Issuance of Decree 56 Implementing the 2024 Electricity Law: Power Development Plan and Investor Selection

Introduction

The Vietnamese government has issued a series of decrees to implement the 2024 Electricity Law (“Electricity Law“)[1], one of which is Decree No. 56/2025/ND-CP of the Government dated 3 March 2025 elaborating the Electricity Law pertaining to power development plan, grid development strategy, investment of power projects and tendering process for selecting investors in power projects (“Decree 56“).

Decree 56 took effect from the date of its issuance. Decree 56 has replaced/revoked a number of articles of Decree No. 115/2024/ND-CP of the Government dated 16 September 2024 detailing a number of articles and measures to implement the Law on Bidding on selection of investors to implement investment projects using land (“Decree 115“).

This Update provides a summary of the key features of Decree 56 only in respect of power development plan and tendering process for investor selection in power projects, and how the Decree interacts with the Power Development Plan 8[2] (“PDP8“) which is currently undergoing revisions, and the existing bidding regulations on investor selection for projects, including energy projects, using land under Decree 115.

Key Features of Decree 56

Decree 56 elaborates on specific articles of the Electricity Law on power development plan, investment projects, selection of investors and related matters (e.g. Articles 8.3, 10.5, 12.1, 12.2, 12.4, 13.4, 14.2, 17.5, 19.1, 19.3 and 81.1), providing clarity on implementation of those articles. Decree 56 amends Article 14.1 of Decree 115 regarding the inclusion of the draft power purchase agreement (“PPA“) in the bidding dossier, Article 19.2(d) on the value proposed by an investor on the effectiveness of the investment, and Article 49.2 on the evaluation criteria for investment efficiency in developing industries, fields and localities. Decree 56 also amends and supplements Appendix III, section II, clause 7(a) of Decree 115 to detail the factors constituting the value proposed by the investor, and revokes Article 70 of Decree 115 guiding bidding matters for energy projects.

1. Scope and Application

Decree 56 regulates the following matters: (i) power development plan; (ii) grid development strategy; (iii) investment in power projects; and (iv) the tendering process for selecting investors in power projects. Decree 56 applies to agencies, organisations, and individuals involved in or related to power planning and investment activities.

Decree 56 outlines, among others, the competitive bidding process for selecting investors in power projects, such as power generation and grid development. This applies to projects within the national power development framework, i.e, those under the PDP8 and subsequently, its revised version. Decree 56 outlines the requirements and procedures for tendering power projects, including the eligibility criteria, bidding timelines, and evaluation standards, with the objective of ensuring transparency and fairness.

2. Power Development Plan and Grid Development Strategy

• • Alignment with PDP8: Investors must align their project proposals with the approved power development plan, which can either be under the PDP8 and its incoming revised version, or a relevant provincial development plan. This includes compliance with capacity targets, energy mix priorities (e.g. renewables vs. fossil fuels), and grid integration requirements. Projects outside the approved power development plan require special justification and approval, which would limit speculative or off-grid ventures.

• • Criteria to determine the scale and capacity of power source and grid voltage level under the approved power development plan (e.g. PDP8 and subsequently, its revised version). These are as follows:
    • total installed capacity of power sources of the national power system according to the structure of each type of power source, including the storage system but excluding the electricity storage system combined with renewable energy power sources; total installed capacity according to the structure of each type of power source of each locality;
    • power source has an installed capacity of 50 MW or more and the power grid is synchronously connected to this power source;
    • power source has an installed capacity of less than 50 MW and the power grid is synchronously connected to this power source from the voltage level of 220 kV or more; and
    • electromagnetic power grids with a voltage of 220 kV or more.

• • Criteria to determine the scale and capacity of power source and grid voltage under the grid network development strategy under a provincial development plan. These are as follows:

• • • power source has an installed capacity of less than 50 MW and the power grid is synchronously connected to this power source from the voltage level of 110 kV or less;
    • power grid with a voltage of 110 kV;
    • estimated total scale of medium-voltage power grid; and
    • scale of power sources and power grids in the province has been determined in the provincial electricity development planning.

