Decision No. 176/2004/QĐ-TTg Approving the Power Industry Development Strategy for the period 2004-2010 with orientations to 2020

DECISION

Approving the Strategy for the Development of the Electricity Industry in Vietnam for the period 2004-2010, with orientations to 2020

Period 2004 - 2010, with orientations to 2020

 

PRIME MINISTER

Pursuant to the Law on Organization of the Government dated December 25, 2001;

On the basis of the conclusions of the Politburo on the Strategy and planning for the development of the electricity industry of Vietnam dated October 24, 2003; Male on October 24, 2003;

Considering the report No. 1768/TTr-KHĐT dated May 2, 2003,  letter No. 4312/CV-NLDK dated August 24, 2004 from the Ministry of Industry proposing approval of the Strategy for the Development of the Electricity Industry in Vietnam for the period 2004-2010, with orientations to 2020; opinions of ministries and sectors regarding the Strategy for the Development of the Electricity Industry in Vietnam for the period 2001-2010, with orientations to 2020,

 

DECISION:

Article 1. Approve the Strategy for the Development of the Electricity Industry in Vietnam for the period 2004-2010, with orientations to 2020 as follows:

1. Viewpoints on Development:

The development of electricity must precede one step ahead to meet the requirements of economic and social development and ensure national security and defense under conditions of international economic integration, to meet the demand for electricity for daily life of the people; ensuring national energy security. Accelerate electrification in rural areas, remote regions, mountainous areas, and islands.

Ensure the quality of electric power to provide electricity services with increasingly high quality and competitive prices. In particular, pay special attention to saving electricity from generation, transmission to consumption stages.

Use efficiently primary energy sources of the country such as hydropower (combined with irrigation), gas, oil, and coal for electricity production, apply advanced scientific and technological equipment and reduce environmental pollution.

Continue to survey, research, prepare conditions for building nuclear power plants (after 2015) to ensure absolute safety in use, aiming to diversify energy sources.

Promote research and development of new and renewable energy forms to meet electricity needs, especially for islands, remote, and far-flung areas.

Gradually form a competitive domestic electricity market, diversify investment and business models, encourage various economic sectors to participate, without turning state monopoly into corporate monopoly. The State will only maintain monopoly in transmission, construction, and operation of large hydroelectric power plants and nuclear power plants. Actively participate in grid interconnection and electricity trading with neighboring countries.

Establish electricity prices to achieve the goal of encouraging investment in the electricity industry, increase competitiveness in electricity prices compared to other countries in the region, particularly electricity prices for production, separating social policy components from electricity prices. Implement appropriate policies on electricity usage in rural and mountainous areas.

Combine unified grid management nationwide with building and operating regional power systems safely to synchronize and modernize the national transmission and distribution network to provide reliable, continuous, safe, and efficient electricity services.

2. Objectives of Development:

The target for the development of the Electricity Industry in Vietnam by 2010 is: to effectively utilize hydropower (combined with irrigation), gas, and coal to develop balanced power sources. Construct gas-electric-ammonia complexes at Phu My and the Southwest region. Promote research and construction of Son La Hydropower Plant. Study options for using nuclear energy. Synchronize and modernize the national distribution network. Diversify investment and business models; implement appropriate policies on electricity usage in rural and mountainous areas. Increase competitiveness in electricity prices compared to the region.

Specific Goals:

Fully meet the demand for electricity for economic and social development. Strive to reach a production volume of about 53 billion kWh by 2005; 88 to 93 billion kWh by 2010, and 201 to 250 billion kWh by 2020.

Accelerate the program to bring electricity to rural and mountainous areas, striving to reach 90% of households in rural areas having access to electricity by 2010, and 100% by 2020.

Ensure sustainable financial balance.

Diversify investment methods for industry development and prepare plans for importing electricity from Laos, Cambodia, and China.

Train staff with sufficient professional qualifications and high sense of responsibility to meet the increasing demands of the Electricity Industry.

Implement a diversified operational mechanism including many companies with legal personality according to the model of Financial - Industrial - Commercial - Service - Advisory Association.

Control and mitigate environmental pollution in electricity activities.

3. Development Strategy:

Develop power sources and grids synchronously towards modernization. Develop hydropower, coal-fired thermal power, gas-fired thermal power, nuclear power..., combining exchange and connection of power grids with neighboring countries. Vietnam Electricity Corporation will only invest in power generation projects with capacity of 100 MW or more, creating conditions for other businesses to invest in smaller projects. Rapidly develop, synchronize, and modernize the transmission and distribution system to improve reliability, safety of power supply, and reduce power losses.

1- Development Strategy for Power Sources:

a) Prioritize the development of hydropower, especially those with comprehensive benefits (water supply, flood control, drought prevention...). Encourage investment in small hydropower plants through various forms to fully utilize clean, renewable energy sources.

