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RECCESSARY spoke with analysts about how renewable energy access is shaping manufacturing competitiveness in Vietnam and Thailand. (Photo: iStock)
As multinational companies accelerate their decarbonization commitments, access to renewable electricity is becoming an increasingly important factor shaping manufacturing decisions across Southeast Asia.
Vietnam and Thailand, two of the region’s most important manufacturing hubs, are now navigating this shift as they compete for investment in sectors ranging from electronics to electric vehicles and data centers. Industry analysts say the ability to supply renewable power reliably is emerging as a structural element of industrial competitiveness.
The growing importance of renewable electricity reflects pressures from both global markets and investors. One major driver is the European Union’s Carbon Border Adjustment Mechanism (CBAM), which will place a carbon price on imported goods such as steel, cement and aluminum. While the policy initially targets a limited set of sectors, it is widely expected to expand over time.
Investor expectations are reinforcing the trend. Many multinational companies, including technology firms and data center operators, have committed to operating on 100% renewable electricity through initiatives such as RE100, creating growing demand for clean power in manufacturing locations.
“As markets increasingly demand low-carbon products, countries that can provide renewable electricity will have a stronger competitive advantage,” said Melinda Martinus, lead researcher at the ASEAN Studies Centre at Singapore’s ISEAS-Yusof Ishak Institute.
Melinda Martinus, lead researcher at the ASEAN Studies Centre at Singapore’s ISEAS–Yusof Ishak Institute. (Photo: Melinda Martinus)
Vietnam and Thailand at different stages of the energy transition
Within Southeast Asia, Vietnam and Thailand are often positioned as alternative manufacturing hubs, particularly for electronics and export-oriented industries. Both countries are now moving toward energy transition policies aimed at strengthening their competitiveness.
This shift is also shaping industrial policy discussions across the region. Recent analysis from the World Bank’s Thailand Economic Monitor argues that Thailand’s next phase of industrial growth will increasingly depend on expanding into more advanced and environmentally sustainable manufacturing sectors, including electric vehicles, solar photovoltaic components and energy-efficient cooling technologies.
Similarly, the World Bank’s report Vietnam 2045 — Growing Greener: Pathways to a Resilient and Sustainable Future highlights how climate transition is becoming increasingly intertwined with the country’s economic development strategy. The report notes that Vietnam aims to reach high-income status by 2045 while achieving net-zero emissions by 2050, a transition that will require reducing the carbon intensity of its manufacturing sector while expanding renewable energy deployment.
Their energy systems reflect different stages of development. Vietnam has experienced rapid growth in renewable energy capacity over the past decade, driven by policy mechanisms such as feed-in tariffs. As a result, as of 2025, renewable generation accounts for roughly 12% of Vietnam’s electricity mix, compared with around 6% in Thailand.
Higher renewable penetration can signal strong policy support and a growing ecosystem for renewable developers, making a country more attractive to investors seeking green electricity, said Lam Pham, Asia analyst at energy think tank EMBER. But headline figures do not necessarily translate into real access to renewable power for manufacturers, he added.
“Higher renewable penetration doesn’t automatically mean industrial users have better access to clean electricity,” said Pham. He noted that transmission bottlenecks and market design issues can prevent companies from directly purchasing renewable electricity even when capacity exists.
Lam Pham, Asia analyst at energy think tank EMBER. (Photo: Lam Pham)
Reliability remains the baseline requirement, but grid infrastructure is the bottleneck
While renewable energy availability is increasingly important, electricity reliability remains the baseline requirement for manufacturers. Power outages can halt production lines, damage equipment and lead to costly disruptions, risks that are particularly critical for high-value manufacturing sectors such as semiconductors, batteries and electronics.
Historically, Thailand has had slightly stronger power reliability indicators than Vietnam, said Pham. However, Vietnam has been catching up rapidly. Between 2015 and 2020, reliability indicators such as outage duration and frequency improved significantly in both countries, declining by about 10% annually in Thailand and roughly 35% annually in Vietnam. If those improvements continue, Vietnam’s power reliability could become comparable to and potentially surpass Thailand’s.
Martinus said that the main bottleneck in the energy transition is not renewable generation itself but the infrastructure required to integrate it into power systems. In both Vietnam and Thailand, renewable resources are often located far from industrial demand centers.
Large solar farms in Thailand, for example, are typically located in northern regions, while wind resources are concentrated in the south. Industrial demand, however, is centered around Bangkok and other manufacturing zones. However, transmission infrastructure has struggled to keep pace with rapid renewable deployment, leading to curtailment in some areas where generation exceeds grid capacity.
Beyond transmission lines, energy storage and system flexibility are also becoming increasingly important as renewable penetration rises, Pham noted.
EMBER’s new report, AI to Unlock the Next Wave of Renewable Integration in ASEAN, suggests Dynamic Line Rating (DLR) as one potential solution. DLR enables a more dynamic assessment of grid capacity by combining real-time weather data, sensor measurements and power flow models to continuously adjust line ratings. It can typically allow transmission lines to safely carry 10 to 30% additional capacity above their static rating for around 90% of the time. When conditions are favorable, DLR increases transfer capacity, reducing congestion and improving system reliability without compromising security.
