Trinity Topics: Vietnam Power Sector in Transition – Key Investment Trends and Opportunities
Published:Vietnam’s electricity demand continues to rise alongside strong industrial growth. The country’s power supply remains heavily reliant on thermal power, particularly coal and gas-fired plants, which together account for more than 60 percent of installed capacity. While renewables have expanded rapidly in recent years, persistent regulatory and payment challenges are testing investor confidence.
This client alert explores recent legal reforms, the evolving role of thermal generation, key developments in the renewables space, and emerging opportunities across the power sector.
1. Regulatory Overhaul and the New Electricity Law
Effective February 2025, Vietnam’s revised Electricity Law and its implementing decrees (including Decree 56 and Decree 61) introduce major changes to the power market. These include:
- competitive project bidding for both renewables and thermal projects;
- clearer fuel cost pass-through mechanisms, especially for LNG and domestic gas projects;
- direct power purchase agreements (“DPPAs”) between generators and large consumers; and
- streamlined licensing for offshore wind, biomass, and grid-scale battery storage.
These reforms improve legal certainty and are expected to enhance the bankability of new projects, particularly cleaner thermal assets such as LNG-to-power facilities.
2. Thermal Power – Continued Relevance and Policy Support
Coal-fired power remains essential for baseload supply and continues to carry a significant share of daily electricity generation. However, pressure to reduce emissions has prompted the government to prioritize the development of LNG-based thermal generation. These projects now benefit from improved tariff transparency, fuel cost recovery clauses, and policy support under the Power Development Plan VIII (PDP8) and its April 2025 amendments.
Gas-fired plants are also seen as a flexible complement to intermittent renewables. Investors in this segment should monitor PDP8 implementation closely, especially regarding LNG import infrastructure and grid connections.
3. Renewable Energy – Tariff Framework Developments
Feed-in-tariffs (“FiTs”) were highly successful in attracting both international and local investors to Vietnam’s renewables sector. However, in recent years, the policies have undergone continuous revisions following the expiration of the FiT regulations.
For many projects that began but were not fully completed before the FiTs expired (referred to as “transitional projects”), there have been numerous reports of ongoing discussions with EVN regarding the applicable tariffs. Additionally, there have been reports of increased scrutiny on some earlier projects concerning their qualification for FiTs.
While these factors, along with the not always fully available curtailment protections, have created some uncertainties during the interim period, the recently introduced DPPA mechanism aims to serve as a substantial mitigant. DPPAs offer a potential alternative by allowing generators to sell electricity directly to large consumers, potentially enhancing revenue stability and reducing dependence on EVN. Specifically, the grid-connected DPPA model, recently approved by the government, facilitates such transactions via the national transmission system, offering a scalable option for corporate buyers.
Although the DPPA framework is still in the early stages of implementation and does not fully address existing risks associated with legacy contracts, it could provide a robust basis for new renewables projects, particularly those located near large consumers, such as industrial parks.
4. Considerations for Investors and Lenders
Investors and lenders should adapt their strategies to reflect the evolving regulatory and risk landscape. Key actions include:
- conducting detailed due diligence on PPA structures;
- renewing focus on LNG and modern gas-fired projects, which now enjoy stronger regulatory support;
- exploring corporate PPA and rooftop solar opportunities to avoid grid-related and curtailment concerns;
- engaging actively with regulators and industry associations to shape future reforms; and
- monitoring the rollout of Decree 56 for updates on competitive procurement frameworks.
5. Key Due Diligence Areas and Opportunities
Key Due Diligence Areas
Due Diligence Topic | Description |
Project tariff situation |
Verify the tariff as agreed in the PPA and/or its amendment and ensure project compliance with the FiT criteria. |
PPA bankability |
Legacy PPAs often lack comprehensive take-or-pay provisions and internationally accepted dispute resolution mechanisms. Sovereign guarantees have historically been available for a limited number of projects only. |
Curtailment exposure |
Study the grid throughput capability in the specific region of interest, including historical curtailment practices. |
On-going updates of the legal framework |
Implementation timelines for new laws and decrees sometimes remain unclear, especially for DPPAs and competitive bidding.
|
Key Opportunities
Opportunity Area | Description |
LNG-to-Power Projects |
Supported by PDP8 and the 2025 Electricity Law, LNG-fired generation benefits from pass-through pricing and flexible capacity, and a long-term contract output mechanism for generating electricity to the national power system. |
Hydrogen |
Hydrogen projects benefit from long-term contract output mechanisms for generating electricity to the national power system, along with exemptions and reductions in sea zone use fees, land use, and land lease fees. |
Offshore wind |
Offshore wind projects also benefit from long-term contract output mechanisms for generating electricity to the national power system, as well as exemptions and reductions in sea use fees. |
Corporate DPPAs |
Direct sales to industrial customers offer revenue stability and reduced dependence on EVN. |
Rooftop solar models |
Behind-the-meter solar solutions help mitigate curtailment and grid access risk while aligning with energy cost savings. |
Grid-linked infrastructure |
Transmission expansion, battery storage, and incentives for private enterprises to invest in transmission lines from high voltage level (220kV) and below, as well as ancillary services, offer infrastructure investment opportunities as Vietnam addresses grid congestion. |
Conclusion
Vietnam remains a compelling power market, driven by strong demand fundamentals and ambitious energy transition goals. Cleaner gas-fired thermal power continues to offer stable investment opportunities. The regulatory framework for renewable energy is transitioning from FiT tariffs to new opportunities through DPPAs. Successfully navigating evolving regulations, offtakers’ credit, and payment risks, while targeting lower-carbon thermal and resilient renewable projects, will be key to thriving in Vietnam’s power sector going forward.
Thank you to Andersen in Vietnam for their contribution to this article.
Key Contacts
Max Damphousse, Partner and Managing Director of Trinity International (Singapore) Law Pte. Ltd.
Fiona Gulliford, Partner and Head of Asia-Pacific
Tom Eldert, Partner and Head of Trinity International (US) PLLC