Expert: Electricity price is not attractive enough for private investment

(Dan Tri) - Vietnam needs 368 billion USD for its Net Zero target, but experts say the unattractive electricity price mechanism and power purchase contracts are hindering green investment flows.

At the annual Oil, Gas and Energy Forum with the theme "Energy Transition: Vision and Action" held on the morning of July 28, Dr. Ngo Tri Long - Economic expert, former Director of the Institute for Price Market Research ( Ministry of Finance ) cited the World Bank Report (WB, 2023) saying that Vietnam needs to mobilize up to 368 billion USD to achieve the Net Zero target.

He pointed out that comparing this scale with Vietnam's average annual public investment (about 700,000-800,000 billion VND, equivalent to 28-32 billion USD), it can be seen that the requirement to mobilize finance for energy transition far exceeds the capacity of traditional public capital sources.

One of the biggest barriers to mobilizing financial resources for energy transition is that the electricity price mechanism does not truly reflect the investment costs, risk level and profit expectations of the private sector.

"Currently, the mechanism for determining ceiling prices in bidding for renewable energy projects - including solar power and wind power - is mainly based on a domestic calculation framework, which does not fully factor in financial risks, loan costs and exchange rate risk hedging costs that foreign investors often face," said Mr. Long.

In addition, the expert said that the power purchase agreement (PPA) lacks long-term commitment, transparency and financial guarantees from the Government or a reliable third party.

According to Mr. Long, Vietnam is one of the countries expected to attract the largest “green” capital flows in the region. However, according to Bloomberg NEF statistics (2024), the total value of green bonds and green loans for Vietnam’s energy sector will only reach 1.9 billion USD in 2023, much lower than Thailand (4.6 billion USD) and Indonesia (3.2 billion USD).

According to experts, Vietnam still lacks legal standards for green financial instruments and a separate legal framework for direct PPAs (Photo: Petrotimes).

The reason lies not in the lack of projects, but in the lack of legal standards for green financial instruments, along with the lack of a separate legal framework for direct PPAs between investors and large electricity consumers.

In addition, the expert said that Vietnam still lacks a unified, synchronous and highly enforceable legal framework for green finance - including carbon markets, green bonds, and renewable energy certificates.

Dr. Nguyen Duc Hien - Deputy Head of the Central Policy and Strategy Committee said that currently, many new international issues are arising, especially regarding energy. Therefore, Vietnam must ensure national energy security to maintain high growth rates, but must have reasonable prices, suitable for people's living standards, while promoting a fair energy transition.

Dr. Nguyen Duc Hien said that institutionalizing energy policies for practical implementation is very necessary to carry out energy transition at reasonable prices (Photo: Petrotimes).

"Currently, energy transition is not simply promoting green transition in industries and fields, but must be associated with the requirement of ensuring energy security at reasonable prices," Mr. Hien acknowledged.

In addition, he said that there should be mechanisms and policies to attract private enterprises to participate, reform the energy market in terms of electricity prices, coordination mechanisms... Besides, the Deputy Head of the Central Policy and Strategy Committee said that after merging provinces and cities, it is also necessary to review the overall energy planning between provinces and regions...

From a business perspective, Mr. Nguyen Trung Khuong - representative of the Strategy Board of Vietnam National Industry and Energy Group (PVN) - said that there are many opportunities opening up for the group when implementing energy transition. That is, the domestic energy demand continues to increase, the trend of switching to low-carbon energy, the 4.0 industrial revolution...

"However, PVN also faces a series of major challenges such as the decline in the traditional role of crude oil and natural gas, the risk of "stranded assets" for oil and gas projects, pressure to reduce emissions, arranging investment capital...", Mr. Khuong acknowledged.

Therefore, the group's leaders believe that it is necessary to perfect institutions and policies to clearly define the state management function for oil and gas activities. Issue a legal framework for new energies such as offshore wind power, hydrogen, nuclear power, etc., as well as have a mechanism for this group to act as the focal point of the national energy industry.

Source: https://dantri.com.vn/kinh-doanh/chuyen-gia-gia-dien-chua-du-hap-dan-dau-tu-tu-nhan-20250728120455608.htm