Vietnam’s solar policy risks becoming victim of its own success

Geneous tariffs risk overloading an under-developed grid and leaving investors out of pocket.

Vietnam’s push to develop solar power has been too successful. Lured in by generous feed-in-tariffs, projects are lined up for approvals to generate gigawatts of power that the current network simply cannot handle.

Without a more aggressive plan to upgrade the country’s transmission and distribution network, the goverment risks investors drifting away, threatening its goal of bringing more power to feed Vietnam’s booming economy.

Prime Minister Nguyen Xuan Phuc effectively kick-started solar development in April 2017, offering an attractive 9.35 US cents per kWh feed-in-tariff, applicable for 20 years, for projects which begin operating before the end of this June.


Curent feed-in-tariffs for different energy sources in Vietnam


In the ensuing investor stampede – they are racing against the clock – Vietnam’s solar power capacity went from nearly nothing to surpassing the goverment’s target for the next decade.

But the boom has resulted in more solar capacity than current transmission infrastructure can handle. That may dissuade new investors, who risk generating power without being paid by Electricity of Vietnam (EVN), the monopoly state electricity company.

Solar shines

Until 2017, Vietnam’s solar power was under-exploited. The country’s total renewable energy capacity is the biggest among the Asean- 5 countries but is almost entirely derived from hydropower.


Vietnam tops Asean’s renewable energy capacity


Hydropower currently accounts for nearly 40 per cent of Vietnam’s total generation capacity and output. Diversifying the energy mix by tapping into other renewable energy sources has become pressing as Vietnam’s electricity demand is growing at more than 10 per cent annually.

Although coal is the most important part of the central goverment’s future energy mix, Vietnam’s provinces have a practical veto on power plant construction and are increasingly relutant to approve new plants were also shelved after the Fukishima disaster.

(Vietnam energy mix)

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