Chapter 5. Electricity

Overview

In the International Energy Outlook 2016 (IEO2016) Reference case, world net electricity generation increases 69% by 2040, from 21.6 trillion kilowatthours (kWh) in 2012 to 25.8 trillion kWh in 2020 and 36.5 trillion kWh in 2040. Electricity is the world’s fastest-growing form of end-use energy consumption, as it has been for many decades. Power systems have continued to evolve from isolated, small grids to integrated national markets and even international markets.

Economic growth is an important factor in electricity demand growth. Although world gross domestic product (GDP) growth slows in the IEO2016 Reference case in comparison with the past two decades, electricity demand continues to increase, especially among the emerging non-Organization for Economic Cooperation and Development (non-OECD) economies. In 2012, electricity generation in non-OECD countries represented slightly more than one-half of world electricity demand. With continued strong economic growth, the non-OECD share of world electricity generation increases to 61% in 2040 (Figure 5-1), as total non-OECD electricity generation nearly doubles, from 11.3 trillion kWh in 2012 to 22.3 trillion kWh in 2040 (Table 5-1).

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In general, the projected growth of electricity demand in OECD countries, where electricity markets are well established and electricity consumption patterns are mature, is slower than in the non-OECD countries. OECD GDP increases by 2.0%/year, less than half the 4.2%/year GDP growth projected for non-OECD countries. OECD net electricity generation increases by 38%, from 10.2 trillion kWh in 2012 to 14.2 trillion kWh in 2040.

The IEO2016 Reference case projections reflect the expectation that economic activity will continue to drive electricity demand growth; however, the rate of growth in electricity consumption continues to become smaller compared to the rate of growth in GDP. From 2005 to 2012, world GDP increased by 3.7%/year, while world net electricity generation rose by 3.2%/year. In many parts of the world, policy actions aimed at improving efficiency will help to decouple economic growth rates and electricity demand growth rates more in the future (Figure 5-2). In the IEO2016 Reference case, world GDP grows by 3.3%/year, and world net electricity generation grows by 1.9%/year, from 2012 to 2040. The 69% increase in world electricity generation through 2040 is far below what it would be if economic growth and electricity demand growth maintained the same relationship they had in the recent past.

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Many countries, particularly among the developed OECD nations are pursuing policies and regulations intended to increase the pressure on generators to reduce greenhouse gas emissions from electric power plants by decreasing the use of fossil fuels. As a result, the role of coal as a dominant fuel for electric power plants is being reduced. Since the last forecast cycle, there have been significant revisions to national clean energy policies to reduce emissions, including China’s target of 15% renewable electricity by 2020 [164], the European Union’s 2030 Energy Framework objectives [165], and India’s megawatts-to-gigawatts renewable energy commitment [166]. The IEO2016 Reference case analysis incorporates many updated targets that reflect the revised regulations and national energy policies that affect renewable energy. (See later sections for region- or fuel-specific revisions.) The effect of the recently finalized Clean Power Plan (CPP) regulations in the United States is not included in the IEO2016 Reference case, but its effects are considered in discussions, tables, and figures throughout the report, based on U.S. Energy Information Administration (EIA) analysis of the proposed rule, which had similar elements.

Given the recent history of renewable energy policy and the scale of current commitments, EIA evaluated the probability that stated targets would be met, based on: (1) data on the countries' prior success in meeting renewable policy objectives, accounting for both the ambition and extent of fulfillment of targets; (2) indicators of the countries’ financial capability to build new projects; and (3) assessments of market pricing to support renewable energy sources. EIA adjusted the probabilities associated with successful implementation, with declining expectations dependent on how far into the future the target was specified.

The IEO2016 Reference case also reflects the impacts of broader policies to constrain energy-related carbon dioxide (CO2) emissions in emerging market countries, such as China and India. In those countries, policymakers have proposed a range of programs that place particular emphasis on the countries' Intended Nationally Determined Contributions (INDCs) for addressing CO2 emissions reductions as part of the 21st Conference of Parties (COP21) meetings [167] held in Paris from November 30 to December 11, 2015. In instances where the objective is clear but specific policy mechanisms are not yet known, judgment was applied to determine the likelihood that the intended outcomes would be achieved without attempting to predict specific actions. New and unanticipated government policies or legislation aimed at limiting or reducing greenhouse gas or other power-sector emissions, which could substantially change the trajectories of fossil and nonfossil fuel consumption, were not incorporated in the IEO2016 Reference case.

