New Policies Aid 25-fold Jump in Rooftop Solar Installations in Vietnam: IEEFA

A new IEEFA note details that there are now over 101,000 rooftop solar systems deployed over residential, C&I premises across Vietnam

A new research note from IEEFA details that as of December 31, 2020, the closing date for eligibility to the second solar feed-in-tariff program, a total of 9.3 gigawatts peak (GWp) (or 7.4 GW) of rooftop solar capacity had been connected to the national power system of Vietnam, as per the state utility Electricity of Vietnam (EVN). Meaning that there are now over 101,000 rooftop solar systems deployed over residential, commercial and industrial premises across the country.

These figures beat even the wildest expectations. Marking a 25-fold increase in installed capacity compared to just a year earlier, the massive escalation is the result of an April 2020 policy decision that awarded rooftop solar projects a feed-in-tariff of 0.084 US cent per kilowatt-hour over a 20-year period. With the aim of incentivising distributed generation assets that don’t require additional land resources or transmission lines, the tariff was markedly higher than those granted for floating or ground-mounted solar farms, at 0.077 and 0.071USc per kWh, respectively.

However, this is not the first time the local renewable energy industry has proven the skeptics wrong. Vietnam made an impressive debut onto the regional sustainable energy landscape in 2019 when it delivered 4.5 GW of utility-scale solar power capacity in less than two years. Today, at 16.5 GW, solar power has penetrated a quarter of the national power system, according to EVN. Rooftop Solar Vietnam

Similarly, a considerable part of the wind power pipeline, which currently stands at 11.8 GW with a further 6.6 GW likely to be confirmed soon, is expected to be delivered by the end of 2021.

The note discusses how investors have shown solid commitment and resilience through the disruptions caused by the COVID-19 pandemic. The growing pipeline of projects and merger and acquisition announcements are proof of their confidence in the market outlook and Vietnam’s broader economic prospects. More importantly, the several gigawatts of new solar capacity is a testament to the fact that renewable energy investors can deliver in this fast-paced market.

Renewable energy investors in the country are sending clear messages across the system:

First, that coal power project developers are facing a losing game. Last year, only 1.2 GW of new coal power capacity was added to the grid, from projects that took years to plan and complete. This performance compares very unfavourably to the rapid completion times that renewable energy players have achieved. The past two years have shown regulators that solar power investors can deliver capacity more efficiently than their fossil fuel counterparts and that it can be done with much less delay over controversial power purchase agreement (PPA) terms.

Second, officials must adopt a flexible approach to power sector planning. Keeping up with power market developments has been a challenge and official renewables projections often have a short shelf life. With the recent addition of rooftop solar capacity, IEEFA estimates that private investors have stepped up to deliver more than 3.5 times the government plan for renewable energy capacity for 2016-2020. The renewable energy industry continues to move quickly and boldly while, in the background, energy ministry officials formulate the new power development master plan for 2021-2030 (PDP8). As of today, the industry has already surpassed the 12.5 GW solar power target to 2025 that officials had in mind just a couple of months ago.

The note ends by stating that while it’s hoped the upcoming PDP8 will instill an orderly development trajectory for Vietnam’s power system, it should not however curtail the potential of renewable energy to deliver fast and cost-competitive electricity. It will be in the best interests of EVN and its ratepayers if power sector planners avoid rigid targets for each energy source, especially those that blunt the dynamism of solar and wind investment for the sake of reserving a room for slow-moving fossil fuel power.

The deflationary cost curve of renewables and the emergence of more innovative financing solutions will guarantee that renewable energy will further displace fossil fuels, including coal, gas and LNG, in Vietnam’s energy mix in the years to come.

Existing concerns by system operators on how to manage effectively the variability of renewable energy are valid but not without answers. Making the right investments in reliable grid infrastructure and storage solutions will be key to optimising renewable energy capacity while generating a stable stream of power supply without the risk of locking in to large-scale fossil fuel plants.