Vietnam seeks to save energy in heat wave as manufacturers abandon China

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Vietnam’s state utility has asked consumers to be economical with their energy consumption, as a heat wave pushes electricity use to record levels in the Southeast Asian country that has become a vital link in the global supply chain.

National electricity consumption hit a record 1 billion kilowatt hours on Tuesday, state-run Vietnam Electricity (EVN) said in a statement this week. In 2023, the maximum consumption in one day was about 940 million kWh, according to state media.

Energy use has particularly increased in northern Vietnam, home to huge industrial parks and factories that supply multinational companies, including Apple. Demand is expected to increase in the coming days, EVN said, adding that it was prepared to ensure stable supply.

EVN’s repeated call to save energy comes despite government assurances that Vietnam will not suffer shortages this year.

Vietnam’s rapid development as a manufacturing alternative to China has put pressure on the supply of electricity, which is generated from a combination of coal, hydropower and wind power, among other sources. In the summer months of May to July last year, northern Vietnam, which is especially reliant on hydropower, experienced shortages that caused factory outages.

Vietnam has become one of the top destinations for companies looking to move manufacturing from China amid geopolitical tensions between Beijing and Washington. Foreign direct investment hit a record $37 billion last year.

But infrastructure, including energy, has struggled to keep up with growing demand.

A lack of investment in power generation in recent years has led to shortages during peak seasons, the World Bank said in an April report. Investment is particularly weak in the north and on the transition lines connecting the north to the south, where electricity supplies are plentiful, he said.

Last year’s summer blackouts caused an economic loss of $1.4 billion, or 0.3 percent of Vietnam’s GDP, according to preliminary World Bank estimates.

“Despite progress toward improving infrastructure, logistics costs remain high and seasonal electricity shortages in northern Vietnam over the past two summers have raised concerns about reliability,” the World Bank said in the report. .

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Vietnam has repeatedly assured foreign investors this year that they will not see a repeat of the blackouts. EVN denied a Reuters report this month that the government had asked Foxconn and other manufacturers to reduce energy consumption by 30 percent.

The government has said that a transmission line connecting northern and central Vietnam will be completed in June, ensuring stable supply. Prime Minister Pham Minh Chinh has urged government agencies to diversify energy sources to ensure adequate supply and even import electricity if necessary.

Vietnam has also been increasing coal imports in recent years to meet energy demand amid a massive influx of foreign investment. Customs data shows coal imports in May more than doubled to 6.5 million tonnes from the same period in 2022.

The pressure on Vietnam’s energy infrastructure comes amid political turmoil. A sweeping anti-corruption campaign has shaken Vietnam’s leadership and caused bureaucratic paralysis, slowing economic activity.

Both the president and the speaker of the National Assembly were removed this year for unspecified violations.

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