Within the next 20 years, most hydropower plants will be constructed in suitable locations. It is expected that by 2020, the total capacity of hydropower plants will be around 13,000 to 15,000 MW.

b) Develop thermal power plants with appropriate ratios, suitable to the availability and distribution of fuel sources:

Coal-fired thermal power: it is expected that by 2010, the total capacity will be around 4,400 MW. During the period 2011-2020, additional capacity of 4,500 to 5,500 MW (base load) and 8,000 to 10,000 MW (peak load) is needed. Due to limited domestic coal production, consideration should be given to constructing coal-fired power plants using imported coal.

Gas-fired thermal power: by 2010, the total capacity should be approximately 7,000 MW, and from 2011 to 2020, an additional capacity of about 3,500 MW needs to be constructed (basic gas supply plan); in case more gas sources are discovered, an additional capacity of about 7,000 MW needs to be constructed.

Invest in surveying, researching, and preparing necessary conditions to construct the first nuclear power plant in Vietnam with an estimated capacity of approximately 2,000 MW, expected to be operational after 2015.

c) Electricity import: pursuant to the signed energy cooperation agreement, Vietnam will import about 2,000 MW of capacity from Laos. Subsequently, importing electricity from Cambodia and China will be considered.

d) Develop power plants using new and renewable energy sources. Utilize local new energy sources to generate electricity for areas where the national grid cannot provide or provides inefficiently, particularly for islands, remote, and mountainous regions.

2- Strategy for developing the power transmission network:

Power generation must go hand in hand with the development of the power transmission network; the distribution network must be developed in accordance with the transmission network.

Rapidly develop the 220kV and 500kV transmission systems to enhance the reliability of power supply and reduce power loss on the transmission network, ensuring economic exploitation of power sources; develop the 110kV network into a distribution network directly supplying consumers.

Study reducing medium voltage levels in the distribution network. Quickly expand the distribution network to remote and mountainous areas. Focus investment on improving the distribution network to reduce power loss, minimize failures, and enhance the reliability of power supply.

3- Strategy for rural and mountainous area electrification:

Accelerate rural electrification to contribute to speeding up industrialization and modernization of agriculture and rural areas.

Use new and renewable energy sources to supply electricity to remote, border, and island areas. Establish management mechanisms to maintain and develop power sources in these areas.

Encourage diversification in investment and management of the rural power grid.

Strengthen price control for rural electricity to ensure compliance with the ceiling prices set by the Government.

4- Financial strategy and capital mobilization:

Implement appropriate financial mechanisms to enable Vietnam Electricity Corporation to play a leading role in achieving the power industry's development goals.

Continue to implement some investment projects under the build-operate-transfer (BOT), joint venture, or build-own-operate (BOO) models to attract additional investment funds, while increasing the ability to repay debts for Vietnam Electricity Corporation.

Develop measures to mobilize social capital for power development investment.

Enhance relations with banks and international financial organizations to borrow funds for investment, prioritizing low-interest Official Development Assistance (ODA) loans with long repayment periods (ODA only allocated to Vietnam Electricity Corporation); subsequently, domestic commercial banks should be approached if they cannot meet the needs, followed by foreign commercial banks.

Study participation in the securities market and issuance of bonds domestically and internationally to finance power projects.

Continue implementing the approved electricity price reform roadmap towards gradually aligning with long-term marginal costs and reforming pricing structures to reduce excessive cross-subsidies among customer groups.

5- Strategy for scientific and technological development:

Concentrate on researching advanced science and technology applicable to power production and transmission. Research the application of modern production technology aimed at efficiency, energy conservation, and minimizing environmental impact through reasonable steps.

Deepen investment, upgrade, and modernize existing power sources and networks, improve management, business operations, and customer service.

6- Direction for telecommunication and information technology development:

Leverage all advantages of the power sector's telecommunications infrastructure, combining telecommunications services for power production and business management with public telecommunications service development.

Vigorously apply information technology to management and production operations to enhance business efficiency in the power industry.

7- Direction for electrical machinery development:

Vigorously develop electrical machinery to contribute to domestic industrial growth and reduce imports. Strive to meet basic requirements for equipment up to 110kV by 2005; by 2010, partially meet demands for 220kV transformers and other 220kV equipment. Research the production of complete sets of equipment for small hydropower stations, solar energy, and replacement parts for power plant maintenance. In the long term, research and manufacture equipment that meets international standards and specific national and regional characteristics to satisfy domestic needs and partially for export.

8- Strategy for developing power construction consulting:

Focus on building multi-disciplinary consulting companies specialized in various fields, gradually enhancing their capabilities to independently design large-scale power projects such as power plants and ultra-high voltage transmission networks.

9- Strategy for developing the power installation industry:

Strengthen the capabilities of power installation units to undertake projects from technical design to construction and installation of equipment for power plants and major transmission projects both domestically and abroad, and participate in bidding for overseas projects.

10- Strategy for human resource development:

Regarding cadre work: establish cadre planning and organize training for cadres within the planned scope.

Regarding human resource training: develop specialized power engineering schools, striving to build some schools to international standards. Coordinate between different educational levels: college, secondary, and vocational; develop unified training programs in specialized fields within the industry.

