Vietnam’s New Electricity Law

As the end of 2024 approaches, Vietnam’s energy sector is moving forward to 2025 with aspirations and numerous fundamental changes in policy and legislative directions under a new electricity law.

In this update, we summarise these changes.

Directions and Drivers

On 26 October 2024, during the heated discussions on amending the existing Electricity Law (adopted in 2004 with one direct and substantial amendment in 2012, and with four other related amendments by other laws), General Secretary To Lam provided some viewpoints and emphasised the necessity of amending the existing Electricity Law. According to the General Secretary, the proposed amendments this time are in response to the requirements of infrastructure and energy, which are the pillars, leading factors, and breakthroughs for socio-economic development, to ensure national energy security. The General Secretary stated that the country is facing a significant electricity shortage. Some investors have highlighted that with the current growth rate, Vietnam is at risk of electricity shortage, prompting them to reconsider investing in Vietnam. Therefore, in addition to a good investment and favorable business environment, it is also necessary to ensure that the electricity output supplied to the economy is sufficient to attract foreign investors in Vietnam. The General Secretary also affirmed that many localities have great potential for developing clean electricity, such as offshore wind power. Hence, it is necessary to set specific goals and clearly identify the difficulties and advantages of each type of power source to have a long-term plan for providing sufficient electricity.

Looking back, on 21 September 2024, Prime Minister Pham Minh Chinh signed Decision No. 1018/QD-TTg on promulgating the strategy for developing Vietnam’s semiconductor industry to 2030 and vision to 2050. This strategy aspires for Vietnam to gain a revenue scale in this industry of over US$100 billion per year by 2050. Since then, the head of the Government has repeatedly stated that semiconductor industry development is Vietnam’s strategic choice and top priority to boost growth. However, semiconductor industry development could not be attained if there was lack of electricity.

The above instances illustrate that power development remains essential, and there will be plenty of room for investment and potential opportunities for both foreign and domestic players, as well as public and private actors in Vietnam on this front.

The Adoption of 2024 Electricity Law

On 30 November 2024, the Vietnamese National Assembly adopted the new Electricity Law as Law No. 61/2024/QH15 (“2024 Electricity Law“) with 439 out of 463 votes. The 2024 Electricity Law was announced on 20 December 2024 via an Order of the President. It will take effect from 1 February 2025. 

Looking back at the entire process from the time the first draft of the amended Electricity Law was submitted to the National Assembly at the beginning of the 8^th Session of the 15^th National Assembly (October – November 2024) (“8^th Session“) until the time when 91.65% of the delegates pressed the “approve” button, this law is considered quite special. The proposed amendments were numerous and complex which would require a long process for their deliberation. However, in the case of the amended draft Electricity Law, the National Assembly completed the process with only one session as opposed to the usual two-session process.  Moreover, while most of the laws passed at the 8^th Session will take effect from mid-2025 (except the investment laws that take effect from January 2025), the 2024 Electricity Law will come into operation earlier, on 1 February 2025.  This demonstrates the urgency of establishing a new legal framework for an extremely important sector of the economy.

Furthermore, prior to the adoption of the 2024 Electricity Law, the National Assembly Standing Committee (“Committee“) stated in the explanation, acceptance, and editorial report of the 2024 Electricity Law that the National Assembly could, if necessary, consider issuing a separate resolution to address urgent problems relating to the industry upon the Government’s proposal during the implementation of the law. Regarding renewable energy projects under inspection and investigation (referred to as the “violating projects“), the Committee had requested the Government to direct the drafting agency, the Ministry of Industry and Trade (“MOIT“), to review the entire draft electricity law to ensure that the contents of the 2024 Electricity Law do not contain any provision legalising the violating projects.

Fundamental Changes Introduced by 2024 Electricity Law

The 2024 Electricity Law is a turning point for Vietnam’s power and electricity sector, aiming to address national energy security and meet the country’s development needs. The 2024 Electricity Law serves as the main legal framework for RE (in Vietnamese: năng lượng tái tạo) and new energy (in Vietnamese: năng lượng mới) while paving the way for a coal-free base load capacity through the development of liquefied natural gas (“LNG“) power and nuclear power.

