Vietnam’s electricity sector is now at a crossroads. The sector remains the most critical for continuing the growth momentum of the Vietnamese economy, which is one of the fastest growing in Asia. Driven by this growth, electricity demand is estimated to grow at around 10 per cent up to 2030 due to rapid industrialisation and urbanisation. At the same time, Vietnam has committed to promoting a sustainable energy transition, particularly through the Just Energy Transition Partnership (JETP), an initiative designed by the International Partners Group (IPG) (comprising nine developed countries and the European Union) to mobilise financial resources and assist Vietnam and other developing countries that have heavy reliance on fossil energies, to decarbonise their energy systems.
Towards this, Vietnam is actively stepping up the transition from fossil fuels to renewable energy sources (RES) to help achieve the country’s 2050 net-zero target. This commitment includes an interim target of increasing the RES share in the energy mix up to 39.2 per cent by 2030 and up to 71.5 per cent by 2050, as per the country’s Power Development Plan (PDP) VIII for the period 2021 to 2030, with a vision to 2050 (approved in May 2023 and the related implementation plan approved in April 2024). This involves an annual electricity sector investment requirement of USD13.5 billion by 2030, which could increase up to USD52 billion annually, during 2031-50.
Such a massive scale of investments outlines the need for diversification of capital sources, including the effective attraction of domestic and foreign capital, while ensuring the national security and competition in the electricity market. This necessitated reforms in the electricity sector, which is currently largely managed by the state-owned, vertically integrated Electricity of Vietnam (EVN). The latter, however, has been facing financial losses due to increasing generation costs, driven by fuel prices and foreign exchange rates.
Recognising this, the government has been proactive in creating a conducive policy and investment environment. The most recent initiative is the adoption of the amended Electricity Law by the country’s National Assembly on November 30, 2024. Effective February 1, 2025, the amended law aims at unlocking stalled RES projects and meeting the growing electricity demand efficiently, by focusing on fair pricing, RES oversight and a phased roadmap to eliminate cross-subsidies. The new law, which was originally established in 2004 and amended several times, provides for comprehensive reform in the legal framework of the country’s power and energy sector after two decades of its establishment.
The law prioritises RES and liquefied natural gas (LNG) for energy security and sustainable development. To expand the use of low-carbon energy, it introduces new regulations for offshore wind (OSW) projects and revives the nuclear power development plan, which was previously suspended in 2016. It provides for build-operate-transfer contracts for OSW and LNG projects. It also allows private ownership of transmission grids, although EVN’s subsidiary, National Power Transmission (EVNNPT) would continue to monopolise 220 kV and above grid, due to national security reasons.
The revised law covers six key areas: power planning and development; RES and new energy sources; conditions for electricity operations, including licensing and revocation; electricity trading; system management and operation; and safety standards for electricity use and hydropower dams. The new law contains 81 articles, down from 130 articles in the government’s draft amendment, but includes 11 new provisions compared to the current law.
Note: The estimated investment in Vietnam’s generation and transmission segments for the 2026-30 period is around USD78 billion. Figures for the 2031-2050 period are projected ranges, and the exact amounts will be refined in subsequent plans.
Source: Vietnam’s PDP VIII; Global Transmission Report
In order to effectively implement the law, on December 11, 2024, based on the request from the Ministry of Industry and Trade (MoIT), the prime minister issued Decision No. 1544/QD-TTg on promulgating the plan to implement the 2024 Electricity Law. The Decision 1544 provides for the release of a set of guiding decrees (five), decisions (two), circulars (five) and other documents relating to the implementation of the law. In line with this, the MOIT has started issuing some of the related draft decrees for public consultation and is drafting relevant circulars. Separately, MOIT is working on amending the PDP VIII to align with the policy and legal framework and changes under the new law. It plans to submit the revised PDP to the prime minister for approval by February 28, 2025.
