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- Modernizing Energy Policy: Vietnam’s updated Electricity Law introduces mechanisms to support renewable energy, enhance market competitiveness, and attract investment.
- Addressing Energy Challenges: Tackles production cost shortfalls, promotes transparency, and aligns with the National Electricity Development Plan (PDP8).
- Transition Timeline: Effective February 1, 2025, with transitional provisions for existing projects and contracts.
Vietnam has enacted a new Electricity Law, effective February 1, 2025, to modernize its energy sector and create a robust framework for renewable energy development. The amended law addresses longstanding challenges in cost structures, regulatory frameworks, and market dynamics while promoting a competitive energy market and transitioning to sustainable energy sources.
A Competitive Energy Market:
The 2024 Electricity Law introduces reforms aimed at market liberalization, including:
- Multi-component pricing systems to phase out cross-subsidies gradually.
- New electricity trading mechanisms, including term contracts, futures, and options.
- Enhanced guidelines for investor selection and bidding in electricity projects.
“The law establishes a competitive electricity market, allowing stronger trading activities and transparent operations,” emphasized the Ministry of Industry and Trade (MOIT).
Renewable Energy Expansion:
The law prioritizes renewable energy sources like solar, wind, and nuclear power. Key provisions include:
- Incentives for small hydropower and offshore wind projects.
- Special mechanisms for urgent energy projects, including simplified approval processes.
- Direct Power Purchase Agreements (DPPAs), enabling renewable energy projects to bypass traditional bidding.
“This framework ensures renewable energy growth while maintaining system safety and stable electricity prices,” the MOIT added.
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Transitional Provisions:
Existing projects and contracts approved before February 1, 2025, will follow earlier regulations with specific adjustments to align with the new law:
- Projects approved under the 2004 Electricity Law will proceed with transitional bidding rules.
- Electricity purchase and sale contracts signed before the effective date must comply with competitive market provisions.
Key Sectoral Enhancements:
The revised law also focuses on:
- Incentivizing private investment in energy storage systems.
- Strengthening the framework for nuclear energy, including amending the 2008 Nuclear Power Law.
- Establishing mechanisms for liquefied natural gas (LNG) energy development to attract further investment.
National Objectives:
Aligned with the Power Development Plan 8 (PDP8), the law targets over 60% of installed capacity from solar and wind energy by 2050. Current renewables contribute approximately 30%, underscoring the law’s role in scaling up efforts.
“The new Electricity Law represents a milestone in addressing Vietnam’s energy challenges and lays the foundation for a sustainable energy mix,” the MOIT stated.
As Vietnam prepares for implementation, the law promises to transform the nation’s energy landscape, bolster financial sustainability, and advance environmental objectives.
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