1. Power Development Policies

Article 5 of the 2024 Electricity Law sets out the fundamental policies of Vietnam on power development. These policies reflect a shift in legislative mindset and provide direction for Vietnam’s power development in the coming years. Detailed in 13 provisions, Article 5 outlines the power development policy framework, which can be summarised as follows:

• Considering power development as an important industrial infrastructure sector for national development and energy security.

• Attracting all economic sectors to participate in investing in the construction of power source projects and power grids according to the power development plan. This includes electricity generation, electricity distribution, electricity wholesale, and electricity retail. Non-state economic sectors are allowed to operate the power grid they invest in and build according to the provisions of law.

• Encouraging the use of new technologies and new energy sources to reduce carbon emissions.

• Setting out principles for the development of LNG power, renewable and new energy sources, and nuclear power.

• Affirming the development of a competitive electricity market with State orientation.

• Providing principles for the upcoming reform of electricity prices and electricity service fees.

• Reducing the scope of State monopoly activities.

• Defining the State’s role and credit incentives in relation to special and remote areas as well as for socio-economic development.

2. Reducing State Monopoly Activities

In respect of the State’s monopoly in the power sector, only the following activities remain exclusively under the State’s role and responsibility:

• Dispatching the national electricity system, which is currently the scope of operation and business of the National Power System and Market Operator Company Limited (NSMO), which is wholly State-owned.

• Investment, construction, and operation of nuclear power plant projects, strategic multi-purpose hydroelectric plants, and important transmission grids from voltage levels of 220 kilovolt (kV) or higher, in accordance with a list decided by the Prime Minister. These activities are currently part of the scope of business of Vietnam Electricity (“EVN“).

• Operating power transmission grids, except transmission power grids invested in and built by non-state economic sectors. This is currently under the scope of operation and business of the National Power Transmission Corporation under EVN (EVNNPT).

3. Renewable and New Energy Sources

For the first time under legislation, separate enumerative definitions for renewable and new energy sources have been provided. Under the 2024 Electricity Law, the following sources are considered as renewable:

• solar energy;
• wind energy;
• ocean energy, including tides, waves, and ocean currents;
• geothermal energy;
• energy from water power, including hydroelectricity;
• biomass energy, including biofuels and other forms of energy derived from plants; and
• energy from waste from production, business, and daily life processes, except waste from production and business processes that use fossil fuels and waste determined to be hazardous according to environmental protection laws.

The following sources are considered as new energy sources:

• hydrogen, produced from solar, wind, ocean, and geothermal power sources (referred to as “green hydrogen“); and

• ammonia, produced from solar, wind, ocean, and geothermal power sources (referred to as “green ammonia“).

Any other forms of renewable and new energy sources that may emerge in future may be added to the list.

Regarding power development, the 2024 Electricity Law stipulates that any development of renewable and new energy sources must be based on principles of development, including:

• ensuring the security of electricity supply and the safety of the power system;

• developing renewable and new energy sources in potential and advantaged regions and localities for renewable and new energy, and synchronising this with the development of power system infrastructure;

• ensuring the training and development of human resources towards technological autonomy in appropriate segments;

• prioritising the effective exploitation and use of renewable and new energy sources towards sustainability, national energy security, and electricity export;

• prioritising the development of large power source projects to form clusters of plants or renewable centres to promote natural advantages and power grid infrastructure, in accordance with the capacity release and operation requirements of the national power system for each region and location, and based on conditions and technological levels at relevant periods;

• encouraging the appropriate development of rooftop solar power, solar power on water surfaces, and irrigation reservoir beds; prioritising development on water surface of existing hydropower reservoirs, but without new investment in transmission power grids;

• prioritising the development of offshore wind power sources, while maintaining national sovereignty over borders and islands; and

• developing RE power and new energy power at sea in accordance with the order of priority for the development of marine economic sectors in each period.

Given the unstable load of renewable and new energy sources, the 2024 Electricity Law encourages a combination of investment in storage systems or the production of green hydrogen and ammonia for electricity generation in wind and solar power projects. To create a foundation for shifting the power structure towards low carbon aimed at reducing emissions, and ensuring the development of a sustainable power system, the 2024 Electricity Law provides flexibility by allowing the Government to promulgate detailed incentive mechanisms and preferential policies for the following:

• development of storage systems for renewable power plants in accordance with available technologies in this field;

• research and development of technologies in wind and solar power in Vietnam; and

• sharing and providing information and data on monitoring parameters of primary energy sources and statistics on electricity output of renewable and new energy power plants, except for self-produced and self-consumed rooftop solar power plants.

