Vietnam has introduced a game-changing Electricity Law amendment that goes into effect on February 1, 2025, aimed at modernizing the nation’s energy sector and creating a solid foundation for the development of renewable energy. The updated legislation tackles serious challenges in the production cost of electricity, regulatory frameworks, and market dynamics that should position Vietnam for a sustainable energy transition while improving its energy market’s transparency and competitiveness.
The new Electricity Law has brought in significant reforms that would help in establishing a competitive energy market. It would have multi-component pricing systems, designed to phase out cross subsidies gradually. The law also provides a basis for the more advanced electricity trading mechanisms such as term contracts, futures, and options. The structured approach to energy trading would be provided. Improved guidelines for investor selection and bidding processes in electricity projects further strengthen the law’s focus on market liberalization and investment appeal.
In this regard, the MOIT in Vietnam stated that reforms create a competitive electricity market with a robust trading activity and transparent operation. It is believed to attract not only the country’s local investors but also international ones, paving fertile ground for the development of its energy sector.
Some of the new features include an emphasis on renewable sources such as solar, wind, and nuclear power, in the new law. It introduces specific incentives for small hydropower and offshore wind projects, alongside special mechanisms for expediting urgent energy projects through simplified approval processes. The law also includes provisions for Direct Power Purchase Agreements (DPPAs), under which renewable energy projects will be able to bypass traditional bidding systems and directly engage with consumers. According to the MOIT, this framework ensures renewable energy growth while maintaining system safety and stable electricity prices.
Transitional provisions for projects and contracts approved before the effective date of the law are addressed. Projects authorized under the 2004 Electricity Law will continue under transitional bidding rules, while electricity purchase and sale contracts signed before February 1, 2025, must align with the competitive market provisions introduced by the new legislation.
Under PDP8, the legislation sets a very ambitious goal of over 60% installed capacity from solar and wind power sources by 2050; this would double the existing contribution from around 30%. Incentives have also been outlined for private investment in energy storage systems. Mechanisms for the development of liquefied natural gas are also mentioned and improvements in the framework related to nuclear energy, through amendments to the 2008 Nuclear Power Law.
The MOIT emphasized that the law has a transformative impact and is a landmark in dealing with Vietnam’s energy challenges while enhancing the country’s financial sustainability and environmental goals. The law positions Vietnam as a regional leader in the development of renewable energy, fostering a diversified and sustainable energy mix.
The reforms promise to redefine the nation’s energy landscape as Vietnam prepares for the law’s implementation. Amended Electricity Law, mechanisms to enhance market competitiveness, attract investments, and prioritize renewable energy, mark a pivotal step toward achieving Vietnam’s national energy objectives and securing a sustainable future.