Vietnam Power Sector: Limited LNG Exposure, Accelerating Shift to Non-Fossil Energy

As Vietnam’s economy continues to expand, the resilience of its power generation system is becoming increasingly central to the country’s growth story. Energy sufficiency and security are no longer just policy considerations, but key structural factors shaping the sustainability of Vietnam’s long-term economic trajectory. In this context, understanding the evolution of the power sector provides important perspective on the country’s broader investment landscape.

We have included a video version right below, featuring an AI avatar of our real estate analyst, Vinh Bui, CFA, for those who prefer a concise visual overview. Our full analysis is provided in the following text.

Current system positioning

Over the past decade, Vietnam’s total installed power capacity has more than doubled to approximately 94.8GW as of 2025. The generation mix has become increasingly diversified, combining stable baseload sources with a rising share of cleaner energy, which has enhanced overall supply resilience.

• This transformation has been largely driven by the rapid expansion of renewable energy, supported by favorable natural conditions and policy incentives, particularly feed-in tariff (FIT) mechanisms that accelerated project development during the 2019-2021 period. As a result, renewables now account for approximately 27% of total capacity, placing Vietnam ahead of many regional peers that remain more reliant on fossil fuels.
• Hydropower contributes a further ~27%, together forming a substantial non-fossil foundation for the system.
• Conventional sources continue to play a critical role in maintaining system stability. Coal-fired power accounts for around 31% and remains the main baseload source, supported by fuel imports primarily from Australia and Indonesia.
• Domestic gas-fired generation represents around 11%, while LNG-based power remains limited at roughly 2% following the commissioning of the country’s first LNG-fired plant in late 2025. The remaining 2% share is supplemented by electricity imports.

The sustained expansion of generation capacity, supported by a more diversified energy mix and ongoing transmission upgrades, has enabled Vietnam to maintain a stable and cost-competitive power supply over the past decade. This has played a key role in supporting economic growth and reinforcing the country’s position as an attractive destination for foreign investment. Ensuring reliable and affordable electricity supply is becoming increasingly critical as Vietnam attracts growing investment into energy-intensive sectors such as semiconductors, data centers, and AI-related infrastructure.

Structural shift toward energy self-sufficiency

Looking ahead, Vietnam’s power system is expected to expand significantly under the revised Power Development Plan VIII, with total installed capacity projected to reach 183-263GW by 2030. The future generation mix reflects a more diversified structure, with a growing share of non-fossil sources alongside a gradual rebalancing of conventional generation.

• Renewable energy is set to lead capacity expansion, accounting for approximately 48% of total installed capacity by 2030, with projects increasingly developed alongside energy storage systems to enhance system stability.
• Hydropower will contribute around 16%, reflecting the limited remaining potential for large-scale development. Together, non-fossil sources are poised to make up approximately 64% of total capacity, forming the core of the system.
• Coal-fired generation is likely to decline to around 14% of total capacity, in line with the government’s direction to gradually phase down coal after 2030.
• Domestic gas-fired power is expected to remain modest at around 6%, reflecting the gradual depletion of local gas resources.
• LNG-fired capacity is projected to increase to around 10%, primarily serving as a flexible source to support system balancing, while its overall share remains relatively contained.
• The remaining capacity will be supplemented by electricity imports and emerging sources. Nuclear power has also been reintroduced into the planning framework, with the Ninh Thuan 1 and 2 projects, totaling 4.0-6.4GW, targeted for commissioning over the 2030-2035 period. Early-stage implementation is already underway, supported by designated developers including EVN and PetroVietnam, alongside ongoing site preparation and international cooperation. Notably, former Prime Minister Pham Minh Chinh’s March 2026 visit to Russia led to an intergovernmental agreement with Rosatom to support the development of Vietnam’s nuclear program, marking a tangible step forward in project execution. Land clearance is expected to be completed by June 2026, providing a clearer timeline for the transition from project preparation to early-stage implementation.

Policy execution driving system transition

To support this transition, the government is implementing a more coordinated policy framework aimed at scaling renewable energy while addressing structural constraints within the power system. The focus has shifted beyond capacity expansion toward improving project viability, strengthening system integration, and ensuring more sustainable deployment over the long term.

• A more structured renewable pricing framework has been introduced to restore investment visibility following the expiration of the feed-in tariff (FIT) regime. Following the expiration of the previous pricing mechanism, renewable power development temporarily slowed as investors awaited clearer guidance. In response, the government introduced a new pricing framework in 2025, marking a shift toward a more predictable and structured mechanism. This approach also encourages development in Northern Vietnam, where renewable penetration remains relatively low compared to industrial demand. Although pricing levels are lower than under the FIT regime, declining capital and operating costs have helped maintain project viability, with investor participation gradually improving, as reflected in a rising number of wind projects securing developers across multiple provinces.
• The government is also taking steps to address long-standing issues with renewable energy investors, with the aim of restoring confidence among foreign stakeholders. According to the government, renewable energy projects were required to obtain Construction Completion Acceptance (CCA) to qualify for Commercial Operation Date (COD) status. However, 173 projects with a combined capacity of nearly 12GW, including 141 solar projects (9.9GW) and 32 wind projects (2.1GW), were later determined not to have secured CCA prior to COD. As a result, these projects were considered to lack sufficient legal basis for FIT eligibility, leading to prolonged negotiations between authorities and investors. Recently, EVN has proposed a resolution under which FIT pricing would apply from the date CCA is granted, with transitional pricing applied to the earlier period. Some investors have already accepted the terms and signed agreements with EVN, while discussions with remaining investors are still ongoing. These developments are expected to contribute to an improvement in investor confidence and provide a more supportive backdrop for the continued development of renewable energy.

• Policy support is also extending to battery energy storage systems (BESS), reflecting the growing need for system flexibility as renewable penetration increases. The expansion of solar and wind capacity introduces greater variability in power generation, placing additional pressure on grid balancing and reinforcing the role of storage as a key enabler of system stability. Toward the end of 2025, the government introduced initial guidelines for a BESS pricing framework, laying the groundwork for future deployment. Early developments are emerging, with EVN advancing a pilot project in Northern Vietnam to alleviate peak load pressure, while Vingroup has begun integrating storage solutions into its solar portfolio.
• Transmission infrastructure and grid integration have become increasingly important as the rapid expansion of renewable energy highlighted structural imbalances in the power system. Solar and wind resources are concentrated in the Central and Southern regions, while industrial demand remains strongest in the North. Strengthening transmission infrastructure has therefore become critical to ensure efficient power allocation across regions.
• Under the revised Power Development Plan VIII, total investment in transmission infrastructure is estimated at approximately USD18.1 bn for the 2026-2030 period, with a focus on enhancing inter-regional connectivity and reducing network congestion. Early progress is evident in key projects such as the completion of the 500kV Circuit-3 transmission line in August 2024, which has effectively increased transfer capacity along the North-Central corridor and helped ease bottlenecks during peak demand periods.

• Alongside grid expansion, market-based mechanisms are being introduced to improve demand-supply matching. The DPPA mechanism, introduced in 2024 and subsequently refined, enables large electricity consumers to contract directly with renewable producers, supporting more efficient power allocation. This is particularly relevant for export-oriented manufacturers with increasing demand for clean energy, while reducing reliance on centralized supply. Rooftop solar is also gaining renewed policy support as a complementary on-site generation solution under a self-consumption model. Recent regulatory updates have streamlined approval processes and improved project economics, encouraging broader adoption. By enabling generation closer to consumption, rooftop solar enhances local supply reliability and supports more balanced system operations.

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