You are using an outdated browser and your browsing experience will not be optimal. Please update to the latest version of Microsoft Edge, Google Chrome or Mozilla Firefox. Install Microsoft Edge

June 4, 2024

Recent Solar Power Developments in Vietnam

Subscribe to Updates

As Vietnam continues its rapid economic development, the demand for sustainable and reliable energy sources has never been more critical. Solar power has emerged as a key component of Vietnam’s strategy to diversify its energy portfolio and reduce its carbon footprint. Recent developments of the regulatory framework governing solar power projects in Vietnam, as discussed below, highlight the country’s commitment to renewable energy and its efforts to create a conducive environment for solar power investments.

Objectives for the Development of Solar Power Projects

On May 15, 2023, the Prime Minister issued Decision No. 500/QD-TTg, approving the National Power Development Plan for 2021-2030 with a vision to 2050 (“PDP VIII”). Following this, on April 1, 2024, the Prime Minister promulgated the Implementation Plan for PDP VIII (“Implementation Plan”). These documents underscore Vietnam’s commitment to promoting renewable energy, particularly solar. They emphasize self-production and self-consumption of solar power, the development of rooftop solar systems, and the promulgation of the direct power purchase mechanism. The integration of solar power with battery storage is also encouraged, contingent upon economic viability.

PDP VIII sets ambitious capacity targets for solar power. By 2030, the capacity is projected to reach approximately 12,836 MW, accounting for 8.5% of the total power capacity. This includes 10,236 MW from concentrated solar power and 2,600 MW from self-production and self-consumption solar power. By 2050, the capacity is expected to rise to between 168,594 MW and 189,294 MW, representing 33.0-34.4% of the total power capacity. Additionally, PDP VIII and the Implementation Plan list 27 solar power projects, totaling 4,136.25 MW, slated for implementation after 2030. However, these projects may be advanced under self-production and self-consumption arrangements.

Draft Decree on Direct Power Purchase Agreements

On April 15, 2024, the Ministry of Industry and Trade (“MOIT”) released a draft decree on direct power purchase agreements (“DPPA”) for public consultation. The draft decree introduces mechanisms for direct power purchases between renewable energy generators, including wind and solar power, and large electricity users, through either private power lines or the national grid. Two mechanisms are proposed under the draft decree:

Physical DPPA: This mechanism allows for direct electricity transactions between power generators and large electricity users through private power lines. The power purchase agreements between the parties must include mandatory content.

Virtual DPPA: Under this mechanism, the power generator sells electricity to large electricity users via the national grid. In terms of structure arrangements:

  • Power generators sell all produced electricity to Vietnam Electricity (EVN) under a model agreement prescribed in the draft decree;
  • Large electricity users purchase electricity from EVN under a power purchase agreement containing mandatory contents; and
  • Large electricity users and power generators sign contracts for differences to manage related risks (e.g., contract term, price, and production output). Generally, the parties have broad discretion to agree to detailed terms and conditions of the contracts.

Draft Decree Encouraging Rooftop Solar Power

The MOIT is also soliciting public feedback on a draft decree aimed at promoting the development of rooftop solar power for self-production and self-consumption. The draft decree distinguishes between two models of rooftop solar systems:

Grid-Connected Systems: These systems must adhere to the capacity limit set in the Implementation Plan, which is 2,600 MW until 2030. They are permitted to inject excess power into the national grid without payment by EVN.

Off-the-Grid Systems: These systems are not subject to capacity limits but cannot transfer surplus electricity to the national grid.

Outlook

Solar power is expected to play a vital role in providing electricity to household and business operations in the near future. The evolution of Vietnam’s regulatory framework, designed to stimulate the growth of solar power in the country, align with national sustainability goals, and enhance energy security through the diversification of renewable energy sources, is a promising sign for investors looking to do business in this space.

