Vietnam’s Renewable Energy Policy Is Spurring Decarbonization of Global Brands

Take a look at the sneakers on your feet, or the gadget in your pocket. There's a good chance they were manufactured in Vietnam, one of the world's largest manufacturing hubs for global brands like Nike, Adidas, Apple and Samsung. As these companies make sweeping commitments to reduce their carbon footprints, successfully meeting those targets hinges on decarbonizing the businesses along the supply chains they rely on, much of which are also in Vietnam.

To illustrate, for fiscal year 2023, factories in Vietnam supplied 50% of Nike's footwear and 29% of its apparel. As of mid-2024, Nike has 155 factories in Vietnam, 71 of which produce garments for its apparel line. There are also 13 factories making sporting equipment and another 13 that produce footwear. Across these factories, more than 530,000 Vietnamese residents are employed by supply chain partners. This large matrix of businesses is not unique to Nike, it can be seen across many large consumer product companies operating in Vietnam.

Decarbonizing operations is now a business necessity for every sector driven by international government policies including those in Vietnam, the EU's Carbon Border Adjustment Mechanism, the U.S.'s Clean Competition Act, and increasing consumer demand for sustainable products. Vietnam's Decree No. 06/2022, following Decision No. 01/2022, mandates greenhouse gas inventories for sectors like energy, construction, waste management, manufacturing and agriculture.

In parallel, the country's leadership set bold climate targets in 2020, including a commitment to reach net-zero carbon emissions by 2050. This target includes milestones such as increasing the share of renewable energy in the national energy mix up to 39.2% by 2030. These twin pressures - from global standards and Vietnam's own sustainability ambitions - have set the stage for innovative companies to help pioneer policies that can help decarbonize one of the world's most critical manufacturing hubs.

Transitioning toward renewable energy not only aligns companies with decarbonization objectives but also promises substantial economic advantages. Since 2010, the cost of renewable energy technologies - including solar and wind - has steadily declined. Remarkably, in Vietnam, these alternative energies have already become cost-competitive, and in some cases, even more cost-effective than traditional fossil fuel-based energy sources. For example, the cost of utility-scale solar is now estimated from $0.0218/kWh to $0.0316/kWh, according to S&P Global data compiled in July 2024. For comparison, the average production and purchase cost of electricity for Vietnam Electricity (EVN) (with coal-fired and gas-fired power accounting for 55% of total electricity generation) is around $0.0882/kWh in 2023. This cost competitiveness is a crucial driver for the adoption of renewable energy in Vietnam.

Solar panel fields share land with rice fields in Vietnam's border region. Photo by Thoai Pham / Alamy Stock Photo.

A New Catalyst for Accelerating Renewable Energy Adoption

Businesses in Vietnam can further accelerate their use of renewable energy thanks to a new policy framework called the Direct Power Purchase Agreement (DPPA). After more than five years of advocacy and development with 15 draft versions of the regulation since its conception, the DPPA rules (Decree 80/2020/ND-CP) were released in July 2024), allowing large electricity consumers to directly purchase renewable energy from generators. The DPPA rules represent the first break away from Vietnam's monopoly power market, allowing consumers to bypass Vietnam Electricity (EVN), the state power purchaser, and support the revival of the struggling renewable energy market.

The DPPA mechanism could also be a solution for many renewable energy projects that have failed to enjoy the government's Feed-in Tariff (FIT) price mechanism that provides a 20-year fixed-electricity price. DPPA is therefore unlocking groundbreaking opportunities for Vietnam's corporate sector to transition to cleaner energy, too.

Vietnam's final decree on DPPAs introduces two mechanisms for connecting renewable energy providers with large electricity consumers: Physical DPPA (connection through private lines) and virtual DPPA (connection through the national grid).

• Physical DPPA: Power generators and consumers are connected through private lines, allowing them to negotiate commercial power purchase agreement terms directly set out in Decree 80, including rights and obligations, electricity price, payment, term, termination and defaults. While all types of renewable energy technologies are permitted and no limitation on generator's capacity, the cost of private lines must be borne by the power generators and consumers without any support from EVN.
• Virtual DPPA: This mechanism connects power generators and consumers through the national grid, facilitating the development of large-scale generators with limitation to only solar and wind projects at least 10MW. Generators must comply with relevant master plans to avoid worsening grid capacity issues. In addition to a retail power agreement, consumers enter into a Contract for Difference with power generators.

Corporate Commitment to Renewable Energy Adoption

Adopting renewable energy through DPPA showcases a company's commitment to sustainable practices and reduces its manufacturing carbon footprint. Additionally, it provides businesses with greater stability in long-term financial planning due to fixed prices over a committed period, in contrast to the fluctuating fossil-fuel pricing. Clean energy participation extends beyond sustainability to include energy security concerns that could impact production, too.

According to a survey conducted by Vietnam's Ministry of Industry and Trade at the end of 2023, around 20 large companies wanted to purchase electricity directly, with a total demand of nearly 1,000 MW. Besides, 24 renewable energy projects with a combined capacity of 1,773 MW wanted to sell power through DPPA, while 17 others with a combined 2,836 MW said they are interested in the mechanism, the survey found. That means the total capacity of 5,609 MW has the potential to be exchanged through the DPPA mechanism, equivalent to one-quarter of Vietnam's total renewable energy capacity in 2023 (21,664 MW).

