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Executive Summary
Vietnam is experiencing significant economic growth and is rising as one of Asia’s fastest growing energy markets. The Government of Vietnam expects power consumption to grow from 10% to 12% annually until 2030. Currently, Vietnam still relies dominantly on coal-fired power, accounting for 34% of power production, and hydropower at 30%, though the country is pursuing a more diversified energy mix to meet growing demand and promote a greener, more stable power system.
Energy security is one of Vietnam’s biggest challenges over the next 20 years. Vietnam has experienced an annual rate of 10.5% power demand growth over the past 20 years and is projected to do the same over the next 20 years. One of Vietnam’s priorities is a clean energy transition, including through adoption of more renewable energy.
In recent years, Vietnam has emerged as a leader in renewable energy in Southeast Asia and has attracted investments from both local and international investors. Renewable energy is expected to increase almost 30% in 2030 but transmission systems throughout the country and the grid infrastructure will require considerable development to meet with the current demand. Vietnam is also expected to begin developing offshore wind energy in the future, to help it meet energy demands sustainably.
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Current Market Trends
Vietnam participated in the 26th United Nations Climate Change Conference of the Parties (COP26) in Scotland in November 2021. The delegation was led by Prime Minister Pham Minh Chinh, and the trip demonstrated the country’s determination and efforts in promoting and realizing international commitments to climate change response.
Coal-fired power has reduced significantly in Vietnam over the past years. Following the global trend, Vietnam encourages investment in renewable energy by accelerating the energy mix restructuring effort to ensure that power demand will rise sustainably and fairly. The power reshuffle will ensure Vietnam’s energy security, reduce emissions, maintain economic development, and provide better access to energy at affordable prices, and create jobs for the broader community.
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Renewable Energy Resources and Commercial Opportunities
Solar Power
Vietnam’s total technical potential for solar power is up to 1,646GW (1,569GW is the ground potential and 77GW is the water potential). The total scale potential for development of large-scale solar power nationwide is approximately 386 GW. In the past two years, Vietnam has been in the leading position in solar power development in the ASEAN region. Regardless of the pandemic impact, Vietnam’s solar power sector grew strongly with new capacity estimated at 17.6 GW in 2021.The current Feed-in-tariff (FIT) for solar projects was also introduced, and was extended from 2021 to 2023, illustrating the government’s support for solar power. This tariff is set at 9.35 US cents/kWh for all solar projects that achieve commercial operation before the end of the FIT period and will range from 6.67 US cents/kWh to 10.87 US cents/kWh, depending on location and type of solar technology.
The new policy replacing the 20-year FIT for rooftop PV policy, which expired in 2021, is based on the ratio between electricity consumed and the total installed production capacity has been drafted, allowing sellers to sell 70-90% of generated electricity and the remainder to the Vietnamese state-owned utility company, Vietnam Electricity (EVN).
Along with replacing net metering with the direct consumption/supply method, the government released the third draft of its mechanism for encouraging the development of solar power. As a general guiding principle, the power purchaser is obligated to buy the power output sold from rooftop solar systems to the grid (consistent with the regulations and technical standards of the national electrical power industry).
Currently, the largest solar project in Vietnam, and indeed Southeast Asia, is the 600MW Dau Tieng Solar Power Complex, located in Tay Ninh Province, 100km away from Ho Chi Minh City. The project started commercial operation and began delivering power to EVN. In addition, in the central Ninh Thuan Province, the epicenter of Vietnam’s solar energy boom, the Trung Nam Group, a Vietnamese conglomerate, has also constructed a solar farm, one of the largest in Southeast Asia.
Wind Power
It is estimated that 8.6% of Vietnam’s land mass could be used for wind power. The country has an estimated total wind power potential between 24.0 GW and 26.7 GW. Onshore and near-shore wind power installed capacity until 2030 is expected to reach 11.3 GW from the current 5.8 GW (stats of 2021).
The offshore wind power sector has recently received significant attention from the broader industry, thanks to the implementation of Vietnam’s Marine Economy Sustainable Development strategy with supporting policies and breakthrough mechanisms for the development of offshore wind power, according to the Central Party of Vietnam’s Resolution 55-NQ/TW National Energy Development Strategy to 2030.
With the 100-meter-height windspeed at 9-10 m/s, Vietnam has good potential to develop offshore wind power projects. US companies can provide the latest generation of offshore wind technologies such as greener manufacturing facilities, greener vessels, and installation vessels that are capable of installing larger turbines, and site surveying technologies that are more accurate and efficient.
