In Southeast Asia, Vietnam has been the undisputed chief with regards to constructing renewable vitality. In 2017, the federal government enacted a regulation that supplied solar energy builders a beneficiant charge if they might construct energy vegetation that had been operational by 2019. This was adopted by an identical incentive for wind. The federal government didn’t place a cap on eligible capability, so there was an enormous inflow of funding exercise as builders and traders raced to get their initiatives constructed earlier than the deadline.
In consequence, electrical energy generated from renewables like photo voltaic and wind has soared. In 2018, photo voltaic and wind accounted for round .4 p.c of all electrical energy produced in Vietnam. Following the 2019 deadline, photo voltaic and wind rose sharply as a share of era. In response to the newest annual report from state-owned electrical utility EVN, photo voltaic and wind accounted for round 13 p.c of electrical energy generated in 2024. Vietnam has outpaced just about all of its regional friends with regards to the manufacturing of unpolluted vitality and performed it in a really brief time period.
However this achievement got here at a substantial price, one which has been borne primarily by EVN. As traders rushed into the market, it created billions of {dollars} in new liabilities and working prices as a result of the utility was now obligated to purchase electrical energy from these energy vegetation at a reasonably excessive charge. In a well-regulated vitality market, a utility may be anticipated to boost costs on shoppers with the intention to recuperate such elevated prices.
However in Vietnam, as in lots of rising markets, electrical energy costs paid by shoppers are tightly managed by the state. And with the onset of the COVID-19 pandemic in 2020, the federal government was extraordinarily reluctant to move any price will increase onto Vietnamese shoppers. This positioned intense monetary pressure on EVN, with the utility recording a $790 million loss in 2022 and a $1 billion loss in 2023 (calculated utilizing consolidated monetary statements at present alternate charges). With money reserves dwindling and mounting funds to new renewable suppliers, the federal government lastly handed a collection of value hikes onto shoppers.
By 2025, EVN discovered itself on a lot sounder monetary footing. Due to the worth will increase income rose 11 p.c from 2024 to 2025, and the utility posted a internet revenue of practically $2 billion. Money from operations is means up, and the monetary peril has light. However funding in new renewable initiatives has additionally slowed means down. EVN has been capable of protect its monetary stability not solely by rising income, but in addition as a result of new renewable initiatives have slowed. Final 12 months, the utility even tried to back-track on some current initiatives claiming there have been questions on regulatory compliance.
EVN’s annual report reveals that after rising sharply in response to the motivation scheme, the share of wind and photo voltaic era has remained regular at round 13 to 14 p.c from 2022 to 2024. This implies rather a lot much less new renewable vitality has been constructed lately, pivoting away from the earlier mannequin whereby EVN acted as the primary purchaser of renewable energy from non-public builders with the intention to induce extra funding.
Does that imply Vietnam’s clear vitality ambitions have reached an deadlock? Not essentially. However the highway ahead might begin wanting much less like the normal mannequin of centralized state management beneath EVN, and extra like a decentralized system with the gradual introduction of market-oriented mechanisms.
A key step on this course of is the expanded use of Direct Energy Buy Agreements for clear vitality. This enables eligible clients with excessive vitality must enter into direct buy agreements with suppliers of renewable vitality, quite than having to undergo EVN. A LEGO manufacturing facility working out of the Vietnam-Singapore Industrial Park is without doubt one of the first large-scale offers of this nature.
Samsung additionally lately agreed to purchase electrical energy from the privately operated Duc Hue 2 Photo voltaic Energy Plant by way of the EVN-operated grid. Information facilities are additionally now eligible for direct buy agreements, an vital improvement given the energy-intensive nature of such operations. The federal government likewise plans to have a retail electrical energy market up and working by subsequent 12 months, which is able to complement the wholesale electrical energy market launched in 2019.
The long-term affect of those reforms stays to be seen, however the general coverage course appears clear. Vietnam’s vitality sector has historically been dominated by state-owned entities like EVN. It has been a centralized mannequin designed to maintain the manufacturing of vitality firmly beneath the purview of the state, and to insulate Vietnamese shoppers from value volatility. However this mannequin has its limits, particularly as funding wants improve in response to speedy financial progress.
Now the federal government is pushing reforms that may, it’s hoped, introduce extra environment friendly mechanisms that present a larger diploma of flexibility with regards to producing and consuming electrical energy. It is going to additionally reduce the monetary burden on EVN because it pushes the vitality sector away from its conventional state-controlled roots, and towards a extra decentralized orientation.
Will it work, and to what extent can the state actually relinquish management over a significant financial enter like vitality, particularly with regards to the worth paid by Vietnamese shoppers? We don’t know. However on the very least, these developments counsel the sector is on the cusp of a brand new section and it is going to be attention-grabbing to see the place it leads.