The national policies represented in the IEO2016 Reference case interact with technology and fuel costs to result in a significant shift in the primary fuels used to generate electricity. Since the late 1980s, coal has consistently met 37% to 40% of world fuel requirements for electricity generation [168]. In the IEO2016 Reference case, the coal share of total generation declines from 40% in 2012 to 29% in 2040, even as world coal-fired generation increases by 25% through 2040. At the same time, the shares of total generation for both renewable energy sources and natural gas expand: from 22% in 2012 to 29% in 2040 for renewables and from 22% in 2012 to 28% in 2040 for natural gas (Figure 5-3).

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Electricity generation by source

The worldwide mix of primary fuels used to generate electricity has changed a great deal over the past several decades. Coal continues to be the fuel most widely used in electricity generation [169], but there have been significant shifts to other generation fuels. Generation from nuclear power increased rapidly from the 1970s through the 1980s, and natural gas-fired generation increased considerably after the 1980s. The use of oil for generation declined after the late 1970s, when sharp increases in oil prices encouraged power generators to substitute other energy sources for oil [170].

Beginning in the early 2000s, concerns about the environmental consequences of greenhouse gas emissions heightened interest in the development of renewable energy sources, as well as natural gas—a fossil fuel that emits significantly less CO2 than either oil or coal per kilowatthour generated. In the IEO2016 Reference case, long-term global prospects continue to improve for generation from natural gas, nuclear, and renewable energy sources. Renewables are the fastest-growing source of energy for electricity generation, with annual increases averaging 2.9% from 2012 to 2040. In particular, in the Reference case, nonhydropower renewable resources are the fastest-growing energy sources for new generation capacity in both the OECD and non-OECD regions. Nonhydropower renewables accounted for 5% of total world electricity generation in 2012; their share in 2040 is 14% in the IEO2016 Reference case, with much of the growth coming from wind power.

After renewable energy sources, natural gas and nuclear power are the next fastest-growing sources of electricity generation. From 2012 to 2040, natural gas-fired electricity generation increases by 2.7%/year and nuclear power generation increases by 2.4%/year. With coal-fired generation growing by only 0.8%/year, renewable generation (including both hydropower and nonhydropower resources) overtakes coal to become the world’s largest source of energy for electricity generation by 2040. The outlook for coal-fired electricity generation could be further altered in the future by additional national policies or international agreements aimed at reducing or limiting its use. It should be noted that the IEO2016 Reference case does not include implementation of the U.S. Clean Power Plan, which would reduce the use of coal in the United States substantially (see "U.S. Clean Power Plan Rule" in the Emissions chapter). Finally, if other nations with shale gas resources (notably, China) are able to replicate the U.S. success in exploiting shale gas production, the outlook for world natural gas-fired electricity generation could be much different from that represented in the IEO2016 Reference case.

Coal

Coal continues to be the largest single fuel used for electricity generation worldwide in the IEO2016 Reference case until the end of the projection period, with renewable generation beginning to surpass coal-fired generation in 2040. Coal-fired generation, which accounted for 40% of total world electricity generation in 2012, declines to 29% of the total in 2040 in the Reference case, despite a continued increase in total coal-fired electricity generation from 8.6 trillion kWh in 2012 to 9.7 trillion kWh in 2020 and 10.6 trillion kWh in 2040. Total electricity generation from coal in 2040 is 23% above the 2012 total.

China and India alone account for 69% of the projected worldwide increase in coal-fired generation, while the OECD nations continue to reduce their reliance on coal-fired electricity generation. With implementation of the Clean Power Plan, projections for U.S. coal-fired generation are reduced in 2030 by about one-third.

