This is an extract from a recent report “State of Transition: How state-owned power companies can drive energy transition in emerging economies” by the International Institute for Sustainable Development.
Overview
Over the past decade, Viet Nam’s power sector has experienced significant growth and transformation, driven by rapid economic expansion and increasing electricity demand. In 2021, the country announced a commitment to achieve net-zero emissions by 2050, reinforcing it with an updated NDC in 2022. The NDC aims for a 7% unconditional reduction in total GHG emissions from the energy sector compared to a business-as-usual scenario by 2030, and up to an additional 17.5% with international support.
Viet Nam’s electricity market is dominated by the state-owned utility, EVN, which is tasked by the government with the production, buying, selling, importing, and exporting of electricity, as well as investing in electricity projects and managing the national grid. EVN holds a direct monopoly on transmission and distribution, making the integration of new renewable energy capacity a major responsibility for EVN and its subsidiaries.
The use of FITs to incentivize renewable energy uptake resulted in the addition of significant capacity in 2020 for solar and in 2022 for wind, mainly in the South Central and Central Highland regions. The aging grid had insufficient capacity to absorb this surge in additional renewable energy supply, resulting in grid congestion and curtailment of wind and solar plants to ensure grid stability.
EVN’s effort to upgrade the grid to accommodate renewable energy will need to be increased as Viet Nam has set ambitious climate and energy goals. The solutions undertaken by EVN—as well as emerging challenges—can serve as lessons for other state-owned utilities in managing their country’s energy transition.
Energy Transition in Viet Nam
Historically, the country’s energy system has relied heavily on coal, gas, and hydropower. However, since 2020, Viet Nam has made significant strides in diversifying its energy mix with a sharp increase in renewable energy capacity. Solar capacity (both utility scale and rooftop) grew from less than 0.1 GW in 2016 to 16.6 GW by the end of 2023. Similarly, wind power capacity expanded from 0.2 GW in 2018 to 5.6 GW by 2023. By the end of 2023, solar and wind together accounted for approximately 27% of the total installed electricity capacity and the equivalent of nearly 14% of total power generation. In support of the country’s NDC targets, the Power Development Plan for 2021–2030 (PDP8) was approved in May 2023. Although the PDP8 originally aimed for a modest amount of new solar capacity by 2030, discussions in February 2025 indicate this will increase significantly, with solar making up 45% of all new capacity by 2030.
Role of EVN in Viet Nam’s Electricity System
EVN held a monopoly in electricity generation until 2006, following which the government decided to liberalize the generation market. The establishment of a competitive generation market in 2012 and government incentives for renewable energy led to private ownership in power generation surging from less than 10% in 2012 to nearly 42% by the end of 2023. IPPs hold about a third of generation capacity.
At the end of 2023, EVN and its generation subsidiaries collectively operated a total of 29.9 GW power plants, representing 37% of the national generation capacity. The National Power Transmission Corporation (EVNNPT), a subsidiary of EVN, operates 153 substations and 25,236 km of transmission lines.
Institutional Structure
The management of EVN reports directly to the Prime Minister as well as two key governmental bodies: the Ministry of Finance (MOF) and the Ministry of Industry and Trade (MOIT). MOF is primarily responsible for overseeing the state’s capital in EVN and other large SOEs. Acting as the state’s representative, the MOF manages and supervises EVN’s strategic decisions, investments, and restructuring efforts. MOIT, on the other hand, serves as the regulator and planner for the power sector. It manages the broader electricity market and sets policies related to energy production, distribution, and consumption. EVNNPT is a wholly owned subsidiary of EVN responsible for the development and operation of the national transmission system.
Together, this creates a complex institutional structure for EVN to operate within, and reduces its ability to make swift, strategic investments, including for grid upgrades and extensions. Projects must be undertaken in accordance with MOIT’s plans, while the capital for these investments must be approved by MOF. EVN’s projects, including for grid work, rely on government will and instruction, and what the regulations allow.
