Vietnam’s energy sector has a substantial task ahead of it in ensuring that power supplies are commensurate with growing demand during the country’s new era of development.
As Vietnam enters a new phase of development targeting double-digit economic growth, its energy sector must go beyond ensuring adequate supplies to build a modern, competitive, and resilient system. It must adapt to the global energy transition and meet the country’s emissions commitments, creating both an opportunity to restructure the sector and a test of policymakers’ and businesses’ ability to deliver.
The sector has made significant strides forward over the last several years. The national power system has expanded rapidly, while oil and gas infrastructure has developed more systematically. Based on the revised National Power Development Plan for 2021-2030, with a vision to 2050 (PDP8), Vietnam faces enormous energy demand in the time ahead. By 2050, commercial electricity consumption is expected to exceed 1.23 trillion kWh, reflecting the scale of energy demand required to support national development.
National energy planning
The most significant change is the shift in the power generation mix. Whereas the national system once relied mainly on coal and hydropower, nowadays LNG-fired power, wind, solar, nuclear, pumped-storage hydropower, battery storage, and other emerging sources are reshaping the generation market.
The transition is also extending beyond generation into energy storage. Battery energy storage systems (BESS) are beginning to be deployed by businesses and power generators, signaling a new approach to energy management.
PDP8 identifies 13 LNG power projects with a combined capacity of about 22.4 GW, with the goal of making LNG a key source of baseload power. In practice, however, these projects face major obstacles.
Though 13 projects are planned through 2030, only Nhon Trach 3 and Nhon Trach 4 have been completed and brought into operation so far. Most of the remaining LNG projects remain only on paper, with investors and power generators still working through legal and regulatory procedures. The challenges include fragmented investment mechanisms, difficulties arranging financing and, particularly, obstacles in negotiating power purchase agreements (PPAs), all of which are slowing investment across the sector.
Nuclear energy has also returned to the policy agenda, with the Ninh Thuan 1 and Ninh Thuan 2 projects included in development plans through 2030-2035. Both remain at the investment preparation stage, however. Policies covering regulatory mechanisms, environmental safety, special incentives, and power purchase arrangements are still under study, with no specific framework yet in place to support implementation.
This shows that while Vietnam is seeking to build one of Southeast Asia’s largest energy systems, planning is only the necessary condition. The sufficient condition is a strong policy framework that allows resources to be mobilized efficiently once projects come online, minimizes waste, and ensures viable returns for investors.
Core bottlenecks
A closer look at the sector shows that institutional reform is a critical prerequisite for development. Four major bottlenecks are constraining investment and project implementation: an inconsistent legal and policy framework; an incomplete and insufficiently competitive energy market; a mismatch between power generation and transmission infrastructure; and shortcomings in policies for emerging energy sectors.
The lack of policy coordination is particularly problematic. Energy projects are subject to multiple laws, including the Law on Petroleum, the Law on Electricity, the Law on Investment, the Land Law, the Law on Environmental Protection, and the Law on Marine Resources, alongside numerous implementing decrees. This creates a complex legal framework that businesses must navigate simultaneously.
A delay at any single stage can have knock-on effects across the entire project timeline. Electricity pricing and PPAs also remain challenging.
For offshore wind, though the government has issued Decree No. 11 on surveying and development, several key mechanisms are still missing. These include a clear methodology for determining electricity prices, standardized PPA templates, risk-sharing arrangements between the government and investors, and foreign-currency payment guarantees. These factors are critical for international lenders assessing project financing. Without adequate payment security and dispatch commitments, projects will struggle to secure financing, directly affecting their timelines and viability.
Vietnam’s energy market also remains incomplete. The gas and LNG markets, in particular, have yet to fully develop. Electricity prices remain insufficiently attractive to major investors, while the power market is still evolving and commitments on maximum dispatch volumes have not been applied consistently.
