The foundational mark of pioneers in renewable energy amidst an evolving legal framework

DNHN - Vietnam’s renewable energy journey was marked by bold early investment at a time when the legal framework was still taking shape.

As policies gradually improved, it was this pioneering spirit that laid the groundwork—a solid foundation that would become the hallmark of Vietnam’s rise on the global renewable energy map.

“Heaven grants sunlight, the land offers space, and people nurture great ambition”—this alignment of “favorable timing, geographical advantages, and human resolve” vividly captures the image of early investors in Vietnam’s solar power sector between 2017 and 2020. This was a “golden wave” moment, as clean energy attracted massive investment across the country—even as the regulatory system was still under construction and lacked cohesion.

In just three years, solar power capacity in Vietnam skyrocketed—from a few hundred megawatts in early 2018 to around 5 GW by the end of 2019, then surging to nearly 17 GW by late 2020. The key driver was the introduction of the FIT1 mechanism, offering a preferential power purchase price of 9.35 US cents per kWh for 20 years, under Decision No. 11/2017/QĐ-TTg.

However, this rapid development brought with it regulatory issues. By the end of 2023, the Government Inspectorate found that several projects had received FIT1 benefits despite failing to fully comply with legal requirements. In early 2024, the Vietnam Electricity Group (EVN) and the Ministry of Industry and Trade launched a retroactive tariff review policy, adjusting FIT prices for 173 projects based on licensing documentation and commissioning certificates.

As a result, these projects—covering both solar and wind power, with total investment nearing USD 13 billion—are now at significant risk. FIT prices were revised from 9.35 cents to 7.09 cents, and even down to 4.8 cents per kWh, representing a 24–47% reduction. EVN also halted or delayed payments starting in January 2025, pushing many projects into cash flow shortages, mounting bank debts, and potential insolvency.

While EVN cited the need to “protect public funds” and “rectify regulatory compliance,” the business community has raised serious concerns about the fairness and legality of retroactively changing an already enacted policy—especially when power purchase agreements had been signed in accordance with the prevailing legal framework at the time.

Despite the legal uncertainty, investors—both domestic and international—placed their trust in government commitments. They took on risk, mobilized resources, and accelerated progress to qualify for FIT1 incentives, even though licensing and administrative procedures were not yet fully aligned. These efforts were not merely acts of courage but demonstrations of faith in a clean and sustainable energy future for Vietnam.

Vietnam’s solar power sector achieved a stunning leap in a short span—from a few hundred megawatts in early 2018 to nearly 17 GW by 2020. Again, the driving force was FIT1 at 9.35 US cents per kWh, valid for 20 years.

But fast growth brought legal turbulence. The retroactive adjustments affected both solar and wind projects—projects already licensed and completed in good faith. Tariffs were cut drastically, and payment delays from EVN exacerbated financial strain.

Regulatory bodies argue that retroactive pricing helps the state save resources for reinvestment. However, inconsistent policy protection erodes investor confidence, resulting in two critical consequences:

1. A decline in foreign investment due to heightened legal risks.

2. Rising borrowing costs, as domestic and international banks may increase interest rates to hedge against regulatory instability—ultimately increasing capital costs for renewable energy projects.

3. 

In a petition to the Ministry of Industry and Trade dated May 16, 2025, 16 renewable energy companies—including Dragon Capital, ACEN, and B.Grimm—warned of potential defaults due to cash flow shortages caused by the new temporary pricing scheme, despite timely project completion under the original FIT framework.

These investors were not just economic pioneers—they were enablers of Vietnam’s national green development goals. They brought the “green flame” to Vietnam at a time when laws were still forming and risks remained high. Yet they remained committed: “Clean energy is not just an investment—it is a mission, a green pledge to the earth and sky.”

Recognizing this pioneering spirit is essential—not just as a tribute to the past, but as a strategic move to restore investor trust. As Vietnam’s legal framework continues to mature, it is the brave decisions made during those early days that will form the firm bedrock for the future—a future where Vietnam makes its mark as a key player on the global renewable energy stage.

Ngọc Diệp