2016/71, 16 November 2016
On 14 November 2016, Vietnam’s National Assembly held a closed-door session to discuss the government’s decision to postpone the construction of two nuclear power plants until a later date. The decision highlights significant challenges that the Vietnamese government is facing in realizing its ambition to develop nuclear energy to power the country’s future economic development.
In November 2009, the National Assembly had voted to approve the government’s plan to build two 2,000 MW nuclear power plants in the central province of Ninh Thuan. The first plant, financed mainly by Japan, was awarded to Japanese contractors, while the second was reserved for Russian companies.
A number of reasons accounted for this decision of the Vietnamese government.
First, the two proposed plants are becoming increasingly economically unviable. The government based its 2009 proposal to build the plants on the projection that Vietnam’s annual economic growth would be maintained at 9-10 per cent, causing the country’s electricity demand to surge by 17-20 per cent annually. However, over the past five years, Vietnam’s economic growth has slowed to less than 7 per cent. Consequently, according to government sources, Vietnam’s demand for electricity will increase at a much slower pace, probably by 11 per cent per year within the next five years, and 7-8 per cent in the 10-20 years thereafter. Nuclear power therefore becomes a less appealing option, especially given the falling prices of coal as well as oil and gas in recent years, which makes traditional power plants a more rational choice in economic terms.
Second, Vietnam’s fiscal deficit has recently been expanding, reaching 256 trillion dongs (USD11.47 billion) in 2015, equivalent to 6.1 per cent of its GDP. At the same time, the estimated cost for constructing the two plants has ballooned from VND200 trillion to VND400 trillion (approximately USD18 billion), putting an excessive burden on the government’s budget. Meanwhile, Vietnam may also need more time to train enough technical experts to run the two plants. The training process will be not only costly, but also time-consuming. As such, putting the two plants on hold will enable the government to have adequate financial and technical preparations for these two important projects.
Finally, there have been increasing concerns in Vietnam regarding the safety and environmental consequences of the two proposed plants. These concerns, first aggravated by the 2011 Fukushima Daiichi nuclear disaster in Japan, have been renewed recently due to the environmental disaster caused by a Taiwanese steel mill in Central Vietnam, which led to devastating maritime pollution and put enormous constraints on the socio-economic development of the four affected provinces.
Government officials have indicated that they are postponing rather than scrapping the two projects. However, it remains unclear whether the two plants will ever be constructed as concerns around them, especially regarding their commercial viability and environmental consequences, will likely persist.
Le Hong Hiep is Fellow at ISEAS – Yusof Ishak Institute.
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