Low electricity sale prices and high input material prices are making Deputy Minister of Industry and Trade Do Huu Hao worry that investors will not inject money in power projects, meaning that electricity could be lacking for 10 more years.

 

 

“The electricity shortage may last until 2020. Our ratio of electricity loss during transmission is quite high, while we don’t have extra sources as we lack capital for investments,” Hao said.

 

He added that a lot of investors have expressed desire to build power plants, but investors and the Electricity of Vietnam (EVN) cannot reach agreement on electricity sale prices.

 

The oil price has increased by 5-6 times, while gas, coal and cement prices have also risen by two times. It is impossible to encourage investors to inject money in power plants as input material prices are all increasing, while the sale prices remain low.

 

The electricity supply is now seriously tense. EVN has had to cut power alternately nationwide for the past few weeks, warning that the short supply will last until May at least, especially in the north. Most water reservoirs now have low water levels, while EVN does not have extra sources.

 

According to EVN, the capital’s electricity consumption increases by 15% per annum, now at 14.3mil kwh a day. On peak days of March, the figures were 17-18mil kwh.

 

Cutting power seems to be the only choice of EVN nowadays to deal with the electricity shortage. EVN does not want to purchase electricity from non-EVN sources, as the more it buys from outside, the bigger losses it will suffer.

 

However, EVN still has to purchase electricity from outside despite losses. In 2008, as EVN estimates, the total electricity output needed is 77.2bil kwh (the commercial electricity volume needed is 68.35bil, and the electricity loss in transmission is 9.6%). Of this amount, EVN can make 39.7bil, and has to buy 13.35bil from joint stock companies and 24.11bil kwh from independent power plants (IPP) and BOT plants.

 

After tough negotiations, EVN still has to purchase electricity at high prices: UScent14/kwh from Hiep Phuoc Power Plant (VND2,254/kwhn), UScent6.7/kwh (VND1,078.7/kwh) from Amata, UScent7.1/kwh from Formusa (VND1,143/kwh).

 

After a lot of negotiations with the arrangement of the government, Ca Mau power plant agreed to sell electricity at UScent6.5/kwh. With the total volume of 4.5bil kwh EVN is to purchase from Ca Mau, EVN will incur the loss of VND2,169bil.

 

EVN is trying to negotiate with power plants to force prices down, but it itself acknowledged that the sales price should not be lower than UScent5/kwh.

 

Why is the electricity supply so short this year?

 

The drought occurred sooner than expected, while water is used not only for running hydropower plants, but for irrigation systems and agriculture production to ensure food security. Meanwhile, power plants have been slow to begin operating as skyrocketing construction material prices have been slowing down the projects’ execution.

 

Another reason is the bad operation of power plants. Some newly operational plants have troubles. Uong Bi Power Plant, for example, has been put into operation, but still are not stable power sources. Ca Mau Plant is still running at half capacity. Moreover, there have been some other troubles like ones with gas pipes.

 

Do you think that it is really a bad thing that more FDI capital flows to Vietnam, while Vietnam cannot provide enough electricity for them?

 

It is because the FDI flow has been increasing dramatically recently. Within one year, the registered FDI capital was equal to the FDI capital of the previous years in total.

 

In fact, if the Hoa Binh water reservoir was not so dry, the electricity supply would be much better. I believe that the electricity supply will be much better after 2015, when the power plant in Son La becomes operational with a big water reserve.

 

The government has asked big corporations and groups, including EVN, not to raise sale prices at the moment. How will this affect electricity production?

 

This will surely affect investment attraction as input material prices are increasing sharply, while output prices remain unchanged. As the sale prices cannot be raised, EVN will not be able to purchase electricity from non-EVN sources. It is always very tough to negotiate with partners about electricity prices.

 

(Source: VnMedia, VNE)

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