This is especially important for LNG, which requires substantial capital and involves a long value chain from import terminals to power plants. Without mechanisms to guarantee offtake and capacity dispatch, investors will remain reluctant to commit. This helps explain why many LNG projects planned for 2025-2030, including Ninh Thuan, Ca Na, Quynh Lap, and Quang Ninh, remain at the investment solicitation stage.
The mismatch between generation and transmission infrastructure is another major bottleneck. Though regulations on direct power purchase agreements (DPPAs) have been issued, generators cannot effectively mobilize their resources without adequate transmission lines and grid connections. PDP8 sets targets for smart grids and energy storage, but mechanisms to attract private investment in the power grid remain limited.
Many businesses have invested in rooftop solar systems but have been unable to feed excess electricity into the national grid, leaving them to use the power internally and resulting in significant underutilization of resources.
Emerging sectors such as green hydrogen, green ammonia, and carbon capture, utilization, and storage (CCUS) also lack clear technical standards and specific incentives. While neighboring countries have developed national strategies for hydrogen and carbon markets, Vietnam remains largely at the research stage.
The absence of pricing mechanisms and viable markets discourages investment, while financial institutions lack sufficient grounds to assess project viability. The main constraints facing Vietnam’s energy sector therefore lie not in a lack of resources or demand, but in institutional barriers and an incomplete investment environment.
Strengthening institutions
Vietnam needs to review relevant regulations and ensure consistency among the Law on Electricity, the Law on Petroleum, the Law on Investment, and the Land Law. Simplifying investment procedures and shortening project preparation timelines would also help unlock capital. The revised Law on Electricity, in particular, needs clearer mechanisms for electricity pricing for renewable energy and LNG projects rather than leaving them at the level of broad proposals or ongoing studies.
One notable development in recent legal reforms is the proposed delegation of authority to the Vietnam National Industry-Energy Group (PetroVietnam) under the new draft Law on Petroleum. Allowing PetroVietnam to directly negotiate, sign contracts, and select contractors for petroleum exploration and production projects, rather than requiring multiple layers of approval, would represent a significant step forward.
The reform could shorten project timelines while facilitating the development of small and marginal fields as fossil fuel resources decline. Greater consistency across legislation, connecting onshore and offshore projects, would also help eliminate legal gaps that have historically complicated cost approvals and project implementation.
Vietnam also needs to develop a fully-competitive energy market under State regulation. Transparent electricity pricing and gas-market mechanisms, together with long-term PPAs and clear risk-sharing arrangements, are essential to attracting international financial institutions. With borrowing costs rising, businesses will struggle to finance investments of $1.2 billion-$1.4 billion for each gas-fired power complex without dedicated financial incentives or specialized energy banks.
The government must play a leading role in creating a level playing field and avoiding fragmented investment that wastes national resources.
Developing an integrated energy industrial ecosystem is equally important. Vietnam cannot focus solely on power generation; it must also invest in transmission infrastructure, energy storage and, particularly, domestic manufacturing and supporting technical services. Specific policies are needed to help domestic companies participate more deeply in global value chains for emerging energy industries.
Companies such as the PetroVietnam Technical Services Corporation (PTSC), Vietsovpetro, and Dai Dung have already begun establishing positions in offshore wind technical services. Maintaining and expanding this market share would not only generate significant revenue - foreign services and offshore wind account for 60-80 per cent of PTSC’s revenue structure - but also strengthen competitiveness and localization across the wider economy.
Finally, amid increasingly complex geopolitical conditions and disruptions in areas such as the Red Sea and the Strait of Hormuz, national energy security has become more important than ever. External shocks have highlighted the need for Vietnam to strengthen energy storage and diversify supply sources to improve resilience.
The fact that refineries such as Dung Quat and Nghi Son have had to operate at 110-120 per cent capacity during recent periods of disruption is a warning of the risks to system security. Vietnam therefore needs an energy market capable of adapting to shocks, supported by a robust legal framework and a strong domestic industrial ecosystem. Together, these elements will be essential if the energy sector is to become a genuine engine of growth for Vietnam’s next stage of economic development.