Natural gas

Worldwide natural gas consumption for electricity generation grows in the IEO2016 Reference case by an average of 2.7%/year from 2012 to 2040. From 22% of total world electricity generation in 2012, the natural gas share increases to 28% in 2040 in the IEO2016 Reference case. In the United States, natural gas-fired generation is encouraged by low prices and favorable greenhouse gas emission characteristics. Natural gas is the least carbon-intensive fossil fuel; like all fossil fuels, natural gas combustion emits carbon dioxide, but at about half the rate of coal. In addition, natural gas generation technologies are more efficient than coal generation in producing electricity. Thus, natural gas can help in meeting CO2 reduction goals for many countries.

Petroleum and other liquid fuels

The use of petroleum and other liquid fuels for electricity generation continues to decline steadily in the IEO2016 Reference case. The share of total world generation from liquid fuels falls from 5% in 2012 to 2% in 2040, an average decline of 2.2%/year. Despite their recent decline, oil prices are expected to be higher in the long-term projection. As a result, liquids remain a more expensive option compared to other fuels used for generating electricity, and generators replace liquids-fired generation with other fuels where possible. Since June 2014, world oil prices have decreased substantially, falling to less than $40 per barrel in December 2015—a level last observed in late 2008, during the worldwide economic recession. The most notable regional declines in petroleum use for electricity generation are projected for the Middle East, Mexico, and Japan, where policy movements have encouraged the phasing out of oil in the electric power sector.

Renewable resources

Renewables account for a rising share of the world’s total electricity supply, and they are the fastest growing source of electricity generation in the IEO2016 Reference case (Figure 5-4). Total generation from renewable resources increases by 2.9%/year, as the renewable share of world electricity generation grows from 22% in 2012 to 29% in 2040 (Table 5-2). Generation from nonhydropower renewables is the predominant source of the increase, rising by an average of 5.7%/year and outpacing increases in natural gas (2.7%/year), nuclear (2.4%/year), and coal (0.8%/year), even without taking into account the growth in renewable generation anticipated under the Clean Power Plan in the United States. By 2030, the CPP would increase U.S. renewables generation by roughly 396 billion kWh (58%) compared to the IEO2016 Reference case, according to EIA’s analysis of the proposed CPP rule. Solar is the world’s fastest-growing form of renewable energy, with net solar generation increasing by an average of 8.3%/year. Of the 5.9 trillion kWh of new renewable generation added over the projection period, hydroelectric and wind each account for 1.9 trillion kWh (33%), solar energy for 859 billion kWh (15%), and other renewables (mostly biomass and waste) for 856 billion kWh (14%).

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In the IEO2016 Reference case, the pattern of growth in renewable electricity generation differs between the OECD regions and non-OECD regions in two ways: the relative rates of increase in generation from nonhydropower renewables and the potential expansion of hydropower capacity. Non-OECD countries surpass OECD countries in their use of nonhydropower renewables for electricity generation by the end of the projection in 2040. OECD net generation from nonhydropower renewables totals 2.3 trillion kWh (or 2.7 trillion kWh with the U.S. Clean Power Plan), compared with the non-OECD total of 2.8 trillion kWh. The difference is primarily the result of ambitious solar targets adopted principally by India and China, and to some extent by other emerging market countries (see "World production of solar photovoltaic modules,”). In the non-OECD region as a whole, solar generation grows by 15.7%/year on average from 2012 to 2040, nearly twice the growth rates for wind (7.7%/year) and geothermal (8.6%/year). In the OECD region, by comparison, wind, solar, and geothermal generation grow at comparable rates of about 4.5%/year.

Even with the projected strong growth of electricity generation from nonhydropower renewable energy sources in the non-OECD region, hydropower remains an important source of growth in the region’s renewable energy use. Non-OECD hydropower generation increases by 71% from 2012 to 2040, accounting for almost 40% of the total increase in non-OECD renewable electricity generation over the period. The world’s fastest regional growth in hydroelectric generation is projected for non-OECD Asia (see "Plans for hydroelectric generation capacity additions in Southeast Asia,"). Hydroelectricity production in non-OECD Asia increases by 2.2%/year on average from 2012 to 2040.

