Feed-in Tariff Mechanism and Renewable Energy Investment Incentives in Vietnam: Policy Analysis in the Energy Transition Period

Abstract

In the context of Vietnam’s commitment to achieving net-zero emissions by 2050, the Feed-in Tariff (FIT) mechanism has been implemented as a policy instrument to stimulate investment in renewable energy under conditions where the electricity market remains incomplete. This study analyzes the FIT mechanism in Vietnam during the period 2017–2023 from an institutional perspective and in terms of investment risk reallocation. Based on qualitative policy analysis combined with the synthesis of secondary data, the study finds that the FIT mechanism has reduced revenue uncertainty, improved the financial feasibility of renewable energy projects, and stimulated a rapid expansion in solar and wind power capacity. However, the design of relatively high fixed tariffs and strict time limits created an investment acceleration effect that exceeded planned capacity targets, resulting in grid congestion and increased pressure on system coordination. The study argues that while FIT is an appropriate policy instrument in the early stage of market development, it is inherently transitional and should gradually be replaced by competitive mechanisms and a fully developed electricity market within the broader context of the energy transition.