The Power Crisis in Vietnam: A Closer Look at the Electricity Shortage  –  Monica Cai monica.cai@crm.szc-group.com

Introduction:
Vietnam is currently facing an unprecedented power crisis that has disrupted various sectors across the country. In many northern regions like Bac Ninh, which host numerous manufacturing enterprises, power outages translate into production halts.

Since the beginning of June, industrial parks in northern Vietnam have been experiencing rotational power cuts, forcing factories to suspend operations. The partial shutdown of streetlights in residential areas, along with scheduled power cuts, has significantly impacted the daily lives of Vietnamese people. This blog explores the causes and consequences of the power shortage in Vietnam, shedding light on the efforts being made to address this critical issue.

1. The Power Crisis in Vietnam:
Vietnam’s electricity system is grappling with severe shortages for most of the day across the whole country.

According to Vietnam Electricity (EVN), power outages have affected 27 provinces and major cities across the country, including Hanoi, Ho Chi Minh City, Danang, and Dalat. Since May 19th, Vietnam has implemented planned rotational power cuts nationwide, with some areas experiencing up to seven hours of power outages per day. The power shortage is expected to persist at least until late June, and residents and businesses are advised to prepare accordingly.

Notices have been issued by local power companies to Apple suppliers like Foxconn and Luxshare, as well as Samsung Electronics’ factories in northern Vietnam, requesting that they consider rotational power cuts or reduce electricity consumption during peak hours.

Work at a garment factory in the outskirt of HCM City, Vietnam.© ILO/Aaron Santos / Flickr

The country heavily relies on hydropower and thermal power plants in the northern areas for electricity generation. However, unexpectedly high temperatures have led to a surge in electricity consumption, resulting in water reservoirs drying up. Moreover, below-average rainfall in the country, with some rivers even experiencing water levels below 40% of normal capacity, has exacerbated the situation. The largest hydroelectric plant in Vietnam, Son La, has seen water levels drop below the minimum operational limit, and as a result, 11 hydropower plants have been forced to halt operations due to low river levels (Vna, 2023).

Photo from VNA

The direct consequence of high temperatures extends beyond increased electricity consumption in Vietnam. It leads to higher evaporation rates from rivers, making it difficult for hydroelectric power plants to maintain sufficient water levels. As a result, hydropower generation has significantly declined by three-quarters. Hydropower accounts for over 30% of Vietnam’s total electricity generation, and this sharp decline has severely disrupted the entire power supply system in the country (Giz, 2019).

Photo from GIZ Energy Vietnam
http://gizenergy.org.vn/en/about/our-of-programme/programme-background

Mai Duc Tiep, head of the operations team at the Son La hydropower plant, informed Tuoi Tre (Youth) news that the water levels in the dam have reached a record low in 13 years, dropping below the dead-pool level of 175 meters. On June 7th, the water level further declined to 174.9 meters, marking the first time in history that the Son La hydropower plant has encountered such a situation (Tuoi Tre News, 2023).

In early June, a reporter from the Vietnam Youth newspaper visited the Sanra hydropower Station (The largest hydropower station in Vietnam with a capacity of 2400MW)

Photo: Photo: Nguyen Khanh / Tuoi Tre
https://tuoitrenews.vn/news/society/20230610/prolonged-drought-takes-heavy-toll-on-vietnams-largest-hydropower-reservoir/73715.html

2. Reasons for the Power Shortage:
a. Natural Factors:
The electricity shortage in Vietnam is closely tied to the country’s inherent limitations.

Geography:
Vietnam has a long and narrow geographical shape, which offers advantages such as a lengthy coastline and numerous ports. However, it also poses challenges as there are few major rivers running from north to south. The two main rivers in Vietnam are the Red River in the north and the Mekong River in the south. Unfortunately, these rivers have relatively flat banks, lacking the necessary gorges for the construction of large-scale hydropower plants. As a result, Vietnam’s hydropower plants are primarily located on smaller rivers and tributaries, resulting in limited power generation capacity.

