Vietnam’s solar power industry has experienced rapid growth in recent years, driven by favourable government policies and increasing demand for renewable energy. With abundant solar potential due to its geographical location, the country has become a significant player in the Southeast Asian renewable energy market. The introduction of attractive feed-in tariffs in 2017 spurred a surge in solar installations, leading to a dramatic increase in capacity and investment. As a result, Vietnam now boasts one of the highest installed solar capacities in the region, contributing to its goal of transitioning to a more sustainable energy mix.
Despite this progress, the industry faces several challenges, including grid congestion, regulatory uncertainties, and difficulties in integrating renewable energy into the national grid. The rapid expansion of solar projects has outpaced infrastructure development, leading to bottlenecks and curtailment of power generation. Additionally, changes in policy frameworks, such as the adjustment of feed-in tariffs and delays in the implementation of a competitive bidding mechanism, have created uncertainties for investors and developers, affecting long-term planning and financing.
Looking forward, the future of Vietnam’s solar power industry will depend on the government’s ability to address these challenges and create a more stable regulatory environment. Investment in grid infrastructure, the introduction of more transparent policies, and the development of energy storage solutions will be crucial for sustaining growth. As global and domestic demand for clean energy continues to rise, Vietnam has the potential to become a leader in renewable energy production, provided it navigates these challenges effectively.
Solar power in Vietnam in numbers
In July 2024, Vietnam’s renewable energy sector generated a total of 24.02 billion kWh, representing 13.4 percent of the country’s total electricity production. This included 16 billion kWh from solar power and 7.3 billion kWh from wind energy, according to data from Vietnam Electricity.
Solar power, in particular, has seen significant expansion due to the implementation of feed-in tariffs and the increasing adoption of rooftop solar systems. Wind energy also continues to grow, particularly in coastal regions, contributing to the diversification of Vietnam’s energy mix and reducing reliance on traditional fossil fuels.
Solar power policies in Vietnam
Vietnam’s solar power sector is governed by a number of key regulations and policies aimed at promoting the development of renewable energy while managing the challenges associated with rapid growth.
Feed-in Tariff (FiT) Program
The FiT program has been a major driver of solar power development in Vietnam, offering a tariff of 9.35 cents per kilowatt-hour (kWh) for projects completed by June 2019. This program led to a surge in solar capacity, reaching 4.46 gigawatts of new installations.
This rapid growth resulted in an overloading of the national grid, prompting the government to revise the FiT rate to 7.09 cents per kWh for projects that commenced operations between July 2019 and the end of 2020.
This revised tariff aimed to balance investment incentives with market sustainability. The FiT rates apply for 20 years and do not account for value-added tax or fluctuations in currency exchange rates. However, there were exceptions, such as for projects in Ninh Thuan Province, which could still benefit from the higher 9.35 cents rate due to a separate development plan for projects under 2,000 MW capacity.
Suspension of New Large-Scale Projects
To address the rapid growth and grid capacity issues, the Vietnamese government has temporarily suspended new approvals for large-scale solar projects. This measure aims to manage the grid’s ability to integrate new capacity and transition from the FiT scheme to an auction-based system for project approval and pricing.
Future Policy Directions
The government plans to switch from the FiT model to a competitive bidding process for solar projects. This approach is expected to bring more transparency and better align project development with grid capacity and national energy needs. Additionally, there is a focus on enhancing grid infrastructure to support the integration of more renewable energy.
These regulations are part of Vietnam’s broader strategy to expand renewable energy while ensuring the stability and efficiency of its power system.
Solar panel trade in Vietnam
Vietnam’s solar panel trade is regulated under Decree 26/2023/ND-CP, which outlines the Schedule of Export Tariffs and Preferential Import Tariffs. This decree, effective from July 15, 2023, sets specific import duties on goods, including solar panels and related components. It aims to balance domestic production with international trade, offering tax incentives for the development and assembly of key industries, including renewable energy. The regulations support local manufacturers while maintaining a competitive import market for solar technology
US circumventing duties on solar panels from Vietnam
Late last year, some solar products exported from Vietnam, Thailand, Cambodia, and Malaysia were found to be circumventing duties applied to some Chinese solar products by the US Department of Commerce. Of note, however, a presidential proclamation was issued in 2022 exempting solar imports from the four Southeast Asian countries from paying additional duties for two years. This amnesty has now ended, however, a new antidumping case is currently making its way through the DOC addressing solar imports from Vietnam.
This speaks to the challenges Vietnam has faced related to anti-dumping tariffs on solar panels, particularly concerning accusations of illegal transshipments. Some foreign companies have attempted to label Chinese-made solar products as Vietnamese to bypass higher U.S. tariffs. In response, Vietnamese customs authorities have made some attempts to crackdown on these practices. For instance, several companies were investigated and penalised for mislabeling products like solar batteries and other goods to take advantage of Vietnam’s trade agreements with the U.S. and the EU.
What’s next?
Vietnam’s solar power industry has experienced rapid growth in recent years, driven by favourable government policies and increasing demand for renewable energy. With abundant solar potential due to its geographical location, the country has become a significant player in the Southeast Asian renewable energy market. However, regulatory uncertainty has become a key bug-bear for foreign firms and this has slowed the industries development.
That said, these regulatory challenges could soon be overcome as the government works on a new strategy for solar power development in Vietnam. With this in mind, foreign firms looking to track the development of Vietnam’s solar power industry should make sure to subscribe to the-shiv.