4. Promoting the Development of Offshore Wind Power

Under the 2024 Electricity Law, in order for a project to be named as an offshore wind power project, the project must include all wind turbines built in the waters of Vietnam and located outside the lowest average sea level edge line of the mainland towards the sea for many years. The lowest average sea level edge line of six nautical miles is used as a line to separate two types of offshore wind power projects: near-shore wind power projects and offshore wind power projects.

Offshore wind power projects can serve various purposes, and the 2024 Electricity Law sets an order of priority for the development of offshore wind power projects as follows: first, to supply power for the national system, then for self-consumption or for producing green hydrogen, and finally, for generating electricity for export, or producing green hydrogen or green ammonia for export.

Prior to the adoption of the 2024 Electricity Law, one of the main concerns regarding offshore wind power was the transfer of projects, shares, or capital contributions in a project company, which, from the State’s perspective, might trigger issues of national security, sovereignty, and territorial integrity.

After various consideration and discussions between the National Assembly and the Government, and to attract capital resources for offshore wind development, the 2024 Electricity Law approaches this matter with an open door policy to private investment. The following matters shall be subject to further regulations by the Government:

• conditions of investment related to foreign investors and domestic investors not being State-owned enterprises (“SOEs“), their ownership ratio in the project company, and any transfer of projects, shares, or capital contributions in the project company;

• the application and termination of minimum and long-term contract power output (qualifying capacity or “Qc“) for projects selling electricity to the national system, along with incentives regarding exemptions of rental fees (related to the use of land and marine areas). To clarify, the 2024 Electricity Law defines “minimum long-term contract power output” (in Vietnamese: sản lượng điện hợp đồng tối thiểu dài hạn) as the lowest level of power output specified in various power-related contracts, including power purchase contracts, power forward contracts, power purchase or sale option contracts, and power futures contracts; and

• special investment conditions and credit limits in the case of SOEs.

In response to various concerns over sensitive data, the 2024 Electricity Law separates the surveying procedure from the investment procedure in offshore wind projects. This means that the survey entity shall be selected prior to the selection of investors for the offshore wind project, implying that the survey entity is not necessarily selected by the investors. The 2024 Electricity Law places the selection of the survey entity, being an SOE, under the responsibility of the Prime Minister, and assigns the Government to promulgate relevant regulations regarding the selection of survey entities for offshore wind projects in accordance with periodic economic-socio development. Accordingly, it seems unlikely that non-SOEs will participate in surveying activities for offshore wind projects. Furthermore, concerns over data are also dealt with by compliance requirement provisions which will be imposed upon a transfer of projects, shares, or capital contributions in the offshore wind project company.

Separately but related thereto, it is worth noting that the Politburo on 24 April 2024 issued Conclusion No. 76-KL/TW (“Conclusion“), which opens a new development space for Petro Vietnam (“PVN“) into the field of renewable and new energy in addition to its traditional business in oil and gas. The Conclusion authorises PVN to grow into a national energy-industry group, playing a pioneering role in the development of renewable and new energy. 

5. Prioritising the Development of LNG Power Projects

Regarding gas thermal power including LNG power, the 2024 Electricity Law sets out the following development policies:

• Prioritising the use of domestic natural gas sources in gas-fired power projects: Quickly develop LNG power to gradually become an important supply power source to support the dispatch load system.

• Mechanism to mobilise thermal power projects: Use maximum domestic natural gas sources per gas supply capacity and fuel commitments to ensure and harmonise overall national interests.

• Mechanism to develop LNG power projects: This includes minimum and long-term Qc and applicable terms, tariff calculation principles, investment implementation guarantees, and policy durations on a case-by-case basis. This also includes prioritising the development of cluster LNG power projects associated with terminals, storage, and pipeline infrastructure to reduce production costs.

6. Resuming the Development of Nuclear Power

The nuclear power development policy under the 2024 Electricity Law is based on the following two principles:

• Linkage with power development plans: Nuclear power development must be linked to, synchronous, and consistent with power development plans to ensure electricity supply security. This seems to imply that nuclear power is set to be the main power source for the country’s load capacity in the future.

