Vietnam’s ongoing review of its feed-in tariff (FIT) regulations has raised alarm within the renewable energy industry, with developers warning of severe financial consequences. Industry stakeholders have petitioned the National Assembly, claiming that state-owned enterprises have breached contractual agreements. They caution that 173 solar and wind projects face potential bankruptcy or market exit if the policy changes proceed.

A government investigation last year revealed miscalculations in FIT rates, particularly in Ninh Thuan province, where certain solar projects received non-compliant rates. This resulted in an additional financial burden of VND 1.48 trillion (USD 57.7 million) for Vietnam Electricity (EVN). Consequently, the Ministry of Industry and Trade (MOIT) has been instructed to revise and rectify the affected projects.

Major Tariff Cuts Threaten Industry Stability

Under Vietnam’s current framework, solar projects must receive approval from the Prime Minister and be listed in the National Power Development Plan (PDP8) to qualify for the 20-year preferential FIT rate of 9.35 cents per kWh. However, MOIT extended these eligibility criteria to provincial and regional projects, leading to incorrect FIT allocations for 173 solar and wind projects—some of which had already secured approvals. EVN now seeks to recover excess payments, prompting significant industry backlash.

With the revised policy, FIT rates for the affected projects will drop between 4.8 cents and 7.09 cents per kWh—a reduction of 24% to 47%. This change impacts over 3,600 MWp of solar capacity and 160 MW of wind capacity, placing foreign investors at risk of financial losses. Companies from Thailand, the Netherlands, Singapore, and China, including Dragon Capital and ACEN (Ayala Corp’s energy subsidiary), are among the affected investors, with total investments in jeopardy estimated at USD 13 billion.

Dragon Capital, which operates three renewable energy projects in Vietnam, reported zero revenue since September 2023 due to the FIT uncertainty. Nguyen Huu Quang, a portfolio manager at the firm, criticized EVN’s attempt to adjust FIT rates based on project completion documents, arguing that the move lacks legal justification.

Risk of Bad Debt Crisis Looms Over Banks

Industry leaders warn that the policy shift could trigger widespread financial distress, as rising costs and construction delays have already strained many renewable energy firms. The Vietnam Chamber of Commerce and Industry (VCCI) recently submitted a petition urging the government to reconsider the FIT revisions, emphasizing the risk of loan defaults. The industry estimates that bad debts could reach VND 200 trillion (USD 7.8 billion), potentially destabilizing financial institutions that financed these projects.

Bangkok Glass Energy (BGE), a Thai renewable energy firm, noted that initial investments were made based on the promised higher FIT rates, leading to high acquisition costs. If the reduced rates are enforced, investors could face heavy financial losses and, in some cases, bankruptcy.

Industry Awaits Government Response

With Vietnam’s interest rates already higher than those of neighboring Southeast Asian countries, developers argue that the revised FIT framework further disadvantages the sector. As affected companies push for policy reconsideration, all eyes are on the government’s next move to determine the future of Vietnam’s renewable energy landscape.