Hydropower development potential is much lower in the OECD member countries than in the non-OECD countries, because most of the OECD region’s economically feasible hydroelectric resources already have been developed. Instead, the greatest potential for growth in renewable energy production in the OECD countries is from nonhydroelectric sources, especially wind, solar, and wood pellets (see "World markets for wood pellets,"). Many OECD countries, and particularly those in Europe, have government policies that encourage the construction of wind and other nonhydroelectric renewable electricity generation facilities [182].

Nuclear power

Worldwide electricity generation from nuclear power increases from 2.3 trillion kWh in 2012 to 4.5 trillion kWh in 2040 in the IEO2016 Reference case, with energy security concerns and limits on greenhouse gas emissions encouraging the development of new nuclear capacity. In addition, world average capacity utilization rates for nuclear power plants have continued to rise over time, from 68% in 1980 to 80% in 2012. In some regions, utilization rates could continue rising in the future. Factors underlying the nuclear power projections in the IEO2016 Reference case include the consequences of the March 2011 disaster at Fukushima Daiichi, Japan; planned retirements of nuclear power plants in OECD Europe under current policies; and continued strong growth of nuclear power capacity in non-OECD Asia (see "Variability in electricity generation capacity factors by region and fuel,").

Despite significant public opposition to nuclear power in Japan [199], two nuclear reactors at Sendai [200] were restarted in 2015 under new safety standards put in place after the 2011 Fukushima disaster. In Europe, Germany aims to move from fossil fuel-based electricity generation to a largely carbon-free energy sector while also phasing out nuclear energy by 2022 [201]. In 2014, the French Parliament adopted a law to reduce the nuclear share of its total electricity generation from more than 75% in 2014 to 50% by 2025 [202]. Among the developed OECD countries, only South Korea has a sizable increase in nuclear capacity (15 GW) through 2040 in the IEO2016 Reference case. However, reductions of nuclear power capacity in Canada, OECD Europe, and Japan more than offset South Korea's increase. As a result, total OECD nuclear power capacity declines by 6 GW from 2012 to 2040.

Almost all the nuclear capacity additions in the IEO2016 Reference case occur in non-OECD countries. In contrast to developments in OECD Europe, nuclear electricity generation grows significantly in Asia, with the strongest growth projected for China and India. In addition, sizeable increases are projected for nuclear power capacity in the Middle East. Average annual growth rates for nuclear electricity generation from 2012 to 2040 in the Reference case include 9.6% in China, 7.9% in India, and 2.9% in the other non-OECD Asia economies. China has the largest projected increase in nuclear capacity, adding 139 GW from 2012 to 2040, followed by 36 GW in India and 8 GW in the remaining non-OECD Asian countries. In the Middle East, nuclear capacity increases from less than 1 GW in 2012 to 22 GW in 2030.

Regional electricity markets in non-OECD Asia

In non-OECD Asia, with some of the world’s fastest-growing economies, electricity demand is expected to grow strongly as standards of living rise, and as demand for lighting, heating and cooling, and electric appliances increases. Non-OECD Asia remains the fastest-growing region in the world, with projected GDP growth of 4.7%/year through 2040. Many of the key non-OECD Asia economies (including Hong Kong, Indonesia, Singapore, and Taiwan) rely heavily on exports, both to China and to OECD nations. For these export-dependent Asian countries, slower economic growth in China and the OECD at large is likely to lower their own GDP growth in the near term.

In view of increasing pressure to reduce greenhouse gas emissions, the likely responses of the non-OECD Asia subregions are reflected in projections for coal-fired shares of total electricity generation. In particular, the most significant reduction in coal-fired generation among the non-OECD Asia regions in the IEO2016 Reference case is projected for China (Figure 5-10).

