In the Draft Law amending and supplementing a number of articles of the Electricity Law being appraised by the Ministry of Justice, the Ministry of Industry and Trade believes that it is necessary to abolish the single buyer model through policies on transferring electricity purchase and sale contracts signed by Vietnam Electricity Group (EVN).
Regarding the Ministry of Industry and Trade's proposal to abolish the single buyer model of EVN, Dr. Nguyen Quoc Viet - public policy expert, lecturer at Hanoi National University of Economics (VNUHN) said that there will be many benefits in liberalizing the electricity market.
The first thing is that prices and costs will be formed according to market signals, based on the supply-demand relationship instead of being affected by the mechanism as at present. Currently, the determination of electricity prices is still affected by the cost calculation method from a party with a "monopoly" position, then added to the profit margin.
According to Dr. Nguyen Quoc Viet, that approach is not really satisfactory and does not ensure transparency. Only when there is a truly competitive market, where many entities participate in selling electricity and many entities have the right to choose to buy electricity, will prices, profits or losses accurately reflect the law of healthy competition.
The second thing is that competition will create great motivation to attract investment. According to Dr. Nguyen Quoc Viet, the investment demand for Vietnam's electricity industry in the coming years is very large, especially when the energy transition process is placing requirements for rapid development of renewable power sources to gradually reduce dependence on imported fossil fuels. However, this is also an area that requires very large capital and potentially risky.
Investors are only willing to invest capital when they see profit opportunities and have a market mechanism that is transparent enough to ensure reasonable benefits. If there is no competition and no market signals, it is very difficult to attract social resources. In the current context, it is not possible to just rely on the state budget or state energy corporations to meet the investment needs for the electricity industry" - Mr. Viet assessed.
Mr. Viet said that many studies have shown that when switching from a single buyer model to a fully competitive electricity market, including both the wholesale market and the competitive retail market, the power transmission system will also have conditions to be modernized.
In particular, smart power systems and distributed grids will have conditions to develop more strongly, helping to optimize direct electricity purchase and sale between buyers and sellers instead of all activities having to go through a single focal point.
This will significantly reduce costs in logistics, electricity transmission and many other operating costs. When the entire system is optimized, electricity prices will decrease, not only for production electricity and business electricity but also for domestic electricity for people.
According to Dr. Nguyen Quoc Viet, the core issue of the current electricity market is not in changing the method of calculating electricity prices but in the institutional design of the market. To have a transparent and effective electricity price mechanism, first of all, it is necessary to strongly promote the liberalization of the electricity market.
In the short term, it is necessary to continue to remove bottlenecks in electricity purchase and sale contracts, including electricity purchase and sale contracts between EVN and power generation units and direct electricity purchase and sale mechanisms (DPPA).
In the long term, it is necessary to gradually shift from a single buyer model to a competitive retail electricity market, creating conditions for more and more electricity selling units and consumers to have the right to choose suppliers.
Only when the electricity market operates according to the correct competitive mechanism will electricity prices accurately reflect the supply-demand relationship, attract social resources for investment, promote technological innovation and improve system operation efficiency. This is the fundamental foundation for building a transparent, competitive and sustainable electricity market in the long term" - Dr. Nguyen Quoc Viet emphasized.
