Blackouts expose Vietnam's thirst for electricity
HANOI - With a surging economy drawing interest from foreign investors, Vietnam is one of East Asia's success stories -- but at a rate outpacing the electricity supply needed to feed its growth.
Planned but increasingly regular power cuts over the past month have left factories at a standstill, plunged homes into darkness and turned off traffic lights.
Vietnam's power plants are struggling to meet the growing requirements of consumers and an economy that expanded more than eight percent last year.
Such needs translate into an annual rise of more than 15 percent in the demand for electricity -- a rate that is expected to last until 2010.
"Vietnam is a victim of its success," said Richard Spencer, a specialist in energy at the World Bank's Hanoi office.
The situation "is typical of a country growing economically so fast."
But Tony Foster, a partner in the law firm Freshfields Bruckhaus Deringer, said the shortage was "becoming a bit alarming to businesses because it's gradually growing.
"It's not a problem that is going to go away in the short term. Demand is growing too fast for them."
Communist Vietnam, a nation of 84 million people, lacks power plants. The World Bank estimates it will have to double electricity production capacity to more than 25,400 megawatts by 2010.
The country is currently heavily reliant on hydro-electric plants but that can be a risk in case of drought, experts say. Indeed, lack of water has been one of the factors behind the recent power cuts.
The Red River, which flows through Hanoi, has fallen to its lowest level in a century, said Nguyen Lan Chau, the deputy director of the national weather forecasting body, and he predicted more difficult months ahead.
Nearly 40 percent of Vietnam's power comes from hydro-electric production. There are gas reserves but they can be expensive and difficult to extract if dispersed, one foreign investor said.
The government is planning greater use of coal but that is a pollutant and in any case the country lacks the necessary port infrastructure.
Strengthening and diversifying production will take time and cost a lot of money. The central government estimates it will need three to four billion US dollars every year until 2010 to cope with the situation.
The World Bank estimates state-run Vietnam Electricity (EVN) will only be able to meet 40 to 50 percent of the necessary investment, but international aid will still not be enough to fill the gap.
So Vietnam is appealing to foreign investors. France's EDF, Sumitomo and Tepco of Japan and Britain's BP are already producing electricity here, while the likes of AES and China Southern Power Grid are reportedly in line too.
But Foster cautioned that old hurdles remain.
"It's very difficult to actually complete a deal," he said. "There are too many people who have an influence on a complex project."
Negotiations can involve the central government, regional authorities, raw materials suppliers such as PetroVietnam and EVN for its distribution network.
Atomic energy is on the horizon. Vietnam plans to build its first nuclear power facilities by 2015, which is drawing interest from France, Japan, South Korea and the United States, but that "is not a solution for now," the World Bank's Spencer said.
In the meantime Hanoi is trying to persuade consumers to save energy and is importing more and more electricity from big neighbour China. Anxious to keep growth on track, it wants to prevent a shortage of electricity becoming a drag on the economy.
Agence France Presse - May 9, 2007.
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