Vietnam has suffered from a power shortage in Q2 2023 that is mainly occurring in the North and is partly due to the earlier-than-expected arrival of El Niño reducing hydropower volume. In response, the Government has released several solutions, including pushing the commercial operation of transitional renewable power plants, requesting Vinacomin and PetroVietnam to increase coal/gas feedstock for power plants, and saving national power use by 2% to completely solve the power shortage in June.

Over the past 20 years, Vietnam’s power shortages have usually coincided with El Niño. Vietnam faced serious power shortages in 2007 and nominal shortages in 2015 and 2019. We expect power shortages to occur in northern Vietnam during the dry season of 2024-2025 (April – July) as (1) we project minimal growth of new power capacity (+7.2%/+7.5% YoY in 2023/24) will make it challenging to catch up with power demand increasing ~9%/year in 2024-2025, (2) El Niño will continue to intensify power demand during the summer months while negatively affecting the performance of hydropower, and (3) imported LNG at the Thi Vai terminal will only help to increase power capacity by ~1,000-1,500 MW (~1%-2% of national power capacity as of end-2022). Nevertheless, power shortages have had a limited impact on GDP growth in the past. Looking forward, we expect the solutions stated above will help to limit the negative impact on the economy (more details on page 6).

Power shortages drive competitive generation market (CGM) price. We raise our 2023 CGM price forecast by 6% to VND1,738/kWh (+13% YoY). Additionally, we raise our 2024-2025F CGM price projections by 6% and 10%, respectively. For 2024-2025F, we forecast CGM price to increase 4% YoY.

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