Vietnam has got the answers to power shortages all wrong

June 26, 2023 | 03:22 pm PT
Nguyen Dang Anh Thi
"As long as it's still hot, we will continue to tell people to save energy," said Pham Minh Duc, a Hanoi employee of Vietnam Electricity (EVN).

He and his colleagues have been touring the streets, even going inside people's homes to tell them to turn off unnecessary electric devices amid the summer heat.

A friend sent me a video of such a tour, saying he felt their attempts were "desperate." I completely understand.

The power shortages we experienced in the previous weeks did not come out of nowhere. They have been forecasts for years. Central and southern Vietnam would have suffered the same fate, if not for (ironically) an economic downturn that reduced power demand.

The hot, dry weather was cited as one of the reasons for the power shortages. New, alternative power sources in the north could not keep up with the region's power demand.

The capabilities of the power distribution system also could not keep up with the development of renewable energy sources in central and southern Vietnam, meaning a burden was placed on the north's power grid. These are just a few of the reasons.

Let's skip the weather for a change. Let's ask ourselves this: could investments in the consistent development of power sources and the power grid help resolve shortages for the long-term, and ensure national energy security in a sustainable way?

To answer that, we should look at the big picture of Vietnam's power demand and usage efficiency.

To ensure energy security, there must be optimal solutions for power supply, demand, and its delicate balance. Such a balance must be supported by institutional frameworks and legal corridors.

I will only discuss power demand in this article. If you want to read about the supply-demand balance to keep up with the ever-increasing production of solar and wind energy, there might be a future article for that.

An important criterion to evaluate the efficiency in power usage for a country is electricity intensity, measured as the number of kWh required to create a dollar of GDP growth. This value is calculated by dividing a country's total power usage by its total GDP in a year. The higher the electricity intensity is, the lower the efficiency.

I calculated Vietnam's electricity intensity over the last 10 years on average at 0.65 kwh per USD, which is twice the global average at 0.31 kWh per USD.

Vietnam's value is 1.2 times higher than China's, 1.4 times higher than Malaysia's, 1.7 times higher than Thailand's, 2.3 times higher than the Philippines', 2.5 times higher than Indonesia's, 3.1 times higher than Japan's and 4.3 times higher than Singapore's.

Most notably, this value is on the rise, with 0.59 kWh per USD in 2021 rising to 0.67 kWh per USD in 2021.

It means Vietnam is becoming more reliant on power usage to fuel economic growth, but we are not using it efficiently. I call this a "power trap," which implies that any issue that affects a country's power sources and pricing harbors the risk of harming its economy and sustainable development.

If we don't find a way to break out of this trap, we will be stuck in an endless loop of power shortages, which spur investments into the power grid, which help drive growth, only for the cycle to repeat.

One of the reasons for this precarious situation is the fact that Vietnam has kept its power prices for production among the lowest in Asia. Over the last 20 years, people who use electricity for daily usage and businesses have had to pay higher power prices to support the industrial production sector. But here's the thing. Industrial production takes up half of all electricity production in the entire country, while power demand for daily usage only takes up a third, and power demand for commercial and service purposes only takes up 5%.

Such a situation means power-intensive industries rush to Vietnam for investments to make use of its cheap electricity prices. This has been happening for a long time.

I have not seen Vietnam clearly shifting its growth model towards green and sustainable production. For example, there's a proposal to build the Lo Dieu steel factory in the central province of Binh Dinh, capable of producing 5.4 million tons of steel a year.

If it goes into operation, the factory will consume around 3.78 billion kWh a year, which is enough for the entire city of Hanoi to use for two months.

Vietnam has around 3,000 power-intensive facilities, with over 2,400 of them being industrial facilities. Out of the 860,000 businesses in Vietnam, these 3,000 facilities consume a third of all electricity produced throughout the country, enough to power around 25 million families.

Just by cutting down power usage in these facilities by 10%, Vietnam would save over 8 billion kWh a year, enough for Hanoi to use for four months. These are conservative estimates, as the World Bank said Vietnam's industrial sector has the potential to cut down power usage from 25 to 40%.

What I'm trying to say is calling for people to save energy by turning off their devices is not something truly necessary. It is indeed something "desperate," as my friend remarked.

Saving energy is each and everyone's duty, but it would be more effective if we knew where to focus our energy, using policies and initiatives in a systematic way.

From adjustments to growth models to choices of investments, and approval of green and sustainable technologies, these are the true answers to Vietnam's power demand problem.

*Nguyen Dang Anh Thi is an expert on energy and environment.

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