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Case Study on Power Sector Restructuring in Vietnam

Nguyen Anh Tuan

This working paper by Nguyen Anh Tuan (Institute of Energy, Vietnam) was commissioned for the 2012 Pacific Energy Summit on "Innovation Generation: Powering a Prosperous Asia."

Executive Summary Vietnamese


EXECUTIVE SUMMARY

This essay provides a case study on power sector restructuring in Vietnam.

Main Argument

Over the last decade, the rapid growth and expansion of Vietnam’s economy has dramatically increased the demand for electricity in the country. Faced with this challenge, Vietnam’s power industry has struggled to expand and improve the country’s power system, as evidenced by difficulties with developing new resources, enhancing high-voltage transmission lines, and reducing transmission and distribution losses. However, in 2006, the government approved a roadmap for establishing a competitive power market and began to restructure the electricity sector, starting with establishing Vietnam Electricity (EVN) as a private holding company. This essay provides an overview of the key features of the restructuring and reform process of Vietnam’s power sector and then assesses both its success to date and the road ahead for continued progress. It argues that as a result of unbundling, competition in the electricity sector is increasing and the quality of power networks has improved.

Policy Implications

  • Vietnam has embarked on an ambitious long-term program to completely restructure its power sector, which may span twenty years from beginning to end. However, critical strategic choices will need to be made over the next few years to adhere to this program.
  • There are still many framework limitations to establishing a perfect power market in Vietnam. Government authorities should review their experiences with EVN to develop and prioritize optimal strategies for further unbundling. This process should also take into consideration the need to develop new shareholder companies that are financially viable and have the desire to ensure a solid foundation for future expansions of the power market.
  • Creating an effective power market cannot be done through unbundling alone and requires holistic approaches to the energy sector. Among other tasks, this will require reforming electricity tariffs, allowing utilities to have decent operational margins, and improving and developing infrastructure to deliver electricity to customers.