Vietnam: Renewable energy in the Asia Pacific: a legal overview (3rd edition) - Vietnam

Carbon Markets and Renewable Energy Update (Australia)
Last Updated: 11 September 2013
Article by Stephen Webb



Civil law Vietnamese


  • Ease of Doing Business Report 2013: 99 out of 185 (no change)
  • Global Competitiveness Index 2013: 75 out of 144 (down 10 rankings)
  • Index of Economic Freedom 2013: 140 out of 177 (down 4 rankings)
  • Corruption Perceptions Index 2012: 123 out of 176 (down 11 rankings)
87.8 million Lower middle $3,250


The communist north united Vietnam in the 1970s after decades of war with southern Vietnam and foreign forces. Vietnam has now emerged as one of Asia's fastest growing economies due largely to the Doi Moi reforms which started the country's transition from a planned economy to a socialist-orientated market economy.

Continued economic liberalisation has resulted in improved living standards, however political freedoms remain limited. In 2007, Vietnam joined the World Trade Organisation which has further encouraged foreign players to explore investment opportunities in the country.


  • Total installed electricity capacity in 2010 was 18.2GW Of this amount:
    • hydropower accounted for 42%;
    • natural gas accounted for 34%;
    • coal accounted for 21%; and
    • oil products accounted for 3%.
  • Electricity demand is expected to increase by 16% per year until 2012 and by 14% per year from 2012 to 2015. This growth in demand will likely outstrip Vietnam's generation capacity. Annual consumption per person is expected to nearly double from 996kW per person to 1,835kW per person by 2015.
  • It was not until June 2005 that the national power grid reached all of Vietnam's provinces. Around 75% of Vietnam's population lives in rural areas, yet the Government has achieved a country-wide electrification rate of 96%.
  • Vietnam experiences frequent power shortages and blackouts. Estimated capacity shortfall during peak demand times is between 1.5GW and 2GW.
  • Vietnam imports small amounts of electricity from China through 110kV and 220kV lines. The importation of electricity from China is expected to increase in the coming years.
  • Vietnam supplies electricity to Laos and Cambodia by a medium voltage line. Recently, Laos and Vietnam signed an accord under which Vietnam will import 2GW of electricity from Laos. A similar agreement has been reached between Vietnam and Cambodia.
  • In 2011 the price of electricity was US$0.05 to US$0.06 per kWh, which resulted in a US$166.4 million loss for the state power company. In July 2012 prices were raised to US$0.065 per kWh.

Generation, distribution and transmission

  • The state power company is Vietnam Electricity (EVN). Founded in 1995, EVN is responsible for the generation, transmission and distribution of power. In 2007, EVN controlled over 72% of Vietnam's total power generation. EVN is in the process of privatising its subsidiaries (except for those operating in hydropower and nuclear). It has successfully privatised more than 40 subsidiaries to date. Key distribution companies are also currently being privatised.
  • Two notable power stations that are operating in Vietnam are the Phu My 2.2 and Phu My 3 gas-fired power plants commissioned in May 2000. Together these power plants can meet up to 40% of Vietnam's energy needs.
  • The Vietnamese Government has stated that it is focused on updating the electricity grid so that all rural households will have electricity by 2020.
  • Much like China and India, the Vietnamese Government is seeking to join the various regional grids into a national grid. Importantly, France has committed US$101 million for a high voltage, 434km long power line to connect hydropower stations in the centre of Vietnam to demand centres in the south of the country.
  • EVN is currently developing a third 500kV North- South Power cable, as the first two lines are overloaded.
  • Independent Power Producers (IPPs) and Build Operate Transfer (BOT) entities supplement the provision of electricity in Vietnam.

Government bodies

  • The Ministry of Industry and Trade (MoIT) monitors activities related to the energy sector in accordance with Decree 189/2007/ND-CP issued by the Prime Minister on 27 December 2007. It is responsible for the management of all types of energy industries, including renewables. It proposes laws, policies, development strategies and plans and submits them to the Prime Minister for approval. The MoIT is responsible for managing the state's stake in EVN.
  • The Ministry of Finance coordinates taxes and tariffs in all industry sectors, including energy.
  • The Ministry of Natural Resources and Environment aids in the research and development of energy and environmental protection policies.
  • The Centre for Renewable Energy and Clean Development Mechanisms was founded in 2007. It operates under the Institute of Energy, which was established pursuant to a decision of the Ministry of Energy (which has since been merged with other
  • governmental bodies to form the current MoIT).

