Vietnam News reported that rolling electricity outages in Vietnam may deter foreign manufacturers from using the country as an export base, prompting the government to raise prices to boost investment in power plants. Vietnam may increase the cost of average household electricity by a record 15% next month.
Mr Nguyen Tan Dung Prime Minister of Vietnam said last week that factories and other major energy consumers must cut power use by at least 1%.
Mr Boy Schallert MD of Aalborg Industries AS said that "Severe power cuts would make it very difficult for me to explain to the board that we want to stay here and want to develop the company here. We hope we will be fine this year, but we fear the worst."
According to the European Chamber of Commerce Vietnam, pricing is the biggest impediment to foreign investment in power plants as state run Electricity of Vietnam, known as EVN, currently sells electricity at a loss.
Aalborg, a Copenhagen based manufacturer of marine and industrial boilers, was warned the country would see heavier power cuts this year because the situation is even worse. The electricity price that EVN offers to investors is about a third of the average amount paid in Thailand and Cambodia, making many energy projects commercially unviable.
Mr Matthias Duehn, the European chamber's executive director, said that "If the energy price is not adjusted it becomes a serious problem for Vietnam in the medium and long run. The power cuts affect Vietnam's competitiveness and may direct investment elsewhere."
According to statistics from the Association of the Electricity Supply Industry of East Asia and the Western Pacific, record low levels at Vietnam's water reservoirs are hurting hydropower production. The company said last month it faces a shortfall of 3 billion kilowatt hours during this year's dry season. Vietnam depends on hydropower for about 37% of its electricity, followed by gas at 36% and coal at 16%.
Mr Mark Hutchinson, a senior director at energy consulting company IHS CERA, said that nuclear projects will run into the same pricing issues. Any politician that boosts electricity prices steeply is not going to be in office for very long.
He added that "Some of these projects are going to get signed, but not enough. They would rather suffer blackouts that potentially hurt economic development than face the wrath of the populace."
(Sourced from www.bloomberg.net)
