The Puzzle of Forming a Competitive Market in Vietnam's Electricity Sector

Vietnam has been implementing policy reforms to welcome private investors into the electricity sector, yet it still has a long way to go before establishing a truly competitive market. Up until 2006, the state-owned Vietnam Electricity (EVN) had a monopoly, owning all power plants in the country. However, its dominance has been gradually diminishing, and currently, it directly or indirectly controls just about 37.6% of the country’s installed capacity of 80,000 megawatts.

This implies that it must purchase the remaining 62% of power supplied, primarily from Petrovietnam, the oil and gas behemoth, Vinacomin, the coal mining company, and several private firms. EVN’s ownership dilution occurred as private companies started investing heavily in power generation, particularly in the past five years due to the surge in renewable energy. Private entities now own 42% of the installed capacity. However, EVN still holds a monopoly in the transmission of electricity, owning and operating all transmission lines and substations.

Despite legal amendments last year that permit private firms to invest in transmission, only one company has taken the initiative to do so, linking its solar plant to the national grid. In the previous year, the Ministry of Industry and Trade conducted a review of EVN’s operations and discovered that the cost of electricity production had risen by more than 9% since 2021, but the government only approved a retail price increase of 3%, resulting in EVN selling power at a loss of VND112 per kilowatt-hour.