Vietnam’s Government Promotes Energy Efficiency

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By Marco Azzaro

Jun. 4 – While foreign and private companies have been allowed to participate in Vietnam’s power sector since 2002, the Ministry of Industry and Trade has issued a formal decision to establish design principles for the implementation of the Vietnam Competitive Generation Market.

In particular, the Vietnamese government has signed an important agreement concerning market incentives and the national target program in response to climate change, including incentives for public and private sectors to prepare mitigation actions and decrease emissions.

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Energy security and savings, cleaner production and emission reductions will remain priority issues on the Vietnamese political agenda.

The vast majority of electricity supply in Vietnam originates from coal-fired and hydro-electric power plants. These sources continue to be important. In addition, natural gas-fired power plants have emerged as a major new source of electricity supply. Reports from the state-owned company Electricity of Vietnam indicate that 30 percent of its generating capacity comes from natural gas-fired power stations. The rise of gas-fired electricity is mainly due to the development of the Phu My Power Plant which consists of five natural gas-fired generating units with a combined capacity of 3,900 megawatts.

Last year, the electricity generating capacity in Vietnam was estimated at 15,764 megawatts of which 35 percent was generated by hydropower plants, 59 percent from coal, oil and gas fed thermal power stations, 2 percent from renewable energy sources, and 4 percent from imports.

Most of Vietnam is situated in the tropical zone with up to 5,000 hours of sunshine per year. The average solar energy density ranges between 100 and 175 kcal/cm2/year. Generation of solar energy can total up to 1744.5 kWh/m2/year. The total potential is estimated at 43.9 billion TOE per year.

Vietnam is also located in the monsoon wind zone and wind density is estimated at 800-1,400 kWh/m2/year on islands and at 500-1,000 kWh/m2/year in the Central Highlands, coastal areas of Central Vietnam and the Mekong River Delta. In other areas, the density distribution of wind energy is less than 500 kWh/m2 per year. Total potential of wind energy in Vietnam is estimated at 713,000 megawatts of which 510,000 megawatts is on land and 200,000 megawatts is on islands.

Vietnam is watered from the Mekong and Red River. There are also river systems composed of small river basins with short rivers, high river bed grades and relatively equal river densities. Average rainfall is high and the combination of high flow density, broadly distributed springs and cut-through relief provides suitable conditions for small hydropower development. Provinces with strong potential are Son La (95 projects), Kontum (80 projects) and Lao Cai (80 projects). At the moment, hydropower is the main supply source for national power demand accounting for 40 percent of total capacity in Vietnam.

The biomass production in Vietnam is based on forestry and agricultural byproducts and solid waste. The biogas energy potential in Vietnam is estimated at 6.4 MTOE/year, 60 percent from agriculture byproducts and 30 percent from animal manure. Another biomass source is solid waste. The Go Cat power generation station operates on municipal solid waste treatment and has a 15,587,983 kWh electricity production rate.

With more than 300 hot streams with temperatures ranging from 30°C to 148°C, mainly situated in Northwest and Central Vietnam, there is an estimated geothermal power potential of 1,400 megawatts.

The current market for energy efficiency (and renewable energy) in Vietnam is still limited in size but its growth potential is high, given the rising awareness and increasing opportunities for trade and investment in the sector.

Dezan Shira & Associates is a boutique professional services firm providing foreign direct investment business advisory, tax, accounting, payroll and due diligence services for multinational clients in Vietnam. For further information and clarification on Vietnam’s international taxation agreements – please email