Vietnam’s ambitious renewable energy goals are facing significant challenges, prompting major European investors to reconsider their commitments. According to Reuters, Enel, the Italian energy giant and one of the world’s largest renewable energy investors, is planning to exit the Vietnamese market, following similar moves by Norway’s Equinor and Denmark’s Orsted, both of which recently canceled renewable projects in the country.
Enel initially had high hopes for Vietnam’s energy market. In 2022, the company announced plans to generate up to 6 gigawatts (GW) of renewable energy. However, the decision to withdraw—expected to be formalized during the company’s annual strategic presentation in November—highlights growing concerns about Vietnam’s renewable energy landscape.
Although Enel did not specify the exact type of renewable energy it aimed to develop, most experts believe wind power was central to its strategy. Wind energy is crucial to Vietnam’s plan to transition away from coal and scale up its renewable energy capacity.
Vietnam’s current electricity capacity is approximately 80 GW, and the government aims to almost double this by 2030. Renewables, including wind and solar, are expected to account for at least 31% of the energy mix by the end of the decade, with wind energy contributing 18.5%. However, solar’s share is projected to drop to 8.5% as the government shifts focus toward wind.
Challenges to Renewable Energy Growth
One of the primary challenges hindering Vietnam’s renewable energy potential is the absence of a comprehensive framework for offshore wind development. Industry experts point to delays in establishing guidelines for project approvals, sea area allocations, and pricing mechanisms as major frustrations for investors.
Chris Humphrey, Executive Director of the EU-ASEAN Business Council, emphasized that these issues are not new. He has long warned Southeast Asian leaders that slow progress on energy transition could drive investors to other markets. Norway’s Equinor and Denmark’s Orsted have already withdrawn from Vietnam’s offshore wind sector due to these regulatory hurdles. Equinor canceled its investment plans in September, while Orsted paused its projects last year, citing regulatory uncertainty.
Dan Martin, a senior associate at Dezan Shira & Associates, explained that despite Vietnam’s abundant wind resources, the lack of clarity around project approvals, sea area allocations, and pricing mechanisms has made investors hesitant. “Without profitability guarantees or operational clarity, companies are proceeding cautiously, stalling offshore wind development,” Martin noted.
Infrastructure and Funding Barriers
Vietnam’s renewable energy aspirations are also constrained by infrastructure issues. The country’s existing power grid is struggling to accommodate the influx of renewable energy projects. Despite its ambitious targets, a significant portion of Vietnam’s energy still comes from coal-fired power plants. While the government has pledged to reduce its coal dependency, the transition has been slow and marked by uncertainty.
Funding is another critical obstacle. In May, Vietnam approved its long-anticipated Power Development Plan 8 (PDP8), which outlines plans to double the nation’s power generation capacity to over 150 GW by 2030. However, this expansion will require an estimated $134 billion in funding, primarily for new power plants and grid improvements.
To help finance this transition, the Group of Seven (G7) nations and other wealthy countries pledged $15.5 billion in December 2022 to support Vietnam’s move away from coal. However, this amount is only a fraction of what is needed to achieve the ambitious goals outlined in PDP8.
Investment Barriers and Global Competition
Vietnam has long attracted foreign investment, especially from companies looking to diversify away from China. However, the lack of financial incentives from the Vietnamese government and rising tax burdens have caused some of the world’s largest firms to rethink their investments.
For instance, Intel had planned a $3.3 billion project in Vietnam to significantly boost its capacity. However, after requesting 15% cash support from the government and being denied, Intel shifted the project to Poland. Similarly, Austria’s AT&S and South Korea’s LG chose to invest elsewhere after Vietnam failed to meet their investment support requests.
While renewable energy challenges weren’t the primary reason for these decisions, they reflect broader concerns about Vietnam’s overall investment climate. European companies are particularly concerned about energy reliability. In 2023, widespread power outages, caused in part by over-reliance on coal, disrupted operations at many foreign-owned factories, including those run by Samsung.
These energy disruptions have raised doubts about Vietnam’s ability to support its expanding manufacturing base with reliable and sustainable power.
A glimmer of hope
Despite these challenges, Vietnam still has the potential to position itself as a leading manufacturing hub powered by renewable energy, according to Richard Ramsawak, Lecturer of Economics at the Royal Melbourne Institute of Technology in Vietnam.
“This won’t require a total transformation,” Ramsawak explained, “but rather a targeted approach, focusing on key industrial zones and sites that can be powered by renewable energy.” As global demand for sustainable manufacturing grows, competitors like Indonesia and Malaysia are already taking steps to diversify their energy sources.
“If Vietnam wants to maintain its competitive edge in global manufacturing, it will need to follow through on its renewable energy commitments,” Ramsawak added. “The only question is whether they will lead or lag in this transformation.”
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