Related Professionals

Industries

Energy

Location

RELATED INSIGHTS​ 

February 28, 2022
On February 9, 2022, the Director-General of the Department of Mineral Fuels (DMF) stated that the DMF is planning to request that the Deputy Prime Minister and the Minister of Energy sign an invitation to open bids for Petroleum Exploration and Production Licenses in the Gulf of Thailand for the first time in 15 years. The DMF’s Chief Department expects that this auction, which will cover three offshore areas, could increase Thailand’s petroleum reserves, and it could lead to the possible discovery of new sources of petroleum for Thailand, which would boost the country’s energy resources, and reduce losses from energy imports. The plots in the Gulf of Thailand that will be auctioned in the 24th bid round are as follows: Plot No. G1/65 with a total area of 8,487 square kilometers. This area is divided into 2 sub-areas: Area A totaling 8,298.49 square kilometers, and Area B totaling 188.71 square kilometers; Plot G2/65 with a total area of 15,030 square kilometers; and Plot No. G3/65 with a total area of 11,646.67 square kilometers. This area is divided into 2 sub-areas: Area A totaling 11,028.22 square kilometers, and Area B totaling 618.45 square kilometers. Generally, Thailand initiates its concession and production sharing contract process with the announcement of an exploration area or a plot in the Government Gazette. Thereafter, the DMF Committee will consider and announce the invitation, so that private sector firms can submit their applications to receive respective rights. The DMF’s sub-committee will consider the applications by: checking the qualifications stipulated under Section 24 of the Petroleum Act; assessing the suitability of the exploration project; and determining the benefits which are offered by the applicant. After considering the requests, the DMF’s sub-committee will consider the petroleum laws and regulations, before submitting the matter to the Petroleum Committee—under
Read More
February 22, 2022
The many new and unique challenges in recent years—from epidemics, to travel restrictions, to supply chain disruptions and energy-related reactions to all of the above, we have all had to adjust to a new status quo. The energy industry has felt these impacts acutely, and as the industry seeks to meet the current challenges and move forward toward a more sustainable future, it is helpful to take stock of where things stand and where they might be headed in the coming years. In the midst of this uncertainty, Energy Law in Southeast Asia by the Tilleke & Gibbins Energy Industry Team seeks to provide clarity on the legal and regulatory environment surrounding energy industry activities. Each chapter of Energy Law in Southeast Asia takes the reader through the essential information surrounding energy and environmental regulations in general and the specific laws and practices for the major areas of energy projects—both in terms of the current energy mix and the sources taking on a larger role as we transition toward a lower-carbon future. These chapter subsections are: Regulatory Structure Oil and Gas Coal Solar Wind Hydropower Biomass and Biogas Environmental Regulations In providing this legal overview of major areas across the spectrum of energy projects in Southeast Asia, we have sought to create a resource for all involved in the energy industry, regardless of their specific area of interest or the different obstacles or challenges they seek to resolve. Energy Law in Southeast Asia is written by specialists on Tilleke & Gibbins’ Energy Industry Team, who together have over 200 years of accumulated energy experience. Spread throughout Tilleke & Gibbins’ offices in Southeast Asia, they function both as an integrated regional team to advise multinational enterprises on their regional energy project portfolios, and as experts for investors and companies looking
Read More
January 27, 2022
The Energy Generating Authority of Thailand (EGAT) has launched a pilot project to study the energy consumption and the economic, social, and environmental impact of electric motorcycle taxis, as well as the behavior of drivers and passengers. The project, which was launched on December 27, 2021, as part of EGAT’s Carbon Neutrality Policy, will continue for a year, after which EGAT will consider the data and decide whether electric motorcycle taxis should be introduced nationwide. EGAT is also currently encouraging the use of electric bikes within their own organization, and they initially expect this to help reduce annual carbon dioxide emissions by 37 tons and prevent the release of about 838,000 milligrams of dust per year. EGAT expects additional significant reductions from electric motorcycle taxi pilot projects in multiple locations. A study conducted in Kenya in 2015 by that country’s energy regulator found that sub-150cc motorcycles emit approximately 46.5 grams of carbon dioxide per kilometer, and these emissions increase proportionally in accordance with engine size. According to Thailand’s Office of Industrial Economics, citing data collected by the Federation of Thai Industries Automotive Industry Group, a total of 1,516,096 motorcycles were sold in Thailand in 2020—a surprisingly robust figure in light of the impact of the COVID-19 pandemic. Assuming that public motorcycles travel an average of 15,000 kilometers per year, each motorcycle is therefore producing approximately 0.7 tons of carbon dioxide per year. If Thailand is able to change 50% of its yearly sales of standard motorcycle to electric motorcycles, annual carbon dioxide emissions could decrease by approximately 530,000 tons. Furthermore, since 28.8% of carbon dioxide emissions in Thailand are generated from the transport sector, the transition to electric mobility vehicles looks to be one of the most promising solutions for lowering carbon dioxide emissions in the country. Considering developments
Read More
January 12, 2022
Thailand’s Board of Investment (BOI) recently published BOI Notification No. Sor. 8/2564, which extends the scope of investment promotion covering electronic vehicle (EV) industry manufacturers to include the production of “automotive platforms” for electric vehicles, and creates a new category of BOI promoted activities covering the manufacture of electric bicycles (E-bikes). Automotive Platforms The following investment promotion categories have been extended: 4.24 – Manufacture of Battery Electric Vehicles 4.26 – Manufacture of Electric Battery Tricycles 4.27 – Manufacture of Electric Battery Busses and Trucks These categories now include the manufacture of “automotive platforms”—which must include an energy storage system, charging module, and front and rear axle module—benefiting from similar tax incentives and subject to additional conditions, as detailed below. New BOI Promotional Category for E-Bike Production The BOI has also introduced a new category, No. 4.28, covering the manufacture of E-bikes. Projects under this category will be eligible for a three-year CIT exemption with an additional one-year exemption if certain criteria are met. Applications for this category must cover the manufacture of E-bikes, the manufacture or sourcing of electric batteries, and a management plan for used batteries. In addition to the general conditions for EV projects (industrial standards, manufacturing timelines, etc.), the BOI has also imposed the following conditions specific to E-bike projects: E-bike frames must be produced from light-weight materials such as aluminum alloy, chromium–molybdenum alloy steel (chrome moly), titanium alloy, and carbon fiber; and E-bike batteries must adopt environmentally-friendly technology. Interestingly the BOI allows E-bike production lines to jointly use manufacturing lines for ordinary bicycles. However, the sale of ordinary bicycles is regarded as non-BOI-promoted income and will not be entitled to BOI tax incentives. These new provisions, intended to stimulate both local and foreign investments in the electric automotive industry, seem to complete the BOI promotion
Read More