As Iran war drives up prices, solar could cut Vietnam’s imports by nearly $600m

Solar power could help Vietnam avoid a total US$594 million from potential coal and gas imports, as prices for both commodities soar from the Iran conflict, which would help fund healthcare for about 2.2 million citizens annually, new analysis showed on Monday.

These savings comprise US$49.3 million from gas import costs and US$545.4 million from coal imports.

Southeast Asian countries like Vietnam that are currently meeting power demand through imports could shield themselves from high prices and support future energy security by pivoting to solar and wind, analysts at Zero Carbon Analytics (ZCA) said in the new research.

“Vietnam could be relatively shielded from increasing global coal and gas prices compared to its ASEAN neighbours thanks to its higher use of solar power,” they said.

This pivot to more renewable generation is a “potential solution for other ASEAN countries looking to shield themselves from the price volatility of imported fuels. Such a shift makes economic sense: solar power is already the cheapest source of power generation, especially compared to gas, in Malaysia, Thailand and the Philippines,” they added.

ZCA pointed out that the cost of batteries hit record lows in 2025. “This strengthens the economic case for building out solar power to meet rising energy demand,” they said, especially since batteries provide an increasingly “viable solution to the intermittency of solar power.”

“In a moment when global energy prices are rising sharply as a result of geopolitical events, it also makes sense to plan now for future energy security – ensuring that energy is cheap and stable at home despite global disruptions,” they stressed.

Vietnam has the highest share of renewable power generation in Southeast Asia, with about 13% of its total power produced from solar and wind as of 2024, ZCA said.

Compared to the ASEAN-5 countries — that’s to say, Indonesia, Thailand, Malaysia, the Philippines and Singapore — Vietnam also saw the largest and fastest solar growth between 2018 and 2024, mainly supported by feed-in tariff policies, it added.

Strait of Hormuz

The U.S.-Iran escalation and disruption to shipping through the Strait of Hormuz has pushed LNG and gas prices higher since the conflict threatened flows through a route that carries a major share of global LNG trade, especially to Asia. Around 80% of Qatari LNG production is sold to buyers in the Asia-Pacific region.

Energy prices in Asia are soaring as a result of the war. Asian LNG prices reached US$16 per million British thermal units on March 11th, up 49% from February 27th, a day before the war broke out. Meanwhile Newcastle coal futures, the Asian benchmark, soared as much as 9.3% to $150 a ton a week ago, according to a Bloomberg report.

Higher global fossil fuel prices increase power generation costs by raising the operating costs of coal and gas power plants, ZCA said, warning that for Asian countries with highly regulated markets, the government “will have to absorb these extra costs, putting pressure on reserves and public services. In countries where generation costs are passed on to consumer power bills, like the Philippines and Thailand, this could mean higher electricity bills for the population.”

Rising energy prices could also “push up inflation in Asia, especially in countries with high energy imports, as was seen during the last energy crisis in 2022. That could mean countries like Thailand and Singapore, the top importers of crude oil and LNG in Southeast Asia, are especially vulnerable,” the analysis added.

However, countries with a higher share of solar and wind power in their energy mix, such as Vietnam, should be more insulated from rising energy prices, ZCA said.

Fossil fuels

Despite progress with adding solar power, Vietnam’s power mix continues to prioritise fossil fuels, which is slowing the transition and the savings it could bring, the ZCA analysis cautioned.

Coal made up 50.3% of Vietnamese power generation in 2024, around half of which was sourced from imports in a trend that shows “no sign of slowing,” they said, adding: “Vietnam led Southeast Asia’s coal import demand growth, as coal imports hit a record high in 2025.”

Under its revised Power Development Plan (PDP8), Vietnam also aims to develop 22.4 GW of LNG-fired power by 2030, which would represent almost 15% of total power generation.

The country started importing LNG in 2023, and signed its first multi-year supply contract with oil and gas major Shell earlier this year.

“This shift towards LNG imports on top of existing coal imports means Vietnam will source more than a third of its power from imported fuels by 2030. This represents significant exposure to global price shocks, such as is underway now,” ZCA warned.

“Future energy security is better served by prioritising solar and wind in its power mix over LNG and coal. Previous conflicts, such as the Ukraine war in 2022, have already shown that LNG is especially vulnerable to price shocks,” the research group added.

(Writing by Sophie Davies)