In response to the fuel supply challenges created by the war in Iran, the Government of Vietnam is looking to accelerate the country’s energy transition. But this isn’t the first time, with several key roadblocks to greater energy efficiency proving difficult to overcome.
On March 19, the Government of Vietnam issued Directive 9 outlining plans to accelerate Vietnam’s energy transition in response to the looming fuel crisis from the conflict in Iran.
The Directive sets targets, including reducing energy intensity by 1 to 1.5 percent annually to 2030, cutting transmission losses to 5.8 percent, achieving 3 percent annual electricity savings among large users, mandating energy audits, and shifting at least 50 percent of urban public transport to electric vehicles.
If past experience is anything to go by, however, these targets may be challenging to achieve.
Between 2012 and 2022, energy intensity registered a decline of just 5.9 percent, or about 0.61 percent a year, falling from 3,559 megajoules per 2015 US$1 PPP to 3,349, according to International Energy Agency data.
This is a far cry from the 1 to 1.5 percent the government is looking for.
This renewed push, however, comes alongside a new leadership cycle, with administrative reform and policy execution high on the agenda.
This could create an environment in which the changes needed to really push energy efficiency forward may be possible.
So what has been slowing Vietnam’s transition?
Electricity prices.
Regulated electricity prices see Vietnamese pay some of the lowest electricity rates in the world.
As of March 2026, according to Global Petrol Prices data, Vietnam’s residential and business electricity prices ranked 107th and 109th, respectively, out of 150 countries, number one being the most expensive and number 150 being the least.
Higher prices, however, can be a key driver of demand for greater efficiency, the current fuel crisis, case in point.
To that end, a 2017 study found that a 10 percent uniform electricity price increase could reduce electricity consumption in Vietnam by an average of 4.75 percent.
The same study goes on to also note that it found residential electricity users in Vietnam are more responsive to power prices than in other developing countries like India and China.
Transition costs.
Electricity prices in Vietnam, however, are set by the government.
This means that they are often set based on political or policy objectives, managing inflation, for example. This sees the retail price at times fall below production costs, which bleeds over into the ability to improve supply-side energy efficiency.
That is, the state power provider, Electricity Vietnam (EVN), is generally expected to cover the gap between production and retail costs — as of December last year, EVN was still carrying an accumulated loss of VND 44,792 billion (US$1.70 billion) from 2022 and 2023.
This takes money away from grid improvements and investment in new technologies.
Moreover, on the consumer side, cheap electricity weakens the business case for investing in higher-cost, but more efficient equipment, extending the payback period and reducing incentives to upgrade.
The economy’s industrial core.
Regionally, Vietnam’s economy is one of the most energy-intensive.
Estimates from last year had Vietnam using almost three times the electricity of Indonesia and the Philippines to produce US$1 of GDP.
Part of this is due to the size of Vietnam’s manufacturing sector, which is generally energy-intensive, relative to its overall GDP — roughly 24 percent, versus Indonesia at 19 percent and the Philippines about 16 percent (2024 data).
However, overproduction has also been a problem.
Cars, fertilisers, and cement have all been cited as industries that are producing more than Vietnam needs, with oversupply putting downward pressure on prices, reducing the value of output recorded in GDP, even as energy input remains unchanged.
Electricity shortages in Vietnam are also not uncommon, with these industries pulling power away from other, more in-demand industries, reducing their output, as well.
What to watch for
All of that is to say, the core challenges that need to be addressed to make a significant difference to Vietnam’s energy efficiency are deeply embedded in Vietnam’s economy and political structures.
Overcoming these challenges will therefore not be without pushback.
However, in light of recent events, it does seem that attitudes are shifting away from seeing energy efficiency as an option and instead towards seeing it as more of an imperative.
Though only time will tell whether this is simply a response to current fuel price pressures or a permanent, long-term change to power policy and objectives.