Investment Incentives for Renewable Energy in Southeast Asia: Case study of Viet Nam

This 2012 case study examines investment incentives for renewable energy in Viet Nam, finding that while a policy framework exists (including tax breaks and price subsidies), these incentives have a limited impact on investment decisions. Major barriers include uncompetitive electricity off-take prices set by the state utility EVN, regulatory opacity, and a lack of trust in government guarantees.

• Stakeholders and investors interviewed for the study reported that current investment incentives have a limited effect on their decisions to invest in renewable energy in Viet Nam. They indicated that incentives are not the primary determinant for selecting a specific site or geographic area, citing a preference for a predictable power system regime and market competition instead.
• The Vietnamese government has established a comprehensive policy framework, including the Power Master Plan VII, to promote renewable energy. National targets set in Decision 1855/QD-TTg aim for renewable energies to comprise 5 per cent of total primary energy production by 2020 and 11 per cent by 2050.
• Investment incentives in Viet Nam are categorized into four main groups: financial incentives (subsidized loans and guarantees), fiscal incentives (tax exemptions), market price support (above-market prices), and other subsidies (such as preferential land access).
• Fiscal incentives for renewable energy enterprises include a reduced corporate income tax (CIT) rate of 10% for 15 years for newly established enterprises, with potential extensions up to 30 years for large-scale projects or those using advanced technology. Additionally, these enterprises may receive a tax exemption for the first four years and a 50% reduction for the following nine years.
• The 'Avoided Cost Tariff' is used for small renewable energy projects with a capacity of 30 MW or less, such as small hydropower plants, to ensure they can sell electricity at prices equivalent to other generation sources. This mechanism has provided modest benefits for small hydropower projects, allowing some to sell electricity at higher prices than in the pre-2008 period.
• Wind energy projects face significant financial challenges because the off-take prices paid by Vietnam Electricity (EVN) are often lower than the actual cost of production. For example, a wind farm in Binh Thuan Province reported that while the break-even price was 10.36 cents/kWh, the purchase price was only 6.8 cents plus a 1 cent government subsidy.
• Biogas projects have struggled due to low electricity prices offered by EVN, leading to the cancellation of several large-scale projects in Ho Chi Minh City. Investors in these projects typically seek a price of US$0.07/kWh, which EVN has not accepted.
• Investors identified several systemic barriers that undermine the effectiveness of incentives, including a lack of a clear and consistent legal framework, excessive red tape and unofficial fees in customs processes, and a lack of trust in government guarantees and macroeconomic stability.
• The role of the state-owned Vietnam Electricity (EVN) is central to the success of renewable energy investments, as it acts as the primary purchaser of power. The study recommends revising price subsidies and improving market competition to reduce the reliance on EVN's ability to cover losses.

APA

International Institute for Sustainable Development (n.d.). Investment Incentives for Renewable Energy in Southeast Asia: Case study of Viet Nam. https://www.iisd.org/system/files/publications/investments_incentives_viet_nam.pdf

Chicago

International Institute for Sustainable Development. Investment Incentives for Renewable Energy in Southeast Asia: Case study of Viet Nam. n.d. https://www.iisd.org/system/files/publications/investments_incentives_viet_nam.pdf.

Wikipedia

{{cite report |author=International Institute for Sustainable Development |title=Investment Incentives for Renewable Energy in Southeast Asia: Case study of Viet Nam |url=https://www.iisd.org/system/files/publications/investments_incentives_viet_nam.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{internationalinstituteforsustainabledevelopmentndinvestment, author = {{International Institute for Sustainable Development}}, title = {{Investment Incentives for Renewable Energy in Southeast Asia: Case study of Viet Nam}}, institution = {International Institute for Sustainable Development}, url = {https://www.iisd.org/system/files/publications/investments_incentives_viet_nam.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }