When it comes to electricity in Vietnam, whether a company is using it or producing it, there are a lot of nuances that foreign investors should be aware of. This cheat sheet runs through a brief overview of how the industry and the market operate.
Vietnam’s electricity supply organisational structure
The Ministry of Industry and Transport is the government body in charge of managing Vietnam’s electricity market and supply. It does this through the wholly state-owned power company Electricity Vietnam commonly known as EVN. EVN generates some power, but also buys power from wholesalers, and sells electricity to consumers.
That said, the actual technical aspects of managing the supply, as in ensuring a stable supply and managing load shedding when necessary, are managed by the National Power System Dispatch Centre commonly known as the NPSDC. This used to be a part of EVN but was spun off into its own entity reporting directly to the Ministry of Industry and Trade in response to power outages last year in Vietnam–it’s not clear how this change will prevent future blackouts.
Power shortages in Vietnam
Last year, power shortages were estimated to have cost Vietnam’s economy an estimated US$1.4 billion. This was attributed to water shortages for hydropower and a lack of a sufficient supply of coal, however, underinvestment in power infrastructure also played a role.
This is in large part because EVN was selling electricity at a loss and therefore didn’t have the money to invest. This was partly because of a jump in input prices but mostly because retail electricity prices, which are regulated by the government, were not increased in line with these increased costs.
Of note, it’s estimated that Northern Vietnam’s electricity consumption could increase by as much as 17 percent this summer, however, the supply of electricity is estimated to have increased just 10 percent.
Electricity pricing in Vietnam
Retail electricity prices in Vietnam are regulated and, though permitted, price rises are not all that common. This has led to EVN selling electricity below cost price. As of January, it was losing about VND 142.5 per kilowatt-hour sold.
Changes have been made to pricing regulations in recent weeks that will see electricity prices reviewed quarterly (as opposed to annually as was the case in the past) and adjusted by up to 3 percent by EVN before approval is needed from the MoIT. This is detailed in Decision 5 issued back in March.
That said, Decision 24 issued back in 2017, the precursor to Decision 5, already had provisions for the electricity price to be adjusted annually, however, between 2019 and November 2023 no adjustment was made. It’s not clear why and in this context, the frequency at which power prices are reviewed does not appear to be a problem so much as a lack of will to increase prices seems to be–there is currently no plan to address this.
For reference, the average electricity price for the world is 15.5 US cents per kilowatt-hour with electricity in Vietnam running at about 7.2 US cents per kilowatt-hour.
Electricity price brackets in Vietnam
In Vietnam, for power projects, the MoIT typically sets a maximum and minimum price within which EVN then negotiates with individual power producers. It’s not clear what the purpose of these price brackets is and announcing the maximum price EVN can pay in advance seems counterintuitive to the negotiation process. Regardless this is the process through which most power project prices are determined.
Vietnam’s Power Development Plan 8
The Power Development Plan 8, commonly referred to as the PDP8, was approved in May of 2023 and essentially outlines goals and plans for Vietnam’s electricity sector–it’s not clear how the figures outlined in this plan have been reached.
Electricity generation targets by source, per the PDP8
| By 2030 | By 2050 | |||
| Description | MW | % | MW | % |
| Onshore wind power | 21,880 | 14.5 | 60,050 – 77,050 | 12.2 – 13.4 |
| Offshore wind power | 6,000 | 4 | 70,000 – 91,500 | 14.3 – 16 |
| Solar power | 12,836 | 8.5 | 168,594 – 189,294 | 33.0 – 34.4 |
| Biomass | 2,270 | 1.5 | 6,015 | 1.0 – 1.2 |
| Hydropower | 29,346 | 19.5 | 36,016 | 6.3 – 7.3 |
| Stored power | 2,700 | 1.8 | 30,650 – 45,550 | 6.2 – 7.9 |
| Cogeneration | 2,700 | 1.8 | 4,500 | 0.8 – 0.9 |
| Coal | 30,127 | 20 | 0 | 0 |
| Converted coal* | 0 | 0 | 25,632 – 32,432 | 4.5 – 6.6 |
| Gas | 37,630 | 25 | 14,930 | 2.6 – 3 |
| Hydrogen | 0 | 0 | 20,900 – 29,900 | 4.1 – 5.4 |
| Imports | 5,000 | 3.4 | 11,042 | 1.9 – 2.3 |
| Flexible power sources | 0 | 0 | 30,900 – 46,200 | 6.3 – 8.1 |
| Totals | 250,489 | 100 | 490,529 – 573,129 | N/A |
Power Development Plan 8 implementation plan
This basically lists all of the power projects that need to be built in order to satisfy the goals set in the PDP8. Note that there are no specific wind power projects listed and the goal of six megawatts by 2030 is unlikely to be reached. In fact, many of these projects have not yet been started and given there are only about five years within which to meet these goals, many of them are looking increasingly unlikely.
