Vietnam’s Power Shortage: Impact on Manufacturing and Government Response

Vietnam’s rapid economic growth is hitting the speed breaker of power shortage, as its energy system struggles to keep pace with rising demand. Electricity demand is expanding faster than supply capacity. This supply-demand mismatch creates shortages that are threatening industrial production and the government’s long-term ambition to move up the global manufacturing value chain under the China+1 strategy.

Why is Vietnam facing power shortages?

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Vietnam’s electricity demand growth is among the fastest worldwide. In 2025, demand is projected to rise between 10.5 percent and 13 percent compared to 2024, which is equivalent to 2,200-2,500 megawatt (MW) of additional capacity requirements. It is well established that the link between economic output and energy is strong. Every 1 percent increase in GDP drives electricity demand higher by about 1.5 percent. From 2026 to 2030, annual power demand is expected to expand by 12-15 percent.

Yet the pace of generation development has not kept up. For example, northern Vietnam added just 3,160 MW of new capacity compared with the 10,800 MW envisioned in the national plan.

Several structural issues amplify this gap:

• Aging coal plants: These facilities consume more fuel per kWh and are prone to breakdowns during peak demand;
• Dependence on hydropower: Almost 29 percent of Vietnam’s installed capacity comes from hydropower. This could leave the supply vulnerable to drought and fluctuating reservoir levels;
• Project delays: Many power generation and transmission projects planned between 2021 and 2023 were delayed, leaving the grid short of capacity; and
• Transmission bottlenecks: Vietnam’s narrow north-south geography creates challenges in moving electricity from surplus regions in the south to deficit areas in the north.

Industrial impact of power shortage

The effects of power cuts have been most visible in industrial hubs such as Bac Ninh and Bac Giang. These provinces host factories for Samsung Electronics, Foxconn, Canon, and Luxshare, all of which have faced sudden blackouts. For example, an incident occurred when a Canon factory lost power from 8 a.m. Monday until 5 a.m. Tuesday which disrupted five industrial parks.

The World Bank estimated that the 2023 power crisis caused losses of US$1.4 billion, equal to 0.3 percent of Vietnam’s GDP. Semiconductor production, which demands intensive electricity usage, was especially vulnerable. In the past, manufacturers have been asked to adjust schedules to conserve power in their region. For example, Foxconn cut power use by 30 percent at northern assembly plants, and factories in Bac Giang had to limit operations between 5 p.m. and 7:45 a.m. Street lighting was switched off in some areas to preserve grid stability. The government has also admitted that chip fabs sometimes face insufficient power supply, which also hampers their research and staff training.

Business-led mitigation measures

The businesses are making efforts in their individual capacity to deal with the supply crunch. More than 11,000 companies have joined the state utility EVN’s “Demand Response” program. The program offers incentives for shifting electricity use away from peak hours.

The results have been positive:

• Energy-intensive firms have reduced consumption by 25-30 percent during peak periods;
• Off-peak operations have lowered electricity bills by nearly 15 percent; and
• They have raised air-conditioning temperature and scheduled heavy tasks for overnight.

Government strategies to stabilize supply

The government machinery has pledged to avoid a repeat of 2023’s rolling blackouts. Prime Minister Pham Minh Chinh has ordered EVN to guarantee supply stability and make energy conservation a “new slogan.” The government has also expanded the use of Direct Power Purchase Agreements (DPPA). DPAA allows manufacturers to contract directly with electricity producers, especially for renewable projects.

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In August 2024, Vietnam completed the 500kV Circuit-3 transmission line. It is a US$876 million investment stretching 519 km from Quang Trach to Pho Noi. The line doubles transmission capacity from central to northern Vietnam from 2,500 MW to 5,000 MW to address one of the country’s most affected bottlenecks.

The government is also encouraging the development of renewable and new energy projects. Coal remains a dominant part of the current energy mix, but it is planned to reduce its share in the upcoming years. Its share is expected to fall to about 17 percent by 2030, and the full phase-out is targeted for 2050. Renewables, excluding hydropower, are planned to make up 28-36 percent of the electricity supply by 2030, thus rising to 75 percent by mid-century.

Vietnam’s transition has also been a product of international partnerships and commitments. At COP26, it has committed to peak emissions by 2035, phase down coal power by 2040, and reach carbon neutrality by 2050. These ambitious commitments will require substantial policy-led measures from the government and trust-based long-term investments by global investors.

