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To achieve the target of 8% GDP growth in 2025 and sustain double-digit expansion in the years ahead, annual power demand is projected to grow by 12%–14%. While energy supply has generally kept pace, challenges such as reliance on weather-dependent sources, regional imbalances, and underinvestment in transmission infrastructure in recent years have led to temporary shortages during peak dry seasons. As the country strengthens its position as a global manufacturing hub and anticipates a new wave of foreign direct investment (FDI) under a Trump 2.0 presidency, a stable and sufficient power supply remains a key concern for foreign investors. This report examines how Vietnam is tackling these challenges to ensure sufficient energy supply for sustained economic growth.
Acknowledging the critical role of the power sector in fueling economic growth and enhancing investor confidence, the government has introduced strategic measures to address energy challenges. These include advancing the development of renewable energy, along with LNG-fired power plants, and restarting nuclear power projects after years of suspension. Efforts are also focused on upgrading transmission infrastructure to strengthen regional power connectivity, supported by streamlined regulations to accelerate project execution. The rapid completion of the 500kV Line 3, which alleviated Northern power shortages in just six months, exemplifies the effectiveness of these initiatives. These actions underscore the government’s commitment to creating a robust and reliable energy system capable of meeting the needs of global manufacturers and ensuring long-term energy sufficiency. With the comprehensive approach, we believe the country will secure the power supply needed to sustain its economic growth.
Power Industry Landscape: Current Demand, Supply, and Key Challenges
Electricity consumption has steadily increased over the past decade, fueled by industrialization and urbanization. Since 2010, electricity consumption has grown annually by over 10% (excluding the COVID-19 period), averaging 1.5 times GDP growth. Manufacturing and construction account for over half of total electricity usage, reflecting the country’s rise as a global manufacturing hub and its ability to attract FDI. Urbanization has further driven construction activity, while improving living standards have boosted household electricity consumption, now comprising 35% of total demand.
Vietnam has rapidly expanded power generation to meet rising demand. Since 2016, total capacity has more than doubled, ensuring system stability by maintaining a strong baseload while accelerating the shift to greener energy. The share of renewable energy in total capacity surged from 5.6% in 2016 to 26.8% in 2024, supported by incentive policies such as Feed-in-Tariff (FIT) mechanisms. This policy offers fixed, favorable electricity prices for solar and wind projects over a 20-year period, provided they achieve commercial operation date before government-imposed deadlines. By offering long-term price certainty, this mechanism has played a pivotal role in fostering investment in renewable energy.
Primary challenges in ensuring stable power supply. Nearly 55% of power capacity relies on weather-dependent sources such as hydropower and renewables, raising concerns over supply reliability. Regional imbalances compound the issue, with solar and wind projects concentrated in the Central and Southern regions, while the North depends on hydro and coal power. Hydropower utilization typically declines during the dry season (April–July), further straining supply. Financial pressures have also posed challenges; between 2020 and 2022, Vietnam Electricity Group (EVN) incurred substantial losses due to soaring thermal power costs, while electricity prices were kept unchanged to support the economy. This situation has prompted a shift toward developing a competitive retail electricity market, replacing the current competitive wholesale market where EVN serves as the sole purchaser from power plants. The new framework will enable direct transactions between consumers and power developers.
How is the Government Addressing These Challenges to Enhance Power Supply and Reliability?
Ambitious plans for a sustainable energy future. Power Development Plan VIII (PDPVIII), approved in 2023, sets a bold vision to double power generation capacity to 150GW by 2030, reflecting a CAGR of 13%. Renewable energy and LNG-fired power form the cornerstone of this expansion, with onshore wind and LNG expected to contribute 15% and 14% of total capacity, respectively. The plan also emphasizes offshore wind development and promotes self-used rooftop solar systems, diversifying energy mix and supporting its sustainability goals.
To achieve these goals, the government has introduced a series of initiatives:
- Renewable energy expansion: The Direct Power Purchase Agreement (DPPA), introduced in 2024, allows renewable energy projects to sell electricity directly to manufacturers, bypassing EVN. Incentives for rooftop solar systems and minimum purchase commitments for wind projects under new regulations are reviving investor confidence after the expiration of the FIT mechanism.
- LNG-Fired power development: Policies now ensure LNG price fluctuations can be passed through to electricity prices, enhancing the financial feasibility of these projects and enabling smooth power purchase negotiations between developers and EVN.
- Integrating nuclear power as a strategic energy source: The Prime Minister recently approved the task of revising PDP VIII, emphasizing the inclusion of nuclear power to enhance baseload stability alongside the growth of renewable energy. This move follows the National Assembly’s approval of the study for the 4,000 MW Ninh Thuan nuclear power project in November 2024, marking the return of nuclear energy as a strategic resource after years of suspension due to safety concerns. This step integrates nuclear power into the nation’s long-term energy strategy, addressing resource constraints and ensuring a stable and reliable power supply for future growth.
- Accelerated project timelines: The revised Electricity Law empowers the government to fast-track critical projects, exemplified by the 500kV Transmission Line 3, completed in just six months, well ahead of the typical 3-4 years.
These efforts aim to enhance the power supply, diversify energy sources, and ensure the reliability manufacturers require for sustained operations.
TIM