The European Union announced a €430 million package to help Vietnam build a major energy storage project that will support the country’s shift away from fossil fuels, officials revealed during the Global Gateway Forum in Brussels.
The funding backs the Bac Ai Pumped Hydro Storage Project, one of the largest energy transition investments under Vietnam’s Just Energy Transition Partnership co-led by the EU and UK. European Commissioner Jozef Síkela met with Vietnamese deputy Prime Minister Bùi Thanh Sơn to finalize the deal. The project will provide grid stability and help Vietnam integrate more renewable energy into its power system. Team Europe brings together multiple development finance institutions to deliver the coordinated investment.
Vietnam relies heavily on coal for electricity generation but faces growing pressure to reduce emissions while meeting rising energy demand from its expanding economy. The country committed to net-zero emissions by 2050 but needs massive infrastructure investments to make the transition work. Pumped hydro storage acts like a giant battery, using excess renewable energy to pump water uphill during peak production times, then releasing it to generate electricity when solar and wind power drop off. This technology helps solve one of the biggest challenges with renewable energy – storing power for when it’s needed most.
Commissioner Síkela called the Bac Ai project “a cornerstone of our joint efforts to build a cleaner, more reliable energy system that supports sustainable growth and attracts private investment.” He said it shows Team Europe’s determination to deliver concrete results through the Global Gateway strategy. The project applies high standards and aims to build long-term partnerships that drive sustainable infrastructure investment. Vietnam’s power grid needs this kind of flexibility to handle large amounts of renewable energy without causing blackouts or instability.
Team Europe for this project includes the European Union, France’s development agency AFD, the European Investment Bank, Germany’s development bank KfW, Italy’s CDP, and PROPARCO, which focuses on private sector investment in emerging markets. The EU’s financial commitment to Vietnam runs at least €293 million for 2021-2027, while EU institutions and member states contribute over €2.8 billion to the Just Energy Transition Partnership. Additional regional support focuses on green transition and electricity connectivity through the ASEAN Power Grid.
The announcement comes as Vietnam works to balance economic growth with environmental commitments made under international climate agreements. The country has abundant renewable energy potential from solar, wind, and hydropower but needs modern grid infrastructure to tap into these resources effectively. European officials see Vietnam as a key partner in Southeast Asia for demonstrating how developing countries can pursue clean energy transitions while maintaining economic development momentum.
