Termination of feed-in-tariff mechanism a major bottleneck in Vietnam’s electricity transition: expert

A major bottleneck in Vietnam’s electricity transition has been the termination of the feed-in-tariff (FIT) mechanism in 2021, with no suitable replacement mechanism in place, according to the director of Hanoi-based Institute of Energy Technology.

Projects on hold as power purchase agreements not signed

Associate Prof. Dr. Dang Tran Tho, head of the institute at Hanoi University of Science and Technology, identified one of the most urgent challenges in Vietnam’s clean energy transition: an incomplete and unstable policy framework.

He made the argument at the “Energy Transition Solutions Toward Net Zero” seminar held Friday in Hanoi, organized by Lao Dong (Labor) newspaper in coordination with the Ministry of Industry and Trade.

Although the country has adopted the adjusted Power Development Plan VIII (PDP8) and pledged to achieve net-zero carbon emissions, Tho emphasized that Vietnam still lacks critical legal foundations such as a Renewable Energy Law or Energy Transition Law.

This legal gap has resulted in fragmented and inconsistent policy enforcement, along with poor coordination between central and local governments, he noted.

A key setback has been the discontinuation of the FIT mechanism in 2021 without a suitable alternative. Consequently, over 4,000 megawatts (MW) of completed solar and wind power projects is yet to be able to secure power purchase agreements (PPAs), or they have had to reduce output due to limitations in grid integration.

The absence of a transitional pricing mechanism has left tens of gigawatts in project capacity stalled, causing significant waste of social resources.

According to Tho, coal-fired power still made up about 45% of Vietnam’s electricity generation in 2023, posing a serious challenge to the nation’s emissions reduction targets.

In contrast, alternative energy sources such as LNG, pumped-storage hydropower, and biomass energy remain in the preparation stages or are yet to have sufficient scales.

He also pointed out that advanced energy models - such as demand response systems, digitalized power grids, and rooftop solar in industrial zones - are still mostly in the pilot phase.

Additionally, a competitive retail electricity market has not yet taken shape, and the direct power purchase agreement (DPPA) mechanism is yet to be widely deployed, limiting the flexibility in clean energy distribution.

Implementing many solutions for progress

On the topic of renewable energy sales, Tran Dang Khoa, a representative from the electricity market department at Vietnam Electricity (EVN), explained that EVN is currently the country’s sole electricity buyer; as a result, all contracts must adhere to standardized formats and pricing set by the Ministry of Industry and Trade.

Khoa noted that following the expiration of the FIT mechanisms - solar on December 31, 2020, and wind on October 31, 2021 - no new pricing framework has been introduced. The ministry is still in the process of evaluating and issuing updated policies.

Doan Ngoc Duong, deputy director of the Electricity and Renewable Energy Authority under the Ministry of Industry and Trade, underscored the need to implement a range of measures to meet the adjusted PDP8 targets and move toward net-zero emissions by 2050.

A top priority, according to Duong, is fostering a transparent, investment-friendly environment and eliminating bureaucratic hurdles that hinder energy project development.

He also stressed that no energy transition can succeed without a smart grid. Vietnam will require approximately $18.1 billion in investment for grid infrastructure from 2026 to 2030 to support increased capacity and regional connectivity through advanced technology.

Duong called for urgent investment in critical transmission lines and the modernization of Vietnam’s power grid through smart digital technologies.