News and developments
LEGAL OVERVIEW OF RENEWABLE ENERGY IN VIETNAM
Vietnam has experienced sustained economic growth (average economic growth rate of 6.2% per year from 2002 to 2022, GDP per capita increased 3.6 times, reaching approximately 3,700 USD along with increasing demand for energy consumption (World Bank, 2024). As the economy continues to grow, this creates an increase in demand for energy, as economic growth largely depends on access to diverse energy sources. The growth rate of energy demand is about 9.5% per year (Phung Thanh Binh, 2011). In 2016-2017, Vietnam’s energy consumption was recorded at more than 184 billion kWh per year. However, the national electricity system can currently only generate about 170 billion kWh per year according to a report by Vietnam Electricity (EVN, 2018). Regarding the Vietnam’s Seventh National Power Development Plan (the “PDP VII”), amended in March 2016 for period 2021-2030 (the “amended PDP VII”), by 2025, the whole country will need an electricity output of about 400 billion kWh per year and by 2030 the electricity output will reach more than 570 billion kWh per year (the Prime Minister, 2016).
According to a report of the Ministry of Industry and Trade of Vietnam (“MOIT”) published on June 30, 2019, Vietnam’s electricity output will reach about 60,000MW in 2020 with the main contribution of hydropower and thermal power (MOIT, 2019). In total, these two power sources accounted for about 87.7 percent of the total electricity capacity in Vietnam in 2020 while other types of small hydropower and renewable energy plants accounted for the remaining 9.9 percent and the remaining 2.4 percent were imported. In the PDP VIII and the amended PDP VII for period 2011-2020, vision 2030, Vietnam aims to double electricity power capacity to 129.500MW by 2030. Power rates are adjusted to reduce dependence on traditional power sources (e.g. hydropower and coal) and increase the available capacity of renewable energy and gas-fired energy projects. However, the market-share of traditional energy still accounts for the majority of the market. According to the MOIT, in 2023 Vietnam may lack electricity by 12 billion kWh. The MOIT proposed that the promotion of renewable energy should continue to be a priority in the coming years to address the country’s energy shortage (ibid). Most recently on June 9, 2020, the Prime Minister issued Official Letter No.693/TTg-CN to the MOIT approving the addition of (i) wind power capacity of 6,830MW; and (ii) 90 new wind power projects in PDPVII (the Prime Minister, 2020). The list of these projects is stated in Official Letter No. 1931/BCT-DL dated March 19, 2020 of the MOIT to the Prime Minister (MOIT, 2020). Below is the detailed proportion of energy related to projections in PDP VII as of 2030:
Table 1: Detailed allocation of energy sources (ibid)
From the ratio in the allocation table of energy sources of Vietnam 2030, it can be seen that the important role of renewable energy includes gas energy, solar energy and wind energy. With 57 percent of Viet Nam’s topography, there is concentrated sunshine all year round. The average recorded intensity of natural solar energy is about 5kWh per square meter, the solar potential in Vietnam is 60-100 GWh per year. Vietnam also has great potential to develop wind energy, having a coastline of 3,400 km with an average wind speed of 6 meters per second (MOIT, 2015). The total power generation potential from wind energy is esti mated at about 500 to 1000kWh/m2/year. In addition, it is estimated that Vietnam can also produce 73 million tons of total biomass energy potential per year, which includes 60 million tons from agriculture, forestry and fisheries and 13 million tons of waste, estimated at 5,000MW (MOIT, 2018).