Integrating Renewable Energy Into the Grid
The rapid development of renewable energy in Viet Nam between 2019 and 2022 can be largely attributed to a highly favourable domestic policy environment. One of the key drivers was the introduction of attractive FITs for solar and wind energy, which spurred significant investment in the sector. Starting in 2011, the Government of Viet Nam introduced a FIT for wind power, which was increased in 2018 and included on-shore, near-shore, and offshore installations. From 2017, government decisions also offered FITs for three types of solar installations: ground mounted, floating, and rooftop. Additional favourable policies, such as lease exemptions, the absence of local content requirements, and tax exemptions for renewable energy equipment, further enhanced the competitiveness of renewable energy compared to fossil-based generation.
As a result, Viet Nam added 11.6 GW of solar capacity in 2020 and 3.6 GW of wind capacity in 2021. This rapid growth in renewable energy was primarily concentrated in the South Central and Central Highlands regions due to high solar and wind potential, low population density, and land prices. However, this renewable energy capacity overburdened the existing grid infrastructure in these areas, and the major load centres are located near the urban clusters of Hanoi (North) and Ho Chi Minh City (South), leading to a geographic mismatch. The transmission of renewable energy capacity from the South to the North is hampered by an aging 500 kV transmission line that fails to support long-distance power transmission. Furthermore, as more distributed rooftop solar came online in December 2020, the distribution grid faced additional strain in some provinces. In 2020, approximately 364 GWh of solar energy was curtailed, resulting in significant financial losses and wasted power resources. By the end of 2023, the NLDC reported 20 overloaded points on the 220/110 kV transmission lines and transformers, along with 220 renewable energy plants that had to cut production due to grid congestion.
In addition to congestion, several technical challenges, such as limited renewable energy forecasting and a lack of support for ancillary services to stabilize frequency and voltage, further increased the pressure on EVN and its subsidiaries to manage and operate the grid effectively.
This FITs for solar and wind applied to projects commissioned by the end December 2020 and 2023, respectively. The lack of an alternative pricing mechanism after the FIT expiration, contributed to a slowdown in renewable energy capacity additions that would sell to EVN. However, in July 2024, the Government of Viet Nam issued a decree permitting direct PPAs for renewable energy between private project developers and private energy consumers (including for privately developed transmission lines). This new legislation could spur a new wave of rapid renewable energy development in Viet Nam.
Challenges for Initial Integration of Renewable Energy Into the Grid
Viet Nam’s success in rapidly expanding its renewable energy capacity has posed grid-related challenges due to several factors. Experts suggest that the lack of coordination between EVN and the MOIT and a lack of comprehensive planning from the MOIT resulted in these mismatches between energy generation and grid capacity. The national grid still requires significant investment to provide sufficient capacity for supply and demand requirements. Construction of new lines on the 500 kV grid has been relatively slow, and it is nearing full capacity. Only 78% and 74% of the planned 500 kV and 220 kV lines, respectively, were added to the system between the start of renewable energy expansion in 2016 and when renewable energy needed to be curtailed in 2020.
Due to regulatory, financial, and institutional challenges, there was an underinvestment into Viet Nam’s grid infrastructure from 2016 to 2020. In 2019, the MOIT had an opportunity to address some of these issues through the first draft proposal for the second round of FITs for solar power, circulated in February 2019. This draft suggested a zonal approach, where the provinces with the highest solar radiation and existing renewable energy capacity would receive the lowest FIT rates. The intention was to promote areas with less solar potential and capacity through a higher FIT rate. However, the final decision did not incorporate this zonal approach, leading to continued concentration of renewable energy projects in the same highstress regions, further aggravating grid congestion issues.
Another issue with power planning in Viet Nam is the mismatch between provincial and national power development plans, particularly in the placement of substations, the direction of power transmission, and the approval of project designs. The lack of coordination between the national government and Provincial People’s Committees creates delays and inefficiencies in upgrading the grid to accommodate existing and new renewable capacities, further contributing to grid congestion and curtailment issues. Investing in the grid is critical for Viet Nam’s efforts to integrate and operate a modern electricity system with high renewable energy penetration. According to PDP8, the total investment required for the development of the grid from 2021 to 2030 amounts to USD 14.9 billion.
EVN’s Solutions for Integrating Renewable Energy Into the Grid
EVN has gained considerable experience in operating a grid with a high renewable energy share after 2019, particularly from solar and wind sources. During this time, the company has made significant strides in building its technical capacity to better manage the grid and ensure more efficient renewable energy integration. In addition, EVN has actively worked with the government and the National Assembly to enhance regulatory frameworks, paving the way for improved renewable energy integration into the grid. For example, EVN lobbied the government to allow private investment into the grid and then the transfer of the grid assets to EVN. Furthermore, EVN was instrumental in the consultation for the amendment of the Electricity Law in 2024 to further allow private investment in generation and the grid.