Direct power purchase agreements (DPPAs)

The electricity sector is witnessing reforms in the form of Direct Power Purchase Agreements. These contracts allow large consumers to buy power directly from renewable generators instead of relying solely on the state utility. In March 2025, Decree No. 57/2025/ND-CP was introduced to provide a complete and comprehensive DPPA framework.

It is applicable to companies that consume more than 200,000 kWh per month, provided they source from renewable plants with a capacity above 10 MW. There are two extant models under DPAA: a private wire model, where users connect directly to a renewable project, and a grid-connected model, where financial contracts are paired with transmission through the national grid.

Expanding capacity under Power Development Plan VIII

Vietnam’s Power Development Plan VIII (PDP8) has set ambitious growth targets for the electricity sector. By 2030, total generation capacity is projected to reach between 236 GW, compared with just over 80 GW at the end of 2023. By 2050, capacity could rise to 840 GW.

Solar and wind are the main pillars of this expansion. The target for solar power has been set to 73 GW by 2030, a sharp increase from earlier goals of 12.8 GW. Onshore wind is now expected to reach 38 GW by the same year. New nuclear plants are scheduled to be commissioned between 2030 and 2035, with offshore wind contributing 6-17 GW in the early 2030s. But the project completion depends on the fulfillment of investment needs, which is considerably large. About US$136.3 billion is required by 2030 alone.

Energy projects and jobs in renewables

The shift toward renewables is already reshaping the labor market. As per the New Climate Institute, the electricity sector currently employs about 300,000 full-time workers. Their projections suggest this will rise to 500,000 by 2035 as renewable deployment accelerates.

There are several renewable energy projects in the pipeline, and some are already operational. The Huong Linh 4 Wind Power Plant in Quang Tri Province achieved full-capacity grid connection in January 2025. It is a 30 MW facility located in Huong Linh Commune of Huong Hoa District, and now produces about 90,000 MWh each year, which is enough to supply electricity to nearly 48,000 households.

In August 2025, the Monsoon Wind Power Project reached its commercial operation date. At 600 MW, it is Southeast Asia’s largest wind farm and the first cross-border renewable energy project under ASEAN cooperation. The project is located in Laos’ Sekong and Attapeu provinces, but exports electricity directly to Vietnam.

Alongside these operational assets, Vietnam is also actively commissioning new construction works. In May 2025, Vietnam successfully commissioned a biomass cogeneration plant with two 10 MW units (20 MW in total). The following month, construction began on the Envision Nam Po Wind Power Plant in Dien Bien Province, which is a 300 MW facility scheduled for completion by December 2026.

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For the future, Quang Tri Province has approved some expansion plans under Power Development Plan VIII (PDP VIII). It has planned for 2,300 MW of additional capacity, which will have 1,800 MW across 43 land-based wind projects and 500 MW of offshore wind.

Vietnam is also preparing for its first offshore wind project. Its construction could begin by late 2025. To guide investment, it has set ceiling tariffs as per the region: VND 3,975.1 per kWh (US$0.15) in the north, VND 3,868.5 per kWh (US$0.15) in the south, and VND 3,078.9 per kWh (US$0.12) in the south-central provinces.

Electricity imports and infrastructure

Imports are becoming a complementary element of supply security for Vietnam. As reported by The Investor, it aims to import 3,700 MW from China and 6,800 MW from Laos by 2030, an increase from current levels of 700 MW and 4,200 MW, respectively. The electricity imports had already reached 5 billion kWh by the end of 2024.

Vietnam is building supporting infrastructure to facilitate this cross-border trade of electricity. For example, French development bank AFD has provided US$76.5 million for two 500 kV substations in Binh Duong and Dong Nai.

Next step

The government’s approach combines near-term guarantees with reforms. It is offering, on one hand, assurances against shortages and, on the other, mechanisms such as DPPAs and international partnerships to address the long-term energy security needs for a manufacturing hub.

But its success will depend on execution. Past disputes over renewable tariffs have created some instability for manufacturing plants, and the challenge now is to have a predictable pricing framework. Industrial users will also expect greater certainty on contracting, and the workers in fossil fuel sectors will require retraining opportunities to manage the shift to renewables.

Read more: Vietnam’s Solar Feed-in Tariffs in 2025: Incentivizing Energy Storage

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