Vietnam’s Energy Sector Entering a New Cycle: What the Data Shows and How Policy Can Unlock Growth

Over the past decade, Vietnam’s final energy consumption has grown almost exactly in line with its economy, averaging +5.88% annually, nearly matching +5.92% GDP growth during 2015–2023.

The energy mix is still mainly petroleum (33.9%) and electricity (28.8%), while the industrial sector accounts for 52.3% of total demand and is the fastest-growing segment at about 9.8% annually. This pattern shows the ongoing move toward energy-intensive industries like metallurgy and mechanical engineering.

According to VNBIS data, industrial zones in Vietnam’s northern and southern corridors exhibit the same trend: increased manufacturing expansion directly leads to higher electricity and fuel consumption.

On the supply side, however, the situation is much less balanced. Primary energy supply from 2020 to 2023 increased by only +1.9% annually, which is just one-fifth of the growth rate seen in 2015–2019 as natural gas output started to decline in 2019, followed by coal production cuts after 2022. Renewable sources and imports helped narrow the gap somewhat, but not enough to keep up with rising demand, especially in the north.

The “Bottleneck” Is More Than Just Transmission Lines

Power generation capacity has grown unevenly across different regions. The central and southern provinces are rich in wind and solar resources and have experienced a surge in renewable energy projects, while the north, where industrial demand is high, faces power shortages. The heavy dependence on hydropower (about 50% in the north) increases the risk of shortages during dry seasons. As a result, electricity increasingly flows northward through heavily loaded 500 kV transmission lines.

Although the total 500 kV capacity has grown at a 9.4% CAGR (2021–2024), this only accounts for 60–70% of the targets under the Power Development Plan VIII (PDP8) for 2021–2025 and still falls short of northern load growth at +13.1% annually. Financial strains, with EVN losing about VND 39 trillion due to higher wholesale purchase costs,have slowed project progress. For factories in the north, this imbalance leads to tangible costs: backup generation expenses and delays in expansion.

Policy Shifts: From “Unlocking Congestion” to “Unleashing the Value Chain”

2025 marks a pivotal policy inflection point as Vietnam attempts to align its generation–grid–market framework. The key components include the adjusted PDP8 (raising generation targets and prioritizing renewable capacity) and Resolution 70 on Energy Security, which elevates energy to a strategic priority in line with the GDP growth goal of +10% per year during 2026–2030.

Supporting decrees and circulars, such as Circular 32/2025/TT-BCT on project bidding, clarify investment procedures, while reforms in the competitive power market aim to separate generation, transmission, and distribution functions, increasing transparency and investor confidence. The recent retail electricity price adjustments (2023–2024) have also improved EVN’s liquidity, creating room for new infrastructure investment.

The game-changer is the Direct Power Purchase Agreement (DPPA), which enables renewable power plants and industrial consumers to make transactions directly. According to Decree 57, two models are recognized: private wire (bilateral contracts within an agreed capacity and price range) and virtual via the national grid (settling the difference between spot and contract prices). Once fully implemented, DPPA will allow industrial parks to secure long-term “green power," helping meet ESG targets and reducing reliance on government off-take mechanisms.

2026–2030: Acceleration Scenario: Turning Expectations into Data

With these reforms, Vietnam’s energy path becomes measurable. By 2030, installed generation capacity could reach 183–236 GW, with total electricity output at 560–624 TWh and primary energy supply at 150–170 million TOE of which renewables will make up 20–25% (up from 19% in 2023).

Annual electricity growth is expected to average +10.4–12.0%, while primary energy supply will increase by +5.7–7.6%, roughly three to four times faster than between 2020 and 2023. Amid a +10% GDP growth target, these are the minimum levels needed to ensure energy no longer limits economic growth.

VNBIS project mapping confirms the official plan: a wave of coastal wind farms in the south-central region, utility-scale solar projects in the Central Highlands and southern provinces, and a network of LNG-to-power facilities and regasification terminals now financed under international standards, all pointing to a more diverse, resilient energy matrix.

