The rapid growth of the Vietnamese economy in recent years has placed significant strain on the national energy sector. Major blackouts impacted multinational companies with manufacturing centers in Vietnam’s northern provinces during 2023. The Communist Party of Vietnam (“CPV”), now led by former security chief To Lam, has sought to avoid a repeat of this embarrassing situation and ensure that the country has enough power to continue attracting high levels of foreign direct investment. To that end, To Lam oversaw the passage of an ambitious new electricity law on November 30, 2024. The electricity law is intended to attract new investment into the power generation sector and provide a legal basis for multiple forms of energy to expedite Vietnam’s stalled transition away from reliance on coal.
Investors in liquid natural gas (“LNG”), offshore wind, and even nuclear power should benefit from the new electricity law. LNG projects will be supported by addressing capital arrangement issues and establishing a clearer legal framework for LNG imports and power purchase agreements. This will help attract investment and streamline the development of LNG power projects, which have faced delays due to regulatory gaps and financial uncertainties. Foreign investors in offshore wind projects will now have additional legal certainty for long-term contracts and will face fewer restrictions on project ownership transfers. The new electricity law will also promote nuclear energy by integrating nuclear power planning into the national power development strategy and in acknowledging that nuclear power is a low-carbon energy source that contributes to Vietnam’s carbon neutrality goals.
The new electricity law represents a major step towards opening up the market, providing assurances to investors, and making energy prices competitive. Numerous hurdles will remain as the Ministry of Planning and Investment (which is slated to merge with the Ministry of Finance) develops pricing mechanisms and other implementing regulations. However, the passage of the law signals that the CPV is serious about moving away from coal while expanding the power supply.
The electricity law is expected to remove some hurdles for investment in energy projects in Vietnam and speed up approvals of so-called direct power purchase agreements, which allow manufacturers to negotiate electricity supplies directly with providers of renewable energy. The measure aims to create a more comprehensive legal system for the energy sector, which is now subject to multiple, separate regulations. Additional legislative texts will need to be approved to complete the regulatory framework for specific energy sectors, such as offshore, wind and nuclear power.
