Power policy

To spur development in wind and solar, Vietnam introduced FiT schemes for wind and solar projects. The first wind FiT implemented in 2011 at $78/MWh failed to incentivize development. It was subsequently revised in September 2018 – the onshore wind FiT was increased to $85/MWh and an offshore wind FiT of $98/MWh was introduced. The FiT scheme expired in November 2021.

Power prices and costs

The solar FiTs successfully attracted investments into the sector, allowing Vietnam to emerge as the regional clean energy leader in Southeast Asia. The two solar FiT schemes drove almost 19 gigawatts of solar build in just two years and propelled Vietnam to become the third-largest solar market in 2020. This led to a significant change in the makeup of Vietnam’s power mix. In 2020, the share of fossil fuel fell significantly to just 42% of installed capacity, from 83% in 2019. However, as most of the solar boom in 2020 occurred in December, coal and gas still generated 66% of electricity that year, falling to 57% in 2021. The rapid development of solar and wind have, however, has given rise to grid and curtailment concerns.

Power market

Vietnam’s power market is dominated by state-utility Vietnam Electricity Group (EVN). The generation sector is open to the participation of independent power producers. Two consecutive solar booms in Vietnam over 2019-20 and a 2021 wind build rush greatly diversified generation capacity mix and ownership. These feed-in tariff (FiT) schemes helped make Vietnam the largest market for solar and wind in Southeast Asia with some 20.6 gigawatts of capacity installed by the end of 2021.

EVN retains a monopoly in the transmission, distribution and electricity retail segment. The government targets liberalizing its electricity retail market by 2025 starting with a planned 1 gigawatt direct power purchase agreement pilot

Vietnam has witnessed strong power demand growth over the last decade. Between 2015 and 2021, Vietnam’s electricity demand increased at a compounded annual growth rate of 7.9%, primarily driven by increased foreign investment in Vietnam’s manufacturing sector. Delays in planned fossil fuel plants and exhaustion of the country’s large hydro potential led to power supply shortage concerns. This led to a pivot in the government’s attention away from coal and toward renewables and gas as suggested by the draft power development plan VIII. The latest draft of the PDP VIII sees coal capacity additions ending in 2030; it also envisions rapid growth of gas power capacity and renewable energy

Doing business and barriers

The investment climate in Vietnam is stable. There are no known defaults by the single off-taker, EVN. There are no barriers to entry in the form of foreign ownership restrictions or local content requirements. There is however uncertainty in the future revenue and offtake schemes for solar and wind projects. After the expiry of the last solar FiT in December 2020 and wind FiT in November 2021, the government has yet to release any new pricing mechanism for solar and wind projects.

EV market

While there are little to no passenger EVs in Vietnam’s vehicle fleet currently, the country leads the Southeast Asia region in electric two-wheelers with over 3.96 million units. In 2021, the country accounted for 99% of all-electric two-wheeler sales in Southeast Asia. This high adoption rate is driven by lax rules on low-speed electric two-wheelers. The country historically allowed these vehicles to be driven without a driver’s license and without registration, making it a popular choice of transportation.

EV policy

The Vietnam government published its Action Plan on Green Energy Transition and Reducing Carbon and Methane Emissions from the Transport Sector on July 22, 2022. The action plan lays out various short- to long-term targets for the adoption of low-emission drivetrains across various modes of transport, including road, rail, waterways, aviation and urban transport.

Vietnam is the second country after Singapore in Southeast Asia to officially set an end date for the sales of gasoline and diesel vehicles. As part of the 2050 net-zero goal, the government aspires to end the manufacture, assembly, import, and sales of gasoline and diesel vehicles by 2040.

There are currently no incentives for the purchase of electric vehicles (EVs) though the country imposes a lower excise tax of 5-15% on battery EVs compared to 35-90% for internal combustion engines. The Ministry of Industry and Trade has said it was considering additional tax incentives to encourage the development and use of electric vehicles in Vietnam. However, none has been finalized.

Buildings market

Vietnam’s low-carbon heating market is in its infancy.

Buildings policy

In 2006, Vietnam approved the first Vietnam Energy Efficiency Program that outlined measures for improving energy efficiency and conservation across different sectors of the economy. The program is now in the third phase for the period 2019-30.

The national technical regulation on energy efficiency buildings code applies to the design, construction or retrofit of buildings with a gross floor area of 2,500 square meters or larger. The energy efficiency building code regulates and sets minimum standards for building envelope, ventilation and air conditioning systems, lighting systems and electrical equipment. Although the regulation was first adopted in 2013, compliance is reported to be low.