Development of Battery Energy Storage Systems in Vietnam

Categorising BESS projects by application, integration and battery technology

BESS projects by application 

• Grid scale BESS can be used for frequency regulation, peak shaving (i.e. reducing demand during peak hours to lower grid stress or avoid high tariffs) and grid stability. The 750 kW BESS project at the PECC2 Innovation Hub in Ho Chi Minh City is an example of this.
• Commercial & Industrial (C&I) BESS can be used within large industrial facilities and data centers for demand charge reduction, back-up power and energy optimization. The 1,850kW BESS system installed at Vinpearl Nha Trang in 2024 is an example of this. 
• Off-grid/remote BESS are key for islands or rural areas that do not have reliable grid access. These are often combined with solar or diesel generators. The 630kW BESS project in Bach Long Vi Island in Vietnam is an example of this, which is charged through a mix of solar, wind and diesel generators.
• Residential BESS can be paired with rooftop solar projects for self-consumption and back-up. In Vietnam, these projects are currently in operation at a small scale only and are mostly for smaller individual households rather than large residential projects.

BESS projects by integration 

• Standalone BESS projects operate independently from generation sources and are used for grid services or back-up.
• Hybrid BESS projects are co-located with solar and wind projects and store excess generation for later use or to export power to the grid.
• Microgrid BESS projects are part of a localized energy system with generation and storage and can operate independently or be connected to the main grid. The 312kW BESS installed at EVNHCMC in 2023 is an example of this.

Battery technology

Lithium-ion batteries are the dominant type of rechargeable batteries used for BESS projects, including those currently in operation in Vietnam. The most commonly used cathode varieties in these batteries are lithium cobalt oxide (LCO), lithium manganese oxide (LMO), lithium iron phosphate (LFP), lithium nickel cobalt aluminium oxide (NCA) and lithium nickel manganese cobalt oxide (NMC). Graphite is currently widely used as the anode in lithium-ion batteries. 

Other types of battery technologies include flow batteries (which are useful for long duration storage and are scalable with a longer lifespan but have a lower energy density) and sodium sulphur batteries (which have good energy density but carry safety concerns due to being operated at high temperatures). Lead acid batteries also find use in off-grid and microgrid projects in remote areas.

BESS projects require significant capital for procurement, installation, and commissioning. Batteries constitute the largest share of construction costs relating to a BESS project (this could be 40-60%). Key items balance of plant items include installing a battery management system (BMS), a power conversion system to manage the AC/DC conversion, the energy management system (EMS) and the heating, venting and air conditioner (HVAC) and thermal management system. Transformers, switchgears, cabling and protection systems constitute other balance of plant components.  

Revenue structures for BESS projects

Long term arrangement 

A BESS project offers multiple revenue streams. A common revenue model for a BESS project is to secure income through long term arrangements - such as a tolling agreement, capacity market contracts or ancillary service arrangements - which can emerge as a viable commercial model in Vietnam. With a tolling agreement, the owner of the BESS project would lease out storage capacity of the BESS to an offtaker (e.g. Vietnam Electricity (EVN)). The offtaker can use the capacity of the BESS at its own discretion, for example, by charging the BESS during the night so that more electricity is available during the day. The owner of the BESS would manage and maintain the system, while the offtaker would have control over its operation, including charging and discharging of the BESS. A contractual revenue arrangement such as a tolling agreement provides for a stable and predictable income for the BESS owner on a VND/kW per month basis, regardless of any market fluctuations.

Trading on the electricity market

It would also be possible for a BESS project to earn revenue without entering into a long-term agreement. A BESS project is well suited to generate profits by trading on the electricity market by taking advantage of the of price fluctuations in this market. The BESS units ‘physically’ store the electricity during the period between purchase and sale. 

A framework around integrating BESS into the wholesale electricity market is under consideration by the MOIT, under which it can be expected that BESS projects would be allowed to participate in the wholesale electricity market by buying electricity during off-peak hours (low prices), selling stored electricity during peak demand (high prices), and also providing ancillary services like frequency regulation and spinning reserves. 

Vietnam has a day-ahead electricity market (DAEM) which is managed by the National Load Dispatch Center and supervised by the MOIT. Generators, retailers, and large consumers (≥1 MW) are eligible participants and BESS operators are expected to be included as flexible participants. It is however currently a single buyer model with EVN being the sole purchaser. Vietnam’s Wholesale Electricity Market (VWEM) came into operation in 2019 with a view to transitioning from a single-buyer model (where EVN was the sole offtaker) to a multi-buyer, multi-seller model. However currently the only buyers of power in the VWEM are EVN’s subsidiaries such as the Northern Power Corporation, the Central Power Corporation and the Southern Power Corporation. There is limited flexibility among this buyer group on negotiating prices or choosing suppliers independently. The legal framework for contract enforcement, dispute resolution and market monitoring is still evolving. As well, the information systems and data exchange platforms needed to support multiple buyers are still under development. Once the VWEM is liberalized, we can expect retail electricity companies (instead of EVN and its subsidiaries) purchasing power from the VWEM and selling it to end-users. This would incentivize development of BESS capacity. 

Tariff structures for BESS in Vietnam

A tariff structure for BESS projects is being developed by the MOIT, which would encourage BESS projects to use time-of-use pricing (to charge during low-demand, low-price periods and discharge during peak-demand, high-price periods). BESS projects could receive payments for available capacity, even if not dispatched.