Multinational firms in electronics, semiconductor, textile as well as consumer product sectors in Vietnam are among those already leading the demand for clean energy procurement:

• Samsung: Samsung Vietnam currently operates six manufacturing plants and one research center with a total investment of $8 billion. Samsung Vietnam's exports account for nearly 14.8% of the country's total export value. According to Samsung Chairman Lee Jae Yong, the group plans to significantly invest in Vietnam over the next three years, with the goal of turning its factories into the largest global module production hub. In practice, Samsung Electronics has relied on unbundled renewable energy certificates actively engaged with the Vietnamese government during the DPPA's policy-making process and expressed its desire for the Vietnamese government to increase the proportion of renewable energy used at reasonable costs.
• Nike: Vietnamese companies remain the largest supply chain partners for Nike Inc., producing half of the company's global output. With an aim to achieve 100% renewable electricity by 2025, Nike purchased 4,070 renewable energy certificates and generated 594 MWh from its onsite rooftop solar in 2023. The company is also actively engaging with its outsourcing manufacturers to adopt rooftop solar. For instance, in May 2023, one of its sports shoe manufacturers, Golden Victory, announced a 20-year agreement with Total Energies Eneos, a solar energy provider, to install 4.6 megawatt-peak (MWp) of rooftop PV.
• Lego: The Lego Group is investing more than $1 billion to build a new factory in Binh Duong province. The site will feature 7.4 MWp rooftop solar PV and 50 MW ground-mounted solar on adjacent land to meet its total energy demand. To ensure the factory can be declared carbon-neutral, the full implementation of the DPPA scheme will be essential. The factory is expected to become operational later this year.

An illustration of the new Lego factory in Bihn Don, Vientam, which is scheduled to be completed in 2025, shows how solar panels will be located over its parking areas and on rooftops across the new campus. Photo by The Lego Group.

Lessons Learned from the DPPA Advocacy Process

The DPPA is a product of dedicated advocacy by organizations such as USAID Vietnam Low Emission Energy Program and the Vietnam Business Forum, which worked closely with Vietnam's Ministry of Industry and Trade. Other organizations, such as WRI and its associated platforms like the Clean Energy Investment Accelerator and the Asia Clean Energy Coalition, were also involved in multiple stages of this advocacy journey.

DPPA's development provides valuable lessons that can inform renewable energy policy in other regions and sectors striving to make significant strides in energy transition. The six-year journey of the DPPA underscores the need for a patient approach in the form of long-term commitment and investment in on-the-ground engagement capacity. This includes building relationships with key stakeholders, understanding the local regulatory environment and continuously advocating for the policy through various stages of development. The DPPA's release demonstrates that transformational change often requires persistent efforts and the ability to navigate complex political and economic landscapes.

Amplifying the Consumer Voice: The Role of Global Brands

Global brands and large energy end buyers play a vital role in policy advocacy by working together and collaborating cohesively. The collective voice of these energy consumers can significantly influence policymakers and drive the adoption of renewable energy policies. In the case of the DPPA, the involvement of multinational corporations such as Samsung, Apple, Nike, Heineken and Google - top foreign investors in Vietnam with significant contribution to the country's economy - were instrumental in advocating for the policy. These companies actively supported the framework through public statements and direct communication with the government, persuading policymakers to move forward with this initiative.

A Nike label inside a shoe reads "Made in Vietnam." Factories in Vietnam supplied 50% of Nike's footwear and 29% of its apparel. Photo by bincidaphoto / Alamy Stock Photo.

Collaborative Approach in International Cooperation and Multilateral Alignment

International cooperation and multilateral alignment with global initiatives will remain essential in Vietnam. The approach includes being responsive to what government decision-makers and institutional bodies communicate as their needs and gaps to address.

International actors have played a vital role in Vietnam's policy development by supporting the government with resources including technical assistance, funding and multi-stakeholder consultations, which were crucial in shaping the DPPA framework.

The Road Ahead: Sustaining Momentum for Vietnam's Renewable Energy Goals

Despite the significant progress made with the DPPA, more work is needed to allow the policy to help corporations and industries decarbonize their electricity use and contribute to Vietnam's renewable energy transition. That includes populating a clear and detailed guideline for immediate application, monitoring DPPA charges and associated fees, aligning market operations and master plan of Power Development Plan VIII, promoting technological innovation in grid capacity and enhancing the regulatory environment to support renewable energy investments.

The DPPA's development highlights key lessons in successful renewable energy policy advocacy. Patience and sustained engagement over the long term, amplifying the voice of large energy consumers and fostering collaboration among international actors are all critical factors in driving meaningful policy change. The same global brands that rely on Vietnam for manufacturing have now become vital players in pushing for renewable energy solutions, showcasing the growing intersection between economic and environmental goals.

As Vietnam continues its journey toward a sustainable energy future, the lessons from the DPPA will guide the road ahead. Just as Vietnam has cemented its place as a manufacturing hub for the world's most iconic brands, it now stands poised to become a leader in the global renewable energy transition.

Editor's Note: Google, which is briefly referenced in this article, is a member of WRI's Corporate Consultative Group (CCG) and supports other parts of WRI work. The company did not influence the substance of this article.