Please download our legal briefing here.
Publishing date:
November 1, 2023


At the 2021 United Nations Climate Change Conference (COP26), Vietnam and 150 other countries made commitments to address climate change, including the pledge to achieve net-zero emissions by 2050 and increase the proportion of renewable energy to over 30%. Subsequently, on 25 July 2022, the prime minister issued decision No. 888/QD-TTg, approving the plan for implementing the outcomes of COP26. This plan targets greenhouse gas emissions reduction in the energy sector, particularly within in the wind power sector, with a special focus on offshore wind power. The government will:

• determine in detail the potential of offshore wind energy in Vietnam's sea areas;

• identify offshore areas that attract investors; and

• initiate some offshore wind power projects in promising regions.

To realise these objectives, on 15 May 2023, the prime minister approved the Eighth National Power Development Plan (PDP VIII) which outlines the strategic development of the country's electricity sector until 2030, with a vision extending to 2050. This plan provides the legal framework for executing projects related to power generation sources and the electrical grid, many of which have been in construction since 2019. In comparison to the previous plan, PDP VII, PDP VIII prioritises the expansion of renewable energy sources, aiming to achieve a contribution of approximately 31-39% by the year 2030, equivalent to a capacity range of 5,000-10,000 megawatts.

Wind power capacity

Notably, PDP VIII envisions a significant increase in the capacity of wind power. The plan outlines a threefold expansion of onshore wind power capacity compared to the adjusted capacity in PDP VII. While PDP VII targeted a wind power capacity of around 6,000 megawatts by the year 2030, PDP VIII sets a more ambitious target of 27,880 megawatts by the same year. This total capacity includes 21,880 megawatts from onshore wind farms and an additional 6,000 megawatts from offshore wind farms.

With the encouragement of investment from the Vietnamese government, Vietnam has become an attractive destination for potential foreign investors looking to invest in the wind energy sector. However, Vietnam's legal framework will need to undergo reforms to align with the Eighth National Power Development Plan (PDP VIII).

Restricted investment sector for foreign investors

Among the international agreements that Vietnam is a member of, only the Comprehensive and Progressive Agreement for Trans-Pacific Partnership and the European Union-Vietnam Free Trade Agreement mentions the energy sector. According to the World Trade Organization Agreements, no provision specifies Vietnam's commitment to opening up the market for energy-related sectors. Therefore, it can be observed that Vietnam does not have specific commitments to open up the wind power sector. Consequently, the government of Vietnam has the right to approve or disapprove and set specific conditions for foreign investment in industries where Vietnam has no commitments.

According to domestic regulations, although according to Decree No. 31/2021/ND-CP, offshore wind energy is a sector with conditional market access for foreign investors in Vietnam, there are currently no specific provisions defining the "market access conditions for foreign investors" in the offshore wind power sector.

Concerning offshore wind power projects, investors must apply to allocate sea areas to facilitate project development. Under article 8.2 (c) of Decree No. 11/2021/ND-CP, foreign investors seeking sea areas for the execution of projects related to the investment in the exploitation and use of marine resources are subject to the decsion of the Ministry of Natural Resources and Environment. While the precise definition of "marine resources" remains somewhat ambiguous, it appears to encompass establishing offshore wind farms. This regulation suggests that, to initiate an offshore wind power project, the investor must apply for a sea area allocation.

However, it is important to note that, in addition to adherence to international treaties to which Vietnam is a party, obtaining an allocated maritime area necessitates preserving:

• national defence;

• security;

• sovereignty;

• sovereign rights protection;

• jurisdiction; and

• maritime interests.

Consequently, in assessing compliance with these defence and security prerequisites, before arriving at a decision, the Ministry of Natural Resources and Environment must seek input from:

• the Ministry of Defense;

• the Ministry of Public Security;

• the Ministry of Foreign Affairs; and

• the provincial People's Committee of the sea area's location.

Consequently, obtaining approvals from state agencies before sea area allocation may take a long time. Moreover, as the precise criteria for security requirements have yet to be explicitly defined, the ability to meet these requirements will depend on the assessments of state agencies and will be subject to case-by-case evaluations.