A key achievement has been the successful deployment of advanced technical solutions to manage renewable energy sources more effectively. The company has invested in information technologies, particularly to improve forecasting accuracy for solar and wind energy. For example, EVN NLDC developed an in-house forecasting model through collaborations with multiple data providers. As a result, the daily forecast error for renewable energy improved, and now consistently stays below 10%, with global leaders aiming for 5%–10%. Incentivizing rooftop solar generators to provide a net production forecast could further improve overall forecast accuracy. EVN has also made substantial progress on grid modernization, particularly through steps of implementation of a Smart Grid Roadmap, across transmission and distribution. These advancements include improved metering, energy management systems, and the deployment of Supervisory Control and Data Acquisition. These technologies enable EVN to monitor critical technical aspects of the grid, such as system inertia, voltage, and frequency, ensuring stable grid operations and preventing failures.
Furthermore, according to experts interviewed, as of 2023, EVN has fully integrated 100% of utility-scale renewable energy power plants into its automatic generation control system, allowing real-time grid management and control of generation outputs. The technical solutions implemented by EVN and its subsidiaries have dramatically increased the grid’s reliability and security. Additionally, EVN and its Power Corporation successfully ensured that 100% of 100 kV substations were operating in compliance with fully automated operation procedures, with 79% of 220 kV substations operating without any staff. EVN has taken steps to retain and retrain employees when substations are automated.
Beyond technical solutions for renewable energy management and forecasting, EVN has also invested heavily in upgrading physical grid infrastructure. In 2023 alone, the company completed and operationalized 187 power grid projects, including substations and transmission grids. Notably, EVN successfully completed the installation of 519 km of Quang Trach–Pho Noi 500 kV transmission lines ahead of schedule in 2024. This project received strong political support from the government, as it aimed to prevent the northern part of the country from experiencing an electricity shortage like in the summer of 2023. In the future, EVN plans to improve grid operations by implementing customer net metering and demand–response measures. Additionally, EVN is completing several 500 kV transmission and substation projects and has plans to develop high-voltage direct current transmission lines to support the transfer of renewable energy capacity from southern to northern Viet Nam.
Lessons From EVN’s Integration of Renewable Energy Into the Grid
Strengthening Coordination With Government and Regulatory Bodies: For SPCs, successful grid integration of renewable energy requires strong coordination between the utility, line ministries, local governments, and regulators. EVN’s experience shows the importance of proactive planning that balances grid capacity and renewable energy potential in specific regions, as well as regulatory support for grid upgrades and new energy technologies. Interconnection with the cross-border transmission grid could help transfer surplus renewable energy to other countries.
Unlocking Financing for Grid Infrastructure, Including From the Private Sector: Access to international financing and government-backed guarantees is important to support grid expansion. However, SPCs should also work with governments to develop and implement policy mechanisms that can help secure commercial and non-sovereign loans, along with mechanisms to encourage private financing for grid development. Private capital constitutes an under-exploited resource, albeit one that presents challenges when it comes to financing transmission investments. Transmission or distribution subsidiaries, with separate financial systems and credit ratings, may find it easier to access commercial loans specifically for grid upgrades than the parent SPC.
Developing Regulatory Frameworks for Renewable Energy Integration: Developing a market for grid services and offering attractive incentive policies, such as a pricing model for wheeling, could help attract private investment in grid infrastructure. Developing such a market as part of a successful energy transition requires regulatory support for market flexibility, ancillary services, and energy storage. SPCs need robust policies that create conducive conditions for renewable energy integration, enhance grid flexibility, and improve energy storage capabilities. This will help them manage the challenges of intermittent renewable sources like wind and solar.
Expanding Smart Grid and Modernization Efforts: EVN has made significant progress in deploying smart grid technologies, much like other SPCs managing large, complex grids. The implementation of advanced monitoring systems, remote control capabilities, and automation has enhanced efficiency. However, continued investment in both physical grid upgrades and digital infrastructure is necessary to accommodate growing renewable energy capacity and increased availability of information regarding network function.
Access the report here
