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In Vietnam, an impasse over feed-in-tariffs for renewable energy producers threatens foreign investors’ confidence in government policies
A festering legal crisis is threatening to derail Vietnam’s energy development plans. 173 solar and wind projects, representing about US$13 billion in investments, are stuck in limbo due to ongoing disputes regarding their feed-in-tariffs (FITs) – the guaranteed payments that the government would pay for their contribution to the power grid. This situation raises concerns about Vietnam’s business environment and the consistency of its economic policy. If Vietnam does not resolve these disputes promptly, the country could face significant legal, financial, and reputational repercussions.
Between 2018 and 2021, Vietnam experienced a significant boom in renewable energy, primarily fuelled by the government’s commitment to offer attractive 20-year FITs to investors for projects that began commercial operations before designated deadlines. However, in 2023, an investigation by the Government Inspectorate found that many of these projects had not obtained their Construction Completion Acceptance (CCA) certificates before their Commercial Operation Date (COD). Following the inspection, the Ministry of Industry and Trade issued a new circular, effective June 2023, stipulating that renewable energy projects must obtain a CCA certificate before being recognised for COD. This effectively disqualified the affected projects from receiving the original FIT rates.
Investors have protested, arguing that the circular is retroactive since the CCA requirement did not exist when their projects were initially certified for COD. Nonetheless, Vietnam Electricity (EVN), the state utility and primary off-taker of these projects, has withheld payments or demanded refunds for “excess” tariffs from them, citing non-compliance. This situation has pushed the projects into financial distress and potential bankruptcy. Investors have sent multiple petitions to authorities, seeking a fair and transparent resolution to the disputes. Earlier this month, 23 foreign investors, representing 4,182 MW, renewed their request for dialogue with relevant authorities to resolve the deadlock.
This policy reversal not only results in immediate financial losses for investors but also undermines the hard-earned trust that Vietnam’s pro-investment rhetoric has built over the years. Foreign bona fide third-party buyers, who acquired projects from local investors in good faith after the COD, are particularly affected, as government policy changes threaten to devalue their holdings. Such inconsistencies naturally foster a negative perception of Vietnam’s business environment among investors. This disillusionment echoes broader sentiments. For example, the Mid-Year Market Update Survey 2025 by the American Chamber of Commerce in Vietnam identified policy inconsistency as one of the primary deterrents to foreign investors.
The prolonged delay in resolving these disputes threatens Vietnam’s dual ambitions of achieving double-digit GDP growth in the coming years and reaching net-zero emissions by 2050. In the Vietnamese context, it is estimated that for every 1 per cent increase in GDP, a corresponding 1.5 to 2 per cent increase in electricity supply is needed. This ongoing dispute may deter energy investors from committing to new projects. Without fresh inflows, estimated at US$135 billion needed for the country’s energy transition by 2030, power shortages are likely to occur, constraining economic growth. Vietnam’s net-zero aspirations are also at risk, with the target of renewables accounting for 28-36 per cent of the energy mix by 2030 and 74-75 per cent by 2050 looking increasingly unattainable if the current impasse prolongs.
While investors prefer dialogue and negotiation, they have indicated their readiness to pursue international litigation. This is a risk that EVN has acknowledged. Spain’s experience serves as a stark precedent. Between 2008 and 2012, Madrid retroactively applied multiple restrictions, including reduced FITs, on solar projects that previously boomed under the government’s generous incentives. This led to multiple claims by investors filed with the International Centre for Settlement of Investment Disputes. Tribunals consistently ruled against the Spanish government, resulting in €1.5 billion in compensation paid to affected investors by June 2025.
It is high time for Vietnam to take decisive action to resolve the lingering uncertainty surrounding these projects, thereby restoring investors’ confidence in the consistency of Vietnam’s policy discourse
Vietnam faces similar exposure. A loss in arbitration could require substantial compensation and lead to significant reputational damage. This would potentially deter FDI inflows not only in the energy sector but also in technology and manufacturing, where policy consistency is crucial to investors.
There are indications that Vietnamese authorities recognise these potential consequences and are exploring negotiated solutions that would be acceptable to investors. For example, EVN has reportedly proposed that owners of renewable power plants who obtained CCA approvals only after starting operations would face only administrative fines, rather than having their original FITs cancelled or adjusted. If adopted, this proposal could resolve the issues currently affecting the 173 projects. However, so far, this proposal has not been formally adopted.
This delay may be due to two main factors. First, the current officials in charge might be reluctant to approve this option due to concerns about political liability. The original FITs are now considered by some leaders to be excessively high, resulting in financial losses for EVN and, ultimately, the state. Second, EVN itself is facing financial difficulties, with cumulative losses reaching VND44.8 trillion (US$1.83 billion) by the end of 2024. As a result, EVN may not have sufficient funds to meet its financial obligations to project owners if the proposal is approved now. Consequently, the affected projects remain in a state of uncertainty, facing increasing challenges.
Since General Secretary To Lam assumed office in August 2024, he has been championing a vision to usher the country into an “era of national rise”. The goal is to transform Vietnam into a high-income, developed country by 2045. To achieve this, he has enacted various political and economic reforms, which have instilled optimism among many investors regarding the promising outlook of the Vietnamese economy. However, significant challenges remain, particularly inconsistencies between political discourse and economic reality, as well as between high-level policies and their implementation at local and ministerial levels. The current legal quagmire in the renewable energy sector exemplifies this inconsistency.
It is high time for Vietnam to take decisive action to resolve the lingering uncertainty surrounding these projects, thereby restoring investors’ confidence in the consistency of Vietnam’s policy discourse. Only then can Vietnam maintain its hard-earned reputation among investors and encourage them to channel new energy investments into powering the country’s economic ambitions.
Author: Le Hong Hiep, Senior Fellow and Coordinator of the Vietnam Studies Programme at ISEAS – Yusof Ishak Institute
This article was first published in Fulcrum, ISEAS – Yusof Ishak Institute’s blogsite.
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