Gas-to-Power and LNG: The Balancing Pillar of the System

After several years of delay, gas-fired and LNG power is gaining momentum again thanks to two key reforms: the two-part electricity pricing mechanism (separating capacity and variable costs) and the minimum off-take guarantee (Qc) for important projects. The advantage of gas-based power is its flexibility; it can quickly balance the intermittency of renewables, lowering system-wide dispatch costs.

Upstream, the Petroleum Law 2022 (effective July 2023) overhauled production-sharing contracts (PSC) to encourage investment in marginal or technically complex fields, reduced approval times, and allowed access to third-party infrastructure. The government’s consistent position of maintaining oil output while increasing gas production through 2030 indicates renewed confidence. As a result, upstream capital expenditure is expected to increase sharply between 2026 and 2028, ensuring a stable supply of gas for southern power hubs.

Regionally, rig utilization rates across Southeast Asia have reached some of the highest levels globally, confirming a cyclical rebound in drilling activity that cascades down to engineering and oilfield service chains.

Transmission Network: The “Infrastructure of Infrastructure”

If renewables and LNG are the new stars, the transmission grid remains the foundation. Investment demand for transmission lines and transformers is set to surge under the adjusted PDP8. Simultaneously, the government’s plan to partially privatize sub-220 kV interprovincial grids aims to ease EVN’s capital burden and speed up North–South connectivity.

Positive signals have already emerged: EVN’s financial health improved in 2024 after tariff adjustments, enabling fresh disbursement plans. Yet challenges persist — chiefly land-clearance and grid-connection procedures, which, if unresolved, could again lead to renewable curtailments and higher system costs.

Risks and Constraints: Where Policy Meets Execution

Three structural risks require close monitoring:

1. Regulatory lag: Delays in secondary legislation (bidding criteria, PPA templates, connection quotas) could hinderthe flow of private capital.
2. Grid pressure: Despite fast progress, 500 kV projects remain only 60–70% complete, while northern demand grows at double-digit rates.
3. Global financial headwinds: High interest rates and exchange volatility weigh heavily on LNG and offshore wind projects with billion-dollar CAPEX; meanwhile, the oil price cycle (expected bottom in 2026) could influence upstream investment momentum.

Implications: From “Solving Today’s Problems” to “Designing Tomorrow’s Ecosystem”

According to updated planning data, Vietnam must expand generation capacity by about +39.4% by 2030, with renewables growing +85.4%. To make this sustainable, four concurrent conditions must be met:

• Standardize the DPPA framework for large industrial consumers to secure custom-tailored green power with long-term price stability.
• Roll out two-part electricity pricing nationwide to reflect real costs and create proper investment signals.
• Diversify gas supply sources (domestic gas plus LNG) to complement renewables and reduce dispatch costs.
• Accelerate grid development under a transparent public–private model to eliminate chronic North–South bottlenecks.

For businesses, especially those in export-driven industrial parks, early participation in DPPAs isn’t just ESG compliance; it’s also a cost hedge and energy security strategy. At the provincial level, land-use and transmission corridor planning must move ahead of investment cycles to prevent “idle megawatts.”

Energy as the Runway for Vietnam’s Next Growth Takeoff

By the numbers, Vietnam is approaching a new energy cycle: 183–236 GW capacity, 560–624 TWh generation, 20–25% renewable share, and 10–12% annual electricity growth through 2030, all feasible if the right levers are pulled.

The real “bottleneck,” however, is not a single substation or 500 kV line but the ecosystem of policy implementation,from the adjusted PDP8 and Resolution 70 to DPPAs, pricing mechanisms, and administrative agility.

Once the triad of generation–grid–market is synchronized, energy will no longer be a growth ceiling but instead serve as the runway for Vietnam’s 10% GDP ambition.

Put simply, if energy is the “conductor” of industrialization, then 2026–2030 will be its symphony’s crescendo with deep bass (transmission infrastructure), soaring highs (renewables and LNG), and a steady rhythm (policy framework). When every section plays in harmony, Vietnam will have an energy ecosystem that is not only sufficient but also sustainable, ensuring the nation’s growth never again relies on a circuit breaker.