Electricity laws

  • The Law on Electricity of 2004 (Law on Electricity)outlines the major principles for the establishment of the power market in Vietnam. It is the first law to regulate the country's energy sector. The Law on Electricity aims to stimulate development and diversify forms of investment in the energy sector and encourage economical use of electricity.
  • Decision 1208/QD-TTg (PDP 7) dated 21 July 2011 provides for the national master plan for power development for the period 2011 to 2020, with an outlook towards 2030.
  • Decision 26/2006/QD-TTg dated 26 January 2006 promotes the establishment of a competitive electricity market to attract investment. By 2022, Vietnam aims to have a competitive electricity retail market where retail distribution companies compete to sell power, and customers will have a choice of whom to buy power from.
  • Decision 1604/TTg-KTN dated 12 September 2011 addresses the main issues in a BOT contract and government guarantees with respect to BOT thermal power plants. With regards to BOT contracts, the parties can choose foreign laws to govern the contract, and English as the prevailing language for BOT documents. Moreover, the price of electricity as stated in the contract can be quoted in USD (but payable in VND). The decision also provides the right for the investor to mortgage assets attached to land, and for government guarantees for the obligations of the Vietnamese party. As this decision only applies to thermal power plants, other energy projects would need to seek such benefits/guarantees directly from the Government, which would be considered and approved on a case-by-case basis.


  • PDP 7 gives priority to the development of renewable energy as a source of electricity. The percentage of electricity generated from renewable resources is expected to increase from 2% in 2010, to 4.5% of total electricity production in 2020 and 6% in 2030.
  • The total capacity of wind power is expected to increase from its current insignificant level to 1GW in 2020 and to 6.2GW by 2030.
  • Biomass power and power co-generation at sugar plants are expected to have total capacity of approximately 500MW in 2020, and increase to 2GW by 2030.
  • The Renewable Energy Development Project, which was launched by the World Bank in 2002, serves as the framework for renewable sector development. Its aim is for large-scale development of renewable projects to deliver rural electrification.
  • Various policies have been introduced to strengthen domestic energy supply, increase international cooperation, improve energy efficiency, develop the oil industry and to develop clean fuels through nuclear energy and new renewables.
  • Diversification and reduction of Vietnam's reliance on imported fossil fuels have been key themes within government renewable energy policies.


  • Vietnam has thousands of lengthy rivers, which confer a high potential for small and large-scale hydropower production. Indeed, hydropower already contributes nearly half of the country's energy supply.
  • The Hoa Binh hydropower plant in North Vietnam is the country's largest electricity generator.
  • There are a number of hydropower plants either under construction or recently commissioned, including the Son La Project (see below).
  • Small hydropower plants are estimated to have a potential capacity of 2.87GW. A number of small hydropower facilities were built by EVN in the districts bordering China from 2007 to 2010.

Wind energy

  • According to a survey conducted by the World Bank in 2009, Vietnam has the potential to produce more wind power along its coast than Thailand, Laos or Cambodia.
  • Vietnam's extensive coastline and high wind speeds averaging 5.6m/s in coastal regions are the reasons for the estimated 713GW of wind-generation capacity in the country.
  • The provinces of Ninh Thuan and Binh Thuan are especially suited to wind generation. The only grid- connected wind power project is located in Binh Thuan.
  • Currently there are over 65 wind projects at various stages of development, each with a power generation range from 6MW to 150MW.

Solar energy

  • Vietnam has approximately 2,000 to 5,000 hours of sunshine per year.
  • 5,000 sites around the country have stand-alone solar PV systems.
  • The Solar Laboratory of Vietnam Science Institute, the Institute of Energy and the Renewable Energy Centre are particularly active in the solar energy space in Vietnam.