The New Electricity Law – Key Provisions
The new law outlines Vietnam’s fundamental policies on power development, which reflect a change in the country’s power strategy. It recognises power development as an important industrial infrastructure sector for national development and energy security. The state would attract investments, both public and private, in power generation and grids according to the national PDP, the power supply network development plan in the provincial planning and the plan to implement PDP, power generation, power distribution, electricity wholesale and retail activities. The government manages the power sector through the MoIT and provincial People’s Committees. Accordingly, the prime minister directly approves the power project list (including transmission) contained in the PDP, while the Provincial People’s Committee approves the project list in the provincial plan.
Generation
Renewable Energy
The new law widens the definition of renewable energy to include electricity generated from solar, wind, geothermal and ocean energy, including tides, waves and ocean currents, hydropower, biomass, waste-to-energy and other RES forms. Further, new energy sources include electricity produced from green hydrogen and ammonia.
The law specifies key principles for the development of RES and new energy projects. Such projects must ensure supply security and power system safety and must be synchronous with the available and ready electricity infrastructure. It calls for prioritising the development of large-scale generation projects to form clusters or renewable energy centres. The law encourages developers of wind and solar projects to invest in hybrids that would combine their RES project with battery energy storage systems (BESSs) or production of new energy to serve electricity generation and use. However, grid-connected RES and BESS capacity must be in line with the overall capacity approved in the national or provincial power master plan. Finally, such projects lay the foundation for a shift in the power structure toward low carbon, achieving the goal of reducing emissions and ensuring the development of a sustainable power system.
Offshore wind
In addition to the above, there are separate provisions for OSW development. OSW projects are now classified as nearshore (which are located up to six nautical miles [about 11 km] from shore) and offshore (which are located beyond six nautical miles from shore), with specific regulatory guidelines. OSW projects may be built for the purpose of supplying electricity to the grid, or self-production and consumption, or production of green hydrogen and green ammonia, or other domestic demand or power exports, including production of green hydrogen and green ammonia for export.
Notably, the final version of the law removes the previous proposal of prohibiting the transfer of projects, shares or capital contributions in OSW projects, which were included because of national security concerns. The law only requires such actions to be compliant with its general regulations or other relevant laws, the details of which would be clarified subsequently.
The law has specific regulations relating to investment incentives, project survey requirements, project investment in-principle approval (IPA) and the investor selection mechanism for OSW projects. These projects are entitled to exemption and reduction of fees for using sea areas as well as land use fees and land rent. It provides the legal basis for the minimum long-term contracted electricity output for OSW projects, selling electricity to the national grid. The MoIT’s draft decree guiding the development of renewable and new energy, released on December 16, 2024, proposes exemption from sea area use levies during the construction period; and 50 per cent reduction of levies for 12 years from the commercial operation; exemption from land rentals during the construction period; and 80 per cent of the minimum long-term contracted electricity output for a maximum of 12 years and within the loan principal repayment period for projects selling electricity to the grid.
Specifically, the law separates the surveying procedures from the investment procedures for OSW projects. Surveys would be carried out by a state-owned enterprise (SOE) assigned by the prime minister and the procedure for the selection of survey entities will be detailed in the relevant decree. Notably, it is not clear if the ongoing OSW projects that have obtained survey approvals issued by the Ministry of Resources and Environment need to get new approvals under the latest law. Under the law, the OSW investor selection would be based on IPA proposals by potential investors or survey entities. The prime minister will, however, approve the IPA, along with investors, in case of national security OSW projects (which will not be subject to the bidding process) and projects proposed and developed by an SOE. Other projects will be subject to a bidding process as per the regulations. Notably, the ceiling electricity price in the bidding documents cannot exceed the maximum price established by MoIT. The winning bid price represents the maximum amount for the electricity buyer to negotiate with the successful investor.
Natural gas/LNG
Given the country plans to reduce the development of new coal-based capacity and phase-out operating projects by 2050, the law promotes the development of thermal plants based on domestic natural gas as well as based on imported LNG. It aims to prioritise the development of LNG power project clusters that would use common terminals, storage and gas infrastructure to reduce electricity generation costs.
