Competitiveness, transparency critical for sustainable electricity development

Competitiveness, transparency critical for sustainable electricity development

Electricity pricing mechanism must properly reflect changes in input costs and be able to cover reasonable expenses as well as a fair margins to attract investment.

Workers of EVN checking the transmission system in Lâm Đồng Province. Transparency in production costs is critical to gain public consensus, secure capital needed for sustainable development and energy security. — VNA/VNS Photo Huy Hùng

A competitive and transparent electricity tariff is vital for the sustainable development of the power sector as Việt Nam is pushing towards its ambitious double-digit growth target, a forum was told on Wednesday.

Speaking at the online event held by the Government’s e-portal, Trịnh Quốc Vũ, Deputy Director of the Electricity Authority of Việt Nam said, with the roadmap for a competitive retail electricity market, more players will join the market, offering customers more choice of suppliers.

Currently, Việt Nam Electricity (EVN) is not the only electricity retailer. There are 742 other wholesalers and retailers who altogether account for a share of 8.59 per cent of the retail market.

The direct power purchase agreement (DPPA), in effect since 2024, enables large electricity users to buy power directly from renewable energy generators. It is an important step towards a competitive retail electricity market and gives them more options beyond EVN, Vũ said.

Lê Việt Cường, Deputy Director of the Institute of Energy, said the electricity pricing mechanism must properly reflect changes in input costs and be able to cover reasonable expenses as well as a fair margin to attract investment.

At the same time, electricity prices must also be appropriate to the socio-economic conditions of each country, he added.

The trend is that electricity generation is increasingly dependent on sources sensitive to market prices, such as imported coal and LNG, he said, adding that it is essential that electricity tariffs reflect the costs accurately and properly.

Ensuring financial resources for both State-owned and private enterprises to implement large-scale and urgent power projects is a key solution, he stressed.

According to energy expert Hà Đăng Sơn, Việt Nam is aiming for strong growth in the 2026-30 period with two-digit growth, in which energy security is identified as a pressing issue.

This creates significant challenges in terms of resources because the State budget is limited while the private investment must monitor policies and consider a number of commercial factors, including profits, Sơn said.

Workers of EVN checking the transmission system in Lâm Đồng Province. Transparency in production costs is critical to gain public consensus, secure capital needed for sustainable development and energy security. — VNA/VNS Photo Huy Hùng

In the context that Việt Nam aims to attract private capital into the energy sector, the country needs to develop a proper electricity pricing mechanism that is attractive to investments, but at the same time, harmonising benefits among related parties towards promoting socio-economic development, Sơn stressed.

EVN’s loss

According to Vũ, the Government has tasked EVN to invest in large-scale power projects such as Ninh Thuận 1 nuclear power plant and Bắc Ai, a pumped storage hydropower project and new wind and thermal power projects.

A healthy financial position is essential for EVN to access loans, he said, adding that it’s time to adjust regulations allowing EVN to account for electricity production costs in a timely and accurate manner.

EVN Deputy Director Nguyễn Xuân Nam said that the group incurred a loss of VNĐ44 trillion (US$1.76 billion) on rising input costs and low below-generation-cost retail electricity prices in the 2022-23 period despite efforts to reduce costs.

According to Nguyễn Tiến Thoả, former Director of the Price Management Department under the Ministry of Finance, electricity pricing aims at multiple policy objectives, including ensuring energy security, stabilising the macroeconomy, and promoting social security.

With regard to the proposal of accounting for the EVN’s loss into the electricity price, Thoả said that EVN must review all the costs to develop an appropriate roadmap to avoid causing shocks to the market, he added.

National Assembly Deputy Phan Đức Hiếu said a pricing mechanism to reflect product costs is undeniable, but what is more important is to find the right balance.

It is an extremely difficult matter to weigh which costs to include, to what extent, how to safeguard the power sector’s attractiveness to investment and how to foster economic growth, Hiếu said.

Hiếu said that details about unaccounted costs should be clarified to determine what are reasonable costs, adding that a roadmap for adjustments should be developed which also takes into account the endurance of residents and businesses.

According to Vũ, transparency in production costs is critical to gain public consensus, secure capital needed for sustainable development and energy security. EVN must continue to improve the operation efficiency, apply new technologies, enhance communication quality and timely provide information as well as ensuring transparency, Vũ urged.

“The challenge is to design a mechanism that is flexible enough, yet still under control,” said Sơn. EVN must first clarify the so-called unaccounted costs to find a balance point then the prices will go up or down along with costs. 

Bizhub