Vietnam is making strides towards a greener future. While coal remains the dominant source of electricity for now, the country is witnessing a significant rise in hydropower and renewable energy. The government’s ambitious target of net zero emissions by 2050, with a goal of 30% renewable energy by 2030, is driving this shift. Hydropower is already a major player, but solar and wind power are rapidly gaining ground, positioning Vietnam as a Southeast Asian leader in the race for clean energy.
This article explores Vietnam’s state of renewable energy, supportive government policies and incentives, investment opportunities, and challenges and considerations for the nation to strengthen its prospects toward green power. Let’s dive into it together!
1. The nation embracing green power
Over the past three decades, the country has achieved an impressive average economic growth rate of 6.2% annually (World Bank, 2024). This translates to a 3.6-fold increase in GDP per capita, reaching nearly $3,700. However, this economic surge also fuels a growing energy demand.
Recognizing the limitations of traditional energy sources and the urgency of climate change, Vietnam is actively pursuing a greener path. The government’s ambitious National Power Development Master Plan (PDP VIII) aims to double national electricity output to 129,500MW by 2030. This plan prioritizes the reduction of dependence on fossil fuels like coal and promotes the development of renewable energy solutions and cleaner options like gas power.
To be more specific:
By 2030, according to Power Plan VIII, the total capacity of power plants catering to domestic demand will be 150,489 MW (excluding exports, existing rooftop solar power, and renewable energy for energy production). Gas power is expected to be the primary power source from 2021 to 2030.
Source: Petrotimes
2. Hydropower: A Powerful Player in Vietnam’s Energy Mix
Vietnam has great potential for hydropower generation with a relatively high average annual rainfall, mountainous terrain, and dense water systems. With over 90 operational hydropower plants across the country, the hydropower sector in Vietnam is well-established and leading Southeast Asia in terms of hydroelectric capacity.
According to the Ministry of Commerce and Industry, 34 medium and large hydropower projects will be developed during the 2021-2030 period, with the total installed capacity of new projects reaching 3,873.9 MW. 11 new projects (with a total installed capacity of 1,947 MW) will be constructed in the 2031-2045 period. Having been considered, this demonstrates Vietnam’s intention to further develop its hydropower output in the upcoming years.
3. Solar and Wind Power are the rising stars in Vietnam
Vietnam’s abundant natural resources position it to become a major player in the renewable energy sector. The country is blessed with both high solar radiation levels, averaging 4-5 KWh/m², and a long coastline of 3,000 kilometers that experiences consistent winds. This translates to significant potential for both solar and wind power generation.
The country boasts exceptional potential for solar energy. With a technical potential of up to 1,646 GW, it ranks among the highest in the world. This potential has been rapidly translated into reality. From a relatively low ranking of 196th globally in solar energy capacity in 2010, Vietnam has skyrocketed to 9th place by 2021. This impressive growth is further underscored by the construction of the 600 MW Dau Tieng Solar Power Complex, the largest in Southeast Asia. Vietnam’s leadership in solar energy is further solidified by its contribution of 69% of ASEAN’s total solar and wind generation in 2022.
Besides that, Vietnam’s extensive coastline, with wind speeds averaging 5.5 to 7.3 meters per second, presents another significant advantage for renewable energy production. This translates to a total wind power potential of 24.0-26.7 GW. The country is actively capitalizing on this potential, with plans to nearly double its onshore and near-shore wind power capacity by 2030, reaching 11.3 GW from its current level of 5.8 GW in 2021. Looking ahead, Vietnam has set its sights on offshore wind farms as well. The government has identified a promising pipeline of 143 offshore wind farm projects, including several large-scale ventures exceeding 2 GW each.
By leveraging its natural advantages and ongoing development efforts, Vietnam is poised to become a leading force in both solar and wind power generation within Southeast Asia.
4. Government Policies and Incentives
Vietnam is actively attracting green businesses and investments. A key part of this strategy is the Feed-in Tariff (FiT) program, offering competitive prices per kilowatt-hour (kWh) for renewable energy electricity. Plus, the state-owned Electricity of Vietnam (EVN) guarantees buying all the power produced, ensuring a secure income stream for investors.
Vietnam also boasts attractive tax incentives. Renewable energy companies benefit from a reduced corporate income tax rate of 10% for 15 years. There’s also a complete tax exemption for the first 5 years of new projects, followed by a 50% reduction for the next 9 years. This lowers upfront costs and boosts profitability. However, it’s important to note that the recent global minimum tax policy might affect these benefits.
The global minimum tax policy aims to ensure multinational corporations pay a minimum tax rate of 15% globally, regardless of location. So, while Vietnam offers a 10% rate, the global minimum tax could require some companies to pay an additional tax to Vietnam if their overall tax rate is below 15%. This would reduce the advantage of Vietnam’s tax incentives.
Beyond taxes, Vietnam offers import duty exemptions for essential project components, land-related incentives, and VAT refunds on qualified development expenses. These measures ease the financial burden and streamline processes for renewable energy investors.
In conclusion, Vietnam’s multifaceted framework makes it a promising destination for renewable energy investors. While the global minimum tax adds a new layer to consider, Vietnam’s commitment to green energy development remains strong.
5. Looking Forward to A Brighter Renewable Future
Vietnam beckons with a bright future in renewable energy. Abundant natural resources, surging electricity demand, and a growing eco-consciousness present a perfect storm for investors. Business-friendly policies like low tax rates and streamlined import processes further sweeten the deal.
Industry experts like Troy Griffiths of Savills Vietnam even highlight the rising importance of renewable energy infrastructure and smart technologies, underscoring the need for a robust and efficient power grid. This burgeoning market presents a lucrative opportunity, but careful planning is key.
While the potential is undeniable, navigating Vietnam’s renewable energy sector requires a cautious approach. Policy changes and implementation hiccups can introduce instability. Medium and small-scale projects face financial challenges, and partnering with creditworthy local entities is crucial. Land acquisition complexities due to state ownership add another layer of hurdles. Finally, integrating new sources into the grid presents technical and operational challenges that require expert consideration.
By acknowledging these challenges and implementing targeted solutions, Vietnam can solidify its position as a leader in the renewable energy transition. Streamlining regulations, fostering domestic participation, and investing in grid modernization are crucial steps. Embracing innovation, training a skilled workforce, and educating the public will further solidify a sustainable energy future for Vietnam. With careful planning and a commitment to responsible development, Vietnam can turn its renewable energy potential into a reality that benefits both investors and the environment.
