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Power Generation opened to Independent Power Producers

Challenges to investment

In 2011, the Government of Vietnam (GoV) outlined its plan for power sector development from 2011 to 2020 in the National Power Development Master Plan VII (PDMP VII), emphasizing the development of renewable energy (RE) for the first time. The PDMP VII set a goal for RE to comprise 4.5% of total power generation capacity by 2020 and 6% by 2030. In 2016, the revision of PDMP VII increased these targets to 7% by 2020 and 10% by 2030, with specific goals for wind power to reach 0.8% by 2020 and 2.1% by 2030. The revised plan also aimed to increase solar power from near-zero to 0.5% by 2020 and 3.3% by 2030. However, international investors' participation in RE projects remained negligible until 2016 due to the lack of a clear regulatory framework and financial incentives, as well as concerns about the creditworthiness of the state-owned Electricity Vietnam (EVN), as the sole buyer of RE.

 

Approach

To encourage private RE investment in the 2010s, the GoV initiated several reforms of EVN that opened the electricity market to independent power producers (IPPs). While EVN remained the dominant electricity off-taker and distributor in Vietnam, the reforms allowed power purchasers other than EVN to buy power from all Build-Operate-Transfer (BOT) plants, wind, or geothermal projects. The government also took steps to ensure that IPPs were given greater certainty about offtake and tariffs from RE projects. In June 2011, the Prime Minister issued Decision 37/2011/QD-TTg, the Wind Decision, mandating that EVN purchase all on-grid wind power produced for 20 years from the start of a project’s commercial operation, with an option for extension. The fixed tariff for wind power, set at VND 1,614 ($0.078) per kWh, was significantly higher than the conventional power tariff of $0.048 per kWh in 2015. This tariff also adjusted for the VND/$ exchange rate, protecting developers from currency depreciation. Similarly, on 11 April 2017, the Prime Minister issued Decision No.11/2017/QD-TTg, the Solar Decision. This decision, valid until 30 June 2019, required EVN to purchase all on-grid solar power generated for 20 years based on a standard power purchase agreement (PPA). The electricity price for solar was set at VND 2,086 ($0.094) per kWh, with adjustments based on a VND/$ central exchange rate set by the State Bank of Vietnam on 10 April 2017, excluding VAT.

  

Key Enabling Conditions

The Wind Decision and Solar Decision were accompanied by several complementary policies, to establish the RE generation market and promote IPPs. Under the PDMP VII and subsequent revisions, the GoV set a clear roadmap for RE generation and a framework for supporting policy measures including higher tariffs, tax breaks, land incentives, and subsidies for RE research. Finally, Fitch assigned EVN a positive credit rating of BB, highlighting EVN's reliability in PPA payments.


Impact / Outcomes

Overall, the increased certainty surrounding tariffs allowed the development of a domestic RE ecosystem. From 2011 to 2021, boosted by participation from IPPs, electricity generation from wind increased dramatically from 87 GWh to 3,344 GWh. Similarly, solar power saw remarkable growth, jumping from 22 GWh in 2018 to 27,791 GWh in 2021. Key solar projects initiated during this period gained international recognition, illustrating IPPs’ impact on RE development. For instance, the Loc Ninh Solar Power Plants, consisting of four projects by Thailand’s Super Energy, aimed for a total capacity of 750 MW in Binh Phoc. The CMX Renewable Energy initiative – a joint venture between Sunseap (Singapore), InfraCo Asia (Singapore) and CMX Renewable Energy Canada – completed a 168 MW solar power plant in Ninh Thuan in June 2019, garnering similar headlines.


Additional Sources

Locations
ASEAN, Viet Nam
Year published
01 January 2011
Policy type
Energy policy
Policy lever
Power market governance
Risk category
Power market risk, Policy and regulatory risk, Political risk, Counterparty risk, Grid/transmission risk, Permits risk

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