Excessive electricity intensity of Vietnam: Evidence from a comparative study of Asia-Pacific countries

Abstract

As electricity consumption in Vietnam has continued to increase much faster than has GDP, electricity intensity (EI) in the country has risen to levels far exceeding those of other Asia-Pacific economies (APEs). By analyzing evidence from a comparative study of other APEs through using the World Bank data, this study proves that EI in Vietnam is excessive and that its escalation over the last few decades cannot be justified as being due to supporting the country's policy of high economic growth. Factor analysis of the economic and electricity indicators for 22 APEs was used to track the shortcomings of the economic structure leading to the EI escalation in Vietnam. Electricity tariff, service share of GDP, and level of institution were identified as determinants of EI across the region. Given the weak performance regarding these indicators, Vietnam has highest EI among APEs followed by China and Mongolia. To reduce EI, Vietnam should consider diversifying away from the electricity-intensive industry sector toward economic activities such as service and information technology. The economic reform should be accelerated to complete the competitive electricity market and reduce the inefficiency of electricity usage through poorly managed state-owned enterprises and inefficient public investment projects.