FiT disputes, delayed DPPA undermine investor confidence in Vietnam

Vietnamese Prime Minister Pham Minh Chinh calls for swift resolution of the feed-in tariff dispute.　(Photo: Baochinhphu)

The Vietnamese government is facing mounting challenges in its renewable energy sector. A year after announcing the Direct Power Purchase Agreement (DPPA) framework, no implementable projects have materialized.

Meanwhile, the previously ambitious feed-in tariff (FiT) mechanism for solar and wind has become mired in legal controversy, prompting Prime Minister Pham Minh Chinh to order urgent solutions to avoid widespread fallout that could stall the sector’s growth on July 23.

Developers push back against FiT subsidy clawbacks

Over 40 domestic and foreign investors have issued multiple joint statements urging the government to revoke a directive demanding the return of FiT subsidies. The policy affects 173 projects with a total investment of USD 13 billion and has raised fears of bankruptcy across the sector.

The FiT mechanism led to a surge in solar and wind development between 2017 and 2021. However, outdated grid infrastructure couldn’t keep pace with the expansion of renewables, and the generous subsidies left national utility EVN with mounting losses. Critics began calling for a comprehensive review of the FiT system.

Following an investigation, authorities found that some projects had not completed technical inspections before commissioning, yet still received FiT payments. In response, the Ministry of Industry and Trade (MOIT) instructed EVN to review the affected projects and recover payments deemed ineligible. This move has sparked backlash from developers, who argue that retroactive enforcement will slash project revenues and could trigger bankruptcies.

Foreign investors from Southeast Asia account for over 40% of the impacted projects, including companies like Ayala Corp (Philippines), Super Energy and B. Grimm Power (Thailand), alongside investors from the Netherlands, France, Japan, and China. RECCESSARY reached out to Super Energy for comment but did not receive a response.

According to Ngu Truong and Trang Nguyen, managing and senior partners at Vilasia Law, the government’s retroactive enforcement faces two major legal hurdles:

1. No Retroactivity Principle: At the time of project commissioning and power purchase agreement (PPA) signing, there was no legal requirement for a construction completion acceptance. That requirement was only introduced in 2023. Under Vietnam’s legal principle of non-retroactivity, the clawback lacks a valid legal basis.
2. Contractual Integrity: Most developers signed PPAs based on standards set by MOIT and EVN. Under those agreements, the sole condition for FiT eligibility were achieving commercial operation date before the relevant deadline and meeting certain technical requirements. Since project inspections were not stipulated in the contract, unilateral amendments and subsidy clawbacks are unjustified.

Hoang Pham, managing partner of VSE Lawyers and an arbitrator at the Ho Chi Minh City Commercial Arbitration Center (TRACENT), believes the dispute hinges on differing interpretations of the commissioning date. While companies consider the date of first electricity generation as commissioning, the government argues that commissioning is only valid after completing all legal procedures.

According to information cited by VSE Lawyers, MOIT convened an emergency meeting with EVN the day after the Prime Minister’s order (July 24), calling for immediate solutions. As of now, no public outcome has been announced.

Vilasia Law's managing partner Ngu Truong (left) and senior partner Trang Nguyen (right) note that the Vietnamese government faces two major legal hurdles: the principle of non-retroactivity and the absence of construction acceptance requirements in contracts. (Image source: Vilasia website)

DPPA framework falters: Experts cite five key barriers

Meanwhile, Vietnam officially adopted the DPPA framework in 2024 and updated it in March 2025 with further details. However, as of July, no projects have advanced beyond the early planning stage. Industry experts cite five major obstacles stalling progress: lack of regulatory guidance, high fees imposed by EVN, shifting corporate electricity demand, uncompetitive price caps, and a limited pool of eligible projects.

Read more: Can Vietnam’s impressive renewable energy buildout satisfy corporate demand?

The March decree reinforced two DPPA pathways: through private wires and the national grid. The former now includes rooftop solar and allows excess electricity to be sold to EVN or its subsidiaries. The latter expands eligible generation sources to include biomass and broadens demand-side participation to include large consumers such as EV charging networks.

Nguyen Huu Quang, portfolio manager at Dragon Capital, told RECCESSARY that Samsung is currently the most active corporate player. Samsung Display Vietnam (SDV) and Samsung Electronics (SE) are both exploring DPPA procurement, but are still in the early stages of tendering. Most other companies remain at the inquiry stage.

Nguyen identified five key reasons for the DPPA bottleneck:

1. Insufficient Regulatory Guidance: MOIT and EVN have not yet issued detailed instructions—particularly regarding contract templates and implementation. Though MOIT has acknowledged the gap and is working on guidance documents, it will take time.
    
2. Cost Uncertainty: Under DPPA, EVN offers relatively stable but high tariffs. Opting out of EVN introduces cost volatility linked to international fuel prices for coal and gas, making budgeting more difficult for buyers.
    
3. Changing Demand Dynamics: Buyers no longer prioritize clean energy at any cost. They now expect renewable electricity to be cheaper than EVN’s rates, which is difficult given EVN’s high DPPA-related charges. This complicates buyer-seller negotiations.
    
4. Unattractive Price Ceilings: Although DPPA allows bilateral pricing, rates cannot exceed MOIT’s official ceiling. Currently, the price ceiling is relatively low, and with limited expected profits, it has failed to attract developers to participate in the DPPA scheme.The current cap is too low to attract developers.
    
5. Limited Eligible Projects: Existing PPA projects with EVN are not clearly allowed to switch to DPPA. Meanwhile, most projects approved under the latest Power Development Plan (PDP8) must go through competitive bidding. This exposes original developers to higher risks and delays due to costlier and more complex land clearance post-award.

Vietnam’s renewable energy shows promise under government support, but incomplete policies and a lack of supporting measures may stall progress, which is hurting both industry growth and carbon reduction goals.

Source: Financial Times, VIR, The Investor, Baker McKenzie