Energy moves can ensure confidence

Thomas Jakobsen, managing director Indochina Energy Partners

The feed-in tariffs (FiTs) mechanism undoubtedly sparked rapid deployment of renewable projects, many of which were built to meet policy deadlines, not long-term demand. That era has now run its course. Even in 2018, experts warned that project approvals were outpacing Vietnam’s Power Development Plan. The risk of overbuilding was not only real but eventually a reality. We are now seeing the consequences as 173 renewable projects are under review for how they qualified for FiT benefits, raising concerns about transparency, planning discipline, and market fairness.

Indochina Energy Partners, a Singaporean independent power producer with offices in Vietnam, having been in the market since 2017, deliberately chose not to invest under the FiTs. We have been a consistent advocate for the direct power purchase agreement (DPPA) which was first made into law in July 2024 and are the only developer from the original working group still active in Vietnam.

Today, Vietnam has the opportunity to take the next step in its energy evolution: one that is more sustainable, transparent, balance risks, and aligned with real market demand.

FiTs are designed to attract early investment by guaranteeing fixed prices, which encourage quick project execution. But it comes with limitations. They bypass the basic dynamics of supply and demand. Projects were approved and built faster than the grid could absorb them, leading to curtailments and inefficiencies.

Many of the same investors who had previously dismissed Vietnam Electricity’s (EVN) PPAs as “unbankable” eagerly embraced the FIT regime when the returns were high, a clear indication of risk appetite shaped more by quick profits than sustainability.

This pattern is not unique to Vietnam. Globally, countries that relied heavily on FITs without built-in degression or adaptive capacity have faced similar outcomes: market distortions, stranded assets, and fiscal pressure on utilities such as Spain and Czechia.

Calls to provide retroactive relief to projects that missed FiT deadlines raise concerns. The risks were well-known, and investment managers pursued high-return timelines by choice. Demanding compensation after the fact undermines investor accountability and could damage Vietnam’s credibility as a rules-based, law-abiding market.

Retroactive relief efforts threaten to undermine the integrity of Vietnam’s investment environment. They erode the principle of accountability, suggest a bias towards investor bailouts, and may call into question Vietnam’s commitment to the rule of law, precisely the kind of uncertainty that deters future capital.

From our perspective, the government’s decision to end FiTs represents a sensible and necessary trade-off. Rather than continue overpaying for utility-scale renewables, Vietnam can redirect public resources towards higher-impact priorities: women’s education, rural food security, climate-resilient infrastructure, and broader energy system upgrades. These are areas where every dollar counts, and where government spending can truly serve the national interest.

The DPPA framework represents a turning point for Vietnam’s power sector. It offers a market-driven solution that balances risks more equitably among stakeholders, developers, buyers, and the grid operator, EVN. Prices are set through direct negotiation in a wholesale market rather than a guaranteed price from the state, allowing for greater flexibility and alignment with real demand.

Moreover, DPPAs open the door for corporate buyers from export manufacturers to tech firms to access clean, reliable power while meeting their own commitments to net-zero and environmental, social, and governance. This model attracts long-term private capital that is less sensitive to subsidies and more focused on regulatory clarity and market stability.

It is, however, crucial to ensure that the DPPA framework does not get bogged down by legacy thinking. Any effort to reintroduce FiT-like ceilings or push excessive pricing risk back onto EVN could replicate the same problems we saw under the FiT scheme.

EVN should not be forced to absorb risk that rightly belongs to the market. A fair, transparent, and rules-based framework gives investors’ confidence. It seems that only the legacy FiT 1+2 investors (the ones demanding the Vietnamese people bail them out) see the DPPA as unclear. International investors who were smart enough to stay away from FiT1+2 understand the DPPA, find it clear, and have made great progress in the last six months.

Vietnam’s energy transition is at a crossroads. The choice is about how the country chooses to build its power sector. A sustainable future requires tough policy choices, not short-term fixes.

We support the government’s decision to sunset the FiT regime and fully implement the DPPA mechanism. This is the right move for Vietnam’s long-term energy security, investor confidence, and national development goals. Vietnam has already shown it can lead in clean energy. Now it has the chance to lead in clean energy policy setting a regional example for how to move from subsidies to sustainability.