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China

Despite some moderation in its projected economic growth, China remains one of the world's fastest-growing economies in the IEO2016 Reference case. As a result, its total net electricity generation nearly doubles from 4.8 trillion kWh in 2012 to 9.4 trillion kWh in 2040, at an average annual growth rate of 2.5%. The impact of China’s continued rapid economic development on the environment has become a primary concern among environmental policymakers in China and also for the general public. In particular, China recently introduced a number of policies and proposals to address heightened concerns about air quality. In a joint statement in November 2014, both China and the United States committed to actions designed to ensure long-run reductions in emissions, with China targeting a reduction in CO2 emissions beginning by 2030 [203]. China is moving to generate more electric power from nuclear power, renewables, and natural gas to address environmental concerns and to diversify its electricity generation fuel mix toward energy sources with lower or zero emissions of greenhouse gases.

In June 2015, China outlined the specific steps needed to achieve a decline in its CO2 emissions beginning in 2030. The government’s INDC policy includes the following energy-related targets for China:

• Lower carbon intensity (CO2 per unit of GDP) by 60% to 65% compared with 2005 levels
• Increase the share of nonfossil fuels in the primary energy mix to approximately 20% [204].

At the time of the announcement of its commitment to peak emissions in 2030, China's government officials estimated that to achieve that target it would be necessary to build 800–1,000 gigawatts of non-emitting generating capacity by 2030, thus offering a comparative benchmark for projections [ 205].

In adapting assumptions regarding China's announced multisector policies to achieve emissions reductions in the electric power sector, IEO2016 combines the application of broad policy levers to alter the use of fossil generation in the projection with detailed analysis of renewable targets, including assessment of their timing and achievement up to 2030.

In recent years, the cost of renewable technologies has continued to decline, with the greatest cost reductions recorded for solar technologies. However, clean energy policy goals also play a major role in the adoption of renewable energy sources in China. Renewables policy targets include both the stated specific national-level goals formally included in various Five-Year Plans and an interpretation of the implications of general policy commitments to additions of renewable generating capacity (for example, capacity growth resulting from the preservation of renewables market share after the deadlines for achieving renewable targets have passed). The 12th Five-Year Plan (2011–15) includes a target to increase nonfossil energy sources (including hydropower, nuclear, and renewable energy) to 11.4% of total energy use (up from 8.3% in 2010). In addition, the plan sets a 15% overall target for the renewable share of total electricity generation in 2020.

China’s renewable energy outlook in the IEO2016 Reference case reflects the policy effects of identified Chinese government targets for specific renewable fuel types from 2015 to 2020, the results for previous Five-Year Plans, and the economic outlook for growth in the electric power sector through the next decade. Projected renewable energy capacity additions are on track to achieve a combined 622 GW of total installed hydroelectric, wind, and solar generating capacity in 2020 (Figure 5-11). At that rate, renewables and nuclear power would fulfill their part in China’s INDC to increase the share of non-fossil fuels in the primary energy mix to approximately 20% by 2030. Strong growth in both wind and solar installed generating capacity supports the projected growth in China’s renewable energy use, with installed solar capacity increasing from 3 GW in 2012 to 184 GW in 2040 and wind energy capacity increasing from 61 GW in 2012 to 350 GW in 2040.

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In 2012, coal's share of China’s total electricity generation was estimated at 75%. Assuming the phase-in of various government policies through 2030 in the IEO2016 Reference case, the coal share declines to an estimated 53% in 2030 and to 44% in 2040 (Figure 5-12). Overall, renewable electricity generation increases by an average of 3.8%/year and nearly triples, from 1,004 billion kWh in 2012 to 2,878 billion kWh in 2040. Solar is China's fastest-growing energy source in the IEO2016 Reference case, with annual growth averaging 15.4% through 2040.

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Another rapidly growing energy source in China’s electric power sector in the IEO2016 Reference case is nuclear power generation. Net electricity generation from the country’s nuclear power plants grows by an average of 9.6%/year, from 93 billion kWh in 2012 to 1,212 billion kWh in 2040. In addition, although natural gas previously has not played a significant role in China's electric power sector, natural gas-fired generation grows at a comparable rate of 9.9%/year from 2012 to 2040 in the Reference case. As a result, the natural gas share of total electricity generation increases from 2% in 2012 to 12% in 2040. A major factor in the expanding role of natural gas in electricity generation is an increase in sources of natural gas supply, including contracts with Russia for large-scale construction of natural gas pipelines between the two countries, financed by China, with the first stage calling for a pipeline with the capacity to carry 1.3 trillion cubic feet per year [206].

