If not already mesmerised by the traffic, visitors to Vietnam's large cities often comment on the mass of cables that hang like jungle vines across the streets.

Along with the ubiquitous motorcycle, the sight of electrical poles that look more like birds' nests is emblematic of modern-day Vietnam. It is also a clear sign that the country's power infrastructure has some serious catching up to do.

As mentioned in last week's post, Vietnam has achieved significant growth over the last couple of decades. Reforms have paved the way for international trade and investment, as well as rising incomes for Vietnamese citizens. The face of cities like Hanoi and Ho Chi Minh City are changing rapidly, with shiny new developments cropping up as far as the eye can see. Many areas are unrecognisable compared to just ten or twenty years ago. Power needs are marching in lockstep with growth. Electricity of Vietnam (EVN) is the country's largest power company, and as of 2015 had a transmission network of some 21,883 kilometres.

Faced with the challenge of urbanisation and industrialisation, Vietnam's power industry has struggled to expand and improve the country's power system, as evidenced by difficulties with developing new resources, enhancing high-voltage transmission lines, and reducing transmission and distribution losses.

The fact that tangled webs of cabling still hang between these buildings is a clear sign that infrastructure needs to be developed. As well as posing a danger to residents in densely-populated districts, the overburdened electricity network causes sporadic brown-outs for local businesses, who are forced to pause production while power is diverted to residential areas. In fact, to deal with their own rolling blackouts, homes and small businesses turn to small generators – an expensive and dirty stopgap.

The country's economic growth, while impressive, is putting the electricity grid under constant strain. However, if new technology is harnessed and innovations adopted for the creaking grid, the sight of smoke-spewing generators will become a thing of the past.

Smart solutions

Facing and overcoming the challenges posed by this continuing expansion will be a key priority for Vietnam's grid over the next few years. The addition of renewables to the country's energy mix will complicate the situation further, and necessitate some clever solutions to ensure the efficient delivery of electricity to power-hungry industry and a demanding customer base. Smart Grid technology could provide the required renovation.

In 2012, the Vietnamese government approved a "Smart Grid Development Project in Vietnam", which sets out a roadmap for the development of Smart Grids in the country. The project aims to automate and manage the increasingly complex power network and meet the rising demands of electricity users. Specifically, 'intelligent' grids would integrate monitoring, protection and control systems to improve reliability and ensure the most efficient use of existing infrastructure. Rather than the prohibitively pricey job of overhauling infrastructure, technology can be deployed to improve existing systems in the short term.

A $500-billion project, with funding approved by the World Bank, will focus on the automation of distribution network operations and the introduction of advanced metering systems at important substations. This will include two-way communications systems to actively monitor power usage. Initially the focus will be on the key distribution substations and larger electricity users.

Improved availability of data will enable quick detection of potential outages, allowing immediate decisions to be taken to improve overall grid reliability.

EVN is partway through the project. Running parallel, the National Power Transmission Corporation (NPT) has accelerated its own Smart Grid development. Particular enhancements will include Substation Automation Systems to improve communications and compatibility, as well as information and monitoring systems to allow real-time power capability calculations across the network.

On top of improvements to efficiency allowing for economic growth, a more reliable network will also help reduce greenhouse gas emissions, in line with the country's international commitments. Investments like this, bringing the power network up to date, will ensure a stable electricity supply to industries and households, reducing the need for alternative and often more polluting fuels, such as coal and kerosene, to meet domestic energy needs.

Putting projects into practice

In terms of concrete steps, foreign firms are already showing an interest. In 2014, Trilliant, a US-based Smart Grid expert, signed a contract with EVN HCMC, a subsidiary of EVN, for a smart grid project in Ho Chi Minh City. The southern metropolis is a hub for commercial activity, thus intelligent power distribution is fundamental to a successful future for the region.

Last year, the U.S. Trade and Development Agency provided technical assistance to Electricity of Vietnam Central Power Corporation (EVNCPC), another subsidiary of EVN, to help modernise their enterprise architecture for Smart Grid deployment.

EVNCPC is developing an overall information technology (IT) and smart grid strategy, including an implementation plan and investment schedule, to improve the quality of supply to its customers. The technical assistance will provide detailed recommendations to automate and upgrade IT systems in order to integrate Smart Grid applications that can help EVNCPC efficiently manage its operations and distribution, ultimately fuelling the sustainable growth of the central region.

Putting this into action, Switzerland's ABB has signed up to provide software to Pleiku and Tam Ky in central Vietnam. The firm's solutions will help improve power supplies for the 250,000 inhabitants of these cities. ABB has previously supplied similar systems to the cities of Da Nang, Hue, Qui Nhon and Buon Ma Thuot, providing stable access to power for more than three million people.

A stable supply

Smart Grid technologies will help achieve a more stable power supply and improve the reliability of the transmission network. Continued implementation, in the direction detailed above, will help increase power transfer bandwidth between the north and the south, which will establish a secure and reliable power supply. A stable supply means stable prices, and provides opportunities that will attract investments and increase competition in the marketplace.

Over time, this approach will allow the connection and operation of Vietnam's mismatched network and enable the integration of renewable sources to help reduce the country's carbon footprint across the whole power system.

Investors can expect greater market integration with neighbouring countries and the chance to play a part in optimisation alongside consumers. Improved reliability, quality and security are sure to make Vietnam's energy sector an enticing proposition in the years to come.

Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.