Photo from wikipedia
https://en.wikipedia.org/wiki/M%E1%BB%A5_Gi%E1%BA%A1_Pass

Climate:
Additionally, abnormal heatwaves have significantly contributed to increased electricity consumption in Vietnam. The Ministry of Industry and Trade and the Vietnam Electricity Corporation (EVN) have highlighted that the surging demand for electricity is the primary cause of the current power shortage. In May, the country witnessed an average daily electricity consumption of nearly 820 million kilowatt-hours, representing a 20% increase compared to April. For instance, Hanoi experienced a substantial surge in electricity consumption during May and June, with Hanoi Power Corporation reporting a 22.5% increase in average electricity usage in May.

b. Human Factors:
Rapid Economic Development:
Apart from natural causes, the power crisis in northern Vietnam has been a persistent issue that has worsened due to climate factors. The rapid economic development in the northern region has outpaced the growth of power infrastructure, leading to a severe electricity shortage. While the demand for electricity in northern Vietnam has been increasing by 9.3% annually since 2016, power generation capacity is expected to reach 5.7% from 2021 to 2030, resulting in a significant supply-demand imbalance. Insufficient planning and delays in the approval and construction of new power plants have exacerbated the situation (Research and Markets, 2022).

Challenges in power grid operation:
Furthermore, the construction of Vietnam’s power grid is progressing at a slow pace, leading to insufficient support from the central and southern regions to the northern region. Transmission capacity is also a concern, putting additional pressure on the supply in the northern region. The delays in transmission projects can be attributed to various factors, including compensation and site clearance issues.

As a result, most transmission projects have fallen behind schedule by one to two years. While the construction of the power grid takes several years, renewable energy power plants can be built in just three to six months. This mismatch in capacity adds to the challenges faced in meeting the electricity demands effectively.

Indeed, the overall power consumption in Vietnam has witnessed a significant increase in recent years, serving as a driving force behind the country’s socio-economic development. This growth aligns with Vietnam’s ongoing industrialization and integration into the global economy, following the market reforms implemented in 1986. When analyzing energy consumption by sector, three major sectors stand out as the largest consumers: industry, transportation, and residential areas. These sectors account for a substantial portion of the country’s energy usage. On the other hand, commercial and public services, along with agriculture and forestry, contribute to a relatively smaller share of the total energy consumption in Vietnam.

Half of all the lights on Hanoi’s Long Bien Bridge are turned off in a bid to save energy. Photo by VnExpress
Photo by VnExpress
3. Addressing the Power Shortage:
To alleviate the severe power crisis, various measures have been implemented in northern Vietnam.

According to Bloomberg, the government is planning to invest $134.7 billion in power development and increase the utilization of renewable energy (Chau & Uyen, 2023). However, Reuters reports that progress in renewable energy generation in Vietnam has been slow. Previous investments in solar power faced challenges with grid integration and pricing, leading to stagnation. Vietnam has significant potential for wind power generation, and a consortium of developed countries, including the G7, pledged $15.5 billion to assist Vietnam in reducing coal dependency and focusing on coastal wind power development. However, the Vietnamese government has been hesitant about accepting foreign loans for wind power projects. Dr. Tran Dinh Thien, former director of the Vietnam Institute of Economics, criticized Vietnam’s lack of systematic planning in the power sector.

A. Importing electricity from China and Laos

In an effort to address the power shortage in Vietnam, the country is exploring options to import electricity from neighboring nations, expanding beyond its previous reliance solely on China. According to a report by the National Assembly Economic Committee, Vietnam plans to import 14 GW of electricity from Laos, 3.8 GW from China, and 4 GW from Cambodia by 2030 (Phu, 2020). Currently, Vietnam imports approximately 572 MW from Laos and over 450 MW from China, accounting for nearly 2% of the country’s total electricity output (Ducc, 2022).

Amidst the electricity shortage in Vietnam, the country has received energy support from China. At the end of May 2023, Guangxi Province in China signed a power purchase agreement with Vietnam for the 110 kV Donggou to Mong Cai interconnection project (Vietnam+, 2023). This marks the first time in seven years that China has resumed supplying electricity to Vietnam.

