Vietnam’s seemingly interminable and widespread power outages have attracted comment by foreign media. AFP and DPA focus on reduced supply from hydropower plants and inefficient power use. Financial Times reports calls by business to break up the power monopoly, EVN. An analysis in Forbes says that things will be better in a few years, when new coal-fired power plants at last become operational.

 

Agence France Presse. In an article posted last week, the French wire wrote that “thunderstorms brought slight relief to parts of northern Vietnam in recent days but not to the Hoa Binh hydropower plant, where water levels hover just above the "dead point" while electricity output is severely restricted. The Hoa Binh facility is Vietnam’s largest, fed by the Da River flowing from China, where drought has brought falling water levels just as it has throughout Southeast Asia.”

 

“Vietnam is confronted with its worst water shortage in decades”, Bui Duc Long, of the national weather centre, told AFP.

At Hoa Binh, electricity production has already been limited for several months, initially to maintain the reservoir at its normal level of 117 metres (384 feet). After a subsequent release of water to irrigate farm fields, the level dropped in late May to 83 metres, and then to just above 81 -- one metre above the dead point.  Below 80 meters, production must be held to a "strict minimum," lest the level fall to 75 metres which requires a halt in electricity output.

The plant was built over 15 years ago with help from the former Soviet Union and has a capacity of 1,920 megawatts. Inaugurated in 1994, it now accounts for more than 40 percent of electricity production in north Vietnam and 15 percent nationwide.

 

AFP notes that Vietnam’s economic growth has exceeded five percent annually for the past decade. Electricity demand comes not only from industry but from increasingly well-off householders buying appliances. Upstream from Hoa Binh, the even larger Son La hydro facility is under construction. It is designed with a capacity of 2,400 megawatts and will go into full operation in 2012.

 

AFP adds that Vietnam aims to diversify its energy sources, including nuclear power. Initial government plans call for four reactors with a total capacity of 4,000 megawatts. At least one should be operational from 2020.

Deutsche Press Agentur wrote “A rash of blackouts threatens to hurt Vietnamese export industries, and authorities are unsure when the power outages will end. The power shortage is caused by droughts that have reduced hydroelectric capacity, as well as rapidly rising demand and inefficient use of energy.”

 

"They cut off our electricity at least one day every week," said Pham Thi Lieu, chief executive officer of MSA-HAPRO Company, an export garment firm, told DPA.

 

She said her company had bought a second-hand generator for $21,000 to maintain production. Buying fuel for the generator costs over $3000 per day, six times as much as the cost of electricity from the national power monopoly, EVN.

 

Deputy Prime Minister Nguyen Sinh Hung said recently the shortages resulted from inefficient energy usage by businesses, especially steel, cement and other heavy industries.

Garment companies can typically save 15 to 40 percent of their energy consumption by introducing new technology, said Huynh Kim Tuoc, head of the Energy Conservation Center in Ho Chi Minh City. Steel and cement companies can often cut consumption by 50 percent.

In a June 28 story, the Financial Times reported that analysts blame Vietnam’s failure to attract sufficient foreign investment in new power plants for the shortages this year. It said that legislators and businessmen blame the national power company, EVN, and are calling urgently for its break-up.  The Government’s reform plans remain unclear, the FT adds.

 

Oxford Analytica, which gathers over 1000 experts and scholars as contributors, has a different view. In an ultimately hopeful brief digested in Forbes Magazine on June 21, ‘OxAn’ wrote: “Vietnam’s slow progress transforming its state-owned enterprises (SOEs) into institutions responsive to market forces and enlightened political direction imposes heavy costs on the economy. This is particularly evident in the power sector.”

 

According to the brief, “since 2000 power reform has been a priority. Vietnam has the panoply of framework laws, World Bank advisers and directives that suggest it takes this seriously. National policy dictates that generation, transmission and distribution will be "unbundled" and the entire sector subject to competition in successive steps to 2020.”

Yet until recently, reforms appeared to make little difference. Five-year plans have been replaced with strategies and visions, but the words and actions of EVN and Vinacomin remained those of sprawling and ponderous enterprises set in old ways.

 

The root problem is that low electricity tariffs make investment in new capacity uneconomical. The technical solution, long evident, has been to get prices right.

 

In 2005 the Ministry of Industry declared 15 independent power producer (IPP) projects open for foreign investment. The aim was to raise the share of electricity purchased from IPPs from 14% in 2005 to 33% by 2010. Yet for four years the sector was immobilized by inability to agree on what electricity should cost. Independent power producers that had flocked to Hanoi waited or lost interest; investment targets of $4 billion annually showed no sign of being met.

 

Late last year, Forbes explains, the outlines of a solution emerged. In November, the Government issued a long-debated decree that established uniform criteria for build-operate-transfer (BOT) projects.

Several weeks later, EVN and the coal conglomerate, Vinacomin, joined by PetroVietnam, told the Government that they were ready for it to broker a viable pricing structure for coal-fired power. This, says the Forbes story, amounts to State agreement that they might pass increased generation costs on to consumers.

Soon afterward EVN and the US merchant power company AES reached an agreement on offtake prices from a 1200 megawatt, $1.6 billion plant that AES will build adjacent to a Vinacomin mine. That deal, stalemated for more than three years, had achieved bellweather status. Other negotiations promptly revived.

As a result, the Forbes/Oxford Analytica brief concludes, the speed with which firms have been cutting deals since the new BOT regulations went into force indicates that Vietnam may have solved its middle-term power supply problems. Some 12,000 megawatts of coal-fired plants are set to break ground in the next year, it calculates. However, management reforms must follow to ensure the sector’s healthy development.

 

VOV/ PV