Challenges and Opportunities

Electric power represents one of the most promising areas for U.S. commercial prospects in Vietnam, but also the most challenging. Vietnam Electricity (EVN), a state-owned enterprise that reports directly to the Prime Minister, is the largest buyer of electricity, and holds a monopoly on transmission and distribution. Electric power is under the jurisdiction of the Ministry of Industry and Trade (MOIT). The Directorate General of Electricity and Renewable Energy (EREA), under the MOIT, is responsible for overall energy planning and policy. The Electricity Regulatory Authority of Vietnam (ERAV), which is responsible for establishing and supervising the power market, power planning, tariff regulation and licensing.

The Vietnamese government relies on the national power development plans to advance the sector, which forecast growth in demand and map out the overall development of the power industry to meet demand ten years out. The long-awaited Power Development Plan VIII (PDP8) was approved on May 15, 2023, for the period from 2021 to 2030, this works as the overall framework for stakeholders of the industry to move forward, with significant amount of renewable energy to be introduced to the market.

The country’s robust industrialization process has fueled a surging demand for energy in general and specifically for electricity. Vietnam is one of Asia’s fastest growing energy markets due to a large population and sharp economic growth coupled with fast declining reserves in its existing oil and gas fields. According to Institute of Energy of Vietnam (IEV), Vietnam is set to face a surge in power demand and consumption over the coming decade, which will have an impact on its energy security. The Government of Vietnam expects power consumption to grow 10-12 % annually through 2030, one of the fastest power consumption growth rates in Asia.

The forecast of power shortage became a reality in Vietnam, as the North of Vietnam faced great challenges in 2023 for power shortage. Power was supplied on alternative schedules for manufacturing, operations and residential areas. MOIT forecasted that localized power shortages in the manufacturing hub of Ho Chi Minh City is expected that by 2030 it will lack more than 10,000 megawatts (MW) or 7.5 % of total capacity. The total investment capital for the 2021-2030 period will be about USD 128.3 billion (average about USD 12.8 billion per year), of which USD 950 million will be for power generation/source/plants and about USD 32.9 billion (USD 3.3 billion per year) will be for power grids.

The Central Committee of the Politburo of Vietnam, which is the highest body of the Communist Party of Vietnam, issued Resolution No. 55-NQ/TW dated 11 February 2020 on Strategic Energy Orientation until 2030 with vision 2045. This document outlined that installed capacity by 2030 is expected to be 125-130GW, doubling of its capacity in 10 years. PDP8 is required to comply with the policies stated in Resolution No. 55.

At the 26th United Nations Climate Change Conference of the Parties in 2021 (COP26) organized in Glasgow, UK, Vietnam’s Prime Minster announced Vietnam’s ambition to reach net zero emissions by 2050. After the event, Vietnam has taken positive steps towards making the commitment a reality by revising and approving PDP8 with significant consideration of renewable energy development, though without addressing significant regulatory barriers, Vietnam will struggle to meet its goals.

According to PDP8, the total power capacity installed by 2030 will be about 146,000 MW and rise to more than 416,000 MW by 2045. The proposed capacity that coal will account for about 30,000 MW of power generation in 2030. As coal’s role in power generation diminishes, natural gas, solar and wind will provide a larger percentage. PDP8 prioritizes renewable energy, particularly offshore wind energy, in the long term. Vietnam aims to complete the coal phase-out by 2050. Only coal-fired power projects previously approved in the Revised Power Development Plan VII (PDP7R) may continue for development.

