During the second half of the 1990s, energy demand in Vietnam grew at a rate 30 percent faster than GDP. The expansion of energy supply was critical for growth in agriculture and industry. Providing electricity access to the rural poor improves health and education levels, and providing an alternative to traditional energy sources reduces environmental degradation.
The IDA-supported Rural Energy Project was identified and designed to
- Extend the electricity grid to 671 communes, with 395,000 households, located in 32 provinces
- Build government capacity to maintain a viable power sector in the long term
- Apply alternative energy sources in areas not reached by the electricity grid.
Expectations were surpassed as about 2.7 million people in some of the poorest rural areas of Vietnam gained access to a reliable electricity supply for the first time in their lives. They reported higher incomes, improved health conditions, better quality education, less time spent on housework and more business development opportunities.
- The project connected 976 communes with 555,327 households to the national power grid, a 45 percent jump in commune access and a 40 percent rise in household access.
- More than 30 percent of men and 29.8 percent of women in recently electrified rural households reported higher incomes.
- A 2006 impact study showed that 17.5 percent of households were operating a business out of their homes, representing a major increase of new small businesses and jobs in newly electrified areas.
- Health clinics reported better conditions for diagnosis and treatment and for improved communication about community health care.
- Children are studying more because of access to lighting at night.
- The government’s broader rural electrification program increased access from 50.7 percent of rural households in 1996 to 90.7 percent in 2005 and 94.5 percent by the end of 2008.
- Of the total project cost of US$216 million, IDA provided US$150 million in financing from 2000-2006.
- IDA has a long-term involvement in the sector and maintains a continuing dialogue on needed reforms.
- IDA helped design a 10-year Master Plan for Rural Electrification that brings government, user and donor resources into one program while improving program management.
- IDA worked with the government to set up technical standards for rural networks.
IDA is financing the Second Rural Energy Project (US$220 million) to upgrade service standards and the institutional framework for delivering rural electricity and the Rural Distribution Project (US$150 million) to improve the reliability and quality of medium-voltage service to targeted retail electricity distribution systems, as well as providing US$200 million in Additional Financing to Rural Energy Project II. This will be followed by the Third Rural Energy Project (planned to start in 2011), which will complete the grid by bringing coverage to isolated or scattered households and to communities in mountainous areas and on islands.