Nuclear
The law states that nuclear power development, which will be a state monopoly, must be consistent with the power development plan to ensure supply security. This implies that it is expected to serve as base-load capacity along with LNG in the future. Importantly, investment, operation, decommissioning and safety requirements of nuclear plants must comply with the Atomic Energy Law and other laws. PDP VIII, which currently does not have any planned nuclear capacity, is likely to be revised to include proposed projects, particularly the Ninh Thuan nuclear power project, the revival of which was approved by the National Assembly on November 30, 2024.
Transmission
According to the law, the state maintains a monopoly on operating the transmission grid and dispatching the national electricity system. However, the law allows non-state entities to invest in and build grid projects and also operate such grids according to the provisions of the law. The MOIT would prescribe the order and procedures for approval of and also approve the prices of electricity transmission, distribution, auxiliary and despatching services submitted by electric entities. It would also prescribe methods of guidance and forms of valuation of transmission power grids invested and built by non-state entities.
To address energy security, the law introduces a new concept of “emergency power projects and works”, including power grid construction projects and works, which play an important role in the power transmission between regions to prevent grid overload; or following an urgent requirement of ensuring national defence and security or urgent requirements of local socio-economic development; and projects and works on the construction of power sources and connected power grids to make up for power shortages. For such emergency projects that need to change the forest use purpose for project implementation, the prime minister’s decision alone would serve as a written investment policy approval and a written IPA for changing the forest use purpose to another purpose. Such projects may also be eligible for government guarantees.
Competitive electricity markets and electricity price reforms
The new law has provisions for the development of an electricity market with competition in generation, wholesale and retail electricity markets. This requires restructuring of the electricity industry, building and completing the system and market infrastructure, and reforming the electricity price mechanism by gradually reducing and eventually, eliminating cross-subsidies between customer groups and between regions.
Notably, a significant milestone in 2024 was the separation of the National Load Despatch Centre from EVN and the establishment of National Power System and Electricity Market Operation Company Limited under MOIT. This restructuring aims to advance the electricity sector’s reforms and lays the groundwork for a competitive power market in Vietnam. The law exempts the national power system despatching and market transaction operating units from electricity operation licence.
A key aspect of the new law aimed at revitalising the country’s power market is maintaining stable costs and minimising the gap between power generation costs and electricity prices. It proposes retail electricity pricing reforms by introducing a multi-component pricing system and gradually removing cross-subsidies. Under the current system, retail prices are based on a national standard, which results in different pricing between different user groups. MoIT will develop a phased roadmap for this change.
The law outlines mechanisms for direct power sale and purchase agreements (DPPA) between large electricity users and power generators. It continues to recognise two models of the physical DPPA (where electricity is sold through a dedicated power line) and the synthetic DPPA (where electricity is purchased via the national grid), as approved by the government under its 2024 Decree No. 80/2024/ND-CP. The law emphasises that these agreements must comply with planning laws, licensing requirements and the competitive electricity market. The government would stipulate the order and procedures for participation, including the roles and responsibilities of relevant parties.
The law imposes certain requirements on tariffs for cross-border power trading. For electricity exports, which are not through the national grid, the price must not be lower than the maximum price set by the domestic electricity price framework. When exporting through the national grid, the export price must be based on the retail electricity price and cannot be lower than the maximum price of the average domestic retail price bracket.
The way forward
As Vietnam strives to strike a balance between the twin pressures of sustainability and development, the latest electricity law provides clear investment signals to attract domestic and international investors. In effect, it serves as a legal framework for RES and new energy and paves the way for replacing coal-based capacity with LNG and nuclear power as well as OSW (a variable baseload technology), while emphasising the importance of accelerating the development of grid infrastructure. With the MoIT, along with other ministries and agencies, engaged in preparing and producing the requisite decrees and circulars to implement the law, greater clarity on several provisions is expected in the coming months. Once fully implemented, the legislation is expected to resolve issues related to cost structures, regulatory frameworks and market operations, while accelerating energy transition, creating a vibrant competitive power market and ensuring the stability and efficiency of the national electricity supply system.