Notably, maximum priority will be given to the commercialization of domestic gas assets (Block B, Blue Whale, and Yellow Leopard), and the upstream appraisal work of Ken Bau for power generation. LNG imports will only be carried out to meet gas supply shortfalls. LNG import and regasification facilities continued development at the Thi Vai and Son My LNG regasification terminals. PDP8 does not include any nuclear power production, and it only allows for nuclear research. The PDP7R called for nuclear power capacity of 4,600 MW to be installed by 2030, representation 5.7% of Vietnam’s energy mix. However, plans for the first plant, Ninh Thuan, have been canceled, and the country will focus instead on renewables, coal, and natural gas for power supply. Following up with the PDP8 approval, the Ministry of Industry and Trade (MOIT) is required to prepare and submit the PDP8 Implementation Plan to the Prime Minister of Vietnam, this sets as the foundation to actual projects to be executed. In addition, MOIT is required to draft the amended Electricity Law and the Renewable Energy Law to submit to the Government of Vietnam for submission to the National Assembly in 2024. MOIT is responsible for submitting Direct Power Purchase Agreement (DPPA) regulations to the Government of Vietnam for approval. MOIT is responsible for coordinating with the ministries and provincial people’s committees to work with sponsors and investors regarding the energy projects located in specific locations. PDP8 proposes about 21,000 MW of onshore and near-shore wind power, 7,000 MW of offshore wind power by 2030. There is no clear legal framework in Vietnam instructing how to carry out on offshore wind power currently. Vietnam’s installed solar capacity of rooftop solar and solar farm has doubled in recent years, rising to an estimated 17,600 MW in 2021, owing mainly to a massive build of more than 11,000 MW in 2020. Even though the sector has experienced growth over recent years, solar power capacity will remain the same by 2030, with major factors contributing to issues of connecting the new solar capacity to the grid that will need to be resolved. MOIT released Circular 15/2022/TT-BCT in October 2022 which set out a framework for EVN to enter bilateral tariff negotiations with the developers of these projects that failed to achieve commercial operations before the applicable feed-in tariff (FIT) deadline referred to in Circular 15 as transitional projects, by reference to a ceiling price i.e., the maximum tariff payable by EVN. MOIT announced in January 2023 that the ceiling price for ground-mounted solar projects is reduced from USD0.0709/kWh to USD0.0502/kWh, a 29% decrease. The ceiling price for onshore wind decreased by 21%, from USD0.085/kWh to USD0.0672/kWh. PDP8 indicates the installed capacity of biomass power, waste-to-power in Vietnam will reach 2,270 MW by 2030. Main issues with power sources: Hydropower source: Currently there are about 17GW of large hydroelectricity over 30MW and 3.4GW of small hydroelectricity. The remaining hydropower construction potential is only about 2.7 GW of large hydropower over 30 MW expected to be operational in the period 2020-2025, and about 2.8 GW of small hydro. As of the end of 2019, major hydropower dams have seen record low water levels, due to changing weather patterns in the country, which threatens hydropower generation output for years to come. In 2022, there were energy shortages in Northern Vietnam due to insufficient water and power generation from hydropower dams along the Red River. Coal thermal power: Vietnam is seeking to reduce coal-fired thermal power from 34 % of its power source in 2020 to 27 % in 2030. Despite increasing pressures on its environmental impact, coal will remain the most practical option in the near term to stimulate affordable electricity generation growth at the pace and scale needed. However, during this period, there will be no additional development of new coal-fired thermal power. The PDP8 allows only on-going coal-fired thermal projects currently under construction and under investment promoted for operation during the 2021-2025 period.Renewables: Significant plans exist to integrate more renewable energy into the Vietnam’s energy mix. These plans require regulatory measures, grid capacity development, prevalence of baseload thermal sources, and battery storage.Nuclear Power: In November of 2016, the Vietnamese government postponed its nuclear power program. Currently, Vietnam encourages nuclear research within the framework of PDP8.

The Vietnamese Government maintains its monopoly of electricity transmission grids to ensure the national energy security. Vietnam’s existing energy infrastructure is inadequate with weak grid capacity, which obstructs the integration of new capacity, particularly from renewable energy projects. Vietnam’s National Power Transmission Corporation (EVNNPT), an EVN subsidiary, operates a total of 153 substations, 25,236km of transmission lines (7,996 km of 500 kV lines and 17,240km of 220 and 110 kV lines), and a total transformer capacity of 91,256 MVA (33,300 for 500kV lines and 57,956 MVA for 220kV and 110kV lines). EVN reported that all the districts are connected to electricity; 99.7 % of the communes with 98.69 % of rural households have access to the power grid with a target reaching close to 100 % by 2020. In the PDP8, MOIT proposes to continue building a 500kV power transmission system to transmit electricity from major power source centers in the Central Highlands, South Central Coast, and North Central region to major load centers of Vietnam (Ho Chi Minh City and Red River Delta) to strengthen the interconnected transmission grid and support the North-Central-South power transmission