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New developments for Vietnam renewable energy

The Government of Vietnam has issued its highly anticipated policy, Decision 13, providing for new feed-in-tariffs for solar power projects in Vietnam. The new solar FiTs will apply for projects which have already been approved and achieve commercial operation by the end of 2020. Thereafter, a shift to competitive bidding for solar power pricing is proposed with several implementation options under consideration.

The new policy also allows for use of direct power purchase agreements for rooftop solar. Wind power has also seen key developments, including   MOIT's recommendation to extend the current wind FiT eligibility to projects for another two years beyond the current 1 November 2021 deadline. So, after a period of uncertainty on the policy front for renewables in Vietnam, it looks like there will now be a more clear way forward.  Please read on for more details.


1.1     New FiTs, but for the remainder of 2020 only

On 6 April 2020 the Government of Vietnam issued the highly anticipated Decision No. 13/2020/QD-TTG on the Supporting Mechanism of Solar Energy Development in Vietnam (Decision 13).  The new solar FiTs set out therein end a period of uncertainty after the old tariffs expired in June 2019. New solar FiTs are applicable to projects which obtained in-principle approval prior to 23 November 2019 and achieve a commercial operation date (COD), in whole or in part, by 31 December 2020.  Thereafter and for those solar projects ineligible for the new solar FiTs, Vietnam's Ministry of Industry and Trade (MOIT) recommended a shift to a competitive bidding mechanism for solar power pricing, with several implementation options under consideration.

The new solar FiTs are:

  • VND 1,758 per kWh (equivalent to 7.69 U.S. cents per kWh) for floating solar power projects;
  • VND 1,620 per kWh (equivalent to 7.09 U.S. cents per kWh) for ground-mounted solar power projects; and
  • VND 1,943 per kWh (equivalent to 8.38 U.S. cents per kWh) for rooftop solar power projects.

The good news, therefore, is that after over 9 months of no implemented policy or tariff certainty, there are finally new solar FiTs in Vietnam.  Unfortunately for regulators, developers, investors and financiers to Vietnam's solar power sector, the window of availability for the new solar FiTs is short; only those solar power projects which had already been approved before 23 November of last year can continue in development with the assurance that they can obtain a power purchase agreement (PPA) with a FiT. 

1.2     Direct PPAs for rooftop solar

On 21 January 2020 in its Proposal No. 544/TTr-BCT, MOIT submitted its proposal to the Government for allowing direct PPAs between renewable energy power generators and electricity consumers for both solar and wind projects. Decision 13 now provides that:

  • rooftop solar generators are permitted to sell part or all of the generated electricity to Vietnam Electricity (EVN) or to other purchasers who are not connected to EVN's grid infrastructure; and
  • if the purchaser is not EVN, the electricity purchase price and the respective power purchase agreements shall be agreed by parties in accordance with Vietnamese law.

1.3     Competitive bidding from 2021 onwards

Along with the new solar FiTs, the MOIT also submitted Letter No. 1968/TTr-DL dated 19 March 2020 to the Prime Minister for consideration on shifting from a FiT scheme to a bidding mechanism to achieve competitive pricing for solar power in Vietnam from 2021 onwards. MOIT's letter analyses the necessity of a bidding scheme for solar power after the expiry of the new solar FiTs. MOIT views the FiT scheme as having certain limitations, including the fact that many solar power projects are located in or are proposed for areas with high solar radiation but which areas are facing grid capacity overload, adversely affecting the stability of the grid and driving up land prices in these areas. Furthermore, MOIT hopes that implementing competitive bidding will bring Vietnam closer in line with international standards, making solar power projects more bankable, attracting lower-cost financing, encouraging more international investment and stimulating greater competition.

MOIT proposed three options for competitive bidding:

  • Option 1 - Competitive bidding for projects already included in project development planning but which are not entitled to the Solar FiT
  • This option shall apply up to June 2021 for those projects already included in the national power development plan but which do not meet the requirements for obtaining the new solar FiTs (i.e. projects that obtain in-principle approval after 23 November 2019 and/or do not reach COD by 31 December 2020). The aggregate capacity of solar projects in Vietnam to which this option can be available will be capped at 1,000 MW.
  • Eligible solar projects may have capped tariffs of (i) 7.69 U.S. cents per kWh for floating solar power projects, and (ii) 7.09 U.S. cents per kWh for ground-mounted solar power projects.
  • Tariffs will apply for 20 years.

Under this option, the PPA will be based on clear take or pay principles which is very encouraging news and it is hoped that this approach could remove many of the current bankability concerns.  

