Rising energy demand calls for investors in hydropower

Surender Singh, founder and co-chief executive officer of Nexif Energy, a Southeast Asian independent power producer, stated that hydro-electric power is one of the most economical sources of electrical energy in Vietnam after it recently announced a plan to increase stakes in the Coc San Hydropower project, which is Vietnam’s first foreign investment hydropower plant below 30 megawatts (MW).

In another case, International Finance Corporation (IFC), a member of the World Bank Group, and Singapore-based Armstrong S.E. Clean Energy Fund which took a combined stake of 36% in Gia Lai Electricity Joint Stock Company. Gia Lai Electricity is one of the largest private sector hydropower players in Vietnam, with an 84.4 MW capacity across 15 run-of-the-river small-scale hydropower plants.

The investment will help the company expand its hydropower portfolio and invest in other renewable energy segments, such as wind and solar power in Vietnam.

Hydropower is the world’s largest source of renewable energy and accounts for one-fifth of the world’s electricity, according to IFC’s statistics. Besides, IFC’s investment is a vote of confidence in Vietnam’s potential hydropower sector and should help attract more international investors.

Hyun-Chan Cho, IFC head for Infrastructure and Natural Resources for Asia pacific, said in a press release that the IFC investment “is an important step to encourage other investors to tap into the rich potential of Vietnam’s green energy sector, where participation by foreign investors is still modest”.

The Vietnamese government plans to relax the electricity market in stages, and encourage more private-sector participation in power generation as the electricity demand in Vietnam increase. A projected 10%-12% a year rise in energy needs stems from population growth and economic development.

Hydropower is considered cheaper to produce than power from fossil-fuel plants-which account for about half of all power generated in Vietnam-and does not emit carbon dioxide.

Japan’s Orix Corporation believes that selling hydropower to Vietnam’s electricity market could yield millions of dollars in profit per year. Orix Corporation, a leading integrated financial services group, and UOB Venture Management announced that they have agreed to jointly acquire approximately US$50 million worth of shares in Bitexco Group, to build hydropower plants in Vietnam, through third-party allocation of new shares.

Given these circumstances, the Vietnamese government has declared a policy of phased-in liberalisation of the electric power market as a way of meeting this strong demand for more energy. This is expected to eventually result in the complete deregulation of power transmission, power generation, and the wholesale and retail sale of electric power, providing more room for entry of private enterprises into the Vietnamese electric power market.

An approved revision of the National Power Development Master Plan in the period 2011-2020, with a vision to 2030 was signed by the Prime Minister earlier this year. The focus is to develop renewable energy, specifically from the hydropower source, with the electricity production aim of 29.5% by 2020.