Vietnam’s electricity sector is at a crossroads. The sector plays a critical role in sustaining the growth momentum of the Vietnamese economy, which is one of the fastest in Asia. Electricity demand is estimated to grow at around 10 per cent until 2030 driven by rapid industrialisation and urbanisation. Meanwhile, Vietnam has committed to promoting a sustainable energy transition, particularly through the Just Energy Transition Partnership (JETP), an initiative designed by the International Partners Group (comprising nine developed countries and the European Union). The JETP aims to mobilise financial resources and assist Vietnam and other developing countries that depend on fossil fuels in decarbonising their
energy systems.
To meet these commitments, Vietnam is accelerating the transition from fossil fuels to renewable energy sources (RES) to achieve its 2050 net zero target. The country’s Power Development Plan (PDP) VIII for the period 2021-30, with a vision to 2050, approved in May 2023 and its implementation plan finalsied in April 2024, set interim targets, such as increasing the share of renewables in the energy mix up to 39.2 per cent by 2030 and up to 71.5 per cent by 2050. This involves an annual electricity sector investment requirement of around $13.5 billion by 2030, likely to
increase up to around $52 billion annually during 2031-50.
The scale of these investments highlighted the need for diversified capital sources, including domestic and foreign capital, while ensuring national security and competition in the electricity market. This has necessitated reforms in the electricity sector, which is currently largely managed by the state-owned, vertically integrated Electricity of Vietnam (EVN). However, EVN has been facing financial losses due to increasing generation costs, driven by fuel prices and foreign exchange rates.
Recognising this, the government has been proactive in creating a favourable policy and investment environment. The most recent initiative is the adoption of the amended Electricity Law by the country’s National Assembly on November 30, 2024. Effective February 1, 2025, the amended law aims to unlock stalled renewable energy projects and meet the growing electricity demand efficiently by focusing on fair pricing, renewables oversight and a phased road map to eliminate cross-subsidies. The new law, which was originally established in 2004 and amended several times, introduces comprehensive reforms to the legal framework of the country’s power and energy sector after two decades of its establishment.
The law prioritises renewables and liquefied natural gas (LNG) for energy security and sustainable development. To expand the use of low-carbon energy, it introduces new regulations for offshore wind (OSW) projects and revives the nuclear power development plan, which was suspended in 2016. It provides for build-operate-transfer contracts for OSW and LNG projects. It also allows private ownership of transmission grids, although EVN’s subsidiary, National Power Transmission, will continue to monopolise the 220 kV and above grid due to national security reasons.
The revised law covers six key areas: power planning and development; renewables and new energy sources; conditions for electricity operations, including licensing and revocation; electricity trading; system management and operation; and safety standards for electricity use and hydropower dams. The new law contains 81 articles, down from 130 articles in the government’s draft amendment, but includes 11 new provisions compared to the
current law.
To ensure effective implementation of the law, on December 11, 2024, the prime minister issued Decision No. 1544/QD-TTg, based on a request from the Ministry of Industry and Trade (MoIT), outlining the plan to implement the 2024 Electricity Law. Decision 1544 mandates the release of five guiding decrees, two decisions, five circulars and other documents related to the implementation of the law. In line with this, the MoIT has started issuing some of the related draft decrees for public consultation and is drafting relevant circulars. Separately, the MoIT is working on amending the PDP VIII to align with the policy and legal framework and changes under the new law. It plans to submit the revised PDP to the prime minister for approval by February 28, 2025.
New electricity law: Key provisions
The new law outlines Vietnam’s fundamental policies on power development, which reflect a change in the country’s power strategy. It recognises power development as a key industrial infrastructure sector for national development and energy security. The state will attract investments, both public and private, in power generation and grids in line with the national PDP, the provincial power supply network development plan and the PDP implementation plan. The government manages the power sector through the MoIT and the Provincial People’s Committee. Accordingly, the prime minister directly approves the power project list (including transmission) within the PDP, while the Provincial People’s Committee approves the project list in the provincial plan.
Generation
Renewable energy
The new law expands the definition of renewable energy to include electricity generated from solar, wind, geothermal and ocean energy, including tides, waves and ocean currents, hydropower, biomass, waste-to-energy and other RES forms. Further, new energy sources include electricity produced from green hydrogen and ammonia.
The law specifies key principles for the development of RES and new energy projects. Such projects must ensure supply security and power system safety and must be aligned with the available electricity infrastructure. It calls for prioritising the development of large-scale generation projects to form clusters or renewable energy centres. The law encourages wind and solar project developers to invest in hybrids, integrating their projects with battery energy storage systems (BESSs) or new energy production. However, grid-connected renewables and BESS capacity must be in line with the overall capacity approved in the national or provincial power master plan. Such projects lay the foundation for a low-carbon power structure, promoting reduced emissions and the development of a sustainable power system.
Offshore wind
There are separate provisions for OSW development. OSW projects are now classified as nearshore, located up to six nautical miles (about 11 km) from the shore, and offshore, located beyond six nautical miles from the shore, with specific regulatory guidelines. OSW projects may be built for the purpose of supplying electricity to the grid, self-production and consumption, production of green hydrogen and green ammonia, other domestic demand or power exports, including the production of green hydrogen and green ammonia for export.
Notably, the final version of the law removes the previous proposal of prohibiting the transfer of projects, shares or capital contributions in OSW projects, which was included because of national security concerns. The law only requires such actions to be compliant with its general regulations or other relevant laws, the details of which would be clarified subsequently.