India

India’s need for energy continues to increase as a result of its economic growth and modernization over the past several years. With nearly a quarter of its population having no access to electricity, a significant component of progress for the Indian economy lies in the prospects for electrification [207]. As a result, India has one of the fastest-growing electricity sectors in the world. Between 2005 and 2012, India’s net electricity generation increased by an average 6.6%/year (Figure 5-13). In the IEO2016 Reference case, net electricity generation in India increases from 1,052 billion kWh in 2012 to 2,769 billion kWh in 2040; at 3.5%/year, this is the fastest growth of any IEO2016 region over the projection period.

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With a large-scale domestic production potential, coal is India's primary source of energy for electricity generation. However, as electricity demand has risen sharply, a widening gap between coal demand and supply has emerged, with coal shortages contributing to blackouts in India. In response to rapid demand growth, India has increased capacity and upgraded efficiency of its transmission grid, which has helped to reduce electricity losses. However, most of the country's remaining transmission and distribution losses are the result of theft (see "Electricity transmission and distribution system losses in India,".).

While trying to accelerate economic growth, India also is attempting to address concerns about the environmental effects of rapid development. In October 2015, India issued an Intended Nationally Determined Contribution which set the following national goals to address climate change:

• Reduce CO2 emissions intensity by 33% to 35% from 2005 levels by 2030
• Nearly triple renewable energy capacity from 2012 levels by 2022
• Increase the share of zero-carbon electricity generating capacity to 40% of the total by 2030 [230].

In 2012, 72% of India’s electricity was generated at coal-fired power plants; that share falls to 55% in 2040 in the IEO2016 Reference case. According to the International Energy Agency, a shortage of coal and natural gas supplies for power generation is a pressing issue for India's power sector. Domestic natural gas production is also declining [231]. In the IEO2016 Reference case, natural gas production increases by an average of 1.3%/year from 2012 to 2040.

In an effort to diversify its electricity generation portfolio and limit emissions from fossil fuels, India's government is promoting renewable energy use. In total, renewables constituted 15% of India's electricity generation in 2012; in the IEO2016 Reference case, the renewables share increases to 28% in 2040. Net electricity generation from hydroelectric and other renewable sources increases from 160 billion kWh in 2012 to 764 billion kWh in 2040. India was the world's seventh-largest producer of hydroelectric power in 2012, with 125 billion kWh generated [232]. Hydroelectric generation increases in the Reference case to 405 billion kWh in 2040. In addition to renewables, India seeks to accommodate its swiftly growing power demand with increased nuclear generation. In the IEO2016 Reference case, India’s nuclear power generation increases by 7.9%/year from 2012 to 2040, and the nuclear share of the country’s total electricity generation rises to 9% in 2040.

Vietnam

Vietnam is expecting a significant transformation of its electric power generation mix, with plans to modernize its agrarian economy over the next two decades and become a more industrialized nation. Demand for electric power in Vietnam has increased over the past five years at annual growth rates of 10% to 12%. The Vietnamese government also is pursuing an enhanced level of energy security to support the country’s economic transformation. Its National Strategy on Energy Development to 2020, with an outlook to 2050, lists “Policy to ensure national energy security” at the top of the energy policy agenda [233].

Vietnam's interconnected electrical system relies heavily on hydroelectric power generation, and the 2005 Plan for Power Development (PDP) called for the installation of 17 GW to 18 GW of hydroelectric generating capacity between 2006 and 2015. However, as a result of environmental problems and concerns over social displacement, only about 4.1 GW has been developed so far [234]. To accommodate the expansion of its industrial sector, Vietnam is diversifying its installed generation capacity to include a larger share of coal- and natural gas-fired power plants [235] and is planning to build the first nuclear reactors in Southeast Asia and to complete the first offshore wind farm in Asia [236].