For ASEAN power systems, the opportunity may be even greater. Long rainy seasons and strong wind conditions can naturally cool transmission lines, meaning additional capacity that traditional static ratings may fail to capture.
Pham said reliability and transmission bottlenecks are “manageable,” adding that “energy transition is promising in the region.”
Policy frameworks shape industrial access to renewable electricity
As energy systems evolve, policy design is also emerging as a key factor shaping corporate access to renewable electricity. Both Vietnam and Thailand are experimenting with mechanisms intended to allow companies to procure clean power more directly.
In Thailand, the government recently approved a pilot Direct Power Purchase Agreement (DPPA) mechanism, allowing data centers with capacity exceeding 50MW to purchase renewable electricity directly from producers. Industry stakeholders expect the scheme to expand to other sectors in the future. Vietnam has also moved in a similar direction, establishing a legal framework for DPPA in March 2025.
Such policies are widely seen as essential for attracting multinational investment, particularly from companies with strict renewable energy requirements. “Clear and stable regulations like the DPPA are essential to support renewable energy deployment,” Pham said.
At the same time, Southeast Asian governments are increasingly exploring carbon pricing mechanisms. Thailand is considering a Climate Change Act that could introduce carbon tax policies, while Vietnam is also studying carbon pricing frameworks.
Regional public support for such policies appears relatively strong. The 2024 Southeast Asia Climate Outlook Survey by ISEAS found that about 70.4% of respondents across the region support the introduction of national carbon taxes, with support reaching 75% in Vietnam. However, Martinus raised concerns that questions remain regarding how carbon tax revenues should be used, particularly whether they should be reinvested into industrial decarbonization and energy transition initiatives. Policy certainty is crucial, telling business stakeholders the direction and ensuring carbon tax won't overburden industry competitiveness, Martinus added.
Industrial parks turn to rooftop solar and batteries
While waiting for policy development and transmission improvements, companies are increasingly pursuing distributed energy solutions to secure renewable electricity. Rooftop solar installations in industrial parks are expanding rapidly across both Vietnam and Thailand, allowing manufacturers to generate electricity directly at their facilities.
Industrial parks offer ideal conditions for such systems. Factory buildings typically provide large rooftop areas for solar panels, while production schedules often align closely with solar generation patterns during daylight hours. This means rooftop solar can supply a significant portion of electricity demand during normal operating periods.
Energy storage is also emerging as an important complement to solar power. Vietnam recently introduced capacity-based electricity tariffs that impose higher charges during peak demand periods. In response, many industrial users are exploring battery systems that can store electricity and discharge it during peak hours, helping reduce demand charges, Pham noted. These systems provide benefits both for companies and for power systems more broadly by smoothing peak demand and reducing the need for costly grid upgrades.
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The next phase of the energy transition and industrial strategy
Looking ahead, analysts say Southeast Asia’s energy transition will increasingly depend on system-level modernization rather than simply building more renewable capacity.
Energy storage, grid flexibility and digital technologies are likely to play growing roles in managing electricity systems with higher shares of solar and wind. Artificial intelligence could also help improve renewable energy forecasting, allowing system operators to predict generation more accurately and reduce the need for fossil fuel backup capacity, Pham said.
At the same time, he cautioned against overstating the technical challenges of integrating renewable energy in Southeast Asia’s power systems.
“A lot of people talk about the difficulties of integrating solar and wind into the grid,” Pham said. “But we’re not there yet. Renewable shares in most ASEAN power systems are still relatively low.”
Many of the integration challenges often discussed by policymakers and system operators typically emerge when solar and wind account for around 30% or more of electricity supply. Even then, solutions such as storage, grid upgrades and improved forecasting technologies are already being deployed in markets with much higher renewable penetration.
“In places like Australia, renewable supply can reach around 50% and the system still works,” Pham said. “So we shouldn’t focus only on the problems. There are already many solutions available.”
For Vietnam and Thailand, the evolving energy landscape highlights a broader shift in the way manufacturing competitiveness is defined. Both countries remain among Southeast Asia’s most industrialized economies and continue to attract large volumes of foreign direct investment, said Martinus.
But as global supply chains decarbonize, the ability to provide reliable and affordable clean electricity is becoming a key differentiator. Governments that can combine strong renewable resources, modern grid infrastructure and clear energy policies may gain a growing advantage in attracting the next generation of industrial investment.
'Vietnam vs. Thailand competitiveness' series
- Energy as a competitive lever: How Vietnam, Thailand compete for green manufacturing investment
- Energy as a competitive lever: How GreenYellow is building renewable energy solutions for manufacturers in Vietnam
- Energy as a competitive lever: WHAUP integrates green power and infrastructure for industrial growth
- Energy as a competitive lever: CCET navigates renewable opportunities and constraints in Thailand
- Why Vietnam’s rapid rise and Thailand’s slower growth tell different investment stories
- How Thailand and Vietnam’s power reforms will reshape corporate energy strategy
- Execution over incentives: Thailand and Vietnam’s structural investment shift
RECCESSARY’s upcoming webinar, “Beyond ASEAN: Mastering Decarbonization Strategy in Thailand & Vietnam,” will take place on April 21.
The session will unpack net-zero regulations, CBAM readiness, green power procurement strategies, and what lies ahead for low-carbon manufacturing across Vietnam and Thailand.
Seats are limited. Register now.