  • Option 2 – Competitive bidding based on transformer station/substation connections
  • Applicable to solar power plants with capacity from 10 MW to 100 MW. The scheme would be piloted in 2020 – 2021 and applicable from July 2021.
  • Applicable to projects connected to substations or transmission lines announced by the MOIT. The investors will propose locations based on information of the substations/transmission lines and areas with potential for solar power development.

This option is still in the research stage and further details are needed. However, it is hoped that this option can be advanced to encourage investment in solar power projects in areas where grid development is needed most. MOIT will be looking into this option and may submit further proposals to the Government for consideration.

  • Option 3 – Competitive bidding for specific projects
  • Applicable to specific projects with high capacity (more than 100 MW). The scheme would be piloted in 2020 – 2021 and applicable from July 2021.
  • Provincial authorities and EVN will be in charge of preparing and making available suitable project sites and preparing connection infrastructure and access to the project site.

Whilst this provides another option for developing larger scale solar power projects in Vietnam, it will be interesting to see whether it can be implemented successfully in practice.  Putting EVN and local authorities in charge of site development can in theory encourage solar power in areas where it may be needed most and also shut out opportunistic developers who are looking to exploit a land play.  However, in practice, land acquisition and issues around compensation and resettlement can be very time-consuming in Vietnam, and many areas still face lack of grid connection or capacity.


Vietnam has enormous potential for developing wind energy projects, having a coast line of over 3,000 kilometers with an average wind speed of 6 meters per second. The country’s technical potential for wind power is assessed at 27 GW. The Government's roadmap for wind power development for the period up to 2020 with vision to 2030 is detailed in the Revised National Power Development Master Plan VII. Under this plan the installed capacity targets for wind power are set at 800 MW in 2020, 2,000 MW in 2025 and 6,000 MW in 2030. A  FiT mechanism is currently in place with 8.50 U.S. cents per kWh for onshore wind power projects and 9.80 U.S. cents per kWh for offshore wind power projects and will be applicable to projects that achieve COD by 1 November 2021.

On 9 April 2020 the MOIT reported to the Prime Minister on wind power projects in Vietnam.  MOIT reported that 78 wind power projects with total capacity of 4,800 MW have been approved, but so far only 11 projects with approximately 377 MW of total capacity have achieved COD and that only a further 31 projects (with total capacity of 1,662.25 MW) have signed PPAs and are in development with a view to try achieving COD by the November 2021 deadline.  Additionally, the MOIT reported that the COVID-19 pandemic has had a negative impact on renewable projects generally, and in particular wind power projects due to delays in the supply of wind turbines as a result of shut downs in manufacturing and supply chains, as well as restrictions on entry of foreign technicians and experts into Vietnam.  However, wind power development in Vietnam was slow before the pandemic, and the more important considerations include the length of time required for construction of large scale wind power projects, particularly offshore wind, together with extensive red tape relating to licensing procedures and delays around land availability and grid connection.

Given the country's high power demand and the current challenges faced by investors, MOIT had recently proposed extending the current wind FiT eligibility to projects that achieve COD by 31 December 2023 with competitive bidding taking effect from 2024.

Other considerations

3.1     Facing a grid capacity shortage

As renewable energy sources grow in contribution to the grid, there are challenges associated with incorporating more decentralised power plants that provide intermittent power supply. Given the increase in solar and wind generation capacity, or at least proposed development, especially in southern Vietnam, there is an urgent need for investment in grid connection and capacity.  Further, there are likely opportunities to include and leverage private sector and international donor expertise in the area of renewable energy grid integration, smart grids, battery storage and flexibility.

For instance, recently, the People's Committee of Binh Thuan has given approval in principle for an investor to develop a solar power project along with a 500 kV substation with 500 kV and 220 kV transmission lines connecting to the national grid. This project will help to reduce the Government's burden in developing sufficient infrastructure to receive power generated by independent power projects. Encouraging private development in grid connection and capacity is a positive step, but investors need to be incentivised to do so, including through appropriate compensation and making things like the licensing process and land access easier.

3.2     Power Development Master Plan VIII

Another vital planning tool that will shape the next round of market opportunities will be the Power Development Master Plan VIII (Master Plan VIII). It is expected to be released in 2020 and will set the stage for the next phase of Vietnam’s renewable energy growth. Key issues will be how grid development is designed to support the growth of renewable energy and how direct PPAs, behind-the-meter renewable energy, and new storage options will be factored into the Master Plan VIII.