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Vietnam: Electricity shortage significantly affects businesses

The manufacturing and service sectors in Vietnam is heavily affected due to sudden power outages, leading to serious economic losses. The Electricity Industry as well as specialised agencies are trying to come up with solutions to overcome this situation.

In Hanoi, industry-construction activities currently account for 28% of the city's electricity demand. Due to the characteristics of Hanoi's power grid, it mainly depends on the external supply as sources from renewable energy and waste electricity account for less than 1.5% of total capacity. The backup generator source is mainly diesel is it is prioritised to be used in hospitals, high-rise apartment buildings, etc., hence, the recent power shortage has seriously affected the production activities of industrial production enterprises. Without electricity, all business activities stopped, hence affecting the project timeline and firms could be late to deliver their products. Some companies might not be able to accept many orders, as if they are late for an appointment with a customer, it will affect the reputation of the business. For example, if in the past, when a factory's production line ran at full capacity, it could exceed the output by up to 120%, but from the beginning of June until now, the company can only accept about 80% of the orders because the machinery can not operate optimally because the amount of electricity is not enough. In addition, when high-tech machinery is running, a sudden power failure will cause damage to the workpiece, hence affecting the overall lifetime of the machine and increasing product faults.

For example, in Thai Binh recently, four industrial zones Phuc Khanh, Nguyen Duc Canh, Song Tra and Gia Le were cut off from 12 noon to 24 pm (3-6th June), and from 12 noon to 20 pm (7-9th June). In the above mentioned industrial zones, nearly 100 projects are directly affected, as production adjustment is almost impossible because the current power outage lasts for 12 hours, and workers (mostly women) do not have enough physical condition to change their working hours earlier than usual. Some companies have to readjust the working time immediately, which might not be desirable for all workers, to meet the deadline from their customers.

The service sector is similarly affected. For example, AEON Long Bien Trade Center, one of the biggest shopping centres in Hanoi, also had power cuts twice in the early days of June. A business representative said that when the power goes out, the generator will operate to maintain the refrigerator, freezer, lighting system, etc. However, in the commercial center area, due to insufficient electricity, some stalls also had to close or temporarily stop operating, and the air conditioning system was not maintained as usual.

Tourism destinations are experiencing significant loss in tourist numbers as well. The sudden power supply sharply reduces revenue from service activities, and negatively affects the tourism image of the locality, reducing the number of visitors during the peak summer season. Restaurant and hotel owners have to invest thousands of dollars to rent large-capacity generators in case there is a power cut. For example, compared to previous years, Ha Long this year is more quiet, especially after the recent power cut. As tourists share information on social networking sites, more people are hesitant to visit the famous site due to the fear of power cut. According to information from the People's Committee of Van Don district, the number of visitors to Minh Chau - Quan Lan tourist area decreased by 35%, only about 12,700 tourists/week compared to the time before the reduction of electricity consumption, and this number is forecasted to continue to decrease in the following weeks if the power reduction is prolonged. It can be clearly seen that the alternating power cuts at the moment are adversely affecting the tourism industry, especially in the peak tourist season of summer, when localities are expecting socio-economic growth when tourism activities revive after the Covid-19 epidemic.

In the short term, the situation could be improved but not solved completely. A report of the Ministry of Industry and Trade and the Electricity of Vietnam (EVN) updated to date shows that the situation of electricity supply in the North is still very difficult and has not been improved much even though the water in hydropower reservoirs has been improved slightly. Additionally, thermal power plants in the Northern region have been mobilised at maximum capacity and output, but it is still difficult to "offset" the electricity output from hydroelectric power plants, significantly affecting the daily life of the people and factories.

In order to ensure the electricity supply, Hanoi city is proposing to the Ministry of Industry and Trade to develop rooftop solar power, especially at manufacturing enterprises in industrial clusters. Furthermore, the Government Standing Committee has just issued Document No. 25/TB-VPCP dated June 15, 2023 announcing the conclusions of the Government Standing on major tasks and solutions to stabilise the macro-economy, control inflation, promote growth and ensure major balances of the economy in the current situation. In particular, the Government requested the Committee for Management of State Capital at Enterprises to direct the Vietnam Oil and Gas Group (PVN) and the Electricity of Vietnam (EVN) to completely solve the power shortage in June. Specifically, the Ministry of Industry and Trade was assigned to focus on implementing Power Planning VIII, speeding up the progress of Quang Trach II Power Plant, coordinating with the Committee for Management of State Capital at Enterprises to focus on leading and directing the implementation of the 500kV transmission project from the Central to the North.

Additionally, businesses also propose that the local government should try to ensure the source of electrical energy for production, and in the case of electricity cut, it is necessary to notify businesses in advance so that they can actively react and rearrange their operation.

Source: The Internet



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