Wind and solar power account for a high proportion of the country's power source structure. To promote the development of renewable energy, the Government has issued many policies to encourage businesses to invest in this field since 2017.

The event marking a leap forward in solar power investment was Decision 11/2017/QD-TTg on "Encouragement mechanism for the development of solar power projects in Vietnam". 

Under this decision, the solar power price was set at 2,086 VND/kWh for 20 years, luring many businesses to invest in this field. 

With a high price for this type of energy (a feed-in tariff price of 2,086 VND/kWh for solar power, 1,900 VND for wind power), Vietnam was able to attract billions of dollars from the private sector for solar power and wind power. 

Renewable electricity now accounts for over 15% of the total electricity output of Vietnam.

The deadlines for applying FIT prices were included in the Prime Minister's decisions. The FIT1 price for solar power expired on June 30, 2019 and the FIT2 expired on December 30, 2020. The FIT for wind power expired on October 31, 2021. 

After June 30, 2019, the FIT price fell from 9.35 cents/kWh to only 7.09 cents/kWh, equivalent to 1,644 VND/kWh (for ground-mounted solar power projects), according to Decision 13/2020/QD-TTg. 

However, the price for rooftop solar power was up to 8.38 cents/kWh, equivalent to 1,943 VND/kWh. This helped attract investment in rooftop solar power.

The rapid development of renewable energy sources added supply sources for the power system, helping to reduce the risk of power shortages in the 2018-2019 period, ensuring national energy security in Vietnam.

As of January 1, 2021 - the end of preferential prices for solar power - the total capacity of grid-connected solar power and rooftop solar power had reached 16,500MW.

Renewable energy has contributed to improving the rate of access to clean energy and electricity sources for people in rural, mountainous, remote, border and island areas; and reduced CO2 emissions under the international commitments the Government made at COP26 (2021 United Nations Climate Change Conference).

The power-source structure has seen a significant shift from gray to clean energy sources. In Southeast Asia, Vietnam and other countries such as Thailand, Myanmar, Cambodia and the Philippines have great potential for solar and wind power. However, Vietnam has far surpassed these countries in exploring solar and wind power.

Vietnam’s wind and solar power output reached 5.242 billion kWh, 10.994 billion kWh and 29 billion kWh in 2019, 2020 and 2021, respectively. This contributed to significantly reducing the output of oil-based electricity of high prices by about 2.17 billion kWh in 2019, 4.2 billion kWh in 2020 and 202, saving about 10,850-21,000 billion VND.

The latest data from Vietnam Electricity Group shows that in April 2024, renewable energy output reached 14.55 billion kWh, accounting for 15.1% of the total output (including 9.26 billion kWh of solar power, and 4.78 billion kWh of wind power). The output of renewable power sources was second only to coal thermal power (hydropower plants had to store water for the upcoming peak season).

A report on policies and laws on energy development for the 2016-2021 period, released in October 2023 by the supervisory team of the National Assembly Standing Committee, said that many State policies and laws had been issued to support and create favorable conditions for the development of renewable energy. 

These policies have created conditions for domestic and foreign investors to participate in the exploitation and use of renewable energy, thereby creating a driving force to promote the strong development of the renewable energy market in Vietnam.

According to the report, these policies helped minimize the risk of short-term power shortages and created a significant amount of spare capacity, reducing coal imports while increasing the national energy security index.

New path for renewable electricity

Renewable energy development will continue to be a priority for the Vietnamese Government, which is shown in Power Plan 8 approved on May 15, 2023. This plan aims to strongly develop renewable energy sources. By 2050, the proportion of renewable energy will reach 67.5-71.5% of the country’s total electricity output. The greenhouse gas emissions from electricity production will be controlled at 204-254 million tons in 2030 and 27-31 million tons in 2050.

The Power Plan 8 also aims to achieve peak emissions of no more than 170 million tons in 2030 (provided that commitments under the Just Energy Transition Partnership or JETP are fully and substantially implemented by international partners); and to build a smart power grid system capable of safely and effectively operating large-scale renewable energy sources.

According to the British Chamber of Commerce Vietnam, the approval of Power Plan 8 shows Vietnam's strong commitment to decarbonization. It recommended rapid implementation of the plan, especially related to the development of Liquefied Natural Gas (LNG) and solar and wind power along with legal regulations for the implementation of the plan, including regulations related to the direct power purchase agreement (DPPA). 

To further support the initiative, the business group recommended coordinated implementation of JETP in line with Power Plan 8 and ensuring the readiness of specific pilot projects, especially on offshore wind energy.

However, the shift to clean energy causes challenges for the Vietnam Electricity Group (EVN) in energy transition, such as high cost of implementing energy transition, and putting pressure on electricity prices. EVN's power grid system does not yet have flexibility when integrating renewable energy sources. The average retail price of electricity in Vietnam is still low compared to other countries in the world, and there is no flexible mechanism for retail prices. In addition, the highly variable proportion of renewable energy makes the power system operation more complex. 

In addition, new renewable power projects must also wait for policies. The legal environment for energy in Vietnam needs to change rapidly to ensure that incentive structures and legal regulations are in place to accommodate the procurement of balanced services. And flexible resources on the demand and supply sides are needed to facilitate a continued transition to clean energy.

Tam An