• Compliance with laws: The investment, operation, decommissioning, and safety assurance of nuclear power plants must comply with the Atomic Energy Law and other relevant laws.

Separately but related thereto, additional legislation and policy in relation to the nuclear power development are now in progress:

• On the same date as the adoption of the 2024 Electricity Law, the National Assembly also approved the investment policy decision to resume nuclear power development and the Ninh Thuan nuclear power project, with necessary approvals from the competent Party agencies.

• The Government is planning to amend the Atomic Energy Law.

• The current Power Development Plan 8 (“PDP8“) does not include any development of nuclear power. Accordingly, PDP8 is expected to be amended to account for nuclear power as the main power source for load capacity. As an update, on 25 December 2024, the Prime Minister has instructed and assigned the Deputy Prime Minister in charge to direct MOIT to review the reasons for the delay of PDP8 amendments and identify individuals, independently and/or collectively, who are acocuntable for the delay. The report must be submitted by 25 January 2025. 

7. A Roadmap to Reform Electricity Price

Vietnam has been applying a single-component price for electricity, often referred to as the cross-subsidy electricity price (in Vietnamese: bù chéo giá điện), which contributes to the losses of EVN. The 2024 Electricity Law introduces the concept of “cross-subsidy” for the first time and sets out policies and principles to reform the electricity price. This aims to remove the cross-subsidy electricity price to move towards a competitive electricity market.

The 2024 Electricity Law defines “electricity price cross-subsidy” as a mechanism for determining retail prices for each group of customers to uniformly apply the retail price schedule. The law stipulates a roadmap to eliminate cross-subsidy of electricity prices and assigns MOIT to submit this roadmap to the Prime Minister for approval. This roadmap is to be synchronised with the roadmap for the competitive electricity market.

In addition, the 2024 Electricity Law assigns MOIT to develop and submit to the Prime Minister a roadmap to improve the electricity retail price structure. This includes a retail tariff with multiple components, such as capacity price, electricity costs, fixed prices, variable prices, or other price components (if any), to be applied to different customer groups in accordance with the available technical conditions.

Upcoming Guiding Regulations

On 11 December 2024, at the request of MOIT, the Prime Minister issued Decision No. 1544/QD-TTg on promulgating the Plan to implement the 2024 Electricity Law (“Decision 1544“). Decision 1544 provides a set of guiding decrees and circulars relating to the implementation of the 2024 Electricity Law which will likely to be issued in the coming months. The decrees and circulars are detailed in the Appendix to Decision 1544.

Due to the urgency of implementation of the 2024 Eectricity Law, on 16, 20, 23 and 24 December 2024, MOIT has published on its website the following draft decrees to gather public opinion:

• Draft Decree providing details of relevant articles of the 2024 Electricity Law on electricity development planning, power supply network development plans, and investment in power project construction;

• Draft Decree providing details of relevant articles of the 2024 Electricity Law on the development of renewable and new energy electricity;

• Draft Decree detailing the implementation of the 2024 Electricity Law on the protection of electricity works and safety in the electricity sector;

• Draft Decree providing details of a number of articles of the 2024 Electricity Law on electricity activity licences; and

• Draft Decree (2^nd version) regulating the direct electricity trading mechanism between RE generators and large electricity customers, which, upon its effectivity, will replace the current Decree No. 80/2024/ND-CP of the Government dated 3 July 2024 on the mechanisms for direct power purchase (“DPP“) between RE generation units and clients who are large electricity consumers (known in practice as the DPP Decree).

MOIT is also actively drafting relevant circulars in preparation for the implementation of the 2024 Electricity Law and its upcoming implementating decrees. Separately, as mentioned above, MOIT is working on the amendment of PDP8 to align with the policy and legal framework and direction changes under the 2024 Electricity Law.

Concluding Words

The 2024 Electricity Law can be seen as a pivotal legal framework for power development in the country. However, it needs to be read together with other legislation in related areas which are also undergoing significant changes, including those in investment, tendering, public-private partnership (PPP), land use and marine, and environmental protection. Most importantly, the full package of guiding regulations to implement the 2024 Electricity Law, as set out in Decision 1544, needs to be put in place and synchronised as soon as possible.

If you have any queries on the above, please feel free to contact any of our team members set out on this page.