Serious electricity shortage

Although the electric power production volume in the recent time has risen up significantly compared to the same period last year, it still does not meet demand.

Serious electricity shortage since beginning 2010

Statistics show that in the accumulated first five months of 2010, total electricity production of the whole sector was estimated to be 36.9 billion kWh, up 17.3 percent over the same period last year.

Vietnam Electricity Corporation (EVN) has also increased mobilisation of electricity power from the independent power plants (IPP). According to Ministry of Industry and Trade, in the early months of the year, the power sources with high production costs such as oil-fired thermal power and oil-fired gas turbine accounted for six percent and one percent, respectively. Hydropower only accounted for 19 percent of the national electricity system capacity, while the contribution was from 35 to 40 percent annually in the past years.

In addition, the new plants, which have just come into operation such as Quang Ninh thermo-electric power plant 1 (2 x 300MW), Hai Phong (2 x 300MW), Cam Pha (1 x 300MW) and expanded Uong Bi (1 x 300MW), have experienced breakdowns, leading to a limit in supply to the economy.
Demand for electricity increased during the dry season, prolonged hot spell since April 2010 combined with low power supply from hydropower plants (due to the very low water level of big reservoirs) has been causing frequent power shortage, particularly at peak hours.

According to EVN’s statistics, from the beginning of the year, power load demand in 2010 would increase by a maximum level of 15 percent.
However, the fact shows that the demand for power has increased by 20 percent, far exceeding the initial estimate. The average power load of the whole system in the months of the second quarter is estimated at approximately from 285 to 300 million kWh per day while the maximum output capacity is just from 275 to 280 million kWh per day.

Operation of electric power firms in the first six months

Hydropower often accounts for 35 to 40 percent of the whole output capacity of the national power system. However, from the beginning of 2010, the contribution into the total power production volume only reached a modest number of 19 percent since northern power companies experienced many difficulties, especially in late May and early June.

The prolonged drought has caused the water level in various reservoirs to record low level, very close to the “death point” (0.5 metre in Thac Ba, 0.75 metre in Thac Mo, 1.48 metres in Tri An and 1.48 metres in Hoa Binh). The hydropower reservoirs in the northern provinces have been operating very in moderation. Therefore, the business results of the hydropower companies were low in the first quarter, and are estimated to be not satisfactory.

In thermal power section, coal-fired and oil-fired thermal power plants, the supply sources with considerably higher production costs compared to hydropower, have been used at high level of production capacity in order to meet the load demand. The output volume of these plants in the first six months of the year is expected to be high.

Electricity trading agreement with EVN

Currently, a number of joint stock companies have been negotiating new power price agreement (PPA) with EVN such as TBC, VSH, and PPC for the next four years (2010-2013). The price has not been finalised yet but there are less possibility for it to be higher than the current price. Da Nhim – Ham Thuan – Da Mi hydropower company (DHD) is one of the first companies to re-negotiate the contract with EVN.

The sales price to EVN is calculated so that the ratio of profit before tax on capital reaches five percent (the previous ratio was 12 percent, applied to the early-privatised companies such as TBC, VSH and PPC).

In addition, according to the contractual agreement between EVN and DHD, if DHD’s output volume is higher than the committed volume, sales price to EVN will be decreased to 40 percent; if the output volume is lower, the company’s loss will be made up at the price equals to 70 percent of the price at committed output volume.

This is a form of risk sharing between EVN and the power plants to ensure stability in business operations of the plants. This mechanism is likely to be commonly applied to the companies negotiating new rates with EVN.

In the second quarter, the companies negotiating power price with EVN have just received the rate of 90 percent compared to the previous contractual price. If the negotiation were to be completed in the second quarter, this new rate would be applied to the business results of the first and second quarter.

Will the situation be better in the last six months of the year?
As usual, rainy season starts in late June. The power shortage therefore will be less serious than it was in the first six months since power production of the plants is usually better in the last six months than in the first six months of the year.

As for thermal power plants, the output volume will be modest in the last six months of the year since the plants will carry out periodical repairs to the units. However, this year is considered unprecedented year of power shortage due to the critical drought situation. The business results of the hydropower plants in 2010 are forecasted to have less possibility to be as high as in 2009.

Tags: Vietnam electricity, Vietnam energy, Vietnam power shortage