The predominant energy sources for installed electricity generation capacity in Vietnam vary by geographic region—coal in the northeast, hydropower in the central and western areas, and natural gas in the southeast (Figure 5-16). Most of the country's electricity grid is concentrated around the capital (Hanoi) in the north and around Ho Chi Minh City (Saigon) in the south.

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Ten main rivers and five main river basins supply Vietnam's existing hydropower system, with resources concentrated in the north, the central highlands, and the lower south central coast [237]. In 2014, Vietnam consumed 54.1 TWh of electricity generated from hydroelectric plants, a 1.3% increase from the 2013 total [238]. The country's slow growth in hydropower generation coincided with relatively weak 2.0% total world growth in hydropower production from 2013 to 2014.

The majority of Vietnam's coal-fired power plants are in the north. The country's proved reserves of anthracite and bituminous coal total 150 million metric tons [239], concentrated primarily in Quang Ninh province, directly east of Hanoi. In 2014, Vietnam produced 41.2 million metric tons of coal, an increase of 0.5% from 2013. In comparison, coal consumption in 2014 was up by 20.6% from the 2013 level of 15.8 million metric tons, primarily as a result of industrial sector expansion.

Over the past decade, increases in foreign investment have supported wider exploration for natural gas in Vietnam, which has increased its proved natural gas reserves significantly. At the end of 2014, Vietnam held 21.8 trillion cubic feet (Tcf) of proved natural gas reserves after producing an annual total of 361 billion cubic feet (Bcf) of marketed natural gas, all of which was consumed domestically. Both production and consumption of natural gas in 2014 increased by 4.7% from the 2013 levels [240].

Although Vietnam currently is self-sufficient in natural gas, PetroVietnam predicts a potential supply gap, particularly in southeastern Vietnam, as consumption outpaces domestic production. Liquefied natural gas (LNG) regasification terminals are already in the planning stages.

The Mekong River Delta and southeastern Vietnam contain nearly all the country's installed natural gas-fired electricity generation capacity. Most of the natural gas reserves are located offshore, southwest from the tip of the Mekong Delta. In addition, ExxonMobil Vietnam recently announced a large discovery off the central coast and is partnering with PetroVietnam to determine potential locations for a thermal power and natural gas treatment complex in central Vietnam [241].

Although Vietnam currently has no nuclear generation capacity, deposits of uranium ore (U3O8 content greater than 0.015%) in the northern and central regions are estimated at 660 million pounds [242]. Vietnam’s nuclear fuel-cycle policy calls for survey and exploration of its uranium reserves to determine whether domestic uranium can be used to produce fuel for nuclear power plants.

Economic transition

Vietnam is developing its industrial sector, with the intention of pursuing a larger share of Asia’s export market for manufactured products. Bloomberg News reports that, among the Association of Southeast Asian Nations (ASEAN), Vietnam was the largest exporter to the United States in 2014. The gain is attributable to Vietnam’s comparatively young work force and relatively low wages.

Vietnam entered the World Trade Organization (WTO) in 2007 and became an early negotiating partner in the Trans-Pacific Partnership (TPP) in 2010. Vietnam’s gross domestic product (GDP) growth was estimated at 6.4%/year in 2014, and it is projected to remain above 5.0% through 2030 [243]. Rapid economic growth, along with industrialization and export market expansion, has spurred domestic energy consumption. The nation's General Statistics Office (GSO) projects annual increases in commercial sector electricity demand, from 169.8 billion kWh in 2015 to 289.9 billion kWh in 2020 and 615.2 billion kWh in 2030. The GSO also forecasts increases in electricity generation, from 194.3 billion kWh in 2015 to 329.4 billion kWh in 2020 and 695.1 billion kWh in 2030 (Figure 5-17) [244].

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Future electricity generation

PetroVietnam is seeking to import 11 million tons of coal per year starting in 2017 to supply the domestic power industry, according to a PetroVietnam Power and Coal Import and Supply Company official quoted by Reuters [245]. The coal imports would supply three power plants—two in the southern Mekong Delta and the third in the northeastern province of Quang Ninh [246].