See also: Vietnam’s Offshore Wind Power Holdup: Unpacked 2024
Box 1: Power police, El Nino see hydropower production dip in 2024
In the first half of 2024, REE Corporation, a major hydropower producer in Vietnam recorded an 11.5 percent year-on-year fall in revenue. This decline was primarily attributed to a downturn in power production, which accounts for approximately 48.1 percent of the firm’s total revenue.
This is partly due to the El Niño phenomenon which has seen drought-conditions in parts of Vietnam, reducing water in hydropower catchments. Additionally, a government policy prioritizing coal-fired thermal power plants to conserve water during the dry season has limited hydropower’s participation in the electricity market.
See also: REE Corporation: Vietnam Stock Overview
Renewables in Vietnam
Vietnam has said it intends to be net zero by 2050. To do this it is looking at wind, solar, and hydro as well as hydrogen. Wind and solar saw a lot of growth over the last decade with policy allowing for considerably generous feed-in tariffs. These policies came to an end at the end of 2021.
Vietnam’s Just Energy Transition Partnership agreement
The JETP was signed by the G7 and a handful of other nations and Vietnam in December 2022. The agreement is for US$15.5 billion in funding for Vietnam’s green transition from both public and private partners. It has, however, run into challenges with a Politico article back in December basically saying that there was no buy-in for the current JETP roadmap on the Vietnam side from key stakeholders.
Rooftop Solar in Vietnam
In 2017, to encourage renewable energy, the government implemented a mechanism to buy excess rooftop solar power at a preferential feed-in tariff price of 9.35 cents per kilowatt hour. This policy led to a significant increase in investments in rooftop solar power systems.
This policy, however, ended in late 2020 due to concerns about uncontrolled growth of rooftop solar power sources. This rapid expansion caused challenges in managing the national power grid and since the beginning of 2021, the signing of rooftop solar power purchase and sale contracts has been halted.
That said, rooftop solar power is currently back in the spotlight with a push for new regulations. Of note, the Ministry had been pushing for no feed-in tariffs on rooftop solar. The government, however, rejected this proposal. The MoIT then suggested feed-in tariffs of about 2.6 cents per kilowatt-hour but limited to ten percent of the installation’s capacity. It has since been suggested by the Deputy Prime Minister that this should be lifted to 20 percent. As of July, 2024, it’s not clear what might happen next.
Offshore Wind Power in Vietnam
The Power Development Plan 8 approved last year, was embedded with a target of six gigawatts of offshore wind power by 2030. The implementation plan for the PDP8 released earlier this year, however, did not list a single offshore wind power project with Vietnam’s six gigawatt goal looking increasingly unattainable.
Key challenges facing the sector include a lack of a marine spatial plan and a dearth of essential legislation as well as a lack of a clear pricing framework.
See also: Vietnam’s Offshore Wind Power Holdup: Unpacked
Nuclear power in Vietnam
In 2006, the Government of Vietnam announced plans to have a nuclear power plant online by 2020. This was followed a few years later by official plans for nuclear power plants in southern Vietnam in Ninh Thuan and Khanh Hoa provinces. These were, however, shelved in 2016 in favour of gas and coal on the back of lower demand projections.
That said, the issue has come up again this year. A visit from President of Russia, Vladimir Putin, saw Vietnam’s former communist ally pledge its support developing a local nuclear industry. Vietnam, however, though suggesting it was open to considering the possibility of developing nuclear power, was fairly non-committal.
Policy outlook
Direct Purchase Power Agreements–DPPAs
Vietnam issued a decree on Direct Power Purchase Agreements on July 3, 2024, clearing the way for businesses to buy power directly from power generators. The decree was a long time coming and has been touted as a critical component to developing Vietnam’s electricity network.
Per the decree, high volume power users will negotiate directly with power generators on supply and price. They will then be able to transfer power either through private lines or through the public grid. On the latter, agreements will need to include a payment for using public infrastructure to the state power provider EVN.
At the time of writing this legislation was only days old and therefore there will still be some time until it is clear how the decree will function in practice.
Electricity pricing
The state power provider EVN has floated the idea of charging a subscription fee on top of metered electricity prices to cover the additional infrastructure costs for some customers–for example, a factory using huge amounts of power might require its own substation and high-voltage power lines, and the subscription fee would be used to cover these expenses.
What’s next?
The electricity market and the industry more broadly, in Vietnam are complex with many moving parts. Whereas this article covers the broad strokes, businesses looking to invest in Vietnam’s electricity sector, or start a business in Vietnam, should go much deeper.
Firms should also keep in mind that Vietnam’s economy is dynamic and prone to change quickly. In this respect, Vietnam’s electricity industry watchers can best make sure they are abreast of all of the latest developments by subscribing to the-shiv.
Latest updates
- May 30, 2024: Added section on electricity price brackets in Vietnam.
- June 21, 2024: Added section on nuclear power in Vietnam.
- July 4, 2024 : Updated Direct Purchase Power Agreements section with new decree, details.
- July 28, 2024: Added sections on offshore wind and rooftop solar.
- September 5, 2024: Added box 1