The law has specific regulations related to investment incentives, project survey requirements, project investment in-principle approval (IPA) and the investor selection mechanism for OSW projects. These projects are entitled to exemptions and reductions in sea area use, land use fees and land rent. It provides the legal basis for the minimum long-term contracted electricity output for OSW projects, selling electricity to the national grid. The MoIT’s draft decree guiding the development of renewable and new energy, released on December 16, 2024, proposes exemption from sea area use levies during the construction period; a 50 per cent reduction in levies for 12 years from the commercial operation; exemption from land rentals during the construction period; and 80 per cent of the minimum long-term contracted electricity output for a maximum of 12 years and within the loan principal repayment period for projects selling electricity to the grid.
Specifically, the law separates the surveying procedures from the investment procedures for OSW projects. Surveys will be conducted by a state-owned enterprise (SOE) assigned by the prime minister and the procedure for the selection of survey entities will be detailed in the relevant decree. Notably, it is not clear if the ongoing OSW projects that have obtained survey approvals issued by the Ministry of Resources and Environment need to get new approvals under the latest law. Under the law, the OSW investor selection will be based on IPA proposals by potential investors or survey entities. The prime minister will approve the IPA, along with investors, in the case of national security OSW projects (which will not be subject to the bidding process) and projects proposed and developed by an SOE. Other projects will be subject to a bidding process as per the regulations. Notably, the ceiling electricity price in the bidding documents cannot exceed the maximum price established by the MoIT. The winning bid price represents the maximum amount for the electricity buyer to negotiate with the successful investor.
Natural gas/LNG
Given the country’s plans to reduce the development of new coal-based capacity and phase out operating projects by 2050, the law promotes the development of thermal plants based on domestic natural gas as well as based on imported LNG. It aims to prioritise the development of LNG power project clusters that will use common terminals, storage and gas infrastructure to reduce electricity generation costs.
Nuclear
The law states that nuclear power development, which will be a state monopoly, must be consistent with the PDP to ensure supply security. This implies that it is expected to serve as baseload capacity, along with LNG. Importantly, investment, operation, decommissioning and safety requirements of nuclear plants must comply with the Atomic Energy Law and other laws. PDP VIII, which currently does not have any planned nuclear capacity, is likely to be revised to include proposed projects, particularly the Ninh Thuan nuclear power project, the revival of which was approved by the National Assembly on November 30, 2024.
Transmission
According to the law, the state maintains a monopoly over transmission grid operations and national electricity system despatch. However, the law allows non-state entities to invest in, build and operate grid projects as per the provisions of the law. The MoIT will prescribe the order and procedures and also approve the prices of electricity transmission, distribution, auxiliary and despatching services submitted by electric entities. In addition, it will prescribe methods of guidance and valuation for transmission power grids invested in and built by non-state entities.
To address energy security, the law introduces a new concept of “emergency power projects and works”, including power grid construction projects and works, which play an important role in power transmission between regions to prevent grid overload; projects required for national defence, security or urgent local socio-economic development; projects and works for the construction of power projects and connected power grids to compensate for power shortages. For such emergency projects that require forest land conversion, the
prime minister’s decision alone will serve both as a written investment policy approval and a written IPA. Such projects may also be eligible for government guarantees.
Competitive electricity markets and electricity price reforms
The new law has provisions for the development of an electricity market with competition in generation, wholesale and retail electricity markets. This requires restructuring the electricity industry, building the system and market infrastructure, and reforming the electricity price mechanism by gradually reducing and, eventually, eliminating cross-subsidies between customer groups and between regions.
Notably, a significant milestone in 2024 was the separation of the National Load Despatch Centre from EVN and the establishment of National Power System and Electricity Market Operation Company Limited under the MoIT. This restructuring aims to advance the electricity sector’s reforms and lays the groundwork for a competitive power market in Vietnam. The law exempts the national power system despatching and market transaction operating units from
the requirement of an electricity operation license.
A key aspect of the new law aimed at revitalising the country’s power market is maintaining stable costs and minimising the gap between power generation costs and electricity prices. It proposes retail electricity pricing reforms by introducing a multi-component pricing system and gradually removing cross-subsidies. Under the current system, retail prices are based on a national standard, leading to different pricing structures for different user groups. The MoIT will develop a phased road map for this change.
The law outlines mechanisms for direct power sale and purchase agreements (DPPAs) between large electricity users and power generators. It continues to recognise two DPPA models – the physical DPPA (where electricity is sold through a dedicated power line) and the synthetic DPPA (where electricity is purchased via the national grid), as approved by the government under its 2024 Decree No. 80/2024/ND-CP. The law emphasises that these agreements must comply with planning laws, licensing requirements and the competitive electricity market. The government will determine the order and procedures for participation, including the roles and responsibilities of
relevant parties.
The law imposes certain tariff requirements for cross-border power trading. For electricity exports that do not use the national grid, the price must not be lower than the maximum price set by the domestic electricity price framework. For exports through the national grid, the export price must be based on the retail electricity price and cannot be lower than the maximum price of the average domestic retail price bracket.
The way forward
As Vietnam seeks to balance sustainability and development, the latest electricity law provides clear investment signals to attract domestic and international investors. It establishes a legal framework for renewables and new energy, paving the way for replacing coal-based capacity with LNG and nuclear power as well as OSW (a variable baseload technology), while emphasising the need to accelerate grid infrastructure development. With the MoIT, along with other ministries and agencies, engaged in preparing and producing the requisite decrees and circulars to implement the law, greater clarity on several provisions is expected in the coming months. Once fully implemented, the legislation is expected to resolve issues related to cost structures, regulatory frameworks and market operations while accelerating energy transition, creating a vibrant, competitive power market and ensuring the stability and efficiency of the national electricity supply system.