Vietnam Draft Decree on Rooftop Solar Power: New Opportunities on the Horizon for Investors

The Vietnam rooftop solar sector is set for a major boost with a new draft decree published in early October 2024, introducing fresh policy guidelines to promote self-produced and self-consumed solar energy. This draft is poised to create favorable conditions and open viable commercial opportunities for foreign investors in Vietnam’s renewable sector.

Vietnam has made considerable progress in its green energy transition, setting a goal of net-zero carbon emissions by 2050 and reducing coal reliance. This commitment is reflected through The Power Development Plan VIII (PDP8), which aims to expand renewable energy to 30 percent by 2030. Multiple policy initiatives have been introduced to encourage investment in and enable the transition to renewable energy, including the Direct Power Purchasing Agreement (DPPA) regulations and the upcoming Decree on promoting the development of self-produced and self-consumed rooftop solar power.

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The draft decree, initially released by the Ministry of Industry and Trade (MOIT) in April 2024 for public comment, specified that rooftop solar power development was intended for the sole purpose of self-consumption, with limited transmission to the national grid line. Surplus energy was not authorized for selling to other organizations or individuals, including the Vietnam Electricity Corporation (EVN).

However, recent commentary from the Government has signaled positive alterations to the industry’s landscape under the second draft decree, offering more lucrative investment opportunities for investors.

Key policy highlights: Unlocking the potential of the rooftop solar power sector

Several key initiatives will be implemented if the draft Decree becomes official.

Classification of solar power systems in Vietnam

The draft Decree outlines two categories of development for rooftop solar power:

• Self-produced and self-consumed systems:

These systems, which do not connect to the national power gridline, will not require registration aside from submitting notification and design documents to local electricity management agencies. Organizations and individuals will be allowed to develop unlimited capacity and be exempt from electricity operating licenses when using these systems.

• Systems designed for both self-consumption and connection to the grid:

Registration is required for rooftop solar power connected to the national electricity system, and surplus electricity can be released to the grid. If installed with zero export controllers, these systems will be allowed with unlimited capacity development. Those with 1MW or more capacity and surplus electricity sales must obtain an operating license.

Technical compliance is required for rooftop solar power installations, including investment, construction, land, environment, safety, fire prevention, and electrical safety. Administration and registration procedures will be minimized, especially for households and residential/office buildings.

Cap for surplus power sales to Vietnam’s national grid

If self-produced and self-consumed rooftop solar power with a capacity of less than 100kW is not thoroughly utilized, the surplus capacity can be sold to the national power grid. The purchasing cap to the national grid is restricted to no more than 20 percent of the installed capacity. Two price options are suggested for purchasing surplus electricity from rooftop solar power systems, including:

• The price will be equal to the average market price of the previous year; or
• The price will be a mutually agreed price equal to or less than the average price.

For reference, the average market electricity price in 2023 is 1,091.9 VND/kWh (about US$0.044/kWh), and the electricity purchase contract is in effect for five years.

Buying 100-percent excess rooftop solar power if systems have storage batteries

The Government’s review mentioned the possibility of purchasing the full surplus capacity at demand-based pricing for rooftop solar power systems with storage batteries.

The MOIT is coordinating with agencies and units to evaluate storage batteries in renewable energy projects, aligning potential adjustments to PDP8. Additionally, competent units are assigned to research investment policies for solar power development, particularly rooftop solar power combined with electricity storage batteries.

Expert view: Vietnam needs trading mechanism for industrial parks and export processing zones

Following the Government’s feedback, the MOIT has amended its draft Decree to expand the list of subjects eligible for rooftop solar power installation, including industrial parks, clusters, export processing zones, high-tech zones, economic zones, and production and business establishments. With 428 industrial parks, over 1,000 industrial clusters, and nearly 8,000 enterprises and secondary investors, the technical potential of rooftop solar power is estimated at almost 22 GW.

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If the new draft decree permits the purchase and sale of electricity through separate connection lines and the national grid within industrial parks and export processing zones, it would significantly accelerate Vietnam’s green energy transition. This move would also help meet electricity demand during peak seasons in the industrial sector, particularly when aligned with Decree 80/2024/ND-CP on the DPPA mechanism.

