indochina was built in Vietnam (Hai Phong City) in 1892; it went into operation in 1894 for the sole purpose of serving European residents and the ruling elite in the north of Vietnam.

In 1954, when the French left the country, there were five thermal power plants with an installed capacity of 31.5 megawatts and production of about 54 gigawatt-hours per year. In 1955, when the country was divided into two, North Vietnam established the Electricity Agency under the Ministry of Industry and Trade; South Vietnam had its own Electricity Agency. After the country’s reunification, new electricity agencies for the central and the southern regions were formed in 1975 and 1976, respectively. Electricity of Vietnam (EVN) was founded in 1995 and became Electricity of Vietnam Group in 2006, taking charge of electricity nationwide. EVN is the main electricity producer and distributor in Vietnam. In 2005, electricity produced by EVN amounted to 80.6 percent of total national production. This percentage declined into the 2010s as independent power producers (IPPs) became more common, reaching about 55 percent by 2018. By 2022, EVN generated just 38 percent of the nation's electricity.

Demand for energy has increased in parallel with the country’s development. Annual electricity consumption reached 6.48 terawatt-hours (TWh) in 1990, 22.9 TWh in 2000, 89.94 TWh in 2010, almost 150 TWh in 2016. By the end of 2023, Vietnam's annual energy consumption had declined to 1.359 TWh.

Between 1999 and 2009, Vietnam experienced an average annual economic growth rate of about 7 percent. Demand for electricity, from the industrial sector and for domestic consumers, increased even more rapidly and was expected to continue to grow sharply into the 2020s. In 2017, installed power generation capacity reached 42.13 gigawatts (GW).

Vietnam’s electricity production relies heavily on hydropower due to the country's abundance of rivers. While this renewable resource provides advantages, poorly regulated overdevelopment of dams and power stations led to serious environmental consequences, including potential loss of water resources, by the 2010s. Most of this development was in the country's Central Highlands region, which had at least 190 operational or planned hydropower plants in 2005. Lack of oversight meant that later development was not well documented, but a 2009 estimate put the number of projects at 257. The period from 2011 to 2014 in particular saw a further boom in hydropower projects, with myriad small dams with generating capacity under 30 megawatts managed at the local level. By the mid-2010s the national and provincial governments were canceling many projects due to overdevelopment concerns, but the demand for energy meant dam projects continued to be proposed.

Hydropower is supplemented by natural gas and coal-based electricity generation (a nuclear energy program was suspended in 2016). The Vietnamese government has investigated energy conservation and development of non-hydro renewable sources to improve sustainability.

Energy Production and Consumption

The annual rate of increase of Vietnam's commercial electricity production for the period 1995–2009 was 15 percent. Extensive hydropower development became a high priority for the Vietnamese government, which considered hydropower to be one of the lowest-cost sources of new power. In the late 1990s and early 2000s, hydropower produced about half of the country’s electricity. Even though that percentage declined in the 2010s, hydropower is still being rapidly developed and will continue to constitute a high percentage of the energy sector. In 2021, 7.1 percent of the country's total installed power-generation capacity came from hydropower.

Growing concerns about the environmental and social impacts of hydropower plants have brought attention to the need for more careful hydropower development. However, the country is still expected to reach 90 percent of its total hydropower potential (21,000 megawatts) by 2025. During the period 2016–25, development of residual hydropower capacity was expected to focus on pumped-storage projects, in both the north and the south.

In line with the government’s integration policy, EVN participates in regional power development with other countries of the Association of Southeast Asian Nations (ASEAN) and the Great Mekong Subregion (GMS). Since 2005, EVN has cooperated with China, Laos, and Cambodia through power purchase agreements for cross-border power.

EVN has also promoted investment hydropower projects in Laos and Cambodia in order to improve power supply to the border areas. With technical assistance from the World Bank, Vietnam, in collaboration with China, is implementing a study on a 500-kilovolt interconnection line. Vietnam, Laos, and Cambodia have also conducted a joint study for a 500-kilovolt transmission line project, with technical assistance from the Asian Development Bank. In parallel with an in-progress GMS power network interconnection, ASEAN countries are proceeding with an ASEAN power network interconnection project. ASEAN countries are expected to have access to diversified energy sources from GMS and ASEAN regions, including hydropower, oil, gas, and coal.

Fossil Fuels

Before 1975, American troops had already begun looking for offshore oil in Vietnam. Oil exploitation, with support from the former Soviet Union, was not begun until after 1985. With 4.4 billion barrels of proven oil reserves by the end of 2016, Vietnam continues to export its crude oil, which is the main source of the country’s commercial energy, followed by coal. The main markets for Vietnam’s oil include Australia, Singapore, and Malaysia. The state oil company, PetroVietnam, is the dominant player in this sector, having stakes in all projects. Other investors include Vietso Petro JV, BP (divested to TNK-BP), and Petronas Carigali.

Local demand for gas, especially for power plants, increased rapidly in the early twenty-first century and became much higher than the domestic supply. Vietnam planned to boost gas imports and the exploitation of untapped resources to offset this shortage. According to the Oil and Gas Journal as reported by the US Energy Information Administration, Vietnam’s proven gas reserves amounted to 24.7 trillion cubic feet by 2016. However, about half of this is in deepwater areas, requiring expensive investment for exploitation. In 2016 Vietnam's gas production reached 375 billion cubic feet.

Vietnam was historically a coal exporter, thanks to production in the country's north dominated by the state-owned company Vinacomin that exceeded domestic consumption. A small amount of mostly bituminous coal, with a calorific value of between 5,000 and 6,000 kilocalories per kilogram (air-dried basis), was imported to supply thermal power plants. After 2009, however, coal exports slowed considerably, and by 2015 Vietnam had become a net importer of coal. The government promoted coal as a cheap source of power generation to cover volatility in the hydropower supply. In 2021, roughly 49.1 percent of Vietnam's electricity was generated through coal.

Renewable Energy

According to the National Institute of Energy, Vietnam has a great potential for renewable energy. In 2021, biomass energy and waste constituted approximately 10 percent of the country's primary energy consumption. Vietnam also contains significant potential sources of geothermal energy and wind energy. It is expected that these sources of energy will be exploited more effectively in the next few decades.

Vietnam also explored the potential for compensating for its electricity shortfall with nuclear power. In 2009, the National Assembly approved the first nuclear power plant project, with a capacity of 4,000 megawatts, in Ninh Thuan Province in south-central Vietnam. However, the program was canceled in 2016.

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