# 1 <u>Introduction</u>

**This case study examines Vietnam’s power sector development and reform experience from the 1990s to 2018.** It explores links between country context, power sector institutions and market reform attempts, and dimensions of power sector performance. The case study is structured in three parts (after this introduction). Part 2 describes how power sector institutions have developed over time in context of the 1990s global model of market-oriented sector reforms. Part 3 focuses on sector performance in terms of four issues: security of supply; user access and affordability; supply-side efficiency and financial viability; and regulation of tariffs and other selected elements. Part 4 synthesizes the findings and reflects on lessons from Vietnam that may be relevant to other countries.

**The case study employs a mixed methodology with inputs from multiple sources** . It has involved a review of literature, collection of data from official sources, analysis of utility financial accounts for the period 2013 to 2017, comparison of several dozen indicators against good practice benchmarks, and 19 interviews with 25 actors including current or former government officials as well as academics and civil society representatives in Vietnam.

**Vietnam has seen significant changes to its market structure, gradually moving from a vertically integrated structure to a more competitive power market.** In less than two decades, the country’s power sector evolved from fragmented companies with high technical and financial losses to an integrated power system, and then to an unbundled group of stated-owned corporations with sizeable participation of domestic and international private sector actors in power generation. Vietnam has achieved rapid electrification and averted major crises of supply, thanks to technically-sound power system planning with political leadership and follow-through by national institutions. A highly dedicated and trained workforce, and a sociopolitical emphasis on ensuring consensus among key actors in the power sector at each reform step, have contributed to continuous implementation of the power sector reform agenda, albeit at a relatively slow rate of institutional reform.

# 2 Vietnam’s power sector reform story

**Over the past few decades, Vietnam’s power sector has developed around stable state-centric institutions and companies, gradually implementing the government’s sector reform agenda.** Prior to the 1990s, state institutions dominated three geographically distinct grid systems in north, central, and south Vietnam. From 1994, as a national grid developed, corresponding institutions were consolidated, just as attention was increasingly paid to “socialist market economy” reform proposals. The government’s motivations for reforming the power sector from the mid-1990s were to ensure long-term reliable power supply in a manner efficient and affordable to users and to the government, with minimal spillover effects on the macroeconomy and on the distribution of wealth across segments of society. A key means to achieve these objectives has been to move from a centrallyplanned monopoly to a power market with private sector investment in power generation capacity, and with multiple competing participants buying and selling power. From 2004, following the passage of the Electricity Law, competition and new market structures have been gradually introduced. The competitive generation market began full operation in 2012 and the wholesale electricity market is planned to begin full operation by 2021. Figure 1 summarizes the timeline of key electricity sector reform elements in the context of other country-level developments.

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