VIETNAM: ELECTRICITY SHORTAGES POSSIBLE

UNCLAS HANOI 000773

SIPDIS

STATE FOR EAP/BCLTV and EB
USDOC FOR 4430/MAC/ASIA/OPB/VLC/HPPHO

E.O. 12958: N/A
TAGS: ENRG ECON EIND EINV VM
SUBJECT: VIETNAM: ELECTRICITY SHORTAGES POSSIBLE



1. (SBU) SUMMARY: Vietnam's power industry is struggling to
meet electricity demand due to a prolonged drought and
delays in the construction of new power plants. Despite
increased electricity imports from China, Vietnam faces a
serious energy crunch in the coming two years, according to
an official at Electricity of Vietnam. With no new large-
scale power plants starting operations until 2007,
electricity shortages are a real possibility in the near
future. End Summary.

Electricity of Vietnam
--------------


2. (U) Electricity of Vietnam (EVN) dominates Vietnam's
power sector. EVN is a state-owned enterprise with 17 power
plants, four transmission companies and seven power
distribution companies. EVN's total installed capacity at
the end of 2004 was 11,500 Megawatts (MW). Total nationwide
electrical power generation reached 47 billion Kilowatt
Hours (KWH) in 2004, of which EVN generated 40 billion KWH.
EVN buys the remaining power, approximately 7 billion KWH,
from independent power producers (IPPs) to satisfy the
country's needs for electricity.


3. (U) Historically, EVN has been able to satisfy the power
demands of Vietnam's development and has managed to
electrify about 87 percent of rural households. Driven by
economic expansion and industrialization, Vietnam's power
generation and consumption have increased an average of 15
percent annually in the last ten years. In some provinces,
particularly those with industrial zones, the demand for
electricity has increased over 20 percent annually.

Shortage of Power in 2005 and Beyond
--------------


4. (U) A prolonged drought has severely curtailed normal
hydroelectric power generation in Vietnam in recent months.
Deputy Director of EVN's Office of International Cooperation
Ms. Phan Thu Thuy Tien confirmed to Econoff that three
principal reservoirs throughout the country (Hoa Binh, Thac
Ba, and Tri An) all have dangerously low water levels and
that the water volume in these reservoirs is down 20 to 40
percent compared to previous years. Hydropower plants have
previously provided up to 40 percent of the country's total
output, but power from these hydropower plants has accounted
for just 24 percent of total output this year.
Precipitating the water level decline is the government's
mandate to release water for downstream farming use, a high
government priority. EVN has estimated that Vietnam will
have a 200-300 MW shortage this year alone. Tien confirmed
that if the current drought continues, blackouts throughout
Vietnam are possible in the near future. She added that a
contributing factor is the delay in finishing the Danang-Ha
Tinh 500 KV transmission line and both the Ca Mau Power (720
MW) and O Mon thermal (2400 MW) power plants. When asked
about the severity of the country's energy problems, Tien
admitted very frankly that it was "serious" and likely to
continue through 2007.


5. (U) EVN has been turning to IPPs and other sources such
as coal, oil and gas to cope with the current electricity
demand, but what Vietnam needs most urgently is additional
power plants, Tien noted. While China is supplying
electricity to Vietnam, EVN estimates that China will
eventually provide only 200 MW of power for Northern
Vietnam. At present, 40 MW of power is being transmitted to
Northern Lao Cai Province using a 110 Kilovolt (KV)
transmission line. Another contract to buy 40-60 MW for Ha
Giang province has been signed, but is not in operation
pending the completion of a 110 KV transmission line, Tien
remarked.

MARINE