Financing challenges

According to land law regulations, if land users pay the land use fee in a lump sum, they can mortgage the land use rights to credit institutions in Vietnam to raise capital for the project. If the land user pays the land use fee annually, they do not have the right to mortgage the land use rights but only have the right to mortgage assets attached to the land. Nevertheless, under the provisions of Decree No. 11/2021/ND-CP, even though the investor can choose to pay the sea area usage fee annually, once every five years or in one lump sum for the entire term (similar to the payment mechanism of fee of land use right under the laws on land, under article 7 of Decree No. 11/2021/ND-CP) the foreign investor is not allowed to mortgage the assigned sea area.

This restriction stems from the fact that project developers are not authorised to transfer the assigned sea area. Therefore, the project developer cannot mortgage the sea area (as part of the security assets) to raise capital for offshore wind power projects. This regulation could be one of the limitations of offshore wind power projects.

Navigating pricing mechanisms for wind power projects remains complex

The feed-in tariff (FIT) pricing for purchased electricity is currently structured into various tiers based on the commercial operation date of wind power projects. If a wind power project commenced commercial operation between 20 August 2011 and 1 November 2018, the FIT pricing for purchased electricity stands at 1,614 dong (approximately, £0.054) per kilowatt hour (excluding value-added tax (VAT)), equivalent to $0.078 per kilowatt hour.

For wind power projects that initiated commercial operation between 1 November 2018, and 31 October 2021, the FIT pricing differs for onshore and offshore wind projects. Onshore wind projects are priced at 1,928 dong (approximately, £0.064) per kilowatt hour (excluding VAT), equivalent to $0.085 per kilowatt hour. Meanwhile, offshore wind projects are priced at 2,223 dong per kilowatt hour (approximately £0.074) (excluding VAT), equivalent to $0.098 per kilowatt hour.

However, projects that began commercial operation after 31 October 2021 fall under transitional projects and are subject to a pricing ceiling mechanism. For onshore wind projects, the highest electricity purchase price is 1,587.12 dong per kilowatt hour (approximately £0.053) (excluding VAT), and for offshore wind projects, it is 1,815.95 dong per kilowatt hour (approximately £0.061) (excluding VAT). It is worth noting that the FIT rates for onshore wind projects in the current transitional projects may not offer particularly attractive incentives for investors.

Misalignment between PPA templates and industry practices

Currently, wind energy projects in Vietnam, upon selling their generated electricity, enter into agreements known as standardised power purchase agreements with Vietnam Electricity (EVN). These standardised agreements are established as per the guidelines outlined in Circular 02/2019/TT-BCT, issued by the Ministry of Industry and Trade on 15 January 2019. In practice, when selling electricity to EVN, most of the template of PPA (power purchase agreement) provisions will be applied. Nevertheless, there are specific clauses in the PPA template that may not align with practices, including the following.

• EVN, or its subsidiaries, are responsible for buying all the electricity produced by grid-connected projects. However, the standard PPA does not include mechanisms for purchasing electricity during periods of interruptions. For instance, if the facility generates power but EVN cannot take it due to maintenance or grid issues, there is no provision for selling that excess power.

• Regarding the governing law and dispute resolution, according to article 11.3 of PPA in Circular 02/2019/TT-BCT, the PPAs are governed by the law of Vietnam. According to article 9 of PPA in Circular 02/2019/TT-BCT, there is a tiered dispute resolution mechanism which includes mediation and adjudication by MOIT's Electricity Regulatory Authority of Vietnam (ERAV). Any appeals will follow administrative proceeding procedures before Vietnamese courts. The standard PPA does not expressly provide for offshore arbitration (ie, in a neutral venue in accordance with generally accepted international dispute resolution rules).


In sum, to meet its climate change commitments and achieve the net-zero carbon target by 2050, the government of Vietnam has taken steps to establish a legal framework for the development of renewable energy. This effort, aligned with the introduction of PDP VIII, has included enticing foreign investments in wind power. However, Vietnam has yet to make specific commitments in international treaties regarding market access in the wind power sector. As a result, it is imperative that specific legal regulations concerning market access conditions and other relevant aspects of wind power project development are introduced in the near future. These regulations will expedite the investment licensing process and create additional incentives to attract foreign investors.

*Disclaimer: This Briefing is for information purposes only. Its contents do not constitute legal advice and should not be regarded as detailed advice in individual cases. For legal advice, please contact our Partners.

External resources
PDF Document:
Download PDF
External link:
Open link
There is no external resources