Despite impressive strides in power development - particularly renewable energy - Vietnam still faces a major challenge: low electricity use efficiency.

Recent data reveals a troubling gap between Vietnam and its regional peers when it comes to the amount of electricity consumed to generate economic value.

Vietnam's rapid power expansion leads ASEAN

According to EVN (Vietnam Electricity), Vietnam's total installed power capacity surpassed that of Indonesia, placing the country at the top of ASEAN. In 2023, Vietnam produced 280.6 billion kWh of electricity, just shy of Indonesia's 308.1 billion kWh. This demonstrates the country's heavy investment in energy to meet rising economic demands.

Notably, Vietnam also leads ASEAN in renewable energy capacity, especially solar and wind power. The country’s electricity sector has grown at one of the fastest rates in the region, underscoring its commitment to industrialization and energy independence.

However, efficiency tells a different story

While Vietnam’s total electricity output is strong, the efficiency with which that electricity is used remains low.

The following table compares electricity consumption per $1,000 of GDP among Vietnam, Indonesia, and the Philippines:

Vietnam consumes approximately 652 kWh to generate $1,000 in GDP - 2.8 times more than Indonesia and 2.4 times more than the Philippines. This inefficiency reflects a more energy-intensive and less productive economy.

Three main reasons for Vietnam’s low energy efficiency

Heavy reliance on energy-intensive industries: Sectors like steel, cement, and raw material processing dominate Vietnam’s economy. These industries consume large amounts of electricity but generate relatively low value-added output.

Outdated technology in production: Many Vietnamese firms still use inefficient and power-hungry production methods, reducing overall productivity and global competitiveness.

Ineffective pricing and energy-saving policies: Electricity in Vietnam is among the cheapest in the region. While this supports growth and improves living standards, it also discourages efficiency and investment in energy-saving technologies.

Solutions to improve electricity efficiency

To tackle this problem, Vietnam should:

Restructure its economy toward high-tech, service, and digital sectors that offer higher value with lower energy consumption.

Modernize production through adoption of energy-efficient technologies and sustainable practices across industries.

Reform pricing policy by introducing electricity rates that reflect actual costs and encourage energy saving, while supporting technological innovation with incentives.

Vietnam’s Power Development Plan VIII already outlines a long-term strategy, including expansion of renewables. However, the key now is not just generating more electricity, but using it smarter.

While Vietnam is in a critical phase of industrialization, prolonged inefficiencies could hinder its sustainability goals - particularly the Net Zero target. Improving electricity efficiency is crucial not just for boosting productivity and competitiveness, but also for reducing greenhouse gas emissions, protecting the environment, and improving quality of life.

Dr. Le Hai Hung - Director of the Institute for Research and Application of Technology (IRAT)