3. Investment of Power Projects

• • Alignment with broader legal frameworks: Decree 56 requires that investment in the construction of power projects must comply with laws on planning, investment, construction, environmental protection, electricity, and other relevant regulations.

• • LNG priority: Decree 56 requires the prioritisation of the development of a centralised LNG storage and port infrastructure with large-scale capacity, along with a pipeline system to supply degasified LNG from central LNG terminals to thermal power plants, to optimise shared infrastructure.

• • Milestones of power project investment per phase’s objectives as stipulated in Article 12.1 of Electricity Law, including: (i) the issuance of the project investment decision; (ii) the commencement of the main project works; (iii) the commissioning of the project into operation; and (iv) other relevant milestones specified under the Investment Law. These milestones must be stipulated in the Investment Registration Certificate or the document approving the investment policy of the power project.

• • Principles relating to fuel cost pass through to electricity prices and minimum long-term contracted power output (in Vietnamese: sản lượng điện hợp đồng tối thiểu dài hạn) for gas-fired thermal power projects as stipulated in Article 15 of Decree 56:

• • • General principle: Gas-fired thermal power projects are subject to policies ensuring (i) energy security, and (ii) balancing national interests and buyer and seller benefits, depending on the competitive electricity market’s development stage.

• • • Fuel Cost Pass-Through Principles:
      • Fuel prices in PPAs are based on the supply price at the power plant, calculated as a weighted average if multiple fuel contracts exist.
      • For plants with LNG import infrastructure (terminals/pipelines), sellers can recover reasonable costs via PPA pricing, avoiding duplication with fuel supply costs.
      • For plants using shared LNG infrastructure, fuel prices include imported LNG costs (at Vietnam’s port) plus storage, regasification, transport, and distribution fees, with the Ministry of Industry and Trade (“MOIT“) setting these service fees. 

• • • Minimum Long-Term Contracted Output Principles in PPAs: 
      • For domestic gas projects: Maximum output per gas supply capacity and technical constraints.
      • For imported LNG projects: At least 65% of average multi-year output, applied during loan repayment (up to ten years post-commissioning); post-repayment output is negotiated per relevant regulations
      • Average output is determined according to MOIT guidelines.

• • • Applicability of the Principles (post acceptance of project completion by competent authority): 
      • LNG projects operational before 1 January 2031; and
      • Domestic gas projects operational before 1 January 2036.

• • • Buyer and Seller Responsibilities: 
      • Negotiate minimum output and duration; and
      • Sellers to provide accurate technical, economic, and financial data for PPA negotiations.

• • • • National Grid and Market Operator Duties: 
        • Plan and operate within the competitive market, ensuring compliance with the relevant laws and regulations.
        • Coordinate with buyers/sellers for efficient dispatch of gas-fired plants.

• • • • Private Public Partnership (PPP) Projects: Gas-fired Build-Operate-Transfer (BOT) projects may opt to apply the above principles, duties and responsibilities. 

4. Bidding to Select Investors

• • Projects requiring investor selection via bidding:

• • • Projects under Article 19, Clause 1 of the Electricity Law[3], and those included in the PDP8 (or subsequently, its revised version) or provincial master plan in the same period, must undergo bidding if two or more investors express interest. These include gas and coal-fired thermal power projects, and renewable energy projects (i.e. solar, wind, hydropower, biomass).
    • Bidding follows the Law on Bidding and the specific requirements set out in Decree 56.

• • Bidding process and specific requirements in bidding documents:

• • • For projects in approved plans (i.e. under PDP8 or subsequently, its revised version, and its implementation plan), Electricity of Vietnam (“EVN“) (or its authorised units) and the regional power enterprises are responsible for purchasing electricity as required by competent authorities or bidding organisers.

• • • The competent authority designates the electricity buyer to sign the PPA with the selected investor.

• • • The bidding documents that must be submitted include: (i) buyer information; (ii) legal bidding documents; (iii) pre-feasibility study; (iv) draft PPA; (v) localisation requirements; and (vi) investment protection measures (per Article 15 of Decree 56 on principles for fuel cost pass through electricity prices and minimum long-term contracted power output).

• • • Costs for surveys and pre-feasibility studies:
      • Borne by the investor if self-proposed; otherwise, by the competent authority (to be reimbursed by the selected investor).
      • Non-reimbursable if no investor is selected or the project is halted. 

