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Vietnam Electricity Reforms Spark Opportunities for Foreign Investment
Vietnam’s amended Law on Electricity allows foreign investment in the country’s electrical grid to improve energy quality and capacity. Power consumption in the country is projected to increase by 10-12 percent annually through to 2030, representing the fastest growth rate in Asia.
As such, early entrants to building, managing, and operating Vietnam’s electrical grid will have the advantage of becoming trusted partners as opportunities grow in Vietnam’s energy sector.
Private investors can now build, manage, and operate power grids in Vietnam following recent legal amendments, as the Vietnamese state gradually reduces its control of the sector.
On January 11, 2022, Vietnam’s National Assembly passed Law No. 03/2022/QH15, which includes amendments to the Law on Electricity 2004. The law is Vietnam’s main piece of legislation governing the electricity sector and includes regulations on investment, market, pricing, and licensing, among other stipulations.
The amendments, which came into effect on March 1, 2022, increase the ability of private investors to participate in Vietnam’s electrical grid, while reducing the state’s role. The reform comes amid a push to improve the quality and capacity of Vietnam’s electrical grid, including by adopting renewable technologies.
The amendments to Article 4 of the law concerns where private investors can and cannot invest. With the changes, private investors are able to:
Accordingly, private investors can now build new segments of the electrical grid and operate those segments without the direct involvement of the state.
Further, according to the amended Article 4, the state of Vietnam retains its monopoly over:
The amendments maintain the monopoly of the state of Vietnam over the construction, operation, and management of the national power grid system and certain large electricity plants. However, the new Article 4 explicitly limits the state from operating the parts of the grid that are built and run by private investors.
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In light of the amendments, foreign entities have greater opportunities to invest in Vietnam’s electrical grid and contribute to upgrading the sector’s infrastructure. Currently, Vietnam Electricity (EVN), a state-owned enterprise, is the largest buyer of electricity in Vietnam. Until the amendments, EVN held a monopoly on the transmission and distribution of electricity.
Fast-paced economic growth, increasing investments in manufacturing and industry, and a burgeoning middle-class have sparked unprecedented demand for electricity. The Vietnamese government projects power consumption to grow by 10-12 percent per year through to 2030, representing the fastest growth rate in Asia.
This article was first published by AseanBriefing which is produced by Dezan Shira & Associates. The firm assists foreign investors throughout Asia from offices across the world, including in in China, Hong Kong, Vietnam, Singapore, India, and Russia. Readers may write to [email protected].
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