[HO CHI MINH CITY] The extreme weather conditions in Vietnam – with temperatures exceeding 44 deg C in some regions recently – are putting a strain on the country’s hydropower production.

Compounding matters is the fact that the majority of Vietnam’s wind and solar energy capacity has not yet been commercialised, due to various regulatory risks.

In a note sent to the country’s trade ministry, state-owned power company Vietnam Electricity (EVN) said it is concerned that a reduced hydropower output caused by scorching temperatures and a lack of rainfall will pose power shortage risks in northern Vietnam in the coming months.

The National Centre for Hydro-Meteorological Forecasting expects Vietnam to experience more hotter-than-usual days this year than in 2022, with peak temperatures forecast to smash records.

Over the weekend, Vietnam reported record-high temperatures of over 44 deg C in some provinces in the northern and central regions, breaking the previous record of 43.4 deg C set in 2019.

EVN noted in its report that the El Nino-induced harsh weather conditions this year have lowered the water volume at hydroelectric reservoirs in the northern part of Vietnam. The amount is at only 70 per cent to 90 per cent of the annual average.

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In a note to investors in April, securities firm VNDIRECT forecast that hydropower output will drop sharply in 2023 due to unfavourable weather conditions and will only bounce back from next year. With the prices of domestic and imported coal still on the rise, the firm’s analysts expect thermal power using natural gas to be utilised in a greater way this year.

Earlier this week, Vietnam raised retail electricity prices for the first time since 2019. The loss-making EVN – the country’s largest purchaser of electricity that also has a monopoly on power distribution – raised prices by 3 per cent as part of the move to ensure energy security amid elevated production costs.

Meanwhile, wind and solar power sources have been under stress for years. Dozens of completed green-power projects are still waiting for their electricity grid approval due to legal obstacles and an uncertain pricing mechanism.

Wind and solar energy capacity make up 26.4 per cent of Vietnam’s total energy capacity. But according to another report by EVN, the amount of electricity generated from these sources only accounted for 12.9 per cent of the total power output.

Installed renewable power capacity in Vietnam has already outrun the electricity generation capacity from fossil fuels such as coal, oil and natural gas.

As at the end of 2022, coal-fired and gas-fired electricity capacity accounted for 32.5 per cent and 9.2 per cent of the entire system’s power capacity, respectively. Renewable power constituted 55.4 per cent of the system’s capacity last year, with 29 per cent coming from hydropower, and over 25 per cent from solar and wind energy.

In recent years, Vietnam’s renewable energy sector has been on an upward trend, thanks to robust investments from abroad, as there are no foreign ownership restrictions applied to the development of renewable energy projects. 

Vietnam currently leads the way in South-east Asia’s renewable energy market, with a combined installed capacity of around 45,000 megawatts (MW) in 2022.

The two largest economies in the region, Indonesia and Thailand, are each capable of producing about 12,000 MW per year, while other countries have a capacity of below 10,000 MW, according to data compiled by the International Renewable Energy Agency in 2022.

Vietnam’s energy demand, however, is predicted to rise by 8.5 per cent per annum over the next five years, and this growth is expected to outpace domestic supply in the short term and lead to severe shortages, said VietinBank Securities.

Against this backdrop, the government is drafting a master plan for the next decade to ensure sufficient electricity supply for domestic demand. The plan will also look at ways to reduce greenhouse gas emissions from power generation, and to build a smart and efficient grid system that is connected with other countries in the region.

In a Viet Nam News report on the latest draft of the national power development plan VIII, the country is aiming for the total capacity of power plants to reach about 158 GW by 2030. This is more than double the 69 GW in 2020.

By 2030, about 18.5 per cent of capacity will be generated from hydropower, 13.8 per cent from onshore wind-powered thermal power, and 13 per cent from solar power. While the draft plan stated that coal will no longer be used in power generation by 2050, coal-fired power capacity is still set to maintain its dominance as the largest source of energy in Vietnam until 2030, accounting for about 19 per cent of the mix.