OVERVIEW OF POLICY FRAMEWORK
Despite good natural conditions and huge renewable energy development potential, Vietnam’s renewable energy capacity is still limited to 5 percent of total power generation capacity (US Department of Commerce, 2022). The MOIT pointed out that regulatory barriers are one of the reasons for low renewable energy application. In particular, Vietnam has not completed the national master plan on renewable energy development, has not had a clear and stable legal policy framework and current incentives are not attractive enough for investors. While policy is the main motivation for growth in the use of renewable energy. In order to start developing and promoting the development of renewable energy, Vietnam must have a specific renewable energy framework policy, which sets out a number of key objectives, basic legal framework and support programs for the development of such energy sources. Regarding the history of establishing the policy and legal framework, since 2007, the Prime Minister has issued Decision No. 1855/QD-TTg (2007), Vietnam for the first time adopted the national energy development strategy with a vision to 2050 including the following main objectives:
Author: Lawyer Nguyen Chi Dzung - Vietthink Law Firm, Vietnam
Footnotes Reference list:
Power source | Density |
Hydropower | 16,9% |
Thermal power (from coal) | 42,6% |
Gas electricity | 14,7% |
Renewable energy (wind, solar) | 21% |
Atomic energy | 3,6% |
Energy imports | 1,2% |
Amount | 100% |
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- Ensuring national energy security;
- Provide sufficient high-quality energy for socio-economic development;
- Efficient exploitation and management of domestic primary energy sources;
- Diversify business models and energy investments;
- Establishment and development of competitive energy markets;
- Promote new and renewable energy sources; and
- Develop energy sources in an efficient and sustainable manner taking into account environmental protection.
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- Meeting electricity development plannings;
- Meet the complex process of executing the buyer and the Power Purchase Agreement (PPA): including agreements on grid connection, monitoring control systems and data collection as well as metering; approving environmental impact assessments; approving fire prevention and fighting plans; power operation licenses and power generation licenses.
- In addition to the above responses, renewable energy projects must also comply with laws on investment, electricity, construction, environment, tax, etc., not to mention the policies and mechanisms of each local Authorities.
Author: Lawyer Nguyen Chi Dzung - Vietthink Law Firm, Vietnam
Footnotes Reference list:
- Department of Commerce US (DOC), Vietnam Country Commercial Guide: Power Generation, Transmission, and Distribution, 2024. [Online]. Available at: https://www.trade.gov/country-commercial-guides/vietnam-power-generation-transmission-and-distribution. [Accessed on 26 Feb 2024].
- Vietnam Electricity (EVN), The Boom of Solar Power in Vietnamese, 2021. [Online]. Available at: https://www.evn.com.vn/d6/news/Khi-dien-mat-troi-bung-no-141-17-27530.aspx. [Accessed on 26 Feb 2024].
- IRENA, 2023, Energy profile Republic of Korea, Available https://www.irena.org/media/Files/IRENA/Agency/Statistics/Statistical_Profiles/Asia/Republic-of-Korea_Asia_RE_SP.pdf?rev=e658d5ecec044be8b81d624eef1c1d2e. [Accessed on 26 Feb 2024].
- Ministry of Industry and Trade, Report on Industry and Trade activities in June and the first 6 months of 2019, 2019.
- Ministry of Industry and Trade, The report No. 1931/BCT-DL considers additional planning for wind power projects, 2020.
- Ministry of Industry and Trade, Maps of solar resource and potential in Vietnam, 2015.
- Ministry of Industry and Trade, Report Potential for renewable energy development, 2016. [Online]. Available at: http://nangluongvietnam.vn/news/en/nuclear-renewable/expectations-on- renewable-energy-development.html, [Aceessed on 26 Feb 2024].
- Prime Minister, Decision No. 1855/QD-TTg approving Vietnam’s national energy development strategy up to 2020, with 2050 vision, 2007.
- Prime Minister, Decision 428/QD-TTg on master plan on the national electricity development in the period of 2011 to 2020 with vision to 2030, 2016.
- Prime Minister (2020), Official Letter No. 693/TTg-CN about adding wind power projects to electricity development planning, 2020.
- Phung Thanh Binh, Energy Consumption and Economic Growth in Vietnam: Threshold Cointegration and Causality Analysis, International Journal of Energy Economics and Policy, vol. 1, no. 1, pp. 1-17, 2011.
- Power China, Development report on energy industry released, 2023. [Online]. Available at https://en.powerchina.cn/2023-06/29/c_828369.htm. [Accessed on 20 Feb 2024].
- Vietnam Electricity Corporation (EVN) (2018), Report on production and business activities of electric industry.
- The World Bank (2018), Vietnam Overview, Available at https://www.worldbank.org/en/country/vietnam/overview. [Accessed on 26 Feb 2024].
- Toan Thang, Increasing Utilization of Renewables Generation, 2021. [Online]. Available at: http://baochinhphu.vn/Doanh-nghiep/Huy-dongnguon-phat-tu-nang-luong-tai-tao-tang/430394.vgp. [Accessed on 26 Jan 2024].