Market InsightsVietnam

Vietnam Sustainability Investments

By 8 September, 2023No Comments

Wind and solar power plant in Vietnam


Energy plays a crucial role in the development of any country, and Vietnam is no exception. With a rapidly growing population and expanding industrial sector, the country is facing increasing energy demand. At the same time, Vietnam is striving to reduce its dependence on fossil fuels and mitigate the impact of energy on the environment. Renewable energy has emerged as a long-term solution to these challenges, offering a sustainable and diversified energy mix that can help Vietnam achieve its goals of economic growth, energy security, and environmental protection.

This article provides an overview of the current and future development for renewable energy in Vietnam, as the country endeavors to transition towards a more sustainable future. In May 2023, the Vietnamese government signed and released the official Power Development Plan VIII (PDP8) for the period of 2021 – 2050 as a significant energy reform initiative for the next several decades. PDP8 aims to adjust Vietnam’s energy development plan to align with the global trend towards more sustainable solutions. Specifically, it outlines the development of the national transmission grid infrastructure and signifies the Vietnamese government’s commitment to increasing the proportion of renewable energy in Vietnam’s total energy composition to 47% by 2030, with the ultimate goal of achieving net-zero emissions by 2050.

Why the hassle

Vietnam is currently the second-largest energy user in the ASEAN region, after Indonesia. As a developing country with a large population and fast economic growth, Vietnam consumes energy at an alarming rate. However, the country is a net importer of coal, which exposes it to risks of international supply and price fluctuations. The impact of sudden energy demand has already been noticeable in 2023, with some regions in Northern Vietnam experiencing power outages during June and July. By 2030, the country may face a potential energy supply deficit of approximately 10GW, which could impede future industrial growth and development.

The demand for energy consumption is expected to reach 97 GW and 130 GW in 2025 and 2030, respectively. Consequently, the consumption level is projected to increase annually by 10% to 12% beginning in 2023. To fulfil this demand, the Ministry of Industry and Trade of Vietnam (MOIT) estimates that a total investment of roughly US$150 billion will be necessary by 2030. A significant portion of this investment will be allocated for the development of a fully functional smart grid system capable of handling large-scale renewable energy installations.

However, the funding required to achieve the vision is already a concern. As of 2023, approximately 58% of the financing comes from domestic companies, with joint ventures between domestic companies and international partners accounting for 27% of the total investment. The remaining 15% comes from other sources. As a result, domestic companies have primarily borne the initial costs of transitioning to renewable energy but subsequently lack the financial capacity to meet future investment needs. Without additional international funding and strengthened green finance, achieving the net-zero goal may become unattainable.

According to data from MIT, most foreign companies involved in renewable energy projects in Vietnam come from other Asian countries, such as Thailand, Japan, and the Philippines.

To address concerns about future energy demand and the lack of funding for renewable energy, the PDP8 has paved the way for renewable energy to become more commercialized and easily accessible in Vietnam, both economically and environmentally. Furthermore, Vietnam has set targets to gradually increase the proportion of electricity generated from renewable sources in its energy mix, with the goal of reaching 48% and 63% by 2030 and 2050, respectively, up from 25% in 2020.

Graph showng PDP8's Projected Energy Composition 2020 - 2050

The PDP8 specifically focuses on solar and wind energies, providing significant accommodations for these specific renewable energy sources compared to its former version, PDP7. In PDP8, wind and solar capacities are tripled and doubled, compared to PDP7. This emphasizes the potential for these energy sources to drive growth for renewable energy sector in the next 10 years.


Decision 39/2018/QD-TTg and Decision 21/QD-BCT established FIT prices for wind power in Vietnam for the following categories:

Table showing Vietnam wind power categories

In recent years, Vietnam has implemented competitive Feed-in-Tariffs (FIT) to support the development of renewable energy producers as these prices offer long-term contracts as a policy mechanism. The South-Central region of Vietnam, which includes Binh Thuan, Ninh Thuan, Khanh Hoa, Phu Yen, and Binh Dinh, is expected to receive the majority of incoming investments due to its high wind areas. The potential output for this area is estimated to reach 80 GW, indicating significant growth for the renewable energy sector.