• • Criteria for evaluation of efficiency:

• • • For projects that are within a MOIT’s price range for a generation source, evaluation is based on electricity price:
      • The ceiling price set by MOIT for the respective generation source is the ceiling price in the bidding invitation;
      • The bid price shall not be higher than the ceiling price; and
      • The winning price is the cap to be used for PPA negotiations. 

• • • For projects that are not within a MOIT’s price range for a generation of source, evaluation is based on the minimum contribution to the annual budget of the State or province proposed by the investor (independent of other tax obligations), with payment terms specified in the project contract.

• • Negotiation and execution of PPAs:

• • • The maximum time for approving feasibility studies from the date of the execution of project investment contract is set out below.
      • 15 months – for hydropower, gas/coal thermal, and wind projects; and
      • six months – for biomass and solar projects. 

• • • PPA negotiation and signing (which may take up to three months) follow bidding results and approval of feasibility studies.

• • • The buyer and winning investor must ensure timely PPA signing to meet power development and electricity supply security timelines. 

Transitional Provisions 

Decree 56 contains the following transitional provisions:

• • Projects in approved plans (i.e. under PDP8 or provincial development plans): Power projects already included in the power development plan or its implementation plan with capacities aligned with the provincial grid network development strategy (as noted above), will proceed as per prior approvals. These projects will be updated in provincial development plans upon their revisions (if any) following the effectiveness of Decree 56 (i.e. 3 March 2025).

• • Medium and low voltage grid projects: Projects with valid investment registration submissions that have been accepted or adjusted before the coming into operation of Decree 56 (i.e. 3 March 2025) will continue under existing investment regulations.

• • Power business projects requiring bidding:

• • • If bidding documents have not been issued by Decree 56’s effective date (i.e. 3 March 2025), compliance with Decree 56 is required.

• • • If bidding documents were issued under Decree 115 but investor selection has not yet been approved by 3 March 2025:
      • If bidding documents are received by 3 March 2025, evaluate them based on the issued documents.
      • If no bidding documents are received by 3 March 2025, the bidding authority may extend the deadline but the bidding authority must amend the bidding documents in compliance with Decree 56.

Some Implications on PDP8 and Investor Selection

Decree 56 directly supports PDP8 by providing a legal framework to operationalise its goals. For instance, it ensures that power planning aligns with PDP8’s targets, such as increasing renewable energy capacity (e.g. solar, wind, and hydropower) and modernising the grid.

The provisions of Decree 56 on tendering and investor selection are pivotal for Vietnam’s energy market, which has historically relied on state-owned enterprises like EVN and negotiated contracts, rather than open competition. It could somewhat reduce favoritism in project allocation, a persistent critique of Vietnam’s energy sector.

By mandating a bidding process, Decree 56 aims to level the playing field, attracting private and foreign investors who have been wary of opaque regulations. This aligns with the call under PDP8 (and its incoming amendments) for private sector participation to meet the national projected capacity by 2030.

Conclusion

Decree 56 is a timely step to operationalise Vietnam’s ambitious energy transition under PDP8, which is being amended and would likely to be issued soon. It bridges legislative intent with actionable policy, particularly in planning and investor engagement. However, it remains in question whether it sufficiently addresses market dynamics, such as pricing reforms or subsidies, which are critical for renewable energy growth. The establishment narrative often shows such decrees as transformative, but without tackling underlying issues (e.g. EVN’s monopoly or land-use conflicts), progress could stall. Its real impact will emerge in implementation, not just on paper.

If you have any queries about the above, please feel free to contact any of our team members set out on this page.

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[1] Please see our December 2024 Legal Update titled “Vietnam’s New Electricity Law” for the key features of the Electricity Law.

[2] PDP8 was approved pursuant to Decision No. 500/QĐ-TTg of the Prime Minister dated 15 May 2023, which sets out Vietnam’s roadmap for energy development from 2021 to 2030, with a vision extending to 2050. PDP8 is currently undergoing revisions.

[3] Except for offshore wind power projects as stipulated in Article 29.3 of the Electricity Law.