Thomas Jakobsen has been operating in the Vietnam market for some two decades, with most of his time in renewable energy. This year has been one to remember for him.
In lockstep, the Vietnam government had approved a corporate green power purchasing scheme in summer, and followed up with clarifying regulations. A revamp of an overarching electricity law last month signalled a further opening up of the state-managed sector to private investors.
Jakobsen, managing director of Indochina Energy Partners, a Singapore-based renewable power producer and developer, said he was “very happy” with the tempo of regulations, which is “as good as I have seen in 20 years in Vietnam”.
Many of his peers could share the sentiments, following whirlwind yesteryears. Renewables developers rushed in on high public procurement prices in 2018, making the country Southeast Asia’s largest user of solar and wind energy by a wide margin. Then government deals abruptly halted in 2021 alongside a political crackdown, leaving green power firms in a multi-year limbo. Total wind and solar capacity has crept up in recent years, though not substantially higher than the 20 gigawatts (GW) already installed by 2020.
“There is still a lot of work to do, but I think that the sentiment in the industry is much more positive than it was eight months ago, or certainly a year ago,” said Mark Hutchinson, director of the Southeast Asia taskforce at industry group Global Wind Energy Council (GWEC).
Still, a renewable energy renaissance for Vietnam may have to wait. While large businesses like electronics firm Samsung and clothing retailer H&M made topline commitments to procure more green power, few actual new clean power projects have been announced this year. Large renewables firms have pulled back from the Vietnam market, and have not said they would return.
Industry players say 2025 will likely still be a year of churning out fine-print legislation, though details down to the cents charged in operational fees could make or break green power development in the country. There are also varying opinions on what exactly Vietnam should focus on, along with outstanding concerns on the sufficiency of its electricity grid, and human rights record in its energy transition.
Dual-track revamp
Vietnam’s renewable energy plans essentially run on two tracks. A segment is carved out for businesses to buy green power directly from producers, while the state also intends to resume renewables procurement for large projects. Recent legislation suggests onshore wind and rooftop solar panels belong to the former group, while offshore wind farms are for the latter.
On corporate procurement (commonly called direct power purchasing agreements, or DPPA), the key anxiety of producers lies in the fees Vietnam intends to levy should deals require the use of public power lines. Recent draft rules suggest a charge of US$0.018–0.025 per kilowatt-hour (KWh) of electricity sent through, a figure that adds up as corporate deals involve huge volumes of electricity supply over many years. Too high a charge would erase the competitive advantage renewables hold in providing cheap power, nevermind its green credentials.
“For the time being, the actual regulation doesn’t allow us to look at selling directly to final customers. We are, of course, ready to consider if the proposed wheeling charge doesn’t make the electricity produced mainly in the South and centre of the country too expensive for the customers located mainly in the North,” said Olivier Duguet, chief executive and co-founder of regional renewables firm The Blue Circle.
Hutchinson said GWEC would consider something closer to US$0.01/KWh feasible, echoing the cost concern for buyers.
Renewable energy projects also need to be listed in Vietnam’s latest national power development plan to be eligible for DPPA deals. This adds another hoop developers need to clear, especially since project lists have not been finalised for some provinces.
But getting things right could also come with huge rewards. For one, power demand in Vietnam is set to grow 10 per cent annually for the rest of this decade, so corporate deals could enable supply to be met by renewables, instead of incumbent coal.
“You can move forward with 10GW of wind power through the DPPA, at little or no cost to EVN (Vietnam Electricity, the country’s sole state-owned utility). That will, to a large extent, solve the major problem of keeping power production capacity above peak demand in Vietnam,” Jakobsen said. Jakobsen’s Indochina Energy Partners is working to complete 400 to 500 megawatts of projects through the DPPA scheme.
On the buyer’s side, global firms face regulatory pressures from the European Union to use greener energy. Heavy industry importers into the bloc will have to pay carbon taxes soon, with the expectation that more sectors will be tithed in the future. Vietnam is the EU’s largest Southeast Asian trade partner for goods.
Offshore wind agenda
Vietnam is also keen on restarting public procurement of renewable energy projects, though progress on this front has been slower. Concepts of how the country intends to run auctions for new developments were recently published, though no details are available.
