Vietnam aims to have liquefied natural gas (LNG) account for 15% of its power capacity by 2030. However, this target is jeopardized by the government’s recent decision to impose a price cap on LNG-generated electricity, which has raised concerns among power producers and foreign investors.
In May, Vietnam set a price cap of 2,590.85 dong ($0.10) per kilowatt-hour for LNG-sourced electricity sold to the state grid operator, EVN. While the government argues this cap is reasonable and will be adjusted annually, many in the industry believe it does not adequately reflect the volatility of the LNG market, making gas-fired plants uneconomic if prices rise sharply.
Experts warn that the price cap is risky given the geopolitical factors influencing LNG supply and prices. Vietnam’s strategy is crucial as it seeks to reduce reliance on coal and transition to cleaner energy sources while also presenting an opportunity for global LNG producers.
The government has plans for 13 LNG-fired power plants with a combined capacity of 22.4 gigawatts by 2030, which would require imports of 14 million metric tons of LNG annually, potentially positioning Vietnam as the sixth-largest LNG market in Asia.
Despite these ambitious plans, the Ministry of Industry and Trade’s price cap is seen as a significant hurdle. Current average Asian spot LNG prices are substantially higher than the capped price, raising concerns about the viability of new gas-fired projects.