U.S. companies will be able to compete with European, Asian, and local companies in target markets in WTG installation, foundation installation, cable supply, OSS installation, G&G, environmental permitting, and O&M support.
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Regulatory Environment
Resolution No. 55 endorsed by the Politburo in February 2020 on National Energy Development Strategy through 2030 vision to 2045, provides for the prioritization of fast and sustainable energy development, while aiming to foster favorable conditions for all economic sectors, particularly the private sector, to participate in energy development. It relates to formulating policies on promoting and developing renewable energy which replaces as much fossil fuel as possible, diversifying energy sources to fully utilize sources of renewable and clean energy. In addition, roadmaps for coal-fired power reduction should be charted out while simultaneously encouraging entrepreneurs to develop
energy projects. Furthermore, Resolution No. 55, states that EVN is committed to buying all power generated from renewable energy plants within 20 years. There are also incentives for investment, export tax, corporate income tax and land rentals and fees for land usage.
The impacts of climate change and pollution in Vietnam, have encouraged the country’s government to adopt reforms in the power sector to establish an effective transition to a renewable energy system. Such a shift would help mitigate this issue, ensure energy security, and meet the growing demand for electricity for business activities and economic and industrial development. It is forecasted that demand for energy will increase by 10% per annum during the period from 2021-2030.
In order for countries to meet the COP26 goals of securing global net-zero by 2050 and keep a 1.5ºC temperature increase within reach, they will need to accelerate coal replacement plans, curtail deforestation, switch to electric vehicles, and promote investment in renewables; (ii) adapt to protect communities and natural habitats; (iii) mobilize finance: developed countries must realize their promise to mobilize a minimum of USD 100 billion in climate finance per year from 2021 to 2025; (iv) work together to finalize the Paris rule-book and accelerate action to solve the climate crisis through
cooperation between governments, businesses and civil society.
Vietnam is among the countries most vulnerable to the impacts of climate change in the world. In recent years, extreme weather events have had tremendous economic and social consequences in Vietnam. If left unchecked, climate change is likely to cause even more severe and unpredictable weather events.
With the goal of containing temperature increases, Vietnam has issued policies and legislation to Market Entry Strategies reduce greenhouse gas (GHG) emissions such as:
- Resolution No. 55-NQ/TW in 2020 on strategic orientations for Vietnam’s national energy development to 2030, vision to 2045
- Resolution 24-NQ/TW in 2013 on the active response to climate change and improvement of natural resource management and environmental protection.
- Ratification of the Paris Agreement on climate change 2015 at the COP21
- Conclusion 56-KL/TW in 2019 on continuing to implement Resolution 7, term XI on proactively responding to climate change, strengthening natural resource management and environmental protection
- Decision No. 1055/QD-TTg in 2020 on National Plan on climate change adaptation 2021-2030, vision 2050
Vietnam is committed to reducing GHG emissions by 9% and 27% with domestic capacities and international support respectively. GHG reduction rates in the updated version of nationally determined contribution (NDC) are higher than the original contribution. Concerning the energy sector, it will significantly reduce coal-fired power. Meanwhile, renewable energy will be increased to 20% of the total primary supply by 2030 and to 30% by 2045.
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Best Prospects for U.S. Exporters
Because of the potential opportunities in the renewable energy sector in the country, Vietnam is most likely to seek cooperation with foreign investors and developers who have experience in the following area:
Solar PV
- PV modules
- Rotors, swiveling equipment
- Energy storage
- Sun-tracking technology
- Off-grid all-in-one solar solutions
- Portable water treatment solar-based units
- Integrated solar energy for manufacturing plants
Wind Energy
- Onshore wind turbines
- Wind turbines
- Digitalization
- Turbine automation
- Security of wind turbines
- Turbine and wind farm smart management
- Cloud-based condition monitoring
Transmission & Distribution
- Smart-grid integration
- Grid stability solutions
- Advanced utility-scale storage solutions
- Maintenance services including artificial intelligence diagnostics
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Market Entry Strategies
For additional guidance on factors to consider when entering the Vietnamese market, visit the Country Commercial Guide and Market Entry Strategy.
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Market Obstacles
For additional guidance on factors to consider when entering the Vietnamese market, visit the Country Commercial Guide and Market Entry Strategy
