Vietnam's I-REC market sees lower prices in 2024 amid supply glut

The overwhelming supply of Vietnamese International Renewable Energy Certificates in 2024 amid several new market participants registering renewable energy projects for issuance led to a consistent fall in prices throughout the year.

Market participants are mixed about the I-RECs prices in 2025, with some optimistic about a price rise, and few saying wind/solar I-REC prices may fall.

Vietnam has the lowest I-REC prices in Southeast Asia, while simultaneously achieving the highest issuance numbers in the region, according to I-TRACK Foundation.

Vietnam issued a total of 8,258,636 MWh of I-RECs in 2024, a significant figure compared to Thailand at 2,427,610 MWh and Malaysia at 5,631,520 MWh.

Total issuance figures for current year Vietnamese I-RECs in 2024 increased 28.62% compared to 2023, while redemption figures experienced a 33.16% rise.

Most issuance and redemption activities occurred in the fourth quarter of 2024, amounting to 5.215 TWh and 939,812 MWh, respectively.

The increase in market activity is attributed to power generators, consultants, and end-users issuing and redeeming their I-RECs in the I-TRACK registry before the year's end.

Fall in hydro I-REC prices

Issuance figures for hydro I-RECs in 2024 reached 3,794,145 MWh, nearly seven times higher than redemption figures at 539,853 MWh, according to data from the I-TRACK Foundation.

Market participants have consistently noted the lack of demand and oversupply of hydro I-RECs.

Several sources indicated traders and buyers are showing greater interest in wind/solar I-RECs over hydro I-RECs, primarily due to RE100 requirements.

RE100 is a coalition of over 400 international companies committed to exclusively using renewable energy. Effective January 2024, the initiative mandates that sourced electricity must come from power generation facilities that are less than 15 years old. This effort aims to stimulate new investments in renewable energy, including hydropower, and to reduce CO2 emissions.

"There is a risk when it comes to purchasing hydropower I-RECs, and corporates are hesitant, despite their low prices," stated a Vietnamese trader.

Platts assessments for current year hydro I-RECs closed at 26 cents/MWh Feb. 19, 2024, with offers ranging from 25-30 cents/MWh, but they fell 15.38% to 22 cents/MWh by Dec. 31, 2024, S&P Global Commodity Insights data showed.

Market preference for 'greener' wind/solar I-RECs

Wind/solar I-RECs are more popular in the Vietnamese renewables market, with several end-buyers and traders requesting them for their sustainability portfolio due to it being "greener" compared to hydro I-RECs.

However, the demand for wind/solar I-RECs has not kept pace with its overwhelming supply.

In 2024, a total of 4.464 TWh of wind/solar I-RECs were issued, with redemption figures at 1.564 TWh, indicating a substantial amount of current year wind/solar I-RECs remaining unredeemed in the market.

Platts assessed current year wind/solar I-RECs at 74 cents/MWh Feb. 19, 2024, with offers as high as 75 cents/MWh, Commodity Insights data showed. However, prices fell to 47 cents/MWh or 36.49% by Dec. 31, 2024, with the highest offers at 55 cents/MWh.

Policy changes in 2024

Vietnam's Direct Power Purchase Agreement (DPPA), launched July 3, was a long-awaited development in the renewable energy sector, enabling renewable energy generation companies to sell power directly to large consumers.

This is expected to stimulate private sector investment and drive economic growth by aligning corporate emission reduction goals with Vietnam's clean energy and investment objectives.

For the first time, Renewable Energy Certificates were mentioned in the decree. RECs belonging to generators are to be bundled with the power price and transferred to large customers or zone electricity retailers, although regulations regarding environmental attributes remain unclear.

However, policy experts do not anticipate immediate impacts from RECs.

"There are still elements in the DPPA's regulatory system that need to be finalized, which will be crucial for addressing infrastructure constraints," a Vietnam-based consultant said.

Additionally, the Vietnamese General Department of Taxation issued Official Letter 4665/TCT-CS on Oct. 23, 2023, stating Value Added Tax will be imposed on RECs.

Through the government's VAT reduction package in Decree 72/2024/ND-CP, from July 1, 2024, to Dec. 31, 2024, VAT rates for REC transactions will be reduced to 8%. However, there are no specific regulations yet regarding whether the 8% tax rate will continue or revert to 10%.