Geothermal energy

  • Vietnam reportedly has 269 hot streams, with temperatures ranging from 30 to 148 degrees Celsius.
  • The estimates for Vietnam's total geothermal generation capacity range from 200MW to 649MW.

Biomass energy

  • Biomass, including wood fuel and agricultural residues (rice husk, rice straw, coffee husk and bagasse), is widely used for energy production in rural areas of Vietnam.
  • Estimated potential for biomass in Vietnam is between 1GW and 1.6GW.
  • Around 25,000 biogas digesters have been installed since the 1960s.
  • Three sugar plants in the Mekong Delta region supply surplus electricity to the power grid, amounting to 50MW. Additional turbines were commissioned in 2006 to increase generation capacity.


  • Since 2004, the Government has gradually sought to diminish the influence of EVN and establish competition in the electricity market.
  • The overlap of government bodies in overseeing the renewables industry, as well as the lack of legislative guidance, are general barriers to renewable energy investment.
  • The contribution of hydropower to the country's electricity generation is already high by regional and even global standards. The environmental impact and inefficiencies of some plants has proved controversial in the past. In early 2013 for instance, the Government decommissioned 21 hydropower plants in Kon Tum.


  • There is currently no "renewable energy act" or designated renewable energy regulation.
  • Decree 102/2003/ND-CP dated 3 September 2003 on energy savings and the efficient use of energy, introduces a raft of energy-saving measures, particularly for large consumers of electricity.
  • The Prime Minister stated at a national meeting in June 2012 that a Green Growth Strategy to 2020 is under development. This strategy would build on the National Strategy for Climate Change Adaptation, which was ratified by the Prime Minister in December 2011.
  • Decision 37/2011/QD-TTg dated 29 June 2011 provides a feed-in tariff mechanism to support the development of wind power projects in Vietnam (see below).


  • An avoided cost-based electricity tariff was introduced in Vietnam in 2008. To be eligible for this tariff, a gridconnected renewable energy plant must meet certain criteria, such as having an installed capacity of less than 30MW, complete renewable generation (as opposed to a hybrid system) and the project must use the standardised power purchase agreement for the sale of electricity.
  • Presently, a feed-in tariff is only available for windgenerated power. Despite being widely predicted as a turning point for wind investment when it was introduced in 2011, the tariff has not proven sufficient to entice much investment as the rate itself is low by regional standards.
  • The Government has introduced a land fee tax exemption and an import tax exemption for renewable energy generators.
  • Investments in small-scale hydropower, wind, solar, geothermal, biomass and biofuels projects receive Government support through PDP 7.


  • Wind Power Plant Farm No. 1 in Binh Thuan, with a capacity of 30MW, was the first wind project commissioned in South East Asia.
  • The Son La hydropower plant, which is the largest hydropower plant ever built in Vietnam, and cost over US$3.2 billion, was officially put into operation in December 2012, three years ahead of schedule. Its installed capacity is approximately 2.4GW and will also increase the capacity of the Hao Binh hydropower station (which is downstream) by 1,264GW. The Son La project was billed as the "project of the century" by state media.
  • In 2010, a US$59 million biomass plant in the town of Phong Chau in the Phu Ninh district was constructed.
  • The Vietnamese Renewable Energy Joint Stock Company runs the only grid-connected wind generation facility. The project comprises 20 wind turbines, each with a capacity of 1.5MW.
  • The World Bank has given Vietnam US$225 million credit to improve energy efficiency in the country.


  • For a variety of historical reasons, foreign investment in Vietnam has been minimal.
  • Recently, the Prime Minister has been playing a direct role in approving foreign investments.
  • The Law on Electricity and PDP 7, as well as other relevant strategies and plans, encourage foreign investment in the energy sector.


  • Vietnam ratified the Kyoto Protocol in 2002. It is a non-annex one party to the United Nations Framework Convention on Climate Change, so it does not have any binding emissions targets.
  • Vietnam joined the Inter-Governmental Agreement on Regional Power Trade in the Great Mekong Sub-Region in 2002.

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