Decision 13/2020/QD-TTg and Decision 21/QD-BCT established FIT prices for solar power in Vietnam for the following categories:

Table showing Vietnam solar categories

Rooftop solar, in particular, has received the most attention due to its price and accommodation from policies related to PDP7 and PDP8. In December 2020, Vietnam installed over 9 GW of rooftop solar, far exceeding market expectations. This sudden influx of investment in rooftop solar was also due to the commercial operational deadline of December 31, 2020. Investors had to complete their projects before the deadline to benefit from the FIT price. By January 7, 2023, MOIT finalized another set of FIT prices to support projects that failed to meet December 2020 deadline. By utilizing these attractive FIT prices, Vietnam nationwide solar power capacity to 386 GW, with a focus on the South, South Central, and Central Highland regions.

In 2023, Vietnam’s CME Solar JSC and Japan’s Sumimoto Forestry Corporation formed a joint venture to provide solar energy solutions throughout Vietnam. Their main objective is to promote the use of rooftop solar energy systems in the country, leveraging CME Solar’s resources, knowledge, and experience in collaboration with Sumitomo Forestry Group. This joint venture is just one example of how Vietnam can attract investments into solar energy development. More such initiatives are expected in the near future as more incentives are introduced in this sector.


Biomass is another form of renewable energy actively supported by the government. Much of the process is still in the R&D stage, with the project currently aiming to enhance the conversion of biomass into renewable energy, such as biogas and biofuels. Vietnam reported that Biomass had a potential capacity of about 500 MW in 2020 and expected the number to increase to 2,000 MW in 2030.

Similar to other cases of renewable energy, Biomass receives most of its support through government-increased FIT rates within Biomass projects. Heat and power biomass projects have increased to 7.03 U.S cents/kWh, and other forms of biomass projects have increased to 8.47 U.S cents/kWh.

How the government supports the cause

In addition to direct support for renewable energy through PDP7 and PDP8, Vietnam government has revised multiple policy and regulatory frameworks to further attract foreign investment in this industry. The Law on Environmental Protection (2014) provides the legal basis for environmental management and protection, including the promotion of renewable energy and energy efficiency. The Law on Investment (2020) outlines the general principles and conditions for foreign investment in Vietnam, incentives are especially beneficial for large-scale projects, as they include an option for an extended duration.


Despite Vietnam government’s efforts to transition towards renewable energy, the current landscape still faces numerous challenges. These include unclear and inconsistent policies, infrastructure development, and the impact of the COVID-19 pandemic on renewable energy projects.

Since 2020, the COVID-19 pandemic has exacerbated the situation. The international disruption of the supply chain has limited the availability of wind power equipment and hindered the progress of related projects. Additionally, the pandemic has caused delays in planned commercial operation dates for many projects.

There are currently three main obstacles in the renewable energy landscape of Vietnam:

  • COVID-19: The pandemic has specifically worsened the progress of wind power projects since 2020. Severe social-distancing policies delayed the commercial operation date of many projects. Local governments appealed for a FIT extension but did not receive approval from the central government, resulting in a total stagnation of 62 projects of almost 3.5 GW falling behind schedule. A transparent process is required for decisions on curtailing renewable energy.
  • Unreliable repurchase terms: Foreign investors in the solar industry consider Vietnam’s standard Power Purchase Agreement (PPA) to be incredibly risky. The current terms lack a repurchase guarantee and allow EVN to cancel purchases at any time for an indefinite period. Meanwhile, Vietnamese companies have been able to reduce risk by engaging key political stakeholders in ways that international companies cannot, creating an unfair competitive landscape for all players.
  • Regulatory permitting procedures: these administrative processes can be daunting for international investors without local connections and experience. Registering a new project involves numerous departments, including initial project approval, integration into provincial-level plans, land permitting, and more.

In order to balance the development of power projects with the need to develop a more efficient and robust transmission system and smart energy grid, Vietnam would require a large amount of investments and advanced technology to modernize the power generation, transmission, and distribution network.


In conclusion, Vietnam is well-positioned to meet its surging energy needs through alternative power but must first overcome various challenges to make a successful transition to renewable energy. The government needs to continue to work on establishing a comprehensive policy and legal framework for the renewable energy sector, improving infrastructure, and attracting private sector investment in renewable energy projects. By doing so, Vietnam can become a leader in renewable energy deployment among emerging markets and achieve its goal of a net-zero economy by 2050.

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