However, the implementation of these initiatives faces regulatory challenges, such as defining the detailed execution process and stakeholders’ responsibilities, clarifying the use of industrial park power grids, and calculating transmission, distribution, electricity market transaction costs, and ancillary services. As a result, experts are advocating for a separate trading mechanism for self-produced rooftop solar power between companies in industrial parks and export processing zones.

Investment opportunities for foreign investors

Rooftop solar power infrastructure

Once the draft legislation is passed, the demand for rooftop solar installations is expected to increase, driving the need for photovoltaic panels, inverters, and related components. Next-generation solar technologies, such as thin-film solar cells, bifacial panels, and building-integrated photovoltaics, present significant growth opportunities for businesses and investors. Additionally, the growing need for efficient energy management in homes and businesses will fuel the demand for smart inverters and integrated solar systems. Smart inverters, equipped with advanced control features and grid-support capabilities—such as voltage regulation, frequency control, reactive power management, and system stability enhancement—are projected to see high demand.

Solar installation and maintenance services

The residential and commercial solar market will present a high-growth area for businesses offering full-service rooftop solar solutions. Companies offering installation services for residential and commercial buildings and engineering, procurement, and construction (EPC) companies are crucial for expanding rooftop solar capacity. Service providers can offer turnkey solutions, including design, financing, and maintenance contracts.

Solar energy storage and grid solutions

With rising energy demands and the potential to maximize the selling cap to the national grid, rooftop solar systems with integrated energy solutions are expected to attract significant market attention. As battery costs decline, solar energy storage becomes increasingly appealing, enhancing energy independence and resilience for rooftop solar users. Combining rooftop solar with energy storage solutions creates new opportunities for sustainable energy use.

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Investments in grid management technologies will be key to integrating rooftop solar with the electric grid, improving grid stability, and enabling decentralized energy production and consumption. This would reduce the burden on the national grid while providing flexibility for energy trading.

If legislation supporting energy trading in economic and industrial zones is enacted, off-grid solar systems will see strong market potential. Microgrid systems integrating solar power are also expected to grow, providing reliable energy access in off-grid areas.

The rooftop solar market will increasingly focus on advanced grid technologies, offering flexibility and demand response capabilities. For example, systems that adjust solar energy inputs based on grid conditions and pricing will allow operators to sell energy back to the grid during peak demand periods or store it when demand is low.

Solar energy software and analytics

Investment opportunities for software platforms monitoring and optimizing solar energy usage, grid connectivity, and load management will flourish. These solutions help maximize efficiency and cost savings for solar energy users by providing real-time data on panel performance, weather conditions, and energy output.

Companies specializing in Internet of Things (IoT) solutions for energy management, such as devices integrated with solar systems that can automate energy usage based on real-time data, optimizing when to store, consume, or sell energy, can benefit from the self-produced rooftop solar market, particularly those integrating smart home systems with rooftop solar installations.

Artificial Intelligence (AI) and Machine Learning (ML) are also emerging technologies that can optimize solar system performance, such as predictive maintenance and energy optimization algorithms. Investors in this area can leverage advanced algorithms to fine-tune solar energy performance in real-time, enabling more efficient energy usage, lowering costs, and exercising the demand-based pricing mechanism for power purchase agreements.

Solar leasing and financing

Leasing and power purchasing agreements (PPAs) allow homeowners to install solar panels without initial investment, with investors financing the installation through lease payments or energy sales. Investors can fund companies offering solar leasing options, community solar initiatives, or PPA-based solar models. However, as the current regulatory landscape mainly prioritizes self-consumption, trading activities of self-produced rooftop solar power in any form may face restrictions and complex legal procedures.

Conclusion

The recent draft Decree on rooftop solar power in Vietnam marks a significant step towards enhancing the nation’s renewable energy landscape. By promoting self-produced and self-consumed solar systems, the Government is facilitating investment opportunities for foreign entities while supporting its ambitious goal of achieving net-zero carbon emissions by 2050.

As Vietnam transitions from coal dependency to renewable sources, the demand for solar technology and services is expected to surge. This shift will present numerous avenues for investment, particularly in advanced solar technologies, energy storage solutions, and smart grid management systems.

However, regulatory challenges remain, requiring investors to closely monitor and navigate the evolving landscape. Ultimately, the successful implementation of this draft Decree could greatly enhance Vietnam’s green energy initiatives and drive economic development.

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