Projects that integrate BESS with solar or wind projects may receive preferential tariffs or grid access priority (see Article 4 of Decree 58/2025/ND-CP).

It is relevant to note that the MOIT issued Decision No. 988/QD-BCT on 10 April 2025 on the pricing framework applicable to solar power projects. As per this Decision, in addition to a tariff for solar standalone power projects (without BESS), a separate tariff has been introduced for solar power projects that integrate BESS. 

Revenue stacking 

By combining multiple revenue streams from a single BESS project, the BESS can maximise financial returns by performing various functions simultaneously or in sequence, depending on market opportunities and technical capabilities. This can be achieved by reserving a set portion of the BESS capacity for each revenue stream.²  

Regulatory and policy framework

Noting that the regulatory and policy framework for BESS projects is under development, below are key regulatory requirements that we expect would be relevant to such projects:

• Generation license and other licenses: To develop and operate a power generation project in Vietnam, a generation license is required under the Law on Electricity and its guiding regulations. As above, the key requirements and procedures are outlined in Decree No. 61/2025/NĐ-CP of the Government and Circular 21/2020/TT-BCT of the MOIT. Decree No. 61/2025/NĐ-CP also regulates transmission licenses, distribution licenses, wholesale licenses and retail licenses. 
• Connection to the Power Grid: Grid connectivity requirements for power projects in Vietnam are governed by Circular No. 05/2025/TT-BCT, issued by the MOIT. This circular sets out the technical requirements applicable to the electricity transmission and distribution systems. 
• Fire safety: Vietnam requires environmental and fire prevention certification as a condition to grant of a generation license to a power project. Thus, it would be essential to obtain approvals on the plan for fire safety works before installation of BESS, to avoid occurrences of thermal runaway, i.e. when excessive heat is generated and accumulated within the battery (this can happen due to poor system design or mishandling, leading to the build-up of heat and flammable gas such as hydrogen).³

Bankability issues relating to BESS projects

Technology related risks

• The battery technology used in BESS projects carries risks relating to degradation and lifespan. Lithium-ion batteries degrade over time, typically lasting 5–15 years depending on usage and chemistry. Over time, batteries lose their ability to hold charge, reducing system efficiency and requiring costly replacements. This risk can be mitigated through degradation guarantees which guarantee minimum energy retention percentage at a certain rate of discharge across a certain portion of the life of the battery and monitoring round-trip efficiency (i.e. the ratio of the energy retrieved from the battery to the energy used to charge it). Damages would then be payable for shortfall in degradation. Performance guarantees and warranties from the battery manufacturer or supplier could also be used to cover replacement of defective components and the cost of doing the replacement (lenders to BESS projects may require these do be documented in a capacity maintenance agreement). Creditworthiness of the performance guarantor is a critical bankability consideration. 
• Obsolescence risk is a key issue in BESS projects. As battery technologies evolve, battery technology used in a BESS project may become outdated or unsupported before the end of the system’s expected life. Older batteries may not be compatible with newer BMS or EMS, among other issues. 
• Safety and fire risks are key technical risks relating to BESS projects. Lithium-ion batteries, which are most often used in BESS, carry the risk of overheating. Failures in HVAC or fire suppression systems can amplify these risks. This underscores the point above about compliance with fire safety regulations.
• A faulty BMS could lead to overcharging, deep discharging, or thermal issues in the BESS. Obtaining a performance guarantee and warranty from the BMS supplier and ensuring availability of spare parts and technical support agreements would help mitigate this risk. 
• Inverters and transformers associated with the BESS may fail under high load or due to poor design. This risk can be mitigated by, among other things, selecting grid compliant inverters and matching transformer ratings to inverted output and load profiles. 
• In the context of hybrid BESS projects, plant operating data is required as an input basis to accurately calculate the capacity of the BESS to be installed. For projects where the amount of capacity is reduced irregularly or for projects that want to install BESS from the beginning, there would be difficulties in optimizing BESS capacity.⁴

Supply risk

The core component of a BESS project is the battery. Thus having access to a robust battery supply chain is critical to the development of BESS capacity. Rapid growth in electric vehicles could strain battery production capacity. Moreover, geopolitical tensions and trade restrictions can disrupt battery supply chains and create risks for project development. Development of domestic battery manufacturing capacity is therefore critical. Vietnam has significant nickel and cobalt reserves, making the country well poised to become a key player in the global battery supply chain with government support and international cooperation. Notably, T&T Group, a major renewable investor with a portfolio of over 2,800MW across wind, solar, and LNG-to-power projects in Vietnam, recently announced a plan to launch joint-venture battery storage products in 2026, aiming to build Vietnam into a manufacturing and technology hub for renewable energy equipment.⁵ 

Grid connectivity 

Vietnam is still developing technical standards and interconnection requirements for BESS. Uncertainty in grid compliance testing and performance expectations risk delaying completion. Delays in obtaining permits and approvals for interconnection and coordination challenges with EVN and regional grid operators are further risks to be considered from a bankability perspective.

Permitting and approvals

The permitting regime for BESS is under development in Vietnam, which would supplement the items discussed inthe regulatory and policy framework section above. In addition, acquisition of land use rights for projects in general (not just BESS projects) is a key issue in Vietnam. Conversion of land use can be time consuming and bureaucratic, especially in areas that have unclear zoning laws. As well, opposition from local communities about safety, noise and land use is a key risk experienced by BESS projects in other markets such as Taiwan. Early engagement with local authorities and communities is therefore key to mitigate this risk.