Snapshots

Advancing Solar PV Policies To Ensure Energy Security and Grid Stability

Viet Nam has emerged as one of the leading players in the South-East Asian solar energy market, owing to its exceptional solar resources as well as supportive policies and feed-in tariffs in recent years. The country's solar PV capacity reached 18.6 GW in 2023, making up around 1.2% of the global total cumulative capacity.

Yet, Viet Nam still relies heavily on fossil fuels to meet its electricity demand. In 2021, coal accounted for 45% of electricity generation, and fossil gas for 10%. Among renewables, hydropower supplied 31% of electricity, solar PV accounted for 11%, and the remaining capacity was covered by wind power and bioenergy, with a combined 2.3% of the total.

Several Vietnamese renewable energy projects have ceased to be economically viable as the grid is strained by rising electricity demand. Related transmission and distribution issues as well as market and regulatory constraints have led to a curtailment of solar power capacity after two years of multi-GW installations in 2019 and 2020. In 2020, Viet Nam was among the top 10 global solar PV markets and its solar power contribution to electricity supply reached 24%, ranking among the highest globally. After the country's feed-in tariff system (FiT 2) came to an end in late 2020, solar PV capacity additions plummeted from 10 GW to 2 GW. In 2023, just 100 MW of solar PV capacity was added.

To tackle the policy vacuum in the sector and revive the Vietnamese solar power market, the Vietnamese government launched a National Power Development Plan VIII (PDP8) in 2023. The plan outlines renewable energy deployment targets until 2030 and a long-term vision for the electricity system until 2050, aiming to enhance the country's energy security and promote sustainable development. Supported by a USD 135 billion funding plan and a direct power purchasing agreement framework, Viet Nam aims to cover at least 31% of its energy demand with renewable energy sources by 2030.

PDP8 particularly encourages rooftop solar PV development by granting household and construction projects unlimited PV capacity, provided that the systems are cost-effective and efficiently utilise existing grid connections. By 2030, 50% of office buildings and residential houses are set to be equipped with rooftop solar PV panels for on-site electricity consumption. Battery storage is further highlighted as a crucial aspect of power development, with a targeted capacity of 300 MW by 2030. Yet, the expansion of rooftop solar PV capacity by 2030 is capped at 2,600 MW to prevent grid overload.

Given PDP8's attention to both grid-connected rooftop solar PV and grid deficiencies, net metering has become a contentious issue in Vietnam. A draft decree on rooftop solar PV was released by the Vietnamese Ministry of Industry and Trade (MOIT) in early 2024, suggesting to rule out the possibility of electricity trading. MOIT instead proposed to deploy solar PV power for self-consumption only and to feed surplus electricity back into the grid on a free-of-charge basis. The primary rationale behind this was, again, the risk that surplus electricity poses to the safety of the national grid.

Taking MOIT's concerns into account, the PDP8 Implementation Plan was adopted in April 2024, focusing on the capacity development of rooftop solar power on a self-consumption basis and on the reinforcement of the country's transmission system. Viet Nam aims to ultimately connect its grid with neighbouring countries and to emerge as a power exporter by the decade's end, targeting electricity exports ranging from 5 GW to 10 GW. Moreover, Viet Nam's solar PV aspirations offer a chance to both decarbonise the energy system and boost the country's local solar PV manufacturing.

Source: See endnote 60 for this section.