11- Strategy for developing the electricity market:

Gradually form an internal electricity market, where the State maintains a monopoly in transmission and exerts significant influence over production and distribution. Initially, form an internal electricity trading market within Vietnam Electricity Corporation. Study and establish comprehensive legal frameworks and conditions to quickly form an independent electricity market.

4. Implementation solutions:

1- Solutions regarding organization and mechanism:

Supplementing and amending the Electricity Law approved by the National Assembly in 2004 to serve as a legal basis for all electricity activities, creating a legal framework for the supervision and regulation of the electricity market. Studying and building comprehensive legal frameworks and conditions to form a competitive electricity market at an early date.

Building a roadmap for restructuring the organizational structure of the electricity industry according to the strategic orientation that has been set out.

2- Investment development solutions:

Establishing mechanisms and policies, including diversified investment methods, to fully utilize all resources, meet the development needs of the Electricity Industry, and the country's development requirements.

Calculating and developing plans for importing electricity from Laos, Cambodia, and China reasonably.

Entrusting Vietnam Electricity Corporation with the leading role in ensuring investment in power sources and grids to meet the socio-economic development needs of the country, in line with its financial capacity and debt repayment ability, ensuring long-term financial balance.

Publicly announcing a list of investment projects encouraging domestic and foreign economic sectors to participate in power generation and distribution investments, particularly non-state-owned economic sectors, based on attracting capital from the market for investment.

Building appropriate investment mechanisms towards administrative reform, quickly resolving land compensation and clearance issues to accelerate the progress of power infrastructure projects.

3- Financial and capital mobilization solutions:

Continuing to implement electricity price reforms according to the approved schedule and studying adjustments to the electricity tariff structure to reduce excessive cross-subsidies between customer groups. Permitting Vietnam Electricity Corporation to separately account for public service components.

Considering reducing value-added tax on electricity products from 10% to 5% to alleviate pressure on electricity price increases.

Prioritizing preferential credit allocation from the support fund, ODA funds, and bilateral loans from foreign countries for Vietnam Electricity Corporation to implement key national power projects.

Encouraging diversification in rural power grid investment and management based on strengthening rural electricity sales price control to ensure they do not exceed the ceiling set by the Government.

Providing budgetary funding for rural electrification projects in mountainous and island areas aimed at economic development and poverty reduction in these regions.

Privatizing power facilities where the State does not need to retain 100% ownership. Testing the issuance of project bonds and stock offerings on the securities market. Implementing joint ventures and collaborations in power facility investments.

4- Science and technology solutions:

Increasing investment in science and technology and management to continue striving to reduce electricity losses to about 10% by 2010 and below 10% in subsequent years.

Utilizing information technology to ensure optimal operation of the power system.

Implementing demand-side management (DSM) programs to cut peak loads to save investment and facilitate power system operation, and promote energy conservation in consumption.

Applying appropriate technology in the industry to enhance investment efficiency and production and business operations.

5- Human resource solutions:

Emphasizing training and improving the expertise of staff with high professional qualifications and a sense of responsibility to meet the development needs of the Electricity Industry.

Focusing on training a team of nuclear energy engineers and experts to prepare for the construction and operation of nuclear power plants.

Article 2. Allocation of responsibilities:

- Propose to the Prime Minister to supplement additional members to the Board of Directors of Vietnam Coal-Mineral Industries Group.

Shall be responsible for directing the implementation of the Strategy for the Development of the Electricity Industry, the Planning for the Development of Vietnam's Electric Power, examining and approving independent power projects in accordance with the planning and submitting for approval

2. Vietnam Electricity Corporation:

Shall be primarily responsible for ensuring the electricity demand of the entire country and electricity exchange with neighboring countries in the region.

Prioritize the allocation of preferential credit capital for investment in electricity development projects from preferential loan funds, ODA funds at interest rates equal to the lending interest rates of financial organizations plus management costs, bilateral credit and state credit for the corporation's development investment.

Implement electricity price adjustments according to the Government's prescribed roadmap.

Support budget funding for investment in power sources and grid infrastructure serving the economic development goals of remote and mountainous areas and rural electrification, infrastructure projects of public utility nature; provide budget funding for the supply of electricity through renewable energy sources in places where national grid supply is not feasible.

The Vietnam Electricity Corporation shall operate separately, detached from commercial production activities in providing electricity to rural and mountainous areas.

3. Ministries, sectors, provincial people's committees under the central government shall be responsible according to their assigned functions and tasks, and in accordance with the specific characteristics of their respective industries and localities, cooperate with the Ministry of Industry and the Vietnam Electricity Corporation to implement the Vietnam Electricity Development Strategy as stipulated in this Decision.

Request the Vietnam Fatherland Front and other political social organizations to actively participate in implementing this Strategy within their scope of operation.

Article 3. This Decision takes effect from the date of signature.

Article 4. The Minister of Industry, heads of relevant ministries and sectors; provincial people's committees and centrally governed city people's committees; the Board of Directors and General Director of the Vietnam Electricity Corporation and related enterprises shall be responsible for enforcing this Decision./.