• Modernizing Energy Policy: Vietnam’s updated Electricity Law introduces mechanisms to support renewable energy, enhance market competitiveness, and attract investment.
• Addressing Energy Challenges: Tackles production cost shortfalls, promotes transparency, and aligns with the National Electricity Development Plan (PDP8).
• Transition Timeline: Effective February 1, 2025, with transitional provisions for existing projects and contracts.

Vietnam has enacted a new Electricity Law, effective February 1, 2025, to modernize its energy sector and create a robust framework for renewable energy development. The amended law addresses longstanding challenges in cost structures, regulatory frameworks, and market dynamics while promoting a competitive energy market and transitioning to sustainable energy sources.

The 2024 Electricity Law introduces reforms aimed at market liberalization, including:

• Multi-component pricing systems to phase out cross-subsidies gradually.
• New electricity trading mechanisms, including term contracts, futures, and options.
• Enhanced guidelines for investor selection and bidding in electricity projects.

“The law establishes a competitive electricity market, allowing stronger trading activities and transparent operations,” emphasized the Ministry of Industry and Trade (MOIT).

The law prioritizes renewable energy sources like solar, wind, and nuclear power. Key provisions include:

• Incentives for small hydropower and offshore wind projects.
• Special mechanisms for urgent energy projects, including simplified approval processes.
• Direct Power Purchase Agreements (DPPAs), enabling renewable energy projects to bypass traditional bidding.

“This framework ensures renewable energy growth while maintaining system safety and stable electricity prices,” the MOIT added.

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Existing projects and contracts approved before February 1, 2025, will follow earlier regulations with specific adjustments to align with the new law:

• Projects approved under the 2004 Electricity Law will proceed with transitional bidding rules.
• Electricity purchase and sale contracts signed before the effective date must comply with competitive market provisions.

The revised law also focuses on:

• Incentivizing private investment in energy storage systems.
• Strengthening the framework for nuclear energy, including amending the 2008 Nuclear Power Law.
• Establishing mechanisms for liquefied natural gas (LNG) energy development to attract further investment.

Aligned with the Power Development Plan 8 (PDP8), the law targets over 60% of installed capacity from solar and wind energy by 2050. Current renewables contribute approximately 30%, underscoring the law’s role in scaling up efforts.

“The new Electricity Law represents a milestone in addressing Vietnam’s energy challenges and lays the foundation for a sustainable energy mix,” the MOIT stated.

As Vietnam prepares for implementation, the law promises to transform the nation’s energy landscape, bolster financial sustainability, and advance environmental objectives.

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