The end of the light

The shocking announcement came aloud in the ear of manufacturers when Electricity of Vietnam Group (EVN) unveiled in straightforward terms last Monday that power shortage will be much more critical in this dry season, that longer power supply disruptions are inevitable, and that steel and cement makers look like the first scapegoats.

Apart from record low water levels at hydropower reservoirs, say local media, EVN points the accusing finger to low power prices that hinder it and other investors from developing new power sources and wreak great havoc on their financial statuses. And, the power shortage not only looms large this year, but also casts shadow on the following years on the economy.

At the meeting last Monday in Hanoi, EVN cried out the low level of water at reservoirs, saying the volume now is some 12 billion cubic meters less than the same time last year, or a loss of some three billion kilowatt-hours, according to Nguoi Lao Dong. This is a huge power shortfall compared to last year’s figure of 1.39 billion kWh, which already caused great public grievances.

At Hoa Binh hydropower plant alone, says Tuoi Tre, the generated output this year will be some 600 million kWh lower than last year due to smaller water volume. Due to the shortfall, says the newspaper, many localities and manufacturers will suffer longer and regular power cuts.

To Quoc Tru, director of the Energy Consulting Center under the Vietnam Energy Association, says on Tuoi Tre that power disruptions will come one month earlier than last year, and the situation will especially strain between March and June.

An EVN executive says at the meeting that all should share difficulties with the power sector, and should be prepared to face power cuts, in cities as well as in the countryside. This is because, he said, the demand is growing by 20% annually, while there is hardly any local industry that can achieve that fast growth in investment. “The situation of power shortage will still occur even if water is sufficient,” he is quoted on Tuoi Tre.

But, there is one thing for sure: the power shortage should not be so critical if investment in new power plants is made to schedule.

Ta Van Huong, head of the Energy Department under the Ministry of Industry and Trade, said the key reason behind the power crunch is that “the speed of investment lags behind the demand growth,” also according to Tuoi Tre.

Sai Gon Tiep Thi, quoting a report from the Ministry of Industry and Trade, says that the total output of new power plants commissioned in 2010 was less than 50% of the target, at 2,272MW compared to the targeted 4,960MW.

The ministry says that for this year, the target of commissioning new plants with a combined output of 5,400MW looks unachievable as four out of ten projects scheduled for getting off the ground last year have been delayed and carried over to this year, and only 11 out of 33 projects under progress are moving in right schedule.

EVN has played down the possibility of running diesel generators to offset the power shortfall, saying it is almost broke and has no money to buy diesel oil, according to Lao Dong. The State utility corporation estimates that to secure enough power from diesel generators, the group would need VND5.4 trillion (nearly US$300 million) to buy diesel power for the dry season alone, and VND12 trillion for the whole year of 2011.

But EVN itself is facing huge financial problems. The group’s board chairman said at the meeting that EVN incurred losses of up to VND8 trillion in 2010, and coupled with debts and other financial arrears, the corporation now needs a huge amount of VND24 trillion in obligations, according to Tuoi Tre.

“EVN now is very close to the corner,” Hung said.

That situation paints a back dab on the gloomy picture of power supply for this year. And therefore, widespread power outage is foreseen this year, as EVN does not see any other solutions to the problem, says Nguyen Phuc Vinh, director of the Northern Power Corp. that supplies power to 27 northern cities and provinces.

“Campaigns to economize power use help little and the only way is to cut supplies to cement and steel manufacturers as the two industries alone consume 10% of the total power supply in the north,” Vinh said. He added that if power supplies to cement and steel industries are reduced by 30%, then the sum of VND5.4 trillion for buying diesel oil will no longer be needed.

His reasoning is challenged by Nguyen Tien Nghi, vice chair of the Vietnam Steel Association, who says on Thanh Nien that disrupting power supplies to some industries is not the suitable approach.

As diesel oil generators are not to operate adequately this dry season due to the issue of high cost, as many new power projects have fallen far behind schedule, as the Government is still weighing a proposal to hike power prices – which will only help with more development in the long term – and as banks are not willing to disburse funds for power development investors, there is no light seen at the end of the tunnel, not only for EVN but also for the whole energy-thirsty economy. Rather, there is a tunnel at the end of the light.- SGT

Tags: Vietnam electricity, Vietnam energy, Vietnam power shortage