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EVN challenges logic of developing steel exports   2010-09-01 - Tuoi tre

Vietnam may lack electricity for a long time to come, says Electricity of Vietnam (EVN), if the Government doesn’t curb the development of steel mills.  Many mills, including new ones, use obsolete, power-gobbling technologies.



An EVN memorandum to the Prime Minister analyzes the steel industry’s voracious demand for power and proposes that mill project developers be instructed to generate it themselves, according to a Tuoi Tre report.


Steel mills consume 3.5 billion kilowatt/hours of electricity a year


In the memorandum, EVN General Director Pham Le Thanh detailed the difficulties created for the state power company by the proliferation of unanticipated steelmaking projects, i.e., projects authorized at the province level, and outside of the centrally-managed ‘strategy’ on steel industry development.


EVN counted 65 iron and steel projects which have a capacity of 100,000 tons or more per annum, not including the projects managed by state-owned Vinasteel.  Only 33 of these projects are listed in the national strategy on steel industry development.  The 32 others were issued operating licenses by city or province  authorities.  They were neither approved by the Prime Minister nor discussed with the Ministry of Industry and Trade, as required by law.


EVN says that every year, these mills require 3.5 billion kilowatt/hours (kWh) of electricity.  To meet their need, EVN invested 35.5 trillion dong in transmission wires, transformers and power plants. Meanwhile, the steel industry has been operating at just 50 percent of its capacity.


In 2007, according to ‘World Factbook,’ Vietnam’s total electricity consumption was 51 billion kWh.

The EVN memo stresses that the demands of the steel mill projects have have had big impacts on its ability to provide electricity to other industries and people.

Currently, the steel mills and other industrial users pay 909.28 dong, or 4.78 US cents, per kilowatt hour (kWh).  In Thailand, by contrast, industrial users pay 8.12 cents/kWh.  In Singapore, they are charged 14.1 cents/kWh, and in Indonesia 6.7 cents.  And that explains, says EVN, why some foreign investors choose to set up heavy industrial production bases in Vietnam.  They take full advantage of Vietnam’s low electricity prices to produce steel for export to other countries in the region.


Even some new mills use power-guzzling technologies


The Energy Institute, a unit of the Ministry of Industry and Trade, reports that the electricity consumption growth rate in 2008-2009 in HCM City, though it has much the highest GDP level, was the lowest in the country, only 7.7 percent. Power demand increased eight percent in Khanh Hoa and nine percent in Dong Nai.  Meanwhile, electricity demand in Hai Phong City and Quang Ninhincreased by over 15 percent, and in Ninh Binh by 17.2 percent.


From this, the institute concludes that energy demand growth is closely correlated not with GDP growth but with the expansion of heavy industry.  Quang Ninh province is the site of Vinashin’s new Cai Lan and Cuu Long steel mills, while Ninh Binh is the site of several giant new cement plants.


Chairman Pham Chi Cuong of the Vietnam Steel Association says that to make one ton of construction steel from steel ingots, steel mills on average need 120 kWh, and to make one ton of steel ingots, they need 700 kWh.  The technologies applied by steel mills in Vietnam are diverse: some mills are using energy-saving technologies but most use outdated technologies.


“It takes 3-4 years to build a power plant,” an EVN officer grumbled. “If local authorities continue granting so many investment licenses to steelmakers, the electricity shortage in Vietnam will never end.”


According to the Hai Phong Electricity Company, just eight of Hai Phong’s many factories, including six steel mills, together consume four million kWh of power daily. At some moments, however, Hai Phong’s power allocation drops to only seven million kilowatts.


“If we could persuade one steel mill to stop operation at such times, we would have 400,000 kilowatts in surplus, enough to serve an entire 120,000 inhabitant district.


It is estimated that the six steel mills in Hai Phong account for 20 percent of the city’s power consumption.

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