In a November report, GWEC said a lack of clear guidance and long negotiation process with state utility EVN are holding back development of offshore wind farms. It presented the government recommendations for a two-stage competitive auction process, first to seek approvals for marine surveys, followed by bids for power offtake – similar to how things work in Australia and the United Kingdom. Developing such a system would take Vietnam “at least a year, if not two”, Hutchinson said.
Meanwhile, state-owned Vietnam Oil and Gas Group has started on an offshore wind pilot, to be completed before 2030. The government had earlier said private companies would not be involved in this effort, though Vietnam Oil and Gas Group has existing work with Singapore utility Sembcorp on exporting wind power to the city-state.
GWEC’s Hutchinson said tie-ups with foreign firms for the pilots can help with know-how and multilateral financing. But several major European energy firms – Enel, Orsted and Equinor – have in recent years retreated from Vietnam due to the stall in its renewables sector.
“We want to bring them back. We have had a number of discussions with companies that have exited to check what they would like to see before returning,” Hutchinson said.
An Orsted spokesperson said the firm appreciates the recent policy changes in Vietnam, and will maintain its presence in the country and work with local companies. An Enel spokesperson declined comment, while Equinor did not respond to queries.
Priorities
Vietnam’s latest electricity law updates concern not just the solar and wind sectors, but also include rules aimed at facilitating the use of fuels such as natural gas and hydrogen. Nuclear power development once again features in the wording, after being left out of the earlier iteration published 2004.
The updates have been billed as important for energy security, but they also attract questions over whether Vietnam can attend to all the different sectors at once. Jakobsen of Indochina Energy Partners believes the immediate priority should be on onshore renewables – generally the cheapest forms of generation even though the scale of projects are usually smaller.
“For other energy sources such as liquefied natural gas, offshore wind and nuclear power, some work can be done in the background, but it would be very helpful if the industry, regulators, and advocates can focus on what is feasible and doable, instead of energy projects that have not happened in the last five to six years as announced,” he said.
There is also lingering concern over the capability of the power grid in Vietnam to support more electricity coming in. Both solar and wind potential are highest in South Vietnam, but some of its business hubs are located up North near capital Hanoi, some 1,000 kilometres away. A 520km high-voltage transmission line was completed in August, but the expectation is that several more of such installations would be needed.
Vietnam’s social and environmental track record in its energy transition have also attracted criticism. The latest electricity law stipulated streamlined approvals for emergency power projects, allowing a prime minister’s decision to replace written approvals for issues such as land allocation and conversion.
Such provisions risk overriding concerns of affected local communities, said Guneet Kaur, member of the Vietnam Climate Defenders Coalition, which is made up of over 30 international and regional environmental justice and human rights organisation. Fossil gas and nuclear developments in Vietnam should be paused to properly assess for economic and environmental impacts, she said.
Several environmental and clean energy advocates have also been jailed in recent years, on charges critics believe are trumped up to instill fear – though Vietnam’s government has denied the accusations.
Broad social dialogue should form the backbone of any form of environmental, social and governance (ESG) or local community safeguards and is a necessary part of a just energy transition, Kaur said.
“However, in Vietnam, independent civil society is persecuted which prevents social dialogue.”
This exclusion of civil society and the lack of transparency makes for “a bad business case and an insecure investor environment”, Kaur added.
Vietnam’s Ministry of Industry and Trade did not respond to an emailed request for comment on its social safeguards and priorities for advancing renewable energy capacity.
Observers said Vietnam is taking a more deliberate approach with managing its energy sector, after the volatility of the previous years.
“We are seeing caution in the government approach, which is understandable. And they are not going to let that happen again, which is the right thing to do,” said Hutchinson.
“Next year is going to be about finalising the DPPA regulations and charges, working to build all the decrees and circulars under the Electricity Law, and moving the EVN and PVN projects forward. So it is going to be less about high-level policy and more about implementation,” he added. PVN is short for Petrovietnam, the country’s state-owned oil and gas group.
Vietnam’s approach will also need to contend with a changing regional landscape for renewables. Thailand has also introduced corporate green power purchasing this year, while the Philippines has been running yearly renewables auctions for four years.
The Philippine model provides for visibility and confidence to invest, said Duguet from The Blue Circle, which has nearly 2GW of projects under development there. “For the moment, in Vietnam, we are far from having the same visibility and clear political agenda with a focus on renewables,” Duguet said.
“Nevertheless, this could be quickly tackled by the central and local government if there is real political willingness,” he added.
