A pivotal focus of Vietnam’s new Energy Law is the prioritisation of renewable energy sources, like solar, wind and nuclear power, as well as green hydrogen and green ammonia. It includes incentives for small hydropower and offshore wind projects, simplifying approval processes. Notably, direct power purchase agreements (DPPAs) will enable renewable energy projects to bypass traditional bidding, facilitating faster deployment of clean energy initiatives.  

The law is also to phase out cross-subsidies through a multi-component pricing system. It introduces new electricity trading mechanisms, such as term contracts, futures and options. At present, retail prices are based on a national standard, which can lead to unfair treatment across user groups, with some households paying higher prices to subsidise lower rates for production and businesses.  

In addition, the law includes enhanced guidelines for investor selection and bidding for electricity projects, setting the stage for a competitive electricity market.  

The updated law also aims to incentivise private investment in energy storage systems and strengthen the framework for nuclear energy by amending the 2008 Nuclear Power Law.  

It also introduces mechanisms for LNG energy development, aiming to attract further investment.  

Transitional provisions aim to align legacy agreements with the new regulatory landscape.  

Also aligned with Vietnam’s Power Development Plan 8 (PDP8), the new law aims to shift the country’s energy mix from fossil fuels to renewable sources. It targets over 60% of installed capacity from solar and wind energy by 2050, up from the current 30%.

‘[The new law] establishes a competitive electricity market, allowing stronger trading activities and transparent operations,’ says Vietnam’s Ministry of Industry and Trade (MOIT). ‘[It also] ensures renewable energy growth while maintaining system safety and stable electricity prices.’

According to the Energy Institute’s Statistical Review of World Energy, coal dominated Vietnam’s energy mix in 2023, generating 129.6 TWh, or 47% of the nation’s electricity. Hydroelectric generated 80.9 TWh (29%), renewables 37.9 TWh (14%) and gas 26.3 TWh (9.5%), with oil accounting for the remaining 0.5% (1.3 TWh). Solar accounted for 68% of renewables generation, and wind 30% (the remainder generated by ‘other renewables’).

Driving the road to net zero  

Meanwhile, a new report from BloombergNEF (BNEF) suggests that the rapid scale-up of clean power will be key to Vietnam achieving its net zero by 2050 goal. Increased take-up of electric vehicles (EVs) and carbon capture and storage (CCS) technology will also play an important role, it says.  

The report builds on the results of BNEF’s New Energy Outlook 2024 report, presenting two updated climate scenarios: a Net Zero Scenario (NZS) that maps a path to net zero emissions globally by 2050, aligned with the Paris Agreement, and a base-case Economic Transition Scenario (ETS) driven by the cost-competitiveness of low-carbon technologies.

Under BNEF’s NZS, Vietnam’s power sector emissions are expected to peak in 2026, and then fall with the swift deployment of renewables, led by solar and wind. Transport sector emissions will peak in 2029, falling quickly thereafter with the electrification of road vehicles. Industrial emissions will peak in 2033, with significant reductions in the late 2030s due to the adoption of CCS technology and hydrogen to decarbonise heavy industries.  

Clean power, carbon capture and energy efficiency are projected to account for 78% of Vietnam’s emissions abatement by 2050. The remaining reductions are expected to come from electrification, bioenergy and hydrogen.

The report envisages an extensive deployment of renewables, with solar capacity reaching 512 GW by 2050 under the NZS, almost three times the target proposed by Vietnam’s PDP8.  

A multi-trillion-dollar opportunity

Reaching net zero by 2050 will also require a rapid ramp-up in investment in both energy demand and supply, according to BNEF. Totalling $2.4tn across 2024 to 2050 under the NZS, this includes $1tn of demand-side investment – just 14% higher than in an economics-led transition thanks to the falling costs of EVs, it suggests.

However, funding requirements for the supply side are more than twice as high under a net-zero pathway compared to the ETS, due to increased electricity demand and the need for carbon capture. Investment in CCS reaches $183bn under the NZS, whereas it is zero under the economics-led transition, notes the report.

‘Vietnam has effectively positioned itself as the manufacturing base for many multinational companies with clean power procurement goals,’ comments Hanh Phan, an Associate in BNEF’s South-east Asia team and lead author of the report. ‘The country can utilise these firms’ growing demand for green electricity to accelerate the deployment of renewables this decade, while also laying the regulatory groundwork for decarbonisation of hard-to-abate sectors.’