Vietnam's 2011 Gas Master Plan includes initiatives to promote natural gas in the primary energy mix, targets for natural gas production and consumption, and detailed infrastructure construction plans for natural gas gathering systems, pipelines, and processing facilities [247]. In addition, the government has considered importing LNG in the southern part of the country to meet growing demand for natural gas. PetroVietnam Gas, a subsidiary of PetroVietnam, has signed a memorandum of understanding (MOU) and a front-end engineering and development (FEED) contract with Tokyo Gas Company to develop the Thi Vai LNG terminal in the Vung Tau province, which is expected to be operational by 2017. Also, in March 2014 PetroVietnam Gas signed a natural gas sales and purchase agreement with Gazprom of Russia. Under the agreement, PetroVietnam Gas will receive 48 Bcf/year via the Thi Vai LNG terminal [248]. A second terminal, Son My LNG, is planned to open in 2018, although its construction has not been started.

Vietnam also plans to build the first nuclear reactors for power generation in Southeast Asia. In 2010, Russia's Atomstroyexport agreed to build two 1,000-MW reactors on the Nin Thuan 1 site at Phuoc Dinh. Japan followed in 2011 with an agreement to build Nin Thuan 2 at Vinh Hai. However, the 2011 Fukushima accident delayed construction plans for both projects. Safety concerns contributed to a postponement of the construction start for the Nin Thuan 1 project until 2020. Vietnam continues to work closely with the International Atomic Energy Agency (IAEA) to develop its nuclear infrastructure and to address issues such as siting, stakeholder involvement, industrial involvement, and environmental protection [249].

Vietnam also plans to build Asia's first offshore wind farm. In March 2015, the United States Trade and Development Agency (USTDA) awarded a feasibility study grant for Phase III of the Bac Lieu Wind Farm, located in a submerged coastal area of the Mekong Delta. Phase I of the project, rated at 16 MW, was completed in May 2013; the scheduled 2016 completion of Phase II, rated at 67.2 MW, will result in a total capacity of 83.2 MW. Phase III, still in the conceptual and early planning stages, has a proposed capacity of 300 MW [250]. The USTDA grant will help Vietnam address the technological challenges of implementing Phase III, which include wind assessments, permitting and land control issues, and electrical grid interconnection [251]. In addition to the Bac Lieu project, the Tay Nguyen Wind Farm broke ground in March 2015. The facility, located in the central highlands, has a design capacity of 120 MW and an estimated cost of $279.62 million (U.S. dollars). The GSO estimates that hydropower will represent a smaller share of Vietnam's power generation mix as other technologies come online (Figure 5-18).

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In the IAEA 2013 Vietnam Country Nuclear Power Profile, Vietnam reported that its generation capacity mix will change significantly by 2030, with coal-fired generation projected to dominate the country's total installed capacity. GSO projections indicate that coal-fired capacity will increase from 36% of Vietnam’s total net generation capacity in 2015 to 56% in 2030, hydropower capacity will decrease from 33% of the total in 2015 to 16% in 2030, oil- and gas-fired capacity will decrease from 25% in 2015 to 13% in 2030, and nuclear power plants will provide 8% of total generation capacity in 2030 (Figure 5-19).

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Challenges

Vietnam faces several challenges to its planned electric power system transformation. The state-owned utility, Electric Vietnam (EVN), is pursuing the dual challenge of installing additional capacity while modernizing the country's transmission and distribution (T&D) infrastructure. In addition, EVN must deal with the effects of the monsoon season, which brings 8 to 10 severe storms annually, with wet foliage, flash floods, and mudslides threatening the reliability of the country's interconnected power system [252]. Another challenge facing Vietnam's electric power sector is attracting the capital needed to finance projects that require large upfront capital expenditures and long lead times to complete, such as the planned Ninh Thuan nuclear power plant project. Developing the necessary T&D infrastructure, creating a stable economic environment to support large projects with longer cost recovery periods, and securing international investment will be critical to Vietnam's ability to achieve its goals of industrialization and energy security.