Shortly after the Vietnamese government approved the long-awaited Power Development Plan 8 (PDP8) in mid-May, northern Vietnam endured a severe energy shortage that hobbled manufacturing and left residents struggling to combat extreme heat.
A perfect storm of record electricity consumption due to high temperatures combined with drought-stricken hydropower reservoirs running out of water created a two-week crisis for the region.
This highlighted the critical importance of future power supply and transmission development laid out in the plan, especially as electricity demand is expected to grow by roughly 9% annually for the rest of the decade.
The scale of the transition needed to meet the goals of PDP8 through 2030 and Vietnam’s commitment to net-zero emissions by 2050 means there are enormous opportunities in the energy sector.
However, there is no denying that serious obstacles need to be addressed.
PDP8 is expected to require US$135 billion to implement, while the World Bank estimates that US$368 billion is needed to move toward a net-zero economy. Vietnam cannot provide this funding on its own, meaning financing is a top concern.
In a report titled ‘The Bankability of Renewable Energy Projects Upon PDP8,’ analysts from FiinRatings and Indochine Counsel wrote: “Vietnam must diversify funding sources beyond the banking credit to fulfill the objectives under PDP8. Corporate bonds and private credit investments from non-bank investors from domestic and international markets should be the primary funding source for this ambitious plan.”
And while PDP8 presents ambitious goals for renewable energy and LNG expansion, detailed policies still need to be released in order for these sectors to move forward.
Offshore wind, for example, which the power plan envisions as reaching 7 gigawatts in capacity by 2030 (up from zero), requires marine spatial planning regulations. In a concerning development, the Danish wind giant Orsted recently paused its market development activities in Vietnam.
Detailed rules regarding direct purchase power agreements (DPAA) and carbon certification are also needed and will help spur further renewable energy development.
While these obstacles cannot be ignored, according to Vietnam Holding’s Investment Manager, there will be huge opportunities for those involved in expected energy growth areas.
Transmission line constructors and consultants stand to benefit, as US$1.4 billion in transmission line investment is needed each year through 2030. The critical importance of this work was evident in the recent electricity shortage in northern provinces, as renewable energy from solar- and wind-rich provinces in the south couldn’t be moved to where it was needed.
EVN is currently responsible for this investment, but FiinRatings and Indochine Counsel argue they will need help.
“To attract private investment into grid transmission under PDP8, regulations need to specify forms of participation, compensation mechanism, and dispute resolution,” the two research firms note.
Renewable and hydropower developers are also in a good position, though it remains to be seen what the future feed-in tariff price will be for new wind and solar projects.
The implementation of a DPPA, meanwhile, would greatly benefit solar panel developers, as this would allow solar plant operators to sell energy directly to private businesses.
Finally, PDP8’s ambitious goal for LNG means gas import facilities will have to be built from scratch, offering huge financial potential for those in the oil and gas sectors. In fact, Vietnam received its first LNG shipment on July 10 at PV Gas’ new facility in Ba Ria-Vung Tau Province.
This could herald the start of an LNG boom for the country, though PV Gas is currently the only licensed LNG importer in Vietnam.
Vietnam Holding is an investor in PV Technical Services (PVS) which, like PV Gas, is part of PetroVietnam. PVS is positioned to benefit from the upcoming energy transition and will play an important role in offshore wind development once that begins.
PetroVietnam, for its part, recently took control of two gas power projects, O Mon III and O Mon IV in Can Tho, from EVN. These plants, which are expected to begin generating power in late 2026, are a key part of PDP8’s outlined gas capacity.
As the bankability report authors note, these projects are at the forefront of Vietnam’s LNG future, and hard work remains.
“For LNG power projects to succeed, pioneer developers will need heavy guidance and support from the authorities, especially concerning on-take and off-take,” FiinRatings and Indochine Counsel wrote.
Another positive step occurred on July 14, when Prime Minister Pham Minh Chinh authorized the creation of the Just Energy Transition Partnership (JETP) Secretariat. The body is headed by the Minister of Natural Resources and Environment and is responsible for laying the groundwork to implement the US$15.5 billion JETP agreement signed between Vietnam and the International Partners Group in December.
While the challenges facing Vietnam’s energy transition are daunting, policies like PDP8 and the JETP show that the country’s leaders understand them and recognize the importance of transforming where power comes from.
Writing credit Michael Tatarski