The Institute of Energy under the Ministry of Industry and Trade predicts an increase in electricity imports in the coming years. The North-Central region of Vietnam is the primary recipient of imported electricity, followed by the Central and Central Highlands regions, which are projected to experience power shortages after 2025. The government aims to supplement these areas with power supplies from the South and neighboring countries due to the challenges faced by hydropower plants in terms of operation caused by water shortages. China, on the other hand, is expected to have a surplus of up to 150 GW in its southern region until 2025. Laos is set to export 6.2 GW of electricity to Vietnam, while Cambodia, which currently imports 0.25 GW from Vietnam, may also have the potential to export electricity depending on the circumstances. Past electricity purchase agreements between the two nations show that Vietnam intends to establish an interconnected electricity grid with power plants in Laos. Additionally, Vietnam is conducting research to acquire 3,000 MW of electricity from China through a one-way transmission line to the Vinh Yen station, utilizing a 500 KV transmission line constructed in the North-Central region bordering the provinces of Houa Muang and Xameua. These initiatives are aimed at bolstering Vietnam’s electricity supply and mitigating the current power shortage.

The key issue lies in Vietnam’s inability to independently construct power plants due to limited resources and expertise. Importing electricity from China becomes a more feasible option for them. Currently, Vietnam’s coal-fired power projects utilize subcritical coal-fired units, which are outdated and make it difficult for Vietnam to achieve carbon peaking by 2030. To meet their energy needs, Vietnam would require higher-grade coal-fired units. However, it is too late for them to introduce China’s latest ultra-supercritical coal-fired units. This is because on September 21, 2020, China made a commitment during the United Nations General Assembly to cease the construction of overseas coal-fired power projects, and Western countries have also halted such projects abroad (Stepansky & Varshalomidze, 2021).

B. Encouraging domestic and commercial users to conserve electricity during the hot season.

Promoting electricity conservation has become a crucial national policy in Vietnam. Ngai, an industry expert, proposed creating favorable conditions for energy sectors to address the electricity shortage. In Hanoi, efforts have been made to educate citizens about saving electricity, such as by reducing lighting in public areas and encouraging the use of stairs. Hapulico, the Urban Lighting Company, has implemented a power-saving mode for public lighting, adjusting operating times and reducing the number of lights. The Noi Bai International Airport has also participated in electricity-saving measures. These combined efforts have resulted in significant energy savings, with Hanoi alone saving approximately 12 million kWh from May 15 to 30 (Vna, 2023). The Hanoi Electricity Corporation (EVNHANOI) aims to continue implementing solutions to save an additional 18 million kWh. Vietnam is committed to alleviating the electricity shortage through responsible energy consumption.

Half the lights on the Long Bien Bridge in Hanoi, Vietnam, were turned off to save energy
However, these measures provide only temporary solutions. To ensure long-term solutions, Vietnam needs to accelerate the construction of power plants and power grid infrastructure. Efforts should be directed toward matching the growth of power generation capacity with rising electricity demand. Additionally, addressing the inefficiencies in the approval processes and enhancing the overall efficiency of the power sector are vital to overcoming the power shortage in northern Vietnam.

Conclusion:
The ongoing electricity shortage in Vietnam calls for concerted efforts from all stakeholders. By prioritizing energy conservation and implementing innovative measures, the country can mitigate the impact of the power crisis. The commitment to saving electricity, from the government to individual households, plays a vital role in ensuring a sustainable and reliable power supply. As Vietnam progresses towards its socio-economic development goals, it is imperative to embrace a culture of responsible energy consumption and continue investing in renewable energy sources to meet the growing demands of the nation. Through collective efforts, Vietnam can overcome the current electricity challenges and pave the way for a brighter and more sustainable energy future.

Bonus:
https://finance.yahoo.com/news/vietnam-electricity-industry-report-2022-103800161.html
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