New Law on Electricity

published on March 19, 2025

On November 30, 2024, the National Assembly of Vietnam passed the Law on Electricity 2024, laying the groundwork for a modernized energy framework that meets the country’s growing need for sustainable power. Effective February 1, 2025, the law addresses longstanding challenges in the power sector while unlocking fresh opportunities for growth and innovation.

Replacing the Law on Electricity 2004, which served the nation for two decades, the new legislation introduces comprehensive reforms in power master planning, project investment, renewable energy development, competitive electricity markets, and state management. Notable provisions of the new law are highlighted below:

Reforming Power Planning and Investment

One of the key sections of the new Law on Electricity is Chapter II, which sets the stage for improved power project planning and investment with several critical updates:

Integrated National and Provincial Power Plans: The law ensures a coordinated approach to developing power infrastructure through detailed requirements for both national master plans and provincial development plans.
Bidding Mechanisms for Investor Selection: The law introduces mechanisms for competitive bidding to select investors for power projects. It also includes provisions for monitoring project progress and addressing delays in power project implementation.
Emergency Power Projects: New regulations are added for the investment and construction of emergency power projects to ensure the security of electricity supply. These projects are prioritized to address urgent needs and mitigate potential power shortages.

Driving Renewable and New Energy Development

The core of the new law is its strong emphasis on promoting renewable and new energy sources. This chapter encompasses:

Promotion of Renewable Energy: The law defines renewable energy electricity as electricity produced from solar, wind, ocean, geothermal, biomass, hydropower and waste energy. It encourages investment in renewable energy projects, including offshore wind power.
New Energy: The law introduces new energy sources, including green hydrogen and green ammonia, and establishes mechanisms to promote their development. This includes incentives and support for energy storage systems as well as the production of green hydrogen and ammonia. New energy power projects classified as clean energy production may qualify for state tax incentives, investment credits, and financial support in line with relevant regulations. The Government will define the conditions and timelines for implementing these mechanisms and policies for new energy projects, considering electricity supply security, technological advancements, and socio-economic development needs.
Self-Produced and Self-Consumed Electricity: The law encourages the generation and consumption of electricity from renewable sources, especially through rooftop solar installations and other small-scale renewable energy initiatives. Self-generated electricity can be connected to the national power grid, provided that the connection adheres to the regulations outlined in the Law on Electricity. Additionally, it allows for the sale of surplus electricity in accordance with applicable laws and permits the use of land for multi-purpose energy projects and public lighting, in compliance with land regulations.
Offshore Wind and Nuclear Power: Offshore wind power development is prioritized, with specific regulations to ensure alignment with national defense, security, and maritime safety requirements. Nuclear power is reintroduced as a vital element of Vietnam’s energy strategy, with strict adherence to the Law on Atomic Energy and related regulations to guarantee safety and compliance.

Evolving Power Transactions

The law introduces modernized power sale and purchase mechanisms, including:

Power Contracts: Forward contracts, purchase and sale options, and futures contracts are now regulated to provide flexibility and risk management tools for electricity transactions.
Bankability: The new Electricity Law notably addresses several bankability concerns by introducing provisions such as minimum purchase obligations and the pass-through of fuel costs. These measures represent progress in enhancing the bankability of electricity projects and strengthening Vietnam's attractiveness for investment in the energy sector.
Direct Power Purchase Agreements (DPPA): The new law continues to support the corporate DPPA mechanism by recognizing both physical and synthetic (virtual) DPPA models, as recently established under the Government's Decree No. 80/2024/ND-CP. This dual model allows large electricity consumers to directly engage with renewable energy generators, bypassing traditional intermediaries. The law also aligns DPPA transactions with the competitive electricity market framework. However, the specifics of implementation remain uncertain. The law authorizes the Government to issue detailed regulations, presenting an opportunity to further refine the DPPA framework, address issues identified during initial implementation under Decree No. 80, and respond to emerging challenges in the sector.
Cross-Border Trade: The new provisions facilitate Vietnam’s integration into regional and international electricity markets, enabling greater participation in cross-border electricity trading. These regulations encompass transactions through the national power system as well as direct connections outside the grid. All activities must prioritize national energy security, align with government-approved electricity development plans, and safeguard public and state interests.

Streamlining Related Regulations

The amended law harmonizes with existing statutes such as the Law on Construction, Law on Natural Resources and Law on Environment, and Law on Price. These updates aim to simplify administrative processes and support the effective implementation of new energy policies.

A Step Toward Sustainability

With its February 2025 launch, the law includes provisions to ensure a smooth transition for ongoing projects. Current power purchase agreements, licenses will remain valid until their natural expiration or renewal under the new framework.

To support the comprehensive implementation of the Electricity Law 2024, the Prime Minister issued Decision No. 1544/QD-TTg on December 11, 2024, outlining an implementation plan that will require numerous guiding regulations, including decrees, circulars, and decisions from the Prime Minister and MOIT. Key existing regulations, such as Decree 80/2024/ND-CP on direct power purchase agreements and Decree 135/2024/ND-CP on rooftop solar power, are expected to be replaced.

To navigate the opportunities and challenges presented by the Electricity Law 2024, clients should take proactive steps to align with new regulations. This includes reviewing investment opportunities in renewable energy and offshore wind projects, leveraging preferential policies, and ensuring compliance through updated electricity operation licenses and power purchase agreements. Engaging in competitive bidding processes and participating in DPPA mechanisms, both physical and synthetic, can secure advantageous positions in the evolving market.