We’re honored to be featured in Bloomberg Businessweek Vietnam 26th Edition. The original Vietnamese article is available here: https://bbw.vn/phat-trien-nang-luong-tai-tao-o-viet-nam-ky-luat-quan-trong-hon-toc-do-phat-trien-56434.html
For English readers, below is not a direct translation but an adapted version highlighting the same core arguments.
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Vietnam’s energy transition has become the subject of renewed international debate. Recent scrutiny has focused on the pace of Direct Power Purchase Agreement (DPPA) implementation and on unresolved disputes surrounding legacy feed-in tariff (FiT) projects. Together, these issues are often portrayed as symptoms of policy uncertainty.
That interpretation misses the point.
Vietnam is not reversing course on renewable energy. It is correcting structural weaknesses created during an earlier phase of rapid, subsidy-driven growth.
The Cost of Moving Too Fast
Between 2018 and 2021, Vietnam delivered one of the fastest renewable build-outs in the world. Generous FiTs triggered a surge in solar and wind development, transforming the country from a marginal player into a regional clean energy leader in just a few years.
But speed came at a cost. Market discipline relies on compliance with existing regulations and the capacity limits set out in Vietnam’s Power Development Plans, both of which were progressively eroded. Projects were approved and built faster than grid infrastructure and demand growth could absorb them. Under Power Development Plan 7, solar and wind developments were capped to ensure transmission capacity could support new generation. Even at the time, policymakers and industry participants warned that approvals were outpacing planning discipline. Curtailment, regional oversupply, and financial pressure on Vietnam Electricity (EVN) were predictable outcomes.
Today, 173 renewable projects remain under review regarding their eligibility for FiT benefits. These reviews are often framed as retroactive policy changes. In reality, they are about regulatory compliance—whether projects met the legal and technical requirements in place when approvals were granted.
This distinction matters.
Risk Was Known—and Accepted
FiTs were never designed to be risk-free. They offered fixed prices in exchange for strict deadlines and compliance conditions. Many investors assessed those risks carefully. Others did not.
Warnings about unbankable PPAs, grid congestion, and approval bottlenecks were widely circulated as early as 2019. Some investment managers chose to proceed anyway, prioritizing speed and short-term returns. Demands for retroactive relief now raise questions about accountability rather than policy credibility.
Vietnam’s investment environment is strengthened, not weakened, when rules are enforced consistently.
Why DPPA Looks Different
The DPPA—particularly the virtual model—was designed explicitly to avoid the supply/demand distortions created by FiTs projects. Under the DPPA, pricing is market-based with the wholesale electricity market (VWEM) acting as the mechanism that balances supply and demand. The DPPA allocates risk between private counterparties, while the FiTs framework shifted nearly all risks to EVN by obligating it to pay for power regardless of demand or grid constraints. The significant overbuilding of solar FiTs projects between 2017 and 2020 is now reflected in very low wholesale prices during midday periods, which signal oversupply, as they do in all functioning power markets. Therefore, the question is not “why does the DPPA move slowly” but instead “why did the FiT move so fast”.
This shift is often mischaracterized as delay or indecision. In fact, it reflects a more mature phase of market development. Market-based systems move more slowly than subsidy regimes because they require alignment between supply, demand, and risk appetite.
That is a feature, not a flaw.
Concerns frequently raised by advocacy groups about DPPA implementation—pricing transparency, curtailment risk, or buyer eligibility—are largely addressed in existing regulations. Wholesale electricity market prices have been made public, with clear calculation methodologies embedded in law. Transmission charges and settlement mechanisms were agreed during policy consultations long before formal implementation.
Matching, Not Subsidies, Drives Bankability
Virtual PPAs rely on matching generation profiles with consumption needs. This is standard practice in mature markets. Solar-heavy portfolios, for example, create structural mismatches for buyers seeking firm supply. Experienced corporate offtakers understand this and structure transactions accordingly.
Attempts to generalize early FiT-era risks to the DPPA context overlook this fundamental difference. Legacy FiT projects and new market-based projects operate under entirely different risk regimes and should not be conflated.
EVN’s Role Has Been Misread
EVN is often portrayed as a bottleneck in power project development. In reality, EVN’s exposure under the DPPA is limited. Power procured through the wholesale market is among the cheapest available. Early termination risk—a legitimate concern under FiTs—does not apply in the same way to new DPPA projects.
With the current PDP8(revised) and the DPPA in place, EVN has a chance to recoup its losses from the FiTs and invest in upgrading their grid and substations.
Confidence Comes from Discipline
Investor confidence is not built by accelerating approvals or retroactively compensating failed projects. It is built through legal clarity, enforcement, and predictable risk allocation.
Vietnam’s decision to move decisively away from FiTs toward market-based mechanisms signals policy consistency. It demonstrates a willingness to learn from past excesses and to prioritize long-term system stability over short-term volume.
A Necessary Transition
Vietnam has already proven it can deploy renewable energy at scale. The current phase is about doing so sustainably—financially, legally, and operationally.
This is not a retreat from clean energy. It is a transition from subsidies to structure.
For international investors, the message is clear: Vietnam remains open for renewable investment—but on terms that reward discipline, not speculation. That is how durable markets are built.
