Therefore, the urgent task is to promptly amend and supplement the Electricity Law to meet the goal of implementing the Party and State’s policies on the energy sector in general and electricity in particular, especially ensuring adequate electricity supply for socio-economic development.
Encouraging renewable energy sources
In recent times, the Party and State have issued many major policies and guidelines related to the energy sector in general and electricity in particular; many new related laws have also been amended and supplemented. Implementing Resolution No.129/2024/QH15 of the National Assembly, the Government has assigned the Ministry of Industry and Trade to preside over and coordinate with relevant ministries, agencies and organisations to develop the Electricity Law (amended) project.
The Electricity Law (amended) project was submitted by the Government to the National Assembly at the end of September. In the context of the 4.0 industrial revolution, digital transformation and green energy transition are taking place strongly and are the main trends, greatly affecting the development of our country’s electricity industry.
Minister of Industry and Trade Nguyen Hong Dien said that the development of the Electricity Law (amended) is to promptly and fully institutionalise the Party and State’s policies and guidelines on sustainable development of the electricity sector; abolishing inappropriate and obstructive regulations as well as supplementing regulations of a fundamental nature suitable to the new situation, aiming to double the installed capacity of the entire system by 2030 and fundamentally changing the structure of power sources to achieve the goal of zero net emissions by 2050.
Specifically, Vietnam’s large hydropower sources have currently been almost fully exploited; new coal-fired thermal power plants are having difficulty in arranging and mobilising investment capital; and imported liquefied gas power plants depend heavily on world oil prices and electricity prices are still quite high. Meanwhile, the demand for electricity for socio-economic development will remain at about 8-9%/year until 2030, which is a big challenge for the electricity industry. Resolution No. 55-NQ/TW of the Politburo has set out many tasks and solutions such as building breakthrough mechanisms and policies to encourage and promote the strong development of renewable energy sources to replace fossil energy sources to the maximum.
To implement the above policy, the new draft law has included framework regulations: the Government will issue incentive mechanisms to support the development of storage systems for renewable energy projects; and incentive and support mechanisms for offshore wind power development such as the electricity buyer and the electricity seller are entitled to agree in the electricity purchase and sale contract on the rate of ensuring the mobilisation of minimum annual electricity output, exemption of land use fees during the project investment and construction phase or incentive policies for new energy electricity; among others.
These mechanisms and policies will then be specifically regulated in sub-law documents. During the management process and periodically, the Government will regulate the scale of these power sources accordingly and simplify procedures while still ensuring development control to avoid wasting resources.
A difficulty of most current gas-fired power projects is that they are large-scale, have high investment capital, and electricity production costs depend on prices and gas sources that fluctuate according to the world market. To mobilise investment capital (mainly from FDI sources), there needs to be a mechanism to ensure revenue and debt repayment capacity of the project after it comes into operation, while the current electricity law does not specifically regulate this issue. Therefore, the new draft law has added a number of principles on assigning the Government to issue mechanisms for gas-fired power development suitable for each period regarding long-term minimum contracted electricity output, electricity price principles, etc.
Promoting a competitive electricity market
To further promote the implementation and completion of a competitive electricity market, especially at the competitive retail level, in the process of drafting the revised Electricity Law, the Ministry of Industry and Trade has added many contents in the direction of removing obstacles in the process of implementing the electricity market in the past, creating a legal basis for the implementation of new electricity trading mechanisms, and the trend of customers consuming “clean” electricity.
The new draft law has supplemented and adjusted regulations related to the electricity price mechanism to promote the formation of a competitive retail electricity market; supplemented regulations on the direct electricity trading mechanism between power generation units and large electricity users, and at the same time assigned the Government to specify in detail the principles, operations, and participation procedures of this mechanism, thus meeting the needs of large electricity users who want to buy green and clean electricity.
Another notable issue in the new draft law is the adjustment of the average retail electricity price according to the market mechanism. Accordingly, the draft proposes that the Government will assume the role of regulating the mechanism for adjusting retail electricity prices, creating conditions for electricity prices to promptly reflect market fluctuations, input costs and reasonable profits. This helps preserve and develop the capital of electricity enterprises while ensuring that the average electricity price is adjusted at least once every three months.
Changing the authority to decide on electricity prices also aims to increase flexibility in reflecting costs, enhance transparency, and ensure the general principle that the Government plays a role in promulgating legal institutions, mechanisms and policies on adjusting electricity prices in accordance with the orientation in Resolution No.55-NQ/TW, consistent with the practice of adjusting electricity prices in recent times.
In general, experts assess that the draft Electricity Law (amended) this time is not only a legal tool to regulate the electricity market, but also an important step forward in developing sustainable energy. The completion of the electricity price policy helps create a transparent, fair and competitive electricity market, thus contributing to improving economic efficiency and meeting the increasing demand for energy in Vietnam.
According to Dr Thai Doan Hoang Cau, an expert in the energy sector, the highlight of this draft is the decentralisation of more power to the Government and competent authorities in issuing decisions, processes and regulations related to the specific characteristics of the electricity sector. As a result, legal documents that supplement the new Electricity Law will be updated, changed more flexibly and frequently to meet rapid changes in technology, electricity demand, economic development as well as design and operation of electricity market mechanisms; thereby, increasing the feasibility and stability of the bill in the face of changes in practice. Energy experts also expect the bill to be soon passed and promulgated by the National Assembly to promote the development of Vietnam’s electricity sector.
