Vietnam’s energy consumption has been on a rapid rise, with electricity demand increasing at a rate of 10-12% per year. The country’s energy demand is expected to continue growing. By 2030, Vietnam’s total power generation capacity is projected to be up to 140,000 MegaWatt, which represents a significant increase from its current capacity of around 80,000 MW. This has brought about an opportunity for foreign investors looking to help meet this need, particularly through the use of clean energy sources.

Strong Government Support for Clean Energy

The Vietnamese government has also made strong commitments to clean energy and sustainability as part of its broader environmental and economic goals. As of 2023, the Vietnamese government set a target to reduce greenhouse gas emissions by 9% by 2030 and net-zero emissions by 2050. To achieve this goal, the Vietnamese government has introduced several policies that encourage foreign investments, including:

• Power Purchase Agreements (PPAs) with a guaranteed feed-in tariff (FIT) for renewable energy projects.
• Investment incentives such as tax exemptions and reduced land lease fees for clean energy projects.
• A $2.3 billion USD clean energy development fund to support investments in wind and solar energy projects.
• Additionally, under the 2025 Vietnamese energy plan, the government aims to increase the share of renewable energy in the total energy mix to 30% by 2030, and 50% by 2050.

Solar and Wind Energy Potential 

Vietnam leads Southeast Asia in solar energy, with over 16,500 MW installed by 2023 and plans for 12,000 MW more by 2030. Key areas like Ninh Thuận and Bình Thuận offer 5,000 MW of solar potential. The country also has up to 160 GW of offshore wind potential, capable of meeting 40% of electricity demand by 2050, with 1,000 MW of wind capacity added in 2023 alone.

Opportunities for Foreign Investors

• Renewable Energy Projects and Financing: Vietnam’s clean energy sector offers lucrative opportunities for foreign investors to participate in renewable energy projects, especially in solar, wind, and biomass. Investors can benefit from the feed-in tariff (FIT) scheme, which guarantees fixed payments for renewable electricity sold to the grid over a certain period. For example, solar projects signed under the government’s FIT agreement offer prices of up to $93 per MWh.

• Partnerships with State-Owned Enterprises (SOEs): Collaboration with Vietnams energy companies such as Petro Vietnam and EVN (Electricity of Vietnam) offers foreign investors access to critical infrastructure and resources, including transmission networks and large-scale land areas suitable for clean energy projects. These companies are looking for energy partners. Foreign companies can take advantage of this as a low-risk market entry opportunity to gain a foothold in Vietnams energy market.

• Government Policy and Legal Framework: The Vietnamese government has put in place clear policies and a favorable regulatory framework for renewable energy investments. For instance, the country has recently revised its Law on Environmental Protection to include stricter environmental regulations. This includes issuing master permits for environmental operations, stricter regulations on environmental compliance and reduction in approvals for projects with high negative impact on local environments. These changes, however, open the door for foreign companies offering eco-friendly solutions as they can capitalize on these environmental regulations.

Challenges and Potential Roadblocks

• Complex Bureaucracy: Despite government efforts to attract foreign investment, corruption remains a significant challenge, with Vietnam ranking 77th out of 180 countries in Transparency International’s 2023 Corruption Perceptions Index. State-owned enterprises (SOEs) and domestic firms often receive preferential treatment, hindering fair competition. Navigating the regulatory environment is equally challenging due to fragmented and lengthy approval processes involving multiple agencies like the Ministry of Industry and Trade (MOIT) and local People’s Committees. Frequent policy changes, particularly around feed-in tariffs (FITs), often lack clarity, further exacerbating uncertainties for investors.

• Limited Infrastructure and Grid Connectivity: Vietnam’s underdeveloped energy grid infrastructure, particularly in regions with high renewable energy potential like Ninh Thuận and Bình Thuận, leads to transmission bottlenecks and delays in connecting renewable energy projects to the grid. The monopoly of Electricity of Vietnam (EVN) in power transmission and distribution further complicates project implementation and negotiations, limiting grid access for new investors.

• Land Acquisition Challenges: Securing land for renewable energy projects can be a time-intensive process due to Vietnam’s land-use regulations. This often requires lengthy negotiations with local authorities, slowed by bureaucratic red tape. Additionally, land disputes or opposition from local communities can further delay projects and increase costs.

Conclusion

Vietnam’s clean energy sector offers substantial opportunities for foreign investors, driven by strong government support, growing energy demand, and an abundance of renewable resources. With the government’s ambitious goals for sustainability and the increasing need for environmental awareness, Vietnam is positioning itself to be a major player in bringing about a carbon-free environment. As the country continues to prioritize clean energy initiatives, it presents a unique opportunity for global investors to participate in a rapidly expanding market, contribute to the global transition toward renewable energy, and benefit from the country’s evolving regulatory framework and investment incentives. With its favorable geographic location, growing infrastructure, and a commitment to sustainability, Vietnam is poised to lead in the development of clean energy solutions in the Southeast Asian region and beyond.